Heritage Cannabis Holdings Corp (CNSX:CANN) Extraction Facilities Coming Online in 2019

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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.

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Heritage Cannabis Holdings Corp (CNSX:CANN) (OTCMKTS:HERTF) (FRA:2UE) CEO Clint Sharples shares details of the company’s 2019 plans. Recently, Heritage finalized a deal to acquire the CannaCure Corporation and completed the acquisition of Purefarma Solutions, appointing Purefarma CEO Graeme Staley to the Heritage Cannabis board of directors. Heritage Cannabis is waiting for its Health Canada licenses, but anticipates beginning extraction in February, with products ready for sale by the end of Q1 2019. Other 2019 targets include completing the company’s greenhouse build in British Columbia and establishing extraction facilities in Ontario and British Columbia. Heritage Cannabis intends to be primarily a white label provider to meet demand during the current supply shortage.

Transcript:

James West:   Hey Clint, welcome back.

Clint Sharples:    Hey, thank you for having me again.

James West:   Clint, Heritage continues to execute on its business plan, and why don’t we start with an overview of some of the recent events that you’ve announced?

Clint Sharples:    Sure. So when we first started coming and talking to you, we were talking about the existence of one subsidiary, one LP, and talking about how we would like to expand our company. Since then, we announced that we were signing a letter of intent with Cannacure, based out of Fort Erie near Niagara Falls – a very large facility, 122,000 square feet. We announced that, we closed that in early November in conjunction with a $7.5 million financing.

Just before that, we announced that we were looking to acquire PurePharma, an extraction company based in British Columbia. We went through the process in the last few weeks of signing a definitive agreement, and then signed the entire deal this last weekend and announced it on Monday, so that deal has closed too.

James West:   Okay, so now you’re definitely in the extraction business.

Clint Sharples:    Very much so! Yeah, it’s taking a front and leading role in how our company is going to expand.

James West:   Sure. And one of the PurePharma members is joining your Board of Directors?

Clint Sharples:    Yeah, today we announced Graeme Staley, the CEO of PurePharma is coming on board, taking a position being vacated by Brad Culver who has helped us immensely for the last five years. Brad is gong off on his other ventures, and Graeme is a welcome addition.

James West:   Yeah, you bet. Okay, so then, in 2019, it sounds like you’ve got this plan to become a revenue positive, even profitable company. So tell me some of the steps you’re anticipating to make that happen.

Clint Sharples:    Yeah, revenue, profits, amazing. Yes, we are absolutely gunning to that right now. The expansion right now with extraction is happening both in British Columbia and here in Fort Erie to both of our LPs. We’ll have in the beginning, two extraction machines each. The supply of hemp that I talked about before, with 1,600 acres coming inbound, that’s been harvested, it’s being dried, it’s being processed out in Saskatchewan, and will be starting to be delivered in mid to late January.

James West:   And so you’re ready to start extracting that upon delivery?

Clint Sharples:    As soon as we get licensed. Both Cannacure and Fiomed, our two LPs, have applied for their extraction license.

James West:   Okay. There’s not a big long lead time on those, generally.

Clint Sharples:    Well, it’s going to be unknown right now.

James West:   I see.

Clint Sharples:    It goes into Health Canada, gets, it gets looked at when they decide to look at it. So we’re hoping that it’ll be sort of the same timing as we’re getting ourselves set up; we expect the machines to be installed and running by end of January, mid-February, somewhere in that neighbourhood. A bunch of things still need to happen with power in particular, and cooling. But that’s just all trades and scheduling. So right now, everything is looking good that if everything goes according to plan, we’ll be extracting by, call it, mid-February. Product needs to go to the lab, be tested, and ready to be sold by towards the end of Q1 2019.

James West:   So you were saying earlier that there’s a real shortage of available CBD supply from extracted cannabis in Canada, and that you’re seeing a lot of demand for your product. So you found this 1,600 acres of hemp to process; are there going to be more opportunities like that going into 2019, or will you have to rely more upon you own feedstock?

Clint Sharples:    So everyone is well aware of the supply shortage everywhere. You’re seeing the lack of retail stores in Alberta and Ontario being awarded because there’s no product to be had virtually anywhere. Dried flower is one that’s tough to put on shelves; but in particular, CBD oil for medical purposes is really difficult to find. It’s been challenging right now for medical patients, people who rely on it, and actually it’s quite unfortunate. Because of the reputation that the guys from PurePharma have with the quality of product that they’ve put out in the past, we’ve had quite the demand and quite an interest level from many other LP partners. Our goal is to be mostly a wholesale, white label provider, and we’re having some conversations right now to see how we go to market.

James West:   Okay, what are the big catalysts in 2019 that are going to, you know, sort of broaden the business exposure of the company?

Clint Sharples:    First and foremost is completing the first grow that’s going on right now – the deal we announced previously with CannTrust, they provided us with the genetics, and the grow is going very well. The plants have been thriving inside CannaCure. We’re completing our greenhouse build, our first setup of the greenhouse build, out in British Columbia; they’ll be ready for growing towards the end of January, when we’ll be bringing in clones there. And all, at the same time, when we’re setting up our extraction units in different areas of the facility both in BC and Ontario, that’ll start driving how the extraction market works: bring in the hemp, put that through the process.

We’re in active talks with several hemp suppliers. There’s good opportunities out there right now. It needs to be vetted a little bit more, but that’s all part of our business plan that leads us into a pretty strong Q2, where Q1 is mostly a prepare ourselves and get ourselves going; it’s going to be a, but a big ramp up starting in Q2, going through 3, going through 4, and it’s continuing to grow. Continuing to put in more extraction units, getting more supply, as we believe that the market for particular CBD oil but also THC will become very large once Health Canada lets us know what’s going on the edibles side, which we’re expecting to hear soon.

James West:   Right, right. The allowance of growing cannabis outdoors in Canada is something that the Canadian government has been very sort of clear on moving toward. And is that where you see that you might have more opportunity to acquire the output of other growers as opposed to having to grow it yourself?

Clint Sharples:    Yeah, I sure hope so. But the actual outdoor grow, the first one was announced a little while ago, a few weeks ago. If indeed there’s the success that happens with the outdoor, or for that matter, even the large greenhouses – if they can start giving us kind of an inbound supply for our product, that’s amazing to us. This is exactly what we’re looking for, for growth. You’ll see, Canada is going to become even more of a leader than we are considered today in the overall cannabis market, if we can start producing that kind of volume to be brought in. it’ll be a game-changer.

James West:   Yeah, no doubt. Do you think that there’s going to be a shift in the quantity of cannabis grown as farmers, you know, who might now be growing, you know, rapeseed or flax or barley, sort of look at the cannabis space and go, Mm-hmm, I think I’m going to plant cannabis this year since I’m allowed to. Do you think that’s going to be an increasing trend?

Clint Sharples:    Yeah, absolutely. You know, farmers, when it comes right down to it, they’re business people, and they take a look at a chunk of land, what’s the best utilization for it? There’s some rules surrounding hemp, there’s some rules surrounding cannabis, your proximity to other crops, as they tend to pollinate and get growing in amongst other things, so there needs to be some space in between. But it’s making a great opportunity for what otherwise would be a more challenging price environment on some other crops. It’s a pretty good opportunity.

James West:   Sure, you bet. All right, Clint, well, that’s a great update. I’m happy to hear of the progress as a shareholder, and so I’m looking forward to 2019. Thanks for joining me today.

Clint Sharples:    Thank you.

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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