CSE: VGW OTC: VGWCF CORPORATE PRESENTATION APRIL 2019

Transcription

1 CSE: VGW OTC: VGWCF CORPORATE PRESENTATION APRIL 2019

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3 3 NOTICE TO RECIPIENT This investment is suitable only for sophisticated investors for whom an investment does not constitute a complete investment program, who do not require immediate liquidity for their investment and who fully understand and are willing to assume the risks involved. An investment may be considered to involve a substantial degree of risk, and an investor could lose all or a substantial amount of his or her investment. This document is not an offer to sell (or solicitation of an offer to buy) any interest in the Company. These materials may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement. The materials may not be circulated outside of the recipient s organization, publicly referred to, or disclosed, in whole or in part, without express written permission. This presentation does not purport to be all inclusive or contain all the information that a prospective investor may require to fully evaluate an investment in the contemplated transaction. Prospective investors should conduct their own thorough investigation and due diligence before making an investment. DISCLAIMER This Presentation contains forward-looking statements and forward-looking information. Often, but not always, forward-looking statements can be identified by the use of words or phrases or state that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. Forward-looking statements involve known and unknown words such as plans, expects or does not expect, is expected, estimates, intends, anticipates or does not anticipate, or believes, or variations of such words and risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements and information. Examples of such statements include: (A) the financial forecast of the Company; (B) the intention to grow the business and operations of the Company; (C) anticipated timing for the availability of the Company s products to market and expected sale prices; (D) expected growth in the number of users of medical and recreational marijuana anticipated; and (E) the expansion of the Company s business into other revenue streams. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this Presentation. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of the Company to obtain necessary financing; the ability to complete a going public transaction; the ability to satisfy the requirements of a stock exchange; the economy generally; consumer interest in the products of the Company; competition; and anticipated and unanticipated costs. These forward-looking statements should not be relied upon as representing the Company s views as of any date subsequent to the date of this Presentation. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as 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 such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements and information contained in this Presentation are expressly qualified in their entirety by this cautionary statement. The forward-looking statements and information included in this Presentation are made as of the date of this Presentation and the Company assumes no obligation to update such forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.

4 4 Our mission is to become the world s most trusted partner for best-in-class cannabis extraction, testing, formulations and product development.

5 5 OUR BELIEFS THE MARKET IS RAPIDLY MOVING TO OIL BASED PRODUCTS U S M A R K E T S H A R E R O A D M A P 29% 25% 53% 47% 71% 75% FUTURE* OIL BASED PRODUCTS FLOWER BASED PRODUCTS Source: Cowen Equity Research Report *Valens forward-looking prediction in the short-term based on market research The future of cannabis in Canada is coming, and we are at the forefront. Tyler Robson, CEO

6 6 WHAT WE DO VALENS KEY FOCUS AREAS 4 3 PRODUCT DEVELOPMENT FORMULATION 2 TESTING 1 EXTRACTION

7 7 1 EXTRACTION WHAT IS IT? OIL WINTERIZATION DRIED CANNABIS CBD CBG THC CBN WAXES LIPIDS FATS OIL REFINEMENT (DISTILLATE/ISOLATE) OIL EXTRACTION

8 8 1 EXTRACTION WHAT IS OUR COMPETITIVE ADVANTAGE? Valens is the only company providing a wider variety of extraction methods allowing us to create more end products and ultimately meeting a larger number of customer needs. Super/Sub Critical CO2 Ethanol Hydrocarbon Solvent-less Terpene Capsules Tinctures Vapes Edibles Capsules Tinctures Vapes Topicals Beverages Edibles Others Concentrates Vapes Shatter/Wax Full Spectrum Rosin Hash Live Resin Add back for experience, flavour and smell

9 9 1 EXTRACTION HOW WE GENERATE HIGH MARGINS INCREASING MARGINS EXTRACTION RESIN REFINED OIL WHITE LABEL Processing from flower to crude oil Processing from crude oil to various refined stages Formulation and product development of oil for market Fee for service Fee for service Fee for service or Revenue share

10 10 1 EXTRACTION A TRUSTED INDUSTRY PARTNER Trusted by industry-leading producers 2 to 4 year renewable contracts with minimum annual quantities Recognized for our expertise and ability to deliver high quality extracts A key element of [our] success is partnerships with companies like Valens who can offer the capacity, quality and expertise to help ensure we deliver on our ongoing commitment to meeting the increasing demand of the global medical and adult recreational cannabis markets. -Greg Engel, CEO of Organigram EXTRACTION PARTNERS EXTRACTING FOR $45B WORTH OF MARKET CAP STRATEGIC PARTNERS GLOBAL INITIATIVES AND MORE

11 11 2 TESTING VALENS LABS: SETTING STANDARDS DOMESTICALLY AND GLOBALLY FOR CANNABIS TESTING METALS PESTICIDES TERPENES RESIDUAL SOLVENTS MICROBIALS CANNABINOID PROFILES First ISO accredited lab - the global gold standard for testing laboratories. Utilizing the latest state of the art instrumentation, Valens can perform analyses that typically take a minimum of 5 days in as little as 24 hours. Working with Thermo Fisher Scientific to publish fully validated, standardized, and turnkey solutions for the cannabis industry to increase the confidence in laboratory results world-wide. Additional revenue source through third-party lab testing (required by Health Canada for all producers) Named a Center of Excellence in Plant Based Science by Thermo Fisher Scientific. Annual Revenue: $24B USD Market Cap: $104B USD Global Employees: 70,000 Consumer products are built on trust. This starts and ends with reliability and consistency.

12 3 12 FORMULATIONS DIFFERENT COMBINATIONS OF MOLECULES CREATE DIFFERENT CONSUMER EXPERIENCES As the cannabis market matures, custom formulations will drive consumer preference more and more. PHENOLIC AMIDES 20+ FLAVONOIDS Tasteless, colorless and odorless 100+ TERPENES 140+ CANNABINOIDS Full spectrum preservation or flower emulating characteristics STEROLS 500+ BIOACTIVE COMPOUNDS ARE PRESENT IN CANNABIS Customized flavor introductions

13 3 13 FORMULATIONS THE IMPORTANCE OF SECONDARY COMPOUNDS Alpha Pinene 3% Cannabinoids bind to the body s receptors to produce different effects, which are further influenced by terpenes and the full suite of secondary compounds TERPENE FORMULATIONS PINEAPPLE EXPRESS* Valens has the capabilities and expertise to create and customize terpene formulations responsible for consumer experience. *Example of the terpene make-up of the cannabis strain, Pineapple Express

14 3 14 FORMULATIONS SORSE EMULSION TECHNOLOGY Shelf stable for over 360 days (not proven anywhere else) Zero cannabis taste, color or odor Provides effective, consistent dosing Lower dosage sufficient due to increase in bioavailability when consumed Faster onset making it the safer and more trusted option. Observed in 5-15 minutes versus normal 30 minutes 2 hours. Faster offset making it feel exactly like an alcoholic beverage. Observed in 45 minutes 2 hours versus normal 4 8 hours. Proprietary formula, exclusive Canadian rights WATER SOLUBILITY ONSET CURRENT PROBLEMS OFFSET SMELL/TASTE CONSISTENCY SHELF STABILITY VALENS SOLUTION

15 4 15 PRODUCT DEVELOPMENT THE FUTURE OF CANNABIS CONSUMPTION V A L E N S W H I T E L A B E L P R O D U C T O F F E R I N G S VAPE CANNABIS AS AN BEVERAGES/EDIBLES INGREDIENT TOPICALS/CAPSULES TINCTURES

16 16 CORPORATE WHAT WE VE ACCOMPLISHED AND WHERE WE RE GOING ACHIEVEMENTS IN ACHIEVEMENTS FOCUS FOR 2019 EXTRACTION CAPACITY EXPANSION 8 PUBLIC MULTI-YEAR EXTRACTION AGREEMENTS PARTNERSHIP WITH THERMO FISHER SCIENTIFIC KELOWNA EXPANSION GEOGRAPHIC EXPANSION ISO VALENS LABS ACCREDITATION STANDARD PROCESSING, CULTIVATION AND ANALYTICAL TESTING LICENSES EU GMP CERTIFICATION EXPORT GLOBALLY GLOBAL PARTNERSHIPS FOR SUPPLY GLOBAL PARTNERSHIPS FOR DISTRIBUTION SORSE EXCLUSIVE TECH & BEVERAGE RIGHTS OTC LISTING ORGANIC CERTIFICATION LAUNCH BEVERAGES & EDIBLES KEY MANAGEMENT, ADVISORY AND BOARD ADDITIONS RAISED $41 MILLION IN CAPITAL VARIOUS MULTI-YEAR EXTRACTION AND PRODUCT DEVELOPMENT CONTRACTS LAUNCH VAPE LINE

17 17 CORPORATE GLOBAL MEDICAL MARKET ALONE ESTIMATED AT $180B ANNUALLY IN YEARS* C A N A D A C O L O M B I A G L O B A L M A R K E T A U S T R A L I A 33 COUNTRIES WITH ACTIVE MEDICAL LEGISLATION* CURRENT GLOBAL PARTNERSHIPS INCLUDE ETICANN (COLOMBIA) AND MEDIGROWTH (AUSTRALIA) TARGETTING EUROPEAN DISTRIBUTION AND EXPANSION * E I G H T C A P I T A L R E S E A R C H

18 18 CORPORATE FINANCIALS & OUTLOOK ANALYSTS OUTLOOK Broker Date Rating Target (C$) Commentary AltaCorp Capital Inc. Mar 14, 2019 Outperform $7.00 "Within the cannabis sector and amongst all companies we have seen, we forecast that Valens will generate one of the most attractive EBITDA margin profiles. Based on our forecasted financial performance, Valens offers a very attractive opportunity to invest in what we believe is an undervalued and uniquely positioned business." Haywood Securities Inc. Apr 10, 2019 Buy $6.25 "The company has executed a number of processing and product development agreements with some of the larger LPs in the Canadian landscape that we believe will drive meaningful revenue and EBITDA growth over the course of 2019 and into 2020." "[Valens'] strong cash position will allow the company to increase extraction Mackie Research Capital Feb 27, 2019 Buy $6.00 capacity at its Kelowna facility, strategically increase its domestic geographic Corp. presence and address potential working capital requirements." "Valens presents investors with an opportunity to gain exposure to a rapidly GMP Securities Apr 9, 2019 Buy $8.00 growing industry very early in its development cycle [with] strong growth expected, attractive valuation, and readiness for edibles market." CAPITALIZATION TABLE OWNERSHIP INSIDER 45.8% (In CAD$MM, unless otherwise noted) Share Price: As of 10th of April 2019 $3.74 Basic Shares O/S Fully Diluted Shares O/S Equity Value $464.6 Cash and Cash Equivalents $70.7 Investments in Other Companies $4.7 ITM Securities $27.6 Debt $0.0 Enterprise Value $361.5 Financials (Based on Analyst Estimates) CY2019 CY2020 CY2021 Revenue $52.0 $124.6 $171.2 EBITDA $23.0 $63.2 $84.4 Trading Multiples CY2019 CY2020 CY2021 EV/Revenue 6.9x 2.9x 2.1x EV/EBITDA 15.7x 5.7x 4.3x Source: Company Filings, S&P Capital IQ, AltaCorp Capital Inc. As of April 10, 2019; Shares outstanding based on most recent quarterly financials and adjusted for share issuance transactions and other significant publicly disclosed transactions; presented as Treasury Stock Method

19 19 COMPETITIVE LANDSCAPE NO. OF ANNOUNCED TOLL PROCESSING AGREEMENTS WITH LICENSED PRODUCERS NO. OF ANNOUNCED TOLL AGREEMENTS IN TOP 10* CURRENT ANNUAL EXTRACTION CAPACITY 240,000KG 30,000KG 150,000KG 56,000KG TYPES OF EXTRACTION ISO ACCREDITED TESTING LAB Y N N N EU GMP CERTIFICATION PENDING N PENDING N ORGANIC CERTIFICATION PENDING N N N MARKET CAP (CAD$) Per Comp Table (p.25) 465M 400M 701M 317M *Companies ranked per market cap Sourced from company presentations and news releases

20 20 INVESTMENT HIGHLIGHTS Largest extraction company in Canada. At 240,000kg of capacity, Valens is equipped to service Canadian demand as well as the global markets with efficiency at scale. High margins. Operating in the highest margin sub-sector of the cannabis industry with low variability in costs. Proprietary technology and processes. Decades of experience have resulted in a best in class proprietary extraction process that is optimized to produce consistently high quality products. First mover advantage. Founded in 2012, Valens was granted the first Dealer s License to process cannabis. Our R&D and testing process allows us to quickly identify market trends and adapt to a changing landscape. Most diverse extraction capabilities. Providing customers with the widest variety of extraction techniques which allows them to produce the largest range of end products. High cashflow visibility. Substantial, reoccurring agreements with leading producers, including Canopy, Tilray and Organigram providing a clear revenue and cashflow path. Customized product development. Valens formulation and testing expertise allows for the production of a wide array of tinctures, capsules, concentrates, vapes, topicals, beverages and edibles. In-house testing laboratory. Setting global standards, Valens labs was the first ISO accredited lab for cannabis analyses and is endorsed by $100B+ Thermo Fisher Scientific as the Centre of Excellence in Plant Based Science.

21 21 W W W. V A L E N S G R O W O R K S. C O M L O C A T I O N C A R I O N R D. K E L O W N A, B R I T I S H C O L U M B I A C O N T A C T U S S C O T V A L E N S G R O W O R K S. C O M ( )

22 22 APPENDIX: COMP TABLE Share Equity Total Enterprise Revenue (1) EBITDA (1) EV/Revenue EV/EBITDA Price Value Debt Value CY2019E CY2020E CY2021E CY2019E CY2020E CY2021E CY2019E CY2020E CY2021E CY2019E CY2020E CY2021E Canadian Large Cap Companies (C$) (C$MM) (C$MM) (C$MM) (C$MM) (C$MM) (C$MM) (C$MM) (C$MM) (C$MM) (x) (x) (x) (x) (x) (x) Canopy Growth Corporation $56.18 $27,332 $89 $17,064 $653 $1,212 $1,645 $156 $324 $ x 14.1x 10.4x >100.0x 52.6x 35.8x Aurora Cannabis Inc. $12.15 $13,745 $827 $13,351 $583 $1,158 $1,937 $33 $325 $ x 11.5x 6.9x >100.0x 41.1x 18.0x Tilray, Inc. $76.03 $7,818 $633 $7,861 $202 $432 N/A ($41) $30 $ x 18.2x N/A NMF >100.0x 45.4x Cronos Group Inc. $24.13 $10,639 $6 $6,700 $68 $255 $400 ($16) $83 $138 >50.0x 26.2x 16.8x NMF 80.8x 48.4x Aphria Inc. $13.36 $3,443 $55 $3,212 $584 $1,012 $1,120 $71 $230 $ x 3.2x 2.9x 45.3x 14.0x 11.5x HEXO Corp. $8.55 $2,525 $50 $1,988 $191 $465 $640 $23 $120 $ x 4.3x 3.1x 86.9x 16.6x 12.0x OrganiGram Holdings Inc. $9.24 $1,517 $13 $1,382 $157 $256 $332 $60 $99 $ x 5.4x 4.2x 23.0x 14.0x 10.5x CannTrust Holdings Inc. $9.92 $1,150 $14 $1,006 $135 $254 $329 ($0) $62 $ x 4.0x 3.1x NMF 16.3x 9.1x The Green Organic Dutchman Holdings Ltd. $4.39 $1,407 $1 $1,008 $60 $498 $537 ($17) $97 $ x 2.0x 1.9x NMF 10.4x 6.3x The Supreme Cannabis Company, Inc. $2.04 $762 $105 $671 $96 $163 N/A $26 $47 N/A 7.0x 4.1x N/A 25.8x 14.3x N/A Zenabis Global Inc. $2.75 $571 $90 $549 $167 $337 N/A $13 N/A N/A 3.3x 1.6x N/A 42.9x N/A N/A The Flowr Corporation $6.73 $658 $2 $630 $24 $94 N/A ($0) $29 $ x 6.7x N/A NMF 21.7x 11.5x Aleafia Health Inc. $1.71 $473 $20 $408 $75 $158 N/A $19 $48 N/A 5.5x 2.6x N/A 22.0x 8.6x N/A Emerald Health Therapeutics, Inc. $4.46 $726 $25 $647 $4 $70 N/A ($19) ($16) $34 >50.0x 9.2x N/A NMF NMF 19.2x Westleaf Inc. $2.13 $318 $4 $294 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A VIVO Cannabis Inc. $0.92 $278 $45 $217 $49 $81 $315 $4 $39 $ x 2.7x 0.7x 57.4x 5.6x 2.0x WeedMD Inc. $1.98 $238 $0 $189 $59 N/A N/A $16 $42 N/A 3.2x N/A N/A 11.5x 4.5x N/A 48North Cannabis Corp. $1.13 $177 $2 $136 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Wayland Group Corp. $1.01 $195 $26 $148 $0 N/A N/A N/A $0 N/A N/A N/A N/A N/A N/A N/A Delta 9 Cannabis Inc. $1.74 $149 $0 $114 $74 $129 $160 $19 $30 $30 1.5x 0.9x 0.7x 6.0x 3.8x 3.9x Invictus MD Strategies Corp. $0.80 $101 $1 $90 $55 $83 N/A $8 $21 N/A 1.6x 1.1x N/A 11.3x 4.4x N/A James E. Wagner Cultivation Corporation $1.11 $106 $6 $96 $35 N/A N/A $3 N/A N/A 2.8x N/A N/A 37.6x N/A N/A Harvest One Cannabis Inc. $0.87 $196 $2 $145 $57 $126 N/A $9 $36 N/A 2.5x 1.1x N/A 16.3x 4.0x N/A Beleave Inc. $0.11 $52 $8 $59 $36 N/A N/A ($14) $7 $29 1.7x N/A N/A NMF 8.9x 2.0x Indiva Limited $0.49 $41 $5 $29 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Mean 10.4x 6.6x 5.0x 32.2x 18.9x 16.8x Canadian Extraction Companies MediPharm Labs Corp. $4.75 $701 $6 $653 $116 $201 $317 $26 $64 $90 5.6x 3.3x 2.1x 25.3x 10.2x 7.2x Neptune Wellness Solutions Inc. $4.80 $400 $4 $374 $54 $114 $176 $10 $28 $48 6.9x 3.3x 2.1x 36.4x 13.2x 7.7x Valens Groworks Corp. $3.74 $465 $0 $362 $52 $125 $171 $23 $63 $84 6.9x 2.9x 2.1x 15.7x 5.7x 4.3x Radient Technologies Inc. $1.05 $317 $7 $267 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Mean 6.5x 3.1x 2.1x 25.8x 9.7x 6.4x Mean - All 9.8x 6.1x 4.4x 30.9x 17.5x 15.0x Source: Company Filings, S&P Capital IQ, AltaCorp Capital As of April 10, 2019; shares outstanding based on most recent quarterly financials and adjusted for share issuance transactions and other significant publicly disclosed transactions; presented as fully diluted with all in-the-money securities added to the equity value and cash proceeds added to diluted cash balance; N/D = Not Disclosed (1) Based on Analyst consensus estimates

23 23 APPENDIX: KEY MANAGEMENT Tyler Robson, B.Sc. Director, Chief Executive Officer and Co-founder. Mr. Robson has over a decade of cannabis R&D, plant innovation and life sciences experience. He previously held the position of COO of Valens Agritech Ltd. prior to becoming CEO in Chris Buysen, MPAcc CPA, CA Chief Financial officer Mr. Buysen has over 15 years of diverse financial experience working as a senior financial executive with many public and private organizations in a wide range of industries. Chantel Popoff Chief Operating Officer Ms. Popoff has over a decade of experience in managing 21+ Western Canadian retail pharmacy chains, including Shoppers Drug Mart. She also has over 6 years of senior managerial experience in the Canadian natural health food industry. Everett Knight Executive Vice President, Strategy & Investments Mr. Knight holds almost a decade of experience in Portfolio Management and Investments. At Matco Financial, he launched the first ever institutional long only cannabis fund in Canada and managed a small cap fund, ranked #1 in its category. Dawn Visintainer, M.Sc. Head of Quality Assurance Mrs. Visintainer has extensive experience in QA/QC laboratories as well as being a research scientist in the natural health products industry. She also has experience setting up and managing ISO accredited labs in both the natural health space and the cannabis space. Anderson Smith Head of Regulatory Affairs Anderson was been involved in the scientific analytical testing space specializing in the analysis of natural health products for over 15 years. He brings this expertise coupled with his extensive knowledge of regulatory regime to Valens. Scott Young Head of Investor Relations Mr. Young has spent the past 15 years working in the capital market sectors of Canada, the United States and Europe. Beyond this, he has extensive business development experience in Hong Kong, North and South America. Quinn Shiskin Head of Production Mr. Shiskin brings his knowledge of extraction from 12 years of experience as a dual ticketed Red Seal tradesman. Throughout this time he studied the cannabis industry with top alchemists in the US creating a deep understanding of the plant from seed to oil, specializing in all methods of extraction.

24 24 APPENDIX: BOARD & ADVISORS Nitin Kaushal, CPA, CA Director, Managing Director, Corporate Finance at PwC Canada. Mr. Kaushal has over 30 years of finance and investment expertise including having held a number of senior roles with Canadian investment banks, private equity and venture capital industry. Ashley McGrath Director, President & Owner of Glencoe Developments Inc. Mr. McGrath has been involved in real estate development for 14 years, overseeing all aspects of the development business and oversees the management of multiple development companies in the commercial, residential and agricultural space. Chris Irwin Director, Partner at Irwin Lowy LLP. Mr. Irwin advises a number of public companies on a variety of matters including continuous disclosure and regulatory matters, reverse takeover transactions, initial public offerings and take over bids. Chris Buysen, MPAcc CPA, CA Director, CFO Mr. Buysen has over 15 years of diverse financial experience working as a senior financial executive with many public and private organizations in a wide range industries. Tyler Robson, B.Sc. Director, CEO and Co-founder Mr. Robson has over a decade of cannabis R&D, plant innovation and life sciences experience. He previously held the position of COO of Valens Agritech Ltd. Top 100 Leaders in Health Care by IFAH. Phil Donne Advisor, Past President/CEO of Campbell Company of Canada, Past CEO of Kellogg Canada Mr. Donne brings over 30 years of international brand management, re-structures and bold brand and communication initiatives including the re-launch of Vector cereal which still remains the largest new cereal product in 20 years. Brett Channer Advisor, CEO of Mass Minority, Past CEO of Saatchi + Saatchi Mr. Channer has over 25 years of marketing industry experience. He was responsible for leading Saatchi Canada to Most Improved Agency in Canada as well as one of the Top 10 creative agencies in Canada and becoming one of the top performing agencies for growth in the Saatchi Network.