Westleaf to Become One of Canada’s Largest Premium Cannabis Retailers

As the Canadian marijuana space matures and big banks continue to step in, large chunks of capital are concentrating amidst a handful of growers. Now, the opportunity ‘of today’ for speculative investors is the legal retail cannabis space. It’s virtually a brand-new segment of a booming market…

Retailers able to roll out quickly and efficiently in 2019 arguably stand to influence the market more than some growers by creating long-term legacy brands. Trusted brands, in any industry, ultimately control consumer spending habits. And growers want access to the end user.

As the regulation framework for legal retail pot shops takes shape, varying from province to province (in many provinces it is still somewhat evolving), the market will soon figure out which retailers are best positioned. Keep in mind, the regulatory landscape is still coming together – which creates uncertainty and significant risk, but also upside potential.

The Opportunity | A Cannabis Retailer with Optionality

We are about to introduce a vertically integrated cannabis company with a core focus on retail and product branding. The company has already garnered partnerships and/or investment from some of the leading licensed producers in Canada: Tilray®, Delta 9 Cannabis, and Vivo Cannabis…

With a market cap of roughly US$7 billion, Canadian-based Tilray® made headlines a few months back when it received approval from the U.S. government to import medical cannabis for a clinical trial. Its leading medical cannabis research team of PhDs, botanists and master horticulturists are dedicated to cultivating and delivering the benefits of medical cannabis safely and reliably. Delta 9 is engaged in the production, storage, and sale of medical marijuana. Vivo Cannabis is also a well-known Canadian marijuana grower, headquartered in Napanee, Ontario.

Before introducing our ‘Canadian Retail Cannabis Play for 2019,’ one must appreciate the speed at which the industry is evolving. Bear in mind, recreational cannabis, and therefore retail cannabis shops, have only been federally legal for barely three months.

There has been, quite literally, a once in a lifetime land rush which took Canada’s retail cannabis sector by storm. It started roughly one year ago, in anticipation of this new era we are now in.

Land Rush for Retail – An Industry in its Infancy

Ask any commercial realtor or property manager you know in Canada if they’ve received calls or lease inquiries regarding pot shops in the past year. The answer will probably be a resounding yes! Demand remains constant for these new retail shops, but licenses, and tier one location opportunities, are not easy to come by.

In our November 17, 2018 report, Retail Cannabis Market Takes Shape in Canada; we outline the current shift of capital moving into retail cannabis plays:

“Retail, retail, retail. It’s why Amazon rules the world.

It’s the sellers, not the creators or growers, that often make the highest profit margins and dictate which products boom or lag. Hopeful legacy growers, the ones who, to date, have garnered the lion’s share of capital and liquidity in the weed space, are fighting for what could become generational market share in a brand-new industry: Retail cannabis sales.”

We cited a Globe and Mail article titled Forget pot producers – here’s a better way for investors to cash in on cannabis legalization, Matt Shalhoub, managing director of Toronto-based Green Acre Capital, summed up the opportunity:

“It’s the person that’s selling the farmer the equipment, that’s wholesaling and distributing the product, that’s processing it into other valuable products, that’s branding and retailing those products.”

Retail and Brands Matter Now

The ‘rush to retail’ as we call it, is only getting started.

In September 2018, Canopy Growth acquired then CSE-listed *Hiku Brands for roughly CAD$250 million in an all-stock deal largely intended to expand Canopy’s retail footprint. Canopy Growth Chairman & Co-CEO Bruce Linton stated, “Hiku equals brands. Canopy is built on brands. So we combined them…”

In February 2018, Aurora signed a deal to buy a minority stake in Liquor Stores N.A. Ltd., a strategic investment to develop a western Canadian retail cannabis business. According to CTV at the time,

“Under the deal, the Edmonton-based licensed marijuana producer will acquire a 19.9 per cent stake in the liquor store operator for $103.5 million through a non-brokered private placement.

It will also have an ability to increase its interest in Liquor Stores up to 40 per cent with an additional investment.”

And that,

“Liquor Stores, which operates 231 retail liquor stores in Western Canada and several U.S. states, plans to use the money to establish and launch a brand of cannabis retail outlets. The publicly-listed company has 178 locations in Alberta, 34 in British Columbia, and a presence in Alaska, Connecticut, New Jersey and Kentucky, according to Liquor Stores’ 2017 information circular…”

Full article from CTV here.

Since its initial investment, Aurora has increased its stake. Click here and here for details.

It’s Cannabis Retailers’ Time to Shine

Dubbed the ‘2nd wave’ of legalization, edibles, various cannabis-infused beverage products, and cool cannabis retail shop concepts will bring the value of branding to the forefront.

We believe access to end-users, quality of locations, the number of stores granted licenses and opened, and brand recognition will drive retailer valuations in 2019. And after two to three quarters of operations, sales numbers will become a factor for the investing community – the proverbial bottom line will then start to dictate valuations.

Now, to why we are writing you today…

Westleaf – The Coolest Retail Cannabis Concept We’ve Seen

Westleaf (WL: TSXV), headquartered in Calgary, Alberta, is a well-capitalized, vertically integrated cannabis company with a core focus on retail and product branding. Its integrated business model includes premium assets across retail, processing/extraction, and cultivation in Canada.

Click image to watch our exclusive video on Westleaf

Although Westleaf’s assets are under varying stages of development and are not currently operational as they are subject to completion of development and receipt of applicable approvals, among other factors, we deem the company a speculative opportunity, for many reasons we will explain today…

With an astute leadership team, roughly CAD$27 million in its treasury, access to credit facilities of roughly CAD$30 million, early mover status, a fine-tuned business plan, and a truly novel branding initiative, Westleaf is the retail play we’re putting our name behind in 2019.

With its retail store concept, known as ‘Prairie Records,’ Westleaf (WL: TSXV) is targeting launching approximately 50 prospective locations by the end of 2020 in privatized markets across Canada (SK, AB, BC, and potentially ON), subject to provincial and municipal licensing and regulations, among other factors. One of its first Prairie Records stores is slated to open in Calgary, on the iconic Stephen Avenue, next door to the Palace Theatre…

For those unfamiliar with Calgary, this is prime retail space in a trendy area with thousands of people walking by it every day. Quality of location is a staple of Westleaf’s retail business strategy. They did not take the approach of ‘throwing mud at a wall’ in hopes of getting tons of locations, but rather are focusing on pursuing a few dozen location opportunities they deem to be ‘premium.’ In other words, densely populated neighbourhoods, high traffic areas, and tourist destinations.

A caveat to remember while reading this report is Westleaf’s prospective retail locations are under development and subject to securing real estate, finalizing lease agreements and/or completing provincial and municipal approvals, among other factors. Westleaf’s development permit applications to municipalities for retail cannabis locations are at various stages of progression, with new applications in draft, submitted applications under review by regulators, and applications with approved development permits received.

Thanks to an acquisition the company announced this past week (official closing expected to occur around Thursday of next week), it garnered seventeen development permits in Western Canada alone. More on this later…

The legal retail cannabis industry is barely three months young. The regulatory environment is highly complex. This is one reason why having a management team in place that can execute on its business strategy as scripted will be so important for Westleaf moving forward. We’ll introduce the company’s key leadership members shortly. But first, watch our behind the scenes exclusive on the company, and learn its game plan for positioning itself as a dominant retail player in the cannabis industry…

It’s Not All About Retail…

Retail is Westleaf’s main focus. However, the company is one of the few truly vertically integrated companies in the Canadian cannabis industry. It has assets owned and under development across each vertical of the business, including cultivation, extraction, processing and manufacturing, distribution and wholly owned retail.

Westleaf believes that being vertically integrated provides significant optionality and defensively positions the company to protect margins across the life cycle of the industry.

Before delving into other aspects of the company, Westleaf’s banner Prairie Records cannabis brand and store concept synergistically combines recreational cannabis and music. We haven’t heard or *seen of any competitor connecting these two passions, which, in our view, go together like Brady and Belichick. Music remains a key driver in pop culture and influences lifestyle choices across generations. By marrying the two, Westleaf’s Prairie Records brand is a novel retail concept.
*We researched competitors before publishing this report. It included going to some of their stores to understand the shopping experience and branding.

According to Westleaf,

“Prairie Records lets consumers hit the high notes through a unique, sophisticated, and immersive environment that replicates an iconic yet contemporary record shop.”

Understanding Valuation in the Cannabis Game

It is very difficult to speculate on valuations in the legal retail cannabis space at the moment. As mentioned, it’s barely three months young, and there are few comparables.

In the cannabis industry, valuations have not only been derived from top-line revenue – but perceived future growth. A name. A brand. A following. What it represents are speculations on future potential cash flows and market share.

In theory, a brand with a market share, or one poised to capture market share, should grow as the market expands. The same way grower valuations were dependent on future production potential and grow operation expansion plans; the value of retailers, we believe, will initially be based on access to emerging and fast-growing consumer markets. And while it is easy to talk about expanding in various regions of the country, as many retailers do, having the capital, regulatory understanding, and right people to accomplish it is another thing entirely…

Enter Westleaf’s COO – Ben Kaanta

Formerly with MJardin, one of North America’s largest cannabis cultivation businesses, Ben Kaanta is Westleaf’s Chief Operating Officer. While at MJardin, he oversaw all aspects of day-to-day operations in over a dozen commercial cultivation facilities, the startup of another dozen facilities, and the development of training and analytics programs.

Christian Monson, Westleaf’s Chief Legal Officer & Vice President of Strategy was formerly General Counsel for MJardin…

In his former position, Mr. Monson oversaw all legal affairs while working closely with the executive team in the long-term development of the business, including co-leading the business with two other executives and returning record month-over-month revenue and profit gains. He has project managed successful merit-based cannabis license application writing efforts for clients in several states and was in charge of ensuring licensing compliance for over 70 state and local cannabis licenses.

Ben and Christian are industry leaders with the depth of experience necessary to execute in Canada’s expanding retail cannabis market.

Meet the team

Well Capitalized with Access to Roughly CAD$57 Million

Capital is paramount to any expansion plan in the retail cannabis space. With roughly CAD$27 million in cash (On December 4, 2018, the company closed a CAD$20,108,403 equity financing resulting in 23,656,945 subscription receipts issued – click here for details), Westleaf is targeting launching approximately 50 locations by the end of 2020, subject to provincial and municipal licensing and regulations, among other factors (see latest press release here for further details). In total, Westleaf has access of up to about CAD$57 million of capital, which includes CAD$30 million in low cost, non-dilutive capital from ATB, according to a January 8th press release.

Strategic Capital Deployment for a Vertically Integrated Model

Westleaf is rolling out a national retail footprint for its retail concept “Prairie Records”, with stores planned for British Columbia, Alberta, Saskatchewan and potentially Ontario. With approximately 50 potential *retail openings targeted in the next 24 months, that alone would make for a very busy and aggressive two years. However, the company has more than that planned…

*Retail locations are under development and subject to securing real estate, finalizing lease agreements and completing provincial and municipal approvals, among other factors.

Westleaf has a world-class laboratory to develop and manufacture a diversified offering of cannabis derivative products, known as the *Delta West lab (50/50 partnership with Delta 9), currently under construction in Calgary, Alberta. The company is also building a state-of-the-art indoor cultivation facility (known as *Thunderchild) to develop and manufacture a premium cannabis flower and trim in Battleford, Saskatchewan…

*Delta West lab is currently under development, and its operation is subject to receipt of all required approvals including receipt of an oil license from Health Canada. Its product SKUs are under development and subject to provincial and federal legislation.
*Completion of building and development of cultivation facility in Battleford is subject to several factors including, among other things, receipt of all government approvals including a production and sales license.

If the company can execute on its aggressive rollout targets, Westleaf could average over two new store openings per month for the next two years. On top of two massive operations facilities coming online in that timeframe.

In such a scenario, we would expect news flow to be steady.

The Calgary Processing, Extraction and Manufacturing Centre

Located in Calgary and known as ‘Delta West,’ Westleaf and Delta 9 (based in Manitoba, Delta 9 was the fourth producer in Canada licensed to produce legal cannabis) each own a 50% interest in the project (click here for partnership details). The 60,650 square foot processing, extraction, and manufacturing centre is under construction as a retrofit of an existing owned building. Westleaf also stated it has the intent to pursue GMP certification for the facility to export globally and supply retail stores across Canada. The facility’s operation is subject to receipt of all required approvals including receipt of a processor license from Health Canada to produce cannabis oil. Product SKUs for the facility are also under development and subject to provincial and federal legislation.

Westleaf reported that significant future expansion opportunities might include research, development, and a product formulation lab for additional derivative products. President and CEO Scott Hurd has high hopes for the strategic partnership with Delta 9, and the multi-faceted cannabis facility in Calgary. He stated in April 2018,

“This strategic partnership allows us to accelerate our growth plans to become a leader in cannabis in the Canadian Prairie region, with a vertically integrated presence across Alberta, Saskatchewan, and Manitoba.”

And that,

“Our goal is for the ‘Delta West’ facility located in Calgary, Alberta to be a world-class indoor cultivation, R&D, processing, extraction and fulfillment centre which will be capable of growing premium cannabis flower and producing a diversified derivative product offering to supply the Canadian and global markets.”

Construction of Phase I of the Delta West facility is expected to be complete in Q2 of 2019.

Looking to Saskatchewan, Westleaf’s Thunderchild Cultivation Facility is also under construction. With an anticipated capacity of >14,600 kg of dry flower production per annum (excluding trim), it could be a substantial indoor operation.

Phase I of the project (84,800 sq. ft.) includes a processing hub with the capacity to accommodate both Phases I and Phase II production.

In an excerpt from a mid-2018 CBC News article, Dave Dormer wrote,

“Hurd says construction began Monday on a 115,000 sq.-ft. indoor production facility in Battleford, Sask., on land owned by Thunderchild First Nation, which will take 10 to 12 months to complete.”

Hurd was quoted as stating,

“At full scale, this project will create approximately 150 job opportunities and we’re in the process of implementing an institutional-quality training program that will allow for the development and advancement of our employees’ careers.”

With construction well underway, we are expecting an update or a tentative completion date from the company soon…

Keep in mind, Thunderchild First Nation, who owns the land on which the facility is being built, invested CAD$8 million into Westleaf, making them the largest shareholder at the time.

Learn more here.

Cannabis Value Chain

Westleaf is looking to control the entire cannabis value chain.

What does that mean?

Scott Hurd, Westleaf’s President and CEO, speaks to this point at the 3:25 mark of our exclusive interview, stating,

“Westleaf’s a vertically integrated company. What I mean by that is we own, control or have an interest in assets across the entire cannabis value chain. From production, processing, extraction, manufacturing, product branding, right down to retail.”

Westleaf’s integrated business model is intended to control assets throughout the cannabis value chain; and the company anticipates benefits including, but not limited to:

• Distribution for Westleaf brands;
• Control over the consumer experience from seed to sale;
• Margin protection against a potentially oversupplied market;
• Maximization of profit margin by capturing all segments of the value-chain;
• Consumer insights through retail ownership and the ability to alter production accordingly; and allowing for proper capital allocation and management across all segments.

The Landscape

In Canada, the second country behind tiny Uruguay to legalize recreational marijuana, the regulatory framework for retail cannabis and related products will likely evolve for many months, if not years. That alone brings its own set of risks and challenges for Westleaf. But the company believes it is up to the task, thanks to the hard work and experience of its leadership personnel.

The cannabis sector will be regulated by long-established authorities within each province. And they all have their own set of rules and regulations – some provinces are more free-market-oriented than others.

Also, it is important to remember that each municipality has its process and bylaws regarding the permitting of retail cannabis within its jurisdiction.

Westleaf’s development permit applications to municipalities for retail cannabis locations are at various stages of progression, with new applications in draft, submitted applications under review by regulators, and applications with approved development permits received.

One of the company’s pending applications was recently documented in a local publication in Banff known as Rocky Mountain Outlook. This may give a sense of the kinds of ‘premium’ locations Westleaf is targeting.

The Rocky Mountain Outlook reported on January 10th that Westleaf has applied for a cannabis retail shop in Banff, one of Canada’s foremost tourist destinations. In 2017/2018, Banff National Park received 4 million visitors, according to Statista.

According to Rocky Mountain Outlook, Westleaf is one of five applications for retail cannabis shops being forwarded to Banff’s Municipal Planning Commission for decision. The company’s proposed location is in the former nightclub Hoodoo Lounge, the report states.

Westleaf has a target to launch roughly 50 retail cannabis shops by the end of 2020. Executing on 50 in that timeframe will be a challenge, but even 20-30 locations would give the company quite a substantial retail footprint. And again, for Westleaf, it’s about ‘premium’ locations, not merely the number.

An example of a prime prospective location in the company’s portfolio will include, following closing of the acquisition which is expected around this coming Thursday (click here for details), the only approved development permits adjacent to the University of Alberta.

Once open, we expect its previously mentioned Stephen Avenue location, situated beside the Palace Theatre in Calgary, to be Westleaf’s flagship shop.

Aside from the locations shown below from the company’s corporate presentation, Westleaf seems rather tight-lipped about most of its prospective locations, likely in part to not tip its hand to competitors.

N.B. Westleaf is prepping to launch a Prairie Records store in Warman, just north of Saskatoon, and “an extended product offering through its e-commerce platform which will serve the entire province of Saskatchewan…”

With about CAD$27 million in cash and access to up to CAD$57 million of capital, including CAD$30 million in low cost, non-dilutive capital, Westleaf appears ready to pursue its retail business plan. Furthermore, with partnerships and large investments ranging from a First Nation group to growers Delta 9, Vivo Cannabis and one of the industry’s top names in Tilray, Westleaf can likely tap into a wide and diverse brain trust of expertise and industry support.

Stages of Development

When it comes to domestic cannabis production and retail sales channels, this is where Westleaf stands with some of its license applications, according to its Filing Statement from November 2018:

Westleaf submitted its application to become a Licensed Producer under the ACMPR for the Thunderchild Facility in Battleford SK, and received confirmation that all security clearances were approved on August 2, 2018, and that the application is now in the review phase. Westleaf’s application is currently being transferred into the new Cannabis Tracking and Licensing System (“CTLS”). Such license, if granted, will allow Westleaf to cultivate cannabis and sell dried cannabis flower from its Thunderchild Facility.

Westleaf’s application is currently under review by Health Canada. At full operational capacity, the Thunderchild Facility will be approximately 115,000 square feet in size and will provide potential job creation for the Thunderchild First Nation community and spur long-term economic development in Battleford, Saskatchewan.

Looking to its 50% owned Delta West Facility in Calgary, Westleaf submitted its application on August 30, 2018 for a license to produce cannabis oils for the facility. Westleaf received a Health Canada file number on September 14, 2018, and its application is currently in the process of being transferred into the new CTLS. Westleaf intends for the Delta West Facility to be a production, research and development, processing, extraction, and fulfillment centre which will be capable of producing a diversified derivative product offering to supply the Canadian and global market.

Source of information: Westleaf’s Filing Statement on Sedar.com dated November 29, 2018

We expect development updates on both of these facilities in the near term.

Growth & Execution

Westleaf is entering a period of ambitious growth, precisely when we look to make introductions. The company has put out several press releases since early December, despite coming to trade (via an RTO) on January 9th, 2019.

Most noteworthy, just this past Thursday, the company’s news release titled, Westleaf to Become One of Canada’s Largest Premium Cannabis Retailers with Exercise of its Option to Acquire Canndara stated:

“..it has exercised its option to acquire 100% of Canndara Canada Inc. (“Canndara”), a cannabis retail company with over fifty (50) prospective premium retail locations across Canada. On Dec. 20, 2018, Westleaf purchased 21.4% of the Class “A” common voting shares of Canndara (“Canndara Shares”) and secured an option (the “Option”) to acquire the remaining 78.6% of the Canndara Shares for an aggregate purchase price of $48.4 million (the “Purchase Price”). The Purchase Price is payable in common shares in the capital of Westleaf (“Common Shares”) at a deemed value of $2.24 per Common Share. Closing is expected to occur on or about January 31, 2019 (“Closing”).”

Importantly,

“Canndara’s locations are at varying stages of development with seventeen (17) development permits already awarded in Western Canada. As a result of the transaction, Westleaf has increased its guidance from 20 to 30 cannabis retail locations to approximately 50 locations, that are expected to be operating by the end of 2020, subject to provincial and municipal licensing and regulations.”

Click here to read the full press release from Thursday, January 24, 2019.

Westleaf appears to be operating with a sense of urgency necessary to secure market share in an ever-competitive cannabis market. Following the closing of the Canndara acquisition, Westleaf will have one of the largest cannabis retail footprints under development in Western Canada.

Ambitions

We like the fact that in addition to the prospective retail locations, Westleaf is targeting online sales within Saskatchewan. Imagine being able to select and buy various cannabis strains and products from the comfort of one’s home. Westleaf anticipates it will be an online product provider in Saskatchewan before the end of Q1 2019.

Westleaf’s Highlights and Plans

• Vertically Integrated: Targeting premium locations in British Columbia, Alberta, and Saskatchewan; 50% owned state-of-the-art extraction and production facility under construction in Calgary, Alberta; large scale indoor cannabis cultivation facility under construction in Battleford, Saskatchewan;
• A Unique Cannabis Retail Experience: Prairie Records is a differentiated retail concept approach with tactile in-store branding and sticky consumer engagement;
• Superior Retail Footprint: Targeting approximately 50 locations to launch by the end of 2020 in densely populated neighborhoods and tourist destinations;
• The Team: Combining cannabis cultivation experts, veteran business development professionals, and tenacious capital market specialists, Westleaf’s senior team brings integrity, innovation, and industry-defining thought leadership to the cannabis space;
• M & A Focused: Track record of successful partnerships & acquisitions with a value-oriented investment approach;
• Strategic Partnerships with Leading Industry Players: Tilray, VIVO Cannabis, ATB Financial, Canndara Canada and Delta 9; and
• Strong Financial Position (reported in January 8, 2019 press release): Access to up to $57 million of capital (~$27 million of cash and $30 million in low cost, non-dilutive capital).

Recognize that we are biased when it comes to Westleaf. Westleaf is a sponsor and client, and we own shares of the company, making us cheerleaders and shareholders. Conduct your own thorough and independent due diligence to properly understand the risks associated with investing in a company of this nature. A good place to start your due diligence is reviewing the company’s Sedar filings at www.sedar.com. Westleaf is most certainly at an expansion stage, which at some point will likely result in further dilution to shareholders. Pick your spots…

Westleaf’s story is a deep one given its vertically integrated business plan. That said, it is in the early stages of development, so one of the biggest risks facing the company will be in its ability to execute on its business development plan as scripted. The company will have to navigate complex regulatory environments, stiff competition, tight timelines, branding strategies, large construction projects and more. A key figure in helping the company deliver on its projections and timelines will be Mr. Shon Williams, Westleaf’s Chief Development Officer…

Shon Williams – West Point Grad & Westleaf’s Chief Development Officer

Simply put, Shon Williams’ credentials are impressive and speak to the calibre of Westleaf’s team…

Mr. Williams previously served as the Director of BD, PM & Design for MJardin, one of the world’s largest cannabis cultivation companies, where he drove multi-national/multi-state expansion and brought project and design discipline to the industry.

MJardin is a global cannabis management platform with extensive experience in cultivation, processing, distribution and retail. For over 10 years, MJardin has refined cultivation methodologies, developed state of the art facilities and implemented vertical integration for and on behalf of license owners. The firm is based in Denver Colorado, with offices in Toronto, Canada and Barcelona, Spain.

After earning a BS in Mech/Aero Engineering from the iconic United States Military Academy at West Point, Mr. Williams served 20 years in the Air Force in roles such as space systems development, flight test, international cooperation, and F-22/F-15 fighter programs including leading the largest (US$30 billion) international sale in US history. He also deployed to Afghanistan with NATO. After retirement as a Lt Col, he became BD Director for Calspan Aerospace. Shon has an MS in Astronautical Engineering and is a USAF Test Pilot School graduate.

Suffice to say, this man is a doer. In recent years, his focus has been centered around the marijuana industry.

Wrapping Up

Regarding the reasons behind the public markets for Westleaf, President and CEO Scott Hurd made his intentions clear,

“It reaffirms Westleaf’s commitment to providing exceptional value to its shareholders by focusing on maximizing profit margins, achieving its growth ambitions and generating robust market share.”

For the reasons highlighted in this report, Westleaf (WL: TSXV) is our ‘Canadian Retail Cannabis Play of 2019.’ We look forward to tracking the company’s development as it pursues its ambitious growth phase intended to transform Westleaf into a producer, extractor, brander, distributor and, most importantly, a retailer of cannabis products – potentially creating a transformative seed to sale organization.

On a broad level, we anticipate continued M&A activity in the retail cannabis sector over the coming quarters.

Expect to hear from us again once Westleaf opens its first Prairie Records store in Calgary, Alberta, anticipated for this quarter…

All the best with your investments,

PINNACLEDIGEST.COM

Westleaf Inc. Stock Information

Exchange: TSX Venture
Symbol: WL
Stock Price: CAD$2.67
10-Day Avg. Trading Volume: 70,000 (approximate)

Issued and Outstanding: According to Westleaf’s ANNUAL INFORMATION FORM (AIF) For the year ended December 31, 2018, posted on Sedar.com (Dated: January 15, 2019), the company has 113,122,688 Common Shares “issued and outstanding as at the date of this AIF.”

That number of shares will increase upon closing given the latest announcement on Thursday that Westleaf will be acquiring Canndara. The release stated, “The consideration payable by Westleaf on Closing is an aggregate of 21,614,407 Common Shares, at a deemed price of $2.24 per Common Share. Closing is expected to occur on or about January 31, 2019. On Closing, Westleaf will also issue an aggregate of 1,080,720 Common Shares to Inform Management Group Inc. at a deemed price of $2.24 per Common Share, in payment of a finder’s fee in respect of the closing the Option exercise. The finder’s fee is subject to TSX Venture Exchange acceptance.”

Full details of the acquisition here.

Online Resources

Visit Westleaf Online

Check out Prairie Records

SEDAR Filings

Pinnacle’s Exclusive Video on Westleaf

Westleaf’s Investment Banking Pedigree

Unlike many marijuana firms, Westleaf’s investment banking experience comes from within…

Previously at Grafton Asset Management, a leading Canadian asset management firm, focused on real-asset investments in North America, President and CEO Scott Hurd is uniquely positioned to lead Westleaf. Already having been involved in raising, investing and managing over CAD$1 billion of capital at Grafton, Scott knows the capital markets well.

Chief Financial Officer of Westleaf and head of its M&A arm, Taylor Ethans was a Vice President for TriWest Capital Partners where he executed eleven acquisitions and divestitures in manufacturing and retail focused businesses, totaling over CAD$1 bn in valuation. Again, having internal institutional expertise is paramount, and has led to the success Westleaf has had in raising capital.

In our mind, Taylor is perfectly positioned to help execute on Westleaf’s aggressive growth strategy. Before TriWest, Taylor worked at RBC Capital Markets where he was involved in numerous public equity and debt financings.

Meet the rest of the team

Corporate Presentation

Disclosure, Compensation, Risks Involved and Forward-Looking Statements:
You must read the following carefully before proceeding.

THIS REPORT IS NOT INVESTMENT ADVICE, NOR A RECOMMENDATION TO PURCHASE ANY SECURITY, NOR IS IT INTENDED TO BE A COMPLETE OVERVIEW OF WESTLEAF INC.

All statements in this report are to be checked and verified by the reader.

This report may contain technical or other inaccuracies, omissions, or typographical errors, for which Maximus Strategic Consulting Inc., owner of PinnacleDigest.com (“Pinnacle Digest” or “we”), assumes no responsibility. We cannot warrant the information contained in this report to be exhaustive, complete or sufficient. Westleaf Inc. is a client and sponsor of PinnacleDigest.com. PinnacleDigest.com authored and published this report. Because we are paid by Westleaf Inc., and therefore we are not independent reporters, our coverage of Westleaf Inc. features many of its positive aspects, and not the potential risks to its business or to investing in its stock.

Important: Our disclosure for this report on Westleaf Inc. applies to the date this report was released to our subscribers (January 26, 2019) and posted on our website. This disclaimer will never be updated, even after we sell our shares of Westleaf Inc.

Do Your Own Due Diligence: In all cases, interested parties should conduct their own investigation and analysis of Westleaf Inc. (“Westleaf” or “the Company” or “Westleaf Cannabis Inc.”), its assets and the information provided in this report.

The securities of Westleaf are highly speculative due to the nature of the Company’s business and the present stage of Westleaf’s development, which is in the early-stages. A prospective investor should consider carefully the risk factors set out below and outlined in the Company’s Sedar filings (we strongly encourage all prospective investors to carefully review the Company’s Filing Statement and all its subsequent news releases and filings on the Sedar website before making any investment decision). An investment in securities of Westleaf should only be made by persons who can afford a significant or total loss of their investment. The securities of Westleaf have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration.

While the information contained in this report has been prepared in good faith, neither Maximus Strategic Consulting Inc. nor Pinnacle Digest, give, have given or have authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information in this report (all such information being referred to as “Information”) and liability therefore is expressly disclaimed to the fullest extent permitted by law. Accordingly, neither Maximus Strategic Consulting Inc., nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness of the Information or for any of the opinions contained in this report or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this report.

Risk to Obtain Licenses: Westleaf’s ability to grow, ship, possess and obtain cannabis is dependent on its receipt of the appropriate licenses and its ability to remain in good standing as a Licensed Producer after the receipt of the licenses. The Company has applied to Health Canada for two ACMPR licenses which the Company expects will transition to applications under the Cannabis Act based on guidance from Health Canada. Even if the Company is successful in receiving these licenses, and other licenses which it may apply for in the future, there is no guarantee that Health Canada will extend or renew any or all of the licenses. Any failure to obtain licenses or future loss of such licenses could materially adversely affect the Company and its ability to operate. Retail locations are under development and subject to securing real estate, finalizing lease agreements and completing provincial and municipal approvals.

The statements and opinions within this report expressed by Pinnacle Digest are solely those of Pinnacle Digest and not the opinions of Westleaf. The statements and opinions within this report expressed by representatives of Westleaf are solely those of Westleaf and not the opinions of Pinnacle Digest.

Cautionary Note Regarding Forward-Looking Information:
This report contains “forward-looking information” within the meaning of Canadian securities legislation (collectively, “forward-looking statements”). All statements, other than statements of historical fact, that address activities, events or developments that Westleaf or Pinnacle Digest believes, expects or anticipates will or may occur in the future are forward looking statements, including, without limitation, statements regarding the future financial position, business strategy, potential acquisitions, budgets, litigation, projected costs, plans, and objectives of or involving Westleaf. Such statements include but are not limited to, statements with respect to future growth predictions for the retail cannabis space; statements relating to when the Company will open its first retail cannabis stores; statements relating to how many Westleaf owned cannabis retail stores will be open by a given date; statements regarding the Company’s intention to grow the business and operations of Westleaf; statements regarding the issuance of Cannabis retail store licenses; statements regarding the objectives and business plans of Westleaf; statements regarding the performance of Westleaf; statements pertaining to Westleaf’s expectations regarding revenues, expenses, production, extraction, product development, EBITDA and anticipated cash needs; statements regarding the expectation of the receipt by Westleaf of all licenses and permits by applicable government authorities to conduct its cannabis operations; statements regarding the expected timing and completion of Westleaf’s near-term and long-term objectives; statements about the competitive advantages, business strategies and future business plans of Westleaf, including its possible dominance of premium retail locations for cannabis suppliers and its ability to deliver a world class, novel shopping experience; statements about Westleaf’s future product offerings; statements regarding the number, terms and timing of leases, construction and licensing of certain facilities and retail locations of Westleaf and its partners; statements regarding strategic investments and partnerships available to Westleaf; statements regarding Westleaf being a dominant player in the retail cannabis space; statements that the expertise of the Company will help its market penetration significantly; that new retail and production assets or locations will result in a major benefit to the Company’s growth and overall shareholder value; any statements relating to the Company’s expectations regarding future development and operation of its cannabis production, processing, and manufacturing facilities; statements regarding the Company’s ability to produce products of high quality; the ability of Westleaf to operate as a vertically integrated entity; the development of brands and brand equity; the Company’s expectations of product sales; and other statements, estimates or expectations.

Often, but not always, these forward-looking statements can be identified by the use of forward-looking terminology such as “expects”, “expected”, “budgeted”, “targets”, “forecasts”, “intends”, “anticipates”, “scheduled”, “estimates”, “aims”, “will”, “believes”, “projects” “could” “would” and similar expressions (including negative variations) which by their nature refer to future events.

By their very nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Westleaf’s control. These statements should not be read as guarantees of future performance or results. Forward looking statements are based on the opinions and estimates of management or Pinnacle Digest at the date the statements are made, as well as a number of assumptions made by, and information currently available to, the Company or Pinnacle Digest concerning, among other things, that demand for the Company’s products will be strong; that Westleaf will receive licenses from Health Canada for facilities; that Westleaf will receive retail licenses for its proposed retail locations; Westleaf’s ability to obtain regulatory approvals in a timely manner; Westleaf’s ability to secure future financing to meet its growth targets; Westleaf’s ability to grow, store, and sell cannabis in Canada; Westleaf’s ability to provide an exceptional retail experience for shoppers that exceeds its competitors; that there will be an increase in number of products available for sale to consumers; and that Westleaf will obtain a consistent and reliable supply of cannabis related products.

Factors that could cause actual results to vary materially from results anticipated by such forward looking statements include, but are not limited to, governmental regulations changing to the Company’s detriment; consumers may not embrace and purchase any of the Company’s products; failure to receive approval by appropriate governing agencies for marketing, producing and/or selling cannabis-related products; results and performance of Westleaf may not meet expectations because its sales concept does not become popular; failure to receive licenses from Health Canada; failure to receive retail licenses for the proposed retail locations; changes in market dynamics including business relationships and competition; failure to raise capital for expenditure programs; changes in key management; the Company’s ability to raise the additional funding that it will need to continue to pursue its business; trademark or other intellectual property challenges; the fact that there may be a recall of products due to unintended contamination or other issues which could expose the Company to legal liability; the inherent uncertainties associated with operating as an early stage company; changes in customer demand and the fact consumers may not embrace Westleaf products; liabilities inherent in cannabis development operations; and volatility in the Company’s stock price.

The legal cannabis industry is new and very risky. It is also important to understand that Westleaf has not generated revenue as of the date of this report and therefore it currently operates at a loss. Even if it is able to generate revenue, there is no certainty that will translate into the Company being profitable.

These forward-looking statements are made as of the date of this report being publicly released (January 26, 2019), and neither Pinnacle Digest nor the Company assume any obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements, except as required by applicable law, including the securities laws of Canada. Although Pinnacle Digest and Westleaf believe that the assumptions inherent in their respective forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to their inherent uncertainty.

Readers of this report should consult all of the information set forth herein and should also refer to the risk factors disclosure outlined in the reports and other documents Westleaf files on the SEDAR website, available at www.sedar.com.

We Are Not Financial Advisors: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned anywhere in this report (particularly in respect to Westleaf). PinnacleDigest.com is an online financial newsletter owned by Maximus Strategic Consulting Inc. We are focused on researching and marketing for small public companies. This report is intended for informational and entertainment purposes only. The author of this report and its publishers bear no liability for losses and/or damages arising from the use of this report.

Be advised, Maximus Strategic Consulting Inc., PinnacleDigest.com and its employees are not a registered broker-dealer or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer.

Never, ever, make an investment based solely on what you read in an online newsletter, including Pinnacle Digest’s online newsletter, or Internet bulletin board, especially if the investment involves a small, thinly-traded company that isn’t well known.

We Are Biased: Westleaf is a client of ours (details in this disclaimer on our compensation). We also own shares of Westleaf. For those reasons, we want to remind you that we are biased when it comes to the Company.

Because Westleaf has paid us CAD$100,000 plus GST for our online advertising and marketing services, and we (Maximus Strategic Consulting Inc. and its President Aaron Hoddinott) own shares of the Company, you must recognize the inherent conflict of interest involved that may influence our perspective on Westleaf; this is one reason why we stress that you conduct extensive due diligence as well as seek the advice of your financial advisor and a registered broker-dealer before considering investing in the Company. Investigate and fully understand all risks before investing.

PinnacleDigest.com is often paid editorial fees for its writing and the dissemination of material. The clients (including Westleaf) represented by PinnacleDigest.com are typically early-stage companies that pose a much higher risk to investors than established companies. When investing in speculative stocks such as Westleaf it is possible to lose your entire investment over time or even quickly. Westleaf is not an appropriate investment for most investors.

Set forth below is our disclosure of compensation received from Westleaf and details of our stock ownership in the Company as of January 26, 2019:

Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, has been paid CAD$100,000 plus GST to provide online advertisement coverage for Westleaf for a six-month online marketing agreement. Westleaf paid for this coverage. The coverage includes, but is not limited to, the creation and distribution of reports authored by PinnacleDigest.com about Westleaf (reports such as this one), as well as display advertisements and news distribution about the Company on our website and in our newsletter. Both Maximus Strategic Consulting Inc. and its President Aaron Hoddinott own shares of Westleaf. Both Maximus Strategic Consulting Inc. and Aaron Hoddinott intend to sell every share they own of Westleaf for their own profit. All shares Maximus Strategic Consulting Inc. and Aaron Hoddinott currently own or purchase in the future of Westleaf will be sold without notice to PinnacleDigest.com’s subscribers or the general public. Maximus Strategic Consulting Inc. and its President Aaron Hoddinott benefit from price and trading volume increases in Westleaf, and are therefore extremely biased when it comes to Westleaf.

PinnacleDigest.com’s past performance is not indicative of future results and should not be used as a reason to purchase any security mentioned in this report or on our website.

The past performance of Westleaf’s management, directors, advisors and leadership personnel is not indicative of future results for the Company and should not be used as a reason to purchase any security mentioned in this report.

Maximus Strategic Consulting Inc. and PinnacleDigest.com (including its employees and consultants) are not chartered business valuators; the methods used by business valuators often cannot justify the trading price for most junior stock exchange listed companies, including Westleaf.

Any decision to purchase or sell as a result of the opinions expressed in this report OR ON PinnacleDigest.com will be the full responsibility of the person authorizing such transaction, and should only be made after such person has consulted a registered financial advisor and conducted thorough due diligence. Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Our views and opinions regarding the companies we feature on PinnacleDigest.com and in this report are our own views and are based on information that we have received, which we assumed to be reliable. We do not guarantee that any of the companies mentioned in this report (specifically Westleaf) or on PinnacleDigest.com will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect.

To get an up to date account on any changes to our disclosure for Westleaf Inc. (which will change over time) view our full disclosure at the url listed here: https://www.pinnacledigest.com/disclosure-compensation/

Maximus Strategic Consulting Inc., owner of PinnacleDigest.com, does not undertake any obligation to publicly update or revise any statements made in this report.

Learn how to protect yourself and become a more informed investor at www.investright.org

You should refer to Westleaf’s public disclosure documents found on the SEDAR website (www.sedar.com) before considering investing in the Company. The public disclosure documents will help investors fully understand Westleaf’s business and the risks associated with the Company.

No warranty, either express, or implied, is given for the information and opinions published in this report. All information is provided “as is” WITHOUT WARRANTY OR CONDITION OF ANY KIND, EXPRESS OR IMPLIED, AND ALL SUCH WARRANTIES OR CONDITIONS ARE HEREBY DISCLAIMED. MAXIMUS STRATEGIC CONSULTING INC. AND ITS SERVICE PROVIDERS ASSUME NO RESPONSIBILITY TO YOU OR TO ANY THIRD PARTY FOR ANY ERRORS OR OMISSIONS.

Please be aware and note the date this report was published (January 26, 2019). As a result of the passing of time, the relevancy of the opinions and facts in this report are likely to diminish and may change. As such, you cannot rely on the accuracy and timeliness of the information provided in this report. Since there is no specific guideline as to how long this report may remain relevant, you should consider that it may be irrelevant shortly after its publication date.

Trading in the securities of Westleaf should be considered highly speculative.