Midas Letter

Horizons ETFs Management (Canada) Inc President and CEO Steve Hawkins provides his 2019 outlook with regards to the cannabis space. Hawkins believes there are a few catalysts driving the current cannabis bounce including a recent briefing by major financial institution, Royal Bank of Canada, announcing its involvement in the sector. In particular, Hawkins is enthusiastic about Aphria Inc (TSE:APHA) (NYSE:APHA) (FRA:10E) rebound and believes it’s a positive sign for the space. Hawkins notes that cannabis prices are not currently correlated to broader market and can be used as a hedge against broader market volatility. Hawkins believes the US names listed on Canadian exchanges are relatively undervalued on a fundamental basis but believes the spread is narrowing. Hawkins notes that the Canadian names in the Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) (OTCMKTS:HMLSF) are getting global exposure and still hold the advantage over their American peers.

James West:   Now right now I’ve got, returning for the first time in 2019, Steve Hawkins, the CEO of Horizons ETF.

Steve Hawkins: James, Happy New Year.

Charting Man Dan McDermitt, founding partner and analyst with the Chart Guys, explains the current relief bounce markets are experiencing and why Tier 2 cannabis names are surging. He highlights the correlation between oil prices, the S&P 500 and the cannabis space, noting that the recent relief bounce the sector is experiencing is following a surge in oil prices. McDermitt breaks down the cannabis industry into three tiers and suggests that large cap, Tier 1 names like Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) and Cronos Group Inc (TSE:CRON) (NASDAQ:CRON) (FRA:7CI) will be under more pressure to provide results this year. In contrast, mid cap, Tier 2 names like Organigram Holdings Inc (CVE:OGI) (OTCMKTS:OGRMF) (FRA:0OG) and HEXO Corp (TSE:HEXO) (OTCMKTS:HYYDF) (

Vertical President Smoke Wallin shares his thoughts on the recently passed Farm Bill. Wallin cautions that the terms of the agreement are not as advantageous as some had predicted; significantly, the FDA still has purview over products made with derivatives. However, Wallin anticipates extract production becoming a dominate industry in the United States, displacing current European imports. In the short term, he predicts that the passage of the Farm Bill will lead to increased hemp cultivation, but because of current infrastructure inefficiencies there will be delays at the processing level. Vertical invested heavily in hemp production in advance of the Farm Bill and is currently processing mass amounts of CBD oil to use in its branded derivative products. Vertical is spinning the CBD aspects of its business into Vertical Wellness, which will be going public, while its California-based cannabis assets will remain private.

Ben Smith:    Welcome, everybody. We’re here with a special guest named Smoke Wallin. He is the President of Vertical Companies, a California cannabis company, and he joins us from Bowling Green, Kentucky today. Smoke, how you doing?

Smoke Wallin: I’m well, thank you. Glad to be here. I’m actually on a road trip to see my family and happen to be passing through Kentucky, so that’s the side of the road to do the interview.

Ben Smith:    Well, that’s a very apt location, because I understand Kentucky is pretty much the home of hemp. It’s a huge market in there, and I was wondering if you could tell the audience what the Farm Bill, and hemp production especially, means for your home state of Kentucky, and for the national landscape in terms of how it’s going to affect cannabis stocks.

Smoke Wallin: Yeah, absolutely. I mean, the Farm Bill is monumental in terms of what we can do now in terms of hemp and the derivative product, CBD, is obviously the hot topic of the day. But what the Farm Bill basically did was, it took what was a pilot program in 14 states and took that away and made it a 50-state agricultural product that can be grown anywhere in the country.

Now, it hasn’t solved all the issues; there’s still quite a few regulatory hurdles that have to be worked through. The FDA has come in yesterday and asserted that it still has purview over product that are derived from cannabis and hemp. But that being said, it’s a huge step forward for the industry, and it’s a huge move for both the farm community who would like to grow it, but also companies like ours who would like to take the product and turn it into brands and put it into stores and all kinds of accounts and bring it to the public.

Ben Smith:    Now, what do you think this means for the price of CBD oil? I mean, to me, that’s one of the better narratives about this whole story, because right now, I think, you know, CBD oil, a lot of people would like to try it. There’s a lot of therapeutic benefits to it – a ton of people. But the price is a little bit disqualifying to a lot of people I know, as well. 30 milligrams might cost anywhere between $80 and $120 American. No

Wayland Group (CNSX:WAYL) (OTCMKTS:MRRCF) is committed to consistent consumer experience and has designed a purpose-built facility in Langton, Ontario to ensure its products deliver the best experience every time. Wayland’s newest facility is the synthesis of expert growing knowledge and industrial-scale production. The company’s team includes experienced industry experts; veterans of the cannabis industry who have a history of success with industrial-scale production. Wayland’s patent-pending drying technique allows the company to dry product 8 times faster than conventional methods but still delivers a great smoke. This facility has both a net zero carbon footprint and European GMP certification. As a result, Wayland is an industry leader in terms of manufacturing best practices and can export its products to lucrative European markets. Wayland Group has partnered with analytics platform AI Datagrow to use programmable hardware to track every aspect of production, from seed-to-sale. The Langton facility has significant innovations that set Wayland Group apart from its competitors. Unlike many cannabis cultivators, Wayland Group’s new facility design places maintenance equipment and other hardware in corridors, minimizing human contact with plants, which is crucial for healthy growing. The Langton facility also features a unique, variable construction.  Each room is customizable and can be converted to a new purpose quickly, which allows Wayland to keep pace in the rapidly evolving cannabis landscape.

Jeff Ayotte, VP Infrastructure:  Every time that you smoke our product, use our product, vape our product, use a tincture, I want it to be replicated every time so that’s why we’re doing a purpose-built manufacturing facility with good manufacturing practices.

Jennifer Ayotte, Cultivation Manager: The diff

420Investor and New Cannabis Ventures founder Alan Brochstein addresses Tilray Inc’s (NASDAQ:TLRY) (FRA:2HQ) free trading stock and the likelihood of increased consolidation in the cannabis space in 2019. Brochstein cautions viewers that the free trading stock that will be available this month is not a significant amount when compared with Tilray’s total number of shares; however, it has been acting as a drag on the company’s share price. Brochstein believes Tilray’s stock should never have reached the heights it did but indicates the company can still grow into its current valuation. Brochstein sees potential for mid-tier LPs to merge into US companies as the valuation gap between the American and Canadian cannabis companies shrinks. He also believes American MSOs will see a lot of organic, state-by-state growth in 2019 and this will also spur M&A activity.

James West:   Hey Alan, how are you today?

Alan Brochstein:   Hey, it’s great to be back again.

James West:   You bet. Alan, let’s start with an overview, I mean, the market’s looking pretty good in cannabis going into Q1, 2019. All of the stocks that are trading in Canada that are US operators in particular seem to be very positive today. Do you have any insight as to why that might be?

Alan Brochstein:   Well, I mean, I think people liked that GTI acquisition today, getting into Connecticut, and for the overall market, I think it’s a reminder that there’s a lot of growth ahead, and I’d add to that as well, Origin House, which used to be CannaRoyalty, talking about receiving takeover bids, and I heard some of that, by the way. So I think those of things kind of, you know, set the tone for optimism here in the United States.

And remember, the end of the year was just horrible for some of these companies. Like, a lot of them came public – like, look at Acreage. I know people very excited about Acreage, it comes out at $25, that’s $25 USD, and then it drops 50 percent and it now it’s back. And so we’re seeing a lot of that, and people are getting a little bit more comfortable with the calendar flip, that some of the selling at the end of the year should be over. I think that’s what’s going on.

James West:   Mm-hmm. So do you think it’s potentially likely that a lot of these Q4 IPOs that came out and promptly underperformed are likely to deliver some good performance in Q1, 20189?

Alan Brochstein:   I think so, and I think what’s going to make this year work or not work for them is just to show being growth. We already know there’s going to be big gro

ZYUS Life Sciences is a research-focused wellness company focused on developing cannabis-based health solutions. CEO Brent Zettl, a cannabis industry veteran, shares the company’s plans for 2019, which includes expansion and obtaining government licenses. ZYUS Life Sciences is targeting 20 different countries for expansion but will also have a presence in the Canadian space. Zettl hopes the company will have received its Health Canada licenses by the end of Q2 2019, with products available for the Canadian market at the end of that quarter. Zettl addresses some of the advantages and disadvantages of outdoor growing from a research and extraction perspective. ZYUS Life Sciences completed a $25 million financing round in October and is looking to go public in 2019.

James West:   Brent, welcome back.

Brent Zettl:  Thank you.

James West:   So you’re getting ready to do this whole big public company thing again with your new project called ZYUS Life Sciences. Tell us a bit about that, please.

Brent Zettl:  Sure. We started the company in about April of 2018 initially, under a different name, and as went through a rebranding exercise and thought that the ZYUS would be the appropriate name given the origins of it are from the zygote, which is the beginnings of life, the cell divisions, and then US, from our creator societal endeavour.

So our ambitions are really to, when we step back and look at it, we’re really trying to advance the science of well-being in order to make life more liveable. And so in doing that, we’re focused in on the phytotherapeutics – it’s a category that we’re talking about as plant-based medicines, essentially, and we’re using cannabinoids as the basis to start that, or cannabinoid-based formulations as a basis.

So to that effect, what we did is, we acquired a ethanol extraction facility that can become a GMP rate facility on scale, it’ll have the ability to produce 35 million bottles f cannabis oil a year, equivalent, and to be able to move into the international markets in this space as we seethe next generation of products coming out in the medical field.

James West:   Okay, so starting with off, I guess, primarily, CBD products in extracts?

Brent Zettl:  No, I think we’re going to – it’ll be focused on THC and CBD complement products.

James West:   Oh, okay, so you’ll be a licensed producer

Brent Zettl:  Licensed producer, that’s the intention, in oils, capsules, and in topicals. Focus on those, and then we’re targeting a series of countries, so our footprint is in around 20 companies that we’re already speaking with, and we’re looking at about 1.1 billion people in terms of our reach.

James West:   I see. So your background is deeply scientific; you’re the founder of Prairie Plant Systems, the first company in Canada really to be involved in the medical marijuana space, and that evolved into CanniMed, etcetera. So I look at this initial sort of four pager on Ziomed and I think, okay, well, that’s got to b

CB1 Capital Management CIO Todd Harrison provides his take on the recent announcement that Green Growth Brands Ltd (CNSX:GGB) (OTCMKTS:GGBXF) is planning a hostile takeover of Aphria Inc (TSE:APHA) (NYSE:APHA) (FRA:10E). Harrison also addresses the current federal government shutdown in the United States and how it impacts the cannabis landscape. He notes that the DEA and FDA are still operating and suggests that without updated guidelines from the federal government, the cannabis space could see a crackdown on illegal operations. Harrison emphasizes that the longer the shutdown lasts, the greater the impact on the cannabis space, as an operational government is crucial for necessary banking reforms to be adopted. He shares his enthusiasm for Canadian player Organigram Holdings Inc (CVE:OGI) (OTCMKTS:OGRMF) (FRA:0OG), indicating the company’s management team and biosynthetics emphasis make it attractive for CB1 Capital Management.

James West:   Todd, are you with us there? There he is. Hi, Todd.

Ed Milewski:  Todd, how you doing?

Todd Harrison: I’m doing all right. How are you gentlemen doing? Happy New Year.

Ed Milewski:  Happy New Year.

James West:   Trying to get my noodle back in the game after barking up half of my lung from some pestilence I got well down on the coast of California there. I don’t know what’s going on. How are you doing?

Todd Harrison: Better than that, whatever that means. I’m glad I don’t have it. But no it’s good. Happy for the new year.

James West:   Yeah. Happy New Year to you. Todd, we were just discussing the Aphria an

Province Brands CEO Dooma Wendschuh shares details of the company’s expansion and financing plans, as well as his thoughts on Health Canada’s draft regulations for additional cannabis products. Wendschuh notes that the company’s 123,000 square foot cannabis brewery is under construction in Grimsby, Ontario. Province Brands is raising capital through a brokered round and plans to go public upon the completion of the current financing round. The company’s shares are $2.30 and half warrants are $2.85 in the brokered round, which will result in a valuation of $112 million if all warrants are included. While Wendschuh believes most of the proposed Health Canada regulations for edibles and extracts are sensible, he notes that the provision that cannabis adult beverages cannot have appearance and branding elements in common with alcohol isn’t in the interest of public safety and potentially impacts the company’s ability to partner with traditional craft breweries.

James West:   The CEO from Province Brands, Dooma Wendschuh, is joining us live from Îles de la Madeleine in the mouth of the St. Lawrence River. Dooma, how are you my friend?

Dooma Wendschuh:   Fantastic! How are you?

James West:   We’re doing pretty too.  Are you actually on Îles de la Madeleine?

Dooma Wendschuh:   In fact I am, yes.

James West:   Wow, and how is the weather there today?

Dooma Wendschuh:   It’s about 20 centimeters of snow. But other than that, it’s beautiful.

James West:   Yeah, I bet. Well, I can’t wait to get out there one day. Did you happen to see our segment that we just ran on you by Sean Cookson and the 4East people on your excellent brewing?

Dooma Wendschuh:   By far the best video I’ve seen on Province Brands all year but years young.

James West:   Oh, yeah how that goes.

Dooma Wendschuh:   And I don’t recommend trying to brew a beer from cannabis using the technique that Sean demonstrated. It will not work. You will not have any intoxicating effect and you might scratch your throat. But yeah, I thought it was great. Thank you so much for filming that

James West:   No, of course! So Dooma, tell us what’s the status? You’re still building your plant down there, down the road from here in Grimsby are you?

Dooma Wendschuh:   We are in fact under construction on a hundred and twenty three thousand square foot facility in Grimsby, Ontario, which will be the world’s first cannabis brewery. It has been a really exciting ride watching this thing come together.

And right now we

Flower One Holdings Inc (CNSX:FONE) is a Nevada-focused cannabis company. President and CEO Ken Villazor explains that while Nevada is a state that allows full vertical integration in the cannabis industry, Flower One is focused on its core strengths of cultivation and production. The company’s flagship facility is the largest commercial greenhouse in Nevada. With over 400,000 square feet and an adjacent 55,000 square foot post-harvest production facility, Flower One’s flagship site is 12 times larger than the average Nevada facility. Nevada is visited by 55 million tourists annually and is primarily a recreational market. While the state believes it has the capacity to meet the needs of this significant customer base, Nevada requires a broader retail footprint. As a result, Nevada is no longer granting licenses to cultivators; however, it is doubling the amount of retail licenses it grants, which represents a huge value proposition for Flower One.

James West:   Let’s start off with an overview: What is Flower One?

Ken Villazor: So we are a cannabis company and we’re focused in the US market, and a step one we’re focused in Nevada.

James West:   Okay.

Ken Villazor: We’re really excited about the Nevada market. You know, we can talk a little bit about that, but in that market, we have two assets: we have a 25,000 square foot indoor cultivation/production facility, it has five licenses, four operational, one provisional. And we have our flagship facility, which is the largest commercial-scale greenhouse in Nevada. It is currently under conversion; we’ve put about 40,000 hours of construction and renovation into it.

James West:

Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P) CCO Cam Battley guides viewers through the company’s innovative new facility, Aurora Sky. Aurora Sky has 17 flower rooms, each bigger than the 32,000 square foot Aurora Mountain, the company’s first production facility. Aurora Sky’s flower rooms provide 578,000 square feet of growing space and its innovative crane and conveyor technology ensure that every square foot of that space is available for growing, as walkways have been eliminated at the facility. Aurora Sky is not a greenhouse; rather, it is a sophisticated indoor growing operation with a state-of-the-art glass roof, which ensures plants receive optimal light. Aurora is currently operating in 23 countries worldwide and  the Aurora Sky facility will help the company meet its annual production target of 500,000 kilograms of cannabis by 2020.

Cam Battley, CCO: This is a very, very different kind of facility. It’s not a greenhouse. It’s an indoor facility with a glass roof that allows us to harness the power of the sun. 17 flower rooms in Aurora Sky, all equal size, 34,000 square feet, and interestingly enough our first production facility north of Calgary, Aurora Mountain had 32,000 square feet of flower space. So, each of the 17 rooms we have here is larger than the first facility that we built when we began to sell medical cannabis in Canada.

So, this is the mother room. In the room righ