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Today, we are fortunate to have Cannara Biotech CFO Nicholas Sosiak with us for an interview. During the last year, the leading Canadian cannabis company has reported a series of major developments and we believe the business is well positioned to record strong growth in 2023 and beyond. Thank you Nicholas!
1) Can you please tell us about the assets that are owned by Cannara, the markets it is levered to, and its growth prospects?
Cannara’s first completely owned asset was acquired in 2018 and is a 625,000 sq. ft. facility located in Farnham, Quebec. This was the first facility that Cannara acquired and we converted 170,000 sq. ft. of this facility into an indoor cannabis cultivation center. In addition, within this area, a significant portion is allocated to post-harvest and post-processing of all cannabis and cannabis derivatives, including cannabis cultivated from its newly acquired facility in Valleyfield Quebec. The remaining 455,000 sq. ft. is leased out on a long-term basis to tenants who pay Cannara monthly rent.The second Facility, located in Valleyfield Quebec, is a 1,000,00 sq. ft. hybrid greenhouse that Cannara acquired 100% from The Green Organic Dutchman (TGOD) for $27M in June of 2021. This second Facility had an estimated construction cost of over $250M, thus representing a significant opportunity for Cannara. The Valleyfield Facility is separated into a 600,000 sq. ft. hybrid greenhouse, 200,000 sq. ft. rooftop greenhouse, and a 200,000 square foot warehouse and post-harvest processing center. The main greenhouse is split into 24 zones each measuring 25,000 square feet. Before Cannara grows in each zone, it has been investing $750k to $1M in each zone to convert the hybrid greenhouse into conditions that replicate indoor cultivation, including growing without using the sun, to maximize quality and consistency of product.
As of July 2022, the Company has successfully activated 6 of its 24 25,000 sq. ft. growing zones and is currently fully utilized in cultivation at its Farnham location. The Company also invested over $1.5Min a butane extraction lab that will permit it to create, in-house, live cannabis concentrates for the Canadian market. This vertical integration allows Cannara to control the quality and consistency while maintaining cost control over the entire process from the start of cultivation all the way to packaged dried flower and extracted products.
The state-of-the-art facility that was acquired from a Canadian LP was purchased for a fraction of what it cost to construct. Can you tell us about the benefits of the facility as well as the benefits from operating in Quebec?
The Valleyfield Facility was a game-changer for Cannara especially that we acquired it for 10 cents on the dollar. This provided Cannara an immediate path to organic growth at a huge scale once we validated our growing capabilities at the Farnham location. In addition, the facility is about an hour away from the Farnham facility, allowing us to significantly utilize synergies from the proximity of both locations. Finally, having owned mega cultivation centers located in Quebec, we have access to favorable labor rates and the lowest cost of electricity in Canada, which are the two largest cannabis cost inputs.
2) When you were looking to acquire cannabis facilities, what were some of the most important factors in the process?
Our main criteria was to have the facility be an indoor operation so that we can ensure quality and consistency of our end product. When we were presented with the Valleyfield opportunity, we took a significant, but calculated, leap of faith in the fact that we were going to completely redesign a hybrid greenhouse into an indoor cultivation center. A year later, we are excited to share that we are on zone 7 now, with previous 6 zones growing on schedule and most importantly on par with the quality generated from our indoor facility
Nowadays, the most important factor for cannabis cultivation is the cost of operation, especially electricity, gas, heating, and water.
Through strategic partnerships and consumer-focused innovation, Cannara has one of the largest cannabis product portfolios in Canada. Can you tell us about the company’s strategy when it comes to determining the types of products and the brands it will work with?
Most of our products are internally created through creativity generated from the top and our talented design team who executes and improves ideas. We believe in growing our 3 main flagship brands, Tribal, Nugz, and Orchid CBD, organically in order to keep the authenticity of the brands and products, which consumers now know us for. If we can grow great cannabis at great prices, we can create exciting derivative products at great prices, and continuously innovate from there. The last piece of the cannabis puzzle, is genetics. Which is why we partnered with Exotic Genetix, to better understand the genetics we grow, continuously improve and innovate to get ahead of the market. In addition, the Exotic Genetix brand has become a staple in the cannabis community, providing us with a strong brand relationship that we can leverage with our own brands and to bring an exclusive US brand to Canada.
4) Does the company plan to expand into international markets? Does the facility meet the requirements to sell to the EU or in Latin America?
As the Company currently sells out all its production capacity it currently grows to only 3 provinces, it is not beneficial for us to scale internationally at this point in time as the Company’s objective is to dominate Canada. However, all our facilities have been built with GMP certification in mind and we are purposively building up our competencies in this area to be ready for the future and eventual entrance in international markets. For example, we have been certified to export to Israel and currently investigating opportunities to do so.
5) Where do you see the most growth potential in the cannabis sector and what markets are you the most excited about?
We believe there is still a lot more of the illicit market to capture (40-50% left) as the current legal industry for main product categories such as dried flower and pre-rolls are experiencing quality issues and product overload, leaving consumers confused. We are excited about how the next year will shape up within the Canadian cannabis industry as brands who focused on products and the customer will persevere and brands that focused on scaling and product count are slowly going to dissipate, leaving shelf space for good brands, restoring customer confidence, and capturing more market share from the black market.
6) During the last year, Cannara has strengthened its balance sheet and has the resources that are needed to be a leading North American operator. How does the company plan to achieve this milestone?
In June of 2022, the Company secured a non-dilutive $50M mortgage with BMO commercial banking during a time in the cannabis industry in which it is very difficult to raise money given the market conditions. BMO is a strong capital partner in the cannabis space when they believe in a company. Through our current success, 5th consecutive quarter of EBITDA, scaling operations and distribution networks, we have managed to build a sustainable business that is set to scale and self-fund its own capital investments and leverage larger capital investments from its debt partners like BMO commercial banking.
If you are interested in learning more about Cannara Biotech, please send an email to support@technical420.com with the subject “Cannara Biotech” to be added to our distribution list.
Pursuant to an agreement between StoneBridge Partners LLC and Cannara Biotech (LOVE) we have been hired for a period of 90 days beginning October 1, 2022 and ending January 1, 2023 to publicly disseminate information about Cannara Biotech including on the Website and other media including Facebook and Twitter. We are being paid $3,000 per month by Cannara Biotech and were paid “ZERO” shares of unrestricted or restricted common shares. We plan to sell the “ZERO” shares of Cannara Biotech that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of Cannara Biotech in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information
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