Midas Letter

Fire & Flower Inc is a cannabis retail franchise operating in Western Canada. CEO Trevor Fencott has nothing but praise for the company’s stores, which have just surpassed $10 million in sales since legalization. Fire & Flower had 5 locations open on October 17 and has since doubled its retail footprint. While the company is currently private, it has plans for an RTO, and to go public shortly after on the Venture exchange, under the ticker ‘FAF’. Fencott describes the process of obtaining product from LPs and provincial organizations such as the AGLC and OCS. Fencott emphasizes that these provincial bodies are still learning about cannabis and that Fire & Flower often acts as a type of “Whole Foods of Cannabis” because it curates a confusing selection of products for consumers. He provides his perspective on the Ontario retail lottery and shares his compliance concerns about sole-proprietors in the space. Fire & Flower continues to expand in Western Canada and has submitted 37 additional license applications in Alberta.

Fraser Toms:  Hey, we have a very exciting guest right now: we have the CEO of Fire and Flower Inc., Trevor Fencott. Thanks for joining us.

Trevor Fencott:    Thank you for having me.

Fraser Toms:  SO your company is a cannabis retailer, and just looking at your latest press releases, you guys have done 10 million in sales since legalization, is that correct?

Trevor Fencott:    That’s right. So we were open right on October 17th, we had five stores open at that point in Saskatchewan and Alberta and we’ve increased it to nine, so yeah, we reached that within 90 days of legalization. So we’re quite proud of that.

Fraser Toms:  Okay, great. Well, we’ll get back to that in a second, but first, just to let our viewers know, currently, as of right now, you guys are a private company?

Trevor Fencott:    Yes.

Fraser Toms:  Plans to change that?

Trevor Fencott:    Absolutely. So we announced that, I think, in the fall, that we are doing an RTO with Cinaport Acquisition Corp too, which I believe has their AGM on the 30th, and then we will be trading shortly after that.

Fraser Toms:  And the ticker symbol on the Exchange?

Trevor Fencott:    Will be FAF, and it will be the Toronto Venture Exchange.

Fraser Toms:  Awesome. We will definitely keep an eye out for FAF. Cool. So the whole retail space is a topic of curiosity for me. I’ve gone in these licensed producers’ facilities and shopped from top to bottom, and I get a sense for how the business works. But then once they’re finished and the product goes into a container, it’s sort of almost a mystery at that point. So what’s that process like from your perspective, just broadly, first, and then I’ll shoot at you with some –<

Faircourt Asset Management and Ninepoint Alternative Health Fund CEO Charles Taerk describes how his fund outperformed other names in the cannabis space. The Ninepoint Alternative Health Fund was up 17.5 percent in 2018, despite extreme volatility in the cannabis industry. Taerk indicates this is the result of an actively managed fund, as fund managers can move holdings to cash, take profit for clients, and preserve agility, which consequently lower volatility. He discusses the Green Growth Brands Ltd (CNSX:GGB) (OTCMKTS:GGBXF) bid to takeover Aphria Inc (TSE:APHA) (NYSE:APHA) (FRA:10E). He believes companies are increasingly going to be judged on cash flow, but cautions that earnings will not be as robust in the first few months of 2019 as some expect. He warns investors to remain patient when it comes to investing in the cannabis space.

Fraser Toms:  Joining me now in the studio is one of our favourites – Charles Taerk, who’s the CEO of Faircourt Asset Management and UIT Funds. Charles, how are you doing?

Charles Taerk: I’m great, thanks for having me on

Fraser Toms:  No problem. So right away, let’s talk about the performance in 2018 which for some, like myself, was pretty rocky and not very fun. But let’s talk about Faircourt and how you did.

Charles Taerk: Sure. So the fund we manage in the cannabis sector is called the Nine Point Alternative Health Fund and we’re the portfolio advisors. This is Canada’s first actively managed mutual fund; it’s coming up on our second anniversary, so we’re two years into this, and 2019 was a, you know, ground-breaking for many factors. Obviously legalization and many countries legalizing for medical purposes.

Performance was rocky. We’re very proud of our performance; for 2018, our annual number was about 17.5 percent. And what’s interesting about that is when you compare our performance to the indexes of a passive strategy, so HMMJ was down close to 20 percent for the year. So we’re up 17.5, HMMJ is down 20. So active management to us is really important. Being able to go to cash, being able to move positions, being able to trade and being able to take profit. I think that was, you know, one of the big lessons of 2018, and you know, just being able to be agile. I think that’s

Eve & Co Inc (CVE:EVE) (OTCMKTS:EEVVF) CFO Landon Roedding discusses the company’s 2019 goals and Newfoundland supply agreements. Eve & Co received its Health Canada licenses in December and is hopeful for a March harvest from its Strathroy site. The company is in the middle of construction on a 700,000 square foot expansion of its Strathroy facility and plans to undertake a financing round to complete the build. Roedding concedes that recreational sales have been slower than the industry would like, but Eve & Co is picking up steam. The company’s inked supply agreements with Newfoundland and is entering into memos of understanding with British Columbia and Ontario. Eve & Co will launch products in Newfoundland in Q2 but has already shipped clones to the province for sale to individuals who wish to try home growing.

Fraser Toms:  I’m joined now by Landon Roedding, who’s the new CFO of Eve & Co. Landon, how’s it going?

Landon Roedding:   Excellent, thank you.

Fraser Toms:  Great. So let’s jump into the company; you jointed the team in October, was it?

Landon Roedding:   Yeah, that’s right.

Fraser Toms:  So maybe can you just tell us a little bit about your background and why it was a good fit for you to join Eve & Co?

Landon Roedding:   Certainly, yeah. So my

Humble Howard Glassman, a cannabis comedian and Humble & Fred co-host, talks about cannabis as a health and wellness product as well as its medical implications. Glassman is excited about Strainprint Technologies’ mobile app, which helps consumers find the best strain of cannabis to suit their needs. Glassman is performing as part of the cannabis-inspired comedy night, Kosher Kush Comedy, at Yuk Yuk’s.

James West:   Welcome back to Midas Letter RAW, it is Friday, and so being Friday, we’re going to do something a little bit differently. I have, as my opening co-host, Mr. Humble Howard Glassman, famed half of Humble & Fred in the morning, Humble & Fred in the afternoon, Humble & Fred at night – one of the longest-lasting syndicated radio shows in Canadian history, I would say.

Humble Howard: Did you almost call me a half-wit? Cause I think you –

James West:   Whoa, stop!

Humble Howard: Cause I just want you to know, I didn’t know I was going to do the show, I haven’t shaved, I’ve got my Christmas sweater on, I’m happy and excited to be here with you, sir. What a wonderful – this is freaking me out too. I don’t want to see myself.

James West:   Don’t look. The trick is not to look. Howard, you’re doing a performance on Sunday night at Yuk Yuk’s. tell us about that.

Humble Howard: [laughter] I will, gentle person. It’s called Kosher Kush, and it’s all about the world of weed and Hebrews. Can you imagine the Hebrews are starting to get into comedy now. It’s a new thing.

James West:   I see, it’s a tribal affair.

Humble Howard: It’s a pretty cool show. It’s headlined by a pretty funny Jewish comedian named Ian Sorota, and myself, I’m hosting it, and all the comics are going to be talking about joints and Jews.

James West:   Wow.

Humble Howard: And we invite everyone to come and see it.

James West:   I have a friend down in California who makes marijuana juice out of cannabis, and so it’s about juice-making in cannabis?

Humble Howard: No, Hebrews, young man! It’s about juice-making, yes, it’s about the JEWS, my friend.

James West:   Oh, the JEWS!

Humble Howard: I’m going to begin the evening by singing Havana, Marijuana, Havana Joint, that type of thing, and then we’re going to take it from there.

James West:   Oh my god, that is awesome. I’m going to come and see you.

Humble Howard: It is funny, and you screwed the joke up, Ed, that’s not the joke. But it’s something like that. Anyhow, I’m really excited to be back on the Midas Letter, because when we got together in October, I had no idea of who you were and what this was. Having now seen it and watched it, I get a sense that you’re really filling a void because there’s not anything like this when it comes to the world of you know, marijuana content dissemination. It’s amazing. I want to say thank you for having me back.

James West:

420Investor and New Cannabis Ventures Founder Alan Brochstein breaks down the latest market news. Brochstein shares his impressions of the recent Benzinga Cannabis Capital Conference in Miami. He notes that the conference showcased a broadening of institutional investor interest, as many different names are looking to deploy considerable financial resources into the space. Brochstein dissects the Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P) debenture deal. He raises some cautions about convertible debt, but highlights how often similar deals have been done in the cannabis space and with great success. Brochstein discusses the potential impact of mergers and acquisitions in the cannabis industry on the broader market and indicates that as long as cannabis M&A activity is accretive, the market should respond positively to such moves.

Brandon Colwell:   And we’re joined here today by Alan Brochstein of New Cannabis Ventures and 420Investor. My good sir, how are you doing today?

Alan Brochstein:   It’s good to be here, enjoying the holiday in the United States.

Brandon Colwell:   Yeah, you got a little bit of a day off. What is it, again? Is it Martin Luther King day, or?

Alan Brochstein:   It is, it’s Martin Luther King Jr. Day, one of my favourite people. I have to admit, I didn’t know that much about his life until more recently, but really an inspirational person.

Brandon Colwell:   Very much so.

Alan Brochstein:   I think he would have been in favour of legalization.

Brandon Colwell:   Well now it is we’re going to be talking about things from legalization on that day. We’re also here with Steve Misener – there’s going to be three of us today.

Steve Misener: Nice to see you again, Alan.

Alan Brochstein:   Good to see you again too, Steve.

Brandon Colwell:   So Alan, why don’t we start off with the fact that just over, I believe it was the weekend or last week, you were at Benzinga, a huge conference. How was that?

Alan Brochstein:   It was, you know, the bar was very high after the Toronto event last August, which many people said that was the best cannabis conference for investors yet, and it was even better this time. Maybe being in Miami helped, but I th

Indiva Inc (CVE:NDVA) (OTCMKTS:NDVAF) (FRA:T8RP) COO Koby Smutylo provides his opinion on the Ontario retail lottery process and outcome. Smutylo reveals that when the government initially released its written framework for cannabis retail operations, cannabis LPs could only have a 9.9 percent ownership stake in a retail outlet. To prepare for application deadlines, Smutylo launched Retail Go, in which Indiva is a 9.9% percent owner, to prepare for retail operations in Ontario. However, the Ontario government opted for a lottery system instead. While Smutylo notes it is unclear to what extent companies like Retail Go can work with lottery winners, Retail Go is open to that possibility. Smutylo warns of the difficulties ahead for the lottery winners, given the short time to become operational and lack of institutional support. Smutylo also reveals that the government has yet to provide guidance on whether LPs are still allowed to open one store at their production facilities. Indiva is particularly interested in this option as it believes its London, Ontario location is a viable retail option.

Fraser Toms:  Hey! In this segment we’re joined by Koby Smutylo, who is one of the founders of Indiva. He’s also the founder of Retail Go which has its sights on retail cannabis in Ontario specifically. Koby, thanks for joining us.

Koby Smutylo: It’s a pleasure. Thanks for having me.

Cannabis industry expert Deepak Anand offers his take on the state of the cannabis sector. Anand highlights the progress and growth cannabis has achieved in Asia. He reveals that India and Thailand are advancing on the cultivation front, with Thailand consider cultivation licenses for medical purposes and India granting cultivation licenses for domestic use and export. Anand notes that some Chinese companies have started to export CBD extracts. He discusses the significance of the Japanese market for LPs, as the country is a huge CBD importer for human and animal consumption. Anand provides his analysis of the Ontario retail lottery process and emphasizes both the limitations of the lottery system and the potential for strict enforcement regarding the non-transfer of licenses.

James West:   Hey, Deepak, how are you?

Deepak Anand: Good, James, how are you?

James West:   Great, thanks! I hear you’ve been travelling the world helping people obtain cannabis nirvana on a legitimate basis.

Deepak Anand: One country at a time, James.

James West:   Awesome. So tell us about what’s going on in the world; give us a sense of the pace of de-prohibition in countries that we’re probably not following so closely as Canada and the US.

Deepak Anand: Yeah, I just got back from Thailand and from India, James, and there’s certainly a lot happening in those two countries. India has issued some cultivation licenses for sort of all purposes: R&D, exports, domestic cultivation, and there’s certainly some very good opportunities in that country, particularly on the product formulation side.

And then Thailand, most people may be aware, recently are looking at legislating cultivation in Thailand, you know, including granting licenses to be able to grow cannabis there for medical purposes. So definitely, you know, the Asian markets seem to be really heating up. We’re seeing a few licensed producers get into those markets, but none of the big guys yet in there. We’re certainly seeing Bedrocan out of the Netherlands make a lot of moves early on into those pockets, so that something we’re watching very closely.

James West:   Sure. You bet. Have you heard anything coming out of China? And the reason I ask this is because at some point I’m expecting to see a press release that says XYZ Corp partners with China XYZ Corp to create the first billion-square-foot marijuana grow operation with an average cost of production of $0.02 a gram, or something like that. Is there any sign of broad de-prohibition in China? I know it’s sort of selectively legal; some of the CBD products in areas of China.

Deepak Anand: Yeah, nothing broadly in terms of a Federal perspective in China. There’s certainly a lot of CBD isolate coming out of China, a lot of manufacturers in China, you know, sort of exporting CBD, bringing in CBD isolate to countries like the UK there’s a number of CBD manufacturers that have licenses to be able to import those products in from China. But nothing sort of on the scale that we’re seeing in Thailand or in

North Bud Company (CNSX:NBUD) CEO Ryan Brown provides an update on the company’s current projects and plans for 2019. North Bud is currently building its 25,000 square foot indoor production facility on 95 acres of agricultural land in Chelsea, Quebec. The company has amended its application to include 500,000 square feet of outdoor grow. Brown anticipates that once this facility is completed, North Bud will have an indoor production capacity of over 800,000 grams per year in addition to 12,000 kilos of low-cost, organic biomass anticipated from outdoor growing. This production footprint positions the company to compete in the boutique flower market as well as the edible and derivative space. North Bud is on track to both receive its Health Canada licenses and open its Chelsea facility by the end of Q1 2019. North Bud went public in the fall and while Brown admits the timing was not optimal due to macro market conditions, he believes the company represents a positive opportunity for investors.

James West:   Hey, Ryan, how are you doing?

Ryan Brown:   Not bad, James, how are you?

James West:   We’re doing great, thanks very much. Why don’t you give us a quick overview, what has North Bud got up its sleeve for 2019?

Ryan Brown:   Yeah, well as we disclosed before going public in late October/early November, building a 25,000 square foot indoor production facility, which we have recently amended our application to include 500,000 square feet of outdoor production. We’re located on 95 acres of agricultural land just north of Ottawa in the province of Quebec, and obviously seeing the developments and the maturation of the space, companies focusing on kind of a lower-cost facilities and quality biomass inputs, we made the decision to focu

International Cannabrands Inc (CNSX:JUJU) (OTCMKTS:GEATF) (FRA:31G) CEO Steve Gormley is thrilled about the company’s recent performance. Gormley notes that International Cannabrands was one of only a handful of companies that closed institutional capital in December, one of the worst months in years. On the heels of closing the company’s deal with La Vida Verde earlier in January, International Cannabrands announced a new distribution deal with Northern Lights, a California-based licensed distributor of medical and recreational cannabis. Gormley is also celebrating the successful rebranding of the company’s JuJu Royal brand, noting the redesign to appeal to millennial men will result in the brand being profitable by Q2 2019.

Steven Gormley:    And this was the worst December since 1931.

Ed Milewski:  I just read that. They were talking about, you know, selloffs, etcetera, and this was –

Steven Gormley:   We were one of only a couple of companies that were actually able to close institutional capital in month of December.

Ed Milewski:  You did your funding –

Steven Gormley:    We did our

StableView Asset Management Inc President and Portfolio Manager Colin Fisher joins James to discuss his 2019 technology market outlook and the investment potential of artificial intelligence. Like the broader market, technology stocks were hit hard at the end of 2018 but are starting to rebound. Technology stocks are also experiencing a hangover effect from industry leaders like Apple announcing macro environment problems as well as a sensitivity to other macro issues. However, the vast majority of Canadian tech companies are B2B, which typically experience less volatility and recover quicker. Given current volatility, StableView looks for companies that provide an essential service and as a result, recurring revenue. Fisher notes the current hype surrounding AI is reminiscent of the early days of the dot-com boom and the recent crypto enthusiasm but predicts it will be harder to invest in because the big winners in the AI space will germinated in the private market.

James West:   I’ve got a special guest here with me now. Colin Fisher’s the CEO of StableView Asset Management. Colin, welcome back.

Colin Fisher: Thanks for having me back.

James West: Now Colin, StableView Asset Management is principally interested in the Canadian technology landscape and so that’s a refreshing break from our focus on cannabis. So tell me, how is the technological landscape from an investor’s perspective going into Q1 2019 in Canada?

Colin Fisher: Well, I think it, like anything else, got a bit of a spanking in the last quarter last year. A lot of what I’m seeing is starting to recover quite significantly. I think, you know, you get the cascading effect of stock price goes down, you run into tax loss selling, and then that really starts to punish it into the tail end, and you have the pylon on the fact that a lot of liquidity typically dries up in the tail end of last year – or of any year where you’re getting into tax loss selling area.

So a couple of stocks that I’ve been looking at are starting to rebound nicely. You know, a lot of the time you get in technology, I mean, if the companies are performing well – I mean, you can splice in out in a whole bunch of different ways, but at the end of the day, if you have real companies doing real things and making real money, and the market writ large writes off, unless they’re in nosebleed valuations, they will typically recover relatively quickly.

James West:   Is that what happened in Q1 so far? Like I mean, with cannabis stocks…

Colin Fisher: Well, we’re only 8 or 9 days in.

James West:   The cannabis space, everything that had sold off by 50 percent is now, a lot of it’s back up 10, 15, 20, 30 percent.

Colin Fisher: Yeah, I don’t – so a number of the positions that I’ve been in, yeah, a couple of them are up in the 20s, 15, 20s.

James West:   Oh, okay.

Colin Fisher: But you know, it’s all relative, right? I mean, it depends on where you’re