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VIDEO: Liberty Health Sciences Inc. CEO George Scorsis on Partnering with Aphria and Operating in Florida

— MidasLetter Live

Liberty Health Sciences Inc. (CNSX:LHS) (OTCMKTS:LHSIF) acquires and operates US-based cannabis companies, including Chestnut Hill Tree Farm LLC in Florida, which represents 14% of the American medical cannabis market, totalling an estimated market size of over $1.1 billion. CEO George Scorsis talks about strategy and operation within and outside of Canada. 

TRANSCRIPT:

James West:     George, thanks for joining me today.

George Scorsis:     Thanks for having me.

James West:     George, let’s talk a bit about Liberty Health Sciences. What’s the business model?

George Scorsis:     It’s exciting times. You know, we definitely identified an opportunity in the US to really be pioneers. Of course, with being pioneers, we determined the opportunities with, first of all, a mass population; secondly, a quickly changing landscape with over 29 states currently approving medical cannabis, and that continuously moving forward, and we wanted to be the first and the largest in the US space.

So we decided to proceed with Liberty Health Sciences in acquiring, owning and operating licenses in medical states.

James West:     Okay. So the big question everybody has when they hear about a Canadian company in the United States, there was a bit of a dust-up with the Exchange recently where there was an indication that there may or may not be some clearing services for Canadian-listed companies with US marijuana assets. What is exactly the status of that situation?

George Scorsis:     Oh, we’re happy to say that TMX has already discussed their position, and there’s no bans from the CDS in any clearance with anyone that is currently on the CSC. So its progress is forward. We continue to raise capital in the space as you saw several weeks ago, and we’re going to go and quickly continue on our path to be successful in the US.

James West:     So tell me about some of the projects that you’re involved with.

George Scorsis:     Well, Florida was our first touch-off point, and Florida was important for us, because Florida really demonstrates to the other areas that we want to expand into that we can be successful in the US. Florida first and foremost has a medical system, and that’s really important for us, first and foremost, because what does that enable us to do? For a licensing agreement with Aphria, we can launch medically-faced produces within the entire marketplace. But Florida, as you’ve seen, it’s grown to 56,000 patients, one of the fastest-growing industries or markets within the US. But also what was important for us was that it allowed for a license that had unlimited canopy size, and that’s important for us. Because why? We can leverage that of what Aphria has really done, and that’s the IP and the know-how that we are gaining through our partnership with them.

James West:     Sure. What’s the percentage ownership Aphria has of Liberty Health Sciences?

George Scorsis:     37 percent.

James West:     37 percent. So this is, in effect, an Aphria subsidiary, not entirely owned though.

George Scorsis:     Not entirely owned.

James West:     But your product development and your go-to-market strategy in the US is in partnership with Aphria?

George Scorsis:     I would say primarily from the cultivation side. Obviously in Florida, you have a completely vertical market, with aspects of the business that are quite different than that of Canada. So we have processing and dispensaries as part of our license, so we have the ability to open up to 25 dispensaries. We own the complete vertical, which also allows us to obviously maximize our margins, but we own the patient journey, and that’s the most important part of what we’re doing, especially in a market in its infancy.

James West:     Right. No doubt. So what is the business model?

George Scorsis:     Well, the business model first and foremost is to go into states that are medical. And that is highly important for us. So you’ll see us really stay away from certain other states that many people find attractive – California –

James West:     As an operator, or as an investor?

George Scorsis:     As an operator.

James West:     Oh, okay.

George Scorsis:     As an operator, absolutely. So that’s first and foremost. The second piece of it is that we would like to go into markets that are highly restrictive. So Florida is a great example of it. It started initially with seven licenses, now 12, in a population of 20.6 million people. When you put that in comparison to what Canada has to offer from a population standpoint, a lot more attractive for our investor base, especially if you take a dominant position in the space.

James West:     Wow. And so, do the numbers sort of reflect the numbers in Canada in terms of percentage of the population that will gravitate towards medical marijuana, now that it’s a legal product?

George Scorsis:     Well, that’s part of our discipline in how we analyze markets. So we take a look at markets and we say, what are the chronic conditions that are proved within that marketplace? As we saw in New York, many people flock to that market, but it didn’t really pan out to be that great, because it’s very narrow what chronic conditions were approved for medical document. Where in Florida, over 30 percent currently qualify for a medical document; that’s 6 million people in the space. 56,000 people currently have a medical document and can get medical cannabis. It’s growing at a 20 percent rate month-over-month.

James West:     Wow. Okay. The other big regulatory question mark, I guess, is for the Federal illegality of marijuana in the United States. How is that going to affect your ability to repatriate income and capital to Canadian investors? Is there an issue there?

George Scorsis:     There’s no issue. You know, there’s been commentary made in the past; these are closed loop systems. We have proper financial backing in all of the states that we’re working in; we have complete transparency and setups with any bank or institution that we work in, in any state. So it’s not an issue.

Currently under the Rohrabacher Act, there cannot be any Federal dollars used to prosecute individuals within any states that have medical cannabis.

James West:     Right.

George Scorsis:     And that’s continuing to move forward.

James West:     Oh, great.

George Scorsis:     Jeff Sessions has clearly indicated that in his last statement, and we feel after the Leahy Amendment, it’ll be approved for another year.

James West:     Those guys are on their way out anyways, come on. But okay, so anyways, when do you start to recognize some revenue?

George Scorsis:     So we’ve already started selling. We have, currently, a very small base of patients, but where we’ll see a large influx of patients is in two weeks. We open up our first dispensary, and I don’t want to use the term ‘dispensary’ because we are taking a very different approach; we’re calling them Cannabis Education Centres, and why that’s important is again, the market’s in its infancy. We need to ensure that we’re educating patients first and foremost, because we need to make them feel safe with the use of it. Again, cannabis is an alternative to traditional medicines, in many people’s minds, and we need to educate how they use it, titration, onset. When they leave that store, they need to be comfortable, and that’s why we’ll have the highest retention out of any of our competitors in the market.

James West:     Okay. So is Liberty’s strategy strictly medical, or is there any contemplation of making ready for the opportunity in the recreational space in the US as well?

George Scorsis:     Right, for the time being, it’s completely medical. But what’s important with that, James, it allows us to really secure and establish the right operational plan. Operations is the key to anything, and we’ve seen it in Canada. Those that can really operate are going to be the leaders in the space, and with us, we want to establish a multi-state footprint with great operations, and if recreational does come to us in some of these states, then we are prepared. We are prepared with brands, we are prepared through licensing, we are prepared to act in a recreational landscape. But right now, we’re strictly medical.

James West:     Cool. All right, George, we’re going to leave it there for now. We’ll come back to you in a quarter’s time and see how you’re doing. Thanks for coming in today.

George Scorsis:     Thank you very much.

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