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Cannabis 2.0 – The Industry's

Second Act

September 24th, 2019

Page #Slide

Agenda

Welcome and Introductions

Part One: Cannabis & the Capital Markets

• Special presentation from The CSE’s Richard Carleton

Part Two: MNP Presentation

• The Cannabis Act and Edibles: What’s Legal and What’s Not?

• Act 1: Canadian Cannabis Legalization 11 Months In

• What can we learn from the US edibles experience?

• Putting it All Together for Firms: Opportunities, Challenges and

Requirements

Questions

Closing Remarks

Page #Slide

Presenters

Mitchell Osak, MBA

Partner, Consulting, Cannabis Advisory Lead

[email protected]

(416) 263 6985

• Cannabis industry veteran, media commentator & thought leader

• 25+ years of consulting & operational experience

• Delivered 35+ strategy, M&A & risk consulting projects

Richard Carleton

Chief Executive Officer

[email protected]

(416) 367-7360

• CEO of the Canadian Securities Exchange in July 2011

• Recognized by the Financial Post Magazine as one of

Canada’s “25 Cannabis Industry Power Players”

• Recipient of the American Trade Association’s “Captain of

Industry” Award in November 2018

mailto:[email protected]

mailto:[email protected]

EXCHANGE UPDATEMNP / September 2019

www.thecse.com / @CSE_News / [email protected]

Canadian Securities Exchange – MNP Update

A Quick Primer About CSE

• Founded in 2003, now well into our second decade of operation

• Original mission statement: provide a modern, disclosure driven exchange model to facilitate capital formation for junior issuers

• The exchange has matured and grown with its issuers

• Privately-owned and independently operated, CSE is aligned with the independent dealers and public venture capital ecosystem in Canada

• Staffed by a growing team of passionate and experienced exchange professionals

CSE recently relocated it’s headquarters to the 72nd floor of First Canadian Place in the heart of Toronto’s Financial District

$5.59 BCapital Raised

541Number of Listings

880Financing Deals

* *

Trailing 12 months*


5 Year Trading Trend

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Num

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Volume

Value

Trades


Turnover – Trading Value/Market Cap

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19

TSX-V CSE

Trading Value/Market Cap = Turnover


Capital Formation – The Year (So Far)

• Cannabis - life sciences issuers have raised $1.87 billion in 2019 (YTD) on CSE

• $82.28 million total raised in hemp YTD

• Investments originated from 86 geographic sources this year

• Independent dealers lead CSE financings, with Canaccord at top of league table

CSE’s Financing Activity by Sector

2016 2017 2018 2019 YTD

# Deals $ Raised (K) # Deals $ Raised (K) # Deals $ Raised (K) # Deals $ Raised (K)

Life Sciences - non Cannabis 37 18,305 38 49,797 38 47,824 21 18,437

Cannabis - Life Sciences 65 203,993 147 656,244 292 4,149,277 202 1,877,585

Hemp - Life Sciences 5 4,340 13 47,578 17 53,908 30 82,276

Technology - non Blockchain 93 85,099 136 181,133 121 110,299 55 50,514

BlockchainCrypto - Technology 5 1,638 27 66,525 42 139,314 12 11,247

Mining 135 99,867 198 208,407 235 225,717 130 152,663

CleanTech 20 7,830 49 29,423 26 30,335 29 35,255

Diversified Industries 56 45,021 70 122,008 108 522,910 56 151,003

Oil & Gas 14 23,038 21 26,501 9 7,785 5 2,878

Real Estate 2 990 3 715 8 11,391 0 0

Total 432 490,121 702 1,388,331 896 5,298,761 540 2,381,859


Industry Leaders in CannabisCSE’s West Coast Director, Anna Serin directs a discussion at the recent ArcviewConference in Vancouver

CSE CEO Richard Carleton is a respected voice in the cannabis life sciences industry and is a recognized advocate for the industry

CSE CEO Richard Carleton honoured with “2018 Captains of Industry” award by the American Trade Association for Cannabis and Hemp (“ATACH”) and included in “The Cannabis Power List” by Financial Post

177

$19

541

$6.2

Cannabis/hemp related issuers on CSE

Financing deals into listed cannabis/hemp co’s in 2018/19

Billion market capitalization of CSE cannabis co’s

Billion raised for cannabis/hemp sector in 2018/19

(all funds expressed in CAD)


What’s Coming Next in Cannabis

• Convergence of technology and cannabis space, including quality control, seed genetics, and oil extraction plays coming to market

• Fewer MSOs will make it to market, choosing acquisition route – Existing companies have a huge cost of capital advantage

• Second wave of legalization in October should not raise a lot of optimism based on rollout of recreational cannabis in 2018…

• Foreign markets, specifically EU, will evolve through the medical space –there are opportunities to participate in early-stages of cannabis sector growth, albeit in a slower growing market


Updates Coming to CSE Rule Book

• Our foundation - rational entrance requirements tailored to early-stage companies

• No duplications of securities rules in CSE policy manual result in a thinner, simpler policy book

• The CSE has filed an application, with regulator encouragement, to create a “non-venture” board; this will formalize the regime in place for senior companies on the exchange:

Requirements for Mature Companies

All CSE listed companies are considered “venture” issuers for purposes of securities law

To address the needs of mature companies, CSE imposes additional requirements:

• All CSE issuers require one-year prior audit; mature companies may need two years

• Coattail provisions for companies with multiple share classes

• Shareholder right plans

• Board size and composition

Special Proposal – Columbia Care Listing on CSE

Clearing and Settlement Initiative

Clearing and Settlement Service

• CSE is engaged in launching a clearing and settlement offeringdesigned to support the launch of tokenized securities in a regulated and secure environment.

• Not crypto assets, instead a new tool for issuers to raise capital at lower cost through the CSE’s innovation in the post-trade arena.

Security Token Offerings

CSE CEO Richard Carleton and CSE VP James Black recently presented their vision of a world with STOs at the Blockchain Revolution Global conference in Toronto.

• Project managed by Andrew Grovestine, in process of organizing client advisory committee, further details available at https://www2.thecse.com/blockchain

New Developments Coming

https://www2.thecse.com/blockchain


Just Launched – Market Open at the CSE Media Centre


Public Entrepreneur Content

#HashtagFinance on Spotify, Soundcloud, Apple Podcasts, Google Play, and more!

CSETV on YouTube – executive interviews, event recaps and market open coverage

Our flagship publication profiling CSE listed companies with interviews and profiles, available at blog.thecse.com


Thank You

Richard CarletonChief Executive [email protected](416) 367-7360


Contact our Listings Team to Learn More

James BlackVP, Listings Development(778) [email protected]

Phil ShumDirector, Listings Development(647) [email protected]

Anna SerinDirector, Listings Development(778) [email protected]

Mark FrancisSenior Advisor, Listings Development(403) [email protected]

Scott PritchardSenior Advisor, Listings Development(514) [email protected]

Toronto

Vancouver Calgary Montreal

www.thecse.com / @CSE_News / [email protected]

Rob CookSr VP, Market Development(416) [email protected]

MNP – An Update & What to Expect…

The Best of Times, the Worst of Times

LEGALIZATION KICKED OFF

OCTOBER 2018

CANADIAN 2019 RETAIL SALES ARE

ESTIMATED TO REACH $1.02B ON AN ANNUALIZED BASIS

(STATS CANADA)

POTENTIAL CANADIAN CANNABIS

ECONOMY: THOUSANDS OF FIRMS, $22.6B IN

ACTIVITY (DELOITTE).

PROFITABILITY SLOWLY COMING TO

LPS

LOTS OF HICCUPS BY REGION

BLACK MARKET STILL STRONG

Snapshot of the Canadian Cannabis

Market

Cannabis 2.0

Edibles, Topicals Become Legal

Types of Cannabis Extracts

1. Solid edibles

2. Liquid edibles

3. Cannabis concentrates

4. Topical extracts

What to Expect with Edibles

…the good

• Up to $3B in sales annually

- extracts-based product like vaping, edibles ~ 50%

- Topicals, beverages, capsules and tinctures ~ 50%

• Drive trial and consumption to 30-40% of Canadians (the mainstream)

• Catalyst for new investment and start ups

• LPs moving up the value chain

What to Expect with Edibles

• Available mid December at

earliest

- 60 day Health Canada wait

period for new products

• Significant restrictions on THC

levels, branding (BC), packaging,

production and availability

(Quebec)

• Major CPG firms sitting on

sidelines

- CBD restrictions problematic

…the bad & the ugly

Some lessons for Canada….and not

• Edibles grab market share

- approaching ~50% of all cannabis consumption

- growing variety of products, formats, doses

- bringing in new consumers

• Cannabis beverages have disappointed (5% of total market)

• Brands matter

• Regional scaling is still a challenge

US Edibles Experience

• More bumps along the road

• Plethora of new products,

leading to market

segmentation

• Increased government and

investor scrutiny

• Global legalization gathers

momentum

It’s safe to say…

What Does the Future Hold?

…the salad days are over

• Time to focus

• Compliance and risk management is key

• Profitability expectations

• Lots of opportunities across the value chain

• Governments aren’t helping

Opportunities, Challenges, Requirements

Questions?

Thank You

www.mnp.ca

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