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3 Deep Questions with Merida 06 : George Scorsis of Liberty Health Sciences

3 Deep Questions with Merida 06 : George Scorsis of Liberty Health Sciences

this is Mitch Berkowitz the managing
partner of Merida Capital Partners and I am delighted for our deep our three deep
questions series to bring on George Scorsis as the CEO of Liberty Sciences who
I had the deep pleasure to meet several years back and just jumping right in
Liberty health is a multi-state operator we use MSO to describe you guys and you
know four years ago we had a chance to have a really deep conversation about
where the industry was going in at that point I was still a little focused on
the multi-state opportunity myself before starting Merida and so you know I
the opportunities are overwhelming I as I just spoke with Vic Neufeld about the
information we’re able to gather from what we’re seeing and you and I speak
enough to know how many crazy things are coming out the pipe so what does take us
inside like the daily of Liberty health and the prioritization and how do you
achieve things knowing there’s so much on your plate on any one day yeah you
know it’s amazing we met a little over two years ago and I remember that that
dialogue like it was yesterday sure I said to myself Wow
where do we start with this I’m just coming off a a acquisition in Canada
-right- I’m looking at the u.s. space because you know still and I believe
strongly it’s it’s the it’s the biggest opportunity for any of us and we’re
seeing it we’re seeing it in the capital market – from a guy who comes from Red Bull that’s right -thats quite large- and I still remember us
just bouncing ideas for hours and talking about States and the regulations
and and then boom you go back and you say where do I start
right and we really took a disciplined approach we said what is the state that
has the biggest opportunity you know there’s population there’s there’s
chronic conditions there’s limited licenses but then you need to look
yourself in the mirror and say what’s your expertise right and we believed
because we come from a school of high regulations in Canada that very strongly
regulated state would be beneficial to us but then we could also work with the
regulators to make it make higher barriers to entry so we entered into
Florida and I always believed you can jump at 20 opportunities or do one
really really well and that comes from -right- the red bull discipline -sure that I had we
never focused outside of energy drinks we just said let’s really win at energy
drinks and we said let’s really win in before we move to other states and you
know we’re disciplined in it we we believe that we’re the best medical
platform in the state we may not be the biggest right now but definitely we’re
growing to that point also not building in a single state that’s one of the challenges -thats right-
that that’s and that goes back to the prioritization elements which is I mean
one thing I always admire in space is the people who do take a more disciplined
approach because as you know as an investor a professional investor you
know corporate behaviors a huge focus and I know it’s come up more than a few
times with us and we’ve had some experiences with people in corp
behavior so you know while you’re prioritizing again just take us through
you’re seeing a million opportunities you’ve been disciplined you’re not
overspending you’ve taken a very circumspect approach to everything so
have you ever woken up one day and said you know I should spend like everyone
else is I should just go crazy dilute my stock spend the war chest and and you
know I’ve even you know bounce some ideas for me and you say it doesn’t fit
it doesn’t fit my discipline method so so you know have you ever woken up and
what goes through your mind when you see some of your competitor spending like
like dilution will go on forever yeah and it’s tempting it’s happening in
the industry it’s tempting everybody’s doing it
they’re diluting they’re using expensive paper for acquisitions but the day of
reckoning is gonna come and when that day of reckoning comes you have a real
business and and actually we’re seeing it we’re seeing it from the investors
now you know in the last few weeks we’ve seen a few of the Canadian LPS release
their quarter tees we’re seeing high burn rates we’re seeing a trend
tremendous amount of spend and we’re seeing so-so revenue and then you’re
seeing the multi-state operators in the US come up with these tremendous numbers
and we need to be disciplined you need to I have over a hundred and eighty
opportunities in my due diligence folder right and I’ve jumped at two right ya
know I’ve always known it’s a while you may get excited about something you seem
to for you at least for in my experience you know I spoke to Pete Kadens from
GTI before and you know even they’ve been very disciplined in it I don’t know
if it’s coincidence but the the multi-state operators that we tend have
the best relations with are the guys who are a lot more thoughtful about their
investment approach because Merida’s we’re known as a pretty tough check to
get as well right so you know so that leads right into my
second question which is we know the pain I know
unlike a lot of us I know the pain of losing a license process right that is a
rigorous tough process in action my neck my next commentary is about the
licensing the what we would want to call the risk licensing process for
medical so and we’ve worked together on one so tell me what goes through your
mind when you know that a decision is coming the fear the pain and then you
know I know what it’s like to wake up the next day and and and have all those
doubts tell me you know really like you’re a 300 million dollar company
maybe more I don’t know your market cap as of today it could be at much higher I
don’t track it they they you’ve done great but you’re competitive guy you’ve
been very successful you are a net room you’re one of the Canadian guys who went
fully eight United States what happens on that next day you know this this
industry is moving so fast yet it’s such an opportunity for us to all grow
professionally as well right sure and I can tell you one of the most heart
wrenching pieces that I had over the last year was when we didn’t get the
Ohio cultivation license and you know that was a great learning for me because
we were extremely confident we have great SOPs we have great
processes we have a great team backed by backed by Aphria – backed by Aphria great
financial acumen great partners in this state big balance sheet I mean you know we had it all
going for us and then you get the news that early in 2016 that’s right but but
but you know what goes through your head that day it’s disappointing but
ultimately I was disappointed because I let down my shareholders sure and it’s
not about me it ultimately is about my shareholders
and it’s about you know what this would have brought as an accretive piece of
our business right – bringing share value up ultimately but you need to just
get your head corrected really quickly and just go and you can’t sit on it and
you know what we learned from it and guess what we were successful in our
processing license -sure- we’re successful in our dispensary license -I know a little bit
about that that’s right if you helped us with
and ultimately where are we today now to complete that full verticle we have the
opportunity 12 months later to actually go purchase a cultivation license and we
have two other assets in that state so it’s a great learning for me personally
but it really is about the shareholder but you know what that loss really
taught me a lot yeah well if you remember and I believe we met after you
know I always loved I always talked up Maryland as a state is this right you
you had lived in so it was the state we discussed and the disappointment of that
you know you at that point you didn’t know what that disappointing I felt like
right and there’s no way to educate someone on that and I and I think it’s
interesting because in Maryland the stick-to-itiveness you know we were able
to get something done there with with a nice local local partner and you’re
right the the feeling of rescuing an opportunity sometimes that can be good
but like a relief pitcher who lets up a run in the ninth inning right now it’s a
little different two years later you can you can forget there’s another game
right the next day so there’s probably a lot of great opportunities in it and I
would say that you know I remember speaking to you after that loss and that
disappointment it’s it’s tangible because you care about your shareholders
and that’s why you haven’t diluted as much and you know so that that leads to
a very natural question which is you’ve met thousands of people in the space
right give me a sense and just it’s it could be a funny anecdote it could be
anything you want open its your floor what’s the funniest thing you’ve seen
interpersonally because we all know there’s there’s some crazy thing no
names or anything no identifiable right things or you can say what was something
that you saw that you said I’m not a Red Bull anymore you know it could be a net
room because I know you’ve I’ve heard some stories you know early canada days
AMCPR days or ACNPR that’s right yeah so what was one of those hey wow
I’m not red at Red Bull anymore look you’re seeing it from the inception
they’re the the true business acumen just wasn’t there in the industry and
and I come from a massive infrastructure where we were extremely disciplined in
terms of our sales marketing having subject matter experts right really who
is a subject matter expert in this industry many cases it was the grower he
was really the only one we’re seeing the industry change you’re seeing you know
we’re seeing just most recently we’re seeing very high-powered marketing
people come into the industry Cresco just brought
we’re seeing Jakob Ripshtein – Jakob Ripshtein of Aphria and you’re seeing people
who are extremely skilled enter but day one I can tell you what’s it like that
it was scary but I’ll tell you one of the the most interesting pieces when I
actually just said wow this is a really different industry well as I was
presenting at a conference and the gentleman before me was presenting and
he was talking about the impact that cannabis will have in reducing opiate
addiction sure in the middle of the presentation I see the gentleman just
standing there and he starts sweating and he collapses in the middle of
presentation Wow and as he’s on the ground and we all run
to him he told us that he took too many painkillers before he presented so I
just thought you know now you’re making me want to tell us more although I’m the
interviewer I guess in theory but this is just a conversation amongst friends
you know I would just say that we host these connectivity dinners you were at one
and one of the professionals who was representing us I guess took an edible
and midway through we were letting companies speak someone was screaming
and it was the person I hired to actually help us manage the event so if
you just see things of this space you wouldn’t see anywhere else but it’s
changing yeah but then you get you also get to meet great people you know to
develop the relationships you develop the ecosystem you built the the connectivity
and that’s kind of one of the rewarding things and you know getting a chance in
a white space space where I get to do this and have conversations that are
educating people and and have an insight you know people may not know a lot about
Liberty Health or they might not know about a lot about George Scorsis that you
were one of the early guys at Metrim where you know one of your colleagues
Brad Rogers became the right the he was at Metrim and he ended up at Canntrust and so you know it’s um the coaching tree kind of thing and I think
of all that connectivity so you know with with that and you’ve been so
gracious to give your insights I’m gonna ask you a question I want you to
speculate a little bit it’s January 1st 2020 mm-hmm
other than California which has the most population what is the what is the
largest state whether its adult use or medical in the United States here’s a
liberty health in that state if you might be there already could be Florida
right so I guess I’m kind of I’m giving you a little leeway there and what do
you think the market cap of the largest multi-state operator is at that point I
don’t care who it is what do you think the market cap
so we’ll work backwards what do you think On January 1st 2020 what do you
think the market cap of the largest multi-state operator the largest now is
probably what 3 billion that’s a 3 bill okay so what do you think it is at that
point look I think I think ultimately what you’re gonna see is you’re gonna
continue to see consolidation -sure- in the space there’s never going to be a
space that you’re gonna see 12 multi-state operators be successful
right okay you’re gonna see competition increase you’re going to see licenses
continue to increase but you’re also going to see consolidation acquisition
happen so I’m not sure you’re gonna see two or three clear breakaway stars okay
like you saw in the Canadian market yes like you’re seeing in the global space
capital efficiency or a lot of reasons for that
that’s right but I still think you’re gonna see the same thing there’s very
few industries I come from big beverage very few industries that you don’t see
the top three take away 70% of the market share and but I do believe though
that market share as much as market cap but I do believe I do believe that they
will be Correlated okay and I do believe the reason will be is the real breakaway
stars in the industry will be the ones that are disciplined the ones that are
disciplined with spends that are truly target the states that will make a
difference but are building the infrastructure they will also look at
things differently multi-state operators are not great because they’re in every
state they are great because they’re in the right states that’s true
and the reason why I’m saying that is when this becomes a free market and
goods can cross state lines of course there’ll be different taxation benefits
-distribution models- it for sure but let me use beverage as a great example we have
three distribution centers in the entire country of the US we didn’t have them
in 32 states right you will not see that happen certain individuals are taking a
discipline approach they will be the breakaways now let’s go to the next
question because because you asked me what the market cap will be right
there’s no reason why you will not see in 2020 some of those players be upwards
of 10 billion okay take a look what’s happening in Canada of course a lot of
the money in Canada is now moving to the US but we’re seeing quickly you know
three four billion dollar plays right why wouldn’t you see a ten billion
dollar play hey from your ears so on that note George thank you so much for
doing this thank you great insights George Scorsis Liberty Health
Sciences -thank you for having me- as always my friend so great to have you here

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