MRMD - MariMed CEO Jon Levine: Cannabis Industry Still Missing The Real Investments

2023-06-29 11:00:00 ET

Summary

• MariMed CEO Jon Levine discusses the cannabis retail market, owning real estate and consecutive quarters of positive cash flow.
• Maryland, Missouri excitement.
• Raising money at relatively decent rates.
• Legalization timelines and future growth.

Listen below or on the go via Apple Podcasts or Spotify .

• 2:00 - MariMed ( MRMD ) CEO Jon Levine on joining the cannabis retail market
• 8:30 - Owning real estate and consecutive quarters of positive cash flow
• 12:10 - Maryland, Missouri excitement
• 17:45 - Raising money at relatively decent rates
• 27:30 - Legalization, interstate commerce and future growth

Recorded May 11, 2023

Transcript

Rena Sherbill: Jon, welcome to the Cannabis Investing Podcast. Super happy to have you on the show. Super happy to have you on Seeking Alpha. Thanks for coming on.

Jon Levine: Thank you, Rena. We're very excited to be here today.

RS: Super happy to have you on. So, talk to us. I know that many people will know you as you know, part of the C-suite at MariMed ( MRMD ) and your journey there. Can you share with listeners your journey to the cannabis industry, and what brought you and what attracted you in the first place?

JL: Absolutely. I’m Jon Levine. I’m the Co-Founder of MariMed with Bob Fireman who recently passed, and we got into the cannabis industry back in 2008. We were introduced to a group of people with a business plan to build a small grow house in Aptos, California, which I flew back and forth, learning about growing in a – it's a very small grow facility in Aptos, and we decided that we would invest into that industry at that time through some creative accounting of doing it through real estate.

And then we, all of a sudden, were offered an opportunity into the retail market in San Jose. And all of a sudden, I found myself in the middle of a cannabis industry that was barely existent at the time other than California and some in Colorado. And then we got phone calls for an opportunity in Rhode Island for a first license there. And we went down there and we helped fund the Thomas C. Slater Center into business through a real estate venture, where we were able to build out and help manage them and teach them a way that to operate a facility in the New England area.

And all of a sudden, we realized, we may have a little business here and started writing applications in Massachusetts. And unfortunately, we didn't win the first round of Massachusetts. But we received several phone calls at that time asking us to come help in other states, which we won an application in Delaware and started to do that build out and people that we were trying to raise money from, were like we want to have more than just one location. We won an application in Illinois – couple of applications in Illinois, Nevada, and Maryland.

So we started raising money and managing these facilities and putting them into operations with the goal that when they were able to be rolled up through the adult use or through the ability of being for profit, that we would take these not for profits and roll them into one entity, which is today MariMed. And that's how we started out as consultants in back office, front office design. We built and designed all of our own buildings. We bought the buildings with the real estate management team behind it.

So Bob and I really were pioneers of construction of the ground up of the cannabis industry, been here for many years doing this. And I'm very happy of where we've got into and we're going to keep continuing to grow this business to our next goal of being in many states as possible, fully vertically integrated with all of our brands and our expertise.

RS: I first wanted to share my condolences over Bob's passing. We had Bob on the show , and I wrote this on Seeking Alpha when we first heard that he seemed like a real mensch in the short time and in the brief way that I knew him, and I read throughout the months that many people feel that way much closer than me, and I know that his loss is profoundly felt, I'm sure, and your team, and I know in the broader cannabis community.

So just wanted to publicly acknowledge that also and share that. And I know a lot of people out there listening feel the same way. So speaking of blazing the trail and kind of building on what you and Bob have built, talk to us a little bit, there has been so much loss and challenge throughout the industry, the past year, the past couple of years, we're talking about it on a personal level, there's also been a lot of loss in the professional level.

How are you navigating Bob's loss, but also navigating a really challenging time in the industry as well? How, especially as a leader and coming on board and navigating a new role within a role that you've had for many years, how has that navigation been going and kind of what's the feeling at MariMed now? Because we're about to talk about a lot of exciting things at MariMed, but I think also we would be remiss if we didn't talk about the challenges also.

JL: Yes. Well, first of all, thank you for the condolences on Bob. Bob was just a business partner, but he was a very long-term life friend and he is surely missed. But Bob and I, like I said, we built this business together, and we developed the procedures and policies around growing it in the way that we would not be hurt if one of us or both of us were to leave that we brought in a very strong management team to continue to grow this business.

But Bob and I had a vision, which I’m very happy to step in and make sure that we continue that vision that he and I started and get to that next level. As far as the tough times, yes, there were some tough times emotionally maybe personally, and the company always misses Bob.

But like I said, we had things in process and we had positions already filled, which I've filled a few extra positions to make sure that we are prepared to move through these difficult economic times, but also these growth times so that we're prepared for the next level.

We have a terrific CFO and Susan Villare that joined us before Bob passed. We were starting our transition to the next level of growth where we were preparing our succession plan to help this company grow as it continues to grow through ordinary expansion of our existing facilities, but give us the ability to look at other opportunities as they come available.

The economic times and the downturn and pressure of competition, I feel that we were very well set up for this. As I said, starting in 2008 and learning how to do everything wrong in California and doing everything to learn from your errors is a big piece of growing up.

And we've been very successful because we try not to make the same mistake more than once, and we've been very fortunate to learn that in tough times. You have to make sure that you have good procedures and processes in place, so that your expenses are not getting out of control. We have very good controls over both our expenses and our balance sheet, which makes MariMed very successful, and I look forward to helping you grow to the next level.

RS: Yes. I think we're definitely seeing it now as the tide is turning, and we're seeing a lot of people swimming in the ocean that are making a lot of promises about cutting CapEx and cutting things and getting to profitability. But companies like MariMed , you can tell what they've been doing up until now, because they don't have to make promises. They're saying what they've been doing. You guys are saying what you've been doing.

You just had earnings , and you announced consecutive quarters of positive cash flow. And all these things that companies are clamoring for and you're able to raise money in an environment that most people aren't.

I'm curious also, you talked about switching to the retail business model, you talked about deciding to own your retail footprints, and that's something that not many companies can point to in terms of owning their own real estate, not every company is even in the retail game and not every company is in the cultivation game, but owning the real estate, I think, is a huge benefit .

Can you talk to and you spoke to about learning from mistakes or learning from others’ mistakes or seeing what the mark – how the marketplace is developing? Can you talk about the different business models and how you've landed on this one and what you think that provides MariMed especially in this environment?

JL: Yes. I mean, you brought up the real estate portion, part of my experience and background prior to joining and creating MariMed with Bob was, I was in the real estate business, commercial real estate across the U.S., and Bob was also an attorney.

So Bob and I together, we have always in – done investments in real estate and we just saw this as an additional vehicle, but it does have big advantages over having to lease, especially where leasing was at a cannabis rate is much higher than a regular standard rate, owning the real estate and putting the investment into it, secures your ability.

There’s a lot of companies in the cannabis industry that have gone out and done sale leasebacks to bring in extra cash flow to help their operations. I think MariMed that Bob and I set up, we didn't run to the market to try to raise or borrow money that was out of control. We kept our strong balance sheet. We took our time.

We were one of the first MSOs in the country, and we were just taking our time growing, where other people ran up to Canada, raised crazy money, bought losing operations and basically keep reporting losses while we have built from the ground up where we are able to take advantage of our real estate and our controls, so that we're reporting positive cash flow and positive earnings.

And that's the difference between rushing to a market and doing it where we take our time and we do it the way that we felt was the right way, which is showing to be a good thing for us and for our investors.

RS: I love it if you also talked about some of the states that you have coming online. We had the Ascend ( AAWH ) team on a few weeks ago , and we were talking about Maryland coming online and how that's one of the states that investors are really looking to in terms of some promising, even if it's not the biggest market, I think, it has some promising things about it.

Also observers of the market are seen Missouri doing gangbuster numbers and just really knocking it out of the park in terms of delivery to the consumer and the numbers that are able to be coming out of there. Can you talk about your presence in these states and how you're growing and what investors should look forward to?

JL: Absolutely. Maryland is one of our first states that we were in, not one of the first states that we were rolled up. We just rolled that into MariMed last year, and we're very happy to have that part of the MariMed package now. But when we built that out and designed it, we looked forward to that market. We knew it was going to be a very strong market.

I think that they have one of the strongest medical markets out there and they keep proving that. The amount of revenue through our wholesale division has been very strong, and it continues to be strong. Now with adult use coming online, that's only going to help much as the wholesale portion, but our retail store will see increased revenue from that state.

I think that state has done a great job with their whole cannabis program , and I think that they're showing why they're able to open this in July is because they have a very organized state to support a really good program, and we're really excited about it.

We've actually just got our GMP certification at the end of the year and have been able to get back into the high dose market this past week with our edibles, which Betty's Eddies before the state changed the law, we were able to be number one in the state for high-dosed edibles. And then when we got our kitchen, had to be cut back to a standard kitchen and then had to be rebuilt to a GMP level.

We now have the certification and we're going to be launching in - sorry, we just launched the edibles again, and we plan to be number one in that state with our Betty's Eddies , but also all of our other brands, our Bubby's, our Vibations, our in-house, We're very excited to be back in that industry there, and we're looking double forward to the adult use market starting this summer.

As far as Missouri, no one can be more excited than us. We were the first MSO to announce that we were moving into Missouri before Missouri even became legal for adult use. And we're excited we're building out our kitchen there. It's a very good market. It keeps showing everybody that's going to be one of the strongest markets out there, and we are looking forward to getting all of our brands into that market as quick as possible. It's just that construction unfortunately has restrictions on how quickly you can do it.

So we're moving as quick as possible, but we're looking forward to launching our brands in the state of Missouri, which is one of the top states right now, and we're very excited.

RS: Would you see those hurdles around building out the kitchen and then having to go – going to have to redo it again, tool it to different regulations. Would you say that's kind of like a perfect example about being a player in the cannabis industry and just needing to figure for things that you didn't necessarily plan on and needing to figure for more money and things that you felt like you were already done with?

JL: Yes and no. I mean, I do look at what happened with the kitchen there. Cannabis is being really new. The states don't know when they write the laws, how they want to set them up. So the kitchens were all part of the laboratory at that time, they weren't two separate facility requirements.

So we had clean rooms within the kitchen, but the way – sorry, inside the lab, but the way that they wanted them set up, they really wanted to have the separation of extraction versus kitchen production for somebody that's going to be consuming. I totally understand that.

When we built out our first facilities, we always went above and beyond what was required by states in terms of security and cleanliness and systems, we went to the extra step because, like I said, I was involved in commercial real estate prior. So I always made it so that it was above and beyond, so that we were ready for any type of changes.

Having that CMG – sorry, the GMP kitchen was part of our plans anyway, was to build a larger kitchen when we got closer to adult use. When they put that certification in, it just meant that we needed to build it out a lot faster. But just with supply chains being so slow with the COVID that happened, it just was bad timing on our part. But cost-wise, we basically were prepared for all that because we had those plans ready in our drawing. So it got sped up a little bit, which is great, but now we're really happy to get back into the market with our edibles at the high-dose level.

RS: Can you talk a little bit about your plans for Missouri? Is it going to remain limited to edibles based on kind of how the state's working right now?

JL: Well, our goal right now is to get in there and test the market, see what it's like with one of the areas of the industry, which we feel is not like building or grow. Grows are a lot more expensive to build out. There's a lot of competition in the retail market, but we figured that going in with the production kitchen and the processing will give us the ability to get in with our brands, which have always been one of the things that we're looking at as the real future is having a brand name that people recognize and want.

So going in there with the brands first, our goal still is to be fully vertical in every state possible. So we do look at the future of looking to get to fully vertical for the grow in the retail in the future, but we're going to take it at our pace not the industry pace.

RS: Coming from your role, especially as CFO, and looking at how other companies have struggled , can you talk about the ability to raise money at pretty good deals at that, especially in this environment? And how you've been able to navigate that? Is that – would you – would you subscribe it mostly to your background and connections? Or is it MariMed’s footprint? And can you talk to us about how you've been able to be successful at that while many, many others have not?

JL: I would say that part of it is my background coming from banking and real estate connections that I had in the real markets that people were very scared about lending money or borrowing money from real institutions, we've been very fortunate. We got some of the first mortgages, real mortgages. I'm not talking about cannabis mortgages that were up in the 10%, 12% range, we were getting real mortgages at 4.5%, 5% many years ago when we first started out.

Now we're basically gone out and we've raised money through private raises. So we weren't basically paying any high rates, so we did it through the ability to raise through our stock. When the stock was low, we did some convertibles. But then, when we needed to take the big leap and try to get our eight projects that we're presently involved in versus paying it out of cash flow, we felt it was best to get those to market sooner.

We went out and we interviewed with a bunch of investment bankers, and we found the best deal that was for us even though I don't think nor does our CFO think that these are the greatest rates, but these are cannabis rates. But as you said, we got one of the lowest cannabis rates that was out there at this time. And we're always looking for those opportunities to improve those rates, and I'll never stop looking.

So, yes, I do think it's partially my background. And Bob, when we – was with us and now Susan and I who come from different industries, but both of us look at this as being abnormal. And without the banking bill going through whether it happens today or not, we have to look through how to get through this market and find the deals that make the most sense to be able to keep capital coming in or borrowings. Right now, you can't raise money through the capital markets.

So it's all borrowings. Good news is that MariMed raised that $30 million. We used it to get our projects that we're presently working on, we'll get them done. But we presently will use all the excess cash flow that will still come from operations for any future growth until we find an opportunity that we may need to borrow more.

RS: I'm curious speaking about you and Susan, the new CFO coming on and looking at opportunities and not necessarily getting caught up in whether Safe Banking is going to get past. There's a lot of talk about 280E and how much that constricts the ability of cannabis companies to really fuel growth.

And then we've had some analysts on, most recently, Jerry Derevyanny , talk about 280E that – when that disappears, it's just going to be replaced by some other tax levied at cannabis companies. Is that something that you think about getting out of the reality of 280E? Do you think it'll be just replaced by something else? Is it something that you spend time or are you focused on kind of what's in front of you?

JL: We focus more on what's in front of us today. 280E, if you understand it and know how to deal with it and understand how to set your operations up to make sure that you're getting whatever you can for tax breaks because there's very few of them. If you run it the right ways and I know that we've gone through some audits and have won, so I'm happy to say that we are comfortable with our 280E decisions. And we run this very close to the chest, but we make sure we make decisions where it's right for the company.

I do agree with you that there will be some type of tax coming from the federal government if they do away with 280E because they're not going to want to give up that beautiful income that they're bringing in that no one realizes that they're bringing in right now because they don't talk about it because Federal Government doesn't want to say that they're making money on the cannabis industry because it's still illegal according to them, but yet, it's legal in many states and the states keep growing. Soon it will be in every state, but it will still be illegal.

I don't understand it, but it's – part of the issue is the tax dollars. How do they give up tax dollars that they weren't counting on? And I do feel that that's the biggest question. So, yes, I do feel there'll be another taps put on us, but it may not be as bad as the 280E.

RS: Yes, certainly many curious questions to be asked around this industry. No doubt about it. So speaking, I'm also curious, there's a lot of talk on this podcast and the industry in general about different tiers of cannabis companies. And MariMed typically places itself somewhere in the mid-tiers.

As we've been mentioning, there's many reasons why it's the top mid-tier that we talk about. It's one of the strongest mid-tiers that we talk about. Is that how you think about it? Do you guys think in tiers? Or do you feel like that's nonsense? There's different ways of people looking at the growth and scaling the industry and who's able to scale this way and who's best suited to scale. How do you think about it? Or what's kind of the narrative in your head? How it – the – how it plays out with the industry?

JL: Well, MariMed is the hidden secret. We're very quietly growing at a pace where people are basically slowing down. Like I said earlier, a lot of the MSOs went up to Canada, raised money or borrowed money, and they've got a lot of debt on their books or their balance sheets a little bit out of whack.

We've been very conservative. We've been doing it at our pace. We're making sure we're growing in the right way that's best for our investors. Unfortunately, the market doesn't look at our stock in that way. But we don't look at the stock every day. We look at our earnings and our cash flow and our goal is to keep being the most profitable in the best division – sorry, the best in the industry at producing growth while not having to worry about what the others are doing.

I do see a lot of people in our industry and other industries that are cutting back work staff. I mean, we're growing our work staff dramatically. I mean, we're going to be close to 800 employees at the end of this year. That's a big growth that we're going to continue because of the fact that we're growing at a pace where we feel that it's best for the company. And I think that we'll keep looking at opportunities because there's more and more opportunities coming on the market that are more reasonably priced that don't have this big money chasing it because the capital markets have dried up.

So do I worry about being a Tier 1 or a Tier 2? No, I'm more worried about making sure that I get the best investment for our investors and that I give them the value. Eventually, the markets will catch up to our value, and we will be one of the leading tiered growth of the market.

RS: Do you – are there certain parts of the market that you're looking at in terms of distressed assets and how best to kind of build up more brand or more capabilities? Are there certain parts? Are there certain players? Or are you looking for what fits best, and the story is kind of still developing?

JL: No, we look at growing in the markets that we're in to become fully vertical but also to get to the numbers of the limits that are in each of the states. Massachusetts, we just announced our opening of our Beverly operation, which gets our third dispensary in our fourth – sorry, yes, our fourth license, and we're in the process of getting our fifth license for medical – sorry, for adult use in Quincy, Mass, and we will apply for the adult – sorry, the medical in Beverly, Mass.

So that will put us at our license limit. But in the state of Maryland, we still have growth opportunities, so we're looking at dispensary operations there. In Illinois, we still have five licenses available to fill, so we'll continue to look in that market. And as Ohio, we already talked about – sorry, yes, Missouri, we talked about trying to get fully vertical in that state in the future.

So as opportunities come up, we'll take a look at those opportunities. I think Missouri would be the wrong time to jump in right now because that market is doing unbelievable and those people are going to want numbers that are not reasonable for what the market in the future will have.

So we'll have to wait for those to basically level out a little bit before we can go in unless we can find a partner that's willing to work with us. We're opening up our Ohio dispensary, and that's a market that we do want to grow in. There's a lot of great opportunities in that market because we have one dispensary. We're allowed up to five. We can also look at going vertical in that state. It's a state that's going to actually go adult use hopefully in the next year-and-a-half, two years. So there's some upside there that we want to be involved in, and this is the time to take a look at those.

RS: And do you have thoughts about how interstate commerce plays out or what happens if it gets – if cannabis gets descheduled or rescheduled? I know that this is like more crystal ball questions and what's going to happen. But it also, I think, that is the question, looking at state after state go online and how well it's doing. It does seem that – or maybe that I'm leading the question, does it seem to you that like one day we're going to wake up and there's going to be kind of de facto if not actual interstate commerce? Or do you think it's going to be quite a slow roll in probably years down the road?

JL: Legalization may bring interstate commerce, but that's not going to be a quick snap of the fingers and you're able to go because there's going to be a lot more operations that are going to be overseeing us from the Federal Government side, the Food and Drug Administration all the way to tobacco, it's going to be a lot different. People just can't say, “oh, I can start shipping it across lines.” There's going to be state mandates that are going to still to be looked at.

So even with legalization, I think, it will take a few years before it is actually interstate commerce. But one thing that coming from the real estate industry is when I buy buildings. I'm buying them in locations that are centrally located with ease to major highways for making sure that my distribution in the future and present is in the right places, so that we can easily transport across state lines or handle territories based upon where they are in the country where we can move it, so that we're not having to rebuild it.

RS: So how do you see the next, let's say, 12 to 24 months, both for the industry and how you see MariMed kind of scaling even further?

JL: Well, I think for the industry, it's going to be a very slow grow right now, mostly because of the economy and peoples while it's getting tighter. This is a big effect across all industries, but it's one that is affecting a little bit of the cannabis industry and will for the next 12-plus months, unless the government does something amazing to get us out of this recession.

But MariMed, in the next 12 to 18 months, we're going to be opening more operations that are going to make our revenues continue to grow, but give us opportunities to enter states that we're not fully vertical, such as Illinois where we're building out our craft grow and processing center, where we'll have the full line of our brands in that state with edibles and smokables by the middle to end of the year. And we're very happy about that, plus going into Missouri, Ohio with our retail store and expanding those areas, like I said, we just expanded Massachusetts with two new dispensary operations here.

So we're very happy about the fact that we're going to see some increased revenue. But it's not going to be that big boom like it was a few years ago when the markets were really hot unless I was actually just in the beginning of Missouri right now and that big boom that they just had, and that's going to continue there. That's a great state. It's going to continue to grow. But there will be the plateau that will level out and it will be a little bit more equal as more places come online.

RS: When we talk about risks to investing in the cannabis industry, I think the risks are pretty evident and clear. Would you say that the biggest risk is the kind of slow – the slow path towards growth that we have before us that it's speaking to the fundamentals not matching the share price that we have further to go there? Would you say that's the biggest risk, or is there something else that you would point to as well?

JL: I’d say the biggest risk in the markets today is that you still can't get onto the big boards and trade like regular traders, we're missing the real investments. I mean, the investment bankers are not really allowed to invest in cannabis companies. Most people that want to buy our stock get kicked out of their banks if they buy it. So it's not an easy task right now. That's why the banking bill possibly could help. We're not positive yet. But we'll have to wait and see.

But getting on to the real markets would help the cannabis industry stock help the investors. These people that are investing today, if you look at the trade values of the number of shares that are trading on a daily basis, we're one of the leaders in the number of trades. But our stock doesn't want to go up very high because the fact is that's where the market has everything today. Everything's that kind of a depressed value.

But I do see when people realize that this industry is going to get a little bit meaner and leaner, that MariMed is going to be one of those survivors that's going to be a champion, that's going to be one of the leaders in the industry.

RS: Do you have any thoughts of a timeline there in terms of how long it took to get that legitimacy?

JL: Knowing our government, unfortunately, there's still a few years before we'll see that.

RS: Yes. Having a base thing on politics.

JL: Hope, I’m wrong.

RS: Yes, yes, we all hope we're wrong. It seems like when we have to base things on politics, the timelines are not in our favor. So when we're looking at the industry and we're looking at the kind of pace of growth and also the limitations around it, what do you think that investors aren't paying enough attention to? Or do you think there's something that investors aren't paying enough attention to in terms of what we have to look forward to or what's coming around the corner?

JL: Well, I just wish more investors would look at MariMed and see that we have been a champion with all of our earnings, positive cash flow, positive EBITDA, you can't see the growth any better than what we have done over the last two, three years. Our continued growth year-over-year, month-over-month, quarter-over-quarter, has been dramatic. But the most important thing is that take a look at our cash flow and EBITDA, all positive, and that's the big thing that we're very proud of, and we're going to continue that. So hopefully, investors are paying attention because we're one of the champs out there.

RS: Given your financial background and speaking to the metrics that you just pointed to, and we've had a number of analysts kind of talking about what the most salient metrics are to look at as cannabis investors. What would you point to as the most salient metric to look at for cannabis investors?

JL: I would look at our balance – most people should look at our balance sheet and cash flow. Our margins are right where they should be. We're growing our margins even more with more seed-to-sale operations becoming vertical, helps every one of our operations. And the fact is, is that we pay all of our taxes on time, so we're not hedging and waiting for trying to use that as cash flow.

So we're going to grow and we're going to use our cash flow for that growth as there's no investor market right now nor is there a great borrowing market with rates going up as high as they are today.

RS: And any thoughts about the West Coast when you're looking at the West Coast? Anything to say there?

JL: The West Coast is not a scary word, but the word California would be a little bit more scary. California is a very big state with a lot of opportunities there. We just have not found the opportunity that we feel would be the best for our shareholders. So we continue to look. If we do find something that is going to be accretive to our business, we'll be happy to take those opportunities to our board and move into the state of California.

I started this whole business in California, so I would love to be able to see us grow that way. But we're going to concentrate on the states that are actually growing, that are going to be limitations of licenses that understand cannabis, and aren’t going to let the black marketeers run the state.

The state of New York has got a lot of work to do to be able to make that state run right. It's going to be very difficult for them to stop what's going on. But we're concentrating on better markets like New Jersey. We're looking at opportunities and future states.

We just applied in the state of Texas, and we're interested to see how that goes. And there's going to be some other opportunities like Arkansas and some other states that are going to come on with opportunities for applications. So instead of going out and buying somebody, we're going to do it the way we've always done it, try to apply, when, build, and opens.

RS: Yes. I think a lot of people looking at Texas with a lot of interest, what's going to happen over there. New York just released, I don't know if you have anything to say about this, but New York just released some revisions to the wide swath of revisions that have already been released. And a few of them are definitely more beneficial. It seems to cannabis companies to the bigger cannabis companies than was previously touted. Any thoughts on that? Any words there?

JL: I did not have a chance to read the full release. I did see that they're allowing MSOs to move up their applications to an earlier round. But again, as I stated, the market there with the illicit drugs that are already being sold in retail that are not licensed is very disturbing and very worrisome that you're going to go into a competition that you can't win if you have to pay the taxes and all the up charges and controls that are under the state.

I mean, I believe the state has a very hefty fee just to get into that market. But if you're doing it on the illicit marketing, you're not paying that. You got a big advantage over those people that are following the rules. So not a state that we're going to run to unless we see some dramatic changes other than these opportunities where they are allowing us to come in sooner.

RS: Are you in touch as a community of cannabis operators? Are you in touch about what's happening in New York and trying to maybe fight as many regulations as is possible that seem to kind of quell growth there?

JL: We have some relationship with lobbyists, but we also do talk with a lot of our partners in the industry. I mean, even though that we're all working against each other in terms of profit, but we're all in the same industry. It doesn't hurt to keep communicado and share experiences. But going into a market like New York, yes, we all have to band together and fight for the right rules just as we did in Maryland.

RS: Yes. And Tim Seymour was on here, probably a year ago or something saying that the real competition is the illicit market. And I think nowhere is that shown more than in New York in terms of the real competition is the huge illicit market. It's totally intact.

JL: Yes, it's California and New York are the two big illicit markets.

RS: Yes.

JL: And that's why I'm saying that those are the two different difficult states to get into and be able to survive. I want to focus our business on the states that we can go in and make money and be profitable for our shareholders.

RS: So what would you say? You mentioned New Jersey. How are you looking at that state?

JL: We've been looking at many opportunities there. We've also got an application that we can drop any time now. It's just really about trying to figure out where the best location is and what makes the best opportunity to enter that market. That market is still young. There's still some upside to it, but there's a lot of people that are already there.

So there's some opportunities that the prices will come down and we can save money on construction cost going in and taking something over, or we'll just finish our application and go at it from the beginning.

RS: And in terms of Massachusetts, that's a different story in terms of more entrenched presence, points of pain to be sure in that state. What would you say to kind of people looking at Massachusetts? What do we have to look forward to or not look forward to there?

JL: Well, I would say the same thing to anybody looking to get into the cannabis industry. This is not an easy field. This is a real business that takes real knowledge and patience and understanding how to do it right. Massachusetts, without having limited licenses, you're seeing an overabundance of retail and some smaller growth coming in, that will not all be able to make it.

We’re already seeing the struggles of many of the retailers being popped up in the same area that they all can't survive in that one little area unless there's more traffic. I think that the state has done an unfair situation of not limiting licenses and putting them at a anybody that can qualify.

So I think that there's a great opportunity in Massachusetts if you know how to grow flower and sell products at the right prices, but you have to do it and have knowledge of how to do it right. That's what our experience has brought us and the knowledge of how to keep our costs down and make it so that we're profitable.

We are also very happy that our Nature's Heritage flower still continues to be number one, and it did not cause us to drop the price to keep that number one. We're a high-quality flower that people understand and want. Those people that really enjoy the connoisseur of cannabis, they're coming to buy Nature's Heritage. Why? Because we grow a top quality flower with a lot of love and patience, and that's what the people want. They want that consistency. The knowledge that they're always going to get a good quality flower, so they know the name, Nature's Heritage, and they come to us.

RS: Any thoughts about how different brands have been developing and kind of how the industry is going to grow with – there's a huge number of brands and a huge number of players. Do you feel that we are going to continue to see kind of brands get rolled up into bigger brands?

Do you feel like there's going to be outside sectors coming in and getting those rolled up? Or do you feel like MariMed is going to be able to make it to the end or certain cannabis players are going to be able to make it to the end with some of those brands intact, and that's who's going to – how do you see it kind of playing out long-term?

JL: As Bob Fireman would say, brands are the next piece of this puzzle. Brands are going to be what wins this race. And we've been very fortunate that we have top-selling brands and our Betty's Eddies, our Bubby's Baked and our Vibations, and we're going to continue our in-house roll out of our gummies, but I do feel that the brands are going to be what makes this whole industry change.

And the difference is that we've had top-selling brands in every state that we go to, but we don't want to just license it to everybody and let them make our brand name. Why? Because we want to have that consistency, that quality that you can count on. It’s kind of like you want to go buy a Coke. You want to make sure that it tastes the same in every market. And that's where a lot of these branded companies don't understand and they don't care. They just want to have their name out there.

But we want to be the Kleenex or the Coke, where people know the name and they know they're going to get that high-quality consistency and taste. And that's what we have been very good at and we're going to continue to do that. We're going to be leaders in this industry in the end because we do it right.

You were talking about interstate commerce. That's really where the big difference is going to come. When we can manufacture our Betty's and every other one of our products at our facilities and ship them to the other states. Why? Because we make a high-quality product today, that is consistent and that is what you need to win in this market.

RS: And building that operational know-how and strategizing for things that's going to build kind of a singular speciality in ways that people coming from outside the sector won't have built up yet. Is that the way you're looking at?

JL: Yes.

RS: All right. We'll be watching. I really appreciate it, Jon. Thanks for sharing so much knowledge with the Seeking Alpha cannabis community.

JL: Thank you very much for having me on today. I appreciate it.

For further details see:

MariMed CEO Jon Levine: Cannabis Industry Still Missing The Real Investments