sproutly canada inc....sproutly canada inc. technology-powered cannabis products company investor...

Sproutly Canada Inc.Technology-Powered Cannabis Products Company

Investor PresentationMay 2020

(CSE: SPR) (OTCQB: SRUTF) (FSE: 38G)

www.sproutly.ca

Notice to ReaderCertain information set forth in this presentation contains “forward-lookinginformation”, including “future oriented financial information” and “financial outlook”,under applicable securities laws (collectively referred to herein as forward-lookingstatements). Except for statements of historical fact, information contained hereinconstitutes forward-looking statements and includes, but is not limited to future M&Aactivity and completion of Sproutly Canada, Inc.’s (“Sproutly”) projects that arecurrently underway, in development or otherwise under consideration. Forward-looking statements are provided to allow potential investors the opportunity tounderstand management’s beliefs and opinions in respect of the future so that theymay use such beliefs and opinions as one factor in evaluating an investment.

The material assumptions upon which forward-looking statements in this presentationare based include, among others, assumptions with respect to: the Company's abilityto access financing on favorable terms to continue with its expansion plans anddevelop its business; the Company’s ability to obtain or maintain the requiredregulatory approvals; the Company's ability to attract and retain customers; thecontinuation of executive and operating management or the non-disruptivereplacement of them on competitive terms; and stable market and general economicconditions. The Company makes no representation that reasonable business people inpossession of the same information would reach the same conclusions. Although webelieve that the assumptions underlying forward-looking statements are reasonable,they may prove to be incorrect and we cannot assure that actual results will beconsistent with such statements. Given these risks, uncertainties and assumptions, youshould not place undue reliance on these forward-looking statements or theinformation contained in such statements.

These statements are not guarantees of future performance and undue reliance shouldnot be placed on them. Such forward-looking statements necessarily involve knownand unknown risks and uncertainties, which may cause actual performance andfinancial results in future periods to differ materially from any projections of futureperformance or result expressed or implied by such forward-looking statements,including the Company's requirement for additional funding to continue its expansionplans in Canada and the United States; the Company’s failure to obtain and/or maintainthe required regulatory licenses for its businesses; the Company's failure to retain keypersonnel and hire additional personnel needed to develop its business; And theCompany's business practice reputation being negatively affected by client or usercomplaints or negative publicity.

Although forward-looking statements contained in this presentation are based uponwhat management of Sproutly believes are reasonable assumptions, there can be noassurance that forward-looking statements will prove to be accurate, as actual resultsand future events could differ materially from those anticipated in such statements.Sproutly undertakes no obligation to update forward-looking statements ifcircumstances or management’s estimates or opinions should change except asrequired by applicable securities laws. The reader is cautioned not to place unduereliance on forward-looking statements. We seek safe harbor.

This presentation and the material contained herein are confidential and are not to bedisclosed to the public. This presentation is for information purposes only and may notbe reproduced or distributed to any other person or published, in whole or part, forany purpose whatsoever. This presentation does not constitute a generaladvertisement or general solicitation or an offer to sell or a solicitation to buy anysecurities in any jurisdiction. Such an offer can only be made by prospectus or otherauthorized offering document. This presentation and materials or fact of theirdistribution or communication shall not form the basis of, or be relied on in connectionwith any contract, commitment or investment decision whatsoever in relation thereto.The information in this presentation is not intended in any way to qualify, modify orsupplement any prospectus, listing statement, information circular or otherinformation disclosed under the corporate and securities legislation and stockexchange policies of any jurisdiction relating to Sproutly, Inc. No securities commissionor similar authority in Canada or any other jurisdiction has in any way passed upon theadequacy or accuracy of the information contained in this presentation.

Sproutly (CSE:SPR) | 2

NOT FOR DISTRIBUTION; NO OFFERING

Technology company focused on discovering and commercializing innovative,

science-based cannabis and hemp technologies.

Exclusive licensee of Infusion Biosciences patent pending APP Technology in Canada.


Sproutly: Technology-Enabled Cannabis Products


Infuz2O Technology

Exclusive licensee of Infusion’s patent-pending APP

Technology in key regions

Controllable onset of effects within 5 mins and offset of

effects within 90 min

_______

Licensed Production Facility

Fully-operational cannabis production and processing

facility located in Scarborough, ONT.

APP Technology installed and operating commercially

_______

Superior Plant-to-Product Economics

Up to ~90% total cannabinoid recovery in Infuz2O and Oil

Solution

Highly scalable with low cap-ex and op-ex requirements

_______

Commercial Applications

Asset-light, technology focused business model for

increased scalability

In discussions with Moosehead & others for

supply agreements for both infuz2O and BNO

_______


TRADITIONAL PRESPECTIVE ON EXTRACTION INFUSION’S DISCOVERY & DEVELOPMENT ON EXTRACTION

Focus on Major Cannabinoids and Terpene Oils

▪ Preferred delivery as vaping liquids for inhalation and edible formulations that use oils.

▪ Artificial chemicals for emulsion and encapsulation are essential for dispersion in water for beverages (“Water-Compatible”).

▪ No experience or health benefits from water soluble nutrients and many other beneficial oils.

Focus on Naturally Water-Soluble Bioactives in Plants to Develop Beverages for Safe and Effective Delivery of Whole Plant Experience and Benefits

▪ Discovered and developed patent pending process to directly recover two whole plant molecular spectrums;

• 1) Naturally water-soluble molecular mix that includes bioactive cannabinoids and terpenes (“Infuz2O”) and;

• 2) Natural oils from cannabis and hemp plants (“BNO”) that provide a complete experience from the full spectrum of oils including the cannabinoids and terpenes.

▪ A variety of stable beverage formulations with a single or mixed cannabis strains that deliver rapid onset/offset for a unique user experience.

APP Extraction Technology is a fundamental paradigm shift within the cannabis industry. Replacing traditional “water-compatible” solutions with true natural water-solubility improves the body’s ability to utilize cannabinoids.

Infusion’s Scientific Discovery: Water-Soluble Cannabinoids

Proprietary APP Technology

APP yields two truly unique cannabis extract products, including the world’s only naturally water-soluble cannabis liquid without the use of artificial chemicals and harsh physical treatments.

“Naturally Water Soluble “ - Infusion Biosciences’ Proprietary APP Technology

2 Step “Soak and Strain” Method: Patent pending process that uses custom GRAS certified reagentsformulated for different plant materials (no artificial chemicals, no harsh physical treatments)

Step 1Soak in proprietary water

reagents; strain/filter to recover naturally water-soluble entourage

Step 2Soak plant material strained from step 1 in

proprietary natural oil reagents; strain/filter to recover free oil entourage

“Water Compatible” – In the Market Today

Co

mp

etit

ors


APP Technology: True Whole Plant Extraction

APP Technology is the only extraction method today which retains the whole plant characteristics of the biomass, including its cannabinoids, terpenes, minerals,

and vitamins.

Sample Extracted Biomass Profile

Source: Infusion Biosciences, ProVerde Labs

Cannabinoids Present

THC, THCV, CBC, CBNTHC, THCV, CBC, CBN

~30% Recovery Rate of Water-Soluble Cannabinoids

THC, THCV, CBC, CBN~60% Recovery Rate of Oil-Based

Cannabinoids

Terpenes Presenta-Pinene, 8-3-Carene, a-Terpinene, Terpineolene, Isopulegol, Guaiol, a-

Bisabolol

a-Pinene, 8-3-Carene, a-Terpinene, Terpineolene, Isopulegol, Guaiol, a-

BisabololAll Terpenes Present

a-Pinene, 8-3-Carene, a-Terpinene, Terpineolene, Isopulegol, Guaiol, a-

BisabololAll Terpenes Present

Vitamins PresentVitamin B1, Vitamin B2, Vitamin B3,

Vitamin B6

Vitamin B1, Vitamin B2, Vitamin B3, Vitamin B6

All Vitamins Present

Vitamin B1, Vitamin B2, Vitamin B3, Vitamin B6

All Vitamins Present

Minerals PresentCalcium, Phosphorus, Sodium,

Potassium, Magnesium

Calcium, Phosphorus, Sodium, Potassium, Magnesium

All Minerals Present

Calcium, Phosphorus, Sodium, Potassium, Magnesium

All Minerals Present

Starting Biomass Profile Extracted Infuz2O Content Profile Extracted BNO Content Profile


Illustrative Value Creation: APP Extraction

Base High

Input Biomass (kg) 1 1

Cannabinoid Content of Biomass(1) (%) 15% 15%

Total Cannabinoid Content (mg) 150,000 150,000

APP Extraction Recovery Rate(2) (%) 90% 90%

Total Cannabinoids Recovered (mg) 135,000 135,000

Price Per mg of Cannabinoids (C$) $0.11(2) $0.16

Estimated Revenue per kg of Input (C$) $14,850 $21,600


Illustrative APP Finished Product Revenue Additional Value vs. Traditional Extraction Technologies

APP Technology provides increased revenue opportunity and enhances margin as compared to traditional technologies.

(1) Management Estimates(2) Wholesale price base scenario taken from Harvest Medicine, high scenario applies a premium for APP Technology value

Potential revenue is not reflective of future revenue guidance or management guidance for actual financial resultsAPP Technology does not require additional processing (e.g. emulsion or encapsulation) after extraction. This provides additional technology value as a result of;

▪ Increased finished product cannabinoid yield to increase revenue per gram equivalent of biomass

▪ Reduced labour costs (e.g. processing labour) to arrive at the finished product

▪ Reduced additional ingredient costs (e.g. artificial chemicals) to arrive at the finished product

▪ Reduced capex requirements on processing equipment

▪ Potential value from preserving whole-plant characteristics of the extract (which is lost through traditional processing steps)

35%

55%

65%

45%

2014 2018

29%

55%

71%

45%

2019 2022

C$2.7 billion Cannabis 2.0 Market Opportunity in Canada


84% 92%76%

$4.19

$6.49

$12.63

Dried Flower Concentrates Edibles

Cannabis 2.0 Expected to Surpass Flower Sales Cannabis 2.0 – Increasing Profitability through Value Chain

Source: BDS Analytics, RBC, Grizzle, Deloitte

Colorado – Historical Market Share

Canada – Projected Market Share

FlowerConcentrates, Edibles, Beverages & Other

Revenue /$ of Production

Cost

Profit Margin

Cannabis derivatives products projected to surpass flower market share and grow to C$2.7bn annually as the Canadian legal market matures. This opens up the

untapped market for higher-margin cannabis derivative products.

& Beverage

Cannabis Beverage Market Estimate


Potential Canadian Cannabis Beverage Market:

$1.4 – $3.0 bn

“With regard to the potential size of the cannabis market in Canada,

if you take an average, then it suggests that this market may be

somewhere between $7 billion and $10 billion in market value, with

beverages somewhere between 20% and 30%”

Mark Hunter, President and CEO

Potential Canadian cannabis beverage market estimated at up to $3.0 billion at maturity. This does not account for additional market growth created

by naturally water-soluble based cannabis beverages and the recent vaping illnesses.

Source: Molson-Coors

Cannabis Beverages: Industry Challenges

Producers of hemp and cannabis beverages are constrained by incumbent approaches that do not meet consumer preferences today

Unpredictable and Lengthy OnsetProlonged Offset/

Lack of Single Form DosageFlavour and Formulation Challenges1 2 3

“We think onset time is going to be one of the critical factors in the next stage of cannabis-infused beverages “

- New Frontier Data

“Many in the industry believe that the key tomainstream acceptance of cannabis beverages iscreating a “session-able” beverage”

- Bloomberg

“Developing cannabis drinks has been a challenge in part because when the active ingredients are concentrated it forms an oil, which is tough to mix with water into a beverage.”

“When you put CBD or THC into a beverage, it has a tendency to degrade over time... And so we've figured it out, but we didn't figure it out for THC yet.”

- Jorn Socquet, CEO of Fluent Beverage Company (Tilray-AB InBev JV)

“The problem of onset time is one of the biggestchallenges facing makers of cannabis beverages”

- Bloomberg

Source: Bloomberg, CIBC, New Frontier Data Sproutly (CSE:SPR) | 11

Infuz2O - Unique Disruptive TechnologyHemp and Cannabis Impact Over Time: Inhaled vs. Ingested

Infuz20

Technology delivers a truly natural water-soluble liquid with fast onset and offset, without the need for formulation techniques such as emulsification or

encapsulation, that mimic those of inhaled hemp or cannabis

Source: Aphria Inc, Management Estimates based on 100+ user feedback

Highly Desired Quick Onset, Quick Offset Profile

Time in Hours

De

sire

d E

ffe

cts

Predictable – less than 5 mins to feel effects, less than 90 to wear off

✓

Experience – Superior effects comparable to smoking and vaping

Safe Discrete Consumption – odorless and smokeless without adverse effects of smoking/vaping

Formulation Versatility – numerous end-user applications including ‘functional’ beverages

Precise Dosing – ability to deliver a measurable amount of cannabis

Strain Specific – APP Extractions retains the full suite of cannabinoids and terpenes in the biomass,

Infuz2O Characteristics

✓

✓

✓

✓

✓


Select Cannabis Beverages in the U.S. Market

Source: Company Websites, Leafly, management analysis

Product Name Dixie ElixirsRipple

(Stillwater Brands)Cannabis Quencher

Keef Brands(Sparkling Water)

Happy Apple Cider Lagunitas Hi-Fi Hops Infuz20

Onset Time 30-60 minutes 20 minutes 30-60 minutes 30-45 minutes 30 minutes 30 minutes 5 minutes

Offset Time 6 hours 4 hours 6 hours ~3 hours 4-6 hours 4-6 hours 1.5 hours

Technology Emulsified Oil ExtractDehydrated &

Emulsified Oil ExtractEmulsified Oil Extract Emulsified Oil Extract Emulsified Oil Extract Emulsified Oil Extract

Naturally Water-Soluble Cannabinoids

Flavor Profile Multiple (Fruity) Tasteless Multiple (Fruity) Citrus Apple Cider Hoppy Flexible

Calories/Bottle Various 0 cal 20 cal 0 cal 140 cal 0 cal Flexible

Serving Type Multiple ServingPackets

Multiple ServingSingle Serving Single Serving Single Serving Single Serving Flexible

Cannabis Content 100mg THC 100mg THC 25mg THC 10mg THC 10mg THC 10mg THC Flexible

$USD/mg THC $0.23 $0.33 $0.64 $0.60 $0.80 $1.10 TBD

States Available CA, CO, NV CO CA CO, CA, AZ, MI, NV WA CA N/A


Liquid Cannabis Technology LandscapeEmulsion Microencapsulation Genetic Solubilisation

Infusion(APP)

Product Type Water Compatible Water Compatible Water-Soluble Water-Soluble

Starting MaterialExtracted Oil

(i.e. CO2 or Butane)Extracted Oil

(i.e. CO2 or Butane)GMO PlantCell Culture

Trim or Bud

Whole Plant Experience

No No Potential / No Yes

OnsetVaries

(Similar to existing ingestibles)Varies

(Similar to existing ingestibles)Unknown <5 min

OffsetExtended

(Similar to existing ingestibles)Extended

(Similar to existing ingestibles)Unknown 0.75 – 1.5 hours

Processing Equipment Equipment Laboratory Work Biotech

Economics Capital-intensive Capital-intensive To be determined Not Capital-Intensive

Current Commercialization

Yes Yes No Yes

Potential IssuesArtificial chemicals, uncertain shelf stability under different storage conditions,

potential reformulation for different beverage types (ex. water vs. sparklingwater, juice, flavour etc.)

No assurance that cannabinoids areuniformly changed, entirely new non

natural moleculesN/A

Infusion’s APP is the only water-based technology that uses trim or bud as starting material and provides rapid onset and offset.


Infuz2O vs. Status Quo Formulations


Select Cannabis Beverages in the U.S. Market

Competitor #3

Competitor #2

Competitor #1

Sproutly

Infuz2O’s true water-solubility allows the solution to fully-dissolve in water, creating a clear finished product. ‘Water-compatible’ cannabis beverages currently in the market show obvious signs of clouding and residue.

Bio-Natural Oil: Plant-to-Product Technology


▪ Bio-Natural Oil (“BNO”) is an edible cannabis oil recovered using APPTechnology

▪ Retains strain specific characteristics with whole plant experience

▪ Full-spectrum of cannabinoids, terpenes, vitamins, minerals and otherplant phytochemicals

▪ Cannabinoids recovered directly in pre-customized carrier oil and readyfor consumption as a cannabis oil or processed further in products

▪ Broad array of applications to provide strain-specific edible and topicalcannabis oil products

▪ Cannabinoids are homogeneously dissolved in oil

▪ Customized for desired use by client

▪ Can be sold directly as cannabis oil, tinctures, and capsules in Canada

▪ No need for de-waxing / winterization

▪ May be formulated into:

▪ Edibles

▪ Topicals

Pre-Customizable Carrier Oil

Proprietary Oil Recovery Process (APP Technology)

MCT Oil

Tinctures

Capsules

Candies

Jellies

Olive Oil

Baked Goods

Savoury Foods

Nutritional Oils

Baked Goods

Topicals

Coconut Oil

Caramels

Baked Goods

Butter

Wide Array of Product FormulationsBNO Characteristics

BNO Benefits

CO2 Ethanol APP Technology

Examples Distillate/Crude Distillate/Crude BNO

Minimally Processed

No High Pressure

Uses GRAS Food Grade Ingredients

No Chemical Solvent

All Natural Process

Retains Natural Terpene Profile

Retains Natural Vitamins

Retains Natural Cannabinoid Profile

Retains Beneficial Plant Oils

Maintains Strain Specificity

Minimal Heat

Homogeneous

Complete Spectrum

No Alcohol & Chemicals Used

Whole Plant/All Natural Products

Similar Experience to Smoking

Why ‘Whole-Plant’ Extraction Matters For Cannabis Oil


APP is a safer, all-natural process that extracts everything from the plant in its natural form. Nothing is removed, nothing is re-engineered.

Multi-Faceted Business Model


Flower

Recreational Beverages

Innovative THC Products

Hemp-Derived Beverages

Medicinal Tonics

Edibles

Health/Wellness

Sprays

Softgels/Tinctures

Moosehead Partnership(1)

Sproutly Brands

Partner Brands

Sproutly Brands

Partner Brands

Infuz2O

BioNatural Oil (BNO)

Wholesale BNO

Proprietary APP Extraction

Purchased Cannabis

Internal Cannabis

Sale

s R

eve

nu

eSa

les

Re

ven

ue

Sproutly Brands Sales Revenue

Wholesale Revenue

(1) The Moosehead Partnership is conditional upon, among other things, completion and execution of the legal documentation necessary to commence operations.

Premium Cannabis Brand: Caliber


CALIBER: High Quality Cannabis Products for Connoisseurs Product and Brand Prototype

Caliber intends to launch in Canada with two initial product offerings;

Indoor Flower: Small-batch grown flower in a controlled, indoor environment toensure for consistent and superior product.

Bio-Natural Oil (BNO): High-quality oil produced by a natural and gentle patentedrecovery process (APP technology) which retains the full strain characteristics fromthe flower which the oil is made from.

Caliber is positioned as premium, high-quality brand amongst experienced cannabis users known as “connoisseurs”.

1st place – 2018

Cannabis Cup

Caliber is Sproutly’s flagship brand for its premium, high-quality cannabis products. The brand is positioned to target the cannabis connoisseur, interested in high quality cannabis products placing emphasis on experience, genetics, and aroma.

4.4 Stars –

Leafly

APP Technology10,000kg Processing Capacity

Sproutly’s Funded Capacity Outlook


Flower Trim Purchased Biomass

Infuz2OBNO

Caliber Flower

Internally Produced Biomass - THR

Capitalization & Trading Performance


Cap Table & Balance Sheet Highlights Historical Trading Performance

Cap Table(1) Sproutly % F.D.

Management and Insiders 106.2 30.1%

Investors 140.9 39.9%

Basic Shares Outstanding 247.1 81.5%

Convertible Debentures 59.5 16.9%

Options(2) 21.1 6.0%

Warrants(3) 8.9 2.5%

Warrants – Equity Special Warrants 7.7 2.2%

Warrants – CD Special Warrants 5.7 1.6%

Broker Convertible Debenture Warrants 1.8 0.5%

Broker Equity Warrants 0.9 0.3%

Fully Diluted Shares Outstanding 352.7 100%

Balance Sheet (11/30/2019) C$ Millions

Cash 0.5

Other Current Assets 3.3

Current Liabilities 8.5

Non-current Liabilities 4.0

(1) As at May 19th, 2020(2) Weighted Average Strike Price of $0.33(3) Weighted Average Strike Price of $0.64(4) HMMJ is an ETF that seeks to replicate, to the extent possible, the performance of the North American Marijuana Index

0

2,000,000

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6,000,000

8,000,000

10,000,000

12,000,000

$0.00

$0.10

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$1.00

2018-07-06 2018-11-06 2019-03-06 2019-07-06 2019-11-06 2020-03-06

Volume Price

For Additional Information Please Contact

Dr. Arup SenChief Executive [email protected]

(CSE: SPR) (OTCQB: SRUTF) (FSE: 38G)

www.sproutly.ca

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