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48North Cannabis Corp (CVE:NRTH) Launches Accessory Brand F8, Available at Tokyo Smoke Locations

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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 are thrilled the company’s stock has surged by 40 percent this week. The pair believe 48North’s company Q2 financials, which announced 48North was EBITDA-positive, has made an impression on the market. Gordon and VanderMarel discuss 48North’s recent deal with the SQDC, the only legal retailer of recreational cannabis in Quebec, for 1,200 kilos of outdoor grown cannabis. 48North recently launched a brand of accessories, F8, and announced F8 products will be available through the OCS and Toyko Smoke shops, a subsidiary of Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1).

Transcript:

Howard Glassman:   All right, we’re here with the co-CEOs of 48North Cannabis Corp. Our guests today, the very talented and lovely pair of Jeannette VanderMarel, that’s you.

Jeannette VanderMarel:  That’s me.

Howard Glassman:   Look at you! You seem very nice. [laughter] Everyone has such an open face. Alison Gordon, you’re also wonderful.

Alison Gordon: Thank you.

Howard Glassman:   The two of you, I can tell you right now, I don’t know anything about, you know, cannabis investing; I’m here hanging out, filling in for James, but I do know you two people seem to know what you’re doing.

Alison Gordon: We do.

Jeannette VanderMarel:  We do. We’ve been at this a while.

Howard Glassman:   Yeah. And maybe you can help educate me; I know that a lot of people that watch the Midas Letter, they’re interested investors. They want to find out backgrounds on companies, they want to see what’s going on, but maybe you can talk a little bit about what’s been going on at 48North. I know there’s been some news we can discuss.

Jeannette VanderMarel:  Yeah, we’ve had some great news recently. Our biggest announcements, we just released our – or actually, I’ll let you talk about the financials, and I’ll talk about the farm, how’s that?

Alison Gordon: Sure. Well, we released our second quarter financials, and we were EBITDA-positive, which you’re newer to the industry, and this may be surprising to you…

Howard Glassman:   Oh, I know what EBITDA is.

Alison Gordon: [laughter]

Howard Glassman:   I do know that term. But please.

Alison Gordon: But what you may not know is that EBITDA-positive in our industry is like, a rare gem.

Howard Glassman:   Is it?

Alison Gordon: It is, and I mean, that’s not people’s faults, it’s just, it’s a new industry, they’re still rolling out distribution, retail, the recreational market, so a lot of the speculation has been forward-looking.

Howard Glassman:   How does being EBITDA-positive impact stock prices for 48North?

Alison Gordon: Well, I mean, I think we can see this week our stock, I think, has gone up about 40 percent or something.

Howard Glassman:   What?

Alison Gordon: Yeah, we’ve had a fantastic week.

Howard Glassman:   So that’s EBITDA very positive!

Alison Gordon: EBITDA very positive.

Howard Glassman:   So that’s great news for 48North. EBITDA positive in Q2? Are we in Q2, is that what you said?

Alison Gordon: Yes. Our Q2. But yeah, I mean, I think the point is, Jeannette and I have been saying for a long time, 48North is focused on profitability, on innovative, next-generation products, on low-cost organic input which Jeannette will talk about. And so the second quarter financials are showing that we are living up to what we said we are going to be.

Howard Glassman:   And Jeannette, before we get to that, I’m just curious, like, a lot of the cannabis industry, a lot of these companies, as you say, being EBITA-positive or having positive information is great for investors, but because there’s so many of these companies that haven’t had a positive – they’re not turning profit yet, people are just buying stock based on possibilities. But as you say, 48North living up to, you know, the promises you’ve made, and the business plan you’ve created.

Jeannette VanderMarel:  Exactly. We saw the industry as maturing, and, well, the first few years, there was a lot of stock promotion, a lot of raising capital, forward-looking for when there was profitability. We’re focused on actually being a profitable company.

Howard Glassman:   Alison laughed, she’s just –

Jeannette VanderMarel:  It’s a rare thing.

Howard Glassman:   It’s a rare thing in this business. Yes.

Jeannette VanderMarel:  So we’re doing some really innovative stuff. Our big announcement this week that I think has already helped our stock, is that we signed a landmark supply agreement with the SQDC, which is the distributor in Quebec, for 1,200 kilograms of our soon-to-be hopefully licensed, pending Health Canada’s approval, 100-acre outdoor farm, which we believe will be the first of the licenses to grow outdoor cannabis in Canada.

Howard Glassman:   Now, is that Good and Green?

Jeannette VanderMarel:  So Good and Green is a company that I co-founded. It’s been acquired by 48North.

Howard Glassman:   Okay. This is what I want to talk about, because up to this point, a lot of the growth obviously in the industry, the actually growing of the cannabis product, is all hydroponic, it’s indoor growing. But your company was still growing it outside.

Jeannette VanderMarel:  Well, no. So there’s been no legal –

Howard Glassman:   So what I just said was completely wrong?

Jeannette VanderMarel:  Completely wrong, but that’s okay.

Howard Glassman:   Okay, let’s start again.

Jeannette VanderMarel:  We’re here to communicate.

Alison Gordon: It’s right, until the wording that you used.

Howard Glassman:   Okay, let’s try different words.

Alison Gordon: We’re going to grow outdoors.

Howard Glassman:   It was, so Good and Green was your company, and then you guys got together to co-CEO this 48North thing.

Alison Gordon: Yes.

Howard Glassman:   Amazing, EBITDA-positive in case you missed that. But Good and Green wants to grow outdoors?

Jeannette VanderMarel:  Correct.

Howard Glassman:   Thank you.

Jeannette VanderMarel:  So 48North has two licensed sites now: it has the DelShen site, which is Kirkland Lake, growing fantastic, top quality, state of the art cannabis, fantastic.

Howard Glassman:   Amazing, okay.

Jeannette VanderMarel:  And then we have the Good and Green site, which is another indoor site, in Brantford Ontario. We’re now working with Health Canada to hopefully become one of the first licensees to grow outdoors in Canada.

Alison Gordon: A third license.

Howard Glassman:   Okay. I mean, from a complete, just from a product standpoint, is that going to be something that will be promoted as a demarcation, kind of like the organic section of the grocery store? Meaning that Good and Green will be known as an outdoor, more natural product, is that what I’m to hear, or -?

Jeannette VanderMarel:  Well, Good and Green currently is growing 100 percent organic in our indoor facility.

Howard Glassman:   Okay.

Jeannette VanderMarel:  And we’ll be carrying the same technology and 100 percent organic onto our farm.

Howard Glassman:   Outdoors?

Jeannette VanderMarel:  Outdoors.

Howard Glassman:   And what’s the point of growing it outdoors? Because you’d think that indoors, you can control the growing cycle so much more. Is there an advantage to having an outdoor?

Jeannette VanderMarel:  You know, cannabis only…

Howard Glassman:   You’re nodding your head like that was a decent question.

Jeannette VanderMarel:  It’s a good question.

Alison Gordon: No, it’s a good question, and Jeannette is, no one is more qualified to answer that.

Howard Glassman:   It’s a good question if you’re an idiot like me.

Jeannette VanderMarel:  So, the only reason cannabis moved indoors was because it was illegal, and people were hiding it from police.

Howard Glassman:   It was illegal? When was that? I had no idea.

Jeannette VanderMarel:  I know, how surprising. Little bit historic, now, but it was illegal, so it moved indoors. But cannabis grows fantastically outdoors in southern Ontario, and a few other small pockets in Canada.

Alison Gordon: And then I think – sorry to interrupt you, Jeannette – is that to your question, indoor is a lot more expensive way to grow, but you are going to have a different, I hate to use the word quality, because it’s not to say outdoor is a bad quality, but in terms of shelf appeal, in terms of the amount of resin that you’re going to see on the buds, when you look at a bud and it’s all glittery, I mean, that’s what you’re going for –

Howard Glassman:   And you can control that, indoors.

Alison Gordon: You can control that better indoors.

Howard Glassman:   Absolutely. That little flake, that silvery –

Alison Gordon: Well, okay. Here, you were right: there’s cracks in the circus, here. [laughter]

Howard Glassman:   Here’s what I like about this, though. Because again, we can talk investing and nuts and bolts and dollars and cents and EBITA positive, but there’s a real gap in people’s understanding of this. Of the growing cycle, of the efficacy, of the plants – I had an interview recently on my radio show talking about, you know, being able to lock in and ensuring that the strains are what they say they are. So quality control in this business is going to be a discussion that everyone’s going to want to have.

Jeannette VanderMarel:  It is a huge part. But most of what the plant produces is directed by the genetics of the plant. There’s thousands of different cultivars, and some are best suited for outdoor; some are best suited for indoors.

Alison Gordon: That’s true.

Jeannette VanderMarel:  So the cannabinoid profiles or the THC and CBD in the plant are generally dictated by the plant. You can tweak that somewhat much indoors by adding CO2 and some other things to your growing environment, but not much difference between a greenhouse and an outdoor grow as far as your CO2 and your environmental controls.

Alison Gordon: And that’s the truth. I meant to say, because indoor it’s a confusing term, but we’re talking about, you know, there’s sort of indoor, greenhouse and outdoor, and greenhouse and outdoor are quite similar.

But I think the important thing, you know, to share, because you’re learning more about the industry is, we’re moving in October 2019 to be allowed to start creating the edibles, the vapes, the creams, all of those things that you can see in the US and California.

Howard Glassman:   Tinctures and all that.

Alison Gordon: Those in those states make up between 60 to 70 percent of the sales, right? So we know this is where the market’s going; people want all of these products. So what that is about, you’re talking about extracting from the cannabis plant, and when you’re extracting from the plant, there is nothing that makes more sense than outdoor, because of the cost.

Jeannette VanderMarel:  Absolutely.

Howard Glassman:   Well, that’s kind of what I wanted to ask, that so really, from a company standpoint, you guys are CEOs; and if you want to stay EBITDA-positive, cost effective is a huge thing. And so maybe the idea is to have that strain grow outdoors where you’re not looking for the shelf appeal of the glittery silver, you know, whatever it is to make it look pretty –

Alison Gordon: The cannabinoids.

Howard Glassman:   The cannabinoids. You know, so that’s a great idea.

Jeannette VanderMarel:  So we have our two indoor facilities; we grow great indoor quality product for those dried buds. On the farm, roughly 10 percent will go for dried bud or cannabis; the other 90 percent will go for extracts. But there’s no other plant-based product for extracts, whether you look at ethanol or canola oil, that we grow indoors for an extract product.

Howard Glassman:   Right. No, that’s a good point.

Jeannette VanderMarel:  It just doesn’t make sense. And we know, as the market gets bigger, there will be downward pricing pressure, and the only way for us to compete, and especially in that organic market which does give us a price premium, is growing outdoors. And I think also, ecologically friendly, sustainable agriculture, and I think modern consumers really do care about that.

Alison Gordon: And people love that sun-grown, outdoor, like, there’s something about that?

Howard Glassman:   And I think what’s going to happen too, and I sort of made this joke a couple of years ago, because, you know, I don’t drink alcohol, but I have availed myself of as much education as I can about different strains of marijuana, and I said, it’s almost like I’m a weed sommelier. But I’m going to say that in the future, more and more people will look for signs of demarcation; was this – it’ll be important to somebody if it was grown outdoors, because they’re looking for a different experience.

As people become more educated to indoor, greenhouse, and outdoor, they’re going to start looking for the company like yours, because that’s what they’re going to want.

Jeannette VanderMarel:  You’re absolutely right.

Alison Gordon: Well, it’s also about the products that we’re creating, as well. So when Jeannette and I came together, part of this was that both of us were really one of a handful of female CEOs in this space. And when I, before we acquired Good and Green and became co-CEOs, 48North was very much focused on the female market. So, creating those products that women will love. And we’re still going in that direction, but we’re tired of having to say we’re a female-focused company; Proctor & Gamble and Johnson & Johnson don’t have to say that, they just are.

Howard Glassman:   I agree.

Alison Gordon: So, I mean, that’s what authentic to us. So I agree with you: the demarcation, not just on how was it grown, is it grown sustainably, cost, all of that, but then also the products we’re creating will be really unique and innovative, too.

Howard Glassman:   I couldn’t agree with you more. I think the time is coming, you know, quickly, where you won’t have to lean on female, you know, focused; it’s just going to be a great product grown by, you know, smart people who are also very nice.

So we learned about the EBITDA, we learned about Good and Green. Any other information that I don’t have in this press release that I just kind of skimmed? Is there something else?

Alison Gordon: There’s so much in the cannabis industry!

Howard Glassman:   There’s so much, Howard! This is what’s happening.

Alison Gordon: Well, okay, I mean, here’s a few things that are exciting for us: so, we actually have launched our accessories line, which is called F8.

Howard Glassman:   Oh yes! I want to talk about Tokyo Smoke. Let’s talk about that!

Alison Gordon: And so, yes, you could talk about Tokyo Smoke. So yes, Tokyo Smoke is carrying our accessories, as is the Ontario Cannabis Store.

Howard Glassman:   So your accessory brand, Fate, but F8, what is that all about? Because you’ve got an agreement where you, you know, announced an agreement with the Ontario Cannabis Store, whenever that happens.

Alison Gordon: No, no, it happens. It’s on, it’s happening online.

Howard Glassman:   It’s happened online. Yeah, all right. Okay.

Alison Gordon: No, it is, it is.

Howard Glassman:   I know, no, I know, I know. Can we not – I just think it’s hilarious that we couldn’t just get it together and have a bunch of stores. It doesn’t matter.

Alison Gordon: We will not comment on that.

Howard Glassman:   Don’t! I’ll comment on it. I’ve been to a Tokyo Smoke.

Alison Gordon: The coffee shop, or the dispensary in Winnipeg.

Howard Glassman:   No. Here’s the cool thing: there’s a coffee shop here in Toronto near where my daughter used to live. I go there for coffee around King and one of those places.

Alison Gordon: Yeah, that’s where our office used to be.

Howard Glassman:   And that little Tokyo Smoke in the back now, they’re starting to put a few little cannabis products in there. I don’t know if they’re supposed to.

Alison Gordon: Well, not cannabis products –

Howard Glassman:   No, no.

Alison Gordon: Accessories. They’ve always had accessories. So it’s always been a coffee shop and accessory shop, yeah.

Howard Glassman:   Sorry, I apologize. No, there’s no cannabis in them; but accessories are in there. Now, F8’s going to do something – what are you doing with Tokyo Smoke, then?

Jeannette VanderMarel:  Well, they’re going to be carrying our products. We’re really proud of them.

Howard Glassman:   Oh, they’re going to be carrying F8 stuff!

Jeannette VanderMarel:  Yes!

Howard Glassman:   Well, okay, I really should be listening. Sorry.

Alison Gordon: No, it’s okay, it’s okay. Alan Gertner, who started Tokyo Smoke, is a friend of ours, and it’s like, Jeannette and I have been in the industry for a long time. Really, it’s been almost five years for me and a little bit more for her. So we were like a small little group, and all of us are still growing, but Tokyo Smoke, we’re super excited to be partnered with them.

Howard Glassman:   Well, listen, you guys: I can tell you right now, I’ve really enjoyed this. Have you guys – I think this has been great.

Jeannette VanderMarel:  Bring us back. You know, we love to hang out.

Howard Glassman:   Are you kidding me? If it were up to me, we’d do this show together, but I got Ed, I got other people…

Alison Gordon: Where is Ed?

Howard Glassman:   Ed’s, he’s around. Don’t worry about Ed, I’m doing this.

Alison Gordon: Okay. You’re doing a great job, by the way.

Howard Glassman:   Am I? I don’t even know anymore.

Alison Gordon: Yes! It’s not an easy industry to cover, for sure, and you really have to delve in, and you are.

Howard Glassman:   Well I, you know, thank you. But again, I’m very deep in terms of the cannabis industry as a whole; I’ve been talking about it on the Humble & Fred show for years. I’ve invested in it, privately and publicly, and I’m fascinated by it, as you can tell, and I think it was a great opportunity to meet both of you, the co-CEOs of 48North: Lovely Jeannette VanderMarel, if I may say lovely, and I say that even if you were a man. I don’t see gender; you know, that’s who I am now. I just see humans. [laughter]

And Alison Gordon, thank you both very much!

Alison Gordon: Thank you for having us.

Jeannette VanderMarel:  Thank you, it’s been a pleasure.

Howard Glassman:   Great having you here on the Midas Letter.

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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