Q1 2020 Strategic Update
VANCOUVER, BC / ACCESSWIRE / FEBRUARY 20, 2020 / Experion Holdings Ltd. (the “Corporation” or “Experion“) (TSXV:EXP)(OTCQB:EXPFF)(FRANKFURT:MB31)
Building the Foundation to Survive and Thrive
With legalization of recreational Adult-use cannabis only coming into effect on October 17, 2018, our industry is still very much in its infancy. However, in this short time, the cannabis sector has gone through a volatile ride from extreme market highs to drastic lows. Like the dotcom era, successful leaders will emerge by delivering positive performance that will rebuild confidence in the market over time. Despite this volatile market, the underlying reason why investors originally invested in this sector remains the same: cannabis is and will continue to be a thriving multi-billion-dollar industry, with significant growth potential year over year. We believe that cannabis companies that survive in the short-term will thrive long-term by delivering on traditional business elements such as providing quality products, effective branding and distribution, operational execution and achieving profitability. At Experion, we have laid the foundation not only to survive, but to thrive in the coming years.
Consumer Demand for High Quality Craft Cannabis
Many retailers and consumers are learning that it is exceptionally difficult to produce old school product; let alone deliver quality from large scale commercial operations. Only a handful of companies in the legal space have been able to provide high quality cannabis products; as a result, there is increased demand for premium products as consumers become more experienced.
Experion’s focus and current success in producing and selling true premium craft flower under our Adult-use brand, Citizen Stash, is one of our core fundamentals. Citizen Stash has been servicing the premium craft market over the past eight months. Our cannabis is valued in the marketplace for consistently providing a superior consumer experience causing it to sell out as soon as it hits retail shelves. We define premium cannabis as a total sensory experience including look (flower size and appearance), nose (aroma and freshness), feel (moisture and stickiness) and effect (cannabis profile). The lack of premium craft flower in the market protects Experion from downward price pressures compared to producers of low or medium quality products. We will continue to ramp up our premium product offerings to drive revenue and profitability this coming year.
Branding and Distribution
Our Adult-use brand, Citizen Stash, is starting to build a strong following by offering new and exciting premium cannabis strains, in addition to our mainstream strains. These are some of Citizen Stash’s recent successes:
- Named Top 5 Product 2019: Citizen Stash’s Lemon Zkittle outranked hundreds of regional and national brands at the Canadian Cannabis Awards.
- Fastest Selling Brand: Citizen Stash products consistently sell out within hours once delivered to provincial distributors.
- First to Market Unique Cannabis Strains:
- Citizen Stash Original Mac1 premium flower tested at an exemplary 29.6% THC level in the first harvest. Only a handful of flower strains in the market have ever reached this THC level.
- Citizen Stash Original Creamsicle strain’s terpene profile tested over 11% with 22% THC creating one of the best flavoured highest terpene strains on the market.
- We were first to the recreational market in Canada with Lemon Zkittle; now a staple throughout Canada.
- Relaunch of Citizen Stash website: Newly redesigned website was launched for our acclaimed brand, Citizen Stash, citizenstash.com, featuring a new look and more information for consumers and business partners on our brand and the products we offer in the retail space.
A strong consumer brand needs to be underpinned by an established retail distribution network. In just over a year, Experion has gone from no provincial distribution to now serving five provinces: British Columbia, Alberta, Yukon, Manitoba and Saskatchewan. We have recently executed a letter of intent to distribute to Quebec and will soon have a presence in Ontario. We are actively engaging retailers that represent over 220 retail stores in the provinces of Alberta and Ontario alone.
Our premium craft products are supported by our established genetic bank allowing Experion to launch first to market, craft premium strains for years to come. Retail is all about the next “new” thing; developing premium first to market products is key to continuously driving Experion’s retail sales growth and path to profitability. Our plan for the next year is to introduce three new strains on top of our mainstream products.
We have seen that bigger is not always better. Many companies which were focused on building capacity, investing in large-scale capital projects and vertical integration were caught out with high overhead, major unfinanced capital commitments, integration difficulties and steep learning curves. Conversely, Experion has always focused on perfecting processes and products before growing scale. Our 14,500 square foot facility in Mission, BC has been optimized to develop quality products, cultivate true BC craft premium flower and to efficiently process, package and distribute throughout Canada. Staying small and focused on quality has provided several advantages; most notably, our ability to acquire the necessary licensing and retail distribution to generate revenue. These are a few of Experion’s operational successes over the past six months:
- Over 50 Harvests at our Mission, BC Facility: Many competitors granted licenses at the same time as Experion are still attempting to build teams that can execute and earn revenue.
- Cultivation Milestones: The cultivation team has continuously achieved 3 lbs per light of flower (a well-known industry performance indicator), sold all cannabis produced and introduced multiple commercial premium craft strains now available in five provinces across Canada.
- Increased Licensed Space: Capital improvements initiated at the Mission, BC facility in Q2 2019 are now complete and awaiting final licensing which will likely occur in Q2 2020. These processing improvements enable Experion to further monetize the facility by:
- Adding premium cannabis flower cultivation capacity;
- Quadrupling (4x) packaging and distribution capabilities;
- Increasing processing space to develop and distribute strain specific value-added products, including pre-rolls, allowing us to diversify our product offerings; and
- Offering white labelling services for other cultivators who need their product packaged and distributed.
- Right-Sizing Operations: Experion has made significant steps in recent months to reduce go forward SG&A expense by 30% with the aim of near-term profitability. These cost reductions focused on:
- Reducing office expenditures including closures of certain offices deemed unnecessary;
- Terminating roles considered redundant;
- Hibernating the clinical trial and related research;
- Eliminating and renegotiating consulting and services fees; and
- Optimizing business processes and functions.
Path to Profitability
There are just over 300 licensed cannabis companies in Canada, but only approximately 100 can sell products to provincial retailers and conduct medical sales. Experion is part of this sought-after group. With its unique genetics, established distribution network, experienced team, positive financial position and supportive financial partners, Experion has built a solid foundation for the future. Our immediate objective is simple: Increase product volume and distribution to return a profit. To meet this objective, we have identified the following milestones for the coming year:
- Take full advantage of our processing space. The additional processing space at our Mission facility allows Experion to increase the volume of product that can be processed and packaged. This creates the potential to increase revenue significantly (4X) without having to deploy capital to increase capacity. By purchasing product through our supply partners and selling it through our distribution network, we can better meet consumer demand in the near-term We intend to process up to 200kgs per month of dried cannabis flower by Q3 2020, subject to partnering with the right suppliers and receiving licensing. Along with this increased processing capacity comes the ability to diversify our existing product lines to include pre-rolls, oils and concentrates creating new revenue streams.
- Obtain an extraction sales license from Health Canada. This will allow Experion to sell value-added, strain specific cannabis products using a new delivery system and creating new revenue streams within our established distribution network. We anticipate obtaining this license in Q2 2020.
- Increase our national distribution footprint. Focus on achieving distribution in new provinces such as Quebec and Ontario to support our sales objectives. With boots on the ground, we plan to target hundreds of additional retailers in established provinces to increase market share.
- Improve our investor communications. Management is committed to keeping both the consumer and investment communities abreast of new developments and milestones. We will be publishing a new corporate investment deck and are planning to relaunch Experion’s website in the next quarter to align with our newly focused business strategy. We have transitioned social media management in-house for better control over messaging and plan to implement other cost-effective communication tools (e.g. vlogs) to inform our communities of any new developments and to reach a new investor audience.
- Identify opportunities to acquire existing cultivation facilities. With many larger cannabis companies looking to divest assets to support their ongoing cash burn, there is an opportunity for Experion to acquire cultivation capacity for less capital and time compared to building a new purpose-built facility.
- Secure financial support with a strategic business partner to fund our planned acquisition and expansion plans.
As we look forward to the next 12 months, we are confident that we will continue to position our company as a brand leader; standing out from the competition and becoming the logical choice for cannabis investors seeking a profitable growth opportunity.
On behalf of the Management team, we thank you for your continued support and look forward to our journey together.
Jarrett Malnarick, CEO
About Experion Holdings Ltd.
Experion Holdings Ltd. is the parent company of Experion Biotechnologies Inc., a Health Canada licensed cultivator and processor of Cannabis, based in Mission, BC.
Experion Holdings Ltd. is invested in a portfolio of products to address a wide spectrum of consumer needs’ including Adult-use, Wellness and Therapeutic, and Medical products.
Experion trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “EXP” on the OTCQB Venture under the symbol “EXPFF” and on the Frankfurt Stock Exchange under the symbol “MB31”
This press release contains forward-looking information within the meaning of Canadian securities laws. Although the Company believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct.
Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate, forecast, postulate and similar expressions, or are those, which, by their nature, refer to future events. The Company cautions investors that any forward-looking information provided by the Company are not guarantees of future results or performance, and that actual results may differ materially from those in forward looking information as a result of various factors, including, but not limited to: the state of the financial markets for the Company’s equity securities; recent market volatility; the Company’s ability to raise the necessary capital or to be fully able to implement its business strategies; the risks identified in the Filing Statement, and other risks and factors that the Company is unaware of at this time. The reader is referred to the Filing Statement dated September 25, 2017 and/or the most recent annual and interim Management’s Discussion and Analysis for a more complete discussion of such risk factors and their potential effects, copies of which may be accessed through the Company page on SEDAR at www.sedar.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies ofthe TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE: Experion Holdings Ltd.