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Cannabis 2.0 – The Industry's
Second Act
September 24th, 2019
Page 2
Page #Slide
Agenda
Welcome and Introductions
Part One: Cannabis & the Capital Markets
• Special presentation from The CSE’s Richard Carleton
Part Two: MNP Presentation
• The Cannabis Act and Edibles: What’s Legal and What’s Not?
• Act 1: Canadian Cannabis Legalization 11 Months In
• What can we learn from the US edibles experience?
• Putting it All Together for Firms: Opportunities, Challenges and
Requirements
Questions
Closing Remarks
Page 3
Page #Slide
Presenters
Mitchell Osak, MBA
Partner, Consulting, Cannabis Advisory Lead
(416) 263 6985
• Cannabis industry veteran, media commentator & thought leader
• 25+ years of consulting & operational experience
• Delivered 35+ strategy, M&A & risk consulting projects
Richard Carleton
Chief Executive Officer
(416) 367-7360
• CEO of the Canadian Securities Exchange in July 2011
• Recognized by the Financial Post Magazine as one of
Canada’s “25 Cannabis Industry Power Players”
• Recipient of the American Trade Association’s “Captain of
Industry” Award in November 2018
EXCHANGE UPDATEMNP / September 2019
www.thecse.com / @CSE_News / [email protected]
Canadian Securities Exchange – MNP Update
A Quick Primer About CSE
• Founded in 2003, now well into our second decade of operation
• Original mission statement: provide a modern, disclosure driven exchange model to facilitate capital formation for junior issuers
• The exchange has matured and grown with its issuers
• Privately-owned and independently operated, CSE is aligned with the independent dealers and public venture capital ecosystem in Canada
• Staffed by a growing team of passionate and experienced exchange professionals
CSE recently relocated it’s headquarters to the 72nd floor of First Canadian Place in the heart of Toronto’s Financial District
$5.59 BCapital Raised
541Number of Listings
880Financing Deals
* *
Trailing 12 months*
Canadian Securities Exchange – MNP Update
5 Year Trading Trend
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200,000
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1,600,000
1,800,000
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Num
ber
of
Trdaes
Volu
me a
nd V
alu
ein
Mill
ions
Volume
Value
Trades
Canadian Securities Exchange – MNP Update
Turnover – Trading Value/Market Cap
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
TSX-V CSE
Trading Value/Market Cap = Turnover
Canadian Securities Exchange – MNP Update
Capital Formation – The Year (So Far)
• Cannabis - life sciences issuers have raised $1.87 billion in 2019 (YTD) on CSE
• $82.28 million total raised in hemp YTD
• Investments originated from 86 geographic sources this year
• Independent dealers lead CSE financings, with Canaccord at top of league table
CSE’s Financing Activity by Sector
2016 2017 2018 2019 YTD
# Deals $ Raised (K) # Deals $ Raised (K) # Deals $ Raised (K) # Deals $ Raised (K)
Life Sciences - non Cannabis 37 18,305 38 49,797 38 47,824 21 18,437
Cannabis - Life Sciences 65 203,993 147 656,244 292 4,149,277 202 1,877,585
Hemp - Life Sciences 5 4,340 13 47,578 17 53,908 30 82,276
Technology - non Blockchain 93 85,099 136 181,133 121 110,299 55 50,514
BlockchainCrypto - Technology 5 1,638 27 66,525 42 139,314 12 11,247
Mining 135 99,867 198 208,407 235 225,717 130 152,663
CleanTech 20 7,830 49 29,423 26 30,335 29 35,255
Diversified Industries 56 45,021 70 122,008 108 522,910 56 151,003
Oil & Gas 14 23,038 21 26,501 9 7,785 5 2,878
Real Estate 2 990 3 715 8 11,391 0 0
Total 432 490,121 702 1,388,331 896 5,298,761 540 2,381,859
Canadian Securities Exchange – MNP Update
Industry Leaders in CannabisCSE’s West Coast Director, Anna Serin directs a discussion at the recent ArcviewConference in Vancouver
CSE CEO Richard Carleton is a respected voice in the cannabis life sciences industry and is a recognized advocate for the industry
CSE CEO Richard Carleton honoured with “2018 Captains of Industry” award by the American Trade Association for Cannabis and Hemp (“ATACH”) and included in “The Cannabis Power List” by Financial Post
177
$19
541
$6.2
Cannabis/hemp related issuers on CSE
Financing deals into listed cannabis/hemp co’s in 2018/19
Billion market capitalization of CSE cannabis co’s
Billion raised for cannabis/hemp sector in 2018/19
(all funds expressed in CAD)
Canadian Securities Exchange – MNP Update
What’s Coming Next in Cannabis
• Convergence of technology and cannabis space, including quality control, seed genetics, and oil extraction plays coming to market
• Fewer MSOs will make it to market, choosing acquisition route – Existing companies have a huge cost of capital advantage
• Second wave of legalization in October should not raise a lot of optimism based on rollout of recreational cannabis in 2018…
• Foreign markets, specifically EU, will evolve through the medical space –there are opportunities to participate in early-stages of cannabis sector growth, albeit in a slower growing market
Canadian Securities Exchange – MNP Update
Updates Coming to CSE Rule Book
• Our foundation - rational entrance requirements tailored to early-stage companies
• No duplications of securities rules in CSE policy manual result in a thinner, simpler policy book
• The CSE has filed an application, with regulator encouragement, to create a “non-venture” board; this will formalize the regime in place for senior companies on the exchange:
Requirements for Mature Companies
All CSE listed companies are considered “venture” issuers for purposes of securities law
To address the needs of mature companies, CSE imposes additional requirements:
• All CSE issuers require one-year prior audit; mature companies may need two years
• Coattail provisions for companies with multiple share classes
• Shareholder right plans
• Board size and composition
Special Proposal – Columbia Care Listing on CSE
Clearing and Settlement Initiative
Clearing and Settlement Service
• CSE is engaged in launching a clearing and settlement offeringdesigned to support the launch of tokenized securities in a regulated and secure environment.
• Not crypto assets, instead a new tool for issuers to raise capital at lower cost through the CSE’s innovation in the post-trade arena.
Security Token Offerings
CSE CEO Richard Carleton and CSE VP James Black recently presented their vision of a world with STOs at the Blockchain Revolution Global conference in Toronto.
• Project managed by Andrew Grovestine, in process of organizing client advisory committee, further details available at https://www2.thecse.com/blockchain
New Developments Coming
Canadian Securities Exchange – MNP Update
Just Launched – Market Open at the CSE Media Centre
Canadian Securities Exchange – MNP Update
Public Entrepreneur Content
#HashtagFinance on Spotify, Soundcloud, Apple Podcasts, Google Play, and more!
CSETV on YouTube – executive interviews, event recaps and market open coverage
Our flagship publication profiling CSE listed companies with interviews and profiles, available at blog.thecse.com
Canadian Securities Exchange – MNP Update
Thank You
Richard CarletonChief Executive [email protected](416) 367-7360
Canadian Securities Exchange – MNP Update
Contact our Listings Team to Learn More
James BlackVP, Listings Development(778) [email protected]
Phil ShumDirector, Listings Development(647) [email protected]
Anna SerinDirector, Listings Development(778) [email protected]
Mark FrancisSenior Advisor, Listings Development(403) [email protected]
Scott PritchardSenior Advisor, Listings Development(514) [email protected]
Toronto
Vancouver Calgary Montreal
www.thecse.com / @CSE_News / [email protected]
Rob CookSr VP, Market Development(416) [email protected]
MNP – An Update & What to Expect…
Page 18
The Best of Times, the Worst of Times
LEGALIZATION KICKED OFF
OCTOBER 2018
CANADIAN 2019 RETAIL SALES ARE
ESTIMATED TO REACH $1.02B ON AN ANNUALIZED BASIS
(STATS CANADA)
POTENTIAL CANADIAN CANNABIS
ECONOMY: THOUSANDS OF FIRMS, $22.6B IN
ACTIVITY (DELOITTE).
PROFITABILITY SLOWLY COMING TO
LPS
LOTS OF HICCUPS BY REGION
BLACK MARKET STILL STRONG
Snapshot of the Canadian Cannabis
Market
Page 19
Cannabis 2.0
Edibles, Topicals Become Legal
Page 20
Types of Cannabis Extracts
1. Solid edibles
2. Liquid edibles
3. Cannabis concentrates
4. Topical extracts
Page 21
What to Expect with Edibles
…the good
• Up to $3B in sales annually
- extracts-based product like vaping, edibles ~ 50%
- Topicals, beverages, capsules and tinctures ~ 50%
• Drive trial and consumption to 30-40% of Canadians (the mainstream)
• Catalyst for new investment and start ups
• LPs moving up the value chain
Page 22
What to Expect with Edibles
• Available mid December at
earliest
- 60 day Health Canada wait
period for new products
• Significant restrictions on THC
levels, branding (BC), packaging,
production and availability
(Quebec)
• Major CPG firms sitting on
sidelines
- CBD restrictions problematic
…the bad & the ugly
Page 23
Some lessons for Canada….and not
• Edibles grab market share
- approaching ~50% of all cannabis consumption
- growing variety of products, formats, doses
- bringing in new consumers
• Cannabis beverages have disappointed (5% of total market)
• Brands matter
• Regional scaling is still a challenge
US Edibles Experience
Page 24
• More bumps along the road
• Plethora of new products,
leading to market
segmentation
• Increased government and
investor scrutiny
• Global legalization gathers
momentum
It’s safe to say…
What Does the Future Hold?
Page 25
…the salad days are over
• Time to focus
• Compliance and risk management is key
• Profitability expectations
• Lots of opportunities across the value chain
• Governments aren’t helping
Opportunities, Challenges, Requirements
Page 26
Questions?
Thank You
www.mnp.ca