The Cannabis Story is one of the most exciting new investment themes to hit our markets in many years. A brand-new sector sprang into existence, almost overnight, providing an enormous ground-floor opportunity for small-cap corporations (and their shareholders).The first few years of this Story were euphoric. Market caps swelled. Company after company announced large financings, as investors – retail and institutional alike – stood in line to throw their dollars into these companies.However, with even the most robust market opportunity, nothing goes straight up. Over the past several months the cannabis sector has pulled back and consolidated. In technical terms, these companies are “building a base” for the next general leg up in this sector.
Now is the time for investors to be positioning themselves for that next leg, but it’s also a time to be more selective. With the initial euphoria having passed, the next growth cycle in the Cannabis Story will be a chapter of winners and losers. The contenders will start to separate themselves from the pretenders.
One of the cannabis companies positioned to be a contender is Canada House Wellness Group Inc. (CSE: CHV, OTCQB: SARSF, Forum). What makes CHV special? That might be a better question to pose to the Company’s 7,000+ registered medicinal cannabis clients.
From Day 1 of Canada House, the focus has been on superior service, leading to superior results. To fully grasp this service-focused model requires delving into the history of this Company. Today, CHV is a publicly listed Company with three divisions.
Marijuana for Trauma (MFT)
The original focus for Canada House was its Marijuana for Trauma division (MFT), a network of medicinal marijuana clinics. The nexus of this enterprise is summarized in its slogan: Veterans Helping Veterans. MFT was founded by two Canadian veterans of the Afghanistan war.
Those who have followed the evolution of medicinal cannabis will already be well aware that few demographics in our society have shown a greater need for and more benefit from medicinal cannabis than military veterans. The need is obvious.
War is horrific. Modern warfare presents its own unique set of horrors: catastrophic injuries and an epidemic of severe trauma, classified as Post-Traumatic Stress Disorder (PTSD).
Conventional medicine was slow to diagnose this debilitating condition and even slower to devise effective treatments. For more and more of these veterans, medicinal cannabis has been the answer. To understand this requires becoming educated about cannabis and its active ingredients: a multitude of complex cannabinoids.
Decades of anti-cannabis propaganda have now (finally) been replaced by cannabis fact. Cannabinoids are naturally produced within the human body – known as endocannabinoids. Far from being “dangerous”, these cannabinoids are essential to maintaining our health.
Cannabinoids are found naturally occurring in human breast milk, to promote the health of infants. Given the facts, it is hardly surprising that these natural, essential substances have been found to possess numerous potent medicinal applications.
Among these numerous applications, cannabinoids have been found to be very effective in relieving conditions with heavy neurological components. Not only PTSD, but an array of other conditions including Parkinson’s Disease and multiple sclerosis appear responsive to some strains of cannabis.
Similarly, cannabinoids have been found to be extremely potent in combatting chronic pain. Chronic pain represents another form of overload to our neurological systems. For many military veterans suffering from chronic pain, PTSD, or both, medicinal cannabis has literally been a life-saver.
CHV’s Chairman, Larry Bortles, relates an anecdote that had a profound impact on his own viewpoint concerning medicinal cannabis – and its critical role in addressing the health issues of Armed Forces personnel.
Fabian Henry, a co-founder of MFT, is a vet of six military deployments, left the service with severe PTSD. He had been placed on such a debilitating “pharma cocktail” by his physician that he visited his sister one evening, some years back, to declare that he was seriously considering suicide. His life and his personal relationships were a living nightmare.
She had been using medicinal cannabis to treat her cancer and urged Fabian to try her medication. He objected, saying that he’d “never touch the stuff”. She prevailed, and Fabian experienced a calmness that had been eluding him for years. The next day he started to shed his pharmaceuticals and began experimenting to determine the best medicinal cannabis for his PTSD. He shared his discoveries with his vet buddy Mike Southwell, who then agreed to invest in Fabian’s dream to form MFT, with its mission being veterans helping veterans leave their deadly pharma cocktails behind.
Military veterans have an appalling suicide rate, estimated at over 40 per day in North America. There are no statistics (yet) on how many military lives have been saved by the therapeutic use of cannabinoids, but as this branch of natural therapy continues to mature, such numbers will certainly be forthcoming.
MFT cut its teeth providing not only access to medicinal cannabis for veterans but also badly-needed counseling. Having been brainwashed for decades that “marijuana is a dangerous drug”, many of these veterans required education on cannabis facts in order to be comfortable with this form of treatment. They also need counseling on disability benefits and related entitlements.
Serving a demographic of patients/clients with arguably the most-demanding medicinal needs has allowed MFT to establish the gold-standard of medicinal cannabis care and counseling. Canada House (and MFT) currently has 11 clinics in operation.
These clinics are primarily situated in smaller urban centers. Given the original focus of the Company, these first clinics were set up in towns/cities with military bases. But MFT is now much more than “vets helping vets”. CHV is now all about veterans helping everyone.
Canada House is ready to begin an aggressive expansion of its MFT clinic network. CHV has already been rapidly building its client base in these smaller markets. Now the Company is moving into Canada’s major urban centers.
To facilitate this expansion, Canada House is preparing to launch a private placement. This financing will soon be featured on the Stockhouse DealRoom, so investors wishing to participate in this opportunity should watch for the upcoming Stockhouse article announcing this offering.
Given the origin of Canada House, it goes without saying that this is a management team that lives and breathes its corporate mission of bringing the important benefits of medicinal cannabis to as many people as possible. But this is a team equally focused on building a successful business.
Chairman Larry Bortles has many years of entrepreneurial expertise, backed up by an MBA from Harvard. President Riley McGee is one of CHV’s Canadian Forces veterans. A decade of business experience is bolstered by the organizational and leadership skills he accumulated in his years of military service.
MFT was designed to be the corporate focal point. From that building block, management has looked to assemble this Company via both vertical and horizontal integration. The vertical component of this business model is the Abba Medix Grow Operations, a cultivation division dedicated to producing CHV’s own medicinal cannabis to meet a portion of its clients’ needs. The horizontal component is Knalysis Technologies (cannabis-centric IT development).
By now, almost everyone “knows someone” who has been helped by the use of medicinal cannabis. This is anecdotal evidence. Even most physicians prescribing medicinal cannabis have relied on the anecdotes from other physicians and patients to guide them in the use of cannabis for treating various health ailments.
It has been effective, but it’s not efficient, and it’s certainly not very scientific. The medicinal cannabis sector needs better data: better data collection, better data analysis, better data distribution. This is the mission of Knalysis Technologies.
If one person tells a story, it’s an anecdote. If 1,000 people tell the same story, it’s data.
- Paul Methot, President of Knalysis Technologies
Many publicly listed cannabis companies have engaged in such horizontal integration. Often, it is a few individuals sitting in a corporate boardroom, thinking that a particular company might be a good fit in their business model. That’s not how Knalysis became a part of Canada House.
As the Company’s MFT clinics were looking for a means to better serve their clients, the focus quickly turned to the need for better data. MFT reached out to Knalysis for their IT needs, and the two Companies had been working together closely and successfully for several years before Knalysis was added as a new division.
Knalysis Technologies is not just a key puzzle-piece as Canada House expands and develops its Canadian operations. Knalysis is also the lynch-pin for management’s strategy in penetrating the much larger U.S. market for medicinal cannabis.
The United States has a much larger military, meaning a much larger population of military veterans who desperately need help in managing severe medical health issues. The data (and expertise) accumulated by Knalysis is already of great interest to U.S. providers of medicinal cannabis.
In a conference call with Stockhouse Editorial; Paul Methot, the President of Knalysis Technologies, connected the dots on the synergies here.
We built software platforms to help clinics like MFT track patients. Then we started to go beyond that, tracking information: how were people using the cannabis and what was working? I’ll give you an anecdote.
A lot of the vets we have complained of PTSD. One of the major symptoms is nightmares: they relive the traumatic event every night. Consequently, they don’t sleep.
We built a free app that tracks symptoms, moods, and treatments. People can use it as a medical diary, and that information is piped back to our clinics and educators, to a big interface where we can track the data on a large scale.
PTSD impacts almost every aspect of a sufferer’s life, including quality of sleep. Producing better data on PTSD nightmares (and the effectiveness of various cannabinoid medications) means not only better treatment outcomes for patients but also much more consistent results.
Already, Knalysis has launched its data analytics business in three U.S. states: Florida, Nevada, and Pennsylvania. The population of these three U.S. states alone equals the entire population of Canada. As Knalysis opens up these new markets to Canada House, MFT plans to follow – with new U.S.-based clinics.
However, management was not content to focus purely on horizontal expansion. The Company is fully committed to cultivation operations: providing seed-to-sale vertical integration for its medicinal cannabis clients in order to produce the best therapeutic results while maximizing synergies and revenue potential.
Abba Medix: One of Canada’s newest licensed producers
Founded in 2013; Abba Medix is now a wholly-owned subsidiary of Canada House. Abba Medix has been methodically progressing through Health Canada’s ACMPR licensing regimen for the cultivation and sale of medicinal cannabis. On September 1, 2017; CHV announced that Abba Medix had been awarded its Health Canada cultivation license.
Abba Medix already has a 21,900 square foot facility, located in Pickering, Ontario. Plans are in place to expand the facility to 49,500 square feet, with a projected date of 2019 for this expansion. The existing facility is targeted to be operational by Q1 2018. It is a state-of-the-art cultivation facility, one of only a few in the heart of the Greater Toronto Area.
The Health Canada cultivation license was a critical-piece in the Company’s complete vertical integration business model. With MFT moving forward with clinic expansions and Knalysis pushing into U.S. markets, now CHV’s third division is also ready to start firing on all cylinders.
The Big Picture
Vertical integration and horizontal integration are just words. What makes companies are people. When the management team of Canada House recently spoke with Stockhouse Editorial, what stood out was dedication. They care about their clients and they care about their Company.
But that doesn’t put money into the pockets of CHV shareholders. As a business, Canada House has worked hard to carve out a competitive edge.
- The best standard of care for medicinal cannabis patients (MFT)
- A data analytics division with an enormous database and unique expertise (Knalysis)
- An in-house cultivation division providing cannabis crafted to MFT’s clients’ needs (Abba Medix). This allows Canada House to bring the same high standards to its (soon-to-be-produced) cannabis products as it already does with its cannabis clinics and its Knalysis division.
Canada House Wellness Group is all about helping people. It has already demonstrated the proven capacity to help its medicinal cannabis patients. As the previous numbers demonstrate, CHV is also poised to help its shareholders as well.
Appendix: Canada House Wellness’ integrated business model – an infographic