ACMPR license sets up major cannabis expansion

Cannabis investors have generally done quite well for themselves over the past year. This is especially true for shareholders of Beleave Inc. (CSE: BE, OTCQB: BLEVF, Forum) A year ago, shares were trading at around $0.30. Today, BE is trading well above $2 per share (most recently $2.44).

For shareholders thinking that it can’t get much better than this, maybe it can? The Company has just announced earning its ACMPR cultivation license from Health Canada. This is not merely an important internal milestone, it is a major stepping-stone in BE’s evolution.

With the Company’s cultivation license in place, Beleave can now fully implement its business plan. BE’s cultivation facility was already complete, along with other necessary infrastructure, meaning the Company can immediately commence production. However, even before the first crop is harvested at BE’s Hamilton, Ontario facility, Beleave will already be busy with the construction of its Phase I expansion.

The existing Hamilton facility hosts 14,500 square feet of production space and at estimated yields can produce 550,000 grams of medicinal-grade cannabis per year. When BE’s Phase I Expansion is finished it will provide the Company with a 60,000 square foot hybrid greenhouse for cultivation with Beleave’s current indoor cultivation space being converted into a processing facility.

Stockhouse recently had the opportunity to check in with Beleave’s CEO, Roger Ferreira, PhD. He took the time to discuss the Company’s new Health Canada cultivation license, and to help investors look ahead to the next phase of BE’s corporate evolution.

1. For investors who are following the Beleave story, can you summarize activities since the Company was last featured on Stockhouse in June 2016?

• Since we were last featured on Stockhouse, we have continued to advance through the Health Canada licensing process to become a licensed producer of medical cannabis under the ACMPR. Specifically, in September 2016 we received notice from Health Canada that we had advanced past the review stage, on March 15th of this year we had a pre-licensing inspection of our proposed production facility, and on May 19th we were issued our cultivation license.

• In terms of Beleave’s current and future capital position, and associated expansion capability, we closed a non-brokered private placement for $1,405,000 in September 2016, another non-brokered private placement for $250,000 in October 2016 that involved certain key strategic partners of Beleave, as well as having entered a non-dilutive interim streaming agreement with Cannabis Wheaton to finance the construction of proposed 200,000 square foot production facility.

• In terms of product research and development, we have developed highly efficient whole-plant extraction methods that retain the full cannabinoid/terpene profile of the starting product plant material. Further to this work, we are now working on selective cannabinoid isolation, to partner highly purified cannabinoid formulations with drug delivery technologies. As well, we are implementing advanced quantitative genetic modeling into our breeding programs for precision control of cannabinoid output.

2. BE has seen significant upward movement in its share price over that time, even without an ACMPR cultivation license. To what do you attribute this strong performance?

• Pre-license, we have always been forward-looking, and have been actively involved in product research and development with our academic, clinical, and industry partners in order to position us for success once we receive the commercial cultivation license. With an emerging IP portfolio and a dedicated management team backed by industry leaders in scientific research, corporate finance, federal licensing, marketing and brand development, construction, and product distribution, we feel that all of these were strong contributing factors to the performance of our stock. Furthermore, our pre-license efforts have demonstrated that we have a view to expand as demand in the emerging legal cannabis industry necessitates, as we vertically integrate our cannabis IP portfolio on a large industrial scale.

3. The Company was just awarded its Health Canada license on May 19, 2017. Please put this into context as a milestone in the development of Beleave.

• Receipt of the license from Health Canada represents the culmination of all of our efforts as a cannabis-focused biotech company, where we are now a player in the commercial cannabis market here in Canada. Importantly, now as a licensed producer (LP), we are able to vertically integrate all of our efforts to-date with respect to research and development. With our academic, clinical, and industry partners, we have been actively developing methods, technologies, and associated IP involving cannabinoid breeding, extraction, and drug delivery. We’re extremely excited to see how the implementation of these technologies will translate into quality in terms of our planned product pipelines for both the existing medical market, and the future recreational market.

4. BE will now be adding its own cannabis cultivation to supply the Canadian market. What internal expertise does Beleave bring to the table which will allow it to produce a product which is comparable to other high-quality cannabis currently being produced?

• In bringing over 20 years of combined expertise in medicinal cannabis cultivation from past experience growing for loved ones, our master growers have a deep knowledge of how to carefully tailor nutrient delivery and environmental conditions throughout each stage of the plant growth cycle. This allows us to maximize yield and the desired cannabinoid output. Importantly, we have set up our operations to allow our growers to employ a craft-grow approach, producing small-size batches of product from carefully sourced genetics, as well as implementing precision plant selection and breeding efforts, which we feel will allow us to develop a stock of some of the highest quality plant phenotypes currently available in the Canadian market. Each and every strain that is propagated will be carefully optimized in terms of the flavor, aroma, and cannabinoid/terpene profile. Marrying a scientific approach involving precision control of plant characteristics like yield and cannabinoid production, with years of unparalleled experience from some of the best growers in the country will set Beleave apart in terms of product quality.

5. The Company has already announced its plans for a Phase I Expansion. When will construction commence on this project and what is the estimated completion date once construction begins?

• Construction of the 60,000 square foot expansion commenced Q1 2017. Its completion is expected Q4 this year.

6. Will Beleave need to raise additional capital to finance this project?

• Very little capital is required to finance our Phase I project due to a significant amount of warrants and options that are held by partners close to the company. However there will be a need for some capital in the future.

7. The Phase I Expansion will produce 60,000 square feet for greenhouse cultivation. What is the Company’s current estimate for total cannabis production once this facility is built out and ramped up to a full harvest?

• Once ramped up to full production capacity, the project cannabis production in this 60,000 square foot expansion is estimated to be 10,000 kg of finished dried cannabis annually, with projected revenues of $85 million.

8. What is your best estimate on the length of time required to reach maximum production once cultivation commences on Phase I?

9. What will be the impact of the Company’s ACMPR license on the bottom line, based on cultivation from only BE’s current facility?

• The company will be able to generate about 1000 kg in the current facility at full capacity. However this is just the first step the company took towards becoming an LP. That will roughly translate to $4mm towards our bottom line.

10. How will that financial picture change once Phase I is online?

• With the new technological advances we are looking to employ, our additional capacity of 60,000 square feet will allow us to grow close to 10,000 kg per year. This will bring in close to $85 million in revenues with 45-50% margins for dry cannabis product. With the advancements we have made in extraction technologies, Beleave is looking to increase revenues and margins significantly.

11. The Company has launched a “community outreach” project. Could you please comment on this initiative?

• Working with the head of our community outreach program, retired Lieutenant-Colonel Dana Gidlow, we are developing services that we feel will provide great resources to medical patients, including educational material describing the clinical evidence for potential medicinal uses of cannabis, connecting patients with physician networks for assessment and treatment management, as well as assistance with registering with licensed producers.

12. Over the longer term, how do you see Beleave positioned in the Canadian cannabis space five years from now?

• Looking forward to the future of cannabis legislation in Canada after the legal recreational cannabis regulations roll out next summer, there are plans to maintain the medical and recreational markets in place for at least 5 years. From a public health and safety perspective, this makes a lot of sense, since there are still going to many patients who are inexperienced with cannabis and yet considering it for medical purposes – these individuals will truly benefit from the treatment management and oversight provided by a physician. And with emergence of standardized cannabis-based medicines, there exists the opportunity for drug coverage for medical usage. For this reason, we plan to develop standardized cannabinoid drug delivery products for the medicinal market, and support clinical evidence-based use of these products to promote clinical best practices surrounding medical cannabinoid usage. We have already announced an exciting clinical collaboration with Dr. Mohit Bhandari to investigate cannabinoid usage for the management of pain within the context of musculoskeletal disorder.

• In terms of the potential that exists in the projected demand of the future recreational market, we also see this as a huge opportunity and are putting forth a lot of effort towards R&D for rec product development also. By partnering our world class growers with our academic partners at Ryerson University, we are marrying practical grow experience with science in order to develop a breeding program that can fine tune the yield and chemical output of our plants. By sourcing great-starting genetics and our planned breeding program, we hope to develop a stock of phenotypes with a wide range of flavor, aroma, and cannabinoid profiles to provide the right recreational user experience for the right person.

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