Heritage Cannabis Holdings Corp (CNSX:CANN) CEO on Company Expansion and Partnerships
Heritage Cannabis Holdings Corp (CSE:CANN)(OTCQX: HERTF) CEO Clint Sharples updates James on recent company announcements positioning them for greater growth in 2019. Having signed a deal with EndoCanna, a technology DNA-based cannabis information service provider, Heritage is given access into the United States. While a partnership with CannTab Therapeutics Ltd (CSE:PILL) (OTCQX:CTABF) (FRA:TBF1.F) will provide them another revenue stream through sales of high quality CBD oil capsules.
James West: I’m joined now by Clint Sharples. He’s the CEO of Heritage Cannabis Holdings Corp., trading on the CSE under the symbol CANN. Clint, welcome back.
Clint Sharples: It’s great to be back here.
James West: Clint, it’s been a while since we’ve seen you. Tell me, what is new with Heritage Cannabis?
Clint Sharples: We’ve been busy lately. I think since the last time we spoke, it’d be about six weeks ago, we’ve been active with signing up some partners, doing some formulation-based work, setting up some extraction business, looking to buy some biomass because we’re going to need that for some of the future, and doing deals. Started our first deal done in the United States; picked up 30 percent of a company called Endocanna, a technology DNA-based cannabis information service provider. It’s probably the best route to go, is helping people take control of their own cannabis-based health future.
James West: Really? And how do they do that?
Clint Sharples: They have a DNA kit that swab, very similar to a 23andMe or Ancestry DNA. In fact, if you have information or the package from both of those, they can be uploaded into Endocanna’s algorithm, and what it does is provides you with a report which matches your own personal genetics and given based on your DNA, with which would be the best cannabinoids, would be the most effective for you and your body.
Right now it’s a crapshoot; you want to go out and you want to buy something to help you sleep or something with your anxiety issues, you go online and you choose what, a label? You choose, you know, you are buying hope.
James West: Right.
Clint Sharples: What this does is allow you to buy, giving you information which you will know these particular cannabinoids give you the best chance of success.
James West: And so this is just the latest – you’ve also announced May 30th that you signed a term sheet with CannTab Therapeutics, who I happen to have, I’ve seen their prototype products and in somewhat of an exciting situation. What’s that deal all about?
Clint Sharples: Yeah, we’re excited about CannTab. We really like the idea of the way that they’ve set up, the formulations that they have; their IP in the hard pills give consumers a really decent amount of optionality on how they want to take their, particularly the CBD or any cannabinoid for that matter, and how they want to ingest it. You want quick release? You want slow release? A lot of it depends on what you believe is the best way for you to administer your medicine, and utilize the cannabis.
James West: So you have, you closed on some money recently as well – you raised 17 million, was it?
Clint Sharples: That’s right.
James West: And so that’s given you the sort of financial firepower you can to make some of these moves. I noticed that you’ve exercised the option to purchase a growing facility, which is one of the seminal transactions of Heritage, the Cannacure facility in Fort Erie.
Clint Sharples: Yeah, not just growing; the facility is 122,000 square feet. 24,000 square feet of that is for grow, and that grow will be very specific strains for our formulations that we want to put to market. So it’s, we’re not just talking about planting Light Widow or Purple Kush or any of the general recreational-based strains; this is designed to be very particular strains which have the various cannabinoids, which in our, mostly in our medical side, or quite possibly in the vape pen side, will show the best in the way of the formulated products.
James West: Wow, that’s great.
Clint Sharples: The other 100,000 square feet is exactly what we’re doing in it: extraction, and then edible-based.
James West: Okay. So Fort Erie is all about extractions and using it as an ingredient. Now, you’ve also got growing operations in the West Coast?
Clint Sharples: We do that, yes. So out in Falkland, British Columbia, it’s a smaller version. We have greenhouse grow. It’ll be doing the exact same thing: growing specific strains for specific formulations, while our indoor space has been set up for extraction and all the downstream happenings that come out as a result of the oils. So you got tinctures, you have vape pen potentials, and eventually we’ll be getting into the gel cap lines and anything else that will be utilizing our extracted products for final sale.
James West: Sure. The cannabis industry generally has now sort of got a bit of a cap on it, since Health Canada changed the rules, and now in order to apply for a license you have to come with a purpose-built facility and submit that as part of your application. Do you think that that’s a good thing for the cannabis industry in Canada, generally?
Clint Sharples: That’s a lightning rod question. So I think Health Canada had to do this. They had way too many applications on people that they deemed weren’t serious or were rolling the dice, hoping to be able to get a license to get something to go and sell down the line. I think what you’ll find is, a lot of Phase I builds happening out there; 3,000 square foot facilities with expansion plan for another 80,000 square feet after they get their license. So there’ll be a lot of scaled down original applications and with future plans to scale up.
But as it sits right now, there’s a lot of people who are still in the queue waiting for their license, that have facilities that are done, and they’re waiting for something to happen.
James West: Right. So right now, Heritage has two cultivation licenses, an extraction license, you have a license to formulate edibles?
Clint Sharples: So we have two cultivation licenses, two processing licenses, and two medical sales licenses, and we’re expecting in reasonably short period of time – I’m hoping by the end of July – will be two full-blown sales licenses in both Cannacure and Voyage out on the West Coast, and we’ll be ready to go right across the North.
James West: Right. So how soon do you think until we see Heritage Cannabis products on the shelves at the various provincial cannabis vendors?
Clint Sharples: So that’s our second phase approach. So we will have our own products out there; it’ll be likely sometime in the fall. Right now, we have some short-term requirements, some deals that we’re working on that we need to be inventorying product for, and we are, and when we complete these projects we’re working on, we believe it’ll take largely most of the rest of the summer. Most of our capacity on our machines are going to be geared towards these pieces of business.
Once we can take care of that, we’ll look to go and complete on our own products, give the 60-day notice to the provincial cannabis boards. We have CannEvolve, our broker, setting up as soon as we give them the green light to go get some pre-sales for us.
James West: CannEvolve.
Clint Sharples: Yeah, CannEvolve. They’re an agency, a cannabis agency that goes around, deals with the provincial sales boards rather than us having to hire a whole bunch of sales reps on our own. They represent our products. They’ve done a great job for us, brought us a ton of opportunity that we’re saying, we’re almost ready for you! Just hold on.
James West: Right, right. Okay, so what is the, what is the plan for the rest of 2019 and going into 2020? Where are you focused?
Clint Sharples: So 2019 is all about setting up how we’re going to grow. Everyone’s seen what we’ve done to date; we’ve done a lot, when you consider we acquired Cannacure in November, raised a little bit of money from there. Since November till now, we’ve done an awful lot. In fact, we just had a strat planning session and we took a moment to take a look back on everything we’ve accomplished, and it’s been a lot. I’m proud of our team, we’ve really executed well.
So over the next six months that we’re going to see in 2019, landing the business that we’re working on today, completing on some of the early contract requirements, and they’re not small, so it’s going to take some effort and some focus. So that’ll be a summertime project, but at the same time, we have some international opportunities we’re looking at. We’ve obviously got this Endocanna deal in the United States; as part of that, they’ve brought some opportunities in the US that we are seriously looking at, that if we can, and we can work on it and progress it, we’ll want to get it signed by kind of early to mid-fall, and get working on it early in 2020. It can be significant revenue for us.
James West: Okay, so we’re coming to the end of the phase, the honeymoon phase for cannabis companies, where they were valued on future speculation. And increasingly, investors are looking at the balance sheet and the earnings. So what does the revenue and the earnings picture look like for Heritage going out 12, 24, 36 months at this point?
Clint Sharples: So first of all, I’ve got to say: it’s about time. There’s been a lot of valuations out there, some stupid numbers for companies that you look at and you think, there’s no way. There’s no way that virtually any cannabis company could ramp up that quickly and that profitably to sustain that market cap. Good news for us, and my background is in operational execution. Understanding where value is, and how we create it. We are targeting to be, by the end of 2019, to be on an annualized run rate – just make sure that the people who are looking at this know that that’s not a 2019 total revenue number, it’s an annualized run rate – for the end of 2019 to be somewhere in the $35 million to $50 million range.
To be able to be building on that through 2020, revenues up, I’d like to see for calendar 2020 somewhere in the neighbourhood of about $80 million, given to what we know today. And then as we’re building some of these international opportunities, they offer one, two and three-year growth plans after that that are significant in their own right. If by 2021 we’re not talking in the hundreds of millions of dollars, I’d be surprised.
James West: Amazing. Well, every time you come, Clint, the story just keeps getting better. Full disclosure, I am a shareholder, but we’re going to leave it there for now. We’ll come back to you again as soon as you have some more good news for us. Thanks for joining me.
Clint Sharples: Thank you.
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