Ca$hing Out 05: Bull Fighting with Matt Nordgren

"Cashing Out" a show that follows the weekly journey of one cannabis entrepreneurs sale of his cannabis company.   In week 05 episode a "Bull" enters the Arena; Matthew Nordgren from Arcadian Fund questions Dan Humiston about his business.   Larry Mishkin our attorney from the Mishkin Law Firm also calls in to talk about Stock Purchase.  Our co-host Dena Jalbert from Align Advisory Management Services leads the discussion.

Produced By MJBulls Media

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Matthew Nordgren:
Your platform I think is very much in line with what we like to do at our firm. I can't tell you how much I enjoyed hearing more about it. I'd certainly like to stay involved.

Dan Humiston:
Hello everyone welcome back to cashing out brought to you each week by Hoban law.. With me today is my co-host Dena. Jalbert from Align Business Advisory Services. Hey Dena..

Dena Jalbert:
Hey Dan. How are you doing?

Dan Humiston:
I'm doing OK. I'm doing OK. We have a busy show today. There are lots more to talk about.

Dan Humiston:
We have two more guests but unfortunately I should say fortunately Dena. has to jump off.

Dena Jalbert:
I know I do. But it's all good things I've. I've got a call coming in to talk about this opportunity to jump on those when they present themselves so.

Dan Humiston:
Absolutely. And I want you to. Why don't we talk a little bit about how we deal with. Am I'm going to call a cold call because we kind of know. But how do you qualify and what do you talk to about. What's the whole process of.

Dena Jalbert:
So traditionally what we do is when one of those calls come in we just kind of start really more socially kind of introductory talk about who they are what they're looking for. And then we talk high level about the opportunity. And through that we start kind of cashing on key keywords for those synergies. You know we've talked in some of the prior episodes about keeping an eye out for those strategic themes or the areas that you really think the puzzle pieces are going to fit together for being the right partners. So in that you just introductory phone call. We try to pass some of that out. And so we'll ask questions about what their investment strategy is what they're looking why lesson would be in those of interest to them if they reach out to us and we try to kind of go to some of that information out to see if it's worthwhile opportunity to continue getting it after that.

Dan Humiston:
One thing that I've seen happening is sometimes a combination of buyers buyer and buyer see kind of worked well together and they're going to do it as a team.

Dan Humiston:
But they don't necessarily know each other or haven't worked together before and you know as you're your job to sort of identify these links.

Dena Jalbert:
Exactly. So as we have conversations with folks kind of through the process those areas of opportunity kind of jump out fresh. And so that's our job is to be looking at the high level process and all the parties that are a part of it and identifying those opportunities. And then what we do is we try to set up subsequent meetings introduce one another and talk about how those synergies might lineup well kind of creating the triangle if you will instead of it being three legs of the stool once a two gives them more strength and gives it more opportunity and so we facilitate that process.

Dan Humiston:
Well I guess I'm just gonna have to muddle through these extra costs yourself.

Dena Jalbert:
No I'm sorry but hey can we get out I get to take these calls when we can and hopefully we'll have some great news to report in next week's episode. Let's hope I'm very clear those conversations. Let's hope.

Dan Humiston:
Well you have a good week and I know I'll be talking to you about the restlessness and we'll talk next week. So thank you. Thank you. Talk to Iran next week. All right.

Dan Humiston:
Ok so now we have an investor that's going to be giving us a call. Hey Matt.

Matthew Nordgren:
Hey how are you doing. I'm good. I'm good. Today's bull in the arena is Matt Nordegren from Arcadian capital Matt. Welcome to cashing out.

Matthew Nordgren:
Dan always good to talk with you. Matt after going through the pitch dark Where were your initial thoughts.

Matthew Nordgren:
Nice to see some growth do you know from me down. I always think it's important to have every conversation in this industry because I've never been in one where more amazing unique differentiating thoughts and ideas are applied to otherwise traditional lines of business whether you're servicing or fundamental aspect of hemp cannabis industry being able to see that this is a repeat theme for this business. We look at the founder and the management team have had success in the same arena before building something back in this business. One would have high hopes that there would be a similar level success given the industry growth. Quite frankly this is a repetitive thing that you'd find there's characteristics of all of our founders have had success doing this before high degree of confidence and then doing that again.

Dan Humiston:
Okay. I think I saw on your website that you're invested in high time so you kind of know the trade show business because they do conferences. You familiar with trade show businesses. What kind of questions do you have for me with regards to our company.

Matthew Nordgren:
Yeah some of this is in the deck and in the materials that I've been able to review.

Matthew Nordgren:
I always like to kind of ask some fundamental questions just because hearing it from a founder's mouth and the way they describe it I think is different than way one can read it or interpret it. So my first question really is can you tell me about the growth in revenue in your 1 two three and projections kind of going forward.

Dan Humiston:
You started the first show was in 2014 and did it the hard rock convention center in Las Vegas. And I think we had 20 maybe 25 exhibitors. A good portion of them could pay me. We did a second show in New York City which a lot bigger but they'll maybe 40 or 50 exhibitors. My partners are trade show people. They've been in the trade show industries for 40 years and they know trade show businesses and they stick with what they know. So they're just applying all their years and years of experience in the trade show industry to a trade show business and cannabis a B2B business and cannabis. I mean our goal is to be the trade show best positioned when mainstream businesses decide to move into this industry and not have any shot in establishing in Los Angeles and establishing new york and establishing in Boston I think we've we've accomplished an objective and clearly you had a number of years of growth if we weren't on air.

Matthew Nordgren:
I'd probably typically ask you to go a little bit deeper into the numbers very specifically behind each one of those points of growth but I what you've indicated sort of relays what that might mean in terms of economics behind the growth. So we'll just keep out of assumptions now. You can definitely create efficiencies you can definitely take what she did right last time and do it a little better and create those efficiencies by that but if they continue grow the revenue associated with various lines of growth are you utilizing data yet are you. What kind of partnerships are you involved with. What area do we want to service going forward. Right. Expos and media are really a relative term. When you think about an industry that's demographic and geographic rate a dynamic is pretty much everybody on planet Earth. So we have to think about that sheer size and how do we address each one of those at a very high level. You don't have to do it all. So all these things is to me are really important in terms of growth. The economics behind them over the years and you've definitely done that and as an investor look at the respect and reputation you have in the industry to grow that you've uncovered. Compare that with the growth going forward. That's exactly the type of person you want to invest and especially at the growth ground investing level because what we want to do is take something that's already really really good and just join the team and figure out how can we be great together. And you're kind of in that perfect place or really an early stage growth investor like us.

Dan Humiston:
I appreciate you saying that you know one point that we think is important is that you add up all the things that you talked about in all of those make getting into this more and more difficult. It's not as easy today to get into the trade show business the cannabis trade show business as it was when I got into it six years ago and every year you go by it gets harder and harder because the barriers to entry just get greater and great the level that you have to be at right now to be competitive just get better and better and then the other thing is you look at MJ biz show and you say to yourself This is what's possible there's not going to just be one show there's too much demand there has to be other shows. And if they're capable of that they're just scratching the surface. Every year it's getting bigger so that gives you a glimpse at what the possibilities are.

Matthew Nordgren:
Yeah I very much agree with you. Dan I mean all we gotta do is call Sheldon Adelson and see if there's any money in show business.

Matthew Nordgren:
Yeah he'll call you right back.

Matthew Nordgren:
I'm sure he may not but his Forbes article will be pretty clear that there is a great economic return when you do these right.

Dan Humiston:
Sure sure. Well any other questions for me any other thoughts that you want to have in closing.

Matthew Nordgren:
Yeah I think to explore partnership further we want to know what you hope that the future like and one of the things you just told me which I'd like to bring up again is that the barriers to entry and the growth and all those things are more difficult right now and they are part of that is because things are maturing so fast that when you look at the really big big big players that are likely to enter the space in 2019 you might not even have enough time to get to scale and before the thing really opens up and everyone's in the mix. So someone like yourself has built a business for so long as it has a clear advantage. So I'm curious to know what your next three six nine and 12 month goals are in terms of growth in terms of partnerships. Because I think those next 12 months are going to be extremely critical.

Dan Humiston:
Yeah I mean we're we're already into 2020 and our three shows are set with trade shows you're least a year out. So we have a lot of our floors already sold for 2019 and then again we're going after mainstream companies so we're spending a lot of time educating people that are not in the industry about the industry it helps that you have relationship with that group which my partners do. So that gives us another advantage.

Dan Humiston:
They've already worked with the people within those larger organizations. Our objective is as I stated earlier is we want to be the guys that convert mainstream businesses and get them into this industry. We'll leave the party to Las Vegas. We'll focus on the business side of this.

Matthew Nordgren:
And really when we're going down I love that you're speaking my language because we had Arcadian I've set out to do the. Exact same thing.

Matthew Nordgren:
That's why we invest in companies with growth with CEOs that know what they're doing in terms of success our reputation and investing in growth rounds in companies that are not considered marijuana businesses related businesses is a completely different level of risk. And being able to be involved in companies that don't touch the plant really allows you to operate institutional and adhere to compliance and think about the way institutional guys think your platform I think is very much in line with what we like to do at our firm. I can't tell you how much I enjoyed hearing more about it. I'd certainly like to stay involved. And last thing I'd like to say is that there's nothing more important than education probably in general and life but certainly in this industry we're on the verge of being able to create something so special for the world and touch so many people and so many amazing ways. Right now education is not only what people need but it's also the way they're going to identify with brands to solve different problems for them for the rest of their life. So I think what you're doing right now is one of the most important aspects of this industry and glad to be associated with you.

Dan Humiston:
Yeah I'd love to have you back on the show again and we'll keep moving forward with this. I'll send you some more information and maybe a week or two. Jump back on and give me some different thoughts. It's a little challenging to try to sell a company on a podcast. But I think the the benefit to the people that are listening especially in this industry you know this is really special. I mean I do want to pat myself on the back but who else is gonna do something like this.. I think people are going to really benefit from it if you like to be back and we'd love to have you and we'll just keep plugging away at it.

Matthew Nordgren:
Any time band you value things I have to say and that comes from a thoughtful place along to share with you at any point in time and I enjoy yours.

Dan Humiston:
Yeah well thanks. Thanks for that. I'll shoot you over some more stuff about but the companies so that you can maybe take a deeper dive at it and we can get to a future calls.

Dan Humiston:
Sounds good to me. All right. Thanks again man. Have a great weekend.

Matthew Nordgren:
You too enjoy the snow. Pretty jokes.

Dan Humiston:
Ok before we call our next guest let me do a little business and think one of our sponsors Alt 36 which is a payment processing platform that uses cryptocurrency on the dash block chain network. And what's great about this is it gives dispensaries an option other than cash. It's super interesting how this is done but you really need to hear it from their CEO Ken Ramirez. He's got MJBulls Episode 12 does a great job explaining how cryptocurrency works and how it's all kinds of safeguards that protect people in it. Go back listen to MJ bulls Episode 12 here how can Romero says do it all 36 great company good people alt36 dot.com. OK now let me call our next guest.

Dan Humiston:
Hi Larry it's Dan Humiston again. What are you doing. Oh yes I'm doing great. I'm doing great. You you're fine.

Dan Humiston:
It's just you and me today. Dena. had to jump off you had to take a call with somebody that was interested in talking to her about her deal. We heard it on the MJBulls Podcast and I love it when a plan comes together. It's like the work.

Larry Mishkin:
That's that's the way it's supposed to work. Wanted to talk to you about again for that for our listeners. In case you missed last week's show Larry Mishkin from the Mishkin Law group also is of counsel with the Hoban law. group handles all of their cannabis needs in Illinois. As you mentioned last time you work in every state in the country. But Hoban law. has offices or attorneys working throughout the world. But Larry is one of the many that in my opinion the best. Well thank you. Yeah. So Larry is a reoccurring guest on our show whenever there's anything to do legally. I'm going to have Larry Larry jumps on and one of the things that we seem to be running into a little bit Larry. And I wanted your opinion on this or maybe explain it to me and the audience at the same time is that I've had some people that talk to me about paying me with their stock or with some stock in their company and some cash flows at work.

Larry Mishkin:
Well you know that's right. That's a good question because you're right for a lot of people who are interested in expanding it's easier for them to give out shares of stock or an ownership interest if it's an LLC as opposed to having to come out of pocket for cash. It's a system that can work as long as both sides have done their homework and are comfortable with what their options are. So for instance a company that's possibly going to come in and buy you out they're going to come in they're going to offer you 50 percent cash and 50 percent in stock in their company. Now you gotta go do some homework. You've got to find out about this company. First thing you need to find out is just in general is it a viable company or are they profitable. They're making money. There's a share of stock in that company. Could it be worth something now or ever. Once if you do that then there's a very big question that comes into play. And the question is whether the company is purchasing you out is publicly traded or whether it's a private. Corporation or LLC. And the reason this is significant is because of the publicly traded that we're following under the domain of the FCC and every good lawyer knows exactly when to say that they've crossed the line on what they know.

Larry Mishkin:
And as soon as we start talking about FCC regulations I'm beginning to cross that way. The good news is that the majority of the purchases that we see are typically by smaller closely held companies that are not publicly traded. And we do deal with those. The short answer on a publicly traded company is you need to make sure that you bring in someone with FCC experience and who understands all the regulations and can let you know specifically how that's going to work. Jalbert said it's an escort or an LLC and they're trying to expand and this is how they're going to do it. Once you've determined whether or not you think the company has any value. The next thing you have to do is you have to read the company's operating documents if it's a corporation. That would be the shareholders agreement. And if it's an LLC that would be the operating agreement. And the reason why you have to read those is because you have to know what restrictions exist on the stocks that they are giving you as compensation for purchasing your business. What I mean by that specifically is you must ask for for a while fees will have restrictions on the transferability of the stock or the ownership interest.

Larry Mishkin:
Well this is darling because in a smaller agency like that people want to know who's coming in to do their owners. So usually operating agreements or shareholder agreements will have restrictions. Many of these documents in fact most of them will have written a right of first refusal so that if you were going to try to sell your shares then the people within the LLC would get first crack. Now that could work out just usually that still has to be done. That's the price you're asking for. But because of that right. A lot of times it's hard to go out and find a third party purchase purchaser who's going to spend the money and the time to do all of the due diligence to stop and only to find out at the end of the day that the other partners are exercising their right of first refusal and purchasing it for themselves. So it's important that you have an understanding of that and if a company comes to you and says take stock you have to sell it. Show me your shareholder agreement.

Dan Humiston:
Ok. Let's say I'm looking at the shareholder agreement or the operating agreement. There are some aspects of it that I'm not comfortable with. Is it a document that can be altered to accommodate the deal or is it take it or leave it. Paper documents.

Larry Mishkin:
The short answer is it can always be altered but it depends by a number of things. First of all it was in the document itself. It will usually have language that will explain how the document can be amended but that will almost always require the input in the approval by the other shareholders or the other members of the LLC. Here's what the issue is. If it's a one or two person LLC then you're negotiating with both of them. Then they may not have any problems they will just demand our documents so that you're happy with this raise or the termination issue and then we'll sign off on it. If there's a larger group that's probably harder to do because to amend the document you almost always need the approval of all members for all shareholders. OK.

Larry Mishkin:
All right. You glossed over because we just don't want to get too deep into it but if if somebody were trading on the penny stocks whether OPEC pink sheets over the counter stocks in our case you deferred to one of your colleagues within the Hoban law. group who was an RCC person and then somebody else were in that same situation they should defer to all an attorney who has that background.

Larry Mishkin:
Yes certainly and I would certainly if your listeners have attorneys that they work with and they're comfortable with them then they should go to those attorneys and ask the attorneys to explain to them what the rules are and really what we're concerned about with a publicly traded company is whether there are certain ways or limitations imposed by law that come into play in terms of the transferability of those shares of stock the public companies to offer often have their own internal rules as to how this can happen because they're very sensitive to the fact that they're subject to audit by the S.E.C. and they need to make sure that everything is done correctly. Any one of your listeners is always free to call me and as soon as I reach that point the Hoban law. group does in fact have attorneys who have quite a bit of experience with the FCC and some of them who have worked side by side with candidates companies as they've gone public.

Dan Humiston:
Well there's a lot to digest. No offense but sometimes it gets a learn not to little dry and it was me entertainment. This is about me it entertaining as well as educational so I don't want to I don't want to overwhelm here. So Larry thank you. Thanks again for being on the show.

Larry Mishkin:
My pleasure. Thank you for including me and call me anytime you need me. Sounds good. Have a great week. If you shoot talk you think OK well that's our show this week.

Dan Humiston:
Everyone thanks for listening. Do you have any thoughts any ideas any comments questions criticism whatever you want to send me please email me connected. MJBulls.com. Also wanted to thank Jamie Humiston for putting together the music of the music on the show's original music from Jamie Humiston who just happens to be my son so quick thanks to Jamie anyway have a great week everyone and we will speak to you again next Sunday.

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