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Positioned for Long-Term Growth: The Cannabis Co. that’s Driving Strong Revenue Results

Dave Jackson Dave Jackson, Stockhouse
1 Comment| June 29, 2021

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Love in the air in the cannabis space again…especially for the last year, year-and-a-half. But there’s a cannabis company that’s not only feeling the love but delivering it to shareholders and investors.

Quebec-based Cannara Biotech Inc. (LOVE) (TSX-V.LOVE, OTCQB: LOVFF, FRA: 8CB, Forum) is a vertically integrated producer of premium-grade indoor cannabis and cannabis-derivative products for the Quebec and Canadian markets. Its Quebec-based facility is one of the largest indoor cannabis cultivation facilities in Canada and leveraging Quebec's low electricity costs, the Cannara facility produces purposefully cultivated indoor premium cannabis flower at an affordable price.

Stockhouse Media’s Dave Jackson was joined by company CFO Nick Sosiak to get investors up-to-date on what’s been going on at Cannara Biotech.


SH: To start off with, can you tell us a little bit about yourself and the history of the company?

NS:My background is a CPA chartered professional accountant. Most of my career was in the audit practice. I audited many public companies in various industries, real estate, oil and mining, forestry, retail andthen I had moved over to a real estate firm as a VP finance firm in that business. What drove me to Cannara is my passionfor the industry and I really wanted to make a mark and a footprint into this industry. So I had discovered Cannara, which was in the province of Quebec, in Montreal, and I joined the company in April 2019 as VP of Finance. And justmy involvement, my work in the finance side, my passion led me to become CFO at the company. As CFO,I'm not just focused on finance and capital markets, I'm in all aspects of the business strategy, marketing, product formulation. SoI thinkthat provides a lot of value to the organization. And a little bit about Cannara. We started in 2018, we bought our building in Farnham, Quebec, an industrial building, 625,000 square feet with the intention of creating an indoor cannabis facility of premium grade cannabis. So we hadpurchased it in 2018 and started construction and then went public in 2019 on the Canadian Stock Exchange. From there we finalized construction of 170,000 square feet, which is our phase one - we're phasing it in three phases - and we finished that construction of phase one towards the end of 2019 and applied for our cultivation license and received that in January 2019 and commenced our first harvest in April, 2020, . Once we finished that we applied for to our sales license to begin to distributeto the provincial authorities and we received our license in January 2021 and went to market at the end of February, 2021. So we've been in market 90 days, and with a focus on Quebec for the moment.

SH: The company’s recently announced the acquisition of over one-million square feet of hybrid green-housing from The Green Organic Dutchman Holdings for an all cash offer of $27-million-dollars. This is a big news deal. Can you unpack the benefits of it for our investors?

NS: Absolutely. So we're a fairly new company, we launched our brands in February and we had the utmost brand success that we could have asked for in Quebec. Our products are moving extremely fast. We ship weekly, we sell out weekly with demand outweighingour phase one production capability. So we had a decision to make you know, constructing the rest of the phases, which are also fully leased out to tenants. So we're running rental income and reducing costs on our Farnham facility that way. We would have to remove the tenants and startfinalizing construction, and then apply for a license amendment, which is a pretty long period of time given how great our products are doing in market and how we want to serve this market. There was an opportunity for an asset that was purpose-built, state-of-the-art -­- a lot of money went into building this asset for production of cannabis - it was in our hometown of Quebec an hour away from both facilities. So we had an issue, and we had an opportunity and we decided to merge those together and bring Cannara to the next steps to really execute our strategy of delivering premium grade cannabis and cannabis derivatives to Quebec and now across Canada.

SH: Cannara is now positioning itself to play amongst the top seven cannabis companies in Canada based on Canopy-size. Can you expand on this initiative for our investor audience?

NS: Sure. So one, our first facility in Farnham Quebec is completely indoor, it's 625,000 square feet and our recent purchase of the Valleyfield facility is a hybrid greenhouse, hybrid meaning it's a state-of-the-artpurpose-built greenhouse for cannabis production, but hybridmeaning that you can also close the roof to really simulate an indoor cultivation. So with that we have over 1.6 million square feet of assets allowing us to produce up to a 125 thousand kilos of cannabis per year, including cannabis derivatives. We believe that this asset really puts us into one of the leading Canadian companies. We have to execute the strategy. I think management here at Cannara set ourselves a lot of milestones in the past two years, and we've delivered all those milestones in a very short period of time. We've created an asset and a process in our Farnham facility that's very successful in creating successful products. So now we have a template to be able to recreate into another facility, a larger facility to really accelerate the growth of Cannara.

SH: As I briefly mentioned in the intro, Quebec boats the lowest cost of electricity and labor amongst metropolitan areas in Canada, along with the lowest amount of competition in terms of number of LPs and brands and is second largest market in Canada in terms of sales volume. What can investors glean from these kind of metrics?

NS: I think there is opportunity because Quebec is exactly right. There are very few licensed producers that are based in Quebec, and I believe it's about 26 producers that are based in Quebec, and about 97 brandsin the SQDC store compared to over 200 brands in the OCS and over 105 producers in Ontario. And Quebec, we've always been like that. Quebec has a preference for Quebec based products and cultivated in Quebec. So there's an opportunity to really earn Quebecer’s trust in a brand and accelerate that and get a following behind Cannara and its brands to provide it throughout all of Canada. I think getting that followingof customers really enjoying our brands and products here at Cannara, coupled with one of the lowest costs of electricity and labor in the country, which is the two biggest cannabis inputs for cannabis cultivation, will allow us to achieve great cost advantages that we're able to pass down to our consumers and offer very, very high quality premium grade cannabis at an affordable price.

SH: For company shareholders and potential investors, what kind of future development and progress can we expect at the Valleyfield Quebec operation?

NS: Right now it's a 3 million square foot piece of land. There's1 million square feet of structure on the facility. The main phase, which is the hybrid greenhouse, there's 24 zones of 25,000 square feet. We plan to kickstart that operationin phases to understand anddevelop our process. We also have the vendor, TGOD,who's also going to be cultivating in those rooms for the first two years. And as we learn the facility and we're able to grow, we're going to expand into the 24 zonesin the next year, and then there's a support, a 200,000 square foot warehouse manufacturing center which will be focused for cannabis 2.0 products.

We're really interestedin creatinghash, a solventless hash and solventless hash rosin products for Quebec and Canada, and so we're going to use that space for that. On top ofthe warehouse and support building is a 200,000 square foot rooftop greenhouse, which we intend to potentially lease out to a vegetable grower to keep the cost structure lean and ensure thatthe operation and Cannaraachieves profitability in Farnham. We'rereally on the way to achieving great revenues and we're very excited for the public to seeour Q3 results,which will be posted in July of 2021, and we'll give an understandingof what Canara is building.

SH: I have to mention your stock has had a very nice bump over the last 12 months…with over a 50-prcent increase in value in a very competitive market sector. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s a good value buy right now?

Click to enlargeNS: I think unlike the other cannabis companies, we had only done one previous financing about two years ago on the initial raise at 18 cents. Our stock, the market, and the industry kind of took a dip, but we haven't raised any money under that valuation. The 27 million that we are purchasing the building with was raised at a market premium of 18 cents. SoI believe it provides investors a sound understanding of where the company is right now, and then you have to factor inthe future operations and growth of the company. We now just acquired a1 million square foot facility and significantly increased our capacity and output, and we have the brands, and we have the process that have been successful.

It's just continuing that traction and applying what we've learned and built in Farnham into our Valleyfield’s facility, create more jobs here in Quebec and execute a strategy that we've been really looking and making sure that it's the right move. We want to be a number one player here in Quebec and the rest of Canada and having a huge facility that's cannabispurpose built an hour away could have also introduced competition for the company, and this is a way to really secure our foothold.

SH: What’s the long-term strategy for the company moving into 2021 and beyond, and what retail and institutional investors should be looking out for?

NS: I thinkit's execution. We really have the assets nowto produce a leading Canadian cannabis company. We have the team and the processes in place. So it's really justwatch what we're setting ourselves as milestones, keep track of us, and every time we tick the box take note of that - we're going to continue delivering exactly how we've delivered in the past two years. We're very passionate people. Unfortunately, our CEO could not be here, Mr. Krivorot, but he's very passionate. He learnedgrowing and cannabis cultivation himself, and that provides a lot of value to the company to really ensure that this is a success, and what we created here in Farnham is going to get replicated and executed in Valleyfield.

SH: Can you tell our audience a little bit about your corporate management and board teams, along with the experience and innovative ideas they bring to the cannabis LP space?

NS: Right. Soour board is composed of five individuals. We have Mr. Krivorot, who's our CEO - he provides a lot of value to our board. We have Mr. Jack Kay. He was the founder of Apotex and does provide a lot of pharmaceutical experience and background to the company - product formulations and just the experience in running a heavily regulated market. We have Mary Durocher, she's a cannabis consultant. She's worked on many big files with Aphria, Canopy on Health Canada licensing. She's a board member and ensures that the corporate compliance, the regulatory side is in check. We have Mr. Stern who runs Olymbec and was an integral part of securing the facility in Farnham when we first created the company and was an integral part of securing our Valleyfield facility, and we have Mr. Donald Olds, he's a life science executive and sits on many boards and has a lot of board experience, corporate governance and financial acumen that really provides a strong board member team for our leadership team.

SH: And finally, Nick, if there’s anything I’ve overlooked please feel free to elaborate.

NS: I thinkit's a transformational period here for Cannara. We'revery excited. We'reextremely happy that the market has enjoyed our products, enjoying our hard work and seeing that we're dedicated to making premium grade quality products at affordable pricing, and we're not going to stop and we're going to deliver those premium products. The Valleyfield acquisition just helps us achieve that in a much sooner timeframe. We're here to create jobs in Quebec. We're here to really build our legacy and I think the amount of talent that we have in our company, the amount of passion that we have in our company will translate to shareholder return and shareholder value.

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FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.

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