Harvest Health & Recreation Inc (CNSX:HARV) Acquires California-Based Falcon International Corp

Harvest Health & Recreation Inc (CNSX:HARV) (OTCMKTS:HRVSF) CEO Steve Wright details the company’s operations and provides an update on Harvest’s acquisition of Falcon International Corp. Harvest has 32 licenses for a variety of cultivation methods across the US and is the third largest cannabis grower in the country. As a company, Harvest is vertically integrated and has 25 production licenses and 85 retail licenses in multiple jurisdictions. In February, Harvest made a deal to buy Falcon International Corp, a purchase that is important to Harvest’s California footprint and strengthens key verticals like distribution and brand development. Wright is eager to see the passage of the STATES Act and believes it will act as a catalyst for institutional capital to enter the cannabis space in the US.

Transcript:

Fraser Toms:  Joining me now is Steve White, who’s the CEO of Harvest Health and Recreation Inc. They trade on the CSE under the symbol HARV. Steve, how’s it going.

Steve White:  Very good. Thanks for having me.

Fraser Toms:  Great. Well, thanks for coming on. Yeah, we haven’t had you guys on before, so we’re going to give people a little bit of an idea of what Harvest Health and Recreation is all about. The first thing that jumped out at me is, there was a, you guys have been ranked as the third largest cultivator in the US of cannabis.

Steve White:  I did see that. That was a publication that measured people’s cumulative square footage. Not sure if it’s accurate or not, but that was the conclusion that they came to.

Fraser Toms:  Yeah, that’s fine. But so, just to give people an idea, what’s the – what is your square footage that you’re cultivating? Is it spread out, how does that work for your company?

Steve White:  It’s spread out all over the United States, and so we measure – we have outdoor, we have light deprivation greenhouse, and we have indoor cultivation in multiple states. We actually have a total of 32 US licenses to cultivate cannabis, so we’ve got projects ongoing all over the place.

Fraser Toms:  Yeah, and another bullet point there that jumped out at me is, 140 facilities across the US. So is that sort of cultivation, some of it’s dedicated for other business activities?

Steve White:  Yeah. That’s a total number of licenses to have facilities across the US. So that would include licenses, we have over 80 licenses, over 85 licenses, for retail; we have over 30 licenses for cultivation. We’ve got over 25 licenses for production, and we’ve got a few distribution licenses in California as well.

Fraser Toms:  Okay, great. And what would you say, you know, comparison to other multi-state operators, which is sort of the buzzword now – what kind of separates you guys from the pack?

Steve White:       A lot of things, actually. First and foremost is the way that we have acquired all of those licenses; up until the summer, we, as a company, didn’t raise much money, and so we got into nine states with a total amount of invested capital of only $18 million. Anybody at the time that had a comparable footprint would have spent at least 10 times that to get there. So we’ve been really good stewards of capital. We’ve been able to do that because we’ve developed an expertise in competitive application processes, and we’ve also are, we’ve been consistently profitable as a company, which is something that’s unique in US cannabis. Actually, cannabis anywhere.

Fraser Toms:  Wow, yeah, that’s pretty impressive. Just looking at your last couple of press releases, you opened recently on the 12^th of February, a first dispensary in Florida. So that’s ramping up the competition. There’s some large operators there as well.

Steve White:  Yeah, most of the large US operators do have a license in Florida; I think there’s only one that isn’t there yet. So that is a, that’s going to be an interesting battleground for years to come. Give you a really good idea of how well and how effective the different MSOs operate.

Fraser Toms:  Yeah. And again, on the 12^th, I can see you opened your ninth dispensary in Arizona, which is sort of your home state, I guess is the way to put it. Is that – you started out as a company there because that’s just where you’re from, or how did that come about?

Steve White:  Yeah, that’s exactly right. It was in 2010, Arizona passed a medical marijuana law, and me and a couple of guys saw an opportunity, and we sought out to try to get a license in Arizona. We ended up getting two, and since that time, started to see states pass medical marijuana laws and saw an opportunity that we didn’t think we could pass up, so we got very good at growing as a company. Not growing the cannabis, but actually growing our footprint.

Fraser Toms:  Yeah. And if you don’t mind, would you be able to speak to the share structure of your company, just so investors have an idea of what that looks like?

Steve White:  So the bulk of our shares are held by insiders, which is, I actually heard recently, people be critical of that, which I think is quite odd, because the decision-makers in our company are directly aligned with anybody who buys shares. So when we make decisions, we – there’s no question that those decisions are being made in the best interests of shareholders, and it’s somewhere in the neighbourhood of, I believe, just over 80 percent is held by insiders.

We didn’t, because we didn’t raise money a lot, we didn’t take a lot of dilution going into our RTO that we did in November.

Fraser Toms:  Yeah, no. Nobody over here would complain about 80 percent ownership, that’s for sure. In fact, that’s something we constantly look for in people that we’re interviewing, because to us, that’s a value add for sure.

Let’s move to you, on Valentine’s Day, acquired California’s Falcon International Corp. Was that a sweetheart deal?

Steve White:  [laughter] Nice. It was a – well, it was a sweetheart deal, and it was one that we’ve been working on for so many months, it feels like the culmination of a lot of efforts.

When we did our road show in October, we told people that we were going to acquire a company that has demonstrated success in distribution or manufacturing in California so that we could ramp that up for Harvest and get some of our brands into the state of California, which we think is critically important.

We were hoping that that acquisition would be Falcon, and so we would consider a sweetheart deal because of how important it is for the development in California, and Harvest generally.

Fraser Toms:  Yeah. And I mean, I’ve mentioned this a number of times: you know, you mention California as a critical state to be in and thrive in. It seems every week, we’re seeing headlines about other states either de-criminalizing or there’s medical now, or rec. What’s your strategy for the rest of the year, and how do you feel things are going in terms of on the Federal level? How will that affect your business operations?

Steve White:  The biggest catalyst for US stocks, I think that we’ve ever seen, is probably going to be the passage of the States Act. And what it does for us is a couple of things that people often talk about, which is, alleviate some of our Federal tax burden and provide easier banking access or traditional banking services for our businesses.

But what people aren’t talking about enough is how much US institutional capital is not able to play US cannabis. And so with the passage of the States Act, you’re going to see that as a catalyst for the New York Stock Exchange and the NASDAQ to permit its listed companies to invest into something that is no longer federally illegal. It is in states, it would be in states that don’t choose to regulate, but the investments that those companies would be looking to make, and the different US institutional capital be looking to make would be in companies that only operate where states choose to regulate.

Fraser Toms:  Right. No, that seems critically important. Looking out through the rest of the year, what are some milestones that the company is looking to achieve? Or, what can investors use as sort of a yardstick to determine if Harvest Health is executing?

Steve White:  So obviously, execution ultimately comes down to a question about earnings. And, but, there’s a foundational element to not just earnings this year, but earnings far into the future. That foundation will be the development of a very extensive retail footprint across the US. So you will see us continue to build that retail footprint.

In addition to that, you did see us acquire a company, CBX, the parent company, the Evolabs in Colorado. So you will see us start to produce the products developed by that company, along with the brands that we had going into it, and spreading them across that national footprint.

And so with the Falcon acquisition, obviously you see some of the development of the infrastructure where the manufacturing for the distribution that CBX acquisition provides us with a number of the products that we’re looking to produce across the country.

Now it is up to us to continue to develop the, you know, the leading footprint in the US.

Fraser Toms:  Awesome. Well, thanks, Steve. That’s a great introduction to the company; I’m certainly going to look into it a little bit deeper, and I’m sure our viewers enjoyed seeing you on the show. So thanks again, and we’d love to have you back in a quarter’s time and see what else is new.

Steve White:  That sounds great, we’d be glad to come back. And appreciate you having me.

Fraser Toms:  Great, thank you. Cheers.

Original article: Harvest Health & Recreation Inc (CNSX:HARV) Acquires California-Based Falcon International Corp

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