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VIDEO: 48North Cannabis Corp (CVE:NRTH) Acquires Good & Green

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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.

48North Cannabis Corp (CVE:NRTH) (OTCMKTS:NCNNF) Co-CEOs Alison Gordon and Jeannette VanderMarel reveal why the company’s acquisition of Good & Green is a game-changer for 48North. The deal gives 48North access to Good & Green’s organic and outdoor growing experience as well as significant industry knowledge from experts like VanderMarel. 48North will begin outdoor production in 2019; significantly, outdoor production is cheaper than greenhouse growing and allows the company to focus on profitability. 48North’s Brantford outdoor facilities have the capacity to produce 40,000 kilos of cannabis annually, which will significantly lower the cost of the company’s extracts production. Gordon does not believe there’s a first mover advantage in Canada’s chaotic retail environment; however, the company is capitalizing on current shortages by supplying wholesale product to other industry players at considerable profit.

 

Transcript

Ed Milewski:  And we got a great, great interview set up right now. We have Alison Gordon and Jeannette, I’ll get this right, VanderMarel.

Jeannette VanderMarel:  Very good, that’s right.

Ed Milewski:  Okay, and just so the viewers know, Jeannette was a founder of TGOD, and she’s now joining her company, her private company with Alison Gordon’s public company, and it’s a very big transaction.

Alison Gordon: It’s a very, very big transaction.

Ed Milewski:  And yesterday the market noted it, and rewarded you with a nice increase.

Alison Gordon: Yes, they did. We were up about 20 percent yesterday. We’ve been working on this deal for, you know, they don’t happen overnight, even though it seems that way.

Ed Milewski:  How long have you been working on it?

Alison Gordon: I think Jeannette and I –

Jeannette VanderMarel:  The summer?

Alison Gordon: Yeah. We were on a panel together and I have long admired Jeannette. She is an industry veteran, and while people say that lightly, it’s so important for our industry, and you and I have talked about this before, which is, really to have the experience having, you know, Jeannette is the only person in Canada to have gotten two licenses from, you know, application right through. So to have that experience of cultivating, building the business, working with Health Canada, understand the regulation – like, you can’t put money on that kind of thing.

Ed Milewski:  Street cred.

Alison Gordon: Well, more than street cred: business cred.

Ed Milewski:  Well, but, but I mean, you know, you’re real. You’ve done it.

Jeannette VanderMarel:  I’ve done it.

Alison Gordon: She’s done it.

Jeannette VanderMarel:  Absolutely, and it was worked out great.

Ed Milewski:  Go ahead, no sorry.

Jeannette VanderMarel:  I’ve been a fan of Alison for a long time. I was – well, we met back in 2014, I believe.

Yeah, when we were all waiting to get licenses from Health Canada at the time. And she’s done amazing. She’s amazing at branding, knowing what consumers need, really identifying brand trends, markets, sales, really get that name out there. So we see it’s a really great complementary relationship between our companies. I’m certainly focused on outdoor cultivation, with Health Canada’s approval; that’s a great new thing in the regulations, we can now actually do outdoor cultivation under the Cannabis Act.

Alison Gordon: Yeah, it’s really interesting. So when Jeannette and I first started talking, they had their indoor facility which they have, and they received their cultivation license a couple weeks ago.

Ed Milewski:  And where is this facility?

Jeannette VanderMarel:  Brantford, Ontario. So just west of Toronto.

Ed Milewski:  Oh, yeah. I live in London, Ontario, so I know – I’ll stop by.

Jeannette VanderMarel:  Right, so you know. Please do! Yeah!

Ed Milewski:  Train stops there every day. Perfect.

Alison Gordon: Yeah, so Jeannette, their facility was in Brantford, beautiful facility, a lot of room for manufacturing, extraction, all the things 48North wants to do with the next generation products that you and I have discussed like the edibles and the vapes and the topicals. And then, sort of really early into our conversation, Health Canada announces they’re going to allow for the outdoor grow.

So we started investigating that at our facility in Northern Ontario, and we just, you know, it’s a lot to get into agriculture, never mind indoor and greenhouse cultivation. So Jeannette, in our conversation, says, okay, we’ve just purchased an organic farm 10 minutes from the indoor facility; it’s perfect, it has two harvests organic, and I’m growing outdoor! And I was like, we have got to get this deal done, because Health Canada wants to work with people like Jeannette: people who they know can show that their process and regulations will lead to success, and she’s done it twice before. So I have no doubt she’ll do it again.

Ed Milewski:  And going forward, you’re going to be co-CEOs of the new entity?

Jeannette VanderMarel:  Yes, yes we are.

Ed Milewski:  And was this a cash transaction?

Alison Gordon: No, this was an all-stock –

Ed Milewski:  All stock transaction, okay.

Alison Gordon: And we received a lead order of 7 million from a very large hedge fund out of the US, so over $20 billion in assets they manage, so very blue chip; we’re super excited about that. They saw the opportunity to be able to meld Good & Green with 48North, bring those together, bring the low-cost production. I mean, outdoor is just a game-changer, and Jeannette can talk to you about that. It’s just – it will change the game in Canada, quite frankly.

Ed Milewski:  So outdoor production is much more –

Jeannette VanderMarel:  It’s much better. So cannabis is a plant that grows outdoors – the only reason you grow indoors…

Ed Milewski:  It’s like the difference between maybe real, like real and not real, right? Like, I hate to say it that way, but it’s true, right?

Jeannette VanderMarel:  But it’s true. The only reason it was brought indoors was the illegality of it. So people started growing in their garages and basements, and greenhouses, inevitably.

Ed Milewski:  And their houses.

Jeannette VanderMarel:  And their houses, and all those places.

Ed Milewski:  That house down the street. What’s that house down the street doing?

Alison Gordon: A lot of electricity, there.

Ed Milewski:  Yeah, like, jeepers.

Jeannette VanderMarel:  So outdoor, my focus is on organics; obviously, founding the other company, The Green Organic Dutchman, started that on a basis of organics, and I’m continuing with that. We found a wonderful 100-acre farm very close to our site in Brantford, and –

Ed Milewski:  Are you from the area?

Jeannette VanderMarel:  I live in Ancaster.

Ed Milewski:  Okay, nice. That’s a nice town. Near Hamilton, right?

Jeannette VanderMarel:  Yes, it is.

Alison Gordon: Yeah, I mean the outdoor production, like, I’m not supposed to give numbers, but really it is significantly less than greenhouse.

Ed Milewski:  In terms of costs.

Alison Gordon: In terms of costs, and that’s where, you know, ultimately one of the things that we admired about each other and why we’re excited is, we’re very focused on profitability.

Jeannette VanderMarel:  Absolutely.

Ed Milewski:  Yeah, that’s nice to hear.

Alison Gordon: Yeah, we’ve talked about this before. For me, I don’t understand, and you know, excuse my ignorance, but running these companies that will have massive overhead because they’ve maybe got a ton of facilities and infrastructure; the idea that we could have 46,000 kilos in 2019 with our current facility as well as what Jeannette’s doing in Brantford and the farm, I mean, like, that’s a very tight operation.

Ed Milewski:  Just remind the viewers: how much cash are you sitting on, right now?

Alison Gordon: Well, I guess we have about 10 million in the bank, we have the lead order of seven, and we’re going to raise another three by the end of November.

Ed Milewski:  So you’re doing, you’re raising $10 million.

Alison Gordon: We’ve raised seven, yeah.

Ed Milewski:  But you’re not using this money to buy this business.

Alison Gordon: No.

Ed Milewski:  You’re doing a stock transaction.

Alison Gordon: Yeah.

Ed Milewski:  So that’s just going to shore up your working capital, etcetera.

Alison Gordon: Yeah. I mean, you know, we’re a public company, so there’s only so much we can say, but let’s just say I’m very excited to announce our first quarter financials very soon, so the cash in the bank is really, for us, part of it is for the farm, some of the stuff in Brantford…

Jeannette VanderMarel:  There’s some low CapEx, and then OpEx for the farm.

Ed Milewski:  So you two are going to be major shareholders, obviously, in –

Alison Gordon: Yes.

Ed Milewski:  And that’s always a something on my checklist: I want to see skin in the game.

Jeannette VanderMarel:     Oh, I definitely have that.

Ed Milewski:  Because if you don’t have skin the in game, and there’s a book on the bestseller list right now, if you don’t have skin the game, what’s the point? Like, nobody cares, right?

Alison Gordon: Right.

Ed Milewski:  If you don’t have your own blood, sweat and tears involved, nobody – you know, you can just turn around and walk away.

Jeannette VanderMarel:  No, that’s certainly not the case, here. I’m obviously heavily invested; obviously all stock transaction. So I have to see success.

Ed Milewski:  do you have an employee option plan?

Alison Gordon: Yeah, we do. Both of us believe strongly in that, incentivizing employees to keep going. I mean, this industry, one of the big challenges is human capital, right? As I said, like, to find someone with Jeannette’s experience, it’s not possible. You could not find them, and you couldn’t hire them. So you have what is it, like 65 sales licenses right now? There aren’t a ton of people out there in Canada who have worked in this industry that you can engage. So anyone that you’ve hired, they’re a hot commodity for another licensed producers. So keeping your staff incentivized and motivated is really a key.

Ed Milewski:  Yeah, this sounds like a really nice marriage, here. It looks like –

Alison Gordon: We think we have a great time, and we think 0- me

Ed Milewski:  Like, I sense your positive energy, here. And you’ve obviously complementing each other.

Alison Gordon: We’re really excited, because it’s not easy running a cannabis business. No one who says it is, is not telling you the truth. You’re running in all directions, like we want to come and speak with you, and you’ve got the stock market set by investor relations growing, so two, we say, is better than one, for sure.

Jeannette VanderMarel:  We’ve somewhat stood up our roles. So I’ll be more focused on operational management, government relations, areas like that; obviously Alison in the great scales lie marketing, branding, sales, investor relations. And it’s very complementary, and it was our companies, where mine was more focused on high production, low cost output, and you are creating great brands that will resonate with consumers. So it’s a perfect company.

Alison Gordon: Yeah, I mean right now, at our facility in Parkland, we are selling wholesale, which we’ve talked about before, and because there is a big under-supply in the market, we’re getting incredible prices; between $7 and $8 a gram for our wholesale product, which requires very little infrastructure and costs. So having Jeannette’s skill set, being able to come in and help us increase those yields, I mean, without with minimal expense or none additional expense, we’re going to be able to up our grow. And quite frankly, the biggest companies in the space are currently competing to purchase our wholesale and make, you know, 12-month commitments. So this is, you know, a really interesting time to have a good solid company.

You know, everybody’s looking at the stocks and going oh, its dipping and the industry is over; it’s like no, this is going to be a $10 billion industry. There will be lots of money for these companies to make, but how tight ca you keep it while it’s, you know, all the kinks get worked out.

Ed Milewski:  Yeah, for sure. And I know, I’ve been involved for 40 years in a number of different things, and quite a bit at the junior end. The disregard for the cash you know, managing the money properly – like, let’s face it: you don’t have any cash, nothing happens. And if you have cash, then you can, you know, meander and you can do what you have to do to survive.

Jeannette VanderMarel:  I think that did work, but I think right now as the interview develops, I think we have to real fiscal responsibility. I think we have to have real, key metrics, and build KPIs. I think we have to be able to execute our business plans effectively, and I think that’s the change of the maturation of the industry right now. Whereas I think threw a lot of momentum previously, and now –

Ed Milewski:  Well, now it’s real, right? It’s here, it’s legal, it’s game time.

Alison Gordon: But it’s not real in the sense – it’s real, but what I think people need to understand is that legalization is a process, so it’s not the government, the provincial governments aren’t just going to open hundreds of stores overnight. So that’s the point that we’re making, we have a low cost, high quality grow, and we have product which is necessary, but we’re not spending ridiculous money to then not really have anywhere to distribute or sell into, right? So I guess what I’m saying is, we’ve always felt, and Jeannette and I are on the same page, we don’t necessarily believe there’s a first mover advantage to brands in this chaotic retail environment. I mean, we both ordered from the OCS on the same night, like the night of the 17th.

Ed Milewski: Right, right, right, right.

Alison Gordon: Jeannette got hers, I think, a week later; I got mine two weeks later. I didn’t even, when it arrived, was like, it just didn’t even – it had lost the lustre of any of it. So that reflects on those companies, right? While it’s not their fault, I wasn’t happy with what I’d ordered, because I got it two week later.

So we’re kind of saying, okay, wholesale is good, we’ll get our stuff into store as we see things start to develop and consumers can have the right experience.

Ed Milewski:  And how many – so what was the specific terms for the, so was it total value of $10 million, was that the transaction?

Alison Gordon: No, it was 18.

Ed Milewski:  Eighteen. So that’s all stock, and at what price was that? What was the deemed value of the stock? Like, was it like, at $0.50 a share?

Alison Gordon: No, we’ve, what we’re saying is that it was at, like, when we calculate everything all together, it would be an $19 million transaction.

Ed Milewski:  All right. Well, it sounds like a great combination.

Alison Gordon: We’d love to host you in Brantford!

Jeannette VanderMarel:  Yes, come visit!

Alison Gordon: You guys should come and visit the grow.

Ed Milewski:  For sure.

Alison Gordon: They just started cultivating on Friday.

Ed Milewski:  Right.

Jeannette VanderMarel:  It’s very nice to have plants in the building now, and we look forward to growing.

Ed Milewski:  So we’re probably at the end of the growing season, here.

Alison Gordon: This is indoor.

Jeannette VanderMarel:  This is indoor, so we have the 46,000 square foot indoor facility in Brantford, and the 100-acre outdoor farm. So we’ve broken ground and we’re working on getting things ready already for the 2019 growing season in the farm, installing fencing, security, all of the things to comply with Health Canada, and working with mending the soil organically. So we’re ready to plant early in Spring 2019.

Alison Gordon: That’s going to be so exciting. It’s a beautiful farm. I think with it outdoor, it’s going to be –

Ed Milewski:  Now, I guess you’re going to have to have, you just can’t – has this got to be fenced in somehow?

Jeannette VanderMarel:  Absolutely. So it has to comply, the new regulations must have the same thing, so perimeter security, access control, and intrusion control.

Ed Milewski:  Barbed wire, electric fences –

Jeannette VanderMarel:  All those things. Yeah, I don’t tell you everything we’re doing for security, but there’s a lot of security features.

Ed Milewski:  I was being rogue.

Alison Gordon: Yeah, it’s not just open fields, we’re not there yet.

Ed Milewski:  No, no. Well, I grew up on a little farm in that area, so I know –

Alison Gordon: Did you?

Ed Milewski:  I know the area. Well no, it’s down towards Windsor, but southwestern Ontario. Brantford is spectacular.

Alison Gordon: Well, for farming, it’s amazing.

Ed Milewski:  If you wanted to live somewhere, it’s only an hour and fifteen minutes by train down to –

Alison Gordon: And you’re not helping to getting Jeannette to move to Toronto, because –

Ed Milewski:  Maybe you’re going to move to Brantford!

Jeannette VanderMarel:  Maybe! But then how would I come visit you guys?

Ed Milewski:  By train.

Alison Gordon: Yeah, that’s true. No, it’s a perfect place to grow, and that’s the thing, too. So when the government announced that they would allow for the outdoor grow, there’s not that many – I mean, you can speak better to this –

Jeannette VanderMarel:  Yeah, there’s not a lot that have moved into that already. My background is in agriculture; my family is one of the largest apple producers in Ontario.

Ed Milewski:  Niagara?

Jeannette VanderMarel:  The Hamilton-Burlington Area. So I grew up in in a large-scale farming, so as soon as outdoor was allowed, I –

Ed Milewski:  Is that a Dutch name?

Jeannette VanderMarel:  It is.

Ed Milewski:  Yeah, I know a lot of people in the area that in the dairy business, just amazing, amazing talent in that field. Like, in, you know, farming and agriculture.

Jeannette VanderMarel:  Most of the communities I think are from an awful lot of Dutch people. My parents were Dutch immigrants, came from Holland and began farming –

Ed Milewski:  The Green Organic Dutchman, is that –

Jeannette VanderMarel:  I’m the Dutch part of that.

Ed Milewski:  No kidding. Whoa!

Alison Gordon: Now it’s making sense to you, the whole thing.

Ed Milewski:  We made a connection here. Now, is there anything else you want to add?

Jeannette VanderMarel:  No, we’re very excited. Low cost production obviously is very important.

Alison Gordon: Sure.

Jeannette VanderMarel:  You know, it’s great that we didn’t spend a lot of capital on greenhouse infrastructure, because I think that outdoor growing is going to be a total game-changer in this industry, and obviously developing brands and products for the edibles and topical health and beauty market for next year.

Alison Gordon: Yeah, I’ll just add, because I know last time I was on, we talked about the outdoor because we had done this supply deal and some of the people were commenting on outdoor. So realistically, the bulk of outdoor, a large percentage of it, is used for extracted purposes.

Ed Milewski:       Yes.

Alison Gordon: So for, as Jeannette said, the 4thing that will come in a year: the edibles, the vapes, all of those things. So for those viewers who are looking going, Outdoor? That’s going to be whatever, not something they’re thinking about when they want that shelf live. So –

Jeannette VanderMarel:  That’s fine. You’ve got the great indoor production at your northern site, and I’ve got a great indoor facility in Brantford, as well. So now we have two indoor sites that are licensed, plus we’ve got the huge capacity on the farm.

Ed Milewski:  And the outdoor, how much acreage do you have again, just – ?

Jeannette VanderMarel:  One hundred acres.

Ed Milewski:  A hundred acres. I know exactly what a hundred acres is.

Alison Gordon: yeah. And a hundred acres, like at a conservative investment, would get you about 40,000 kilos. Like, that is a significant amount of inventory, and for extractive purposes, it’s huge. And so when you think about, you know, we all saw the speculation around Coca Cola and all the big CPGs coming in: they are going to need to partner with a company that a have a large-scale, low-cost, organic I think would be ideal, supply. Because think about, if Coca Cola is doing a CBD drink, I mean, that’s a mass amount. They can’t work with people who may or may not have the inventory for them.

Ed Milewski:  And I was just thinking, there’s going to be a lot of successes, but there’s also gong to be failures, and if u manage the money properly, then you’ll be a –

Jeannette VanderMarel:  I completely agree. And that’s really what we’re focused on: profitability and fiscal responsibility. And then, you know, good shareholder value, but there’s ways to do it without burning excessive amounts of capital.

Ed Milewski:  Yeah, I really – this is good.

Jeannette VanderMarel:  The Dutch are known to be frugal, so you know, it’s –

Ed Milewski:  Listen. Sometimes less is more, right?

Jeannette VanderMarel:  Yeah, absolutely. We know who we are, and we’re not trying to take over the world. We want to have great revenues, great profits, and expand from there; we’ll see where it goes. But certainly focus on those key metrics first, and make sure we’re doing it right.

Alison Gordon: And the other thing that I think is really important is Jeannette and I, you know that 48North was focused on the female market, and Jeannette has been a long advocate for women in the industry. Bu really, as we came together, we were like, we still want to have focus and do female-oriented products, you know, for women, but we also want to have more diversity. We feel there is a real lack of diversity in the industry; not just gender, all sorts of diversity, and we just think that these are markets that are engaging issuers and consumers, and by taking the time to engage these markets, you can really win.

Ed Milewski:  Perfect. Okay, I think we’re going to leave it there.

Alison Gordon: All right.

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.

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