THE FUTURE IS ORGANIC INDUSTRY LEADER IN LOW-COST, CERTIFIED ORGANIC CANNABIS PRODUCTION

Transcription

1 THE FUTURE IS ORGANIC INDUSTRY LEADER IN LOW-COST, CERTIFIED ORGANIC CANNABIS PRODUCTION August 2018

2 Disclaimer This presentation is not, and under no circumstances is to be construed as, a prospectus, or advertisement or a public offering of securities of Rubicon Organics Inc. ( Rubicon Organics" or the "Company"). This presentation contains forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs of future performance, statements regarding Rubicon Organics plan to cultivate, Rubicon Organics plans, timing and estimates of production for its facilities, how Rubicon Organics will be valued going forward, Rubicon Organics bringing the 1964 Supply Co. brand to Canada, Rubicon Organics completing a Pre-IPO brokered private placement and the terms of such an offering, Rubicon Organics beginning trading on the Canadian Securities Exchange and the timing thereof, Rubicon Organics receiving its license to cultivate from Health Canada and beginning production of 11,000 kg per year of organic cannabis, Rubicon Organics identifying acquisition opportunities in the U.S., Rubicon Organics selling organic cannabis in Canada and timing of its first sale in Canada, the state of the marijuana market in Canada and the U.S. in the future, Rubicon Organics implementing an aggressive growth strategy to rapidly build market share in the U.S., Rubicon Organics engaging the Fraser Valley Organic Producers Association to become a certified organic cannabis producer in Canada, Rubicon Organics producing more cannabis in 2019 compared to other mid-tier Canadian LPs, the construction of two additional 5-acre greenhouses to expand production to 67,000kg/year in 2020, Rubicon Organics processing trim from its facilities in Washington and British Columbia, and Certified Organic Cannabis being a key ingredient in a variety of high margin products are "forward-looking statements." Forward-looking statements can be identified by the use of words such as "plans" or "is expected", or variations of such words and phrases or statements that certain actions, events or results are to begin, ramping up to, imminent, set to or "will" be taken, occur or be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward looking statements. Such risks and uncertainties include, among others, dependence on obtaining and maintaining regulatory approvals, including acquiring and renewing state, local or other licenses and any inability to obtain all necessary governmental approvals licenses and permits to complete construction of its proposed facilities in a timely manner; engaging in activities which currently are illegal under U.S. federal law and the uncertainty of existing protection from U.S. federal or other prosecution; regulatory or political change such as changes in applicable laws and regulations, including U.S. state-law legalization, particularly in California, due to inconsistent public opinion, perception of the medical-use and adult-use marijuana industry, bureaucratic delays or inefficiencies or any other reasons; any other factors or developments which may hinder market growth; Rubicon Organics limited operating history and lack of historical profits; reliance on management; and the effect of capital market conditions and other factors on capital availability; competition, including from more established or better financed competitors; and the need to secure and maintain corporate alliances and partnerships, including with customers and suppliers. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. Although Rubicon Organics has attempted to identify important risk factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other risk factors that cause actions, events or results to differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. Rubicon Organics assumes no obligation to update any forward-looking statement, even if new information becomes available as a result of future events, new information or for any other reason except as required by law. The focus of Rubicon Organics business is the cannabis industry. The production, distribution, sale and use of marijuana and its derivatives are still restricted by law in some of the jurisdictions in which Rubicon Organics intends to operate, including under federal law of the United States despite being legalized under some state law. These laws and their enforcement are in flux and vary dramatically from jurisdiction to jurisdiction. The enforcement of these laws and its affect on Rubicon Organics and its business, employees, directors and shareholders are uncertain and accordingly involve considerable risk. This presentation contains information obtained by the Company from third parties, including but not limited to market data. The Company believes such information to be accurate but has not independently verified such information. To the extent such information is obtained from third party sources, there is a risk that the assumptions made and conclusions drawn by the Company based on such representations are not accurate. Cannabis-Related Practices or Activities are Illegal Under U.S. Federal Laws. The concepts of "medical cannabis" and "recreational cannabis" do not exist under U.S. federal law. The U.S. Federal Controlled Substances Act classifies "marihuana" as a Schedule I drug. Accordingly, cannabis-related practices or activities, including without limitation, the manufacture, importation, possession, use or distribution of cannabis are illegal under U.S. federal law. Strict compliance with state laws with respect to cannabis will neither absolve the Company of liability under U.S. federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company. Any such proceedings brought against the Company may adversely affect the Company's operations and financial performance. An investment in the Company is speculative and involves substantial risk and is only suitable for investors that understand the potential consequences and are able to bear the risk of losing their entire investment. The Company is in the early stage of development and has a limited operational history, making it difficult to accurately predict business operations. The Company has limited resources and may run out of capital prior to becoming profitable. The Company may fail and investors may lose their entire investment. An investment in the Company is illiquid. The Company is not a reporting issuer in any jurisdiction of Canada and there is currently no market through which the special warrants or any other securities of the Company may be sold. The Special Warrants (and the securities issuable thereunder) will be subject to an indefinite hold period in Canada and will only be freely tradeable in Canada in the event the Company becomes a reporting issuer in Canada. Purchasers may not be able to resell those securities. The Company s securities have not been, and may never be, registered under the United States Securities Act of 1933, as amended, or under applicable state or foreign securities laws. An investment in the Company may have tax consequences to the investor. The Company assumes no responsibility for the tax consequences of any investment. Investors should confer with their own tax advisors regarding an investment in the Company. The production, packaging, labelling, handling, distribution, importation, exportation, licensing, sale and storage of cannabis products are affected by extensive laws, governmental regulations, administrative determinations and similar constraints which are beyond the Company s control. There can be no assurance that the Company is or will be in compliance with all of these laws, regulations, determinations and other constraints. Failure to comply with these laws, regulations, determinations and other constraints or new laws, regulations, determinations or constraints could lead to the imposition of significant penalties or claims and could negatively impact the Company s business. In addition, the adoption of new laws, regulations, determinations other constraints or changes in the interpretations of such requirements may result in significant compliance costs. This may have a material adverse effect on the Company s business, results of operations, cash flows and financial condition W

3 Disclaimer CAUTIONARY NOTE TO UNITED STATES INVESTORS The securities of the Company described herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the U.S. Securities Act ), or any state securities laws, and may not be offered and sold in the United States, or for the account or benefit of any U.S. person or any person in the United States, except that securities may be offered and sold to a limited number of accredited investors in reliance upon an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws. U.S. person and United States are as defined in Regulation S under the U.S. Securities Act. INVESTOR NOTICE STATUTORY RIGHTS OF ACTION: In certain circumstances, purchasers resident in certain provinces of Canada, are provided with a remedy for rescission or damages, or both, in addition to any other right they may have at law, where an offering memorandum (such as this presentation) and any amendment to it contains a misrepresentation. Where used herein, misrepresentation means an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make any statement not misleading in light of the circumstances in which it was made. These remedies, or notice with respect to these remedies, must be exercised or delivered, as the case may be, by the purchaser within the time limits prescribed by applicable securities legislation. The following summary is subject to the express provisions of the applicable securities laws, regulations and rules, and reference is made thereto for the complete text of such provisions. Such provisions may contain limitations and statutory defences not described here on which the Company and other applicable parties may rely. Purchasers should refer to the applicable provisions of the securities legislation of their province for the particulars of these rights or consult with a legal adviser. The following is a summary of rights of rescission or damages, or both, available to purchasers resident in the Province of Ontario, New Brunswick, Nova Scotia and Saskatchewan. If there is a misrepresentation herein and you are a purchaser under securities legislation in Ontario, New Brunswick, Nova Scotia and Saskatchewan you have, without regard to whether you relied upon the misrepresentation, a statutory right of action for damages, or while still the owner of the securities, for rescission against the Company. This statutory right of action is subject to the following: (a) if you elect to exercise the right of action for rescission, you will have no right of action for damages against the Company; (b) except with respect to purchasers resident in Nova Scotia, no action shall be commenced to enforce a right of action for rescission after 180 days from the date of the transaction that gave rise to the cause of action; (c) no action shall be commenced to enforce a right of action for damages after the earlier of (i) 180 days (with respect to purchasers resident in Ontario) or one year (with respect to purchasers resident in Saskatchewan and New Brunswick) after you first had knowledge of the facts giving rise to the cause of action and (ii) three years (with respect to purchasers resident in Ontario) or six years (with respect to purchasers resident in Saskatchewan and New Brunswick) after the date of the transaction that gave rise to the cause of action; (d) with respect to purchasers resident in Nova Scotia, no action shall be commenced to enforce a right of action for rescission or damages after 120 days from the date on which payment for the securities was made by you; (e) the Company will not be liable if it proves that you purchased the securities with knowledge of the misrepresentation; (f) in the case of an action for damages, the Company will not be liable for all or any portion of the damages that it proves do not represent the depreciation in value of the securities as a result of the misrepresentations; and (g) in no case will the amount recoverable in such action exceed the price at which the securities were sold to you. The foregoing is a summary only and is subject to the express provisions of the Securities Act (Ontario), the Securities Act (New Brunswick), the Securities Act (Nova Scotia) and the Securities Act (Saskatchewan), and the rules, regulations and other instruments thereunder, and reference is made to the complete text of such provisions contained therein. Such provisions may contain limitations and statutory defences on which the Company may rely. Notwithstanding that the Securities Act (British Columbia) and the Securities Act (Alberta) do not provide, or require the Company to provide, to purchasers resident in these jurisdictions any rights of action in circumstances where this presentation or an amendment hereto contains a misrepresentation, the Company hereby grants to such purchasers contractual rights of action that are equivalent to the statutory rights of action set forth above with respect to purchasers resident in Ontario. Figures are presented in Canadian dollars, unless otherwise noted. 2

4 Vision for the Company Rubicon s vision for the future is to build a global premium cannabis company with a strong branded presence. In order to do this, we require 3 things: High Quality, Low Cost production Premium retail brands and premium CPG brands Multi-jurisdictional distribution 3

5 Investment Highlights Certified Organic Near-Term Production Rubicon Organics holds proprietary intellectual property (IP) to produce premium quality Certified Organic Cannabis Will be one of two certified organic publicly traded cannabis companies shortly Set to begin cultivation by Q with an initial capacity of 15,400 kg/year (165,000 sq. ft.) Ramping up to ~82,000 kg/year by ,000 sq. ft. of cultivation currently licensed & operational (1) Operating in the Largest Markets The North American cannabis market is expected to be US$25.7 billion by 2021 Canada, Washington & California accounts for 58% (US$14.8 billion) of the market with 83 million people Significant Value Catalysts Seeking a public listing on the Canadian Securities Exchange ( CSE ) in Q Imminent valuation re-rating with the License to Cultivate expected in Q Brand Focus in Influencer Markets 1964 Supply Co. a rapidly growing cannabis brand in California Distribution agreements in place for the entire state of California 4 Source: Arcview and Canaccord research (1) Off-take agreement with greenhouses in Santa Barbara and Monterey County

6 Certified Organic Cannabis Key Differentiator Rubicon Organics holds the IP to produce premium quality Certified Organic Cannabis Jesse McConnell (CEO) Co-Founder of WMMC, the first and only Certified Organic Cannabis producer in Canada Rubicon Organics Chief Scientific Officer (CSO) Wrote the Certified Organic Cannabis Standard in Canada and led WMMC through the organic certification process Proprietary cultivation program developed in 40 acres of hightech greenhouses over 10 years Low-cost production system estimated at <C$0.50/gram Rubicon Organics will soon be 1 of only 3 Certified Organic Cannabis producers in Canada 24% Organic Premium (1) $9.02 $11.14 Why Certified Organic? 57% of Canadian consumers prefer organically grown products (2) Significant European demand for organic cannabis Critical for therapeutic market & OTC products Industry Average Price (C$/gram) Organic Price (C$/gram) 5 (1) Source: (2) Source: Topline Report - prepared by Hill+Knowlton Strategies (Dec 20, 2017)

7 Responsible & Sustainable Cultivation Rubicon Organics greenhouse facilities are equipped with the following features: SOIL CONSERVATION Manufacture all fertilizer and soil in house with 100% Canadian, Certified Organic inputs Soil is reused in perpetuity Crop residue is composted on site WATER CONSERVATION 100% rain water collection and recycling Precision, sensor-based watering reduces water consumption Condensate traps, moisture sensors, used to recycle all water vapor collected from processing ENERGY SUSTAINABILITY Solar Powered grown under the sun LED lighting reduces energy consumption Net-zero energy all electricity generated through hydro-power Net-zero waste all carbon-dioxide generated used as crop supplement ENVIRONMENTAL FARM PLAN Management contributed to scripting of Environmental Farm Plan standards Site visit/audit/review completed To be first cannabis operation in Canada to complete an Environmental Farm Plan 6

8 Near-Term Production Rubicon Organics is a vertically integrated producer of Certified Organic Cannabis with two greenhouses set to begin cultivation in Q British Columbia California (2) Washington (2) Cultivation Division Retrofitting a 125,000 sq. ft. greenhouse facility with Phase I capacity of ~11,000 Cultivation kg/year (1) Expansion to 67,000 kg/year by 2020 Off-take on 400,000 sq. ft. greenhouse production of premium flower Off-take on 120,000 sq. ft. of outdoor cultivation Completed 40,000 sq. ft. purpose-built high-tech greenhouse with Phase I capacity of 4,400 kg/year Expansion to 15,000 kg/year by 2020 Oil Extraction Division Extraction Retrofit includes a new 15,000 sq. ft. cgmp-euro certified processing area Agreements with two industry leading oil extraction facilities Operational 3,800 sq. ft. oil extraction facility Brands Division Brands Set to launch a premium Certified Organic Cannabis brand in BC Bring 1964 Supply Co. to Canada Rapidly growing cannabis brand 1964 Supply Co. Distribution agreements in place for the entire state Award-winning cannabis brand Doctor & Crook Co. 7 (1) Late-stage applicant under ACMPR Submitting video evidence to Health Canada in August 2018 with License to Cultivate expected in Q (2) Rubicon Organics does not currently hold cannabis licenses or otherwise produce, process or sell cannabis in California or Washington. Rubicon Organics and/or its affiliates lease or sublease facilities and license brands to one or more state-licensed producer and processor licensees

9 Market Overview United States Legal U.S. cannabis market will be over US$21 billion by 2021 California & Washington will account for nearly 50% of the U.S. market (US$10 billion) Rubicon Organics has established two rapidly growing cannabis brands in California and Washington Upon completion of the public listing on the CSE, Rubicon Organics will implement an aggressive growth strategy to rapidly build market share in the U.S. Adult & Medical Use Legalized Medical Use Legalized CBD/Low THC Only Legalized No Marijuana Access Law 8 Source: National Conference of State Legislatures and Arcview Research

10 Market Overview International Rubicon Organics has a signed LOI to supply the German medical market Germany Quick Facts: Population: 82 million GDP: US$3.8 trillion Largest medical cannabis market in Europe (US$12 billion potential market value (1) ) Significant price premium to North American market: up to US$25/gram (2) Covered by medical insurance Co-development of German brand 9 (1) Prohibition Partners European Cannabis Report (Nov 2017) (2) Retail price; Source:

11 Significant Value Catalysts Imminent valuation re-rating with both the public listing and License to Cultivate expected in Q Q1 2019: First sale of Certified Organic Cannabis in Canada (1) Jan 2018: Received Confirmation for Readiness from Health Canada Q3 2018: Commence trading on the CSE Q3 2018: Receive License to Cultivate from Health Canada (1) Sept 2017: Acquired BC Greenhouse and began retrofit Dec 2017: Completed construction of high-tech greenhouse in Washington Q4 2018: Identify acquisition opportunities in the U.S. August 2018: Completed Pre-IPO brokered private placement 10 (1) Expected timeline

12 Brands Two Rapidly Growing Brands in California & Washington

13 1964 Supply Co. Mainstream Lifestyle Brand 1964 Supply Co. is a rapidly growing cannabis brand in California (1) Creative marketing and unique packaging has attracted significant media attention Collaboration with renowned artist Tristan Eaton Past collaborations include Hublot, Johnnie Walker and Versace Major title sponsor of the International Surf Festival Rubicon Organics will bring 1964 Supply Co. to Canada in Q (1) Rubicon Organics does not currently hold cannabis licenses or otherwise produce, process or sell cannabis in California. Rubicon Organics and/or its affiliates lease or sublease facilities and license brands to one or more state-licensed producer and processor licensees

14 Doctor & Crook Co. Craft Cannabis Brand Launched in Q and is currently in 65 retail stores across Washington By Q3 2018, D&C will be fully integrated with flower production and CO2 extraction all done at Rubicon Organics facilities (1) Winner of the 2017 Dope Cup Award for Best Oil 13 (1) Rubicon Organics does not currently hold cannabis licenses or otherwise produce, process or sell cannabis in Washington. Rubicon Organics and/or its affiliates lease or sublease facilities and license brands to one or more state-licensed producer and processor licensees

15 Consumer Packaged Goods Certified Organic Cannabis will be a key ingredient in a variety of high margin products Oils Beverages Pharmaceuticals Cosmetics Edibles 14

16 Comparison of Mid-Tier Canadian LPs Rubicon Organics 2019E production is in line with other mid-tier Canadian LPs Significant re-rating potential with upcoming public listing on the CSE Organigram Market Cap $120M (C$M) (1) private placement price of C$3.25/share) $1,339M (TSX:TGOD) $644M (TSXV:OGI) $277M (TSXV:HIP) $212M (CSE:MARI) 2019E Production (kg/year) 15,400 kg 29,000 kg 19,800 kg (2) 21,000 kg 16,000 kg Planned Expansion Capacity 82,000 kg (Q2 2020) 195,000 kg (H2 2019) 113,000 kg (Q4 2019) 30,000 kg (H2 2019) 105,000 kg (Q4 2019) Organic? Low-Cost Production? n/a n/a (< C$1.00/gram) U.S. Cannabis Operations? Source: Capital IQ, company disclosure, broker research 15 (1) Market Capitalization as at August 7, 2018 (2) Based on average FY2019 estimated production from Canaccord and Haywood research reports dated July 31, 2018

17 Capital Summary Seeking a public listing on the CSE in Q Capital Structure # of Shares (1) Shares Outstanding 36,811,425 Options 4,848,500 Warrants Exercisable at C$4.20 2,038,021 Warrants Exercisable at C$ ,431 Restricted Share Units 50,000 Fully Diluted Shares Outstanding 43,931,377 Summary of Funds Raised (1) Round Date Funds Raised ($M) Share Price ($/Share) Initial Financing Dec 2015 US$7.7M US$ Financing Sept 2016 US$1.5M US$ Warrants Exercise Dec 2016 US$4.5M US$1.50 C$42.6M raised to date with 300+ shareholders 2017 Financing Jan 2018 US$9.3M US$ Special Warrant / Unit Financing Jul 2018 C$13.2M C$3.25 Total Funds Raised C$42.6M (2) 16 (1) As at August 7, 2018; Assumes the issuance of 3,658,820 common shares and 1,829,410 warrants underlying the Special Warrants issued in the July 2018 financing. Each Special Warrant automatically converts into one common share and one-half of one warrant upon filing of Rubicon s final prospectus to commence trading on the CSE (2) Converted at USD/CAD exchange rate at financing close date

18 Investment Highlights Certified Organic Near-Term Production Rubicon Organics holds proprietary intellectual property (IP) to produce premium quality Certified Organic Cannabis Will be one of two certified organic publicly traded cannabis companies shortly Set to begin cultivation by Q with an initial capacity of 15,400 kg/year (165,000 sq. ft.) Ramping up to ~82,000 kg/year by ,000 sq. ft. of cultivation currently licensed & operational (1) Operating in the Largest Markets The North American cannabis market is expected to be US$25.7 billion by 2021 Canada, Washington & California accounts for 58% (US$14.8 billion) of the market with 83 million people Significant Value Catalysts Seeking a public listing on the Canadian Securities Exchange ( CSE ) in Q Imminent valuation re-rating with the License to Cultivate expected in Q Brand Focus in Influencer Markets 1964 Supply Co. a rapidly growing cannabis brand in California Distribution agreements in place for the entire state of California 17 Source: Arcview and Canaccord research (1) Off-take agreement with greenhouses in Santa Barbara and Monterey County

19 APPENDIX Overview of Facilities

20 British Columbia Greenhouse & Extraction Facility 20-acre property (871,000 sq. ft.) in Delta, British Columbia Retrofit of existing 125,000 sq. ft. greenhouse facility (nearly complete) Includes 15,000 sq. ft. cgmp-euro certified processing and extraction lab Phase 1 production capacity of ~11,000 kg/year Expansion to 565,000 sq. ft. with annual production of 67,000 kg/year by 2020 ACMPR Licensing Timeline: January 2018 Received Health Canada request for video evidence Detailed Review August 2018 Submission of Video Evidence Package to Health Canada Q Receive License to Cultivate Actual Photo Delta, British Columbia: Best climate in Canada for year round greenhouse production One of the lowest energy rates in Canada 15 minutes to Vancouver International Airport 19

21 Washington Greenhouse & Extraction Facility 16-acre property (~700,000 sq. ft.) in Ferndale, Washington Newly constructed 40,000 sq. ft. high-tech Dutch-glass greenhouse (fully complete) Phase 1 production capacity of 4,400 kg/year Expansion to 15,000 kg/year by 2020 Tier 3 Cultivation License to be received by Q (1) Vertically Integrated Extraction: Operational licensed extraction facility in Bellingham (1) Produces oil for Doctor & Crook Co., Rubicon Organic s craft cannabis brand Winner of the 2017 Dope Cup Award for Best Oil Actual Photos 20 (1) Rubicon Organics does not currently hold cannabis licenses or otherwise produce, process or sell cannabis in Washington. Rubicon Organics and/or its affiliates lease or sublease facilities and license brands to one or more state-licensed producer and processor licensees

22 California Supply Chain Secured Working with Fully-Licensed Partners for Distribution, Cultivation, Volatile & Non-Volatile Extraction (1) Premium Organic Flower Supply: Supply off-take agreement in place with a leading greenhouse cultivator in California Pre-Rolls & Organic Cannabis Oil Supply: Supply off-take agreement in place with a local farm in Santa Barbara and Monterey County 20,000 sq. ft. of outdoor cultivation 400,000 sq. ft. of greenhouse cultivation Expansion area of 300,000 sq. ft. tilled & prepped for outdoor production Actual Photos 21 (1) Rubicon Organics does not currently hold cannabis licenses or otherwise produce, process or sell cannabis in California. Rubicon Organics and/or its affiliates lease or sublease facilities and license brands to one or more state-licensed producer and processor licensees

23 Market Overview Canada Canada: $1.4bn Current Medical Cannabis Market 269,502 Current Registered Medical Patients $6.0bn Estimated Medical & Recreational Market 500,000 Estimated Medical Patients by M Estimated Recreational Users by 2021 By 2021, the marijuana market will be comparable to other recreational industries in Canada: $5bn Whisky/ Spirits $6bn Weed $7bn Wine 22Source: Canaccord Canadian Cannabis Industry Overview and Stats Can

24 CONTACT US James Biggar Please visit us at: Rubicon Organics Inc W Hastings St. Vancouver, BC V6C 1A5 23