Midas Letter

Nextleaf Solutions Ltd (CNSX:OILS) (FRA:L0MA) is the first public company to be issued a patent for the extraction and purification of cannabinoids in Canada. CEO Paul Pedersen explains that by acquiring existing technology, Nextleaf was able to beat the large licensed producers and pharmaceutical companies to the first extraction patent. While Nextleaf has the capability to extract minor cannabinoids, Pedersen notes the company is focused on THC and CBD extraction because that is more profitable at scale currently. He emphasizes the importance of tasteless, odorless, clear extracted oil as an ingredient for regulated edibles, as less pure results have to cover up with sugar. Nextleaf’s ethanol-based solvent system is proprietary and unlike many competitors, is industrial scale because the company can process material continuously at high throughput.  Pedersen emphasizes that the company’s highly-refined distillate provides a consistent and reliable ingredient for large existing CPG companies and is even more important in the medical sphere.  Nextleaf’s process is so efficient it allows the company to take lower grade biomass and refine it at considerable cost savings.

Narrator:        Nextleaf Solutions Ltd is an extraction technology company that has developed a portfolio of issued and pending patents for producing purified cannabinoid distillate, a tasteless, odorless cannabis concentrate.

Nextleaf has completed construction of its dedicated extraction and processing facility in Greater Vancouver, British Columbia, which also includes research laboratory infrastructure. Nextleaf Solutions Ltd has 96 million issued and outstanding shares with a management ownership at 17 percent. The company is listed on the Canadian Securities Exchange under the symbol OILS.

James E Wagner Cultivation Corp (CVE:JWCA) (OTCMKTS:JWCAF) CEO Nathan Woodworth provides an overview of the company’s proprietary GrowthSTORM system. Woodworth explains that the core technology is aeroponic-based and the company uses several additional steps to maximize the value of aeroponic growing. In November, JWC filed patent applications for its GrowthSTORM Dual Droplet technology. According to Woodworth, the Dual Droplet system solves the problem of droplet size as it relates to nutrient uptake and growing cannabis. JWC has experienced less than one percent crop loss while using the GrowthSTORM Dual Droplet system and Woodworth credits the control provided by the company’s technology for such impressive results. Woodworth explains how JWC ensures consistency and reliability, which is vital for the company’s medical customers and as JWC makes strides into the recreational space.  Through its GrowthSTORM licensing program, James E Wagner Cultivation plans to leverage its technology to gain a foothold globally.

Narrator: James E. Wagner Cultivation is a licensed producer of cannabis in Canada, with operations based in Kitchener, Ontario. The company uses an advanced and proprietary aeroponic platform named GrowthSTORM. GrowthSTORM is designed to achieve a balance of air and water at the root zone, and a more controlled delivery of nutrients to improve plant health.

This proprietary system is designed to eliminate all contaminants from the cultivation facility, allowing for a controlled growth environment to provide clean and consistent cannabis every life cycle.

James E. Wagner Cultivation has 88 million issued and outstanding shares and their management and insider ownership sits at slightly over 50 percent of issued shares.

James E. Wagner Cultivation trades on the TSX Venture under the ticker symbol JWCA.

Horizons ETFs Management Inc CEO Steve Hawkins is thrilled with the launch of Horizons US Marijuana Index (NEO:HMUS) (NEO:HMUS.U), the world’s first US-focused cannabis index ETF. He discusses the rationale behind creating the new ETF and the key ways it differs from company’s existing marijuana index, Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) (OTCMKTS:HMLSF). HMUS is designed to provide investors with a diversified basket of stocks, as well as exposure to the largest cannabis market in the world. He explains that the new fund is NEO exchange-listed and was created to meet investor demand for US MSOs, which HMMJ cannot hold. Hawkins reveals the fund was launched with over $2 million in assets and was up to $10 million after just an hour of trading, making it the most successful NEO launch in history. Currently, HMUS is carrying 32 names, 30 of which are listed on the CSE. Hawkins discusses several of the US MSOs in the fund’s selection universe, including TILT Holdings Inc (CNSX:TILT) (OTCMKTS:SVVTF) (FRA:0T01). He shares his thoughts on the impact of federal decriminalization and his belief that the US cannabis space will be the next significant driver of large investor returns.

Narrator: Horizons ETFs is the world’s largest provider of cannabis ETFs. In April 2017, the company launched the world’s first cannabis fund, HMMJ. More recently, they launched HMUS, the world’s first US-focused cannabis index ETF. Horizons ETFs is listed on the TSX under the symbol HMMJ.

CO2 GRO Inc (CVE:GROW) (OTCMKTS:BLONF) (FRA:4O21) is developing advanced carbon dioxide technologies to accelerate plant growth. COO Aaron Archibald explains that carbon dioxide is beneficial for growth, resulting in larger and quicker-growing plants. The company’s proprietary process dissolves carbon dioxide into water, which is then applied to the foliage of plants using CO2 GRO’s foliar spray system. Typically, growers use gas deployment systems that result in significant carbon dioxide loss as a result of venting; CO2 GRO’s foliar sprays ensure each plant receives the necessary carbon dioxide. Unlike gas deployment systems, the company’s foliar spray technology can be applied to outdoor grows and greenhouses. Archibald reveals that using CO2 GRO’s foliar sprays regularly results in yields 25 to 30 percent higher than yields produced by using gas deployment systems. Archibald anticipates that the company’s technology will be adopted by cannabis LPs in Canada, as Health Canada is in the process of reviewing applicable regulations. CO2 GRO currently has licensing agreements in both Canada and the US, and has seen broad interest from the American hemp space since the passage of the Farm Bill.

Narrator: CO2 GRO is a Toronto based, precision agriculture technology company. GRO offers CO2 foliar spray systems to both indoor and outdoor growers for increasing their crop yields, safely and naturally.

The company has over 66 million shares outstanding, with management ownership at 26 percent. CO2 GRO Inc is listed on the TSX-Venture under the symbol GROW.

Blueberries Medical Corp (CNSX:BBM) (OTCMKTS:BBRRF) (FRA:1OA) is a Latin American-based licensed producer of premium extracts and oils for the medical cannabis market, with operations in Colombia and Argentina. CEO Patricio Stocker explains what sets the company apart from other Colombian cannabis companies. Blueberries’ geographic location provides a low-cost growing advantage and Stocker explains the company’s model is highly scalable. Stocker indicates Blueberries plans to undertake its first extractions as well as earn EU GMP certification for its Colombian operations this year. Blueberries has a joint venture with Cannabis Avatara, S.E. (Cannava), a state-owned cannabis company in Argentina. This partnership with the government of Jujuy, an Argentine province, separates Blueberries from other companies. Stocker highlights that the deal with Cannava allows Blueberries to enter and develop products not only in Argentina, but will also provides easier access to other Mercosur countries such as Brazil.

Narrator: Blueberries Medical Corp is a Latin American licensed producer of cannabis with its primary operations located in the Bogota savanna region of Central Colombia and operations currently being established in Argentina.

Blueberries is fully licensed for cultivation, production, domestic distribution, and international export of CBD and THC-based medical cannabis.

The company has 106 million issued and outstanding shares, with management ownership sitting at 18.68 percent. Blueberries Medical Corp is listed on the CSE under the symbol BBM.

Midas Letter Capital Markets Advisor Steve Misener, CFA discusses White House chief economic advisor Larry Kudlow’s recent comments that the Fed will not raise interest rates again “in his lifetime.” Misener notes that Kudlow’s statement echoes similar thoughts made by former Fed Chair Ben Bernanke in 2014. Misener speculates that there might be some truth to their comments in terms of the major rate hikes that were common in the past. He explains why the Hong Kong stock exchange, with a market cap of US $5.7 trillion, surpassing Japan’s stock exchange as the second largest in Asia is significant. Misener believes it is a testament to the growth and strength of the Chinese economy to have Shanghai and Hong Kong as the leading exchanges in Asia. He also notes that the change is a reflection of Japan’s slow long-term economic growth. The segment wraps with a discussion of the double growth component unique to the cannabis space. Misener explains that new customers and markets are generating revenue for cannabis companies but those revenues will increase as the illicit market is eliminated.

Ed Milewski:  I’m now joined by frequent visitor here on the show Steve Misener. Steve, glad to have you back. Always got a lot of interesting things to say. Never a dull moment on Wall Street, Bay Street. Larry Kudlow made an interesting comment.

Steve Misener: He did. He’s President Trump’s advisor, but long time Wall Street personality and for years a very, very high-profile guy, and he recently said that for the rest of his lifetime, he doesn’t see interest rates going back up again. That’s a powerful statement and it’s kind of interesting because it echoes former Fed Chairman Ben Bernanke who in 2014 said essentially the same thing, that he did not see rates climbing for the rest of his days. Now, we’ve had a little backup and rates, but I guess they’re talking about major long-term secular rising rates like we had decades ago and perhaps they’re right.

Ed Milewski:  Maybe we won’t see that and I know you know, they were pretty rambunctious back in October and looked like they were going there pricing in this rate, this rating and now I read make the next move might be down.

Steve Misener: Yeah, it’s amazing because the Fed and all central banks around the world, they only have two. I used to say arrows in their quiver. They can tell people they’re going to raise rates which is the soft arrow and then they can actually use the big hammer and actually raise rates and it’s the, they’re equally powerful because just indicating trend, indicating a you know, an intention to tighten is what caused the, it wasn’t the December hike that was well anticipated that caused the stock market to get really, really corrected in December and to create that scare as it did, but it was the speaking that even then we’re still planning three more rate hikes for 2019.

Ed Milewski:  Right.

Steve Misener: And then 90 days later, they’re not hiking rates and they’re telling people maybe we s

420Investor founder Alan Brochstein, CFA provides a rundown of the Paradigm Capital Biosynthesis Conference. Brochstein explains that companies are attempting to create biosynthetic cannabinoids with the goal of creating a standardized, low-cost source of cannabinoids. Brochstein suggests that, if successful, biosynthetic cannabinoids could be a game-changer for the industry. He cautions that while institutional money is starting to flow into the space, no company has been able to synthesize cannabinoids at scale and at cost. Brochstein breaks down what biosynthetic cannabinoids mean for existing cannabis companies, indicating that while it could be negative for cultivators, it offers a potential boon for cannabis product manufacturers. Brochstein believes cultivators aren’t currently under threat and notes there will always be a demand for flower, especially premium dried flower. Brochstein suggests that with growing acceptance and evidence that cannabis consumption has health benefits, extracted products will grow in market share. He feels CannTrust Holdings Inc (TSE:TRST) (NYSE:CTST) (FRA:C9S) management should have been more proactive with guidance prior to releasing its latest financials. However, he notes the market has responded too harshly to CannTrust and the company’s recent downward trend is providing appealing entry points.

James West:   Alan Brochstein joins me now, CFA extraordinaire from the United States of America. Alan, welcome to the show.

Alan Brochstein:        It’s great to be here live.

James West:   It’s great to have you here. Yeah. So you’re here for the Benzinga Conference tomorrow.

Alan Brochstein:        And I was at Paradigm yesterday.

James West:   So let’s talk about that Paradigm Capital Conference because that was really the first biosynthesis cannabis conference that I’ve ever heard of. Do you know of any other one?

Alan Brochstein:        These guys have done a good job of bringing it to the institutional investor awareness and I’ve been following biosynthesis. I learned yesterday a lot of people prefer to call cellular agriculture.

James West:   The other guy said metabolic engineering.

Alan Brochstein:        Oh, yeah, there you go. So I’m not a scientist. I’ve been following the stuff for about, I think, about three years, and very aware of what might happen and what the risks and opportunities might be.

Cresco Labs Inc (CNSX:CL) (OTCMKTS:CRLBF) CEO Charlie Bachtell discusses the company’s focus on branding and distribution as well as its recent acquisition of Origin House (CNSX:OH) (OTCMKTS:ORHOF) (FRA:CY4). Bachtell reveals that the company’s focus on the middle verticals of the cannabis value chain made it a perfect fit with California-based Origin House. Bachtell sees the acquisition as highly accretive for both companies and emphasizes the combined entity’s distribution footprint in the country’s largest cannabis market. He describes the deal as the next generation of US M&A activity because it was M&A activity designed to ensure success, not simply expansion. Cresco is currently in 11 states and the company’s geographic expansion has been strategic. The company prioritizes expanding into states with regulatory frameworks designed to eliminate the illicit market. Cresco has operations in states with the largest populations or that are home to key markets like Phoenix and Las Vegas. Cresco has the highest market share in Illinois and Pennsylvania as well as the largest distribution network in California. With top tier markets secured, Bachtell anticipates focusing on executing on recent M&A activity.

Narrator:        Cresco Labs Inc is a Chicago-based grower, processor, brand manufacturer, and retailer of cannabis. The company develops and distributes precision-dosed, medical-grade cannabis, in both medical and adult use markets across the United States. Cresco Labs recently acquired Origin House for $1.1 billion. With their recent acquisitions, Cresco Labs will have operations in 11 states.

The company has 21.9 million issued and outstanding shares with management and insider ownership at just under 50 percent. Cresco Labs Inc is listed on the Canadian Securities Exchange under the symbol CL.

Khiron Life Sciences Corp (CVE:KHRN) (OTCMKTS:KHRNF) (FRA:4KH) President Chris Naprawa addresses the company’s recent stock volatility. Naprawa clears up a misconception created when the company announced it had signed a definitive agreement for the acquisition of NettaGrowth International. Naprawa explains the move was originally disclosed on January 25 and that the confusion stemmed from Khiron commencing US press releases with the announcement of the definitive agreement. Naprawa discusses the rapid evolution of the Latin American cannabis market and Khiron’s monitoring of changing regulatory frameworks. While Khiron is often grouped with domestic cultivators, it is more accurately described as a multi-jurisdiction medical and CPG company, according to Naprawa. Khiron is a leader in the emerging cannabis cosmeceutical space and Naprawa anticipates that the company’s CBD cosmetic products will be available in up to 400 stores in Colombia by the end of this quarter. Naprawa discusses the possibility of Kuida products being available in the US by the end of the year, as a result of Khiron’s JV with US-based Dixie Brands Inc (CNSX:DIXI.U) (OTCMKTS:DXBRF) (FRA:0QV).

Narrator:        Khiron Life Sciences Corp is a Latin American-based pharmaceutical company that develops and commercializes medical cannabis products. Khiron has core operations in Colombia and is fully licensed in the country for the cultivation, production, domestic distribution, and international export of both THC and CBD medical cannabis.

In May 2018, Khiron listed on the TSX-Venture, becoming one of the first Colombian-based, medical cannabis companies to trade on any exchange globally.

Khiron Life Sciences Corp is listed on the TSX-Venture under the ticker symbol KHRN.

James West: Chris Naprawa joins me now.

Flowr Corp (CVE:FLWR) (OTCMKTS:FLWPF) CEO Vinay Tolia has nothing but praise for the Flowr team after the company’s most recent earnings report. Flowr generated gross revenues of $3.3 million despite having only 20 percent of its main production facility in operation. Tolia explains that Flowr’s operations are still scaling in terms of production and yield optimization. He anticipates that by Q3 of this year, the company’s facility will be fully operational and estimates it will produce in excess of 10,000 kilos annually of premium cannabis. Tolia discusses the importance of consistency when producing high-quality cannabis. He emphasizes the significance of Flowr’s recent supply agreement with retail pharmacy chain Shoppers Drug Mart. Tolia shares details of Flowr’s European strategy and highlights the significance of the company’s recent partnership with Holigen, which provides access to the European medical market. Flowr is currently in the process of uplisting to the NASDAQ in the United States.

Narrator:     Flowr Corporation is a licensed producer of cannabis with a head office in Toronto and a production facility in Kelowna, BC.

Flowr is expanding globally in Portugal and Australia and has signed a distribution partnership with Shoppers Drug Mart.

The company recently broke ground on a 50,000 square foot R&D facility in partnership with Scotts Hawthorne. The company has a net cash of $572.64 million with management and insider ownership at just over under 75 percent.

Flowr Corporation listed on the TSX Venture at two dollars and 60 cents per share on September 26, 2018 under the symbol FLWR.

Benjamin A. Smith: Joining me today is Flowr Corporation CEO V