Serge Chistov, CFO Honest Marijuana- Interview Series

Federal legalization in the United States is still on the horizon, but there will be many regulatory hurdles in trying to work across state lines. Meanwhile, expansion into Africa, including the leveraging of existing supply chains, means access to another huge market: Europe.

–  Serge Chistov

There are many intriguing things about Serge Chistov. From a promising career in Medicine he made a crossover to the iffy bourse and finally wound up cannabis. (All the things that a typical doctor would rather give a wide berth to). This is a man who clearly knows how to push boundaries. As CFO of Honest Marijuana, he is keen on taking marijuana to a little known of and quite conservative country in the East of Africa- Tanzania.  Chistov must be seeing beyond the horizon to take this bold step.  Let’s hear from the man himself.

Meet Serge.

As an intro, how did your career path lead you to the cannabis industry?

It was an interesting path, but I've always been an entrepreneur. After I completed my education to become a doctor, I decided when I arrived in the United States that it wasn't for me. I had more interest in the financial markets, so I got licensed to become a stockbroker on Wall Street. That led to becoming a financial adviser, leading the investment division of a bank in New Jersey. Within that sphere, I spent a lot of time looking for the next big opportunity, from an investment point of view. At the same time, I was developing Serge Import LLC, focusing on becoming the sole U.S. importer of Exclusiv Vodka. In 2007, I left investment banking to focus on my own business. It was during these early years in importing that I noticed the growth of state legalization of marijuana and became interested in the investment and entrepreneurial opportunities there. At industry events and shows, which often included suppliers for pharma tech and packaging companies that used to shy away from any mention of cannabis, suddenly started embracing conversations about it. I knew in or around 2013 that marijuana was an opportunity not to be missed. So, I took my well-earned sales skills and looked for a way to become part of the marijuana industry. That's where Honest Marijuana Company came in.

Tell us more about your role as the Chief Financial Officer with Honest Marijuana Company.

If you know anything about the cannabis industry, you know that the lack of federal legalization means that traditional lending institutions are more or less off limits for cannabis based businesses. I decided to leverage this opportunity I could see coming by becoming an early lender for Anthony Franciosi at Honest Marijuana Company. Lending Anthony the money to get off the ground with his organic growing operation was just the first step. Obviously, with my long experience in investing and sales, I had a lot of other tools to share too and am able to do that in my capacity as CFO. Creating branded stores that are all about consumer education and the mainstreaming of cannabis is part of the sales function. The key for us is to build up Honest Marijuana to a point where that same business model can be transplanted elsewhere, as legalization continues to expand from state to state.

Honest Marijuana has plans of expanding its operations to Africa: Tanzania. What has inspired this move?

Federal legalization of recreational marijuana is still a distant dream in the United States. Even if it were to become a reality, any expansion opportunities will continue to be faced with a lot of regulatory hurdles, at both the federal and state levels. Not being able to export from state to state makes the whole operation an expensive proposition as it will definitely not be an option to export out of the United States to places like Europe. So I was looking for expansion opportunities outside of the U.S. with a view to downstream export to the very valuable market that is Europe. Result? Tanzania. Working with our business partner Elmira Hadzhykhanova, Business Development lead for Your Local Clinic, we're establishing a base opportunity with medical clinics within that brand in Tanzania. The goal is to help clinical practitioners and pharmacists have access to and the ability to prescribe locally grown medical marijuana. This is the first step into an expansion opportunity for growing marijuana to our standards in a climate friendly place, with a view to exporting to Europe, along existing supply lines. Countries like Tanzania are watching others, like Uganda, reap the benefit of the tax revenues and the job creation that cannabis businesses can offer. We have the experience and the technology to make it happen.

Honest Blunts has created a product category, Insta Products which are powered by a patented techonology: Nanobidiol™ Technology. Tell us more about this product range and what makes it superior.

Simply put, THC is not easily absorbed into the bloodstream in anything other than inhaled forms. Edibles have long been in existence but because they are processed through the gastrointestinal system, the impact of the THC is lessened and takes a long time to take effect; upwards of an hour in most cases. We wanted to figure out technology that would make the cannabinoids that are oil based and therefore not easily mixed with water based organic matter, like the human body, more bioavailable. The solution was Nanobidiol™ Technology: reducing the cannabinoid to a nano size particle and surrounding it by a coating that would allow it to pass easily through the walls of the stomach and into the bloodstream. The result is that our edibles can create the desired THC high just as quickly as inhaled marijuana products. For the discerning consumer who isn't interested in smoking, this is a major shift and will help bring cannabis further into the mainstream.

Honest Marijuana is a vertically integrated company that is committed to organic and sustainable practices. Why is this important to you?

If you think about the marijuana at its most basic level, it is an agricultural product. People consume it and in the same way that many consumers don't want to ingest non-organic fruits and vegetables, many don't want to consume low quality pot. Particularly for inhaled products, there is a definite push to creating the cleanest experience possible and that starts with organic growing practices. The double advantage to these practices, however, is sustainability. Growing clean marijuana also means doing it in a way that limits the impact to the environment. From heating and air conditioning systems, to electricity and lighting for growing, right down to sustainable and recyclable preservation methods and packaging, Honest Marijuana Company is committed to the philosophy of creating the cleanest cannabis experience, from growth to end consumer. It just makes sense and many of our customers have been absolutely clear that this is a driving force behind their interest in our products.

The legal marijuana industry in the U.S is beset with several constraints. What do you think of the hefty licensing fees, fines, and taxation in the industry?

All industries have some level of regulation and that's normal. Because pot isn't legal at the federal level, there is a certain amount of uncertainty on the part of states as to how to go about dealing with the industry and so there is a fair amount of variation, from state to state. The fact that marijuana is only legal for medical consumption, versus recreational, in many places, adds an added burden and continues the criminalization of what should be a totally decriminalized product. Taxation is a primary incentive to legalize however. Fortune Magazine was just talking about how cannabis tax revenue was rocketing up and likely would pass alcohol revenues at some point. In this way, the cannabis industry is likely to end up being a lot like the alcohol industry and how it's managed, within states and across the country.

For someone looking to venture into the cannabis space, what are some of the bottlenecks that they are likely to come across when applying for a license?

It's important for a cannabis business to clearly define what it is they are trying to do. The licensing requirements are different in every state and within each state. Whatever business you want to set up, you need to first be clear on the location. The state regulations are also different depending on whether you are growing weed, selling it, or both, and whether it's for medical or recreational use, or both. It gets complicated quickly, so it's important, as a business, to be absolutely clear about what you want to do. Sometimes one type of licensing is required before the other can be obtained, like in Arizona, where you have to set up a medical dispensary before you can qualify to also cultivate, under their health services medical marijuana program. Let's also remember that technically, growing and selling marijuana are illegal under federal law, so it's key to avoid any unwanted legal attention by following the state regulations to the letter.

What are your personal predictions for the global cannabis industry in 2022?

As cannabis becomes more and more mainstream—a reality that has ironically been enhanced by the global pandemic—there will be greater opportunities for businesses to thrive. For one thing, lack of access to traditional banking and lending sources hasn't just been an issue with the lack of federal legalization in the United States. It's an issue the world over. But as consumer interest increases along with legalization, industries like cannabis are being given a wider berth to operate within traditional spheres. Technology will also continue to play a role in the expansion of the industry, from growth of the plants in places previously inaccessible or inhospitable to agriculture, to dispensing and consuming practices becoming mainstream. Pot vacation packages are becoming increasingly popular, with consumers looking to include their favored marijuana experiences with their holidays. As cannabis and wellness become more and more interconnected, there is a broad base of potential consumers around the world who will look to the industry for the medicinal properties cannabis offers.

Thank you for the great interview and for all of the work that you have done to help move this industry forward, readers who wish to learn more should visit Honest Marijuana.