When Stockhouse first met up with
Empower Clinics Inc. (
CSE.CBDT,
OTCQB: EPWCF,
Forum) back in
February 2020, the company was pioneering new technologies in the still-emerging medical cannabis and CBD markets.
Fast-forward to today and Empower Clinics has pivoted to an industry-leading, vertically-integrated healthcare company that provides body and mind wellness for patients through its clinics, with digital and telemedicine care, a medical device company, and world-class medical diagnostics laboratories. The company’s Health & Wellness and Diagnostics & Technology business units are positioned to positively impact the integrated health of our patients, while simultaneously providing long term value for our shareholders.
In this intriguing video Q&A podcast, Stockhouse’s Dave Jackson was joined, once again, by company Chief Executive Officer and Chairman of the Board of Directors, Steven McAuley, to get our investor audience up-to-date on all things Empower Clinics.
(CLICK IMAGE TO PLAY VIDEO)
TRANSCRIPT BELOW:
SH: To start off with, can you tell us a little bit about yourself and the history of the company?
SM: Yes, of course. Well, I'm primarily a corporate guy, and really on the public company side. Always really on finance and then, specifically, automotive finance for many years at a good tenure with GE Capital, on the finance side, and Roger Penske staff at the public company, called United Auto Group at the time, it's now called Penske Automotive. Ran a TSX listed automotive aftermarket company and really just came into this opportunity, coming up on three years now. As we were looking at this sector, and the company used to really be attached to the medical certification industry for medical cannabis, and all the assets were in the United States. However, it was a public company that listed back in April 2018, and unfortunately, at that time things weren't going very well for that company, which was a bit disappointing for its key investors out of Vancouver and Toronto, and I was asked to come in and take a look and try to figure it out and we put a plan together that brought me on in January 2019. I've been kind of moving and evolving ever since to bring us to kind of where we are today and where we're going tomorrow.
SH: Can you update our investor audience and your Empower shareholders on any new company developments, especially in the wake of COVID?
SM: If you're new to our story you should know that we certainly positioned ourselves to be very strong in COVID-19 testing. Last year when the pandemic hit, we were working very hard, particularly in our Arizona based clinics to really shift the services away from the historical medical cannabis certification services, because we knew writing was on the wall that that was going to be kind of running off in the state of Arizona, and we started COVID-19 testing in the clinics. It quickly became evident to us that we really needed to be in the lab. We went on the hunt for some medical diagnostics labs, and we landed on a group called Kai Medical out of Dallas, Texas and we closed that October of last year and things just sort of exploded from there in the fourth quarter and in the first quarter of 2021.
US markets had a little bit of a lull, sort of politically, in the middle of the year, but we're really seeing a big uptick now. We’re seeing a lot more kind of opportunities and contracts coming our way through Kai Medical. They're doing some nice work, as we speak, on some big events. I think there's a lot of talk in global markets as it relates to the new variant, and it's very important for us to really understand it and validate, and make sure that we are able to detect it through our testing systems and protocols. We'll have more updates coming there. Then really the other key things that are happening, our continued expansion of our new brand in Canada called The Medi-Collective, which is our health center brand. We've been opening new clinics and setting acquisitions up under that brand. We've got three more openings scheduled here by the end of December, and we've got two good acquisitions that are lined up to close in early January. We'll go into the first quarter with 15 medical centers opened and operating with 800,000 patient roster, and in excess of 70 medical doctors, and 160 staff just on the healthcare side.
SH: You just successfully completed a Health Canada review to sell COVID-19 at-home saliva collection kits. Can you expand on this initiative for our investor audience?
SM: This has to do with really bringing our Kai Care At-Home RTPCR test programs to Canada. We launched the program in the US first because we have the lab in the United States. We have an e-commerce site called kaitests.com and we have the same version, kaitests.ca, for Canada. The other thing that we do in Canada is we really partner with our pharmacy channels. We've got a lot of great national relationships in place with some of the biggest household brands that everybody would know, such as Rexall or PharmaChoice or Pharmasave, and we want to see Canadians have better access to at-home RTPCR testing. We're also actively selling rapid tests in Canada now as well.
The Health Canada update was, we originally got our preliminary approval – you then have to get what's called an MDEL license to be a medical device distributor and importer. We got that approved on our class one device status, and then typically when you get a new Health Canada status, anywhere from three to six months they'll come back in and run an audit or a mini-audit and that happened to us. They asked us to stop selling while they reviewed the class status, and they came back and they agreed that the class that we filed under, which is a class one device, was in fact the correct device class to file under. We're now reactivating sales and we'll look for that to really come online, probably in the next two to three weeks. We've got a lot of pharmacy partners who are very hungry to get the at-home test kits on their shelves. There's a lot of Canadians that are traveling again and to meet the travel requirements, this RTPCR test is a great product. We are seeing a lot of uptick and demand for our rapid test kits in Canada, also.
SH: Now on to the big news…you’ve recently announced Q3 2021 results with 372-percent year-over-year revenue growth. This may be news to many investors. Can you unpack some of these third quarter numbers?
SM: Yeah, the third quarter financials were interesting for us, because we had to change the presentation of our top line revenue. Now, proportionally year-over-year the growth numbers are correct and our year to date, like the nine-month numbers, were actually up 1350% year-over-year. Really what happened was we are selling off or announced that we're selling off the last of our medical cannabis certification clinic assets in Arizona, and when you make that an announcement, we have an accounting requirement that says those assets and all the revenue associated with them must come off top line, and just go down to discontinued operations. The presentation of the financials on the top line looks a little bit different than it has historically. There would've been another, say $200,000 of revenue in the quarter, that would've normally been in there, but it actually has all just moved to a different category, but we're pleased to see the year-over-year growth, but most important for us is the continued momentum in the fourth quarter and the building up of our 2022 and beyond. And if you start to see the amount of clinics that will have open and the acquisitions that are going to land, our annualized run rates for 2022 are very substantial.
SH: Can you tell us a bit about your aforementioned Kai Medical Lab in Dallas that offers various COVID testing and vaccinations?
SM: Yeah, so Kai Medical, again, was an acquisition we closed just over a year ago. It's really turned into a very interesting asset for us. They have great state of the art diagnostics equipment. We have wonderful molecular scientists and staff and we decided to expand the lab as well in the summer. We tripled the size of the lab to prepare for future demand and to really make the operations more efficient, really sort of separating out science from administration and sales and marketing and whatnot, the two shouldn't really be together. We are bringing new products to market. Not only are we COVID-19 testing unit on all the standard types of tests, whether they're nasal swabs or throat swabs or our direct to consumer at-home saliva-based test kit and these programs are applied to schools and students, they apply to businesses, they apply to our drive-up center at the medical laboratory, which is doing testing or specimen collection every day.
The other interesting products that are coming to market, we believe that we want to help change the paradigm of healthcare, and really help patients take more control over their healthcare outcomes by getting better test products, that can be self administered in the privacy of their own home. Think of things like women's health, men's health, disease detection. We have a number of tests. I believe we've got nine unique tests that are related to come online in the first quarter. These are blood spot-based tests again that you would self administer at home, send back into our lab. This would be things like vitamin testing, hormone testing, testosterone testing on men's health and others like that.
Recently, you mentioned vaccination, so we recently got our federal US status and our state of Texas status as an approved vaccination provider. We're now listed on the CDC website as such and we are administering the Pfizer vaccine, both the adult version and we've just received our first shipments of the children's version. We also have the Janssen product as well. We're offering vaccinations in, in kind of a couple of forms. Think of, again, our drive-up centers are an ideal situation for it and we're also offering what we call like popup clinics, where we can go into a school or we can go into a place of work or a location and administer vaccinations to patients as they come along.
SH: The company has now moved completely away from the cannabis sector and you’re now a pure play healthcare company. Why so, and what are the benefits to this kind of pivot?
SM: Yeah, it is interesting for us because if you look at the history of the company, although it was providing medical cannabis certifications, we're actually just fundamentally clinic operators initially. We've got clinic locations, they're very medical looking, they have doctors, and they have practitioners, and they have admins, and we have telemedicine. We've always had that, but the historic service as various states are regulating or deregulating cannabis to go from medical to recreational, it actually destroys the need for the certification service. We knew that was coming. We started to work in late 2019, and then the pandemic shows up and we're starting to pivot to different types of medical services, and we just found our path. I feel like we've repositioned ourselves, we've repositioned our narrative and it's like we're meeting the market where the market wants us to be.
It's pure play health, really focused on what I describe as kind of two key pillars, which is health centers on one side offering primary care but with paramedic services included, and we'll be bringing on some key specialty services within those locations. On the other side, I think of it as science and R&D, supported by our medical diagnostics laboratory and our R&D capabilities. We acquired a medical device company, called Medisure, about 120 days ago. That's very complimentary to both our health center business units, and our science units and I think there's some underlying base of strength that we have, and one is its technology. We're a firm believer in healthcare technology. We're on the hunt for a lot of interesting new technology that we can bring into our company.
We also closely align with pharmacies and that helps us across our entire business unit not just the medical centers. Think of if, we're doing clinical work or clinical locations and it happens to be with Rexall as an example, think of a clinic inside a Rexall, on top of a Rexall, adjacent to a Rexall. It’s really beneficial for the communities that we both serve. We know our lane, they know their lane and it really works, and one of the things that some people don't always understand is by leveraging those partnerships, we actually have a dramatically reduced cost structure for our clinic operations going forward. It's a really clever, well thought out arrangement and then, because we have medical device company and other medical products distribution with these various pharmacy groups, is a natural by-product and a natural fit. We want to be on the shells of these great pharmacies, whether they're corporate or they're independent but across all the markets that we serve. That kind of base is really important to understand about why we align so closely with pharmacies.
SH: The Company looks set for strong growth in 2022. How are you placed to expand operations to meet demand?
SM: Well, we've been doing it all year. Everything that we've been doing, the capital that was raised, the influx of cash flow, just the cash that we have from continuing operations, has all been about investing for this future annualized growth rate and that's upon us now. We're having a very nice fourth quarter. We want to have a strong closeout to December and again, as we turn into January and on the Medi-collective side, we're going to have 15 locations that are open. The two acquisitions that we've already announced, they each generate a little bit over 4 million in top line revenue already and that's only with primary care services. It doesn't have any of the additional pieces on our model. Then our additional locations that we're opening as standalone, with other partner pharmacies, same thing. Those will have an immediate run rate.
What we like about the health center model in the markets that we serve is, the moment that we open our doors we start generating revenue, there's no lag here. The only lag is build-out time and getting the doctors in place, and then probably about four weeks till you get it into the billing cycle. From that point on, it's month in, month out, that cash is there, and it starts to become a bit of an annuity play. Think of them as building blocks. We build up, we've got 15 locations, well we turn around and we've got 25 locations and then we've got 50 locations in the various markets that we serve. Mathematically I mean, you could just do it on the back of the napkin and you can understand kind of where our trajectory is going.
Now, you overlay R&D, and science, and Kai Medical. If we can continue to meet demand that's out there in the COVID-19 testing space and then bring our new test products to market, I mean, we've got a tremendous opportunity here. I don't think anybody in any markets around the world think that COVID-19 testing, and the concepts of booster shots are going to slow down in any form. We certainly don't see it and we've invested in Kai Medical in such a way that they're ready to take on more demand and take on more volume.
We're also bringing our COVID-19 strategies to Canada. We've been very actively working on identifying partner labs across the country in Canada, the lab space in Canada is very different than the lab space in the United States. We have had to work hard to identify, and really go out to proposal or solicit bids to have stable lab partners in Canada who can process our specimens in Canada, because we don't want to send them across the border. We have inconsistencies with courier companies to try to do such things. We think we're going to see some pretty interesting opportunities to announce very shortly. We will announce to the market once we've signed the agreements with the new Canadian labs. That's quite imminent. We are reviewing agreements right now. I think everybody can look for some updates in the not to distant future on that topic.
SH: What separates Empower Clinics from the competition and makes your business model unique?
SM: Well, I tell you what, we're developing one heck of a team and don't underestimate how important having leadership in the right roles, having divisions that are staffed and positioned correctly. We spend a lot of time on organizational development and organizational structure and making sure that we're filling gaps in the right way. We're about to announce a new high-power CFO. The market knows that we've been conducting a search. We've got really great candidates come our way. We'll be looking to make an update on that very, very soon. I think that we’re finally clearing out the old assets now, we’ll come out of December with the Sun Valley acquisition, sorry, not acquisition but actually sale completed, and all of that legacy will be kind of cleaned up and behind us and we're laser focused on the pure play healthcare.
It's an incredible sector, as we know. I mean, nobody questions the size of the market in healthcare. It's really about what part of healthcare are you going to participate in? What's your role? What are your lanes? I don't like getting off on tangents. We need to have discipline as we look at where we're going. I think what differentiates us, I always talk about it with my team members and followers, is we are known for execution. We're known to just simply get things done, whether that's opening up new locations through the Medi-collective or it's negotiating non-binding term sheets for an acquisition and then getting that acquisition closed. We very much pride ourselves in our reputation and for execution and getting things done. I think that's a real key differentiator for us as I think of our team, think of our execution capability. I think we've done a pretty great job in building national relationships with pharmacy groups, in a very short period of time. These are big brands that often takes a very long time to break into. I think we've got a great formula and we're building a very good reputation with those brands both in Canada and in the United States.
SH: I have to mention your stock has been on a bit of a roller coaster ride over the past year. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s a good buy right now?
SM: Well, I mean, it's highly undervalued. We're in December, we see tax loss selling, we see a lot of different types of pressures come. I think that we need to continue to get fresh eyeballs to our story. We've got some significant milestones that are about to be met. I think our market wants to see those milestones be met and we have a great set of followers. I mean, you would not believe how much growth in our shareholder base we have had over the last 12 months. I mean, we're literally going from maybe just over a thousand registered shareholders, to in excess of 25,000 shareholders in such a short period of time. The other thing that everybody should pay attention to, and have confidence in, is that we've managed to always find a way to have continued daily liquidity. Getting liquidity is difficult, it is a journey.
You have to grow your shareholder base in order to generate consistent liquidity. That's one of the things that I kind of maybe most pride ourselves on from a capital market standpoint. Now I'm the largest shareholder of this company by a landslide. Of course I'm a net holder. If there's anybody out there who looks at how the stock chart has made itself work over the last little while, and this concept, oh, is this just some sort of game of a pump and dump sort of strategy? Dump implies selling, and none of us insiders are sellers, and particularly myself and we are all holders because we believe in our business model. We believe in the path that we're going and frankly, I believe that we have the ability to uplist this to bigger markets in probably the not-too-distant future.
We've done all the technical work to be ready for up list. Now it's just, let's see how the markets go into 2022. Let's get these annualized run rates starting to show up and see them become tangible and materialized through the financial statements, the P&L, and I think that that market confidence and market sense is going to be there. It's certainly, I would argue, a very good value as we sit today, and I'm very optimistic about where it's going forward.
SH: What’s the long-term strategy for the company moving forward and what should retail and institutional investors be looking out for?
SM: I think we're starting to see how we're building out a healthcare ecosystem. We see us leveraging the expertise in opening or acquiring, but running health centers with diversified services, not just primary care but diversified services. We really see value in bringing specialty services into that model, on what we refer to as a hub and spoke model. Think of our locations in whatever communities they serve as kind of the spoke out there, and the hub might be a cardiology center or a dermatology center or a nephrology center that we partner with or, ideally, we would own in the future. Patients in whatever community they may be, get better access and better reach because of technology, because we can bring state-of-the-art scanners into our regional spokes and have patients have quicker, better access, shorter wait times.
We think these services, especially services, like we call it tele-dermatology, cardiology are two key ones that we've identified now. We also like the areas of research in healthcare itself, not just our medical diagnostics lab and new products but just research in general. I think there'd be more to come in the future, but as really think about us, 2, 3, 4 years out, as building our own healthcare ecosystem, that has tremendous scale. I'll be turning my attention quite quickly back to US markets. We've got a number of acquisitions in our pipeline. We've been very focused, of course, in Canada and the province of Ontario over the past 12 months. Rightfully so, it's the largest market in Canada but we should be looking to see the Medi-collective clinic locations starting to expand to other provinces, then we'll determine whether or not we want to bring that same brand into the US, but we tend to think that we do. We like what the brand stands for, and we designed it and built it and built these trademarks, with the intention of being a North American brand for sure.
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 this integrated healthcare space?
SM: Yeah, at the executive level, we're building out a much stronger team, much more depth. That's a combination of getting great, let's say, with acquisitions, we're bringing on so many tremendous medical doctors and professionals and specialists. Some of which want to just maintain running the practices that they're in and seeing patients. Others want to bring their years of education and experience to our healthcare company and advise us and help us move forward. I said we're adding in a real high powered, capital market CFO in the very near future. I've got a tremendous chief of staff, Tenzin, who comes from a political background, and we're really applying a lot of strategy that you would apply sort of in politics to this small cap world, being able to huddle, react, gauge sentiment, react to sentiment and be very nimble so that we really are paying attention to our shareholders needs and we're transparent about that.
Our board is made up of three of us right now, an attorney out of Arizona who's become a very good friend, very talented and competent. Brings a lot of outside experience, corporate experience and really understands the public sector. President of Kai Medical, Yoshi Tyler, as part of the acquisition, stayed on, and we moved her into a board position. We will be expanding our board as we go into 2022. We already know that. We're continuing to seek after the right type of individuals, and we also created a strategic advisory board. The first participant in that is a lady by the name of Annette Robinson. Annette is a 30-year pharmacist here in BC. She's the president of the BC pharmacy association, and she also sits on the Canadian pharmacy association. On top of that she's a certified diabetes educator, and very passionate about it. I tell you what, we couldn't have a better fit as our inaugural strategic advisor to come to the committee and she's already proven to be an incredibly valuable asset for us. We're not completely there. We still have a few gaps to fill but we're seeing a lot of bench strength - there's talent across the board, whether it's new hires or it's the acquisitions themselves. I think we've just got a highly motivated group of people who are aligned on our vision, and we work hard. We try to work smart but we have energy, passion and we have compassion for our patients and for all of our employees.
SH: And finally, Steven, if there’s anything I’ve overlooked please feel free to elaborate.
SM: Well, you know, that that could be dangerous. We could be here for the next hour and get into minutia, but I think we've had had a chance to cover off some really interesting topics on a short term, where we'll certainly try to use this medium on a regular basis - whether it's sort of a corporate update format, kind of like this or it's some important material news that we want to get out there to our followers. We're very keen to go deeper into the Stockhouse community and I encourage everybody to follow us and watch for our developing narrative. Don't look backwards. Don't look at old financials, it's not going to help you. The MD&A from the third quarter was much updated to a better narrative. That's shifting toward our future path. We've got a brand-new investor deck that'll be coming out shortly. That really speaks to some of the things I touched on today, and the 2022 view of our world, and what we think we're going to look like.
For regular updates, visit
www.empowerclinics.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.