Search
  • Beverly Stoddart

A New Hampshire Native Answers the Call to Cannabis



Paul Morrissette has a lot to say. Born and raised in New Hampshire, he has been an auctioneer for the better part of three decades and the speed with which he talks matches the cadence as he would take bids and declare a product sold. But we are here to talk about his newest passion and business, cannabis. We meet on a rainy day at his Penacook location for his company, Regal Auctions. The building is a long brick structure filled with household items for his next national auction. His auction business is in New Hampshire. His cannabis business is in Maine. I know Paul through the Union Leader’s weekly ads. So, how does an auctioneer get so deeply involved in the cannabis business?

“I've been an auctioneer for thirty-five years and we've been successful every year. I'm not just an auctioneer. I do a lot of real estate. I've owned over 200 units of real estate mostly in New Hampshire but in other states also. Since I'm in the auction business, it exposes me to a lot of people. One of them was a customer of mine and a close personal friend and partner, Tom Cusano. Tom Cusano is probably the largest cannabis landlord, certainly in New England and maybe on the East Coast. Sanctuary ATC, grows in his mill in Rochester. They're not the only tenant. His mill in Rochester, the SAI Mills is 230,000 square feet.”

So, Sanctuary is one of the four ATCs in New Hampshire.

“There are three companies that serve the four areas. The state was split into four areas when they did HB 573 and what happened was I was actively involved in the beginning. How did I get involved? Opportunity. I'm an entrepreneur. I saw it coming. I was a real estate guy and one of the big parts was securing real estate. I wanted to get into it and so we watched when they did the medical laws. Besides that, my friend, Tom Cusano, was involved in it then. He got Sanctuary at the end. He also owns properties in Maine where medical growers grow and in Massachusetts on One Cabot Street in Holyoke, Mass. He owns a large mill there that was sold to him by the City of Holyoke and got a big opening when they were trying to bring somebody in to specifically develop cannabis in the old large commercial buildings. My brother is one of the growers in the building. There are many cannabis growers and manufacturers going in that building. He also owns another building close by in Turners Falls, Massachusetts that's another mill and that one has hydroelectric generation in it, as does his Rochester mill. He provides some of the power for cannabis.”

You connect with him, and he says I'm going deep in cannabis, and you want to get involved.

“I absolutely want to get involved. I had gotten together with a Massachusetts company called MariMed. They are one of the big players in the cannabis business. They needed somebody in New Hampshire for one of the New Hampshire ATCs (Alternative Treatment Centers) because you had to have a New Hampshire resident actually hold the license and the majority of the board members had to be New Hampshire citizens which is an attempt for all the states to try and keep the licenses away from the big corporate guys. It doesn't work because you need giant amounts of money.”

“There's different ways to do it. We did it here vertically integrated. There's basically three aspects on the cannabis business. Testing has to be independent. It's hard to pull off all three. The first part is cultivation. You make a plant. All cannabis products that contain THC come from that plant. The plant does one of two things, It either gets used as a raw product where they dry buds of the flower, and they get sold to smoke or it gets processed into products. That's the second part, manufacturing. In the manufacturing process there are different ways to extract it. THC is a trichome on the leaves of the plant. On the bud or leaves of the plant, you can see triangular shape and that is the THC which is what gets people high. In the manufacturing process, they use a solvent like C02 or butane and they reclaim it. What comes out looks a lot like honey. That's concentrated oil used to make gummies or vape cartridges. A licensed cultivator who grows can sell products to anybody else up the chain that is licensed or vice versa. A cultivator can sell to a manufacturer and a cultivator can sell to a retail store. The manufacturer normally buys from the cultivator and then processes it and then sells it to the store. “

How did cannabis come to be grown in buildings? It’s a plant. Plants grow outside.

“A lot of corporate guys got involved in the business. It didn't seem like they wanted the farmers to be involved with this so much. They saw opportunity in it. They wrote laws and forced cannabis to be grown inside buildings under lights which uses a lot of electricity. I was with a corporate guy and I sat at a desk in a room full of guys that are in a huge cannabis company where they talk more frankly about their intentions. The New Hampshire ATCs are not really making any money. They came here for future legalization and spent millions of dollars and now the state wants to stick the thumb in their eye after they've done all this. You had corporate America as this went from state to state. When New Hampshire wrote some of their medical bills they didn't know what to write. They took some from Mass and some from Maine. Mostly the plants were grown in commercial mills and they were spending $300-$400 per square foot to renovate the buildings and then put these things under lights which do give you higher quality but they, for the most part, ignore the fact that it is an agricultural product. They put it in cities which is politically expedient for them, too. The cannabis gets directed to where they think they can make most of the money. On top of that, you need people. If you're in Groveton and you have a big grow, where are you going to get the people? You have to bring in knowledgeable people who don't want to live in the willywags. They want to live in cities. That's how it moved across the country.”

“One of my partners who is the COO of one of the big Mass companies that's growing, they let him grow outside this year. He grew an acre of weed outside at the old Bayer Pharmaceutical plant in Fitchburg, Mass. The fallacy is when cannabis comes all this crime comes in. That's not what happens. The opposite is what happens. We opened in Lebanon, Maine last week. It's a 2500 square foot converted restaurant. We have 36 cameras in the building that goes into a central system that's kept for 42 days. You think you want to break in that building? There is very good security no matter how you're growing it. Now what's happening is markets are maturing. Growing it the most expensive way possible might have worked when you had monopolies in medical dispensaries, but it's not going so good now. I had this in my testimony before the Ways and Means committee, the big cannabis companies are crashing. The time is coming when they will go out of business. One of the largest cannabis companies in the world, is Canopy Growth. They are a Canadian company which has an option to buy a big American company. Their stock in the last few years is off seventy-five to eighty percent.”

Why is their stock dropping?

“They're not making a profit. It's not legalizing fast enough. The laws aren't going their way. The market is maturing. Prices are coming down. My partner, Byron Staton, grows in Fitchburg, Mass. He grows in modified green houses. You have composite buildings with an opaque roof, and they have supplemental lighting. It's a fraction of the cost of growing in a building. It was a natural evolution to go from one to the other. A lot of the grows in Massachusetts are in big buildings. Holyoke, Mass is like the epicenter of the cannabis business in Massachusetts. They grabbed it and liked it because they were an old mill town with a bunch of empty buildings which is one of the places that cultivation goes to.”

In New Hampshire we have ATCs, and the fight is to get it legalized.

“The ATCs want it legalized. They have a patient base of approximately 10,000 people. Thirty-two percent of the state uses this product. That’s 400,000 people.”

How do you know the percentage?

“From industry polls and behind the scenes talking at events. There has been a lot of polls taken. When you talk behind the scenes, there is a lot of hypocrisy from the legislature, I know for a fact with regards to this product. Do you know how many times I've heard; I don't want my kids seeing me voting in favor of marijuana while I'm telling them that they shouldn't be smoking it. There is some of that. It gets less and less every year as this product gets accepted.”

What is the condition of the ATCs in New Hampshire?

“What I hear through the grapevine for the ones who've I've talked to, they are about breaking even because they have a small patient base. The difficulty getting the medical card is harder than other states and frankly, the medical industry existed because the retail adult use industry didn't exist. If it's the same product it's true you can go into a medical dispensary and talk to someone who can give you advice. But, once you know what you're taking you can go to a retail store. If there's a retail store two miles from you and in New Hampshire, you've got to drive an hour to go get your medicine. I can tell you what's going to happen. What happens everywhere that state's become legal the first thing is the medical people want to convert to adult use and then the medical thing starts to fall apart. It contracts. It still exists but the customer base is not there. It doesn't go completely away because in a lot of states, they don't tax medical cannabis. It's medicine. It's a little bit cheaper. There's a big fight going up in Maine now because they've legalized. They have compassionate caregivers that grow up there.”

What is a compassionate caregiver?

“You're a patient for cannabis, perhaps a cancer patient and you're at home but you can't travel. You need someone to help you with your medicine and go pick it up and be responsible. So, a compassionate caregiver is someone who doesn't necessarily consume the product, they act as a caregiver for the person who needs the product. They go pick it up and bring it back or get advice. The patient can call in an order and then the caregiver picks it up on their behalf and brings it to them at their house.”

How do they track the caregiver?

“The caregiver is registered with the state. In Maine, they can grow, and they can manufacture, too.”

How many plants?

“Here's how it works. You apply to the state of Maine for a compassionate caregiver license. They don't necessarily grow or provide product. You might just go to a dispensary. That compassionate caregiver can make their license bigger. They can grow at their house. On top of the annual fee, they can get a license for cultivation two ways. They can pay based on the number of plants. On the application, for one plant to ten plants the annual license fee is $200. The licenses can go up to like fifty plants. That's a lot. Our ATCs only had seventy plants to start with in New Hampshire. Here's how the ordinance was written that they could start with seventy plants and then they could add six plants for every patient they registered. The medical card holders can't go to any one of the medical ATCs. You can only go to the one that you registered at. That's how it developed in New Hampshire. In Maine, the compassionate caregivers generally speaking were smaller. There is over 3,000 compassionate caregivers in Maine. These 3,000 people can grow. They can pay by the plant or now they're offering a new license that says you can grow anything you want up to 500 square feet. They can stuff a 500 square foot room with as many plants as they want. That's a lot of plants. You can grow. You can manufacture. And, I'll say that it is not very regulated. There is no maximum amount of milligrams of THC.”

You could put one thousand milligrams in one chocolate bar.

“It makes it interesting for the black market. Where do you think the stuff is coming from in New Hampshire for all these people who are smoking it in giant quantities? It's either being grown here in New Hampshire or Vermont or Maine where there is a system in place. I think a very larger percentage of what's coming to New Hampshire and to Massachusetts in the black market, is coming from Maine. Every person over twenty-one can grow in Maine. You can grow up to six plants in your house. It's like growing a tomato plant. They put it into the law. In New Hampshire, they've tried to put growing through. They cannot grow here. They can consume only goods they buy from the four medical dispensaries.”

“The New Hampshire medical ordinance was supposed to have a study done after five years after it was signed. It was to give a report on whether it should even be continued. They never did it. And when you call and talk to the attorney general or Department of Health and Human Services, there's no answer for it. It's been seven years. Two years ago, they started it and it didn't go so well and we didn't hear anything. They fight about these laws. They put these laws together. Then they don't even follow the laws.”

How does a New Hampshire citizen born and raised here end up in Maine for his cannabis business?

“My friend, Tom Cusano, the real estate guy, and I heard rumors that they were going to vote in Lebanon, Maine to allow adult use cannabis. That's on the side of Rochester, New Hampshire.”

Let's talk about East Coast Cannabis.

“East Coast Cannabis has three partners. One of the founding partners, Dana Brearley, was a compassionate caregiver and medical grower and seller in Maine. He's from the Concord area in New Hampshire. He and two others, Ryan Ward and James Folan decided when Eliot, Maine was going to allow recreational they were going to try and get the license there. And, they did. They became vertically integrated. They developed Eliot. Then Tom and I came along last year. Maine had only just approved recreational cannabis November 2021. I think these guys are the superstars in the cannabis business. They are out of medical now. That's what happens. Medical is a small endeavor. Especially in Maine, there's thousands of suppliers because tomorrow you could be a compassionate caregiver. They knew to switch but it is a very complicated process. There are about seventy-five adult use stores in Maine now. The Eliot store did 10.3 percent of the business for the whole state. Our store in Lebanon which we just opened, will eventually be vertically integrated. We are working on other things that we are developing with East Coast Cannabis. We brokered to become part of East Coast Cannabis. That's the storefront we have and the manufacturing license. We converted this old 1950s diner, Miner's. It belonged to my partner’s aunt and uncle who started it in the 1950s. He was renting it to somebody. When we saw the location and getting cannabis in town, we worked with the town and ended up with a retail license and a manufacturing license that we're partners with East Coast Cannabis. We have two-20,000 square foot cultivation licenses. It takes years and are in the process. We have a nursery license there, too. The State of Maine is going to be collecting all the sales tax from the people in New Hampshire. Most of the license plates that come in the last week say, Live Free or Die on them. That's what's going on.”

Does New Hampshire care that its residents are going to Maine and Massachusetts to buy cannabis?

“The UNH poll said seventy-four percent of Granite Staters approved legalization. What else is polling at seventy-four percent?”

“I've never seen opportunity to develop like this, you know like the tech boom. We thought the cannabis industry would consolidate once federal legalization comes. But the feds have largely ignored it and now it's to the point they couldn't make an arrest if they wanted to. It's in thirty-five states. Major national brands like Cookies does retail stores. The first one on the east coast opened in Worcester. Those guys can't cross state lines. One of the bigger ones is Belushi Farms, Jim Belushi. He has a show on the Discovery Plus Channel called Growing Belushi. Jim Belushi, Dan Ackroyd, and his cousin, Chris. They have a cannabis farm, and they are starting to market the Blues Brother's brand across the United States. The CEO and the cousin, Chris, were with me for two days last week to try and make a deal with us. What these national brands have decided to do is partner with somebody in another state. It's very convenient to partner with somebody that is vertically integrated. If you wanted to take a brand like the Blues Brothers into the state of Maine, you'd have to go to the state and find somebody who could adequately grow it, find somebody who could adequately manufacture it, which usually aren't the same two people, and then find somebody to retail it. It's a complex process because they can't cross state lines. The few people who are vertically integrated, they're in the catbird seat. You have something to offer no one else has. If you have large cultivations, we can supply other retail in the state. We can manufacture for them. The deals we are making are vertically integrated deals with national suppliers looking to get and break their brand into markets that you already have access to. The state of New Hampshire doesn't have that. They will be white label cigarettes at their stores if they try that. The whole thing they are trying to do is convoluted. They don't know anything about anything they are doing not even the most basic stuff. Then they temp fate with the feds on top of it because technically this isn't legal. Some day you might get a different president who will make an example of somebody in the cannabis business. We don't like the fact that the state of New Hampshire is not taxing cannabis. Do you think the state pays tax on the booze they sell at the liquor stores? No.”

“There’s an IRS rule called 280E* that’s for cannabis and drug companies. It's the federal government pigging out on taxes and saying we will tolerate what you're doing but you can't write off this and that. We pay tax on what traditional business doesn't pay taxes on like advertising, electricity, maybe even employees. We pay this huge inordinate amount of tax federally in Maine. In Maine, we pay Maine sales tax, Maine business profits tax, and we pay federal income tax that doesn't allow us to write off 90% of what a traditional business is allowed. New Hampshire thinks it's going to go around this and they are going to clobber Vermont, Massachusetts and Maine. They will hire a contractor to come in and grow for them or manufacture. This person will go out to make the deals. The sole buyer will negotiate to buy their crops. If they don't buy their crops the company will have to destroy what is not sold.”

“The federal government allows us to operate, and they tolerate it because they collect and exorbitant amount of tax from anybody that's in business. I was one of the first ones to educate Representative Abbas who wrote HB 1598 about cannabis when he got there a couple of years ago when we were doing another bill. They are totally clueless. They think they are going to go into the cannabis business, and they are going to set up stores. All their numbers are wrong. The problem they have is they want to put ten stores in, but they've got an opt-out provision in the bill. The projections are on the moon right now because if you cut out the best sales area how are you going to project sales? Their numbers are extravagantly high. Now we know. It's absurd.”

“The problem is with the federal government. Number one, you aren't paying any tax. If the feds decide they want to make an example of somebody in a big way what they'll say you aren't paying federal tax.”

This is just a theoretical threat the federal government is holding over the state.

“All the cannabis businesses that exist in the United States are being tolerated and are paying federal taxes and they are private companies. All of a sudden, the Republicans want to do a communistic thing and have the state control private business. Nobody has tried this anywhere. The feds have said we're not going to touch private businesses. If you are New Hampshire and it is going into the pot business, it is saying we are not going to pay federal taxes. We don't pay income tax. New Hampshire isn't writing the feds a check for the profit they make on liquor. They're putting that in schools. They want to take cannabis another private product and they want to sell it. The Republicans have been holding up legalization for years. Now they have a plan and Sununu has signaled that this is the only legislation that he'll sign for cannabis. He's facing a seventy-four percent approval rating for this in the state.”

Let's take that process and give it to me point by point. It gets into the cannabis store, and they need product so who do they go to?

“The state is going to hire one person that's been in the industry who is going to come in and decide how much the state is going to need. In the budget they have ten stores. They are figuring $700,000 for ten stores, $70,000 per store. My store in Lebanon that just opened last Wednesday wholesale we spent $270,000 for the stock in the store. But New Hampshire is going to have bigger stores than mine and thinks they can do it for $70,000. And they are only going to allow the stores to sell flowers. They won't sell manufactured products to the general public. The stores will be allowed to carry manufactured products to sell to someone who comes in and has a medical card. What are they going to do with the ATCs? They're going to sell the same products. They're going to compete with their own state stores that they gave exclusive right to do this. They've been breaking even and not only will they steal the retail adult use business they're going to steal some of their customers and sell them in their stores and selling at a lower price.”

What will happen to the New Hampshire ATCs?

“I think they'll go out of business. They tried to compare this to liquor. That is in a national distribution chain. You're buying exactly what you need for your market. Plants don't grow that way. Can you grow a tomato plant and tell me how many pounds of tomatoes you'll get off that plant. A buyer comes in from the state and decides he doesn't want their product. They might have $2 million in their grow and now the state doesn't want it. What will you do with the product? You'll have to destroy it. You can't sell it to someone else because it's illegal.”

I visualize there are walls around all of the states that are selling cannabis. You can make licenses with other companies. They will license within these walls of each state, and everything has to take place in the state.

“Anything illegal does. Anything that has THC in it has to take place in the state. It has to do with the Interstate Commerce Clause. You can't cross state lines. The state is going to control everything, and we've got one buyer and he's going to name the price that I have to grow, and I hope to make money on. The state liquor store model for cannabis will never fly.”

What I'm hearing from you is the state is not taking into consideration the grower's needs.

“They know full well.”

The vote goes to the next step on Thursday.

“It's going to get voted on the floor of the House next week. We think it's probably going to die. If not, it's going to the Senate.”

“This is what I think they should do. It should be an open market system and opt-in for towns. It should go to private enterprise. You shouldn't allow giant cultivation licenses. Make the maximum license smaller so more people can get involved. I think we should bring this back to farms. And I think what should happen with the taxes is New Hampshire should export what is in the market and become a provider. We have farmland and farmers and I think we should take this onto farms. Still, they could grow in buildings but prompt it to go into farms that way towns like Groveton and Berlin and smaller towns can participate in this and it's not going to be the big cities that take all the opportunities. I think we should allow up to three percent tax on the product in the town that goes to the town that it is in. It could do something good.

I don't want my state hurt. And, I don't want the industry hurt. I love this state and I want to see it done right here. It has to be done the right way.

*Section 280E of the Internal Revenue Code:

"prohibits taxpayers who are engaged in the business of trafficking certain controlled substances (including, most notably, marijuana) from deducting typical business expenses associated those activities." www.jdsupra.com

1 view0 comments