Tag Archives: cse issuer stories

GlobeX Data: There is no such thing as privacy in the online world anymore. Or is there?

GlobeX Data (CSE:SWIS) is on a mission to keep your data and communications safe, and in a world where each week seems to bring news of yet another large-scale data breach, it’s a mission of vital importance.

The Vancouver-based company offers a powerful product suite for cloud-based storage, document management, encrypted e-mail and secure communication with a few twists that differentiate it from the competition.  For one, data is stored in Switzerland (by Swiss partner GlobeX Data S.A.) in centres used by Swiss banks and organizations such as the United Nations. Switzerland is home to some of the strongest privacy protection laws in the world thanks to regulations such as the Swiss Federal Data Protection Act and the Swiss Federal Data Protection Ordinance.

GlobeX Data is readying a marketing push at a time when the cybersecurity market, by some counts, is set to exceed US$300 billion within five years, making the company’s recent debut on the Canadian Securities Exchange particularly timely.

In this interview with Public Entrepreneur, Chief Executive Officer Alain Ghiai explains why data is such a valuable commodity and why that means companies and individuals alike need to take more caution to protect themselves.

Can you give us a quick introduction to GlobeX Data and the company’s origins?

GlobeX Data has its origins in Switzerland and in payment processing. In 2008, during the credit crunch, most of the banks stopped lending to merchants. We used our technology to transform ourselves into a data backup company. In 2010, we started to develop a couple of products, the first of which became DigitalSafe, our secure backup file-share password manager. In 2012, I started GlobeX Data Inc. out of New York to expand in North America.

I was approached to license our technology to a CSE-listed company, which eventually became a shell company. When the licensing was supposed to be exchanged for funds the company didn’t have the money, so I called my board members and suggested listing on the CSE ourselves and formed GlobeX Data Ltd.  We raised money locally and set up an office in Vancouver. We started to receive a lot of interest from overseas and wanted to have an entity that handled everything outside of our Swiss-based private company. Vancouver was a perfect choice geographically to handle Asia and Latin America, our prime targets to start off our international business, and was also selected for the purpose of going public in an IPO on the CSE.

Our first major contract was with America Movil and its mobile division in Mexico called Telcel that has 75 million subscribers. Because they’re in 26 countries, we would eventually be able to sell services from the US all the way down through South America.  Over the last couple of years, we’ve signed deals with half a dozen partners. America Movil has close to 400 million subscribers, almost 300 million of them mobile users.

Why did it make sense to go public now?

Our goal in going public was to have a platform to raise more money and get wider recognition because when you are public it brings a level of transparency to the company that our partners like. Right now, data security and privacy is becoming a predominant subject in our society. People are the product now – the big companies are making money off our data. There is no real player that can offer the variety of services that we do when it comes to privacy and security. Our prime directive is to respect your privacy. We use the best security possible and have proprietary technology that other businesses don’t use because they think it’s too costly. Storage has become commoditized, but there’s no price for privacy.

I find that Canadians are quite conservative, almost too conservative to adopt new technologies. Also, they underestimate the value of security or privacy and the value that they hold. I think US investors value technology stocks a lot more than we do in Canada. This is why companies go to the US to get funding – investors there will pay for innovation. It’s a shame because Canada is a fantastic country with some great tech stories.  In order to attract more investors in the US, we plan to co-list in the US market by Q1 of 2020.

There’s a lot of talk out there that data is more valuable a commodity than oil. What’s your take?

I think data is even bigger than oil right now. The thing that makes it valuable is that a company or group can use it to create a profile and sell it to a third party to try and sell something to the consumer. Contrary to oil, which is a consumable, data can be repackaged and resold. Thanks to social media, the public is used to advertising their status every few minutes.

Why is it that people seem to be incredibly willing to give away their data for free?

When it comes to information, anything that is “easy” in the digital world is counterbalanced by the individual giving away more and more privacy. We live in a society where everything needs to be instant. If you want to have this instantaneous response, you are essentially giving away your data for free. Most people don’t realize the danger that this can cause because the average person doesn’t think they have anything to hide. It’s not about hiding from the government, it’s about keeping your data private so commercial companies don’t exploit you like a commodity.

How do the services work? Are they an alternative to popular instant messaging applications?

GlobeX’s services don’t use open source coding; instead, we use our own technology to add privacy and security by design. We try to offer what businesses and people need, which is a backup for their data and a file share and secure e-mail. DigitalSafe is like a Dropbox, e-mail and a password manager all in one. Our e-mail engine, Custodia, lets you send a message to an unsecured e-mail address and that service will not be able to read the content. PrivaTalk is a secure communications suite with chat, voice, video and e-mail. Our chat has a self-destruct timer that will disappear on the device. We never require your phone number because the minute you do that, hackers have an even higher ability to access your data.

We are also launching a product called Sekur, a service for high net worth individuals and corporations, in the fourth quarter of 2019. We were inspired to create the product from the Sony hack that happened a few years ago. This service is for any business for management to communicate without the in-house IT department knowing what’s going on.

What else is coming down the pipeline in the next few months?

We’ve already released DigitalSafe and PrivaTalk and plan to launch Sekur before the end of the year. In Mexico, we’ve launched and integrated DigitalSafe with America Movil and are planning to release PrivaTalk by the end of the year. Another product we’re excited about is PrivaTalk Messenger, which is similar to BlackBerry Messenger in that it’s a server-based closed-loop system. We’re going to launch PrivaTalk Messenger by the end of the year as well.

We’ve talked at length about the dangers of leaving data unsecured. What are some simple steps that we as individuals can take to protect our information?

The question that we need to be asking ourselves is how much is our data worth to us? The first thing I would advise is to reduce your social media footprint. Essentially, you are announcing to the world where you are and what you’re doing, and eventually artificial intelligence will put together a profile on you that can lead to hacking.

The second thing is to use secure services. There’s no free privacy or security. Use a paid service that will secure your information because at least then you have some sort of comfort or recourse that your data is safe.

This story was featured in the Public Entrepreneur magazine.

Learn more about GlobeX Data Ltd. at https://globexdatagroup.com/.

RIWI Corp: Getting one’s hands on insight nobody else has requires creative thinking…and 1.5 billion responses

RIWI Corp. (CSE:RIW) runs a business for the curious, the analytical, for governments of the world, and for financial services firms looking to develop an edge. It is a business that is never the same two days in a row and thus endlessly fascinating, with the potential to drive policy, influence strategy, and bring improvements to the world at large.

In short, the company performs global trend tracking and predictive analytics that provide previously unavailable insight into how people think and behave. Relying on the Internet, it conducts surveys and can also run ad tests assessing the efficacy of corporate marketing initiatives. The company has thus far analyzed over 1.5 billion responses in putting together reports for its clients.

RIWI’s client roster includes companies in the private sector, predominantly finance, as well as groups active in humanitarian aid such as the World Bank and the Bill and Melinda Gates Foundation. Security is another area of great importance to the company.

Public Entrepreneur caught up with Founder and Chief Executive Officer Neil Seeman recently for a discussion of RIWI’s role in today’s rapidly evolving digital landscape and a look into corners of the technology world we never even knew existed.

How has technology and the market you serve changed over the last decade or so?

The market for global data collection has really exploded in the last 10 years and we’re just at the cusp of it. I feel that we’re sort of in Web 3.0 right now. I was lucky enough to have been an investor in Web 1.0 (the early days of the commercial Web) and then Web 2.0 (the social Web). Now today with Web 3.0, where RIWI sits is the world of incalculable amounts of data, and more importantly, data for actionable insights.

It’s less about Big Data these days than it is about Smart Data and that’s where we focus. And the second titanic change, which is just occurring, and where RIWI sits at a leadership position, is the importance of being an ethical data broker and only collecting data free of personal identifiers. This is becoming a game-changing issue in the world of data collection. It’s a highly competitive marketplace but the total addressable market is pretty extraordinary.

Your technology uses machine learning. Can you explain in simple terms how you collect data?

RIWI invented a global platform such that anyone with access to a Web-enabled device can stumble into a RIWI survey or ad test as they navigate the Internet and enter an abandoned domain that doesn’t exist at that moment in time – they encounter a RIWI survey or ad test on a non-trademarked domain. We invented that and expanded our intellectual property and we continually learn which constellation of domains is able to capture a perfect mirror of the Web-using audience in any region of the world. This changes in real time and we understand why and how that happens. We have a decade of historic data so we understand the changing Internet infrastructure in every country and that is a form of intelligence that can be very valuable to understanding how we can solve client needs.

How does your technology differ from that of other companies? How do you position yourself against your peers?

It’s differentiated in a number of ways. The first is global access. We have single-button technology such that you can access eight or 180 countries, or 229 territories and countries using RIWI. Otherwise, you would have to go to online panel suppliers or different market research providers in the countries.

Secondly, we reach opaque or otherwise impossible markets. We are the only continuous data provider in terms of sentiment data and ad testing data in all cities and regions across China, for example.

Thirdly, we are random in our reach. We patented and then built out a global platform and cloud-based architecture called Random Domain Intercept Technology such that the recipients who are intercepted are random and RIWI is privacy-compliant such that we are not collecting any personally identifiable data, and this fourth aspect of RIWI is highly differentiated from other digital data collection tools.

Fifth, and most importantly, we’re being recognized for broadening the voices of people who participate in surveys and ad tests. In other forms, traditional or even modern forms of sentiment collection, whether it’s social media analytics or public opinion panel-based polling or natural language algorithms using artificial intelligence, you’re getting a very, very narrow slice of public opinion, whereas with us, the majority, and in some cases the vast majority, of the people whose opinions and behavioural reactions we collect have not answered a survey or ad test of any kind in the preceding month, nor are they regular posters online.

Who are your customers and how many do you have? Can you give me an example of where your data has been particularly impactful for a client?

We currently have several dozen major enterprise clients across our business lines. They range in size. We try to build recurring revenue-based clients such that they are either quarterly subscriptions or annual subscriptions that can be renewed, sometimes on a rapid-response basis. Within each of these, some are such that they have multiple sectors or country groupings.

In terms of impactful work, we have worked for G7 agencies on strictly confidential matters, but on the unclassified side we’ve done, for example, very impactful work for the Canadian government where we’ve measured the sentiment toward women and girls and how they are treated under ISIS in 18 Middle East countries. We’ve enabled some fascinating data that have helped educate people in all regions of the world about the brutality of how women and girls are treated under ISIS.

We’ve also done a lot of work on marginalized groups, populations that don’t participate in surveys and this is not only important in the humanitarian aid sector, it’s important, for example, to the finance sector, which is trying very much to understand the future consumer of technology adoption. We’re also the largest data collector in the world for changing attitudes toward LGBTQ communities, and for undocumented citizens and people in rural communities, even in America, whose voices are often left out of important debates. We like to say we give “voice to the voiceless” in any region of the world.

It’s impactful to me when we may only solve 2% to 5% of a company’s data challenges but we are embedded with them such that they thereafter understand the universe of their other data collection needs.

The possibilities for your data seem limitless. How big can you see this getting?

Our goal is to be the Booz Allen of global data collection. We want to be everywhere in terms of our continuous data collection, in fragile and conflict states, in opaque markets, and we want to deliver data that provides actionable insights in real time. We do that with real-time dashboards that are constantly being updated such that with the touch of a button, a decision-maker can understand the truth of what’s going on, whether it’s predictions about stock market turmoil, trade wars, or gang violence.

You’re clearly growing and have been turning in quite good performance numbers of late. What is your business model? Is it the case that when revenue grows so does profitability? Are your costs mostly fixed?

One of the beautiful things the math analysts like to observe about our company from a shareholder perspective is that as our revenues grow and as our profit grows, our costs associated with sales decline or stay relatively flat. This was always embedded in the vision of the company, such that we’re not, for one, selling people, we’re selling data and dashboards and analytics, but secondly, we’re a machine-learning platform such that the technology itself is embedded, or twinned, with shareholder value creation, because the machine-learning technology continually expands in its capacity for data collection and continually decreases the costs associated with data collection. Further, our offerings are “plug-and-play” for our clients – the same issues that confront our client Bank of America Merrill Lynch also confront Asia- or Europe-based hedge funds looking for a privacy-compliant information edge.

How do you go about landing new clients?

Two ways – there’s no secret sauce here. It’s about boots on the ground and hardcore sales, using a highly disciplined sales process. I’m an accidental entrepreneur because this grew out of a small research unit I had at a college associated with the University of Toronto, and we’ve changed the mindset by going from a creative think tank environment to a heavily sales-focused enterprise with sales-focused disciplines and systems and processes.

Secondly, the uniqueness of our platform and the uniqueness of our data – especially it being privacy compliant – and the nature of our clients means that we get a lot of attention, whether it’s media attention or public presentation opportunities, or thought leadership opportunities. Our Head of Research was selected to present this Fall at TEDxToronto. Our data collection tools to generate alpha for the finance community won us a global “Battle of the Quants” award that created buzz this year.

And we also win attention from new audiences because we are in this great situation where we can generate internal data in unusual parts of the world in rapid fashion, so we offer insights that we know will be valuable and get the attention of prospective clients whose eyes light up when they see it.

This story was featured in the Public Entrepreneur magazine.

Learn more about RIWI Corp. at https://riwi.com/.

XPhyto Therapeutics: Unique assets and a focus on Germany’s medical cannabis market set this opportunity apart

The art of successful investing is not about what is happening now, but rather figuring out what is on the horizon and set to emerge as the next big thing. Positioning oneself to make the most of that development is what gives competitors in any aspect of the business world an edge – the famed early-mover advantage.

Hugh Rogers and his team embraced this concept wholeheartedly when putting together XPhyto Therapeutics (CSE:XPHY), the company Rogers now leads as Chief Executive Officer, two years ago.

Armed with a legal background focused on corporate restructurings, plus experience in molecular biology from research work at the University of Toronto, Rogers agreed with his business partners that they wanted to participate in the burgeoning cannabis industry, yet not in the way everyone else seemed to be doing it.

Large-scale growing operations in the US and Canada did not interest the group. So, what was it that others were overlooking, something with greater potential than was to be found in the increasingly crowded North American arena?

“The vision for XPhyto was to foresee where the industry would be in two, four, and six years, and then position the company accordingly,” explains Rogers. “In the end, we decided that medical formulations and clinical validation in emerging European cannabis markets was the best place for us to be.”

That best place, to be precise, is Germany, where cannabis is legal for medical use and, according to XPhyto, not subject to the same stigma the drug suffers in North America and many other parts of the world.

“It’s a very open market in the sense that, in our experience, regulators at every level of government, and I would also say the medical community – physicians and pharmacists – are open to cannabis products,” says Rogers. “There is a history of botanical medicine in Germany where they are eager to learn but at the same time are looking for clinical validation.”

And no other entity, quite literally, is positioned in the German market the way XPhyto is to help cannabis achieve the level of formal validation that consumers expect of widely used pharmaceutical products. The company’s 100% owned German subsidiary, Bunker Pflanzenextrakte GmbH, possesses a German cannabis cultivation and extraction licence for scientific purposes issued by the German Federal Institute for Drugs and Medical Devices. To XPhyto’s knowledge, it is the only one in existence.

“We’re setting ourselves up to work with the government on the scientific side,” explains Rogers. “That means cultivation, extraction, remediation of oils, seed banks, tissue banks, clinical trials – all of the scientific knowledge.”

The XPhyto team has done an admirable job of building a company with top clinical talent both at the German operations and in Canada, including its recently announced cannabis research and development agreement with the Department of Biochemistry at the Technical University of Munich.

Soon to follow in Germany is a 10,000 square foot facility, half of which will house small-scale cultivation rooms, with the other half being for storage, manufacturing, and distribution. The company estimates it will be up and running with plants under cultivation in the first quarter of 2020.

Expect security levels to be high, given the structure that aptly named Bunker is renovating was once a military command centre. Bunker founder, and now XPhyto Vice President of European Corporate Development, Robert Barth will oversee the renovations. It was also Barth who brought the Technical University of Munich into the fold.

The German research bandwidth is augmented by two exclusive five-year engagements XPhyto has with the Faculty of Pharmacy at the University of Alberta. “Our primary goal in Canada is to focus on clinical validation,” says Rogers. “We have an ISO-certified clean room for our new extraction equipment for production of cannabinoid extracts and isolates. I think the first formula we’ll clinically study will be for topical dermatology followed by oncology pain management. Our expertise at the university is drug delivery and we have some unique applications for cannabis products.”

Clearly, the company’s main objective is clinical testing, and ultimately clinical trials, designed to provide the medical community with the same standard of product understanding and trust that many other prescribed treatments currently enjoy. In this way, doctors will know exactly what type of cannabis, or cannabis-derived product, to prescribe for a given condition, in what dose and for how long.

But investors and others new to the company shouldn’t conclude that the validation theme at the core of XPhyto’s model means that cash flow is something far off in the future. The supply/demand balance in Germany’s medical cannabis market features more of the latter than the former, and XPhyto is positioned to help.

“The German market is large and domestic production expected to come online in 2020 will meet only a small fraction of total demand. There is a deficit that will be made up through imports and that is an opportunity we are rapidly pursuing,” remarks Rogers.

“We are working to secure supply of ultra-premium flower in Canada,” he says in beginning to explain the import strategy. “The best premium growers are in Canada and the US. We are focused on Canada and are working with a number of great growers to source product.”

The XPhyto team believes that providing the best experience for patients must embrace testing for pesticides, heavy metals, and offering products in optimal packaging. If everything goes according to plan, product will be ready for shipping by Q1 2020.

Advancing this strategy on multiple fronts is the acquisition, announced in late August, of Vektor Pharma TF GmbH, which holds permits for cannabis importation and narcotics product manufacturing, among others. And in a possible sign of things to come, Vektor also has established itself in the research and manufacturing of thin-film strips for drug delivery, including transdermal patches and oral strips.

Said Rogers at the time of the acquisition’s announcement, “We believe that Vektor will add significant long-term value at every level of our business, from clinical trial expertise and drug manufacturing capability to their German cannabis and narcotics import licences and strong relationships with the German health authority.”

XPhyto’s strengthening German presence will be a source of many things, boots-on-the-ground intelligence being one that should enable the company to smoothly blend into the German supply scene with the long term in mind.

As an example, Rogers explains that if XPhyto has a certain volume of cannabis ready to sell it won’t necessarily put it all on the market as fast as possible. “What we want to do is build our distribution and demand through consistent supply so the physician knows when they prescribe our product that there is availability for three to six months. We would rather build our patient base slowly and steadily than flood the market – here is a whole bunch of supply and then, oops, it is not available next month. The end result when you take that approach is that physicians are less likely to prescribe your product.”

Having only made its trading debut on the Canadian Securities Exchange in August, XPhyto is a newcomer to the public markets. But asked why investors should be interested, Rogers is clear as to what sets the XPhyto opportunity apart. “It is important to understand that the cannabis industry is here to stay,” he concludes. “But at the same time, you must carefully consider where to allocate your investments. We have gone 100% into opportunities that were on the sidelines for a long time, and I think you are going to see medical applications, clinical validation, and European opportunities come to the forefront over the next two years. And that is exactly where XPhyto is positioned.”

This story was featured in the Public Entrepreneur magazine.

Learn more about Xphyto Therapeutics at https://www.xphyto.com/.

Nextleaf Solutions: Cannabis extraction technology takes the spotlight as edibles and beverages prepare to hit Canadian shelves

Nextleaf Solutions (CSE:OILS) is a BC-based cannabis extraction technology company that takes pride in doing things just a little bit differently.

When most cannabis companies were thinking of cultivation, Nextleaf had its intentions set on the future of the cannabis industry: infused products. Since 2017, the company has focused on developing and acquiring the technology, processes, and formulations around extraction and post-extraction for cannabis concentrates, the precursor to every cannabis-infused product.

Co-Founder and Chief Executive Officer Paul Pedersen remembers the day he met soon-to-be Co-Founder and Chief Technology Officer Ryan Ko, who at the time was working on a novel extraction process aimed at producing highly refined oils derived from cannabis.

“When I met Ryan in 2016, he was doing things with extraction and molecular distillation that I had never seen before,” says Pedersen. “He was light years ahead of where large licensed producers were at with extraction and purification. That was the genesis of how it all started.”

The rest, as they say, is history.

With six issued patents – including the first issued US patent for industrial-scale extraction and purification of cannabinoids – and 23 pending in the United States, Canada, Mexico, Colombia, Jamaica, Europe, and Australia, Nextleaf’s intellectual property portfolio is growing quickly.

A glut of cannabis and hemp biomass in the market, coupled with a shortage of extraction and processing suppliers, means the company holds a notable position as one of a few extraction companies in Canada with a real solution.

“We have a head start,” says Pedersen. “Our strategy from day one was to be the absolute best at developing disruptive extraction technology, and to focus on the underlying methods that transform plant into product in a highly scalable way.”

Technology takes centre stage
Nextleaf’s patented technology covers a range of hardware and processes, and goes beyond traditional crude extraction, implementing additional processing measures aimed at higher standards of purity without sacrificing capacity.

The company produces a premium distillate and believes what differentiates its product from others is the additional purification and refinement steps found in its unique process. In short, it can turn failed crops of biomass into standardized, high-purity oil for use in a variety of infused products.

However, not all infused products are created equally.

Major issues with taste, smell, colour and even performance can be experienced when purchasing infused products found in unregulated markets. This is due to the chlorophyll, fats, lipids and other impurities in the crude extract used. Nextleaf’s highly concentrated THC and CBD distillates are odourless, tasteless, and standardized for potency – meaning the consumer will enjoy a reliable and repeatable experience with each product.

Scalability is key
Notably, the Nextleaf process is also truly scalable on an industrial level.

“Scalability gets massively overlooked,” explains Ko. “There are a number of companies that can produce an oil that is tasteless and odourless on a benchtop scale, but being able to do that on an industrial scale is key. We look at THC and CBD as ingredients. As with any ingredient, it comes down to the quality, and the cost to produce it.”

“Before you can formulate all these value-add products,” Ko states, “you’ve got to have that standardized element.”

Going beyond crude extraction allows the company’s PhD-led team to separate and isolate molecules, with the ability to reformulate those molecules to best suit the desired end product, whether that be edibles, vapes, gels, or other topicals.

Growing intellectual property
One area Nextleaf has remained hyper-focused on since 2017 is filing patents to develop and acquire the industry’s most advanced technology, processes, and formulations as related to cannabinoid extraction and purification.

“It’s been proven that the companies who get to enjoy the competitive advantage are the ones that have been first to secure unique intellectual property in their industry,” says Pedersen.

This summer, the company bolstered its IP portfolio by acquiring a US patent-pending hydrocarbon extraction process and award-winning formulation to make shatter, a cannabis concentrate.

For Nextleaf, 2019 and 2020 will focus on monetizing the company’s IP portfolio as consumer preferences switch from flower towards THC- and CBD-infused products, with the legalization of these products in Canada slated for this fall.

Through its commercialization partner, the company will provide processing solutions to licensed cultivators, and supply cannabis oil and extracts to qualified Canadian and international B2B partners under its own brand. Revenue will come from toll processing, white-label production, and licensing IP.

“We’ll start to commercialize our technology,” says Pedersen. “However, our primary focus remains on innovating and growing our intellectual property.” The company plans to double their portfolio in the next six months.

Pedersen also gave news of some major commercialization partnerships on the horizon.

One of those partnerships involves an exclusive supply agreement with BevCanna Enterprises, whose team brings experience in creating iconic beverage brands such as Mike’s Hard Lemonade and Vega.

“We have the technology to make water soluble distillate, and now, under their research licence, our partner BevCanna can begin to develop formulations and SOP’s for a portfolio of infused beverages leveraged through our IP,” adds Pedersen.

Promising future
The Canadian market for edibles and extracts is expected to reach more than $2 billion in 2020, according to a report from Deloitte. The report estimates that roughly $1.6 billion will be spent on edibles, followed by cannabis-infused beverages at $529 million and topicals at $174 million. It’s expected that the global market for alternative cannabis products will nearly double in the next five years.

With ample availability of cannabis and hemp biomass in Canada, and high-end extraction and processing capacity in short supply, Nextleaf is poised to take full advantage of what the company refers to as the next oil boom.

This story was originally published at www.proactiveinvestors.com on September 11, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Nextleaf Solutions at https://www.nextleafsolutions.com/.

TruTrace Technologies protects intellectual property to send counterfeiters packing

Product validation is more important to the cannabis industry than you might think 

Instagram is a hotbed for selling knockoff fashion and cannabis, from fake Chanel bags to phony Gucci slides to counterfeit vapes, cannabis oils and edibles.

Loudpack Farms spent US$2.5 million on new packaging and hardware just to distinguish its award-winning Kingpen cannabis vapes from fakes. After Kingpen won 13 prizes, the company said knockoffs began proliferating at unlicensed dispensaries across California.

In a particularly brazen move, a counterfeiter went to cannabis cultivator THC Designs’ website, downloaded data that showed how its marijuana had fared on state certification tests, then stuck the lab results on the side of fake products to assert authenticity.

Fortunately for the legitimate cannabis industry, help is finally at hand. TruTrace Technologies (CSE:TTT) has developed the first blockchain-secured platform to track intellectual property for cannabis. The company provides DNA-based cannabis product validation and helps with intellectual property protection and product guarantees for patients and customers.

“It’s a combination of science, enterprise software, and blockchain technology,” says TruTrace Chief Executive Officer Robert Galarza. “By focusing on granular genetic, chemical and contaminant data, as well as motion and movement information and then merging that into a blockchain we are able to provide real-time data on each product being purchased.”

Galarza comes across as a veritable Renaissance man compared to most pinstriped CEOs. His background spans roles as a corporate attorney, movie producer, advertising executive, and entertainment lawyer. He’s even managed professional fighters and co-founded the enterprise technology company Spark Digital Technologies.

Channeling the power of blockchain
With TruTrace, Galarza now channels the power of blockchain to enhance trust and fix the grim realities of corrupted supply chains in the medical cannabis industry.

In a nutshell, TruTrace combines the power of big data with the security of blockchain to provide strain identification, registration and verification for cannabis at scale.

The firm’s immutable, cryptographically secure technology is the brainchild of Co-Founder and Chief Technology Officer Tommy Stephenson, who developed enterprise software platforms over two decades for companies such as Microsoft and Mercedes Benz.

Galarza says his favourite part of the job is traveling to Seattle to visit the development centre, which has “a Disney feel” to it. The engineers exude an “if we can dream it, we can build it” philosophy, he says.

The dream team in Seattle
“Tommy’s passion and genius percolates into the team. At our core, we are data nerds who love cannabis and understand the issues around moving this product around the world. When blockchain came on our radar, we knew it could be a powerful tool in data management,” says Galarza.

“Combining this with the immutable recording nature of blockchain also made it attractive as a protection method for intellectual property and creating a permanent lineage for cannabis strains.”

The Seattle team’s goal has been to build a framework to help licensed cannabis producers and micro-cultivators easily and inexpensively move their products through the mandatory testing process. TruTrace places that test data on the blockchain for its own protection and that of the company’s intellectual property.

In this way, TruTrace’s StrainSecure cannabis tracking platform establishes an accurate, single-source, validated, and permanent account for cannabis strains from seed source to market. A cannabis strain’s genetics are stored into an immutable ledger and information is added during each processing stage.

TruTrace’s seed-to-sale tracking technology
In short, TruTrace’s seed-to-sale tracking tackles two pain points in the cannabis industry: it modernizes the inventory tracking system and provides customers with details about a product’s lab test results and cultivar.

It’s been a busy year for TruTrace, which listed on the Canadian Securities Exchange in June. The company expects momentum to continue into the second half of 2019 driven by its medical cannabis pilot program with national Canadian pharmacy chain Shoppers Drug Mart.

“Our biggest inflection point has been the relationship with Shoppers Drug Mart and Loblaws. I’m not sure everyone fully grasps how much it means to have a company of their size, history, and reputation in the medical cannabis industry,” says Galarza.

Pilot program with Shoppers Drug Market
“Working alongside Shoppers changes the conversation about what our technology could mean for the industry because we are focusing on building a bridge between medical cannabis and the traditional medical industry – that’s a bigger divide than people like to admit. If we can help make cannabis a customary part of medical treatment, it could impact the trajectory of the industry in a positive way.”

In June, TruTrace announced a milestone deal with Shoppers Drug Mart for a pilot program to use its StrainSecure technology as a central hub for identity management, asset tracking, validation, and product authentication.

Licensed producers are also using TruTrace, in part to assure stakeholders that the medical cannabis industry is serious about offering a verified, standardized cannabis treatment option.

Harvest One Cannabis joined TruTrace’s master genome strain and clone registration program in February to verify its United Greeneries cannabis strains, becoming one of StrainSecure’s early adopters. The company said it turned to the platform so patients could enjoy an increased level of confidence in the consumption of its Satipharm branded cannabis sold through Shoppers.

Similarly, well-known medical cannabis producer WeedMD is a big believer. The Ontario-based company saw 40 of its cannabis strains undergo validation as part of the first phase of its pilot program with TruTrace.

Working with about 10 major producers
“We are working with about 10 major producers, with several others getting finalized at the moment. Although our focus has been in Canada throughout year one, we’re seeing some exciting momentum in South America and the US as well,” says Galarza.

In another recent move, TruTrace applied StrainSecure technology to cannabis water company NXT Water by fixing QR codes on its just-launched AKESO hemp-derived fitness water. A customer can now scan the QR code to learn instantly about the fitness water’s test results.

“This relationship was born out of a blind test they performed on several leading CBD water products in the US market. They found most of the products fell well below the advertised amount of CBD, with some having none at all,” says Galarza.

“Alternatively, the AKESO product was consistently testing out at around 12 milligrams of broad-spectrum CBD per bottle and NXT wanted to find a way to communicate this to their customers. They turned to TruTrace and started using the StrainSecure platform.”

Strong technology adoption
TruTrace has spent a lot of time, effort, and money perfecting its software. Now that the technology comprehensively solves a very real problem, long-time supporters are experiencing the moment they knew eventually had to come.

“The hallmark for an innovative technology company is adoption at various levels of industry. A great idea without customers unfortunately will remain nothing more than an idea that never panned out,” points out Galarza.

“We believe TruTrace has achieved this in its young history. From Shoppers Drug Mart and Deloitte, to WeedMD and NXT Water, we’ve found great adoption at many levels. We believe that sets us up for long-term success.”

As adoption grows with each new user, TruTrace further stakes its claim as a technology game-changer for the cannabis industry.

This story was originally published at www.proactiveinvestors.com on September 13, 2019 and featured in the Public Entrepreneur magazine.

Learn more about TruTrace Technologies at https://trutrace.co/.

Acreage Holdings: The most transformative deal in cannabis history is worth taking the time to understand

A lot has been written about the game-changing deal between Canopy Growth and Acreage Holdings (CSE:ACRG.U) announced on April 17 of this year. Much of it is complex.

Most observers assume that final consummation of the megadeal is predicated on a single, very specific occurrence: federal legalization of cannabis in the United States. But Acreage Chief Financial Officer Glen Leibowitz and Vice President of Communications Howard Schacter say this actually is not quite the case.

One thing for sure, though, is that once the acquisition of Acreage Holdings by industry giant Canopy Growth Corporation is finalized, it has the potential to cause a sea change in the way companies structure business deals in the cannabis space.

Deal structure

Here are the facts as they stand today.  Canopy and Acreage have entered into an agreement that will grant Canopy the right to acquire 100% of Acreage’s shares at such time that cannabis production and sale becomes federally permissible (remember that term) in the United States.

As part of the transaction, Acreage shareholders will receive an aggregate payment of US$300 million, which works out to approximately US$2.51 – $2.63 per share.  The payment is to be made immediately following the receipt of approval from shareholders of both Acreage and Canopy, plus the Supreme Court of British Columbia.

Later, once the “federally permissible” condition is met, Acreage shareholders would receive 0.5818 of a common share in Canopy for each Acreage share held. Canopy has stated that it intends to waive the requirement when a change in rules policing the New York Stock Exchange and Toronto Stock Exchange would enable the acquisition to occur.

US footprint

To understand how the deal came about, a bit of background is necessary. Acreage’s roots started in 2011 when Chairman and Chief Executive Officer Kevin Murphy, a Wall Street veteran, began making moves in cannabis with a minority investment in Maine. By 2017, the company, at the time called High Street Capital, was rebranded as Acreage Holdings, welcoming former US Speaker of the House John Boehner to its board. There were several rounds of private raises, including a US$119 million financing that represented the largest in the industry at the time, culminating in a reverse takeover on the Canadian Securities Exchange last year.

Today, the multistate operator has a footprint in 20 states, making it one of the largest cannabis companies in the US. Its April 2019 acquisition of Form Factory, a manufacturer and distributor of virtually any type of ingestible cannabis product, propelled Acreage into the big leagues of the mainstream consumer packaged goods industry for cannabis products. With the acquisition under its belt, Acreage hopes to become the first port of call for traditional CPG companies like Kraft and Mars if they decide to enter the cannabis space.

In that context, it’s easy to see why Canopy saw Acreage as an ideal partner in its US expansion plans. Canopy’s $5 billion deal with Constellation Brands, which manufactures spirits such as Corona Extra, Modelo Especial, Robert Mondavi, Kim Crawford and SVEDKA Vodka, is a clear sign that global CPG companies are already making moves into cannabis.

The Canopy-Acreage deal is about creating a multinational cannabis brand, gaining consumer recognition and customer loyalty in the same way as a company like Constellation has with its product portfolio. According to Leibowitz, Acreage’s main focus prior to combining the entities is to be the number one player in every state and every market that Acreage operates in. Canopy’s intellectual property and flush treasury would certainly make it easier to reach those goals.

“We’re seeing the birth of a global cannabis brand, which doesn’t exist,” says Leibowitz. “Long term, that consumer loyalty and brand recognition is the value of the deal.”

Trigger events

There are clear synergies between Canopy and Acreage, but investors are still trying to wrap their heads around how a multibillion-dollar deal can hinge on US federal permissibility of cannabis.

The truth is there are multiple pathways, or “trigger events,” that could see the final combination of the companies take place.

“The trigger event would spur Canopy’s obligation to complete the acquisition, but they have said they would do it at their discretion if the exchanges indicate that they will approve the deal,” explains Schacter.

In terms of permissibility, the STATES Act in its current form would not necessarily constitute a trigger event, according to Acreage. The trigger event is about change to federal law, which could include new law that would make it permissible to cultivate and/or distribute cannabis in the US. That’s not necessarily federal legalization but rather a change in law that speaks to permissibility.

That’s not to say that the decision is entirely in Canopy’s hands. If Acreage believes that the trigger event has occurred, it can put the shares to Canopy. “It’s not just an exclusive option for Canopy to pull the trigger,” Leibowitz says.

Valuation

Many investors have also voiced confusion as to the value of the transaction. At the time the deal was signed, it was valued at nearly US$3.4 billion, a 41.7% premium over the 30-day volume weighted average price of Acreage shares.

The figure only illustrated the value of the deal if it were to close on the day the announcement was made, says Schacter. “Admittedly, our news release could have been more explicit in that regard,” he acknowledges. “The true value of the deal won’t be known until it closes.”

A host of factors that affect the share price of either company could change that valuation by the time the deal is finalized, one of the clarifications that Leibowitz wants investors to understand.

“There’s a lot of confusion around the value that the transaction was agreed to,” he says. “I want to be clear that the shares of Canopy and Acreage do not move in tandem. There could be opportunities where Acreage shares will move up in value and don’t necessarily correlate to Canopy’s share price.”

To calculate the implied value, take the Canopy stock price on the closing date and multiply by 0.5818 to reach the ascribed value of the Canopy shares. Add the approximate $2.51 – $2.63 upfront per-share payment to Acreage shareholders, then multiply that by Acreage’s current outstanding fully diluted shares (currently 117 million fully diluted outstanding shares). The resulting amount will be the implied value of the acquisition.

The value has fluctuated since the April announcement in a possible sign that not all investors are keen on the transaction. According to Leibowitz, that is likely a result of the groundbreaking structure of the deal.

“A lot of the conversations that we have on the institutional side are people asking about the models we used,” says Leibowitz. “They can model a lot of these transactions pretty easily. The problem is this doesn’t have any certainty to it, so they can’t calculate the premium and arbitrage. The result is that institutions will say the risk is too great.”

On the retail side, investors have never seen a transaction structured this way before. “It’s a game changing, innovative deal that has taken time to digest in order to effectively understand the value to both companies,” Schacter explains.

Once the deal is agreed to by Acreage and Canopy shareholders, Acreage becomes Canopy’s exclusive pipeline in the US, ascribing value to the shareholders of both companies.

Global cannabis brand

Whether the trigger is federal legalization, or relaxed restrictions on the New York Stock Exchange, or the passage of a new law, it’s clear that Acreage and Canopy are committed to acting together to create a global cannabis brand.

In the meantime, Acreage maintains the flexibility to conduct further acquisitions through the ability to issue 63 million new shares that will be convertible to the more liquid Canopy stock.  That amounts to approximately “$1.4 billion of dry powder for M&A activity,” says Leibowitz.

Leibowitz says the phones are ringing with calls from companies wanting to be a part of the promise of an Acreage-Canopy merger.

“The combination of the number one player globally with the number one player in the US creates a superpower in this industry.”

This story was originally published at www.proactiveinvestors.com on June 14, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Acreage Holdings at https://www.acreageholdings.com/.

1933 Industries prioritizes Silver State as new era dawns for cannabis

Brayden Sutton is a refreshing change of pace in the cannabis industry.

Sharp. Concise. Thoughtful. And yet, blunt – not in any way that is impolite, but in a way that very simply underscores his bunker of experience in the cannabis industry.

As the founder and Chairman of the Board of 1933 Industries (CSE:TGIF), Sutton is helping steer a small but mighty ship that is looking south – to the Silver State, primarily.

“Nevada is the place to be,” says Sutton. “It’s one of the most attractive cannabis markets in the US, which provides a solid backdrop for growth.”

Nevada is more than a stone’s throw from 1933’s headquarters in Chilliwack, British Columbia, but it is, undoubtedly, a state like no other. The company also has partnerships in California and Colorado, but it is Nevada where 1933 has been at the heart of growth in the cannabis business for years.

Dawn of a new era

As for the name? The “1933” in the company’s moniker is a nod to the year when the prohibition of alcohol ended in the US.

“It was the dawn of a new era,” says Sutton. Today, 1933 Industries aims to capitalize on opportunities that have come as a result of the end of cannabis prohibition in Canada and industry legalization in a collection of US states.

“The US has not even begun yet,” says Sutton. “I compare it to what Canada was like in 2012 so there’s an incredible opportunity there. It has years of accelerated growth ahead.”

“There’s no roadmap right now,” adds Sutton. “The risks are higher in the US than in Canada, but it brings much higher upside potential.”

A diversified mix of assets

1933 Industries certainly seems to have the asset portfolio to make the most of that potential. Licensed medical and adult-use cannabis cultivation and production assets; proprietary hemp-based, CBD-infused products; CBD extraction services and a specialized cannabis advisory firm.

The company has three subsidiaries: Alternative Medicine Association LC (AMA) and Infused MFG – both located in Nevada – and Spire Global Strategy, located in Vancouver.

AMA is a licensed medical and adult-use cannabis cultivation and production facility in Las Vegas that hosts its own line of products, while also manufacturing other companies’ brands. Some of these products include concentrates such as Cake Batter, Crumble and Sugar; a vape pen sold with distillate oil; and several flower strains.

“AMA holds the first cultivation license for cannabis in Las Vegas,” says Sutton. “It has over 100 products in 46 states across 700 retail stores.”

And that’s a number that’s poised to grow, thanks to 1933’s brand new 67,750 square foot cultivation facility in Las Vegas, which represents a 10-fold increase from what it previously held.

Nevada, the place to be

If Nevada is the state to be in, Las Vegas is the city.  With more than 42 million visitors each year, it is poised to become one of the world’s largest adult-use cannabis markets.

The new facility is a key piece of the puzzle, as it will ensure consistent supply of cannabis flower and input material, meaning increased capacity, production efficiencies and economies of scale, all of which the company believes will improve yields and provide higher margins.

The facility is segmented into five different zones, with 15 bloom rooms and four veg rooms. Once at full capacity, it’s anticipated it will produce 700-800 pounds of flower monthly.

But that’s not the only piece of the puzzle for 1933 Industries. Subsidiary Infused MFG is a Las Vegas-based manufacturer of hemp- and cannabidiol-based products with a number of proprietary product lines, which include the well-known Canna Hemp, Canna HempX, Canna Hemp Paws and Canna Fused. The consumer packaged goods division experienced over 8,000% growth during its first year and represents the fastest growing segment of the company’s business. Nationally recognized, the Canna Hemp brand resonates with customers seeking the benefits of CBD and hemp and are available in over 700 retail outlets across the US.

Building a hempire

Adjacent to its cultivation facility, 1933 Industries is progressing with plans to launch one of Nevada’s largest hemp extraction facilities, as it focuses its gaze on the booming cannabinoid, or CBD, industry.

The new processing facility will produce extracts for full spectrum oils, distillates and isolates. The lab will also have the flexibility to isolate cannabinoids that are emerging in popularity. 1933 Industries aims to have it up and fully running by the end of the year.

The company has invested heavily in research and development, particularly where it comes to the design of its customized equipment, in order to provide maximum capacity and efficiency.

“We want to utilize the isolates in the manufacturing of our own consumer branded goods and secure the supply of raw materials,” says Sutton, adding that the move will increase margins and benefit from a recurring revenue stream from sales to other manufacturers.

Another subsidiary is Spire Global Strategy, an advisory firm that provides diligence, security, and intelligence services to clients around the world and is headquartered in Vancouver. It gives the company exposure to Canada and addresses the lack of discussion around infiltration of organized crime, diversion of product, internal theft of product, products making it into stores when they should not be, and other issues.

A string of, let’s face it, cool deals

There is a certain coolness factor when it comes to 1933 Industries – from its Instagram page to some of the partnership deals it’s signed to the look and feel of its products.

1933 subsidiary Infused MFG partnered with legendary skateboarder Tony Hawk in April under a two-year licensing agreement with House of Hawk for the launch of several exclusive, co-branded hemp & CBD products. It’s part of a growing trend, aimed to bring awareness of the rise of CBD in the sports world.

The company also inked a two-year agreement with OG DNA Genetics to cultivate, manufacture, distribute and sell OG’s branded cannabis. In the cannabis world, think of OG DNA Genetics as the crème de la crème of the cannabis genetics world. Rooted in Los Angeles and founded in Amsterdam, over the last decade the company has built and curated a seasoned genetic library, with operating procedures for genetic selection, breeding, and cultivation.

Subsidiary AMA also recently inked a licensing deal with hip-hop artist and actor Kurupt to bring his Gotti’s Gold cannabis brand to the Nevada market, the second partnership of its kind. For those unfamiliar, Kurupt is a hip-hop legend and actor who played an instrumental role in the launch of the early careers of some of the most notable names in the genre: 2Pac, Warren G, Dr. Dre and Snoop Dogg.

Bright future

But at the end of the day, on paper, numbers matter, and Sutton is the first to underscore that.

In an industry that can be quick to assign eyebrow-raising valuations to companies that have no earnings, no revenue and sometimes little more than a logo and an investment deck, 1933 Industries appears to be a lean machine poised for an exciting year and beyond as it moves towards profitability.

The next step?

“Block out the noise, build value and continue what we’re doing,” says Sutton. “We have an incredible head start.”

1933 Industries is using a tried and true model for a simple reason: it works. That model is to establish a foothold in several parts of the value chain and replicate it in other jurisdictions. The firm’s strength lies in its diversity of assets, which are focused on some of the most attractive niches of the cannabis industry.

“Many have the strategy to get into as many states as they can,” says Sutton. “But some states are superior to others. We’re not interested in a ‘let’s own the world’ strategy. We’re interested in a ‘best-on-balance’ strategy. At this point, Nevada is the place to be, so we’re going to go big there.”

This story was originally published at www.proactiveinvestors.com on June 17, 2019 and featured in the Public Entrepreneur magazine.

Learn more about 1933 Industries at https://www.1933industries.com/.

Curaleaf Holdings: Vertical integration, national retail reach position this early cannabis entrant as industry leader

Joe Lusardi is a self-styled “reluctant pioneer” in cannabis.

At the helm of Curaleaf Holdings (CSE:CURA), the largest multistate operator in the United States, Chief Executive Officer Lusardi has overseen the company’s expansion into 15 states and driven blockbuster acquisitions, all while remaining at the forefront of advocacy work toward federal legalization.

But when he opened the first vertically integrated cannabis shop in Maine in 2010, the landscape was much less certain. “We were out on the risk curve, I’ll just say that,” he jokes during an interview with Public Entrepreneur in early May.

Things are much different in 2019. Cannabis is a multibillion-dollar industry and savvy early investors are seeing exponential returns. Canada has legalized cannabis at the federal level and, with two milestone bills being debated in the House of Representatives, signs point to the US eventually following suit. What’s more, public sentiment toward the plant and the substances derived from it is drifting positively.

“Every day the public sentiment around cannabis continues to improve,” says Lusardi. “It’s beyond a tipping point.”

In an industry where winners and losers are starting to emerge, Massachusetts-based Curaleaf clearly belongs in the former group. Over the last three years, Lusardi and his team have established not only the largest US cannabis company by market capitalization, but also a national brand. Now with two game-changing acquisitions under its belt, Curaleaf is a driving force in the cannabis space.

For Lusardi, the goal is to be the biggest cannabis brand in the country. Curaleaf-branded products are currently available in 47 states representing over 600 SKUs. Its product line is comprised of oils, flower, lotions, tinctures and edibles. Last year, the company launched Curaleaf Hemp, offering a range of premium, natural hemp-based products.

Execution Matters

Curaleaf has a vertically integrated model, meaning it controls the cultivation, manufacturing, processing, distribution and retailing of its products. That model can be challenging for a company no matter its size, but for Curaleaf it means control of product consistency throughout the value chain.

“Execution really matters,” says Lusardi. “We have to be a good grower, manufacturer, distributor and retailer, which all contribute to brand identity.”

If running a vertically integrated business is challenging, expanding it can be even more so. It should be no surprise that acquisitions are a cornerstone of Curaleaf’s growth strategy. The challenge for one of the biggest cannabis companies in North America is finding those opportunities that make the most strategic sense and creating incremental value for shareholders.

Funding the acquisitions is not a problem. In 2018, when Curaleaf went public on the Canadian Securities Exchange, the company raised US$400 million from investors around the world. Private equity firm Blackrock recently took an US$11 million stake in the company.

Revenues during 2018 were approximately US$88 million. The company has nearly doubled its share price since the beginning of the year, giving it added currency to grow the business.

Acquisition Trail

When Curaleaf set out to look for acquisitions, they knew that they needed to be in California, the largest market for cannabis in the US. The acquisition of Monterey County-based Eureka Investment Partners fit that requirement immediately. Although small in value – the total deal is worth just under US$31 million – the acquisition of Eureka’s 110,000 square foot greenhouse facility allowed for seamless integration with Curaleaf’s manufacturing facility in the state.

Calling the acquisition the “first step in a multistep California strategy,” Lusardi says the deal gives Curaleaf a platform to build more manufacturing and dispensaries on the West Coast.

The company plans to launch three dispensaries as part of its retail expansion strategy to eventually cover the state.

According to Lusardi, Curaleaf has a full acquisition pipeline and will continue to make deals that strengthen its position as a market leader.

The next acquisition came hot on the heels of Eureka and represented a sea change for the company. At the beginning of May, Curaleaf announced it had acquired Cura Partners, makers of the Select oil and CBD brands, in a CDN$1.3 billion deal.

Based in Oregon, Select is one of the most well-known cannabis wholesale brands in the US with its products on the shelves of around 900 retailers. For Curaleaf, the deal gives it a stronger foothold on the West Coast as a complement to the company’s dominance in the eastern part of the country.

Lusardi calls the acquisition a “perfect fit” for the cannabis leader. “We intend to meaningfully accelerate our topline growth trajectory with the addition of the Select Oil product range,” he stated in a press release about the deal. “In addition, we intend to create significant operational synergies from the integration of Select’s wholesale business with our vertically integrated cultivating, processing and retail platform.”

Bay Street analysts love the transaction, with Cormark Securities calling it a good fit with nice synergy potential. “We see particular potential in Curaleaf’s ability to introduce the Select brand on the East Coast, while the integration of Select’s wholesale and distribution platform with Curaleaf’s cultivation and processing capacity should drive material cost reductions in Western markets,” Cormark analysts Jesse Pytlak and Sam Fraser noted in a May 2 report.

Cormark also raised its price target to CDN$18 a share, from $15, calling Curaleaf a “must-own” US cannabis name.

Advocacy Leaders

With Curaleaf an established cannabis leader, Lusardi and his team are doubling down on the advocacy and policy work that is a pillar of the company’s ethos. On the policy front, Curaleaf is front and centre advocating for federal legalization of cannabis in the US. Lusardi notes that the majority of Americans are in favour of legalization, citing statistics showing that over 90% of the population supports medical cannabis use and nearly 66% supports recreational use.

“Elected leaders can’t avoid the will of the people,” says Lusardi. “It’s a question of when, not if, legalization will occur. Every elected official is trying to formulate a thoughtful position on cannabis because they’re hearing from their constituency that they want legal access to cannabis. The ‘when’ is not clear, but I think you’ll see the House of Representatives take significant initiative this year, which will put pressure on the Senate and the White House to move forward the cannabis agenda.”

A key feature of Curaleaf’s corporate strategy is creating opportunities for underrepresented communities to participate in the industry. “Minority groups need to have a seat at the table,” Lusardi says. “We want to make sure that the industry is as diverse as its customer base. It’s something that we think about a lot, and we plan to be a part of that solution.”  Curaleaf also launched an initiative this year called the Veterans Cannabis Project, dedicated to improving US military veterans’ quality of life through access to cannabis.

These initiatives are part of Curaleaf’s long-term strategy to build a trusted, recognizable brand that consumers can interact with legally. At the moment, the company is comfortable remaining US-focused. Lusardi is optimistic on federal legalization but is building the company and creating value for shareholders regardless of the outcome.

“The long-term value in this industry will rest in the brand value and the relationship with your customer,” he says. “We feel we have all the makings of a national brand and we’re going to work hard to nurture that relationship.”

This story was originally published at www.proactiveinvestors.com on June 19, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Curaleaf Holdings at https://www.curaleaf.com/.

SLANG Worldwide: Brands at core of efficient business model that naturally scales with cannabis industry growth

The power of a brand is an amazing thing. A good brand touches our heart, gets people to buy more, to pay more, and the best of them can even become everyday words that transcend the boundaries of the company that created them. SLANG Worldwide Inc. (CSE:SLNG) is well aware of this potential and that’s why brands are its thing…lots of brands. Some, such as O.penVAPE, District Edibles, and Firefly rank among the top-performing brands in the entire cannabis industry.

Public Entrepreneur spoke recently with Peter Miller, SLANG’s co-founder and Chief Executive Officer, to explore this fascinating side of the cannabis market. From developing strategies to suit specific jurisdictions to the wisdom of pursuing growth through acquisitions, Miller speaks with the experience of an executive who has been there from the beginning, yet in terms of the potential to take SLANG to new heights is perhaps only just getting started.

Give us a brief introduction to SLANG.  How did you and your partner build the company into such a force in the cannabis consumer packaged goods space?

SLANG Worldwide is a consumer packaged goods company that owns, licenses, and markets 11 cannabis brands serving the flower, concentrates, edibles, and beverage categories. Our portfolio is one of the highest selling of all time, as tracked by a third party, with over $250 million in sales at retail. SLANG is a multistate and multinational operator, with brands and products available in over 2,600 retail stores – one of the largest distribution footprints in the cannabis industry. Our brands are more widely distributed than any portfolio I’m aware of. We source biomass, extract it and manufacture it into finished goods with our brands and formulations, then wholesale and distribute to retail accounts. That focus has allowed us to scale quickly and grow to where SLANG is today.

My co-founder Billy Levy and I previously founded a vertically integrated limited-licenses cannabis business in Canada. We came from the tech world and didn’t have a lot of experience in cannabis, so we spent a lot of time visiting markets that were maturing. We got to watch cannabis retail go from unbranded jars of bud to more sophisticated form factors like edibles and vaporizers, which really excited us. Our licensed producer was sold to Canopy Growth and we thought about where we wanted to be, so we started making investments and formalizing partnerships in the US.

SLANG recently launched a CBD-focused health and wellness division. How does this fit within your strategy going forward? Is it better to acquire brands or build them up on your own?

SLANG’s goal is to offer cannabis products to a wide variety of consumers. CBD products have proven to be extremely compelling and popular to consumers, but just producing CBD products doesn’t necessarily guarantee success at the cash register. CBD products require a different set of skills and relationships than THC. We identified a powerful opportunity with Greenlane to distribute our products into retail environments that aren’t your core cannabis retail environments. Greenlane is the largest online and smoke shop distributor in the industry. It represents an exciting go-to-market strategy for us. SLANG will continue to round out the products that we offer within the health and wellness verticals, initially on the inhalable side, and in the near term moving to the edibles side as well.

A number of SLANG products are best sellers. How do you develop these brands into winners? What lessons can be learned from your experience?

No two markets are the same. Canada has strict rules on promotion and advertising, but brands aren’t built solely through promotion and advertising. Brands benefit most from being trusted by customers, and you establish that trust over time. SLANG products have been leading in the most competitive and oldest legal markets in the US. How do we do that? SLANG establishes trust with our retail customers by consistently delivering them exactly what we say we will, which makes them inclined to continue carrying our products on their shelves. You start developing a subconscious attachment between your brand and the consumer. That’s when you really form that close relationship.

SLANG’s head of sales likes to say that the best ability to create a brand is to make it as broadly available as possible. Making our products widely available and then ensuring that our customers are aware of that availability are the keys to developing these brands.

When it comes to the question of organic growth versus acquisitions, which approach do you prefer?

The US is really a series of markets within a market. Each state is at a different point in its market maturity, so you have to use a tailored approach. In the more mature states like Washington or Colorado, we can look at acquiring brands that are proven winners that have been operating at scale for years in competitive environments. In new markets, it’s difficult to say who’s going to win it all. The deal SLANG announced with Arbor Pacific in Washington and Oregon was a situation where we were picking winners.

When we looked at other exciting markets like Florida, which is a limited-license market, it wasn’t as simple as picking a winner, so we decided to grow organically through a partnership with Trulieve, the largest retailer in the state.

Trulieve is an example of how we go about buying into a market. Instead of acquiring a Florida operator, we partnered with one who would help us get our brands on the shelf in the near term.  SLANG can help drive more customers to their stores to buy our brands, but we could also help support and share our product knowledge with them. We’ve been extracting cannabis for many years and can help them avoid some of the pitfalls of starting an extraction unit. We saw that as the best way to address new markets that are limited license.

What do you think makes the most sense for shareholders in the current environment?

As this market continues moving toward a consumer packaged goods framework, investors will pay close attention to branded unit sales. It is the most apples-to-apples way to understand the competitive landscape. How are consumers voting with their dollars and whose brands are driving the most sales? Consumers spent $32 million on SLANG branded products in the quarter.

Another key metric for investors is branded servings, which measures the number of experiences consumers have with cannabis brands. Quantified by 5mg servings, 52 million SLANG branded servings were purchased by customers in Q1. By branded servings sold, SLANG is one of the largest cannabis companies in the world.

How can investors make sense of the frenetic pace of M&A activity that’s going on in the sector right now?

There’s always going to be the temptation of the new shiny object and the trend of the moment. I think investors need to look at the kinds of assets people are putting together and support a cohesive thesis and strategy, rather than just looking at revenue figures or exciting markets and thinking it will be better together. In fact, it’s rarely the case if you look at M&A across other industries historically. It’s easy to get distracted. I think it’s important to make sure that there’s a central mission or strategy around all the M&A.

What are a few upcoming catalysts for SLANG shareholders?

I’m incredibly encouraged by the macro tailwinds we see in our industry, generally, but as each state-level market matures, we’re seeing validation of the SLANG business model. From the manufacturing process through the marketing of finished goods, SLANG’s business is scalable, capital efficient, and its success is repeatable in new markets. In fact, our business model improves with more competition, meaning the more retailers that open their doors, the more points of sale for our brands. Our business model lends itself to growing with the industry and we’re doing everything possible to grow more quickly than the broader industry. All the catalysts we have a line of sight on right now provide net benefits to our business model and our strategy.

Is there anything you’d like to add?

SLANG’s business model is simple and focused on sourcing biomass. We’re extracting and formulating it into finished goods and distributing our brands to as many stores as possible. It’s the same business model that has allowed some of the biggest consumer package goods companies in the world to scale up operations. A level playing field, in terms of regulation and unit economics, will only highlight our approach and the value of our brand portfolio.

This story was originally published at www.proactiveinvestors.com on June 19, 2019 and featured in the Public Entrepreneur magazine.

Learn more about SLANG Worldwide at https://www.slangww.com/.

Cresco’s acquisition of Origin House accelerates its advance toward 100% market penetration

Cresco Labs (CSE:CL) is one of the leading cannabis growers and retailers in the US, marketing several well-known brands across multiple states. The Chicago-headquartered company’s 2018 results showed increasing production and distribution, along with a near 300% increase in revenue compared to the previous year.

In April, Cresco announced plans to acquire California-focused Origin House for CDN$1.1 billion in what would be one of the largest public company acquisitions ever in the US cannabis space.  It would come on the heels of last year’s acquisition of Florida-focused Vidacann by Cresco for $120 million.

Proactive caught up with Chief Executive Officer Charles Bachtell recently to get his thoughts on the Origin House transaction and what lies ahead for Cresco and the cannabis sector in general.

Cresco has really gone from strength to strength over the past year. Let’s begin by having you tell us about your corporate strategy and what some of your advantages are compared to industry peers.

Cresco is one of the larger multistate operators in the US. We participate in all main verticals of the supply and value chain – from cultivation and extraction to the creation of branded products, carrying on into distribution of those branded products to stores we don’t own and then also bricks-and-mortar retail. Including pending acquisitions, we’re in 11 states and those states are arguably the most strategic footprint.

Some of our peers have more states in their portfolio but our 11 states – seven of the 10 most populated states in the US and four that aren’t in the top 10 – they all have very key strategic rationale behind them, like Nevada with Las Vegas and Massachusetts with adult use. We focus on the regulated market.  We have compliance backgrounds. The founders of this company come from the banking industry and a lot of the lessons we learned on the operations side, the legal side and the compliance side of banking have helped us create an operation in cannabis that is very focused on regulation and doing cannabis the right way.

Those are some very strong pillars. It seems that many companies in this industry are pursuing similar goals, but it’s the ones executing consistently on their growth plans that separate themselves.

The strategy behind our growth has not been just about trying to make as big a footprint as possible.  It was making sure that we were thoughtful in the states we launched in. We pride ourselves on execution and if you’re looking for maybe points of distinction between us and our peers, because to a certain extent you could say we look alike – we’re all trying to create multistate national platforms, we all want to create brands, and now we all have access to capital – I think this is what has always resonated with the investor community.

It comes down to three things with Cresco. The strength of management has always been commented on by investors. It is a unique background to have, specifically mortgage banking experience and what it was like to go through the economic downturn and not only survive, but we thrived in our prior lives when regulation came to mortgage banking.

Then we’ve built out the team with some phenomenal professionals with a ton of experience in big international CPG (consumer packaged goods), so the strength of management has always stood out. The level of execution – our ability to win these very competitive, merit-based application processes is second to none.  And then the ability to execute on M&A. We call it the ‘gets’ – we get access to the markets, we get operational, we get products to market and then we get disproportionate market share.

In Pennsylvania, for example, we all received licenses on the same day. We were able to go through all the things to operationalize and bring product to market 45 days faster than the second group that came to market, and 70 days faster than the third.

We execute at a different level and then we focus on market penetration and market share, which are fundamental ways of evaluating your success. But a lot of our peers were focused on the landgrab aspect and maybe a little less on operations.  But we’re operations guys.

We like the story of highest market share in Illinois, highest market share in Pennsylvania, largest distribution footprint in California. That’s how we judge ourselves and we like telling that story.

The third point of distinction is our focus on the creation of branded products more so than how many bricks-and-mortar retail stores we own. We like vertical integration. We think it’s important in some markets, but our goal is not to own more bricks-and-mortar retail than anyone else. Our goal is to make sure our products are on the shelves of every dispensary in a state and that’s a little different from our peers.

Tell me more about the acquisition of Origin House. How did you go about that and what was the rationale for the deal?

It came on the heels of another big announcement we made, which was the Florida acquisition. In order to create a national brand, you have to have that strategic geographic footprint.  You only want to be in the states that really matter. So, Florida, being the third most populated state in the US, of course really mattered. We were able to check that box and it really is the last of the tier-one states we needed. So, you create the geographic footprint that matters but then you have to get a meaningful position in those markets.

Our story is 100% market penetration – getting on the shelves in every dispensary and then having the most market share of any group. And so that’s where Origin House fits into the narrative. We were already in California – we already had operations. We closed that transaction last year and we were starting to produce, but how do we create a meaningful position in the most important, largest cannabis market in the world? That’s where Origin House really spoke to us as a transaction. They’re the largest distribution company in the largest cannabis market in the world. That in and of itself is a reason to do the deal.

The best part about the Origin House acquisition has actually been everything that came after it. They really do distribution because they’re fundamentally focused on finding and identifying brands that matter. They wanted to be in the branding space too so that was very aligned with us.

And now that we’re a publicly traded company, granted this has always been our mindset anyway, who we can and who we can’t do business with, we have to ensure that our standards are met when it comes to corporate governance and adherence with strict compliance with state regulations. With Origin House, you had a company that was publicly traded for over two years now and compared to its peers out there they’ve been held to a higher level, a higher standard of compliance and corporate governance.

Then you start looking at the human capital side of the space.  They’ve got a very astute corporate development department over there. Over 20 lawyers and analysts that have been working on cannabis M&A deals for the last couple of years. That was great and then the icing on the cake is their founder and CEO Marc Lustig. His capital markets experience is unique for cannabis. His understanding of the way that capital markets and Canadian capital markets work. The relationships he has, the reputation he has. You start layering all of those assets on top of each other and you can see why it was a very enticing transaction for us to want to complete.

Merger activity has really picked up in the US cannabis space. Why is this and do you see the trend continuing?

This goes back to the experience we had in mortgage banking. I think any time you have emerging industry meets high regulation you’re going to have consolidation. It’s going to get to a point where people are going to struggle to reach where they thought they would be able to get. Maybe it’s less realistic – whether timing, whether infrastructure, whatever it is, access to capital that’s going to limit them, that’s going to create great opportunities for consolidation by the companies that have built out the infrastructure, that have the experience, that have been able to get out in front. I think that’s what you’re seeing and are going to continue to see in the cannabis space.

Consolidation is a part of this next phase of growth in the industry for a lot of reasons. When you can find some of that bandwidth, when you can find that experience, when you don’t have to create it all from scratch, that becomes a faster, less risky way to expand than building from scratch every time.

How do you see the US federal landscape for cannabis in terms of legislation changing?

I think everybody is more bullish on this than we would have been a year ago.  You’re seeing the SAFE Act with a lot of support. You’re seeing the STATES Act with a lot of support. The feedback and the chatter out of DC seems very positive on both of those fronts. People are handicapping SAFE to potentially be a 2019 passage, but they are also looking at the STATES Act as likely getting figured out before the 2020 election cycle. It’s moving in the right direction, I’ll tell you that.

What are your plans for the rest of 2019 and beyond?

We feel like we’ve created that geographic footprint of substance and now it’s making sure we go as deep in those programs as we can. That we do accomplish that market penetration and market share that has become our calling card. I think you’ll see us focus on implementation and integration with Origin House and with Florida. And we’re opportunistic, so if there’s another state that comes up that fits into our thesis and growth strategy, we’ll evaluate it. But I think for the next quarter or two, any M&A would be focused on deals that help us go deeper in states that we’re already in. Acquiring another operator in a state that we’re already in to increase our position in that state is the likely future of M&A for us.

This story was originally published at www.proactiveinvestors.com on June 20, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Cresco Labs at https://www.crescolabs.com/.