VIDEO: International Cannabrands Inc (CNSX:JUJU) Acquisition-Friendly Restructuring

MidasLetter Live
|

International Cannabrands Inc (CNSX:JUJU) (OTCMKTS:GEATF) (FRA:31G) CEO Steve Gormley talks about consolidating the company’s share structure and removing the “A” from its stock symbol. Gormley believes that with these changes International Cannabrands now has a structure that is capital and acquisition-friendly. International Cannabrands buys revenue-generating cannabis businesses with franchising potential, which Gormley believes is crucial for capitalizing on the rare opportunity legalization represents.

Transcript:

James West:   I’m going to have a conversation with International Cannabrands, trading under the symbol JUJU on the CSE. Steve, tell me about your background in the cannabis industry, and that of your partner, Neal Pomroy.

Steve Gormley: He’s sort of the brains. Neal is a Harvard MBA, 25 years on Wall Street including a decade at Credit Suisse. He actually operated the Hard Rock Casino in Vegas, so he’s squeaky clean, because you know what it’s like getting a gaming license.

I got involved in cannabis seven years ago. I ended up working for a US-based, publicly traded company in 2011, and it was a rough run then. It was still a really tenuous time in the market; at that point, we might have had, you know, a little bit more than a dozen states that had cannabis laws on the books, and you know, maybe a little bit less than half of Americans supported adult use. A little bit more than half supported medical marijuana. And so it was a tough time to get in, but it was a great training ground for me.

And it was during that experience where I created an incredibly robust network of cultivators: commercial-grade cultivators and dispensary operators and law enforcement experts and legal experts. I learned the law, and I ended up becoming a member of the community. The company I was with eventually bought a hydroponics retail gardening supply enterprise, which I operated; learned a lot about how buildouts are done, and then privately, I became a cultivator, a lawfully operating cultivator. I learned that I have a black thumb – I have a terrible, I could kill a redwood, James. A terrible gardener. But I learned the plant, and I learned how to evaluate and vet good cultivators, which is really difficult, because they’re not business people, per se; they’re like artists or engineers in the tech space.

James West:   That’s generous. [laughter] Some of them are space cowboys.

Steve Gormley: Well, there is that, too. But you know, for people who talk to the plant and baby the plant and do better with plants than they do with other human beings, that shows up in the quality of the product, and that’s actually, in many regards, the kind of technician, the kind of artist, if you will, that you want running your cultivation.

James West:   Sure.

Steve Gormley: And they get followings, you know. There are aficionados out there that believe they can taste a particular cultivator’s strains, people who think that they can tell the difference between something grown outside and something grown hydroponically, something grown in soil.

James West:   Oh, that’s not such a tough one. Now, you also raised a pile of money for cannabis companies.

Steve Gormley: I have.

James West:   Like, I was reading news clips, and you raised funds through a private equity firm into one of the biggest raises ever done in US cannabis.

Steve Gormley: Yes. We’ve done pretty well, and we’ve raised a lot of money recently into International Cannabrands, which I’m quite proud of. I took some of your advice to heart, the last time we were here and we talked off-camera about the capital structure of the company and that dot A, that it was troublesome for a lot of your viewers.

James West:   Well that’s, to sort of interrupt, but that’s exactly why I was happy to step in the market and buy 4 million shares, because you said “I’m going to do this,” and you did something that everybody was scratching their heads and saying well, I don’t know how he’s going to pull that off in any kind of thing like a timely fashion. And next thing you know, the press release is out: the A is gone, the share structure is consolidated, and it’s like, you did what you said you were going to do, in record time. So that’s rare in this industry.

Steve Gormley: Thank you, thank you. James, thank you. I appreciate that, and it was not a singular effort, it was a team effort. And you got together with me the Thursday before Labour Day, and we got it done by Tuesday morning after Labour Day. And really, it was a discussion with management, the prior management, about doing the right thing; and the right thing was creating a structure that was capital-friendly, that was acquisition-friendly, and we needed to signal to the market that this was a full, comprehensive turnaround, that a new management team with expertise across a variety of cannabis verticals, who are operators, who understand the plant and the consumer, who know brands, who know distribution, who know cultivation and manufacturing, that we would be coming in with the best accretive targets that aren’t for sale, with rock-solid management teams.

And the only way to attract that kind of, those kinds of companies, to attract the sorts of investors that we want, strategic and otherwise, was to deal with the issues that the .A created in terms of the perception of overhang. And, you know, the former regime needed to do the right thing and return to treasury what has turned out to be close to 90 million shares. And so, the market responded better than we thought. We got the kind of support for having moved through the process so swiftly, and I can’t thank you enough.

You know, we knew what we had to do, and you fed us the tough medicine, and we got through the process together, and we made it happen. And I’m proud of that, and I’m grateful to former management for stepping down and being able to see what was in the best interests of shareholders and the company, and allow us the runway to do what we have to do, which is to effectuate the strategy of an aggregation platform, predicated on accretive acquisitions of emerging brands in cannabis.

James West:   Yeah. That was impressive enough, but then the more impressive thing to me, from a, you know, investing in people perspective, was, I learned through my due diligence process that you had actually been presented with the opportunity to go and run a separate company that was separately funded and abandon JUJU and its shareholders, and you did the right thing and you turned down that opportunity and decided to resurrect JUJU and create a capital structure that was investor-friendly, that is accretive-friendly, and so for that, I again salute you.

Steve Gormley: I’ll say this about that: it is true, myself and Neal were offered the opportunity to go into glorified specs, to go into funded shells, to take slugs of money upfront and to hit the reset button; to essentially pick up our marbles and go elsewhere. But there were two issues with that: one was, time to market, right? We had the ability to rehabilitate a shell, and there’s intrinsic value to any shell as long as it’s not laden with too much toxic legacy, and this one wasn’t. it had a specific problem, and if we could solve the problem, we could move forward.

The other issue is that the old regime, while, you know, they needed a comprehensive turnaround, the former CEO, Jeff Britz, who’s a lovely person, provided me with this opportunity, and he’s just been an incredibly generous man and advisor and mentor to me. And you know, it’s the, can I get up in the morning and look myself in the mirror. You know, he kept the company alive out of his own pocket for quite some time, and there’s value to that.

James West:   Sure.

Steve Gormley: And that needs to be recognized. And there were also investors who cut cheques recently in good faith, real money, people that I want to carry through to the next round and the round beyond that, as we build toward, ultimately, potentially a buyout strategy. I think those people who came in and believed in us early on, who showed us support, should be the beneficiaries of our hard work inside of this existing vehicle.

James West:   You bet.

Steve Gormley: And look: you know, so I get a smaller piece of what I consider to be a more valuable pie.

James West:   That makes sense. Okay, so let’s quickly run through exactly what the business model – how is it that you’re going to make money?

Steve Gormley: We’re buying businesses that already make money. We’re not in the business of generating start-ups or being in R&D or getting a hold of things that are in beta; we are, I think I said this last time I was here: I liken it to the microbeer, you know, the regional beer strategy, where we’re looking at emerging cannabis businesses that are really popular in the regions that they serve, and have strong consumer bases in the markets where they reside. Companies that have real earnings and EBITDA, and they are out there. Most of them are south of the border; there’s a larger concentration of them in California than any other market, not only in North America but probably the world.

And having been a member of the community now for seven years, I know all these guys.

James West:   Right.

Steve Gormley: And women. And I know where the profitable companies are, the companies that are cash flowing, the companies with tremendous brand potential; brands that have the ability to franchise when we get to the point in the market where you can do that in the US. And so those are the kinds of companies we have in our pipeline.

You make money when you buy companies that are making money, and for us, you know, I want press releases that are focused on earnings. I want to come in here and talk about earnings and EBITDA with you; that’s going to be my mantra going forward.

James West:   Which, you know, I would listen to that from most guests and I would roll my eyes in the back of my head and think, okay, like I haven’t heard that before! But so, the ability that you demonstrated by executing on what you said you were going to do, to the letter, and then some –

Steve Gormley: Thank you, sir.

James West:   – Was the first thing. Diving in on the due diligence, your exposure to raising capital in the industry particularly, but then Neal Pomroy’s background as the head of leveraged buyouts for Credit Suisse, which he then bought that department and took private –

Steve Gormley: Wow, you’ve done your homework.

James West:   – And he still operates to this day – I mean, that’s the main skill set in acquiring businesses, especially on a leveraged buyout basis, is knowing how to value them, knowing how to pay for them, and having the access to capital to make sure you do the deal at a proper cost of capital. So I am a big believer. Obviously, I’m conflicted as hell, but I’m going to buy more stock.

Steve Gormley: Thank you.

James West:   And I congratulate you on what you’re doing. And we’re going to talk to you regularly.

Steve Gormley: Thank you so much.

James West:   So thanks for joining me.

Steve Gormley: And I encourage your viewers to continue to follow us, to get in now. We’re up to great things; we’re really excited about the future, we’re committed to our shareholders, and you know, another thing that you don’t often hear in shows like this – we love what we do. I’ve never had more fun, I’ve never been more excited and stimulated by anything I’ve done, and you know, I leap out of bed in the morning, because we’re at the precipice of something tremendous. I liken this to what it was like to get involved in alcohol three to five years before Prohibition was repealed. This is the kind of opportunity where Joe Kennedy created his money and his brand. The opportunity exists for entrepreneurs right now to actually replicate that. We haven’t seen anything like that in over 100 years. I mean, we got a taste of it with technology, but this is something epic.

James West:   Well that’s good, because now you’re in the spotlight, because all 50,000 of our audience members will be watching!

Steve Gormley: Great.

James West:   We’re going to leave it there for now, Steve. Thank you for joining me.

Steve Gormley: Thank you, James. Love being on.

James West:   Hey, thanks for watching. Check out one of our other videos here along the side, or subscribe to the channel, or visit us at Midasletter.com to see our cannabis mini-docs: they are something else.

More Great Cannabis Content

MidasLetter Live

Midas Letter LIVE!

Midas Letter LIVE is the video channel from Midas Letter Financial Group's headquarters studio in the Exchange Tower in the heart of Canada's Financial District in downtown Toronto, Ontario, where we interview the CEO's from the top emerging companies on the Canadian publicly traded company landscape. Live Streaming on Facebook...
More Info...

[email protected]

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Free Newsletter,
Priceless Content.

Get more of Midas Letter delivered right to your inbox.

Special Offer

Sign-up today and receive free and immediate access to three recently published special reports!