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Canada House Wellness Group Inc (CNSX:CHV) CEO on Expanding Clinic Network

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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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Canada House Wellness Group Inc (CNSX:CHV) (OTCMKTS:SARSF) (FRA:509A) is an integrated cannabinoid therapy company. Founded by military veterans, Canada House Wellness serves veterans and non-veterans alike. CEO Chris Churchill-Smith explains that the company has three subsidiaries: Canada House Clinics, Abba Medix, and Knalysis Technologies. Canada House Wellness has 12,000 registered patients through Canada House Clinics and has 11 clinics across the country. Churchill-Smith projects the company’s LP, Abba Medix, will produce 2,000 to 3,000 kilos of premium cannabis at its Pickering facility and that product is available to patients through Canada House Clinics. Abba Medics recently partnered with Cannabis OneFive as part of a move toward earning EU GMP certification.

Transcript:

James West:   Hey, I’m with the CEO of Canada House Wellness now, Chris Churchill – sorry, it was hyphenated.

Chris Churchill-Smith:  That’s right, Chris Churchill-Smith.

James West:   Chris Churchill-Smith.

Chris Churchill-Smith:  You’re halfway there.

James West:   All right! Chris, it’s the first time we’re meeting. Welcome.

Chris Churchill-Smith:  Thank you so much. Thanks for having me on the show, I really appreciate the opportunity.

James West:   Of course! Now, let’s start off for those with the gnat-like attention span and memory that I have: what does Canada Wellness House do?

Chris Churchill-Smith:  So Canada House Wellness, ticker CHV on the Canadian Stock Exchange, is an integrated cannabinoid therapy company with three subsidiaries: Canada House Clinics, Abba Medix, our licensed producer, and Knalysis Technologies, which is our technology platform where we’re developing proprietary cannabis patient management software for our 12,000 registered patients on Canada House Clinics.

James West:   Interesting. That’s a multifaceted approach. Okay, so tell me: how do you, how’s your revenue picture, how’s the, you know, how is the company progressing?

Chris Churchill-Smith:  So on the Canada House Clinics side, we have 10 clinics around Canada; we produce between $4 million to $5 million of revenue per year, on an annualized basis, from education and service fees charged to licensed producers for the front-end work of educating the patients and then registering them on licensed producers to receive their medicine.

Our Abba Medix, which is a wholly owned subsidiary of Canada House Wellness Group, is our licensed producer on the Health Canada website, and we just had a wonderful Christmas present: on the 24th, we received our sales license, completing the trifecta of having our cultivation license, our processing license, and now our sales license. So we’re very happy with the progress that the licensed producer Abba Medix is making over its progression, and we’re coming up to the completion of our Pickering facility, so right now, we have about 22,000 square feet of indoor controlled grow space in Pickering, Ontario, and we expect that to produce, on an annualized basis, between 2,000 to 3,000 kilos of premium craft cannabis per year.

James West:   Wow. So now you can sell your own cannabis to everybody at your clinics.

Chris Churchill-Smith:  Well, that’s – we’ll be adding Abba Medix as one of the 25 licensed producers from which our clients, or patients, will be able to choose from.

James West:   Okay. So that’s quite the evolution from where I recall the story starting, which was focused more on education, if I’m not mistaken.

Chris Churchill-Smith:  Yeah, exactly. I mean, that’s exactly where the company started, so the roots of the company are really with the military veterans. So we have a landmark clinic in Oromocto, New Brunswick, which was founded by two military veterans – really kind of the etymology and the genesis of the company, started with providing cannabinoid therapy services to the veteran community, founded by two military veterans, Fabian Henry and Mike Southwell. From there, and basically, you know, they were providing services to their fellow veterans that came back from operations in far parts of the world, coming back with operational stress disorders, and helping them access the Veterans Affairs Canada program that allows for the full reimbursement of cannabis for military veterans.

Since then, we’ve opened up 9 additional clinics across Canada, and we’re very happy to announce that on Monday, we’ll be inviting the Mayor of Fredericton, Mike O’Brien, for a ribbon cutting ceremony with one of our Board members, Norm Betts, for the opening of our 11th clinic.

James West:   Wow, that’s great. So that’s real progress. What are the sort of steps that you have to go through to take it – what is your sort of long term game plan to go to the next level?

Chris Churchill-Smith:  Yeah, so there’s – that’s a great question. So we’re looking at it, if I can just bifurcate the conversation on the clinic side and then on the production side, on the licensed producer side. So on the clinic side, we’re really trying to become the go-to institutionalized clinic providing process and diligent treatment for our patients. And what we’re trying to accomplish is to become very friendly with the payers of the, you know, the big insurance companies that are going to come in and eventually reimburse cannabis and group insurance and workers’ comp and so on and so forth.

And one of the problems we’re seeing in the industry is that there tends to be quite a bit of recreational users that are using prescriptions to access cannabis. If the payers are going to come in and feel comfortable with this, there needs to be a process, and there needs to be turn-down rates, and that’s something that Alex Kroon, who we just brought in as the president of Canada House Clinics in August, has been tasked with to kind of flesh out those processes, understand the markets and the payers better, and then implement on that strategy.

Typically, if I may, the opening of clinics across Canada has largely been based on next to military bases; we’re very comfortable with our processes now, and we’re looking to kind of expand that service offering, of course, to non-military patients and all Canadians, with a real focus on Boomers and seniors’ markets, and are targeting larger urban centres like the GTA, like Vancouver, like Montreal, and so on and so forth.

So you’ve seen Canada House Clinics have a presence in mostly secondary cities, and you’ll see that kind of continue because of our obligation and, you know, part of the moral fabric of Canada House with the veterans will continue to, of course, service that population; but of course we feel that we have a service offering that can be applicable to all Canadians.

James West:   Okay, so does, at this point, does Canada reimburse all veterans for cannabis prescriptions related to PTSD and/or other operational stress disorders?

Chris Churchill-Smith:  Yeah, very good question. So if you’re a military veteran and you have a diagnosed condition with a prescription, 100 percent of the cost of cannabis is reimbursable by Veterans Affairs Canada, which is a program administered by Medi Blue Cross. But not all Canadians, of course, I mean this is just very specific to the military veterans. And the range of dosages, of course, ranges from, you know, up to 3 grams a day. And with a second-level assessment, they are able to have prescriptions that go up to 10 grams a day as well.

James West:   Wow, 10 grams a day – I wouldn’t be doing anything else if I was consuming 10 grams of cannabis a day. All right, so then, besides – so what is the size of the veteran component of the cannabis market?

Chris Churchill-Smith:  Yeah, so we have 12,000 registered patients; about approximately half are active, ordering on a monthly basis, and of that, of the active monthly orders, about half of them are military veterans. So you can probably safely assume between 2,200 to 2,700 – almost 3,000 of our patients are military veterans. And we expect to see significant growth in that subsection of the population, and of course on the other non-veteran demographic, as well.

James West:   Interesting. Are there international plans afoot for Canada House?

Chris Churchill-Smith:  Yeah, absolutely. So if I may, on the Abba Medix front, our Canada House Wellness’ 100 percent owned licensed producer, we’ve recently announced a partnership with Cannabis One Five, which will allow us – that’s basically the first step in achieving EU GMP certification.

So one of the big challenges that any licensed producer faces, is really establishing a strong distribution network. We feel, of course, that Canada, within the medical market and the recreational market, is, of course, a very interesting market in our own backyard. But also, being able to establish meaningful distribution channels outside of Canada, with a focus on the European Union, is of great importance to Canada House, and that’s why we chose and made the investment and training our staff so that we’re EU GMP compliant to be able to fulfill that.

James West:   Okay. So is there a focus on veterans in the European context, or is that more broadly just a medical focus?

Chris Churchill-Smith:  That’s more broadly a medical focus. There are plans, and we’re looking very selectively at different markets outside of Canada to where we can apply the knowledge that we have and the experience that we’ve accumulated with the veterans. Of course, there are a number of countries around the world that are looking at this very seriously for allowing access to cannabis for the veterans, and we feel that, you know, we have a very strong understanding and knowledge base that we can share with these other countries.

James West:   Okay. Can I ask quickly, what was your last capital raise at what price, how much did you raise?

Chris Churchill-Smith:  Yeah, so this pre-dates me, there was a capital initiative that was completed at the end of 2017, early 2018, at, which was a convertible debenture with a conversion price of $0.19, which escalated up in early December to, I believe, $0.40. We’ve been very focused on putting our heads down and operating and building a company, and now that we’re really kind of at the end of the construction phase of Pickering, which will see us moving plants into the vegetation room imminently, you’re going to be hearing a lot more from us as we ramp up into perpetual production in the middle of this year.

James West:   Wow, fantastic. All right, Chris, we’re going to leave it there for now; that’s a great update on the company. I look forward to having you back and continuing to follow the story. Thanks for joining me today.

Chris Churchill-Smith:  Thanks so much for the opportunity, I really appreciate it.

James West:   You bet.

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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