WeedMD Inc (CVE:WMD) (OTCMKTS:WDDMF) (FRA:4WE) CEO Keith Merker discusses the termination of their previously announced Arrangement Agreement with Hiku Brands Company Ltd (CNSX:HIKU) (OTCMKTS:DJACF) (FRA:D98) and their new financial and operational position. Canopy Growth Corp (NYSE:CGC) (TSE:WEED) (FRA:11L1) will now acquire all of the issued and outstanding common shares of Hiku. In the previous couple of months, WeedMD have commissioned the expansion of their Strathroy greenhouse, signed a supply agreement with Shoppers Drug Mart and secured supply agreements with the Alberta Gaming, Liquor and Cannabis Commission as well as the British Columbia Liquor Distribution Branch.
James West: Hey welcome back to Midas Letter Live. My guest this segment is Keith Merker. He’s the CEO. Yes former CFO, but now CEO of WeedMD. Trading on the TSX Venture under the symbol: weapons of mass destruction, no WMD. Keith thanks for joining me.
Keith Merker: I chose the ticker.
James West: Did you?
Keith Merker: I love the ticker.
James West: I love that.
Keith Merker: I was a trader in a former life, so I know how that goes.
James West: Ticker symbol is more important than people realize. In many cases that’s how a lot of people, especially in the capital markets, think of the brand. It’s like what’s the company name? I don’t know. It’s WMD.
Keith Merker: Yeah.
James West: Brilliant, brilliant brand.
Let’s start with the elephant in the room. The deal with Hiku, got sort of sidetracked by the deal with Canopy and you got $10 million for your trouble.
Keith Merker: The consolation prize.
James West: Exactly.
Keith Merker: So I guess the best way to describe this would be using an analogy I suppose, and I guess it’s the same old story
James West: We’re all about analogies here.
Keith Merker: Boy meets girl. Girl meets wealthy, elderly gentleman with a fancy watch and a nice car. Girl walks off with the elderly, wealthy gentleman.
James West: [laughter] Wow. That’s a brilliant analogy right there.
Keith Merker: WeedMD, if you haven’t figured it out, is the boy
James West: Right
Keith Merker: And WeedMD is going to be just fine.
James West: Yes of course.
Keith Merker: I’ve been that boy before.
James West: Right. It builds character. [laughter]
Keith Merker: Thank you. The wonderful thing about that merger is also the wonderful thing about the breakup and that is that WeedMD brought to the table a very robust production platform, a very robust medical market, a brand in WeedMD. A great group of people doing a great bunch of things. Partnerships on the pharma side, partnerships on the R&D side, partnerships with groups like Phivida on the branding side. HIKU brought the retail side. So together would’ve created an interesting opportunity and story. But as the retail side walks away, WeedMD’s been knocking the ball out of the park for the past few months. We’ve ramped up our Strathroy location. We’ve announced deals with Shoppers Drug Mart, with a couple of the provinces more to come. And we’re growing a great product and we’re doing great things.
James West: Sure and there’s lots of retail strategies yet to come?
Keith Merker: Exactly
James West: You can create your own. You’ve got an additional 10 million dollars in the Treasury. You can acquire something.
Keith Merker: You bet.
James West: Well so that’s great. That’s a great attitude, just another great turn in the saga of the cannabis industry in Canada. I love it.
Okay so let’s talk about Strathroy. You’ve got a harvest coming in September. You’ve got a deal with Shoppers Drug Mart – there’s a retail strategy. And so what’s the next game? What’s the next step?
Keith Merker: Yeah and listen I’d love to have you out to see what’s going on in Strathroy because it’s very exciting.
James West: We will come. We will bring the camera crew and we are on the way.
Keith Merker: Please do because what we’ve created there I think is one of the most unique and high functioning hybrid greenhouse operations in the ACMPR and surely in the cannabis regulations in Canada. We now have two of our 10,000 square foot grow rooms up and running, populated with over 10,000 plants. I was in there two days ago. In the blazing heat outside, it was 75 degrees and comfortable, the relative humidity was in the mid 40s. We were looking at very happy plants on the floor. We’re doing a great thing there.
James West: Yeah
Keith Merker: Those two grow rooms that are now functional will be replicated as we go forward into that full five acres over the next couple months. And I think that the happiness of those plants I’m seeing today proves out the model of what we set out to accomplish in that greenhouse. And I look forward to showing you
James West: Yeah you bet. I love happy plants, so I’m excited to see them.
So the harvest is in September. That actually works well for us because Strathroy is practically in our backyard. Let’s talk about brand strategy now. If I recall there was a bit of a focus on creating products for mature adults?
Keith Merker: Yeah
James West: Is that still the main focus? Or is that just now another component in the brand strategy? What’s your strategy for the recreational market?
Keith Merker: Yeah, so we are currently developing some new brands which will be exposed to the market in due course. But currently we are using the WeedMD brand. The WeedMD brand has been around for four years. It’s got a history. People know it. People relate it to the high-quality cannabis that we’re growing.
I mean another story I can quickly tell you is that our original Elmer facility, we’re growing a strain called Wine Gums. I honestly wish you could see them today because the cola’s that we’re growing are bigger than my arm.
James West: I happen to love wine gums anyways. In fact when I smoke too much cannabis I want Wine Gums, so this is going to be wine gums and wine gums
Keith Merker: Two for one. [laughter]
So we’re doing some wonderful things there. So my point is that we thought about what we should do for the rec strategy in the immediate term and what we circle back to is the fact that we have developed a good brand in WeedMD. We’ve developed a brand where we have people behind it, where we have product behind it, where it’s a known entity. And I think that the name kind of sticks with you. So despite what you may be seeing from other LP’s currently with respect to press releases around new brands and names that they’ve released that no one’s ever heard of before. WeedMD is going strong and we’re going to stick with it.
James West: Wow very cool. The agreements that you have with the Alberta Gaming Commission. You’ve got agreements in B.C. Is the liquor distribution model that a lot of the provinces are going to feature. Do you think those are going to be the limit to the recreational brand distribution opportunity for the LP’s like WeedMD? Or do you think that incrementally the rules are going to ease and they’re going to try to make it more broadly available in an effort to curb supply from the black market?
Keith Merker: Yeah, I would hope for the latter. I don’t unfortunately write the regulations but certainly I think that it will be a process that evolves over time. What we will see in three to five years, let alone 10 years, is going to be completely different than what we’re going to see on October 17. That much we do know. Are they going to get it perfect the first time around? No. Did WeedMD get it perfect the first time around? No. It’s very rare that you can. So I think that the expansion of retail access is going to be important and if private retailing is part of that and eases that transition, I think it should be considered.
James West: Yeah absolutely. Do you have any plans to develop an international strategy? Either in the United States or Europe?
Keith Merker: So currently we’re not looking at the United States. Although, interestingly we are partnered with a group called for Phivida on the beverage side. Phivida is about to roll out a very comprehensive strategy in the U.S. and I encourage you to follow that.
James West: Yeah, we have had them here before actually.
Keith Merker: Yeah, they’ve done a great job and we’ll be rolling out their brands here in Canada shortly. So that’s very exciting for us. That’s as close as we’re going to get to the U.S. for now.
Globally: stay tuned. Even as soon as potentially next week there’ll be some announcements about what we’re doing and planning.
James West: Really? Wow.
Keith Merker: We’ve had a number of things in the works. WeedMD has always tried to take the approach that we announced things when we’ve accomplished things as opposed to talking about what we think we’re going to accomplish.
James West: Right. Good strategy
Keith Merker: So yeah, I mean that’s kind of the way we act. And we do have a number of irons in the fire internationally and you’ll see some of those be exposed to the marketplace shortly.
James West: Sure. Are you currently open to joint ventures and partnerships with other retail strategists? Other ACMPR growers?
Keith Merker: We’re always open.
James West: 24/7?
Keith Merker: [laughter] I tell you. I mean one of the things WeedMD has done that’s unique in this industry, is we like to say seed the industry. So we have a very comprehensive genetics program, a very wide seed bank and living plants library of genetics that we currently sell both to home growers as well as, importantly, LP’s. So we’ve sold to currently more than 20 percent of the licensed producers in this country. And by virtue of that, have created a number of strong relationships with other more junior, perhaps, not always, licensed producers across the industry. And I think we’ve made a name in differentiating ourselves and showing how we can act opportunistically to find new revenue streams in ways in which to build a business.
James West: Right.
Keith Merker: And going back to your original question. Yeah, I mean we’ve got a number of partnerships as a result of that and we will continue to pursue things like that going forward.
James West: Well fantastic. Well we’re going to keep watching. It’s great to have you back here, we’ll have you back more often and we’re guys come and visit you. But for now, thank you very much for coming in today.
Keith Merker: Thanks for having me.
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