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BioHarvest Sciences CEO Ilan Sobel: Pioneering Plant Cell Biology for Cannabis.

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Ilan Sobel, CEO of Israeli/Canadian biotech innovator BioHarvest Sciences, believes his company has created a better way to grow major and minor cannabinoids. The company has developed a patented bio-cell growth platform technology capable of growing the active and beneficial ingredients in fruit and plants, at industrial scale, without the need to grow the plant itself. This technology is economical, ensures consistency, and avoids the negative environmental impacts associated with traditional agriculture. BioHarvest is currently focused on nutraceuticals and the medicinal cannabis markets.
By David Rheins

David Rheins: Welcome to another edition of Marijuana Channel One. It is my pleasure this morning to talk to the CEO of BioHarvest Sciences, Ilan Sobel.  Thank you for joining us today.

Ilan Sobel: David, it is an absolute pleasure to be on your network and on your show.

DR: So you are in Israel, and BioHarvest Sciences is an Israeli/Canadian company, is that right?

IS: We are listed on the Canadian Securities Exchange.  We are listed on the OTCQB, and our R&D activities are largely done here in Israel.  But, I am actually happy to say we are right now doing some pretty interesting R&D in Canada, as well, with one of our partners there. So it is basically bringing the two countries closer together, and I guess that is what Canada has done with many Israeli cannabis companies and the opportunities that the Canadian market and the Canadian exchanges provide companies like ourselves. It is a good win/win.

DR: So, I want to hear more about BioHarvest Sciences. You know, it is interesting for us in the US [that] the Israeli cannabis market has really been hyper-focused on medical cannabis, and has unlike the US, really from the get-go worked with universities and medical institutions and hardcore scientific research — despite the fact that we have had international prohibition — and now those investments have started to pay off as international law, and cannabis is becoming more mainstreamed.

DR: Tell me a little bit about BioHarvest Sciences and its evolution.

IS: Well, what is interesting is that we are not a cannabis company. We are a biotech company, with platform technology.  And, in fact, we are the global leaders in plant cell biology. We have been doing this since 2007 — so that is 15 years of building expertise in capabilities,  And with that expertise and capabilities, David, we have built the capabilities to unlock the secrets of cellular plant biology better than any other company in the world.

Now, what does that mean to the viewer out there? What it means is that we have a platform technology where we are able to take any plant out there — and God gave us 500,000 plants on day three of creating the world, one of those was the cannabis plant — we can take any of those plants that each contain critical phytomedicinal compounds, so that could be polyphenols, many people in America understand antioxidants, and of course, cannabinoids.

So, [with] our technology we are able to literally take the plant once, and we take cells from the plant throughout the plant’s growth life cycle.  And we take cells from all parts of the plant, and we have developed this unique AI expertise where we can actually look at all the millions of cells and we can figure out which cells are the really smart cells — [the ones] that are responsible for eliciting the critical phytomedicinal compounds: polyphenols, antioxidants, and cannabinoids.

We take those cells, and we grow those cells in solid media — in a petri dish. And, over time, we have developed this unique technology where we are able to take those cells and grow them in massive industrial scale bioreactors. And if you think about what an industrial scale bioreactor look like…I am not going to stand up here, but I am 6 foot 2. They are 7 foot high, maybe 1.5 meters wide, and each of these bioreactors can produce from the cells.

We have in the case of cannabis, been able to really break biological barriers, and to create biological history.  And, we were able to ensure that every cell was able to grow a trichome.  And we all know [that] the trichome is the most important part of the plant — the mini factory that produces the cannabinoids, terpenes and flavonoids.

Biomass produces from BioHarvest Sciences bioreactors is 93% trichomes

So, inside our bioreactors, the cells grow trichomes. Inside our bioreactors we produce, today, 93% trichomes. Every 3 weeks, on average, we produce 8 to 9 kilos of bubble hash in one of these bioreactors, because we are in perpetual flowering. We don’t go through the regular stages that you go through [with traditional agriculture]: from vegetation,  grow cycle, into flowering and [harvest], and you start from the beginning [each crop]. That [cycle takes], in the best multi-state operators, 12 to 16 weeks let’s say.  Now we don’t have to deal with that, because we have figured out how to get the cells of the most important parts to grow the trichomes, and then like I said, we are in perpetual flowering.  And we harvest every 3 weeks the actual material, which is literally the trichomes.

We dry it with special technology, and you are left with this our biomass (holding up jar of biomass) as the audience can see here.

DR: Let me ask you the question [that our readers want to know]: Is what you are talking about really a synthetic process?

IS: No, no, no, no!  You can see how you can see how upset I got there! We are the antithesis of biosynthesis, or synthesis.  Our process, basically, is a non-GMO process. We do not in any way shape or form we do not change the actual structural molecular composition of the actual cells themselves, therefore we are non-GMO.

“We are the antithesis of biosynthesis, or synthesis.  Our process, basically, is a non-GMO process. We do not in any way shape or form change the actual structural molecular composition of the actual cells themselves, therefore we are non-GMO.”

And that’s why this material that we produce, and we are the only company in the world that can grow trichomes in liquid media, in a way that we are really bringing the power of full-spectrum cannabis together with obviously multiple cannabinoids and the power of technology.

We are able — through altering the conditions — we can actually ‘fine tune’ our cannabinoids, which allows us to get actual, let’s call it ‘certificates of analysis’ that you will never find with a regular agriculturally-grown, traditionally-grown, indoor-grown, cannabis plants.

We demonstrated that about three months ago, when we shared a certificate of analysis where we showed how we took a hemp plant — and we did this to just to show the gravity in the magnitude of the technology —  where we took a hemp plant, which had roughly 3% of CBD, obviously no THC,  and we took that plant we put it through our system.  And through our technology, we are able to increase significantly the levels of the cannabinoids.  We came up with a proposition, which went from 3% cannabinoids to 36% cannabinoids. And we took the CBD from 3% to 18%,  and we took the THC — total THC — from literally 0.09 right to 7.5%.  And, we were able to grow significant levels of the variant CBDV of 4.5%, THCV of 2.5%, plus significant amounts of CBG, CBC, CBN.

And that provided us a certificate of analysis, where when you show this to people — whether it’s recreational, or more specific medicinal, people look at this and say, “We’ve never seen a composition of cannabinoids like this all working together in full spectrum.”

As we bring this to market, and commercialize our technology through the different strategies that we’re going to be deploying, we are going to be providing a level of cannabis that I believe cannabis consumers have never seen before. And, frankly, from an economic perspective, the lowest cost in the business by far, and we know very well the costs of the multi-state operators out there.

And importantly, because we are a biotech company that’s focused on health and wellness and making sure that we’re driving transformational positive change in people’s health and wellness in a way that preserves the planet. We have sustainability credentials that are second to none in an industry that really now is plagued by sustainability challenges — whether it’s around water management, whether it’s around energy management.

 

So, that’s really what the technology allows us to bring.  It is important to understand, we do this in cannabis, we do this in polyphenols, antioxidants, and there are many other verticals that we will build in our company, as we aspire to build a multibillion dollar biotech platform technology company, overseeing multiple critical verticals, of which cannabis is one of them.

WATCH THE FULL INTERVIEW ON MARIJUANA CHANNEL ONE

Results of B.C.’s Cannabis Engagement Available in ‘What We Heard’ Report

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CANADA: Feedback gathered through the Province’s public engagement about cannabis is now available online.

In spring 2022, the Ministry of Public Safety and Solicitor General invited Indigenous partners, stakeholders and anyone living in British Columbia to provide their thoughts on non-medical cannabis-consumption spaces. A summary of the feedback is now available online in a “what we heard” report.

“Health and safety are our utmost priorities as we consider how provincial cannabis policies could evolve,” said Mike Farnworth, Minister of Public Safety and Solicitor General. “This report provides valuable insights into people in B.C.’s perspectives on cannabis and will help guide our work to support a strong, diverse and safe legal cannabis sector across the Province.”

Information was gathered to assess the level of public support and interest, and public-health and safety implications of cannabis-consumption spaces. Feedback was sought through a demographically and geographically representative telephone survey, an online survey and written submissions.

“Exploring the feasibility of cannabis-consumption spaces is another way B.C. is working to support the success of the industry,” said Brittny Anderson, Parliamentary Secretary for Tourism. “With the recent introduction of a licence for farm-gate sales, understanding public opinion on cannabis-related hospitality and agri-tourism activities is a practical next step. The feedback in this report will play an important role in the development of provincial policies.”

Quick Facts: 

  • 730 respondents completed the telephone survey
  • 15,362 respondents completed the online survey
  • 66 written submissions were received from individuals, businesses and organizations

Learn More:

Learn more about consumption spaces and read the “what we heard” report here: https://engage.gov.bc.ca/govtogetherbc/impact/cannabis_consumption_spaces_results/

For more information about cannabis sales licensing in B.C., visit:
https://www2.gov.bc.ca/gov/content/employment-business/business/liquor-regulation-licensing/non-medical-cannabis-licenses

For information about cannabis regulation in B.C., visit: https://www.cannabis.gov.bc.ca

Cannabis Orchards Announces Agreement with National Institute of Health to Screen Minor Cannabinoids for Epilepsy Treatment

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CANADA: Cannabis Orchards Inc., a biotechnology company focused on the research, development and commercialization of minor cannabinoids and innovative industrial hemp varieties, announced it has signed an agreement with the National Institute of Health (NIH) to participate in the Epilepsy Therapy Screening Program(ETSP) to study minor cannabinoids for epilepsy treatment. 
The use of minor cannabinoids as an anti-seizure drug was subject to a patent submission in September 2022 by Cannabis Orchards Inc.
The ESTP involves studying compounds in various pre-clinical models of epilepsy to determine the safety and efficacy of new candidate drugs for use as novel epilepsy treatments. Almost all common epilepsy drugs have been included in the ETSP program, including cannabidiol (CBD). After a rigorous qualifying process, Cannabis Orchards Inc. has successfully been chosen to submit minor cannabinoids, such as cannabigerolic acid (CBGA) and cannabichroneme (CBC), for inclusion in the program.
Statement from Cannabis Orchards CEO, Dr. Jamie Ghossein
“After engaging in a rigorous qualifying process, we are proud to have been selected to register minor cannabinoids, namely CBGA and CBC, for inclusion in this world-renowned program. Minor cannabinoids will now be studied in the same way as common anti-seizure drugs as new alternatives for epilepsy treatment.”
Cannabis Orchards Inc. has successfully produced CBGA isolate and completed shipment to the NIH in Q3, 2022.
“Minor cannabinoids have demonstrated promise as alternatives to anti-seizure drugs for epilepsy treatment, including CBD. With differing efficacy and side effect profile, minor cannabinoids may prove effective as anti-seizure medications for chronic use with enhanced tolerability compared to standard therapies.”
Currently, Epidiolex (CBD) is the only FDA-approved cannabinoid treatment for drug-resistant epilepsy. With a market size expected to reach over USD 1.0 billion in 2023, there is a large market opportunity to offer alternative cannabinoids with enhanced efficacy and tolerability compared to CBD.
“Over the last several decades, minor cannabinoids were not possible to study as no Cannabis variety produced enough content for isolation and testing. After several years of plant breeding efforts, Cannabis Orchards has successfully produced novel industrial hemp variety with minor cannabinoid content, allowing for the isolation and study of minor cannabinoids in various models of disease. We look forward to leading the way for new therapeutic development using minor cannabinoids. This exclusive agreement highlights the start of a pipeline for minor cannabinoids as therapeutic options for various disease models.”

Government of Yukon Completes Handover of Cannabis Retail Sales to Private Sector

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CANADA:  The Yukon’s cannabis licensees now operate all retail locations, online sales and delivery. As of today, the Yukon Liquor Corporation’s Cannabis Yukon website will no longer sell cannabis products to Yukoners, leaving cannabis e-commerce to private licensees.

In May 2022, the Government of Yukon introduced regulations that allow licensed cannabis retailers in the Yukon to sell and deliver legal cannabis products to Yukoners. This fulfilled the Government of Yukon’s commitment to support the Yukon’s private cannabis industry.

I am pleased to fulfill our commitment to transfer all cannabis retail, including online sales, to the Yukon’s private, licensed retailers. The Yukon’s cannabis industry continues to see year-over-year growth and I look forward to seeing the  industry continue to thrive, responsibly serve Yukoners and contribute to our territory’s economy.

Minister responsible for the Yukon Liquor Corporation Ranj Pillai

Quick facts
  • Cannabis Yukon opened in October 2018 and closes today. The website is being re-purposed to provide wholesale purchasing options to the Yukon’s licensed retailers.
  • There are currently six licensed cannabis retailers open in the Yukon, and one federally licensed producer. The list of retailers can be found here.
  • Since legalization, the Cannabis Yukon website has provided legal options for Yukoners living far from a retail store and information to help Yukoners make informed decisions about responsible consumption.
  • During the public engagement at legalization, 58 per cent of respondents agreed that online sales and home delivery of cannabis should be allowed.

Adastra Receives Controlled Substances Dealer’s License

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CANADA: Adastra Holdings Ltd., a leading cannabis company focused on processing, adult-use and medical sales, organoleptic testing and analytical testing, is pleased to announce that the Company has received its Controlled Drug and Substances Dealer’s License on August 24, 2022. This license allows Adastra to process psilocybin and psilocin, the active compounds derived from psychedelic mushrooms.

“This is another significant step forward in the next phase of Adastra’s goal to become a leader in alternative, plant-based treatments and remedies for physical, mental health and optimal functioning,” said Michael Forbes, Chief Executive Officer of Adastra. “The medically regulated psychedelics market is just beginning to lay its foundation in North America; receiving this license enables us to process, formulate and perform scientific tests to verify the active ingredient and its stability for use in products once the market matures.”

Under the Dealer’s License, Adastra can possess up to 1,000 grams of psilocybin and psilocin at any time and can transfer the extracted material to other companies who hold a valid Dealer’s License. Adastra intends to utilize its in-house analytical testing lab, Chemia Analytics, to validate and develop its extraction processes, to optimize and enhance efficiency ahead of any future potential regulatory modifications to the existing psychedelics framework. As the market matures to include regulations for other compounds, such as MDMA, LSD, 5-MeO-DMT and Ketamine, Adastra plans to include these substances in future Dealer’s License amendments, positioning itself to leverage clinic and patient demand. When approved, the Company will be permitted to process and formulate a variety of psychedelic compounds, increasingly used and sought-after by patients and healthcare practitioners to combat a variety of physical and mental ailments.

“We believe our Dealer’s License offers Adastra a preemptive advantage over our peers, by having our processes for the extraction and formulation of psilocybin validated before any future potential changes in regulations, enabling us to stay ahead,” added Forbes. “Having foresight over what we can control today – standardization of our processes and training of our personnel – we believe positions Adastra for continued growth as we expand our capabilities and revenue streams.”

Superette Becomes DoorDash Canada’s First Merchant Partner to Launch Cannabis Pickup

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CANADA: Superette, a leading local cannabis retail and lifestyle brand, and DoorDash Technologies Canada, have entered into a partnership to provide cannabis pickup in Toronto, Canada. As the market leader for its differentiated approach to cannabis retail, Superette was a natural choice for DoorDash’s first foray into cannabis. With a proven track record for transforming cannabis retail shopping into an immersive experience, Superette will apply their creative approach to cannabis retail on the DoorDash marketplace app.

Superette and DoorDash Canada both recognize the growing expectations of customers who want to access the best of their neighborhood through the convenience of an app. This partnership will address that growing demand by bringing Superette’s in-store shopping experience onto the DoorDash app. The partnership will give consumers access to curated menus and special collections that reflect the best of the locale in which each store is based.

“We are super excited to be able to partner with DoorDash to continue to transform how consumers engage with cannabis! In true Superette fashion, every element of the experience has been carefully considered with the goal of making our retail experience digital on the DoorDash platform.” – Drummond Munro

Superette embodies DoorDash’s mission to grow and empower local communities and partners with local restaurants and food banks, as well as sourcing from sustainable vendors. This launch brings together the best of both companies: the convenience of pre-ordering and picking up cannabis at your local store,  while also expanding Superette’s reach to DoordDash’s large customer base of DoorDash across Toronto.

DoorDash and Superette will offer a compliant product to ensure that consumers are able to access the best of their neighborhood. Customers are age-gated, so only those customers who confirm that they are aged 19+ can view cannabis retail store information, cannabis products, or anything related to cannabis. Superette will verify IDs and strictly enforce maximum possession amount at the store during pickup.

Tilray Brands Announces Proposed Agreement for Strategic Alliance With Hexo Corp.

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Tilray to Acquire Hexo Corp.’s Senior Secured Convertible Notes

CANADA: Tilray Brands, Inc., a leading global cannabis-lifestyle and consumer packaged goods company inspiring and empowering the worldwide community to live their very best life, today announced proposed agreements for a commercial and financial partnership with HEXO Corp. that would bring together Canada’s top two cannabis market share leaders, strengthening their respective positions and setting the stage for increased production efficiencies amid competitive market dynamics. 

Under the terms of the proposed agreement, Tilray Brands would acquire up to US$211 million of senior secured convertible notes that were issued by HEXO and are currently held by funds affiliated with HT Investments MA LLC. The Notes would be amended to permit Tilray Brands to exercise conversion rights at a price of C$0.90 per HEXO Share and acquire a significant equity ownership position in HEXO, driving meaningful, additional upside and direct participation in HEXO’s considerable growth opportunities.

Irwin D. Simon, Tilray Brands’ Chairman and CEO, said, “We believe this proposed Transaction would be a win-win for Tilray Brands and HEXO as it would launch a strategic partnership between two leading Canadian cannabis producers with complementary brand portfolios. For us, it provides a path for meaningful future equity ownership of HEXO, and enables us to participate in HEXO’s share price appreciation as it continues to execute on its growth initiatives. We also expect to realize further commercial and production efficiency savings of up to C$50 million within two years, which would be shared equally and would allow us to continue being the leading, low-cost Canadian producer. I look forward to working with HEXO’s management team and Board to create additional brand and shareholder value.”

The strategic alliance between Tilray Brands and HEXO would provide several financial and strategic benefits, including:

  • Accretion and Flexibility: the acquisition of the Notes by Tilray Brands would be immediately accretive to Tilray Brands. As amended, the terms of the Notes will provide that the Notes shall bear interest at a rate of 10% per annum from the date of closing. During the first year, the interest will be paid in cash and during the remainder of the term, the Notes will be paid half in cash in each year and the remaining half will be added to the principal amount as a payment-in kind when the payments are due and any payments of such PIK will be made in cash at the time of maturity or paid in additional HEXO Shares upon conversion (if converted prior to maturity). In addition, Tilray Brands shall have the flexibility to either be paid the principal amount plus any accrued interest and PIK upon the maturity of the Notes or, prior to maturity, convert the principal amount plus any accrued interest and PIK into a substantial ownership position in HEXO.
  • Substantial Synergies: the proposed alliance between Tilray Brands and HEXO is further expected to deliver up to C$50 million of cost synergies, to be shared equally, within two years of the completion of the Transaction. Both companies have been working together to evaluate cost saving synergies as well as other production efficiencies, including with respect to cultivation and processing services, certain Cannabis 2.0 products, including pre-rolls, beverages and edibles, as well as shared services and procurement.
  • Increases Product Breadth and Commitment to Innovation: Tilray Brands and HEXO bring together industry leading expertise in the global cannabis industry, including cannabis cultivation, product innovation, brand building, and distribution. Leveraging both companies’ commitment to innovation and operational efficiencies, both companies would share their respective expertise and know-how to strengthen market positioning and capitalize on opportunities for growth through a broadened product offering and accelerated CPG innovation.

Upon closing, Tilray Brands will nominate Denise Faltischek to the HEXO Board of Directors, in addition to appointing one Board observer.

Transaction Details

Under the terms of the Transaction, and subject to negotiation of the definitive documents and the satisfaction of specific conditions, Tilray Brands would acquire 100% of the remaining US$211 million outstanding principal balance of the Notes, all of which were originally issued by HEXO to HTI. As consideration for Tilray Brands’ interest in the Notes, Tilray Brands would pay 95% of the then outstanding principal balance for the Notes (“Purchase Price”), which includes accrued and unpaid interest on the Notes, as well as other agreed direct and indirect costs incurred by Tilray Brands in connection with the Transaction. Until closing, HTI may continue to redeem the Notes pursuant to their terms; however, in no event shall the outstanding principal balance of the Notes, when ultimately purchased by Tilray Brands, be less than US$182 million.

Among the various amendments to be made to the Notes, the initial conversion price would be C$0.90 (subject to adjustments as set forth in the certificates for the Notes and the indenture governing the Notes), implies that, as at March 2, 2022, Tilray Brands has the right to convert into approximately 37% of HEXO Shares (on a basic basis). The Purchase Price would be satisfied in cash, common shares of Tilray Brands, or a combination thereof, at Tilray Brands’ sole discretion.

HEXO will not receive any proceeds as a result of Tilray Brands’ proposed purchase of the Notes from HTI.

In connection with the proposed Transaction, the parties would amend and restate the indenture governing the Notes to, among other things, (i) extend the maturity date by three (3) years, to May 1, 2026; (ii) provide for the revised interest amounts previously identified; and (iii) amend or eliminate certain affirmative and negative covenants, including as it relates to minimum liquidity and minimum EBITDA covenants. The Notes will also provide Tilray Brands with subscription rights and top-up rights in respect of all future equity and debt issuances by HEXO following closing, other than in respect of certain customary exceptions.

Commercial Transactions

As part of the proposed Transaction, HEXO and Tilray Brands would work together, in good faith, to evaluate cost saving synergies as well as other production efficiencies and enter into definitive agreements related to certain mutually agreed commercial transactions. These mutually beneficial commercial transactions are expected to include (i) cultivation and processing services, (ii) certain Cannabis 2.0 products (including pre-rolls), each with a view to achieving optimal profitability between Tilray Brands and HEXO, and (iii) establishing a joint venture company that will provide shared services to both companies. Total savings, which will be shared equally between Tilray Brands and HEXO, are expected to be up to C$50 million within two years.

Transaction Conditions

The proposed Transaction will be subject to a number of conditions, including (i) execution of definitive documentation relating to the Notes; (ii) completion of all required amendments to the terms of the Notes; (iii) receipt of approvals from the Toronto Stock Exchange and the Nasdaq Stock Market LLC, satisfactory to both Tilray Brands and HEXO, as applicable; (iv) Tilray Brands’ satisfactory completion of confirmatory financial due diligence; (v) receipt of all consents and approvals required by any regulatory authorities; (vi) final approval of the boards of directors of each of Tilray Brands and HEXO; (vii) receipt of shareholder approval from the HEXO shareholders; (viii) no material adverse effect having occurred in respect of HEXO; and (ix) a committed equity line being made available to HEXO for up to C$180 million on terms acceptable to both HEXO and Tilray Brands.

Conference Call

Tilray Brands and HEXO will host a conference call to discuss today’s announcement at 8:30 a.m. ET, details of which are provided below.

Call-in Number: (877) 407-0792 from Canada and the U.S. or (201) 689-8263 from international locations. Please dial in at least 10 minutes prior to the start time.

There will be a simultaneous, live webcast available on the Investors section of Tilray’s website at www.Tilray.com. The webcast will also be archived.

For further details, investors and other security holders may also obtain a copy of the presentation associated with the transaction on the Investors section of Tilray Brands’ website at www.Tilray.com.

Transaction Advisors

Canaccord Genuity Corp. is serving as financial advisor, and DLA Piper LLP is serving as legal counsel, to Tilray Brands.

Lazard is serving as financial advisor, and Norton Rose Fulbright Canada LLP is serving as legal counsel, to HEXO.

Tilray Brands Update; Prospectus Supplement Filing

Tilray Brands also announced today that it has filed a prospectus supplement with the U.S. Securities and Exchange Commission, under which it may offer and sell shares of its common stock having an aggregate offering value of up to US$400,000,000 from time to time through an at-the-market equity program.

The Company intends to use the net proceeds from sales of its Common Stock under the ATM Program offering to strengthen its balance sheet (including through debt repayments) and to fund accretive acquisitions, including potential acquisitions of cannabis assets upon federal permissibility.

The Company has entered into an at-the-market issuance sales agreement with Jefferies LLC and Canaccord Genuity LLC. Pursuant to the sales agreement, Jefferies and Canaccord Genuity may sell the Company’s Common Stock in transactions that are deemed an “at-the-market offering” defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Global Select Market. The timing and amount of any such sales will be determined by a variety of factors considered by the Company. Sales may be made at market prices prevailing at the time of a sale or at prices related to prevailing market prices. As a result, sales prices may vary.

A registration statement on Form S-3 (File No. 333-233703) utilizing a shelf registration process, including a base prospectus relating to Tilray Brands’ securities was filed with the SEC on September 11, 2019 and became effective automatically upon filing, and a prospectus supplement and accompanying prospectus relating to the ATM Program was filed with the SEC on March 3, 2022. Prospective investors should read the prospectus supplement and accompanying prospectus, together with the documents incorporated by reference therein. Prospective investors may obtain these documents for free by visiting EDGAR on the SEC’s website at www.sec.gov. Alternatively, a copy of the prospectus supplement and accompanying prospectus relating to the offering may be obtained from Jefferies LLC, 520 Madison Avenue, New York, NY 10022 or by telephone at (877) 821-7388 or by email at Prospectus_Department@Jefferies.com.

GCAC Awarded License to Operate as Medical Cannabis Retailer

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CANADA: Global Cannabis Applications Corp. (“GCAC”), a leading medical cannabis retail sales and blockchain compliance platform, is pleased to announce today it has been approved as a Sale for Medical Purposes (without possession) License holder by Health Canada under the Cannabis Act. GCAC will operate Canada’s first medical cannabis online retail store that uses blockchain technology on a per batch basis to safely and reliably deliver medical cannabis treatments.

GCAC provides a unique and engaging retail experience with blockchain truths underpinning the provenance, quality, and accuracy of potency disclosures of medical cannabis [1]. The store expects to provide a wide selection of therapeutic products for patients, including the Company’s own line of branded cannabis, as well as a comprehensive offering of medical cannabis, including whole flower, oils, vapes, and pre-rolls, all offered with patient health and wellbeing in mind.

Unique to GCAC, patients may anonymously provide efficacy feedback on cannabis treatments using the Efixii app [2], thereby helping to improve the health of others in the Efixii community.

“We applied for our license last year [3] and have since worked with Health Canada to meet the strict conditions of such an incredible responsibility. In parallel, we’ve been working with some amazing micro-cultivators during the pandemic, and while challenging, it has helped us to better learn of the environmental concerns in the cannabis space. We believe consumers want to know about the Environmental, Social and Governance policies that cultivators follow, and we listened, invested, and upgraded Efixii to allow our cultivators to tell their ESG story before the launch of our retail store [4].” says GCAC’s CEO, Brad Moore.

The addressable market for GCAC’s medical cannabis sales in Canada is C$2 billion, which comprises 292,000 registered patients, consuming an average of 2 grams a day each [5], with an average price of C$9.81 gram [6]. In addition, GCAC is the only national vendor to demonstrate the entire lifecycle of each plant consumed which gives patients much comfort in their treatment.

Efixii is licensed to cultivators in a SaaS model and is a free-to-use app for cannabis consumers. Cannabis sold through the licensed GCAC portal generates sustainable revenues. Efixii’s cannabis data is the intellectual property (“IP”) of GCAC. This IP creates an inherent difficulty in replicating or competing with GCAC’s cannabis sales and datasets. GCAC defined their protocols in a provisional U.S. patent application, ‘System of Process and Tracking Cannabis Products and Associated Method Using Blockchain’ filed with the USPTO on December 17, 2020.

The Valens Company To Acquire Leading Premium Craft Licensed Producer, Citizen Stash Cannabis Corp.

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Accretive acquisition strategically accelerates Valens’ entry into the approximately $2.7 billion flower-based market through an asset-light model that leverages a robust network of craft contract growing partners1

Catapults Valens into the high margin premium flower category with the leading Citizen Stash brand which is the #1 flower brand by market share with an average retail price over $13.00/gram2

Significant revenue and cost synergies are anticipated through the combination of the Citizen Stash brand with Valens’ buying power and low-cost, manufacturing infrastructure

CANADA: The Valens Company Inc. and Citizen Stash Cannabis Corp. (formerly Experion Holdings Ltd) are pleased to announce they have entered into an arrangement agreement pursuant to  which Valens will acquire all of the issued and outstanding common shares of Citizen Stash by way of a court-approved plan of arrangement under the Canada Business Corporations Act, in an all share transaction.  The transaction is valued at approximately $54.3 million on an enterprise value basis.

Under the terms of the Arrangement Agreement, Citizen Stash shareholders will receive 0.1620 of a Valens common share for each Citizen Stash Common Share held. The Exchange Ratio implies a premium per Citizen Stash Common Share of approximately 35.1% based on the 15-day volume-weighted average price of the Citizen Stash Common Shares on the TSX-V and the Valens Shares on the TSX as of the close of markets on August 27, 2021.

The Citizen Stash Acquisition is expected to be accretive to Valens in 2021 and 2022 before synergies, and will provide Valens with a strategic, asset-light expansion into flower and pre-rolls, the largest segments of the Canadian cannabis market currently accounting for over 70% of retail sales. This acquisition is anticipated to solidify Valens’ position as a top tier cannabis company by enhancing the Company’s market share and adding an innovative, premium flower brand to its portfolio. Closing of the Citizen Stash transaction will mark the third acquisition Valens has made this year, which will accelerate Valens’ strategic initiative to create a leading global manufacturing platform, capture market share through innovative product launches with unique consumer experiences, and expand on its existing domestic and international distribution network to better capitalize on the global opportunity.

Key Transaction Highlights

  • Top premium craft flower brand meets top cannabis product manufacturer to create a best-in-class cannabis company: Leading premium flower brand, a full suite of innovative product manufacturing capabilities, scale, and operational and financial flexibility best position the pro forma company to close the significant trading discount to the large cap cannabis peer group3 currently experienced by both companies.
  • Competitively positioned to win: The Citizen Stash complementary award-winning brand portfolio will bring over 40 provincial listings to Valens’ growing house of brands across seven provinces which will bring the proforma company to over 220 provincial listings as of August 2021.
  • Accretive transaction: Expected to be accretive to the Company in 2021 and 2022 before synergies. The Acquisition represents an attractive revenue multiple of approximately 4.3x first half fiscal 2021 annualized revenue.
  • Asset-light model aligns with Valens’ philosophy of operational flexibility and continued financial discipline: Utilization of Citizen Stash’s craft contract growing model will provide Valens with operational flexibility to work with industry leading growers, efficiently manage proprietary strain rotation, reduce risk, and avoid the challenges a large growing infrastructure creates.

Citizen Stash is a licensed cultivator and processor of premium craft cannabis products based in Mission, British Columbia, and will provide Valens the opportunity to unlock additional growth with its extensive and specialized product portfolio in the premium flower and pre-roll segments. Citizen Stash operates a unique, asset-light platform comprised of a network of craft contract growing partners from which it selectively sources premium bulk flower grown from Citizen Stash’s industry leading proprietary genetics. Citizen Stash manufactures and packages flower and pre-roll products primarily through manual processes.

Citizen Stash is one of the top performing premium brands in the flower and pre-roll categories. Based on Hifyre data for the flower category during March to May 2021 in the markets of Ontario, Alberta and British Columbia, Citizen Stash is the highest ranked premium brand by market share in the flower category with an average selling price above $13.00 per gram and is the only brand in the top 20 by market share with an average selling price above $13.00 per gram. Within the pre-roll category during March to May 2021 in the markets of Ontario, Alberta and British Columbia, Citizen Stash is the third highest ranked premium brand with average selling price above $13.00 per gram and one of only five within the top 20 overall brands. The Citizen Stash brand has demonstrated very impressive strength in the competitive flower and pre-roll categories with year-over-year market share gains unlike many other competitor brands – a testament to the product quality and consumer loyalty borne out of Citizen Stash’s industry leading genetics.

Tyler Robson, Chief Executive Officer and Chair of the Board of The Valens Company, said, “We are excited to join forces with Citizen Stash’s experienced team and broaden our offerings in the flower and pre-roll verticals with a best-in-class brand. The premium price tier of the flower and pre-roll segments represents the best expansion opportunity for Valens in the flower category, as premium brands are the hardest to build, while also capturing the highest margins. Citizen Stash’s asset light model, and proprietary genetics will provide us significant operational flexibility and an opportunity to leverage the growing capabilities of our existing LP partners.  In short, this strategic acquisition will allow Valens to significantly expand its presence in the recreational market and capture a share of the largest categories of the Canadian cannabis space without the burden of a high-cost growing infrastructure. We are opportunistically expanding our product offering to align with consumer demand for high quality craft cannabis flower and pre-rolls.”

Jarrett Malnarich, Chief Executive Officer of Citizen Stash, said, “Combining our business with The Valens Company represents an outstanding opportunity for our company and the shareholders of Citizen Stash and is wholeheartedly endorsed by our Board of Directors. We look forward to the full integration of Citizen Stash with The Valens Company. We believe the combination will create a leading platform in the Canadian cannabis industry which spans all categories, while focusing on profitability and creating value for all shareholders. Together we look forward to taking the Citizen Stash brand to new heights that Citizen Stash could not have achieved on its own, by leveraging Valens’ best-in-class, low-cost manufacturing capabilities and industry leading distribution scale. In our collaboration with Valens to date, Citizen Stash has come to realize the common values we share centered around providing consumers with the highest quality cannabis products. We anticipate that the future of our combined company will be filled with product innovation fueled by our shared entrepreneurial vision and mission to provide outstanding consumer experiences in both domestic and global markets. We look forward to the support of our shareholders in completing this transaction and the full integration of our two businesses.”

Curt’s Cannabis Corner: Business Ethics in the Cannabis Industry

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A primary focus of emerging cannabis companies is social equity and inclusion. Such pinnacle issues beg those in the C-suite and middle management to consider the overarching issue of business ethics. This includes methods and programs to expedite the adoption and implementation of inclusivity, sustainability, and social responsibility programs in an industry that has yet to mature and find its stride. 

 

CURT’S

CANNABIS

CORNER 

Business Ethics

In The

Cannabis Industry

 

By Curt Robbins

 

 

Standards & Regulation

With legalization comes regulation. Most regulations are imposed at the governmental level. However, in some areas, such as quality assurance and advocacy, guidelines emerge at the industry segment level.   

The current focus of such management and operational standards involves product transparency and accountability to both consumers and distribution channels. This represents a small step toward ethical business practices in which players are accountable for their supply chain and overall strategy. 

According to many thought leaders, becoming a better corporate citizen necessarily involves business ethics. These ethics and their practice must exceed a simple accounting of how profits are spent. These practices must define and, arguably, power strategies regarding revenue and reinvestment.

Several tools are available in this arena. Assessing and benchmarking the ethics of the practices of a business can be aided by Environmental, Social, and Governance (ESG) reporting standards. This modern corporate management methodology involves equal elements of environmental stewardship, social equity, and regulatory oversight.  

Mika Unterman & ESG 

In 2018, Canada shocked the world—including itself—when it legalized adult-use cannabis at the federal level. Montreal, Toronto, and Vancouver have since become cultural and financial epicenters within the Canadian adult-use cannabis marketplace.

Mika Unterman is founder of the Apical Ethical Cannabis Collective in one of those epicenters, Toronto. Her expertise is in business intelligence and the commercialization of the once-underground culture of cannabis into the now legal—and heavily regulated—industry of cannabis. One of Unterman’s core passions is that all companies in the emerging industry might understand the potential benefits of ESG. 

ESG is “an actionable commitment that companies can invest in to make the world a better place,” writes Unterman in an article for the Alan Aldous PR and digital strategy agency in Toronto. “ESG investing relies on independent ratings that assess what a company says and does for the environment, social justice, and governance issues,” explains Unterman in the article. 

The Interview

Curt’s Cannabis Corner conducted the following exclusive interview with Mika Unterman in August of 2021. The goal is to educate cannabis industry professionals in our reading audience about the topic of ESG and ethical standards that they may desire to adopt and promote.  

Curt Robbins: “Mika, thank you for taking the time to share your expertise in business ethics and, more specifically, ESG and social consciousness within the burgeoning cannabis industry.”

Mika Unterman: “Thank you for having me. It’s an honor to have the opportunity to speak on this topic.”

CR: “Mika, you have your finger on the pulse of business ethics within emerging legal adult-use cannabis markets such as the United States and Canada. What are the leading companies doing right in terms of ethics and ESG?”

 

MU: “The only thing I can say for certain is that it’s being discussed. What’s unique about cannabis as an industry is that most of the workforce is millennial and most of the consumers are millennial and Gen Z. The inclusivity, sustainability, and social responsibility initiatives of businesses are important to these demographics. It’s certainly being discussed when it comes to marketing initiatives.

“In terms of action, I’ve seen a wide range. Most ambitious have been cannabis investment funds that focus on small BIPOC-owned businesses. Some ESG reports have emerged within the last year. There have also been donations to specific social justice causes. But that is not the same as fundamentally changing the way you do business to build up the resilience of communities, both human and natural.”

CR: “The Apical Ethical Cannabis Collective website describes the cannabis industry as ‘fast paced and bootstrapped.’ Can you elaborate?”

MU: “As with any new industry or startup company, the work seems to never end. Not only is there very rarely a formal, tested process on which to rely, but the rules of the game are constantly changing. The challenge is like changing a tire without stopping the car. You have to figure it out as you go. Most companies are comprised of a relatively small team. That is very energy expensive in terms of human capital.

“The cost of compliance is very high. That’s what I mean when I say ‘bootstrapped.’ Planning and paying for a facility with the appropriate quality, security, and environmental mitigation equipment requires a long runway and heavy capital. Workers in the cannabis space will often hear from employers that they simply can’t pay market rate for their services and work…that there isn’t enough cash.”

CR: “What are emerging companies doing wrong in terms of embracing and implementing ESG programs?”

MU: “Not thinking about it early enough and not incorporating it into the business strategy from the beginning. Some confuse ESG and the practices around inclusivity, sustainability, and social responsibility to be more like charitable giving. Something you do after the profits are made. But ultimately, ESG is about how you run your business every day.”

CR: “What can small operators, who employ from three to 20 employees, do to understand the benefits of ESG and implement their own programs and standard operating procedures?”

MU: “I think these small businesses are the ones with the potential to take the most action. Larger companies are inhibited by bureaucracy and red tape. Small businesses can be nimble, try things, fail fast, and try again, in an iterative path to true improvement for all parties affected or involved. Another big benefit: Done properly, ESG programs can be both sustained over the long term and their benefits quantified by cynical accounting.

“The best way to start implementing ESG is to be open to asking yourself questions. This includes identification of all stakeholders and externalities. The environment is almost always an important one.”   

CR: “What can the United States learn from Canada—and what can Canada learn from the U.S.—in terms of their respective ESG implementations?”

MU: “In this case, it might be the blind leading the blind. I think we have much more to learn from the European Union and Japan in terms of how we incorporate the cost of externalities into our business and how we are accountable to society. We must create an industry that is built for our environment and all in society—not on its shoulders.”

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