The CSE Quarterly, Quarter 2, 2017

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

4 | www.thecse.com

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2 ®

Quarterly Issue No. 2 | 2017

contents

Publisher Uptick Mail Inc. #317—1489 Marine Dr. West Vancouver, BC Canada V7T 1B8 1.604.202.7841 Group Publisher Terry Tremaine Editor in Chief James Black Graphic Design Vanessa Fryer

8

CannaRoyalty CEO Marc Lustig

6

CEO’s Message

Free Digital Subscription

feature story

Published by Uptick Mail Inc. on behalf of the Canadian Securities Exchange. To receive your complimentary subscription, please visit www.thecse.com and complete the contact form.

8 CannaRoyalty The diversified approach to North America’s cannabis marketplace

company profiles

12 The Canadian Bioceutical Corporation Profiting from a strategic shift to the US Cannabis Market

15 Namaste Technologies Vapor trails and big sales in cannabis driven e-commerce

18 Maricann Group Large-scale cultivation for medical cannabis markets in Canada and Germany

21 iAnthus Capital Holdings Advancing cultivation and retail assets in multiple US states

24 Alternate Health A focus on the medicinal aspects of the cannabis plant

www.thecse.com @CSE_News

special feature

28 Cannabis investment tips for grandpa: It’s time, dad! www.thecse.com | 5

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

CEO’s Message As you may have discerned from the cover this issue, we have directed our full attention towards the cannabis sector for this edition of the CSE Quarterly Magazine. Without question, the cannabis industry has been a boon to the public capital arena since the first license applicants under MMPR arrived on the CSE back in 2014.

Since that time A LOT has happened in the industry. Regulations have evolved, companies have matured (raising huge sums of capital), and the institutional and retail investment communities have rallied around the sector in a big way. The capital injection into, and build-up of the cannabis sector over the past year may represent the most rapid accumulation of capital and resources around a sector in the public markets ever.

RICHARD CARLETON, CEO Canadian Securities Exchange (CSE)

Recollecting on the “early-days” of this sector back in ’14, it is astounding to see how much the industry has matured. For instance, most dialogue of any public company back then was relegated to online message boards and other dark corners of the internet. Dedicating an entire issue of the CSE Quarterly to cannabis companies three years ago would have been unfathomable. Professionally speaking, most law and accounting firms were staying away from clients in the space, and there were many in the finance industry who were extremely reluctant to invest their client’s money into anything cannabis-related.

Fast forward to today and you cannot watch an hour of business television without coming across the topic of cannabis. The professional community has embraced the sector and with it the business renaissance that it has brought upon the public capital space. Hundreds of millions of dollars have poured into cannabis-sector companies and the secondary market for these issues has reinvigorated a dormant retail base that had ridden out one of the worst resource bear markets in Canadian markets history.

Looking forward, there is still plenty of ground to cover as the industry continues to mature and organize itself. This issue itself can be seen as a primer on where the industry currently stands. We have companies covering a wide array of industry verticals: cultivation/growing, devices/vaporizers, investment/royalty streaming, and more. Additionally, the geographic coverage of these stories is varied, with at least half of the companies featured exploring various business strategies in the US. The capital requirements of the fast growing US legal cannabis industry will provide the financial industry and investors in Canada with some extraordinary opportunities in the coming years.

As an exchange, the CSE continues to take a principled approach to the cannabis sector—opening its doors to companies that have solid business foundations, integrity of principals, and the resources to execute their visions. Our exchange’s emphasis on enhanced disclosure has been the perfect fit for an industry finding its footing—resulting in a platform that offers the most cannabis-related investment opportunities of any exchange in North America and arguably the world.

As always, we hope you enjoy the issue.

Sincerely,

Richard Carleton

6 | www.thecse.com

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

UPTICK

GLOBAL SOCIAL MEDIA MARKETING AND PUBLICATION SERVICE FIRM

TAP INTO THE POWER OF SOCIAL MEDIA. Extensive experience serving public companies and developing investor relations Terry Tremaine 604-202-7841 terryttremaine@gmail.com http://uptickmail.com

www.thecse.com | 7

Originally published on Proactive Investors May 2, 2017.

feature story

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Marc Lustig, CEO

8 | www.thecse.com

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

“

When you consider all the therapeutic uses it could have, that is where the unlimited upside comes from—the idea that cannabis can be officially recognized as a medical product as well.

—MARC LUSTIG

”

CannaRoyalty

The diversified approach to North America’s cannabis marketplace

By Peter Murray

W

hen the first companies focusing on cannabis opportunities started listing on the Canadian Securities Exchange a few years ago, the common model was to submit an application to Health Canada with an eye to producing for the domestic medical-use market.

Fast-forward to 2017 and regulatory change in Canada, plus some 29 US states and the District of Columbia, is creating new business opportunities in what is beginning to take on the guise of an international market.

For CannaRoyalty Corp. (CSE:CRZ), it’s 25 opportunities so far, or at least that is the number of holdings the company has acquired to date.

Run by founder and Chief Executive Officer Marc Lustig, former head of capital markets for investment banking powerhouse Dundee Securities, CannaRoyalty looks on both sides of the border for investment opportunities with the potential to contribute a dependable stream of cash flow.

Candidates are put through a strict due diligence process and those making the cut are offered capital under a set of terms tailored to fit their business, along with guidance from CannaRoyalty that has proven valuable in helping investee companies deploy that

capital to boost growth.

“There is no cookie-cutter framework we use as a threshold for all asset types,” says Lustig. “We are primarily seeking exposure to obtain royalties, which means that when we invest we are getting a part of the business in the future in the form of a percentage of revenue or a percentage of net income.”

A quick perusal of the CannaRoyalty portfolio shows that royalty agreements often come alongside equity stakes in a business, which enables CannaRoyalty to be more hands-on than would be the case if it were merely receiving a percentage of revenue.

One of the company’s earliest investments was in Toronto-based Resolve Digital Health, in which CannaRoyalty participated as a seed investor. “With minority positions such as Resolve, we of course want a good return, but the bigger priority is the strategic side,” says Lustig. “Resolve is producing a revolutionary technology called the Breeze platform which we aim to license from them. It’s great that Resolve is worth eight-times more than where we invested, but the strategic upside is equally important.”

Resolve’s Breeze vaporizer provides users with a metered dosage of cannabis using a sealed pod that is inserted into the device.

Usage can be monitored through an app that works via bluetooth www.thecse.com | 9

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

on smartphones, thus providing accurate information for the patient and supporting health care professionals.

Another example of a minority holding is Vancouver-based Anandia Laboratories, in which CannaRoyalty holds a 20% equity stake. “Anandia is definitely one of our most exciting holdings,” says Lustig. “It is a leader in testing and genetics of cannabis and a good example of our interest in ancillary businesses that are integral to the execution of a federal recreational policy in Canada.”

Lustig refers to the Anandia investment as the “picks and shovels model,” whereby rather than investing in producers themselves, CannaRoyalty favours businesses that make products cultivators need to grow cannabis effectively—moving up the value chain as compared to cultivators, whose product is at risk of becoming a commodity.

10 | www.thecse.com

At the other end of the ownership percentage spectrum, CannaRoyalty owns 100% of DreamCatcher Labs, which Lustig describes as one of the largest companies designing vaporization pens and cartridges.

Hardware designed and manufactured by DreamCatcher is sold to other companies on a private label basis, with one model in particular also used for CannaRoyalty’s own GreenRock Botanicals brand.

Lustig’s personal interest in the cannabis industry developed through his work at Dundee, and he had an edge in understanding the potential of the fast-changing sector thanks to his molecular biology degree and start in the pharmaceutical industry, prior to moving into capital markets for his career.

In 2014, when Canada allowed companies to set themselves up as entities producing commercially for the medical-use market,

the overnight change in investor sentiment opened the banker’s eyes to a new opportunity.

“If you were in one of the investment firms in Canada you could not help but do financings for new cannabis companies and that was my education in terms of the capital markets opportunity—there was endless capital that wanted to be invested in this new and exciting area. But it was also an opportunity for me to learn about cannabis the plant and cannabis the market.”

Lustig believes sales of cannabis and related products could one day outstrip those of alcohol and tobacco, seeing as the plant has both recreational and medicinal uses. “Because of the legal environment, cannabis has never had the chance to benefit from large research budgets to determine the full extent of its medical properties,” says Lustig. “When you consider all the

the canadian bioceutical corporation

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

The Canadian Bioceutical Corporation Profiting from a strategic shift to the US Cannabis Market

By Peter Murray

Originally published on Proactive Investors May 8, 2017.

T

echnology companies often attribute their success to a strategic “pivot” that saw them de-emphasize an early business in favour of what ultimately proved to be a better idea.

The burgeoning cannabis sector now has its own example in the form of The Canadian Bioceutical Corporation (CSE:BCC), which shifted its focus to the United States after identifying cultivation opportunities it could advance much more quickly than its founding project in Canada.

Through a strategy of acquiring existing businesses and providing capital and management expertise to accelerate their growth, the company has positioned itself to be profitable early in its young life.

With its first acquisition, completed in January 2017, The Canadian Bioceutical Corporation acquired highly profitable assets in Arizona. These were only consolidated as of January 1, so their contribution to the company’s full financial year, which ended March 31, will be limited. Still, they will provide a good indication of what can be expected in coming quarters.

The Arizona assets are the first of several that Chief Executive

12 | www.thecse.com

Officer Scott Boyes is working to bring under the company’s umbrella. The plan is to move quickly, setting up shop in states where risk is quantifiable and businesses are available at valuations that allow for multiple expansion as capacity is expanded on both the production and distribution fronts.

“The market in the US is highly fragmented, characterized by a landscape with thousands of small producers,” explains Boyes.

“This contrasts with Canada, which has a much more concentrated landscape with fewer but larger players.”

Boyes shares that the Arizona deal cost US$25 million, and was concluded at around 1.5 times revenue and 4 times cash flow, undeniably reasonable metrics for a business in the super-hot cannabis sector.

The Canadian Bioceutical Corporation gained more than just operating assets, as Boyes was eager to work with the executive who had built the Arizona business, Beth Stavola. So much so that Stavola is now president of the company’s US unit, CGX. Purchasing the Arizona assets was an easy decision based on

ompany snapshot

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

The Canadian Bioceutical Corp.

(CSE:BCC)

• BCC is a growth story, fueled by a 2-fold medical marijuana production expansion in Arizona, additions and relocation of dispensaries, as well as aggressive expansion into other U.S. States.

• Expansion into Nevada, through the acquisition of GreenMart of Nevada, adding 1.6 million grams of dried flower production capacity and 85k grams of concentrate. While the population of Nevada is only 2.6 million, the State’s Las Vegas strip attracts over 40 million visitors annually, which has huge implications on market demand for cannabis products. Nevada, which has voted to legalize adult use of cannabis, is projected to reach cannabis sales of US$630mm in sales by 2020.

• Expansion into Massachusetts, adding 2.25 million grams of dried flower capacity and 500k grams of concentrate by January 2018. The state is legal on both medical and recreation marijuana use, with a market forecasted to hit US$1 billion in sales by 2020.

• Industry low production costs, target at US$1.00/gram by 2018.

financial analysis Having recently secured a US$25mm line of credit as well as closing a US$11.2mm equity raise, BCC is on track to grow amongst the fragmented American cannabis industry via acquisitions and organic business growth.

The Company’s highly profitable Arizona assets, projected to achieve high double-digit growth for the twelve months ending March 31, will be consolidated in the Company’s result from January 1, 2017. While BCC’s Year-end result will reflect only one quarter of Arizona results, the trend over 2016 results in Arizona should give a strong indication of the growth potential for BCC.

MARKET DATA (CSE:BCC) Price (5/15/2017 close) 52 Week Range Market Cap (mm) Shares Outstanding (basic, mm) Free Float Average Daily Volume (3 months) HEADQUARTERS

$0.56 $0.39 – $1.10 $141.5 252.7 98% 54,000 Toronto, Ontario, Canada

All figures in CAD unless otherwise stated.

Source: Thomson Reuters (5/15/2017)

POWERED BY

14 | www.thecse.com

having recently given the green light for recreational use the total market could be very large.

Completing over C$50 million in acquisitions during the first half of 2017 would be quite a feat, and a $US25 million line of credit the company secured in May will play an important role. It will also help to limit dilution; the company stated its intent in late March to raise US$20 million by issuing new shares but decided to raise less (the book was closed at $11.2 million) because the line of credit can cover a substantial portion of near-term spending.

While Boyes says the Canadian cultivation license for its facility in Owen Sound, Ontario, is still something the company would like to obtain, the focus for now is definitely the US, where he says more acquisitions can be anticipated this year.

Boyes has been somewhat surprised that his company has not achieved the valuation multiples enjoyed by some other public cannabis issuers in Canada, but thinks this will correct itself over time as investors become more comfortable with businesses operating south of the border, where on a federal level the possession of cannabis remains illegal.

“There is a degree of concern about the political environment in the US, but the more you are involved down there the less you see it as a risk,” Boyes concludes. “Some states may need to tighten their regulations, but overall the industry is growing too quickly and simply creating too much employment and tax revenue. We may see some speedbumps along the way but, in my opinion, the US is a good place to be growing a business such as ours.”

namaste technologies

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Namaste Technologies Vapor trails and big sales in cannabis driven e-commerce

By John Harrington

A

at a rate that even appears to have caught co-founder and Chief Executive Officer Sean Dollinger by surprise.

“We identified vaporizers,” said Dollinger, a serial e-commerce entrepreneur, explaining why he got into the business line.

“We thought we’d sell two or three a day. That quickly turned into a hundred or two hundred a day, and some days now we ship well over five hundred per day around the globe.”

Having acquired the rival vaporseller.com and everyonedoesit. com sites Dollinger feels the company is equipped to dominate the sector.

To back this up, he discloses that, at the beginning of 2016, with namastevapes.com (and international variations thereof ) as the main e-commerce platform, monthly site visits were around 35,000; by the end of the year they had risen to 576,846 across the whole Namaste platform.

With 26 websites, a local presence in 20 countries and a customer mailing list of around 300,000, the company is well-placed to hit the accelerator pedal.

It is looking to organically grow base e-commerce revenues www.thecse.com | 15

Originally published on Proactive Investors April 26, 2017.

few years back we might have had to be coy about the core market of e-commerce retailer Namaste Technologies (CSE:N).

These days, with recent legislative changes (and more on the way) we can come straight out and state the seller of vaporizers and associated paraphernalia is focused on the medical and recreational consumer of cannabis.

Regulatory changes and technological advancements are accelerating growth in the vaporizers and accessories industry, as are health concerns about the old ways of enjoying the weed—what comedian Bob Newhart described as users “sticking burning leaves in their mouths.”

The vaping industry as a whole was turning over US$2 billion a year in 2014, according to investment bank Wells Fargo, and by 2016 had more than doubled in size.

The bank’s projection is that the market will top a staggering US$20 billion a year by 2021.

That sum includes e-cigarettes, which is not Namaste’s target market, but the market is still plenty big enough, and it is growing

Sean Dollinger, CEO

Namaste Technologies Inc. (CSE:N | OTCQB:NXTTF)

• One of the largest e-commerce distributor of vaporizers and accessories, operating 30 websites in 20+ countries. Namaste now boasts over 600k+ visitors per month, and over $12 million in sales.

company snapshot

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

• Namaste signed an MOU with Canopy Growth Corp., helping Canopy develop their e-commerce presence.

The partnership will seek to educate clients on the legal, regulated framework for medical cannabis, as well as to support in selling Canopy branded vaporizers and accessories.

• Namaste acquires Cannmart, late stage applicant for Licensed Distributor (LD) • E-commerce distribution for medical cannabis • Receives Health Canada Medical Device Establishment License • 5000 sq ft facility in North Toronto

Dollinger is confident it will only be a matter of time before the market ascribes a more realistic valuation to the company, if only on the strength of its customer database.

“Just to give you an idea, licensed cannabis producers in Canada are buying verified e-mail addresses at C$300 per e-mail. On a given day, Namaste collects 1,000 e-mail addresses around the globe, so if you start doing the ‘quick and dirty’ on that, you can see the value of our database.”

Dollinger also cites the example of chewy.com, an e-retailer of premium pet food founded by Ryan Cohen, who just happens to have started three dot.com ventures in the past with Dollinger.

“He just sold his one website for $3.3 billion in the largest e-commerce deal of all time,” Dollinger noted, adding that Namaste largely follows the same e-commerce formula to chewy.com.

“That was in dog food, the most competitive business in the world. Why would people choose that site over Amazon?

“It comes down to a few things: you’ve got to be obsessed with the company; number two, you’ve got to offer the best customer service you possibly can, because people call Amazon for vaporizers—you’re not going to get any support.

“Number three, you’ve got to have an amazing range of products. That’s what we’re doing.”

Dollinger concedes that there are more dogs in North America than cannabis users but with the speed at which the legalized market is growing, he is confident he can grow Namaste “in the exact same way” as chewy.com.

• Medical Cannabis Packing for 3rd Parties

• Vaporizer and accessories market is expected to reach US$17.8 billion by 2020 (Wells Fargo). With such an overwhelming interest for the product, aided with current growth trends in overall e-commerce, Namaste only stands to gain in the upcoming years.

financial analysis Namaste is well financed, sporting working capital of $1.9mm and net assets of $6.5mm (as at Feb. 28, 2017).

Namaste generated $1.9mm in revenue for Q1/2017, grossing 43% (or $827k).

MARKET DATA (CSE:N) Price (5/15/2017 close) 52 Week Range Market Cap (mm) Shares Outstanding (basic, mm) Free Float Average Daily Volume (3 months) Total Debt (mm) Cash & Short-Term Investments (mm) Total Assets (mm) HEADQUARTERS

$0.22 $0.10 – $0.42 $36.50 166 88% 727,000 $0.40 $0.50 $8.00

Vancouver, British Columbia, Canada

TOP SHAREHOLDERS Dollinger Enterprises Kory Zelickson All figures in CAD unless otherwise stated.

Source: Thomson Reuters (5/15/2017)

POWERED BY

8.7% 1.7%

www.thecse.com | 17

maricann group

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Maricann Group

Large-scale cultivation for medical cannabis markets in Canada and Germany

Originally published on Proactive Investors May 9, 2017.

By Peter Murray

A

nyone looking for a model company in the medical cannabis sector would be well advised to consider Maricann Group (CSE:MARI), as thus far it seems to have done everything right. With a green ethos that drives both product development and corporate efficiency efforts, Maricann succeeded in becoming one of the first companies in Canada approved to cultivate and sell medical cannabis.

Not content with being an early mover in just its home market, Maricann was quick to stake its claim in another jurisdiction 18 | www.thecse.com

largely overlooked by its peers: Germany.

The combination has the company predicting profitability by the second quarter of 2018. Its top line is off to a good start, with sales currently running at $450,000 per month. And having just announced a $42.5 million non-dilutive stream financing that will fully fund its German plans, Maricann is positioned to really put its foot on the accelerator.

The strategic mix of Canadian and European markets notwithstanding, Maricann Chief Executive Officer Ben Ward sees the

company’s key point of differentiation being technology for extraction and product formulation.

“We have locked up two groups with preparative chromatography expertise in cannabis and this means we have the only ability in the industry to get all the cannabinoids, terpenes and flavonoids,” says Ward.

“To formulate the plant, you first have to be able to deconstruct it to make sure you get the active pharmaceutical ingredients.”

Ward explains that there are 500 terpenes—an organic compound found in

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

“

I see Canadian companies moving into other markets and helping governments with regulatory issues so that their citizens can look forward to safe, reliable access to high-quality cannabis.

— B E N WA R D

”

Ben Ward, CEO

numerous plant-based products—specific to the cannabis plant, and that companies looking only at cannabinoids or THC are missing much of what cannabis has to offer. “We are focusing on whole-plant medicine, which is done by extracting all of the different isolates.”

This approach to the industry reflects the direction set for the company early on by founder Dr. Eric Silver. An Assistant Professor and Clinical Teacher in the Department of Family and Community Medicine at the University of Toronto, Dr. Silver knew first-hand the benefits that alternative medicine employing cannabis could have on patients. The next step was to gather colleagues from the industry with capital and know-how and begin the search for a facility to purchase.

Eventually, the team settled on the Langton facility, which had been operating under the MMAR (Marihuana Medical Access Regulations) regime established in 2001.

The facility was approved under the more robust MMPR (Marihuana for Medical Purposes Regulations) in March 2014, with a license to sell product grown at the facility arriving in December of the same year.

A brief analysis of the facility indicates Maricann is committed both to being a custodian of its environment and running its business with an eye on costs. Langton has its own co-generation plant to help with electricity needs and there is even a natural gas well on the property to provide some of the fuel. The company also uses equipment to capture rainwater for use in the fertigation process.

These and other efforts lead Maricann to believe that it is among the most competitive producers on the Canadian landscape, with per-gram costs estimated at just $1.37. That should translate into healthy margins that really make their presence known as sales continue to ramp up.

“Our revenue generating capacity right now is restricted only by our footprint of 34,000 square feet,” says Ward. “We are building a 216,000 square foot facility and that will be able to produce another 20,000 kg of dry flower starting in the first quarter of 2018.”

As far as near-term trends are concerned, Ward is in the camp of industry executives who believe smoking cannabis will give way to ingestion in other forms over time. “We think users will come to prefer extract-based products, which is the experience in more mature markets such as www.thecse.com | 19

ompany snapshot

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Maricann Group Inc. (CSE:MARI)

• Maricann is the 13th company to be licensed by Canada’s MMPR (Cultivation and Sale), having received their license in March of 2014. This long track record of operations gives the company a legup on competition attempting to enter International markets (such as Germany, with a 3-year operational history requirement for licensing approval).

• Maricann’s unique competitive advantage lies within their managerial pharmaceutical expertise. Terry Fretz, COO, has built two pharma companies which were later acquired by publicly traded billion-dollar multinationals. Neil Tabatznik, Chairman, creator of Arrow Group of Companies, consisting of Oryx Pharmaceuticals and Cobalt Pharmaceuticals. This focus on pharmaceuticals is taking an R&D approach to building the most effective delivery methods of cannabis products.

• By October 2017, the company’s production facility will be upgraded to a size of 217,500 sq. ft., achieving production costs of under US$1.34/g.

financial analysis Having recently secured a $42.5mm non-dilutive financing, Maricann is now well funded to dominantly expand within the German market. Use of proceeds will be to fund a 150,000 sq. ft. expansion of cultivation operations, an additional 250,000 sq. ft. of expansion in a two tiered cultivation plan, as well as an outdoor hemp farm.

MARKET DATA (CSE:MARI) Price (5/15/2017 close) 52 Week Range Market Cap (mm) Shares Outstanding (basic, mm) Free Float Average Daily Volume (3 months)

$1.70 $1.35 – $2.65 $123.30 72.5 97% 942,000

Total Debt (mm) Total Cash (mm) Total Assets (mm)

$25.20 $16.20 $24.60

TOP SHAREHOLDERS Lori Mindy Etkin Michael Brian Stein Julian Neil Tabatznik Raymond Howard Stone Benjamin Allan Ward

10.5% 7.9% 6.3% 5.8% 4.7%

All figures in CAD unless otherwise stated.

Source: Thomson Reuters, SEDI (5/15/2017)

POWERED BY

20 | www.thecse.com

Colorado and California,” Ward notes. “Once people can access a product with a consistent extract in a dose they are used to, they will opt for that. We think that is when the real adoption will take place.”

Maricann is ready with its own line of gel caps, which it developed in partnership with another company, to help that trend along.

The Canadian operations are clearly well on their way to developing serious momentum, and the plan is to create the same success in the German market.

It was only in January of this year that Germany’s lower house of parliament, the Bundestag, voted to legalize medical cannabis.

The drug will be available from pharmacies to patients with a prescription, and importantly for companies serving the market it looks like it will be covered by German health insurance.

“I think we will see almost a carbon copy of the Health Canada program as far as cultivation and regulations are concerned.

The difference will be in distribution,” posits Ward. “It won’t be supplied directly to patients but through major pharmaceutical companies or wholesalers, or distribution through pharmacies.

Germany’s market will likely remain medical for a long time, but from an ease of access standpoint I think it will move ahead of Canada because of the German population’s propensity to seek alternative therapies.”

Ward explains that companies hoping to grow cannabis in Germany need to possess over three years of cultivation experience, a benchmark that the team at Maricann is able to meet.

The company is currently preparing an initial 150,000 square feet of space in a facility that it has the option to purchase. “All we have to do is install the tables, the fertigation system and the lights and we will be operational,” says Ward. “We are moving through the licensing process there right now.”

Ward comments that the team is happy working in jurisdictions where legalization is uniform on a federal level, contrasting the environments in Canada and Germany to that in the United States, where cannabis is illegal federally but many states have passed laws to make it legal.

“Much of the rest of the world, and especially western Europe, is moving forward with legalization in some way,” observes Ward. “There is a much larger population that Canadian companies can export our experience to, and in doing so create best in class companies that compete globally. We might only be talking five or six years, but that is a lifetime of experience in the cannabis sector. I see Canadian companies moving into other markets and helping governments with regulatory issues so that their citizens can look forward to safe, reliable access to high-quality cannabis.”

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

iAnthus capital holdings

iAnthus Capital Holdings

Advancing cultivation and retail assets in multiple US states

By Jon Hopkins

T

Chief Executive Officer of iAnthus Capital Holdings.

“Citibank and Bank of America aren’t making any loans to cannabis operators, and the Goldman Sachs and Morgan Stanleys of the world aren’t taking anyone public.” iAnthus, however, raises capital in Canada, where cannabis is legal for medical use at both the federal and provincial levels, and puts the cash to work in the US market.

That market is growing at a compound annual rate of over 30% so the returns on investment have the potential to be significant. iAnthus, which has raised over C$50 million since its founding, has been putting money to work in Colorado, Vermont, New Mexico and Massachusetts, and is also in discussions pertaining to other high-growth markets.

In early February, iAnthus announced a strategic partnership with The Green Solution (TGS), a big player in the US cannabis industry.

TGS operates 12 dispensaries and integrated cultivation and processing facilities in the state of Colorado and has generated over www.thecse.com | 21

Originally published on Proactive Investors May 10, 2017

he movement to legalize cannabis in a majority of US states is drawing interest from an expanding list of companies, as entrepreneurs sense opportunity in a market where growth is trending upwards for the foreseeable future.

Currently, 29 US states and the District of Columbia have legalized the use of medical cannabis, with eight of those states allowing recreational use of the drug as well.

According to industry data, direct legal cannabis sales totalled US$7 billion in the US in 2016 and by 2020 will reach around $22 billion.

However, although this looks like a good opportunity for businesses, the fact that cannabis is still illegal on a federal basis in the US makes it difficult for entrepreneurs to finance their operations.

This is where Canadian Securities Exchange-listed iAnthus Capital Holdings (CSE: IAN) has stepped in.

“You have a strange anomaly in the US where cannabis is legal at the state level and illegal at the federal level,” says Hadley Ford,

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Hadley Ford, CEO

“

You have a strange anomaly in the US where cannabis is legal at the state level and illegal at the federal level.

—HADLEY FORD

22 | www.thecse.com

”

US$150 million of cumulative revenue since its inception in 2010.

“The chance for us to work with TGS on strategic opportunities is very exciting,” said Ford. “TGS is a leader in cannabis and we look forward to seeing what we are able to do by working closely together.

As part of the strategic relationship, TGS will provide iAnthus with retail expertise and advice on investments in Massachusetts, Vermont, New Mexico and Colorado. iAnthus is providing a US$7.5 million credit facility to TGS which will be used to fund the build out of additional store locations. The facility runs for one year and carries an interest rate of 14% during the first four months, escalating to 23% thereafter.

To finance the credit facility, and also to provide cash for general corporate and working capital purposes, iAnthus closed a bought deal private placement at the end of February which raised gross proceeds of C$20 million. The deal was structured as a convertible debenture with an 8% coupon and convertible into common shares at a price of $3.10 per share.

The stock also started trading on the OTCQB in early April.

“If you are an investor, there are very few industries where you can pretty much have guaranteed top-line growth of 30% for the foreseeable future,” Ford points out. “There are not many ways for the public to play that opportunity. We believe iAnthus provides an easy way for investors to invest in multiple operators across high-growth states in the US.” Ford says the group has put over US$19.1 million to work to date, and he thinks the opportunities for investors “look outstanding.”

Aside from being excited about working with TGS in Colorado, Massachusetts is also high on Ford’s radar.

At the start of March, iAnthus said construction had begun on a state-of-the-art cannabis cultivation and processing facility for affiliate Mayflower Medicinals, Inc., a Massachusetts non-profit and cannabis dispensary licence holder.

The 36,000 square foot facility in Holliston is expected to have annual production capacity of 8,700 pounds, with the ability to supply over US$35 million of medical and retail sales. The company has spent US$2.1 million of the approximately US$10 million it will need to build out the cultivation, processing and store locations. “We have the necessary cash on our balance sheet today to complete the project,” notes Ford.

Ford calls Massachusetts the “Colorado of the East, but with less competition.” Mayflower has been awarded two of its three licences by the state, including one of the three dispensaries currently approved to open in Boston. A Boston ordinance provides that no other dispensaries can be opened within a half-mile of any dispensary currently approved by the City.

Ford believes that operations in Massachusetts should start generating revenue in the fourth quarter of this year.

“

We believe iAnthus provides an easy way for investors to invest in multiple operators across high-growth states in the US.

”

—HADLEY FORD

The election in November last year which made Donald Trump US President included referendums in a number of states on legalizing cannabis in one form or another.

Even so, some people question the heightened political risks to the US cannabis industry caused by Trump’s presence in the White House.

Ford, however, plays down such fears, seeing no material change with Trump in power from the environment under President Barack Obama. “President Obama could have decriminalized cannabis, but he didn’t,” notes Ford.

Ford says the real issue is not one of politics, but of economics, with states like Colorado seeing a big tax boost and the cannabis industry serving as an important jobs provider.

“Nothing is going to stop the forward motion of the industry at this point,” Ford explains. “It doesn’t make sense politically, doesn’t make sense economically, and there just aren’t the federal resources available to roll back the progress that has been made in 29 states.” iAnthus reported a small loss last year, but as it puts its capital to work it should ultimately see the business turn very cash generative. “When I look at some of the opportunities we have in the pipeline, the future looks very rosy from our perspective,” Ford concludes.

iAnthus Capital Holdings Inc. (CNSX:IAN | OTCQB:ITHUF)

• Acquired certain assets of Organix LLC, the owner and operator of a Colorado medical and recreational marijuana operation, including a 12,000-sq. ft. cultivation facility in Denver. Organix is the only store in Breckenridge with both medical and recreational retail licenses, giving them a 40% market share in the town. Furthermore, the town is one of North Americas top ski and winter destination, attracting more than 2 million winter tourists and 1 million summer tourists per year.

• Converted $2.3mm in outstanding loans into a 22.98% stake in Reynold, Greenleaf and Associated LLC. The company manages a production facility, three cultivation operations with a total of 1,350 plants and four clinics located in Albuquerque.

• Started to build a state of the art cannabis cultivation and processing facility in Holliston, Massachusetts for the benefit of Mayflower Medicinals, Inc. As of May 1st, 2017, the company has invested $3.7mm in support of Mayflowers operations, with an expected $6.6mm incremental investment needed to complete the entire building, which will be funded by cash on hand.

financial analysis The company recently completed a $20mm bought deal private placement of convertible debentures, giving them an estimated cash position of $29mm, which should be sufficient for growth in 2017. The company reported revenues of $392k in 2016 (up 760% from 2015), although at a net loss of $5.1mm.

MARKET DATA (CSE:IAN) Price (5/15/2017 close) 52 Week Range Market Cap (mm) Shares Outstanding (basic, mm) Free Float Average Daily Volume (3 months) Total Debt (mm) Total Cash (mm) Total Assets (mm) HEADQUARTERS TOP SHAREHOLDERS Hadley Ford Randy Maslow John Traylor Henderson Julius John Kalcevich All figures in CAD unless otherwise stated.

Source: Thomson Reuters (5/15/2017)

POWERED BY

$2.90 $1.20 – $3.75 $46.40 16 80% 17,000 $0.70 $9.40 $20 Vancouver, British Columbia, Canada 17.0% 17.0% 8.8% 2.6%

company snapshot

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

www.thecse.com | 23

alternate health

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

Alternate Health

A focus on the medicinal aspects of the cannabis plant

By Renae Dyer

Originally published on Proactive Investors May 8, 2017.

T

he waves of legalized recreational marijuana in Colorado, Washington, Canada and now California have sparked a ‘Green Rush’ in the cannabis industry, but Alternate Health (CSE:AHG) Chief Executive Officer Dr. Jamison Feramisco reminds investors not to forget about the market potential of the medical side of the business.

“The key to leadership in medicinal cannabis is constant innovation in the scientific research that puts the patient’s needs first,” says Feramisco. “Alternate Health takes a value-added approach, investing in the clinical studies and patented technology that turns cannabinoids, like CBD, into real medicine.”

The diversified healthcare company— which has patent rights for CBD delivery systems for sublingual tablets and transdermal patches and offers education programmes,

24 | www.thecse.com

electronic medical records (EMR) software and toxicology laboratory analysis—started trading on the Canadian Securities Exchange in January. Two months later it joined the US markets on the OTC bulletin board.

Feramisco brings experience in delivering profitability, strategic mergers and acquisitions and innovation in healthcare as the co-founder and president of Texas-based Apri Health—a healthcare data analytics company, formerly known as Transfuse Solutions. Feramisco is a graduate of the University of Texas at Southwestern Medical School with a Ph.D. in Molecular Genetics and Biochemistry.

Alternate Health stands to gain from the growing market for medical marijuana in more ways than one.

There are about 40,000 patients with prescriptions for medical marijuana in Canada, according to Health Canada. Over the

next 10 years, the number of these patients is expected to grow to more than 450,000.

The group’s Alternate Health Media division offers education programs for training healthcare professionals and physicians in the use of cannabis to treat medical conditions.

The Cannabidiol Certification Programs have been approved by the American Medical Association (AMA) and address all facets for the use of marijuana’s two active chemicals that have medical applications—cannabinol (CBD) and tetrahydrocannabinol (THC).

CBD and THC are considered useful substances to manage pain, and are also prescribed by some physicians for conditions including glaucoma, epilepsy and anxiety.

In January, the company announced the first continuing medical education course for practitioners on the endocannabinoid system, the body’s reaction to CBDs. The video-based course, accredited through

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

“

The key to leadership in medicinal cannabis is constant innovation in the scientific research that puts the patient’s needs first.

—DR. JAMISON FERAMISCO

” Dr. Jamison Feramisco, CEO

the University of Louisville and approved by the AMA, provides an overview of the endocannabinoid system and the role it plays in the different functions of the human body.

“Doctors and medical professionals have been waiting for a proper medical education program to provide details for this emerging medicine,” says Feramisco. “This program is the culmination of many years of investigation and research, coupled with a substantial investment in production to create a quality and highly necessary education program for doctors and healthcare practitioners.”

Alternate Health has acquired the commercial rights to patents for developing and manufacturing sublingual tablets that include CBDs and/or THC. The sublingual tablets can be absorbed into the body in less than three minutes. The company said it recognised the need for a more efficient way to use medical cannabis than the traditional smoking and ingestion methods.

Sentar Pharmaceuticals in March granted Alternate Health an exclusive 10-year agreement for global nutraceutical license rights to its patented sublingual delivery systems to administer CBD and THC in tablet form.

The company paid Sentar 850,000 common shares for the renewable license agreement.

“Alternate Health is uniquely positioned for licensing their manufacturing pharmaceutical grade delivery systems of CBD and THC healing products in this fast-growing new marketplace,” says Feramisco.

“Alternate Health facilitates the development of organic, safe and healthy medicines through our patented delivery systems to patients around the world, and the California market represents a significant starting point for us.”

Alternate Health also describes itself as a leader in software applications and processing systems to the medical industry.

Its Alternate Health Technology business includes VIP Patient, electronic medical record (EMR) software that allows doctors to register patients and document their diagnosis and generate insurance recoveries with up-to-date billing codes.

The CanaCard Patient Management System tracks patient data and prescriptions while ensuring regulatory guidelines and financial transparency. It is a complete EMR, managing controlled substances like medical marijuana with an interface between patient, doctor and licensed provider.

“Alternate Health’s proprietary EMR systems give doctors, patients and producers the tools to manage prescriptions and dosages in a safe and transparent way,” says Feramisco. “This software is a key asset in the management of Alternate’s CBD delivery systems, while providing us with valuable feedback and clinical data.”

The group also has an independent clinical lab in San Antonio, Texas, under the banner of its Alternate Health Labs business, which specialises in toxicology and blood testing services.

The lab receives and assesses the blood and urine of patients from across the United States and then supplies the results to physicians so they can diagnose and treat diseases and medical conditions. www.thecse.com | 25

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

www.thecse.com | 27

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

CANNABIS INVESTMENT TIPS FOR GRANDPA:

It’s time, dad!

SPECIAL FEATURE CONTRIBUTOR CHRIS PARRY

S

o you’ve heard the rumblings that people out there are investing money in cannabis and actually making money.

You never touch the stuff, obviously—you’re more likely to engage with a library card than a medical marijuana card—so you’ve stayed out of the whole ‘green rush’ until now.

But maybe it’s time to play the game the cool kids are playing.

But where to begin?

I’ve got you, grandpa. I’ve been writing about marijuana related companies (among other things) since 2014, and I’ve seen

28 | www.thecse.com

the activists, the billionaires, the scammers, and the true believers battle it out like scorpions in a bucket. Frankly? It’s a mess. Picking winners can be a fleeting joy, when the federal rules change every other week, and the big players seem to flail from one PR nightmare to the next.

So before you put your hard-earned into something closer to a Cheech and Chong routine than an industry leading brand aggregator, take a moment to assess.

These are my rules for not burning your doughbucks.

THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2

RULE #1: BE A SHOWER, NOT NECESSARILY A GROWER.

The easy in is to just go buy all the biggest market cap companies in the space, which are mostly big grow companies, and assume your cash is in good hands. But the big guys are coming off some seriously inflated valuations over the last six months, and they’ve been coming off those valuation hard of late. It’s tough to justify a billion dollar market cap with $20 million per quarter in revs, and you’ve got to think, one day in the distant future, imports will be a legal thing and every Jamaican farm field will be cranking out the ganj on the cheap.

Right now, supply doesn’t match demand, but that won’t always be the case. When prohibition of alcohol ended, was it the barley farmers that got rich, or the brand builders? Put another way: Who makes more per cup—the coffee bean farmer, or the cafe owner?

Companies like CannaRoyalty (CRZ.C) and Namaste Technologies (N.C) have gone hard after the value-added side of the cannabis business, with CRZ stacking up 25 branded assets across multiple US states and Canada, while Namaste owns the world’s biggest online accessory portals. Both are, to my mind, exceedingly undervalued, cashed up, and boast multiple takeout targets. And they make that big margin that the growers might not always make.

RULE #2: PRE-LICENSE MEANS NO LICENSE. YET.

Tomorrow, I could put in a Health Canada application to get a cannabis grow license, and for several years, I won’t know whether that license is being taken seriously or not. Sure, they might move me through the process every six months or so in order that I don’t get all persnickety and talk to lawyers, but the holding patterns can run a long time with precious little feedback. Beleave (BE.C) is ever so close to a license, and getting it will prove abundantly profitable for those who own stock when it happens... if it happens. Will it happen? It must, surely. But when...

RULE #3: CANADA IS NICE. CALIFORNIA IS BIGGER.

Tinley Beverage Company (TNY.C) just released a de-alcoholized alcohol line in California. This is important because where the booze has been removed, the psychoactive element in cannabis— THC—has been added. No hangovers! Now you can drink your weed... but not in Canada. Only in California, the sixth largest economy in the world.

Frankly, CSE-listed Tinley doesn’t care what Canada does because they run a cannabis collective down south that allows them to supply dispensaries all over the state. Golden Leaf (GLH.C) does cannabis oils in Oregon, but is also moving into other states and buying brands to fill shelves. Valuations in Canada are high right now, but these US plays still show real value, considering their potential customer base and low market cap.

RULE #4: THINK BIGGER STILL.

Maricann Group (MARI.C) is building an airport-sized grow operation in Canada, but before phase I is even locked down, they’re setting up shop in Germany, attempting to nail down an 800,000 square foot facility and license. If/when that happens, Maricann becomes a European player of note, because most countries in that part of the world don’t want their own weed industries—they want a reliable supplier in the Union to get them enough product to be happy. Though it may be hard for a new player to join the giants in the Canadian game at the top level, a scrappy startup can jump the queue in Germany, Australia, Brazil and beyond. Global is the go.

The views expressed above are solely those of Chris Parry. For more of Chris’ musings and insight, visit Equity.Guru to read and watch exclusive resource, tech and cannabis industry analysis by Chris and his team.

www.thecse.com | 29