Midas Letter

Horizons ETFs Management (Canada) Inc President and CEO Steven Hawkins provides his take on the current state of the cannabis market. Hawkins is still bullish about cannabis stocks and believes the recent Altria Inc (NYSE:MO)-Cronos Group Inc (TSE:CRON) (NASDAQ:CRON) (FRA:7CI) deal is just one of many potential industry catalysts; however, he also notes that equity markets are currently extremely volatile. Hawkins describes the performance of the Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) (OTCMKTS:HMLSF), which Horizons ETFs Management launched last year. He notes that while the ETF is down 15 percent since October, it slightly outperformed the top five Canadian cannabis companies, and remains a viable option for investors looking to enter the space. Hawkins praises the Canadian Securities Exchange for becoming the “cannabis exchange of the world.”

James West:   Welcome back. My guest this segment is Steve Hawkins, CEO of Horizons ETF Canada. Steve, welcome back.

Steven Hawkins:    James, thank you for having me.

Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P) CCO Cam Battley showers the company’s leadership team with praise, as Aurora continues to successfully execute its vision. Aurora is positioning itself in new markets internationally where it has a first or early mover advantage. The company’s recently announced deal with Farmacias Magistrales in Mexico brings Aurora’s footprint to 23 countries. Battley explains that the company is preparing for the European cannabis market boom by having two EU GMP certified facilities and existing agreements that allow Aurora to enter each new market in the Eurozone as additional countries come online. As the Farm Bill moves closer to being signed, Aurora Cannabis Inc anticipated the huge potential of industrial hemp and CBDs in advance by securing agreements with extractors like Hempco Food and Fiber Inc (CVE:HEMP) (OTCMKTS:HMPPF) (FRA:22Y), Agropro UAB, and ICC Labs Inc in strategic geographic regions. As 2019 approaches, Battley is ecstatic about the revenue potential of high-margin products such as medical and recreational softgels, which the company produces at Aurora V, a facility that can manufacture 1.4 million capsules weekly.

James West:   Cam, welcome back.

Cam Battley:  Nice to see you.

James West:   Cam, Aurora has been executing on all fronts.

Liberty Health Sciences Inc (CNSX:LHS) (OTCMKTS:LHSIF) (FRA:S6UQ) CEO George Scorsis provides viewers with an inside look at the company’s Florida operations, from its greenhouses to its dispensaries. Viewers are shown the company’s Gainesville production facility, where Liberty Health Sciences produces Mary’s Medicinals and PAX products, as well as a variety of transdermals, ointments, and vaporization pens. Viewers get a chance to see the extraction process, which uses Supercritical CO2 Extraction to create the flavourful oils used in Liberty Health’s vaporization pens. The company’s Gainesville property is over 386 acres, allowing Liberty Health’s operations to expand and meet the high growth rates of the Florida market. Scorsis walks viewers through a visit to a Liberty Health Sciences dispensary, which provides an inviting atmosphere for patients to learn about cannabis in a user-friendly way. Liberty Health Sciences will have 30 stores operational in the state by the end of 2019 and plans to replicate its Florida model in additional states.

George Scorsis, CEO: The most interesting thing about Florida is we control the entire seed to sale. So, we control everything from the production of our product all the way to the dispensary. So, we’re permitted to open up to 30 dispensaries in Florida.

This is our room that we have all of our mothers. We’ve since retrofitted all the facilities up to our standards. We’ve also seen an output upgrade of upwards of 40 percent. So, come along and I’ll show you some of our plants.

4Front Holdings, LLC CEO Josh Rosen provides details regarding the company’s merger with Cannex Capital Group (CNSX:CNNX) (OTCMKTS:CNXXF). Rosen believes the companies are a great strategic fit because Cannex has significant expertise as a cultivator and processor, while 4Front’s strengths are its retail and regulatory knowledge. The merger allows the combined company to apply its knowledge and expertise, refined in established cannabis markets like Washington State, to new jurisdictions with less competition. In particular, Rosen is excited about the opportunity states like Massachusetts and Illinois provide, as those jurisdictions move toward full recreational legalization. The new company has a footprint on both coasts, the potential to become a leading multi-state operator, and represents “a hybrid of West and East that just doesn’t exist in the industry today.”

James West:   Joining me is Josh Rosen. He’s the CEO of 4Front, right?

Josh Rosen:   Correct.

James West:   Now tell me, Josh: are you now the CEO of Cannex Capital as well?

Josh Rosen:   Not formally, no.

James West:   Not formally?

Josh Rosen:   But announced merger, yes.

James West:   Oh, that’s interesting. So tell me how that whole transaction came about? It sort of came out of left field from where I sit, having had some exposure to Cannex. But so how did you guys get involved, and how did you end up sort of coming to this merger?

Josh Rosen:   Yeah, certainly. So it actually goes back, we formed 4Front back in, kind of the germination was 2010; our origins going back to 2010. Formed 4Front in 2011, though we’re a private company, so not a well-known commodity at this point relative to public markets, unlike Cannex, in this case.

And so we’re a multi-state operator in the US, and ultimately, what, two years ago, I first interacted, someone referenced Leo Gontmakher, the COO at Cannex – or actually pre-dated Cannex, it was a company called Northwest Cannabis Solutions at the time. Kind of immediately did a tour of Leo’s cultivation and processing operation in Washington. It was at the time, and still to this day, one of the most impressive single operations we’ve seen, and been around for a while, and then more recently, you know, prior to putting this together, kind of re-did that diligence trip.

When we come across folks that we like in the industry, I tend to put it on my calendar to check in with them once a quarter or so.

James West:   Sure.

Josh Rosen:   Had kind of consistently checked in with Leo and his team, followed the progress through the getting public with Cannex and stayed engaged, and then went back and visited his facilities. And since then he had expanded Northwest Cannabis Solutions and related entities into a second facility, a cultivation facility done a

420Invester and New Cannabis Ventures founder Alan Brochstein, CFA shares his thoughts on the Hindenburg Research report on Aphria Inc (TSE:APHA) (NYSE:APHA) (FRA:10E). Brochstein cautions viewers that the full picture has yet to emerge and it’s still unclear what this means for Aphria long-term. He notes that Aphria got behind its peers, companies like Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) and Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) (FRA:21P) domestically and internationally and may have felt external pressure to complete the deals mentioned in the report. Brochstein suggests that while US cannabis stocks have been outperforming their Canadian counterparts recently, the Aphria report will impact the entire space. Brochstein adds his thoughts on the Cronos (TSE:CRON) (NASDAQ:CRON) (

CB1 Capital Management CIO Todd Harrison talks about the growing negative sentiment in the US cannabis space after Hindenburg Research’s report on Aphria Inc (TSE:APHA) (NYSE:APHA) (FRA:10E). Despite the negativity, Harrison is still enthusiastic about a lot of US players ahead of a number of catalysts. He notes that industry leaders like Tilray Inc (NASDAQ:TLRY) have held their positions, but notes that many good companies are being “thrown out with the bathwater.” Harrison cautions that the risk in the cannabis space is a duration risk and that the current despondency of people in the cannabis space is not consistent with the opportunities that exist for long term investors. He addresses growing concerns of a recession and discusses the steps CB1 Capital takes to guide its positions through downturns.

Todd Harrison: Hey, fellas, what’s going on?

Ben Smith:    What’s going on, Todd?

Ed Milewski: That’s why we called you, Todd. We want to know what’s going on!

Ben Smith:    Now, Todd, if I could lead the question here, I’ve been dying –

Todd Harrison: [inaudible]

Ben Smith:    I want to lead off with a question here, I’ve been, you know, I want to get your take, and I asked Alan Brochstein a similar type question pertaining to Aphria; I wanted to get your take on it, because it seems to be some leaching into the sentiment down on the American side, which you’re most concentrated in, although your fund, you own stocks on both sides of the border. Are you starting to see a leaching in of negative sentiment south of the border with the Aphria situation? And if you could just give us your overall take on what you’re seeing there and what you’re looking for, and perhaps whether you’re a buyer, if certain benchmarks appear, stabilization benchmarks appear in the future.

Todd Harrison: Yeah, no, it’s certainly not helping. There’s a lot of US banks that I think are ready to roll out coverage of the Canadian space and the US space, the banking comes through. I don’t think there’s a legal department on Wall Street right now that’s feeling real good about that, considering that Aphria was really considered one of the chosen ones. That was a safe one, it had a New York Stock Exchange listing, it had institutional holders, it had analysts researching the stock…now, I can’t speak to the allegations, I don’t know the allegations. I think that the

Liberty Health Sciences Inc (CNSX:LHS) (OTCMKTS:LHSIF) (FRA:S6UQ) CEO George Scorsis responds to the second Hindenburg Research report. Scorsis highlights the self-interest of short sellers as well as the many inaccurate statements in the report in defense of Liberty Health’s practices. Scorsis clears up a misunderstanding about an early stage private placement, in which shares were sold at $0.01, by noting that those shares became tradeable over a year ago and won’t cause future downward pressure on the company’s stock. Liberty Health had a strong quarter, reporting a 45 percent increase in earnings and a patient load growth of 46 percent. Liberty Health will open another 7 stores by February, bringing its total number of dispensaries in Florida to 14 by the end of Q1 2019.

Brandon Colwell:   I’m with George Scorsis, CEO of Liberty Health. Welcome to the show. It’s been a very action-packed couple of days for you, and I just want to let our viewers know, just right off the bat, any instances or information in regards to Vic and Aphria, we are not touching on during this interview; this is about yourself and Liberty Health Sciences. So I just wanted to make sure we made that clear from the get-go.

George Scorsis:    Yeah, I think it’s important to note that, you know, what short-sellers actual intentions are. I think that’s the most important aspect out of what we really want to discuss. Short-sellers are not there for the actual overall interests of the common shareholder, they’re there for their interests of their specific individual or the activity that they do.

Cannabis Compliance Inc Vice President Deepak Anand shares his views on the supply issues plaguing both the recreational and medical sides of the cannabis space in Canada. Anand is excited about the possibility of medical cannabis imports to Canada and how imports will impact pricing. He anticipates that there will be a supply shortage for at least the next year and predicts that much of the 2019 capacity coming online will be exported to international markets. He notes that companies like Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) have already exported medical cannabis to the United States for research purposes. Anand believes that there are opportunities for Canadian cannabis companies to provide industry know-how as new markets come online, but that Canada risks losing this advantage if the country falls behind policy trends and developments, such as advertising and branding. Cannabis Compliance Inc believes that US de-prohibition or legalization of cannabis at the federal level with create huge compliance issues for existing companies and will drastically change how medical cannabis companies operate in the United States.

Brandon Colwell:   And we’re back in studio today with Deepak Anand, VP of Government Relations for CCI. Welcome back.

Deepak Anand: Thanks for having me.

Brandon Colwell:   Absolutely. And the last time you spoke, it was just after legalization, and now we’ve had a good month and a half since then. What’s been going on?

Deepak Anand: Yeah, lots. I mean, clearly you’ve seen SPY issues across the country; you know, we’ve seen the AGLC in Alberta looking at limiting sort of the number of new stores that they’re approving. You’ve seen PLE product chargers in the Alberta market. Quebec has seen the same thing; you know, a lot of shortages in that market. The SPDC has done a limiting the hours that they’re operating. So certainly supply problems on the recreational side, but what we’re also seeing is medical cannabis patients actually don’t have enough product, and we’ve seen various licensed producers not have much inventory in terms of supply medical patients.

And then one of the other things we’ve also seen is a significant increase in the sort on product, what’s not used to.

Brandon Colwell:   Yeah, and it’s interesting, because a lot of people were concerned that the demand wasn’t going to be there, or that, you know, exactly what’s happening now: we have this incredibl

Hill Street Beverage Company Inc (CVE:BEER) (OTCMKTS:HSEEF) CEO Terry Donnelly visits the Midas Letter set to praise the company’s line of award-winning non-alcoholic beer and wine. Hill Street generated $1 million in revenue last year and Donnelly expects that number to climb this fiscal year as new retailers and distributors come on board. Significantly, the company’s products are available in 7000 stores across Canada including large grocery retailers like Loblaws and Sobeys. In addition to their great taste, Hill Street’s beverages are low calorie and Weight Watchers approved. While Hill Street’s products are non-alcoholic, the company has completed an LOI with Lexaria Bioscience Corp (CNSX:LXX) (OTCMKTS:LXRP) to use Lexaria patents to produce rapid onset cannabis (both THC and CBD) beer and wine beverages. Donnelly anticipates the company receiving its Health Canada license to produce cannabis beverages in Q1 2019.

Ed Milewski:  Hello everyone. Welcome to Midas Letter Live, and today we have – my name is Ed Milewski, I’m your host today. We have Terry Donnelly. He’s the CEO and chairman of Hill Street Beverage Company, ticker BEER. Beer. There you go; couldn’t be better. Terry –

Terry Donnelly:    Thanks for having me.

Ed Milewski:  Nice to have you.

Terry Donnelly:    Yeah, pleasure to be here.

Charting Man Dan McDermitt of The Chart Guys discusses the consistent bearish reaction to earnings statements in the cannabis space. McDermitt suggests the market got ahead of itself in terms of company valuations in the lead-up to rec legalization in Canada and indicates it makes no sense for bulls to jump into the space right now when investors are getting bearish reactions. Charting Man Dan provides technical analysis of an interlaid chart of the S&P 500 and Canopy Growth Corp (NYSE:CGC) and walks viewers through a day trade. When examining the Canadian cannabis space, McDermitt looks at five large cap producers: Canopy, Tilray Inc (NASDAQ:TLRY) (FRA:2HQ), Aphria Inc (NYSE:APHA), Aurora Cannabis Inc (NYSE:ACB), and Cronos Group Inc (NASDAQ:CRON). He notes that Cronos has held up better than its peers and worries that if Aurora breaks the $7.25 mark it has the potential for a double bottom.

Brandon Colwell:   And we’re joined not in studio but by Skype today by Charting Man Dan, back for another day of going through some TA. How’s it going, my man?

Charting Man Dan:  Good, how are you?

Brandon Colwell:   Doing well, and thanks for coming on. Usually you’re used to a different face; Brandon this time as opposed to James, but nonetheless, we’ll go through all the things that are catching your attention, and just seeing what the market’s doing, what you’re excited with.

Charting Man Dan:  Yeah, right now, this is a week for US MJ stocks to have earnings. We had all the major Canadian LPs fairly recently, and we’re getting into the swing of things. We have a solid, you know, 10=plus names this week, and after yesterday, we’ve already got our first three, and we’re having consistent bearish reactions to the US MJ earnings. So it’s the kind of scenario with so many companies having their earnings coming up, it makes no sense for bulls to be jumping in right now when we are consistently getting bearish reaction.

We had, Kira had a bearish reaction, RIV bearish reaction, KSHB bearish reaction. So it’s definitely still a bearish sentiment in this market, and we’re seeing that reflected in the market’s reacti