Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio Walking. The cannabis cultivator Golden Seed,
Speaker 1: is among the first of its kind to earn approval
Speaker 1: for a nationwide public offering from the SEC. Call it,
Speaker 1: if you will, a mini I p O. We're gonna
Speaker 1: talk about that. We're gonna talk about the cannabis business. Business.
Speaker 1: Excuse me. Scott Goldie is with us, he CEO of
Speaker 1: Santa Cruz based Golden Seed, and he joins us in
Speaker 1: our Interactive Broker studio on this Friday. Welcome, nice to
Speaker 1: have you here, Thank you, Thank you for having me.
Speaker 1: Tell us a little bit about your business. And I
Speaker 1: mentioned to you before we got going off air that
Speaker 1: we had jealous ality of cure Lea Finns. So cannabis
Speaker 1: is certainly and the industry something we've talked a lot
Speaker 1: about over the last two years, going from I think
Speaker 1: to focus so much on the Canadian companies a little
Speaker 1: bit more now on the US companies, and now we're
Speaker 1: just trying to figure out, you know, where the regulatory
Speaker 1: environment goes and what that means for the growth of
Speaker 1: the business. Tell us about our company, golden seed. We
Speaker 1: started a couple of years ago and UH initially to
Speaker 1: be a cultivator and to sell wholesale UH cannabis to
Speaker 1: the market. UH we got into a situation where our
Speaker 1: harvest was reduced UH with regulatory issues in California, and
Speaker 1: so we immediately went into the retail market with the
Speaker 1: product pre roll joint and it was very unique in
Speaker 1: that we included a turpene tropic typene, and that's really
Speaker 1: the Roman the flavor of the plant, so that same
Speaker 1: plants flavor intensified in the joint. And essentially the first
Speaker 1: two contests we entered, we were we won the Gold Cup,
Speaker 1: and our brand was really established and to create enterprise value,
Speaker 1: I think in cannabis you can't just be a cultivator.
Speaker 1: You have to have a lifestyle brand, and Santa Cruz
Speaker 1: is a perfect place for that. I have to say,
Speaker 1: I was in Santa Cruz over Christmas break that checks out.
Speaker 1: It is such a great laid back part of the country.
Speaker 1: I mean, what's interesting too is your you know, your
Speaker 1: background is largely in real estate, environmental land red mediation,
Speaker 1: so like tie that together for us, what have you
Speaker 1: seen from sort of that background that sort of lad
Speaker 1: you here. Well, you know, we have been a real
Speaker 1: estate developer in finance for thirty years, my own company
Speaker 1: for twenty years. About five years ago we started buying
Speaker 1: operating companies that had real estate. The first big acquisition
Speaker 1: was the Napa Valley wine train as that ends up
Speaker 1: with like seventeen other pieces of property we could develop.
Speaker 1: About three years ago the opportunity to buy a nursery
Speaker 1: in Santa Cruz County that sells conventional plants that came
Speaker 1: to us and so that business is essentially funded the
Speaker 1: start of the cannabis UH company. We've parceled off twenty
Speaker 1: acres to have the appropriate zoning and started that operation.
Speaker 1: So it's a real estate play and it's also an
Speaker 1: operating company play. But um, so give us a little
Speaker 1: bit idea of the outloo because I think, you know,
Speaker 1: we're trying to figure out kind of where does the
Speaker 1: industry go from here, because I think the regulatory environment
Speaker 1: is taking slowerty evolved, certainly on a federal level. Then
Speaker 1: everybody anticipate anticipated in more states certainly are signing on
Speaker 1: in terms of medical marijuana and recreational Um, how do
Speaker 1: you see it though? For us out in California, it's
Speaker 1: still insulated, right because it's not a national market. The
Speaker 1: regulatory environment and California is very difficult. Uh. The legal
Speaker 1: market last year is about three billion. The black market
Speaker 1: and California is estimated at eight billion. So you know,
Speaker 1: until they can get some really strong compliance and enforcement,
Speaker 1: that's going to continue to be a challenge. And that
Speaker 1: challenge is the accepted industry, right or the legalized industry.
Speaker 1: On the flip side of that, you know, if you're
Speaker 1: a producer of legal cannabis, there's a great market for it.
Speaker 1: And so how did how does that imbalance get solved?
Speaker 1: Like what are the sorts of regulations, the sorts of laws,
Speaker 1: or I guess maybe just the sorts of enforcement that
Speaker 1: need to happen to sort of bring that essentially the
Speaker 1: other way, right, that the that the legal outweighs the illegal. Well, first,
Speaker 1: I think the regulations need to be clarified and may
Speaker 1: be simplified. It's been kind of a disaster the way
Speaker 1: it's unfolded in California. The big hurdles for legal weed
Speaker 1: is the the pesticides, the testing that's required, the taxes,
Speaker 1: and there's very arcane rules that are different different by
Speaker 1: every jurisdiction. I'm in three counties right now, three sets
Speaker 1: of rules. So it's very this is this is largely
Speaker 1: regulated on the county level, not the state level, and
Speaker 1: the state basically delegated the jurisdictions the right to create
Speaker 1: their own ordinances. Taxes are different, everything. It's different in
Speaker 1: building permits, standards. So it makes it really hard to
Speaker 1: have an enterprise that's in multiple areas. I mean, here
Speaker 1: here we've talked about how you have to be vertical
Speaker 1: in in a single state because of the lack of
Speaker 1: obviously federal regulation or or anything like that. I did
Speaker 1: not know that it been deeper way down county County.
Speaker 1: I think that's ultimately gonna be a challenge when that
Speaker 1: becomes federally legal. Is you have all these different states
Speaker 1: of their own rules, all the counties and jurisdictions within
Speaker 1: the states have their own rules, and I think creating
Speaker 1: an order to that type of market's gonna it's going
Speaker 1: to be a challenge. So, okay, so when do you
Speaker 1: see a more orderly market like is it? Can you
Speaker 1: even do even have that kind of visibility to be
Speaker 1: to say that, I don't know, it's gonna be another
Speaker 1: year or it's gonna be another five years, and it
Speaker 1: really is down to the federal government. I think that
Speaker 1: I think we're within five years it will be federally legal.
Speaker 1: Might even be sooner than that. Recreational and medical, Yeah,
Speaker 1: I believe that. I actually, you know, in the short term,
Speaker 1: just from my own company's perspective, it's not bad that
Speaker 1: it is federally illegal because I can establish my brand
Speaker 1: and presence in California, which is the largest legal market
Speaker 1: cannabis in the world. So we'd be remissed because we
Speaker 1: want to talk to you about disapproval that you got
Speaker 1: to do a nationwide public offering to offer shares to
Speaker 1: the public. Talk to us a little bit about this
Speaker 1: and why you chose this route. Well, you know, the
Speaker 1: capital markets and cannabis are difficult, and our company were
Speaker 1: not friendly right now, very very much so, so we
Speaker 1: self funded until we got to the point where we're
Speaker 1: very close to turn the corner and going cash flow positive.
Speaker 1: We came to the market the first cannabis company in
Speaker 1: the United States to be qualified by the SEC to
Speaker 1: sell shares in our private company regulation is unique and
Speaker 1: that you don't have to be an accredited investor, so
Speaker 1: we can sell to anyone in the United States or
Speaker 1: even in the world. So after a little bit five
Speaker 1: weeks we have about people that have applied for investment.
Speaker 1: There's a clearing mechanism, so about eight hundred seven hundred
Speaker 1: official investors. The mechanism background checks. You have to provide
Speaker 1: your I D. California requires that takes a couple of
Speaker 1: weeks to clear. Uh. You know, it's very simple, straightforward, sus.
Speaker 1: Our website is owned Golden seed dot com. You can
Speaker 1: pay it the credit card minimum investment of only a
Speaker 1: hundred dollars. But the cool thing of ISZI creates brand
Speaker 1: ambassadors for our lifestyle brand and you know, to have
Speaker 1: national exposure before Canadas goes legally nationally. I mean, we're
Speaker 1: building a we're building a base in all these states.
Speaker 1: So how has no one done this before? I think
Speaker 1: people are intimidated by the fact the SEC is a
Speaker 1: federal agency and could you really get through that? And
Speaker 1: it's not inexpensive to do it, and so we took
Speaker 1: the risk that we could get through it. Great Securities
Speaker 1: Council Kendall Almerico, He's done other regulation A offerings and
Speaker 1: it's been a great experience, And so is this a
Speaker 1: precursor to a more traditional I P O or what
Speaker 1: what does this get you from a financial perspective and
Speaker 1: what happens next in that regard. Well, this offering is
Speaker 1: you can have it open for a year. Our offerings
Speaker 1: for ten million dollars. We can close it at anytime
Speaker 1: if we want to look at changing the valuation. Uh,
Speaker 1: it's gonna how sticky is it that? In other words,
Speaker 1: if someone makes an investment and then they decide I
Speaker 1: don't want to be in it, is there a commitment
Speaker 1: or is it liquid? Can they get out of it?
Speaker 1: They'd have to sell out to another individual, so they'd
Speaker 1: have to find somebody. There's not a market for it.
Speaker 1: Uh yeah, But so our goals uses to reinvestment facilities,
Speaker 1: marketing and building the brand and just keeping our debt low. Alright,
Speaker 1: So tell us about how you see this market growing
Speaker 1: for you. What does it mean to be a lifestyle brand?
Speaker 1: What is it? What does that mean in terms of
Speaker 1: different products? You mentioned him, but give us the whole
Speaker 1: portfolio as you envision it. Well, what I like to
Speaker 1: say is that we're going to be one of the
Speaker 1: strongest vertically integrated companies in both hemp and in cannabis.
Speaker 1: And you know early on when I was stocking to
Speaker 1: private equity groups, being a cultivator is not going to
Speaker 1: be creating a lot of enterprise value. You know, Coca
Speaker 1: Cola is going to buy a Gatorade, They're not going
Speaker 1: to buy a production facility, say at a big valuation.
Speaker 1: So for us, it's continuing to grow that brand, get
Speaker 1: exposures and stakeholds in other states, and we think that
Speaker 1: will be very attractive. You know when the consolid consolidation happens,
Speaker 1: and you do anticipate that there's going to be more
Speaker 1: of it there or there has to be, right absolutely,
Speaker 1: because economy is a scale, right. We heard that from
Speaker 1: Pure Leaf that basically like we're at this moment where
Speaker 1: there are a lot of smaller players that are going
Speaker 1: to uh that are going to get uh sort of
Speaker 1: either put together somehow or another. Uh So how expensive
Speaker 1: is expansion though? Because you do have to be essentially
Speaker 1: vertically integrated state by state, you can't really have any
Speaker 1: kind of cross business, right, We're not planning going to
Speaker 1: any other states until there's potential to license our genetics
Speaker 1: and other states. We've been exploring that but we won't
Speaker 1: be doing that anytime soon. A lot of business in
Speaker 1: California at this point, it's the largest legal market in
Speaker 1: the world. What do you see is the biggest risk
Speaker 1: to your industry right now? I think the regulatory risk
Speaker 1: and kind of the confusion around that causes a lot
Speaker 1: of expense, a lot of uncertainty, and it's really kind
Speaker 1: of rundom how they enforce. And do you imagine that
Speaker 1: you will do acquisitions? Uh, you know they're in California
Speaker 1: because there are other smaller players right now. We're looking
Speaker 1: at some opportunities right now where we may bring some
Speaker 1: in under our umbrella. And I think again, if you
Speaker 1: have a company that's looking to acquire, you have multiple
Speaker 1: lifestyle brands that would be a good target. We also
Speaker 1: can combine your cultivation, right right, Yeah, I mean this
Speaker 1: is a classic sort of scale business and in some
Speaker 1: place I would imagine, but I do wonder about cash
Speaker 1: burn right as you wait for the regulatory environment, it's
Speaker 1: going to be kind of tough, or is it. Once
Speaker 1: we start our cultivation. Our first starvist will be in May. Yeah,
Speaker 1: that will be the turning point. Okay, Hey, good to
Speaker 1: check in with you. Very interesting as it grows up,
Speaker 1: as it were, all right, it's got Goldie? Is this ce?
Speaker 1: I did? Well? You know you? What did you do earlier?
Speaker 1: You did something earlier, Dear, I don't even see how
Speaker 1: you can criticize that was a really bad one. Scott
Speaker 1: Goldie as the chief executive abuser of gold and See
Speaker 1: based out in Santa Cruz, California, here with us in
Speaker 1: New York City today