Aleafia Health Inc (CVE:ALEF) Reports 36 Percent Sequential Growth

Aleafia Health Inc (CVE:ALEF) (OTCMKTS:ALEAF) (FRA:ARAH) CEO Geoff Benic shares details from the company’s latest financial statement. Aleafia’s patient base grew during the last quarter and the company experience 36 percent sequential growth. The company achieved another milestone last quarter when it received its sales license and made its first cannabis sales. Aleafia received approval to begin going outdoors in 2019 at its 30 acre facility in Port Perry, Ontario. Benic estimates the facility will produce 30,000 kilos of high-quality, low-cost cannabis. The company’s joint venture with the Serruya Family gives Aleafia access to 5 of the top 10 cannabis brands, which it will produce and distribute in Canada. Aleafia is planning to uplist on the NASDAQ; such a move will give the company the liquidity necessary for growth.

Transcript:

Brandon Colwell:   And we’re in the studio today with Geoffrey Benic, CEO of Aleafia. How are you doing?

Geoff Benic:  Great. Great, thanks for having me, and good job on the Croatian.

Brandon Colwell:   Yeah, we were testing it a few times, I knew that he’s going to see it a certain way. But we brought you down to the studio today, it so happens that you had your earnings out today, as well. How are things going over at Aleafia, and for those who may not be too aware of what you’ve been doing recently, give us a little update of what you’re up to.

Geoff Benic:  Yeah, so things are going great. We had earnings out today, as some of you may or may not know: 36 percent sequential growth, phenomenal. Exciting time for us, we had a great quarter, did a lot of stuff in the quarter. Did a deal with this Serruya family, concluded the purchase of our greenhouse, well on its way on the retrofit…did a deal with CannaPacific in Australia, and you know, just continued to grow our patient base.

Brandon Colwell:   Good, yeah. We’ve got the news release up in front of me here, and one of the elements you said you’re up 36 percent – is that quarter-over-quarter?

Geoff Benic:  Sequentially, quarter-over-quarter, correct.

Brandon Colwell:   Sitting at around 1.6 million and 3 million over the nine months, and I think you just recently got your sales license, correct?

Geoff Benic:  Yeah, so we did, which was another milestone for us as well: we had our first cannabis sale, right, in the same quarter.

Brandon Colwell:   Nice.

Geoff Benic:  So it’s super excited. A lot of great stuff happening, we’re working really hard.

Brandon Colwell:   And in this quarter, how much is recognized with your sales license? I don’t think it was the full quarter, correct?

Geoff Benic:  So it was about 500,000 in the quarter in cannabis sales.

Brandon Colwell:   Gotcha. So now you’re entering your first quarter now, or probably been in it for a little bit, now, of sales license and now recreation, as well?

Geoff Benic:  Correct. So 2019 will be our first year where we will be at a 98,000 kilogram clip by the end of the year.

Brandon Colwell:   Nice.

Geoff Benic:  So 2020 is going to be a great year for us, too.

Brandon Colwell:   Yeah, and it’s interesting, a lot of the people I’m talking to recently are, you know, 2018 is great, legalization came, that’s great, but everyone is looking towards 2019, 2020. I think that’s when we’re really going to see the divergence: what companies were doing their job over the last year or two, some of them longer, if they’ve been around longer, who’s been doing their job properly, and who’s just been making news releases. I think we’re going to see that next year and especially the year after.

Geoff Benic:  Time to put up or shut up, right?

Brandon Colwell:   Exactly.

Geoff Benic:  We’ve, you know, part of our business now is, we’ve actually got the local authorities and Port Perry Conservation Authorities as well to give us the OK to go with our outdoor grow, which is going to be phenomenal for us. It’s on 30 acres in Port Perry, where we have a small, 7,000-square-foot indoor Hydro facility. But the 30 acres is going to generate about 60,000 kgs of high-quality, super, super low-cost cannabis.

So we’re super excited about that, and I think we’re one of the first that are out there doing it, and you know, we’re shovels ready for March/April, Spring of 2019.

Brandon Colwell:   Yeah, and you don’t hear too many companies – I know a few people had it in their investor presentations over the while, and you hear a couple of announcements, but really no one’s – you know, there’s not that many people really jumped on the outdoor grow, yet. I wonder what that is – if it’s harder to do, I don’t know?

Geoff Benic:  I think the biggest thing is that, you know, you had your first movers that had first mover advantage, you know, your Auroras, Canopys, Aphrias, etcetera. They invested heavily in greenhouses, right? So as second mover advantage, which we really think we have, is a great opportunity to learn from the mistakes that they made, and ultimately move towards lower cost opportunities. So right now it’s not as big of an issue because hey, I got to tell you, prices, there’s a shortage of supply in the system today, so you get premium no matter what. But at some point you’re going to be really, really, you know, recognized and you’ll benefit from lower cost opportunities, which is exactly what we’re doing with the outdoor grow in Port Perry.

Brandon Colwell:   And do you have any, you know, ballparks of what you might be growing at? Are you guys going to throw it out just yet of what the outdoor is going to cost you, like, per gram or per pound?

Geoff Benic:  We’ve got some ideas, and we’ll be in the low cents for sure, and but I’m leaving that up to Lucas Escott, who’s our, you know, top cultivator – our cultivationist. Lucas is probably one of the best cultivationists in the business; as you may know or may not know, he’s been doing it for years. He’s proven, he’s had, you know, several facilities that he’s brought on board, founder of Mettrum, sold to Canopy for over $400 million. So we’re super excited we’ve got him on our team.

Brandon Colwell:   Gotcha. I didn’t know that connection, actually, that Metrrum and you guys over there. It’s always nice to find somebody who obviously understands growing. Again, we made a point about, I think, 2019 and ’20 are going to be years where we really start seeing who’s actually getting their act together and who wasn’t; I think we’re also about to see – we’re already seeing it now, some of these reviews coming from the Ontario Store and things like that, who had a grower who can actually grow. It’s one thing to grow 10 plants; it’s a whole other if you’re trying to do a full facility or outdoor grow as well. So having a proven person, that’s interesting.

Geoff Benic:  Yeah, and we’re lucky to have Lucas and the team that he brings onboard, and it’s a proven track record. So we’re super excited, you know, with our 160,000 square foot facility, our Dutch hybrid greenhouse in Grimsby, as well; that’s going to come online, and we’re going to be harvesting in the Spring there. So combined, we’re going to be around 96,000 kilograms of great quality cannabis that we’re going to be able to sell to our 50,000-plus patients. We’re super excited.

Brandon Colwell:   Fantastic. And where are you selling right now, for, like provincial agreements or plans of going abroad? What’s a breakdown of where you are going to be pushing this product?

Geoff Benic:  So we’ve done a great job at diversifying our business. You know, so we’ve got a couple of things: we have a 15,000 kilogram wholesale agreement with CannTrust, who’s really been, you know, helping us, you know, through all of our early stages of our business, they’ve been great. Helping us with genetics, and now with this agreement to purchase our cannabis, number one.

Number two, we did a phenomenal deal with the Serruya Family. That took a little longer than usual, than what we wanted to get done, but we got it done, and a big part of that was because we had regulatory issues that the province did not know what percent ownership we could have in terms of the adult use part of our business.

But the one thing that really comes out of that relationship that’s better, that really I hope – and I’m going to do a great job at trying to communicate to everyone – is that we have got five of the Top Ten brands through the Serruya Family, and their holdings out of California. So we’re going to have these great brands coming out of California, that we’re going to manufacture, we’re going to grow, manufacture, process, market and sell, not only here in Canada but internationally, as well.

And the last part of it, too – sorry, the other part of our revenue stream as well is, you know, some of you may heard, we did a great sale, sorry investment, with CannaPacific in Australia.

Brandon Colwell:   Yeah.

Geoff Benic:  And they’re the number two licensed cultivator – they’ve got the number two license for cultivation in Australia. And they’re really leaning hard on us to help provide expertise, IP, our platform, which is going to be great in terms of managing patients and data. So we’re super excited about that as a revenue stream as well.

Brandon Colwell:   Very nice, very nice. And going to your news release from earlier, one of the things we were talking about just as we sat down is that you have different divisions, actually, and you’ve broken your revenue and operating income between these different divisions. So you’ve got the health and wellness division, the farms and products division, and I believe the other one was the adult rec division.

Geoff Benic:  Adult use, correct.

Brandon Colwell:   And what are the differences between these, between like the farms and products compared to, like, the health and wellness?

Geoff Benic:  So you know, as our business matures and as a person that really, really focuses on execution, I really want to set the business up so that we could measure. Because if you can’t measure, you’re not fixing it.

So we broke it up into the three divisions, here, so we really could dial in on, you know, where the successes of the business are, and what are some of the areas that we need to improve on.

So if you look at the farms, that’s pure cultivation, right? So that’s going to be what we’re growing, what we’re harvesting, and what we’re selling either to ourselves, in the form of our patients, and/or on a wholesale basis to CannTrust as an example, or overseas to CannaPacific and some of the other relationships.

In terms of the health and wellness, there’s actually three opportunities there: so we generate revenue there from provincial governments in the form of fees for attending to patients; as an example, here in Ontario, we get an OHIP fee, right?

Number two is, we’ve got a thesis study going on with Cronos right now, so we use the data that we have, and there’s ten million parts of data there, that we’re using on a sleep study with Cronos that’s going to come out shortly, that’s going to prove itself theoretically and probably get moved into a clinical study.

And then the last one is, you know, the referral program we have right now with our LPs, with our patients that we’re referring, and we’re getting about a 20 percent fee on that, which ultimately, when we finally start growing and selling directly to our patients, we’ll get 100 percent of those dollars, right?

Brandon Colwell:   Yeah.

Geoff Benic:  And then the last one is going back to the Serruya relationship on the adult use. So not just the retail stores, which we’re committed to 20 right now in Ontario, but we’re also looking to expand that across Canada and probably get into a bigger number than that. But then ultimately, the one that we’re really excited about is the brands that we get out of California from the, from Aaron Serruya and his brothers on licensing and distributing, growing, processing, and selling those brands.

Brandon Colwell:   Absolutely. That’s a really good breakdown, actually, for those who didn’t know what you’re doing and what you’re up to. Why don’t we quickly switch gears to the stock itself? We’re facing a red day again today, it’s been all over the place with cannabis companies, but a sign that we’ve seen recently is, earnings come out and then going red afterwards. You guys weren’t too red earlier today, but it was the same theme: earnings come out, and red after. What do you think that means for yourself but also for the sector?

Geoff Benic:  If you look at – I look at broadly speaking, because I look at the broad markets as well. And I think, you know, generally speaking, there’s a pause right now. I think the retail investor is just a little fatigued right now. Everybody’s feeling it, whether you’re top three or bottom three, everybody’s feeling it, and I think it’s really going to boil down to fundamentals, and who has the best fundamentals wins, right? And I gotta tell you, we’re setting ourselves up to be one of the winners, and you know, it’s just a matter of time before that red turns green. And we think we’re going to position ourselves well.

We’re focused on an up-listing right now on the NASDAQ, and what that does for us is give our shareholders and give us, Aleafia and our stock, the opportunity to have hundreds of thousands of shareholders, which will give us the liquidity that we need to create a gold-standard stock that’s going to help us down the road, whether it’s through M&A acquisition and/or whatever. But we really think that the NASDAQ is going to give us that liquidity that we need or we feel is going to help our stock continue to turn green.

Brandon Colwell:   Yeah, and I couldn’t agree with you more when it comes to the actual sentiment of North American markets in general. If you look at the indices, they’re hurting. And even when they do have a good day – I can’t remember the last time I’ve seen two really good days back to back with one another. It’s just one of those times, like you said – there’s tax law season, it’s getting close to Christmas, legalization just passed – so really I think it’s important that if you’re an investor and you’re listening to this, you should be looking for companies that you believe, okay: here’s where they are today, here’s their valuation, here’s what they’re about to be doing. You want to see the growth of the company, but you also want to see the opportunity for growth in your investment, as well, and you’re saying unequivocally from yourself that you believe Aleafia has that formula.

Geoff Benic:  We’re positioning ourselves, no doubt, for success. Long term, we’re fully funded, we’ve got a strong balance sheet; we don’t need any cash. We’re going to start generating tons of cash next year. We’ve got patients that we can sell into, premium cannabis at premium prices. So we’re super excited as to what the future lies, what it brings for Aleafia, and you know, we’re just focusing on execution. We’re not out here just dropping press releases; we’re out here actually executing, and there’s a lot of work ahead of us, but I can tell you the team comes in every day, we give 120 percent. We throw nickels around like manhole covers, and we’re just super excited. And we think that market’s going to continue to recognize us.

You know, so I’ve been here since June – July 3^rd was my first day. I focused on building a world-class team with some real world-class assets, and I think we’re well on our way there, and I think that, you know, when I got involved in the business for $0.50, we hit a high of 4.70, and we’re kind of sitting around $2.00 right now and we’re getting ready for the consolidation and next leg up. And I think that, you know, the NASDAQ and some of these assets that we talked about, and ultimately, ultimately, it’s going to boil down to execution. 2019 we feel very strongly about it.

Brandon Colwell:   Absolutely. Well hey, I appreciate you coming down to the studio and giving us a little of your time. For those who are curious, ALEF, you can find, I believe, on the TSX Venture?

Geoff Benic:  Correct.

Brandon Colwell:   The TSX Venture, go check them out, and I appreciate you being on the show, and good luck with everything going into the end of 2018 but also to start off 2019 very soon.

Geoff Benic:  Thank you. Let’s hope for some green days and green weeks and green months.

Brandon Colwell:   There we go. Take care, now.

Geoff Benic:  Thank you.

Original article: Aleafia Health Inc (CVE:ALEF) Reports 36 Percent Sequential Growth

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