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3 Sixty Secure Corp (CNSX:SAFE) Cannabis Security Provider Generating $2.4M in Monthly Revenue

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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.

3 Sixty Secure Corp (CNSX:SAFE) (OTCMKTS:SAYFF) (FRA:62P2), a wholly-owned subsidiary of 3 Sixty Risk Solutions Ltd, is a leading security provider to the cannabis sector. CEO Thomas Gerstenecker explains that 3 Sixty is the first pick-and-shovel ancillary approach to seed-to-sale security in the cannabis space. 3 Sixty provides security consulting, guarding, monitoring, and secure transportation of cannabis products across Canada. He highlights the significant need for such services in the cannabis space and notes that the company has experienced 2800 percent revenue growth in the past 16 months, with revenue now at $2.4 million monthly. The company counts industry leader Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1) among its clients, as well as provincial entities, such as the LCBO and the OCS.  3 Sixty completed its RTO in January and added licensing expert David Hyde as president as part of that transaction. The company’s 2019 strategic plan includes a larger footprint in Canada and expansion to the United States.

Transcript

James West:   I’m joined now by Thomas Gerstenecker. He is the CEO and founder of 3 Sixty Secure Corp., trading on the CSE under the symbol SAFE. Thomas, welcome.

Thomas Gerstenecker:    Thanks for having me.

James West:   You bet. Thomas, so your focus is in security and licensing. Why don’t we start with an overview of exactly what it is you do.

Thomas Gerstenecker:    Sure. I would argue 3 Sixty is really the first picks and shovels ancillary approach to the cannabis space when it comes to seed-to-sale security services. So, everything from the consulting component, licensing on the security planning and security consulting aspects, to providing security guarding, monitoring and moving of cannabis product across Canada.

James West:   And so is this a service that the cannabis industry is in dire need of?

Thomas Gerstenecker:    Well, based on the scale in which our company has moved, I would say most definitely. If you look back even 16 months ago, we were less than 10 staff, a couple of secure transport vehicles, and making something around 40,000 a month in revenues, to April this year, more than 2,800 percent revenue growth where we’re now at more than 600 people, 150 vehicles across Canada, and our revenues hover around the 2.4 million mark per month.

James West:   Wow. That is some serious growth.

Thomas Gerstenecker:    It is.

James West:   Who are your biggest clients?

Thomas Gerstenecker:    I would say our biggest, biggest clients, certainly Canopy Growth is one of our largest clients, and on that note as well, I mean, there are others provincially; the Ontario Cannabis Store, the LCBO, I would say, are some of our biggest clients.

James West:   So do you actually move cannabis itself securely, is that sort of one of the key features?

Thomas Gerstenecker:    Absolutely. Out of our four main service lines, secure transport was really the genesis of us being in the cannabis space at the end of the day. I recall doing an assessment for a licensed applicant, or a prospective licensed applicant, and at the end of the assessment, I had asked him, How are you now going to move your product from Point A to Point B safely and securely? And he had no idea. So that led us on the, I guess, research, if you will, of how to move product safely and securely.

James West:   Yeah, sure. Okay, so now, as part of your growth strategy, you have David Hyde, who is as I said earlier, a brand unto himself in terms of getting companies licensed in the Canadian context, and he’s now joined 3 Sixty as the President?

Thomas Gerstenecker:    That’s correct, that’s correct. So part of our RTO transaction, part of that was the acquisition of the David Hyde and Associates component. We are listed on the 4th of January, and as that came through to fruition, David then joined 3 Sixty and I appointed him as President of 3 Sixty.

James West:   Okay, so that sort of suggests that licensing and compliance with regulations in terms of facilities is now a core competency of 3 Sixty.

Thomas Gerstenecker:    Yes.

James West:   But his focus has been in the Canadian market. Now, you’re taking this whole value proposition global?

Thomas Gerstenecker:    We are. Most definitely, and I think, you know, it’s important to note that our strategic plan for 2019, two main components: one is to get a better density across Canada so that we can service our clients quicker, faster and more effectively; and the other component, the other objective, is to enter the US market, which we are actively doing. More information is due out in the near future on that.

James West:   Sure. How many countries are you able to assist people who want to start growing cannabis legally in, right now?

Thomas Gerstenecker:    Well, I think if you look at the four service lines, our sort of genesis into different sectors is really the consulting arm. From there, then we establish the, let’s say, footprint, with prospective licensed applicants, and then we establish a working relationship, and from there, once they’re licensed, that consulting then turns into integration of security systems. It turns into facilitating guarding services, and then ultimately, secure transport of product.

James West:   Interesting. And in the United States, I guess, at this point you have secure transportation of the cash, as well?

Thomas Gerstenecker:    That’s right. It’s another element that we’re currently looking at, and each state brings its own unique aspects to moving product, no doubt.

James West:   Sure. Okay, so tell me a bit more about the economics of the business. What kind of margins are you making on 2.4 million in revenue?

Thomas Gerstenecker:    Sure. Well, I mean, we have to appreciate first of all that we’re still, relatively speaking, young; we’ve only done one quarter as a public company, so our first quarter was of course heavy on the burn. Appreciating that, though, as we are increasing our revenues significantly, our margins really hover, I would say on average, around 18 to 22 percent.

James West:   Okay.

Thomas Gerstenecker:    And adjusted, hovering around somewhere between 10 and 13 percent. But we do see, based on our forecasting, we do see positive growth in terms of revenue towards the end of this year, and as we had stated in our operational update, forward-looking statement into Q2 this year, we’re going from Q1 at 3.5 million to a forward-looking statement of 7.5 million for Q2. So still a significant growth within a one-quarter period.

James West:   The business of doing all of these things to provide security to the industry, is that a competitive marketplace? Are there lots of companies doing this, a few? What’s it look like?

Thomas Gerstenecker:    Well, I would say it is, there is competition, which is always good for us. It’s good for anyone. However, I feel that the competition is very fragmented, and what I mean by that is, some will do some type of form of movement of product; there’ll be some guarding components, and there are some smaller consulting firms, typically a one-person operation, that may do some consulting for the industry, because it’s very specific knowledge.

And so a fragmented environment that we see not only in Canada but also in the US, which allows us to come in and provide that seed-to-sale, A to Z solution for clients, which has been extremely effective and successful for us.

James West:   Fantastic. The number of countries that are legalizing cannabis for medical purposes is growing; I think it’s at 55 now worldwide, and certainly of the 220-some-odd that can be, we know that a large portion of them are moving in that direction, because the leading countries are sort of driving that momentum. Is it safe to say that a 4X increase in the amount of countries uptaking legal cannabis is likely to result in a similar impact on your business?

Thomas Gerstenecker:    I would say without a doubt. Just going back to our strategic plan for 2019, Canada/US, I can say with certainty that we are looking beyond those borders, as well. Without a doubt.

James West:   Sure. Now there’s a lot of companies that have started in different sectors that have ultimately become big growers of cannabis. Is that one of your ambitions as well, or absolutely not?

Thomas Gerstenecker:    We remain a picks and shovels ancillary approach. We know what we can do well, and we’re going to stick to it.

James West:   Wow, fantastic. So, tell me about the capital structure of the company: how much money have you raised, who are the major shareholders?

Thomas Gerstenecker:    Sure. I mean, capital structure really comes down from a raise point of view: we did three raises last year, all over-subscribed. We did, in the, I guess about a year ago we did a $0.25 round, raised about 5.8 million; and then pre-RTO, we raised 17.5 million, and you know, primarily used for the growth component, both from a CapEx/OpEx point of view, but also appreciating that that money was also used for, or is being used for, acquisitions. So from the David Hyde & Associates acquisition to our recent acquisition with acquiring Inca’s Security Cash and Transit Solutions.

James West:   Wow. Okay, so finally, what are the big sort of achievements/milestones that you’re going to knock off in the next 12/18/24 months, that will warm the hearts of investors?

Thomas Gerstenecker:    Well, I would say that our growth from a revenue point of view will not decrease. I can say that every quarter, when we bring out our Q financials, our quarter financials and operational update, they’ll always be having a forward-looking statement into the next quarter. As I mentioned, growth is not going to slow down at this point in time. You’ll see us also looking significantly in the secure storage of product, as we move forward, and having a significant footprint in the US and by the end of this year, like I said, beyond borders in some interesting companies. A lot of good stuff coming down our way in 2019.

James West:   Okay. Great. Well, that’s a great introductory conversation about the company. We’ll follow it, and we’ll have you back soon. Thanks for joining me today.

Thomas Gerstenecker:    Great, appreciate it. Thanks very much.

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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