Canadian CANNAINVESTOR Magazine April / May 2018 | Page 125

Page 5
CAPEX per square-foot estimates (Quebec cannabis facilities)
Company
The Hydropothecary Corp.
The Hydropothecary Corp.
Matica Enterprises
MYM Nutraceuticals
The Green Organic Dutchman
Average
Facility
Gatineau Facility (Expansion)
Gatineau Facility (Expansion)
Dorval Facility
Sublime Culture Facility
Hamilton & Laval Facilities
Province
Quebec
Quebec
Quebec
Quebec
Quebec & Ontario
Total Facility Area
(SQ-FT)
250,000
1,000,000
10,000
36,000
970,000
CAPEX
$
$
$
$
$
25,000,000
80,000,000
2,200,000
1,800,000
160,000,000
CAPEX/
SQ-FT
$
100
$
80
$
220
$
50
$
165
$
123
Source: FRC, Public Disclosures
We look favorably upon the acquisition, as it expands Alliance’s portfolio of strategic
investments in the cannabis cultivation space and indicates that the company is targeting the
Quebec cannabis market. The province, relative to Ontario and British Columbia, has
relatively few issued ACMPR-licensed producers, with only six to date. This represents only
7% of all issued ACMPR licenses, despite over 20% of Canada’s population living within the
province. Though the province is one of the more opposed against federal cannabis
legalization, we believe that the province will still require a large amount of cannabis to
satisfy recreational demand. Alliance’s move to lock in supply to meet this demand may
boost the company’s potential future cash flows.
Alliance’s CTO Alliance’s most recent Cease Trade Order
On January 5, 2018, the British Columbia Securities Commission issued a Cease Trade Order
(“CTO”) on Alliance’s shares. The reason for the CTO was that the company had missed the
deadline to file its audited financial statements for fiscal year 2017, ended August 31, 2017.
We have since connected with management in order to clarify the events surrounding the
CTO, and they have expressed that the late filing of their financials was due in large part to
an unexpectedly large influx of capital activity, which required disclosure in the subsequent
events section of their filings. To prevent a similar error in the future, Alliance has increased
its budget for continuous disclosure, though management have not disclosed exact figures.
Though we see the CTO as a disappointing development in Alliance’s otherwise positive
track record since our initiating report, we believe that the company should be able to avoid
similar events in the future. We urge investors to place emphasis on the company’s
operational developments, moving forward.
Industry
Overview
Industry Overview
The ACMPR authorizes select suppliers to produce cannabis via the issuance of licenses. To
date, there have been 89 licenses issued. A map showing the geographical distribution of
these licenses is given below:
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PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT