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C S E : C A N A
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Not for Distribution; No Offering This Presentation and the material contained herein are confidential and are not to be disclosed to the public. This Presentation is for information purposes only and may not be reproduced or distributed to any other person or published, in whole or part, for any purpose whatsoever. This Presentation does not constitute a general advertisement or general solicitation or an offer to sell or a solicitation to buy any securities in any jurisdiction. Such an offer can only be made by prospectus or other authorized offering document. This Presentation and materials or fact of their distribution or communication shall not form the basis of, or be relied on in connection with any contract, commitment or investment decision whatsoever in relation thereto. No securities commission or similar authority in Canada or any other jurisdiction has in any way passed upon the adequacy or accuracy of the information contained in this Presentation.
Cautionary Note Regarding Forward-Looking StatementsThis Presentation contains forward-looking statements and forward-looking information within the meaning of applicable Canadian and United States securities legislation. 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 CannAmerica 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 statements about expected timelines for product acquisition and launches, completing financings, finalizing collaborations and contractual arrangements, market growth and size, CannAmerica’s strategies and objectives,
future revenues, targeted EBITDA and profits, expected timing and receipt of necessary government licensing, forecast number of product lines and sales, the expectation of additional licensing agreements and planned partnerships and commencement of operations. 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 expected timelines for product acquisition and launches will be correct, the successful completion of financings, the successful finalization of collaborations and contractual arrangements, the market’s growth and size will be as anticipated, CannAmerica’s strategies will be successfully implemented to achieve its objectives, future revenues will be as anticipated, targeted EBITDA and profits will be as anticipated, expected timing and receipt of necessary government licensing will be as expected, forecast number of product lines and sales will be accurate, CannAmerica will enter into additional licensing agreements and planned partnerships and the successful commencement of operations. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of CannAmerica to be materially different from those expressed or implied by such forward-looking statements or forward-looking information. Important factors that may cause actual results to vary, include, without limitation, the risk that the expected timelines for product acquisition and launches will be incorrect, CannAmerica will not be able to close any additional financings, CannAmericawill be unable to successfully finalize collaborations and contractual arrangements, the market’s growth and size will be slower and smaller than anticipated, CannAmerica’s strategies will not be successfully implemented and CannAmerica will be unable to achieve its objectives, performance or achievements or such objectives, performance or achievements will be
materially different from the estimated future results, expected timing and receipt of necessary government licensing will be delayed or denied, forecast number of product lines and sales will be inaccurate, CannAmerica will not be able to enter into additional licensing agreements and planned partnerships and the commencement of operations will be delayed or unsuccessful. These forward-looking statements should not be relied upon as representing CannAmerica’s views as of any date subsequent to the date of this Presentation. Although CannAmerica 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 the sending of this Presentation and CannAmerica assumes no obligation to update such forward-looking statements to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.
The focus of CannAmerica’s business is the cannabis industry. The production, distribution, sale and use of marijuana and its derivatives are still illegal in some of the jurisdictions in which CannAmerica intends to operate, including under federal law of the United States despite being legalized under some state laws. These laws and their enforcement are in flux and vary dramatically from jurisdiction to jurisdiction. The enforcement of these laws and its affect on CannAmerica 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 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. This presentation may have been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission. You are responsible for protecting against viruses and other destructive items. Your receipt of this electronic transmission is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. As a consequence of the above neither the Company nor any director, officer or employee of the Company or any affiliate accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version that may be made available to you.
Cannabis-Related Practices or Activities are Illegal Under U.S. Federal LawsThe 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.
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“ CannAmerica offers licensed and regulatedcannabis businesses around the world the
opportunity to license their well established brands. Licensees receive the benefit of a recognized brand, including the flagship CannAmerica brand, as well
as access to proprietary formulas, recipes, IP, packaging solutions, ingredients and trade secrets
for creating high quality cannabis products. ”
DAN ANGLIN Founder and CEO
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EXECUTIVE SUMMARY
1. We aim to maximize the value of our brands bypromoting, marketing and licensing the brands throughvarious distribution channels, including to dispensaries,wholesalers and distributors in the United States andinternationally.
2. Our core strategy is to enhance and monetize the globalreach of our existing brands, and to pursue additionalstrategic acquisitions to grow the scope of and diversifyour portfolio of brands.
3. Management has deep knowledge in cannabis space.CEO Dan Anglin has been involved with drafting cannabispolicy in Colorado for seven years, and remains a drivingforce in US dynamic and robust cannabis industry.
4. Branding and licensing allows for high margins with lowoverhead compared to traditional cultivation andmanufacturing licenses.
We own a portfolio of cannabis brands in the cannabis space currently in the states of Colorado, Nevada and Maryland.
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$5.4 millionRaised to date to acquire and grow CannAmerica and AmeriCanna brands.
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THE CANNAMERICA STORY
Veteranowned and
operated
“Top Shelf”quality in
product and process
“Clear Oil”distillate (vs. food
grade oil)
Focused on the ability to
“Be Free” and targeted an
audience who embraced that
lifestyle5
CannAmerica quickly developed as a highly-attractive brand in Colorado with over 12 million gummies sold because of the story it told:
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OPPORTUNITY
Adult Use & Medical Medical No Laws
31 MEDICAL USE INSTATES & D.C. 1
x9 STATES WITHADULT USE 1
86% OF AMERICANSHAVE ACCESS 1
61 https://marijuana.procon.org/view.resource.php?resourceID=006868
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Our Licensing Strategy01
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CANNAMERICA BRANDS GROUP LICENSING STRATEGY
Royalty payments based on fixed price per unit
Each licensee has specific geographical territories and distribution channels in which the licensed products may be sold
Expand existing brands into multiple states as well as acquire new brands
Raise capital and acquire established brands from manufacturers in exchange for long term licensing agreements
Our licensing and branding agreements grant the licensee• Rights to the application, manufacture
and/or production of certain proprietaryblends, formulas and licensed products.
• We have created a proprietary blend ofcannabis oil to be applied to the rawmaterial (substrate) for the licensedproducts.
• Includes a precise ethanol formulation thathas been designed to optimize the functionof the equipment that is used to apply theblend to the substrate. 8
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OurLicensees02
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TR SCIENTIFIC (Colorado)
• TR Scientific is located in Denver, Colorado
• Their team has years of experience operating closed loopextraction systems and producing world-class extracts usingonly the most advanced extraction equipment andtechniques, ensuring that quality material always shines.
• Current selling through 350+ dispensaries in Colorado
• 25,000 sq ft
CannAmerica receives $2.17 USD per gummy bottle including packaging, labelling, formulation processes and substrate
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MATRIX NV (Nevada)
• Matrix is a well established cultivation and manufacturing facility
• Currently selling through 63 dispensaries in Nevada
• 30,000 sq ft
• North Las Vegas, NV
CannAmerica receives $2.25 USD per bottle including packaging, labelling, formulation processes and substrate
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0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18T
hou
sand
s
MD Medicinal Cannabis Market Monthly Sales3
MD sales Sales % change from prior month
FGM PROCESSING (Maryland)
• FGM Processing is one of the first extractionlicenses in Maryland
• Production commenced in August 2018
• CannAmerica receives a Gross RevenueRoyalty and revenue in USD per package forpackaging/branding/intellectual propertyrights
• 7500 sq ft
• 1 of only 15 licenses in the state of Maryland
• CannAmerica owns 10% of the license inMaryland with an option to acquire anadditional 30% of the license for $2.5 millionUSD.
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MARYLAND MARKET
The Maryland medical cannabis market has grown significantly on a monthly basis in the brief period since the first medical dispensary was approved in July, 20172.
2 https://medicalmarijuana.procon.org/view.resource.php?resourceID=000881#Maryland3 https://mjbizdaily.com/chart-first-year-medical-marijuana-sales-maryland-could-hit-100-million/
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PLANNED LICENSEE ROLLOUT
CannAmerica Brands Group expects to rollout out additional licensing agreements as follows:
• Canada (Q3 2019)
• California
• Washington
• Oregon
• Massachusetts
• Vermont
• Maine
• Alaska
• Hawaii
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Brand Acquisition Pipeline03
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BRAND ACQUISITION PIPELINE
CannAmerica plans to launch a major brand acquisition strategy to expand the Company’s portfolio of leading brands.
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Acquisition Pipeline Transaction Value($USD)
PODA brand acquisition $2.0 million
PODA brand launch $1.0 million
Acquisition of additional 30% of FGM Processing (Maryland licensee) $2.5 million
HempAmerica $4.0 million
Other brand acquisitions in progress $14.0 million
Total capital required for pipeline of brand acquisitions $23.5 million
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PODA
Poda is the developer of a revolutionary vaping system:
• Zero cleaning system - Disposable
pods contain 100% of the mess.
• Vape anything - Dry herb, tobacco, e-
liquid, concentrates, waxes & oils.
• Pre-filled compostable pods
• Barcode scanning - Extremely low-
cost tech and automatic settings.
Development PhasesPoda will be ready for market in two phases:
• Phase 1 will introduce the market to the
Poda system with a simple, sleek
device compatible with Poda’s flagship
compostable dry-herb pods.
• Phase 2 will introduce the smart device
and liquid pods for concentrates and e-
cigarette liquids.
CannAmerica is currently building a brand acquisition pipeline and has the opportunity to acquire the PODA brand, a leading vaporizer and dry herb pod.
16Flagship compostable dry-herb pods.
Phase 1 vape Phase 2 vape
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Financial Information04
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CAPITALIZATION TABLE(at September 6th, 2018)
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($CAD)Number Price/ Share Dollars
Series A 300,000 $0.01 $ 3,000
Series B 7,060,000 $0.20 $ 1,412,000
Shares issued to acquire CannAmerica Brands Corp. 29,166,000 -
Series C 13,158,865 $0.30 $ 3,947,660
Total shares issued and outstanding 49,684,865 $ 5,362,660
Stock Options at $.30 per share 4,100,000 $0.30 $ 1,230,000
Warrants at $.50 per share 3,000,000 $0.50 $ 1,500,000
Total fully diluted shares outstanding 56,784,865 $ 8,092,660
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TheTeam05
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Dan AnglinFounder, CEO and Director
A US Marine Veteran, Dan Anglin is Founder and CEO of AmeriCanna Brands, a Marijuana Infused Products manufacturer and cultivator of both medical and recreational marijuana products in Colorado. Since 2011, Dan has been a high-profile leader in the marijuana industry, having owned and operated a successful recreational dispensary in Black Hawk Colorado, and co-owned one of the largest marijuana manufacturing companies in the world, operating in multiple states. Dan is also a national expert in marijuana public policy, serving on rule-making work groups for the Colorado Marijuana Enforcement Division on more than 10 occasions, as well as crafting legislation directly at the Colorado General Assembly for the good of Colorado and its regulated industry. Dan founded and is the Chairman of the Board of Directors of the Colorado Cannabis Chamber of Commerce, an industry-based trade organization dedicated to advocacy and networking opportunities for the cannabis industry, as well as promoting reasonable regulation on legal commercial cannabis businesses.
Frank FalconerFounder, COO and Director
Frank’s involvement in the cannabis industry started in 2009 with the ownership and successful sale of marijuana edibles company, Wild Flour Baking Co. (“WFB”). Shortly after the sale of WFB, Frank shifted focus to distribution and development of new brands in the Colorado market. The impressive portfolio of infused-product brands he introduced into the market include: EyeChronic, ExtractionTek, CRREO bags, Kush Bottles, ApotheCanna, PharmPods, Organa Labs Vape Pens (Open Vape), and Atmos Vape Pens. In addition to this list of brands he introduced into the market, he co-founded Denver Consulting Group (A Cannabis Consulting Firm, catering to clients nation-wide), Cannascore (a Compliance Audit Software Program, tracks compliance for cannabis operations, nation-wide), and now Americanna. Frank brings a unique, creative, intuitive approach to cannabis brand development, and his successful portfolio has lead him to become one of the most trusted, sought-after players in the industry.
Nitin Kaushal, CPAChairman of the Board
Nitin Kaushal serves as Managing Director, Corporate Finance at PwC Canada. With over 30 years of finance and investment experiencein the financial, healthcare and technology industries he has worked in senior roles with a number of Canadian investment banks,including Desjardins Securities Inc., Orion Securities Inc., Vengate Capital Partners Company, HSBC Securities Inc., Medwell Capital Corp.and Gordon Capital, and has held various roles within the private equity/venture capital industry. In addition, he has sat on the boards of anumber of public and private companies, including Patient Home Monitoring Corp., Convalo Health International, Delivra Inc., GlobalGardens Group Inc., and Shelby Ventures.
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OUR TEAM
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Dylan Easterbrook, CPACFO
Mr. Easterbrook is a seasoned accounting and financial professional, who is currently the CFO of a Canadian cannabis company Invictus MD Strategies Inc. (TSXV:GENE), and previously was controller of a publicly traded global fibre optic connectivity solution provider. Prior to that role he was with Ernst & Young, one of the largest professional services firms in the world and one of the Big Four accounting firms, where he led audit engagements for both public and privately held companies from a variety of industries, including the emerging markets. Mr. Easterbrook is a Canadian Chartered Professional Accountant (CPA, CA), and also holds a Bachelor of Science in Life Sciences degree from the University of British Columbia.
Russel Henderson, CPADirector
Russell is an experienced corporate finance and strategy professional. He has advised both private and public clients over the past five years on mergers, acquisitions, divestitures and financing transactions with enterprise values in the hundreds of millions of dollars, most recently with MNP Corporate Finance and Ernst & Young Orenda Corporate Finance. Prior to working in mergers & acquisitions, Russell spent three years working in the assurance practice of Ernst & Young LLP. Russell has worked with clients in a broad range of industries in Canada, the United States and the United Kingdom. Russell is a Chartered Professional Accountant (CPA, CA) and holds a Bachelor of Management and Organizational Studies specializing in Finance and Administration from the University of Western Ontario.
OUR TEAM
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Jordan CrockettDirector
Mr. Crockett currently owns and operates a progressive commercial and residential construction company. He has been involved in the design and construction of cannabis cultivation facilities over the years. Mr. Crockett graduated with a degree in commerce specialising in finance at the University of British Columbia Sauder School of Business.
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Appendix0623
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Product Overview
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Fruit Juice Gummies
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Product Overview
SuperSoftGummies
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Some of the Company’s planned business activities, while believed to be compliant with applicable certain U.S. state and local law, are illegal under United States federal law.
Unlike in Canada which has federal legislation uniformly governing the cultivation, distribution, sale and possession of medical marijuana under the Access to Cannabis for Medical Purposes Regulations, it is cautioned that in the United States, marijuana is largely regulated at the state level. Although certain states and territories of the U.S. authorize medical or recreational cannabis production and distribution by licensed or registered entities, under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal and any such acts are criminal acts under federal law under any and all circumstances under the U.S. Controlled Substances Act (“CSA”).
Violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including but not limited to disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on the Company, including its reputation and ability to conduct business, its holding (directly or indirectly) of marijuana licenses in the United States, the listing of its securities on various stock exchanges, its financial position, operating results, profitability or liquidity or the market price of its publicly traded shares, if any. In addition, it is difficult to estimate the time or resources that would be needed for the investigation of any such matters or its final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.
In addition, since the possession and use of cannabis and any related drug paraphernalia is illegal under U.S. federal law, the Company may be deemed to be aiding and abetting illegal activities through the contracts it has entered into and the products that it intends to provide. As a result, U.S. law enforcement authorities, in their attempt to regulate the illegal use of cannabis and any related drug paraphernalia, may seek to bring an action or actions against the Company, including, but not limited to, aiding and abetting another’s criminal activities. The Federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its
commission, is punishable as a principal.” As a result of such an action, the Company may be forced to cease operations. Such an action would have a material negative effect on our business and operations.
The Company’s investments and operations in the United States may be subject to heightened scrutiny.
For the reasons set forth above, the Company’s existing investments and operations in the United States, and any future investments or operations, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada. As a result, the Company may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on the Company’s ability to invest in the United States or any other jurisdiction. Relatedly, it has been reported by certain publications (the “Publications”) in Canada that The Canadian Depository for Securities Limited is considering a policy shift that would see its subsidiary, CDS Clearing and Depository Services Inc. ("CDS"), refuse to settle trades for cannabis issuers that have investments in the United States. CDS is Canada's central securities depository, clearing and settlement hub settling trades in the Canadian equity, fixed income and money markets. Although the TMX Group, the owner and operator of CDS, released a statement on August 17, 2017 confirming that there is no CDS ban on the clearing of securities of issuers with marijuana-related activities in the U.S., the TMX Group did indicate that it continues to work with regulators to arrive at a solution that will clarify this matter for issuers, investors, participants and the public. If CDS were to proceed in the manner suggested by these Publications, and apply such a policy to the Company, it would have a material adverse effect on the ability of holders of Common Shares to make trades if the Company is publicly traded at such time. In particular, the Common Shares would be highly illiquid as investors would have no ability to effect a trade of the Common Shares through the facilities of a stock exchange in Canada.
Government policy changes or public opinion may also result in a significant influence over the regulation of the cannabis industry in Canada, the United States or elsewhere. A negative shift in the public’s perception of medical or recreational cannabis in the United States or any other applicable jurisdiction could affect future legislation or regulation. Among other things, such a shift could cause state jurisdictions to abandon initiatives or proposals to legalize medical and/or recreational cannabis,
thereby limiting the number of new state jurisdictions into which the Company could expand. Any inability to fully implement the Company’s expansion strategy may have a material adverse effect on the Company’s business, financial condition and results of operations.
Regulatory scrutiny of the Company’s industry may negatively impact its ability to raise additional capital.
The Company’s business activities rely on newly established and/or developing laws and regulations in various states in the United States. These laws and regulations are rapidly evolving and subject to change with minimal notice. Regulatory changes may adversely affect the Company’s profitability or cause it to cease operations entirely. The cannabis industry may come under the scrutiny or further scrutiny by the U.S. Food and Drug Administration, Securities and Exchange Commission, the DOJ, the Financial Industry Regulatory Advisory or other federal state or nongovernmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical or nonmedical purposes in the United States. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any proposals will become law. The regulatory uncertainty surrounding the Company’s industry may adversely affect the business and operations of the Company, including without limitation, the costs to remain compliant with applicable laws and the impairment of its ability to raise additional capital, which could reduce, delay or eliminate any return on investment in the Company.
The size of the Company’s target market is difficult to quantify.
Because the cannabis industry is in an early stage with uncertain boundaries, there is a lack of information about comparable companies and, few, if any, established companies whose business model the Company can follow or upon whose success the Company can build. Accordingly, there can be no assurance that the Company’s estimates are accurate or that the market size is sufficiently large for its business to grow as projected, which may negatively impact its financial results. The Company regularly purchases and follows market research.
RISK FACTORS
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RISK FACTORS
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The Company may have difficulty accessing the service of banks and processing credit card payments in the future, which may make it difficult for the Company to operate.
In February 2014, the Financial Crimes Enforcement Network (“FinCEN”) bureau of the U.S. Treasury Department issued guidance (which is not law) with respect to financial institutions providing banking services to cannabis business, including burdensome due diligence expectations and reporting requirements. This guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the DOJ, FinCEN or other federal regulators. Thus, most banks and other financial institutions do not appear to be comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which can be amended or revoked at any time by the Trump Administration. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, the Company may have limited or no access to banking or other financial services in the United States, and may have to operate the Company’s U.S. business on an all-cash basis. The inability or limitation in the Company’s ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for the Company to operate and conduct its business as planned. The Company is actively pursuing alternatives that ensure its operations will continue to be compliant with the FinCEN guidance and existing disclosures around cash management and reporting to the IRS once it moves from development into production.
U.S. Federal trademark and patent protection may not be available for the intellectual property of the Company due to the current classification of cannabis as a Schedule I controlled substance.
As long as cannabis remains illegal under U.S. federal law as a Schedule I controlled substance pursuant to the CSA, the benefit of certain federal laws and protections which may be available to most businesses, such as federal trademark and patent protection regarding the intellectual property of a business, may not be available to the Company. As a result, the Company’s intellectual property may never be adequately or sufficiently protected against the use or misappropriation by third-parties. In addition,
since the regulatory framework of the cannabis industry is in a constant state of flux, the Company can provide no assurance that it will ever obtain any protection of its intellectual property, whether on a federal, state or local level.
The Company’s contracts may not be legally enforceable in the United States.
Because the Company’s contracts involve cannabis and other activities that are not legal under U.S. federal law and in some jurisdictions, the Company may face difficulties in enforcing its contracts in U.S. federal and certain state courts.
There is uncertainty surrounding the Trump Administration and Attorney General Jeff Sessions and their influence and policies in opposition to the cannabis industry as a whole.
The inconsistency between U.S. federal law and the laws of certain states concerning cannabis was addressed in August 2013 when then Deputy Attorney General, James Cole, authored the Cole Memorandum (the “Memorandum”). The Memorandum was addressed to all U.S. district attorneys acknowledging that notwithstanding the designation of cannabis as a controlled substance at the federal level in the U.S., several US states have enacted laws relating to cannabis for medical purposes. The Memorandum outlined certain priorities for the DOJ relating to the prosecution of cannabis offenses. In particular, the Memorandum noted that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level. Notably, however, the DOJ has never provided specific guidelines for what regulatory and enforcement systems it deems sufficient under the Memorandum standard.
In light of limited investigative and prosecutorial resources, the Memorandum concluded that the DOJ should be focused on addressing only the most significant threats related to cannabis. States where medical cannabis had been legalized were not characterized as a high priority. On January 4, 2018, US Attorney General Jeff Sessions issued a memorandum
to US district attorneys which rescinded the Memorandum. With the Memorandum rescinded, US federal prosecutors may exercise their discretion in determining whether to prosecute compliant state law cannabis-related operations as violations of U.S. federal law throughout the U.S. The practical impact of the decision to rescind the Memorandum is unknown and may have a material adverse effect on the Corporation’s business and results of operations.
Due to the classification of cannabis as a Schedule I controlled substance under the CSA, banks and other financial institutions which service the cannabis industry are at risk of violating certain financial laws, including anti-money laundering statutes.
Because the manufacture, distribution, and dispensation of cannabis remains illegal under the CSA, banks and other financial institutions providing services to cannabis-related businesses risk violation of federal anti-money laundering statutes (18 U.S.C. §§ 1956 and 1957), the unlicensed money-remitter statute (18 U.S.C. § 1960) and the U.S. Bank Secrecy Act. These statutes can impose criminal liability for engaging in certain financial and monetary transactions with the proceeds of a “specified unlawful activity” such as distributing controlled substances which are illegal under federal law, including cannabis, and for failing to identify or report financial transactions that involve the proceeds of cannabis-related violations of the CSA. The Company may also be exposed to the foregoing risks. In the event that any of the Company’s investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such investments in the United States were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This could restrict or otherwise jeopardize the ability of the Company to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada in the foreseeable future, in the event that a determination was made that any such investments in the United States could reasonably be shown to constitute proceeds of crime, the Company may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.
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CONTACT
DAN ANGLINChief Executive Officer
