VIDEO: CEO of Canadian Bioceutical Scott Boyes on Being “Undervalued” and the Risks Involved in Investing in the U.S. Cannabis Industry

James West
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The Canadian Bioceutical Corporation (CNSX:BCC) (OTCMKTS:CBICF), which is focused on their MPX brand, is a Canadian cannabis company, with the majority of their production and distribution occurring in the United States. CEO Scott Boyes talks to James about how “undervalued” they’ve been in the stock market in relation to their market value, as well as the political uncertainty of the future of the Cannabis industry in the U.S.

 

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TRANSCRIPT:

James West:     Scott, thank you for joining us today.

Scott Boyes:     James, it’s great to be here.

James West:     Scott, let’s start with an overview: what is it MPX does?

Scott Boyes:     MPX is a cannabis company focusing on the cannabis industry in the United States. We’re active cultivators, producers of concentrate, and we operate several dispensaries now in multiple states.

James West:     Okay. Give me a rundown of the states.

Scott Boyes:     We started out in Arizona; we acquired a business in Arizona in January of this year. It operates two full dispensaries, about 25,000 square feet of cultivation, and one of the most advanced production sites you’ll see for cannabis concentrates: oils, shatters, wax, all marketed both through our dispensaries and through 40 to 50 other dispensaries in the States at a wholesale level.

James West:     How much marijuana do you produce, and are you a profitable company?

Scott Boyes:     We’re scaling up to produce about 9 million grams of cultivation and about 1.5 million grams of concentrate production; we should be pretty well operational in all locations by the end of the first quarter of next year.

James West:     Okay. So you say all locations; is this now recreational or medicinal solely?

Scott Boyes:     Okay, so we’re in Arizona, which is fully medical, but a pretty mature medical state. There are 150,000 medical marijuana cards in the State of Arizona, which is almost equivalent to what’s currently in all of Canada. The state is limited in terms of the number of dispensaries or licenses that are issued, so it was particularly attractive to us. There are about 95 operating dispensaries in a state of 6 million people.

In May of this year, we acquired a 51 percent operation of a license in Massachusetts, and we’re currently building out there a 40,000 square foot production and cultivation facility, and three dispensaries in this state.

Last week we announced the acquisition of a full cultivation and production facility in North Las Vegas, 35,000 square feet of cultivation there. And once again, a very advanced production site. Our business is focused on concentrate production as opposed to just dried flower. In fact, in the last quarter, almost 50 percent of our sales were in non-dried-flower products.

James West:     Is that right?

Scott Boyes:     We sell them all under the MPX brand.

James West:     So the 95 dispensaries in Arizona, do they all source their own marijuana? Do they grow their own, all of them, or do some of them buy and sell and trade?

Scott Boyes:     Quite frankly, because there’s so many strains available, we all buy and sell from each other. Many of the dispensaries that are operating are truly retail operations, they don’t have the capital invested in cultivation; the big capital is in production, now. It’s taking the cannabis trim or the flower and turning it into oils and concentrates, which is by far the highest margin product, and that’s where we think our specialization and our focus is.

The MPX brand won the Herer Cup at the Medical Marijuana Show in Las Vegas last year as the best hybrid concentrate, and it’s won awards in Arizona and elsewhere. So we’re expanding the brand across the US as quickly as we can.

James West:     Great. So then, it’s not a well-known company in Canada at this point; I guess that’s probably because you’re in the US.

Scott Boyes:     Unfortunately that’s true, although we are listed on the CSC. We trade as well on OTC, at the QB level, and we’re in the process of upgrading to the QX, to their top tier. We trade almost as many shares now in the US as we do in Canada, but our trading is limited. It’s gone dramatically upwards in the past five or six months; we’ve had days close to a million shares traded.

James West:     So, what do you say to a Canadian investor who looks across the border and sees Jeff Sessions making all this racket that sort of strikes the fear into the people who might invest there, but you know, you’re faced with the potential uncertainty as to the Federal policy. Is that risk at all to Canadian investors?

Scott Boyes:     Well, we have to acknowledge it as a risk, and in all our publications, we acknowledge it as a risk. But having said that, a lot of things that come out of the cabinet and the White House in the United States these days, we take with a bit of a grain of salt.

James West:     Sure.

Scott Boyes:     The cannabis industry in the United States is the fastest-growing sector. It currently employs more people than all three of the largest car companies combined. It’s creating hundreds of millions of dollars in tax revenue, creating billions of dollars in capital investment; it just wouldn’t be – we just don’t expect that the Federal government is going to mess with that. And we also have to remember that most of the advances in the cannabis sector have come through the Congressional branch. It’s through the legislative branch, and not through the Executive branch. There’s actually a fair number of pieces of legislation on the floor of Congress right now that would facilitate even further growth of the industry.

James West:     Sure. So do you get a sense – assuming, let’s just say for the sake of argument that the current administration is a one-term administration. Do you get the sense that the impetus in the United States will be towards a Federal program?

Scott Boyes:     We’d like to see that, although quite frankly, I hope it takes a little while. Right now if you look at the industry in the United States, because it’s state-centric, there’s a lot of smaller companies, Ma and Pa companies, that we can go in and acquire for a pretty attractive multiple. We can go in and buy them at 3 to 5 x EBITDA, bring them back under the Canadian market, play the arbitrage to 17 to 20 times, and it’s a pretty attractive proposition, particularly from an investor point of view.

James West:     Sure. So you don’t experience any difficulties personally as a Canadian crossing the border, an operator of various marijuana locations in the United States?

Scott Boyes:     Haven’t so far. Once again, and there are other companies in Canada that operate assets in the US, they’re back and forth. It just hasn’t been an issue so far.

James West:     Sure. What’s the market cap of your company currently?

Scott Boyes:     It’s about 100 million Canadian.

James West:     Well, that strikes me as pretty reasonable considering all of the various opportunities that you have.

Scott Boyes:     I think it’s ridiculously low considering our revenue stream and where we’re headed and our growth factor. We think we’re one of the best value plays in the cannabis sector on any of the Canadian exchanges. We’re undervalued in terms of our revenue and our projections.

James West:     Okay. Well that’s a great overview, Scott. We’re going to follow along and see how you’re making out. We’ll come back to you in a quarter’s time and we’ll look at those numbers again. Thank you very much for joining us today.

Scott Boyes:     A pleasure, James.

James West

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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