CEO Letter to Shareholders
To our valued shareholders,
October 17, 2018, marked a historic day in Canada; full federal legalization of adult-use cannabis, which ended a near century-long federal prohibition. It was a momentous step for the Canadian cannabis industry, and a turning point globally. It signified the beginning of a Canadian national industry with a global reach, which is a once-in-a-lifetime opportunity. October 2018 also marked my appointment as the Chief Executive Officer of Experion Holdings Ltd. (“Experion”), formerly Viridium Pacific Group Ltd. Over the past year, we have initiated and executed on multiple key initiatives to position Experion as a key player in the cannabis space.
First and foremost, I want to acknowledge the most important component of our plan, my team. I am fortunate to have hired and be working alongside an extremely skilled, highly motivated, committed and passionate team. When it is all said and done, the strategy is only as good as the people chosen to execute that strategy. The nascent nature of the cannabis industry has proven that a good management team, with the interests of its shareholders in mind, is vital to the success of a licenced producer (“LP”).
The cannabis sector has evolved considerably since legalization and during my time as CEO. The Cannabis Index for example is now only half of what it was at its height in October 2018, and most LPs large and small have faced significant revaluations as a result. Experion’s strategy is purpose-built to enable us to be relevant in all market conditions. We are and will continue to take a ‘’long-game’’ approach, and to not divert undue attention to market volatility. With cash on hand, no debt, and revenue-generating brands, we are in an enviable position that has enabled us to be opportunistic in these changing markets and industry conditions.
Our plan is simple, build a viable business and chart a path to profitability. It is our belief that executing a plan to profitability will set us apart from our competitors while rewarding our shareholders and attracting new investors.
In this first CEO letter, we will discuss Experion’s:
- value proposition including key segments of the industry we are targeting; and our brands;
- international footprint; and
- the path forward.
After reading this letter, we hope you will acquire greater familiarization of our corporate strategy and goals and have a clearer understanding of our path forward to build a lasting, profitable cannabis company.
Consumers around the world spent approximately $12.2 billion on legal cannabis in 2018, according to BDS Analytics, increasing from $9.5 billion and $6.9 billion in 2017 and 2016 respectively. While these numbers indicate considerable growth, there are still significant opportunities in this nascent industry. A clear example is the new wave of products slated to become legal in Canada this October 2019. Another example is the current limitations of our national distribution network as provincial governments continue to struggle to open new retail locations.
As with any new industry, cannabis companies are grappling with rapid growth, and along with that, the scramble for top tier talent. Negative headlines and industry noise still garner much more attention than positive stories, and there have been plenty of the former. The real industry news based on profits, strategic mergers and growth is still emerging; the noise persists, but we try not to let it distract us. Experion has a strong management team set to endure the changing market conditions and become one of the companies that will lead this industry.
Experion believes that as the cannabis industry matures, the market is going to reward focused companies that can monetize their assets. The narrative around how much canopy you control, the size of your facilities or even the number of licenses you hold, is not enough for companies to garner significant increases in market value. The market is now demanding that cannabis companies demonstrate how they will utilize their assets and present a roadmap to achieve profitability. Experion seeks to control its grow costs today to be competitive tomorrow, while positioning our business in the most attractive segments of the space. We believe the roadmap to profitability is based on (i) Cultivation, (ii) Brand development and (iii) Distribution, both nationally and internationally. While most of the focus within the cannabis industry has been the domestic recreational market, Experion is placing strong focus on the medical cannabis segment where we see a burgeoning market rife with opportunities both at home and abroad.
- Cultivation – Growing quality flower
Experion grows quality cannabis, with strains sourced from rare genetics and cultivated using the highest standards. Our cannabis is widely regarded and will be vertically integrated into our own value-add products. The concept is simple; grow well, provide consistency, and your company and its products will be valued by customers. Our aim is to increase our cultivation capacity to benefit from economies of scale and to achieve revenue targets to support the operations of the business. Increasing capacity will be achieved from several initiatives such as adding extra licensed cultivation space at our existing facility and property in Mission, BC; and developing strategic grow partners via partnerships and acquisitions. Opportunities continue to present themselves weekly and will increase the near term as more companies continue to struggle to become licensed, and do not have the teams, ability or the resources to fully execute on their business plans or strategies.Experion values and is ready for scalability. We started with a smaller facility to allow us to gain the experience needed to grow our cannabis to the highest standards of quality while meeting regulatory requirements. Our cultivation is tight and consistent allowing us to stay ahead of consumer demand with the plan to scale up in the near future. The market has rewarded size in previous years; but as previously noted, we see that trend shifting. As the market matures, it will look to reward companies through profits for quality and consistency over sheer size. Experion is ready for that paradigm shift.
- Brands – Experion is focused on a full-spectrum product range
Developing brands that represent our value-add products is key to our business plan and growth metrics. Well executed brands create trust and loyalty with consumers, and drive revenue to the bottom line for our shareholders. Experion’s market strategy includes catering to a variety of consumers by establishing value-add category leading brands focusing on the adult-use as well as health and wellness categories. Experion’s position in Canada’s legal adult-use cannabis marketplace has been staked out in British Columbia and Saskatchewan; where products in both categories are already being sold through provincial and private licensed retailers. We are actively expanding our footprint into other provinces soon to be press released.
- Adult-Use – Citizen Stash
Citizen Stash is our adult-use brand, which introduced the award-winning strain “Lemon Zkittle”, currently available in British Columbia and Saskatchewan through provincial and private licensed retailers. We have had a great consumer response to Lemon Zkittle, with shipments often selling out in hours. Experion plans to launch additional adult–use strains to compliment Lemon Zkittle in the coming weeks; and to expand the product line within current provinces along with new distribution agreements in additional provinces in the near term. https://citizenstash.com/products/
- Health and Wellness – Kanabé Goods Co.
Kanabé Goods Co. (“Kanabé”) is our brand for cannabis health and wellness products intended for everyday use (#EVERYDAYKANABE). Our Kanabé products will further advance our growth strategy to establish a strong national footprint and to further build our brand presence in various jurisdictions within Canada. Experion’s aim is to ensure that Canadians have access to a reliable supply of premium health products including topicals, oral sprays, capsules and other micro-dosed products. Kanabé capsules will serve those looking for a micro-dose option made from our high-grade full spectrum oil produced at our facility. Kanabé’s products will be strategically launched throughout Canada as the new regulations take effect in the fall of 2019.
A significant near-term catalyst for Kanabé will be Health Canada’s final regulations for Value-Added Products scheduled to come into effect on October 17, 2019. Kanabé has currently developed over 50 formulations, which can be manufactured at our Mission facility. Experion‘s management team is also working with key strategic partners for larger scale commercial rollouts. https://www.kanabe.ca/
- EFX Laboratories Inc.
Medical research divisionEFX Laboratories Inc. (“EFX”) was acquired on February 2019 and has formed the medical research division of Experion. EFX is focused on medical applications and treatments using cannabis, and has developed several proprietary formulations for pain control, as well as a suite of value-added medical products. This division rounds out our strong portfolio of cannabis brands and products for the Canadian medical, wellness, and export markets; and positions Experion for the ‘’3rd wave’’ of investment focused on cannabis biotech applications in the retail consumer market.
Through EFX, Experion is sponsoring a Phase III Clinical research trial in Canada on the use of cannabis for post-operative pain management with the aim of preventing the over-subscription of opioids. We feel that this singular issue is germane to what is often referred to as the “Opioid Crisis”. According to national data, the opioid crisis claimed more than 11,500 lives from January 2016 to December 2018 with Canada alone. In the US, the numbers are just as staggering; as of January 2019, overdoses from opioids claimed the lives of 130 people a day. As I am writing this letter, the big news headline right now is: ‘’Several Big Drug Companies Considering Massive Settlements to Resolve Opioid Suits” and “…Confronted with a torrent of lawsuits across the U.S., several major drug companies are in discussions with authorities to resolve thousands of opioid-related suits filed against them…” https://www.npr.org/2019/08/28/755007841/several-big-drug-companies-considering-massive-settlements-to-resolve-opioid-sui
I am not purporting that we can or will solve the opioid epidemic; I believe Experion’s team is doing important work to open the eyes of, not only the medical community, but mainstream society, on the benefits of cannabis for medical purposes. We intend to be a significant part of the conversation now and going forward. More to follow in the coming weeks. https://www.efxlabs.ca/
International Footprint – Europe, Australia and Asia
We are excited about the long-term potential of the European, Australian and emerging Asian cannabis markets. Europe is home to more than 740 million people; a population more than double that of the United States and Canada—the two largest cannabis markets today.
As medical cannabis becomes legalized around the world, Experion continues to focus on the vast export market opportunities. We are currently preparing our facility for Good Manufacturing Practices (“GMP”) to be able to export products for scientific research and medical purposes. GMP certification will remove significant barriers to entry and allow Experion to be one of the first Canadian producers to enter these markets. We already have letters of intent and/or Partnership agreements in place in Germany and Poland.
The Path Forward
Ten months ago, I was asked to help drive Experion forward. To achieve progress, it first required looking at the entire company to assess areas of value and retire objectives that did not support a profitable path forward. In this short time, I assembled a top team and together we have made significant progress on achieving goals and milestones for our shareholders. Some timelines were aggressive, but for the most part, we have delivered on schedule, and our dedication to the organization has never been stronger. We are extremely proud for what we have achieved, but also acknowledge that we have more to accomplish.
For Experion shareholders, like in most companies, there exists a thirst for more and better communication. In May, we hired a dedicated investor relations manager and begun a broad internal initiative to improve our overall communications infrastructure and efforts. As part of this plan, I will be writing letters like this one each quarter to provide you with the most recent updates on our progress, growth and challenges. We have numerous objectives at various stages of development that we believe will further escalate our growth, shareholder value, and our overall market standing. Please watch for these letters and provide your feedback, but also ensure you turn your attention to press releases that will evidence our progress. Again, our plan is simple, build a viable business and chart a path to profitability. This will set us apart and very importantly it will reward our shareholders.
Jay Garnett, Chief Executive Officer and Director