 Good morning everybody. Happy New Year and welcome back to the Economic Development Webinar Series. Today we have a fascinating topic and this is Breaking Records for the most popular webinar we've done in the last year. Today's topic, regulation and opportunity in the recreational cannabis industry. And I'm sure everyone is fascinated. We'll be focusing on the industry, however not product use. So get your pens and pencils out and get ready to learn. I'm excited to be here today in the Unceded Territory of the Lungan-speaking people known as the Esquimalt and the Songhees First Nations. And I'm going to be joined today by Peter Goh from NNPLLP. And soon to be joining us will be Terry Rosal and Josh Huska from the Liquor and Cannabis Licensing Branch in the Ministry of Attorney General. A reminder that today's session is being recorded. The speaker slides and presentations will be shared in PDF format on our website as well as a video of the presentation will be going online. It takes us about a week to get those produced for you and you can look under BCID's exchange on gov.bc.ca slash economic development for the past webinars recordings and you can see everything that we have done going back several years. So I'm going to let each of our speakers introduce themselves rather than me provide their bios for them. First we have Peter from NNPLLP talking about the recreational cannabis industry. Take it away, Peter. Thanks Susan. Good morning everyone. Hope you can hear me all okay. Beautiful, glorious Sunday day here in Vancouver. I'm broadcasting from our office. I'm going to do a little bit of the corporate swag for everybody to know which firm on that. My name is Peter Goh. I lead our enterprise with services practice for the province of BC for MNPLLP and also our cannabis industry services team. I've been doing this for about 25 plus years in professional services. Lots of connectivity with many of you out there in the audience. I know there are a lot of people that I recognize the names and certainly the organizations that you're with. And certainly I think with many of you I've been in your local chambers of commerce or some of your local events presenting on this topic and others as well. Susan, I don't know if we're going to launch right in or if we're going to do the intros for the rest of the folks? No, let's go right ahead and launch right in. Okay, excellent. Well, thank you everyone. Hopefully you can see my slides okay. I'm going to go through these fairly quickly. We can't see your slides yet. Oh, okay, yeah. While you're doing that, I'm just... Ah, there we go. Now it's coming up. Okay, good. See that's what happened? You said launch right in. I'm just reminding people as they have questions that come up during the webinar, feel free to ask your questions. And as Peter is sort of switching topics, I'll be following along and I'll ask your questions. So Peter will be talking for 25, 30 minutes. So by all means ask questions and we'll put those in there with a little bit of time for questions at the end. And then we'll switch over to Terri and Josh and they'll give their presentation. And again, ask questions when you have them. Thanks very much. Yeah, excellent, Susan. Yeah, and you know, I welcome a lot of questions. It makes the presentation a lot more lively. So let's dive right into it. I'm going to move through these slides fairly quickly. Make sure I'm on the slides. There we go. Okay, so who's MMP? Fifth largest accounting professional services firm in Canada. We are definitely made in Canada. We started in a little place called Brandon Manitoba, which I can guarantee is a lot colder than it is now for all of us here in BC. We are now the second largest firm in BC located in 20 communities throughout. So we're in the peace district through the Okanagan, across the lower mainland, Caribou, and up and down Vancouver Island. What's our sort of approach and sort of footprint in the cannabis industry? This next slide shows many of the clients that we work with. These are span sort of licensed producers, some extraction companies, some retail companies, and some edibles companies. Most of these are Canadian-based, but they're also some US-based ones. Dixie, for example, which is just past the Aurora logo. I think many of you know Aurora and Tilray being two very big licensed producers that are operating in our province. Dixie is a US-based edibles manufacturer that has listed on the Canadian Securities Exchange and is looking to get into the Canadian marketplace as a result of the legalization or the upcoming legalization of edibles in October this year. But more on that a little bit later. Some of the things that we do, we run the whole gamut of services to the cannabis industry and the public sector. We are currently doing an evaluation assignment for the province of BC, but we've done lots of work way back into the MMAR, MMPR days. And again, I'll walk through the history of some of those acronyms. You know, as accountants and professional advisors, we do like our TLAs, our three-letter acronyms, and I'll sort of break some of those down for you. But it goes through the full gamut of this. One of the things that we're very proud of and certainly very relevant here at BC because of the strength and maturity of our Indigenous communities and Indigenous business entities is we work very closely with First Nations. In fact, right now we have four assignments on the go with Indigenous feasibility studies around building a cannabis business in their communities on their land. So I'm happy to answer any questions around that because I know it's very relevant for all of us on this call. So let's get into the Canadian cannabis landscape. A little bit of a snapshot. Is it legal? Yes, it is. October 17th last year, I wasn't in town actually. I was in Europe and my wife and I were sitting in a hotel room and we were watching the BBC and there were two reporters and I can't imitate the beautiful posh British accent. But if you can imagine two reporters speaking to each other about how happy the Canadians are today because of the legalization of cannabis. And once they got over sort of the wit and the tongue-in-cheek comments they really dove into the conversation and what was really interesting was the acknowledged leadership that we have on the global community of the way we've undertaken legalization. We've gone through the medicinal regimes all the way into the legal retail regime and that was very, very positive. A lot of the conversations circled around what will the rest of the world do, what's Europe going to do, what's the UK going to do. And in essence, much of what's happening in terms of legalization or decriminalization seems to be following on the path that we have set and a lot of people are asking us a lot of questions to try to implement it in their jurisdiction. So very positive news. For those of you who don't know what's on the screen, on your left is a excise tax sticker. That's a sample of one of those that must be applied to cannabis packaging. And on your right is basically a screw top. If you look at it, it looks like a prescription bill bottle. It certainly pretty much is. And it gives you a sense of some of the labeling that goes and this is what you will find in legal retail outlets right now, whether it's the governmental and store in Camelers or in some of the legal private retailers that have started getting their approvals and started operating around our province. So with that, let's keep going. A little bit of the history. One of the things I don't like to do for my audience is read slides to you. I think we're all literate and all adults here. So I'll leave that for you to peruse. And again, as Susan said, these slides will be available in PDF format. And I'm also happy to answer any questions afterwards. But it gives you a bit of the timeline here and some of the sort of the governments and the parties that were empowered when the legislation changed. What we have right now is we still have the ACMPR. So access to cannabis for medical purposes regulations. That continues and that allows those who are registered for medicinal use to continue to buy directly from licensed producers. But what has happened as we transition in the liberal government under Justin Trudeau is that we started working on the adult use recreational rules. And in essence, the passing of Bill C-45 really drove the change of legalization into the recreational and consumer markets that we saw culminate in legalization last year in October and has recently resulted in December announcement of the regulations for both regulations for cannabis legalization of edibles in the fall of this year. In fact, Bill Blair reiterated that legalization of edibles will occur in October of this year, October 17th, a year after legalization of cannabis. But he did warn that it may take a while for the market and the provinces to get sort of their ducks in the road to make sure that product is available for consumers. So that gives you a sense of the timeline. Where's the industry at? These numbers keep changing. We keep updating them. It's a bit of a shifting landscape. In the top left, we have 146 licensed producers. So those who are licensed to cultivate under Health Canada. The number of ACMPRs, so registered medical patients, numbers over 340,000. The bottom number is the bottom row is very interesting. There was an estimate in 2017 of 4.9 million. So about 15% of our population were consumers of cannabis. The estimate back then was 5.7 billion. It has since gone up. The estimate of cannabis demand is 2019. Those are very difficult numbers to land on. But what's important is not only understanding that the size of the market is something that we are still trying to wrap our head around, but also the delta between what demand might be and what's available supply. So I'm going to click here. That is what was an inventory that we know of and that was reported to the Canadian government as of September of last year, just before legalization. The numbers since have gone up. But if you look at the delta between demand of 926 tons, metric tons, and 102 tons of dried product in the oil, you can see that we still have the ability to generate a very large additional capacity of 800 tons. 800 metric tons, let's just put that in perspective. 800 tons is 800,000 kilograms. 800 million grams, if you multiply it by the price of cannabis anywhere from $6 to $10, that will give you a sense of the retail inventory that's available. Some of that is retail, some of that is medicinal under ACMPR, and some of that also is for export purposes. So to see what is specifically earmarked for Canada, it is really hard to land on that number. The fact, though, is with a nine times increase available to meet demand, you can understand why the activity still continues to be so frenetic in terms of cultivation and the ability to put product on the shelves for consumers. On the next slide, I go through some recent stats Canada on cannabis. We jokingly call it stats cannabis these days, but this is health Canada data again. Again, it shows that the inventory levels are rising. What's really interesting is the sales component, the finished inventory, so those are the bold lines in the unfinished inventory. At 109,000 kilograms or 109 tons, we have dried and 26 tons of oil, or 26 liters, it's not exactly tons. The density is a little higher. We're still a far cry from the 900 tons we saw in the other slide. So estimates of demand and trying to figure out where the supply and demand curves will cross will continue to be a really interesting exercise. It's actually become a bit of a spectator sport for those of us in the industry, but suffice it to say that supply is not sufficient at this time. So I'm going to jump to the regulatory regime. I'm looking over here. I don't see any questions yet, so I'm just going to keep piling ahead. I want to make sure I have enough, leave enough time for my presenters that will follow. This slide in a nutshell really spells out the Canadian regulatory regime. The first three chevrons on your left, that is under federal regulations. So Bill C-45. So the supply, which includes seed stock, the production, which is cultivation and the processing or extraction. Those are all under Health Canada regs. There are specific licenses that people have to apply for. I want to make sure for all the economic development folks on this call that you don't think this is something that we just download the form and fill it out. I mean, there's an element to that for sure. But right now, the cost of getting a production or cultivation license, just the consulting fees alone typically is about a quarter million dollars. That's on top of the need to build a facility. A modest facility is probably 8 to 10 million. A larger facility, larger being 15 to 20,000 square feet, will push you into the 15 to 20 million stage. The massive facilities that Aurora, Canopy, Tilray, some of those, I mean, those are, you know, in tens, you know, 50 million dollars at up. And so this is not for the faint of heart. For those 146 licensed producers I showed in two slides previously, it's about a 10 to 1 drop off of those who apply to those who actually make it. That ratio of conversion is getting better just because people are getting better at it, but it's still not something that you want to undertake lightly. Now, knowing BC, we're going to talk about microprocessing. I'll get to that in a later slide, but, you know, just as a rule of thumb there, a microprocessing license, again, the consulting fees. And MNP doesn't do the consulting. We should support entrepreneurs and the consultants by doing projections and feasibility studies, but the consulting fees to fill in and submit your Health Canada application for micro cultivation right now is about the big national consulting firms are charging about 85,000. So 85,000, I'll repeat that as a fixed fee. And on top of that, you still have hard costs. You still have to hire people. Okay, back to the slide. To the right, the two lighter green ones, distribution sales, that is all potentially regulated. We have some of our licensing folks that are going to come after me, but in essence, that's the LDB at the distribution point. Every licensed producer has to sell their product into the LDB. The LDB has been very transparent, very clear. They put a 15% wholesale markup on, and then it goes to the sales channels. The sales channels can be the public store, which is in Kamloops, or it could go to private retailers. Many of them have applied and some of them have sprung up. So I'm not going to steal my colleagues' thunder, but that is the provincial regulatory regime, and that's how it's split up in almost all the provinces. I'll have a summary of the provinces in the next slide. Interesting enough, quintessentially Canadian, as I always say, we agree on a lot of things, but we always do things a little bit differently, province by province. So here in BC, wholesale is public through the LDB. Retail is hybrid, as we talked about. Online retail is public again through the LDB. Many of the provinces have a variation on that. What was really interesting was Ontario when they first came out. So Ontario has probably the largest number of licensed producers. Actually, not probably. They do. And they're going to allow the most retail outlets. But when they first came out, all of that was going to be public. And then with the election of the Doug Ford government, they switched that around and decided to go private retail. And since they've iterated on that and they created a lottery scheme where only 25 people got a winning lottery ticket, which created unbelievable angst and concern. And the push to resell some of those, they can't resell it. But I've heard offers of up to $5 million from some of the licensed producers to get a toehold in some of the best locations in Ontario. So it's a crazy market, more to see as Ontario rolls out. The one that stands out as being totally privatized is Saskatchewan. So and it's interesting, some of you may have noticed a CBC article about a young lady from Saskatchewan. She just graduated from business school. She wrote a business case and she actually got one of the private retail licenses to operate in Saskatchewan. So lots of entrepreneurs, lots of activity, and again lots of variation as well. Hey Peter, we've got a question for you. Any idea how many of the licensed producers to date are in the microprocessors category? Sorry, microproduction category? I can answer that question, there are none. Because the microprocessing category just opened up for this year so those applications are now starting to be submitted and working itself through the health Canada licensing regime. Oh, okay, so there's no microproducers yet, wow. Not licensed by Health Canada, yeah. Now what's interesting is again, respecting that this is a BC conversation is, come on folks, there are lots of micro cultivators out there, we know that, right? And many of them are having to make some decisions. Do I stay basically in the grey-black illicit market or do I convert and move into the legal market? Those who are wanting to convert are going to go through the health Canada licensing regime. Those who are not will continue to go the way they are going. The reality though with October 17th of 2018, what legalization of adult consumer cannabis is that unfortunately their days are numbered. Now some of them will still continue to operate quite well and still make money but we're starting to see a move even though it's early days where retail, cultivation, soon to be edibles, all those things, if people want to do it right at a large scale they will move into the legitimate market. So we're starting to see this. The other thing we're going to see and this question is really good and I can build on this is we're seeing the large licensed producers creating micro-cultivation activities and I'll get to that in a little bit but that actually creates economic development opportunities throughout BC for micro-processors or micro-cultivators and the licensed producers either in a joint venture format or in other formats. So are the big guys buying the little ones or investing in micro-producers? The short answer Susan is yes but the little ones that the big guys are buying tend to be other licensed producers which are non-micro-cultivators. So they're buying other licensed producers who already have their health Canada license to grow or are on their way and therefore they're gobbling them up to get that capacity. Remember that 900 ton, the 800 ton gap we talked about earlier, many of you are still building into that capacity or buying into it. Okay so then the small sort of mom and pop operation that's growing their own and wants to get in they have a choice to either go through the health Canada process or stay on the fringes as it were. Yes yes and what I see I think you know if I could put you know look into the crystal ball right and trust me my crystal ball is not that good but if I could look into the crystal ball I could see a movement eventually where the large licensed producers or those who have the health Canada license will work in a joint venture or a cooperative collaborative format to help some of those others on the fringes who want to get in to get into the legal space. But you know until we get the micro cultivation licenses well underway and being approved by health Canada the reality of that can't happen until that regime has frankly got its legs under it. Okay thank you. Yeah so while I've been answering the question that was a great question thank you for asking I'm not sure who asked that question. I wanted to put the BC public sort of cannabis framework here up for everyone. I think enough media has covered all these I mean you know you still can't drive when you're impaired and I think we all agree to that. 19 is the minimum age for plants per household. You can see all these things and you know what this is unlikely to change. Okay so let's keep moving. You know what's happening there's some industry bottlenecks that are preventing the free flow of the entrepreneurial spirit to really land and you know we understand that I think as Canadians we understand the balance we have to strike between the regulated market and making sure that you know government and policy has a way to play itself out. You know we got to keep the stuff away from kids out of the hands of bad guys build a business, tax it, et cetera all those things. There's some growing pains we have done here ago but I wanted to point out some of the ones that kind of are quite stark and I think for each of you in your communities it's something that you want to be cognizant of if you're thinking about entering the cannabis ventures or if you're advising people or people are coming and asking questions. So I promise not to steal the thunder of my colleagues coming up but I wanted to send this show the slide. Now they may have even more up-to-date statistics on that but right now approved in principle we have six, eight licenses have been issued so follow the year we're there it's good. You know we have three in Vancouver and I know I think all three have opened up now in talking to the LDB they were getting ready to ship product to those three licensees but that tells you the amount of activity we have the squares and bubbles to the right of the slide tells you how many people have applied. Now what's interesting on the indigenous slide is that Chief Robert Louie from Ossoyus Indian Van and Ossoyus you know is very mature and has very strong economic development experience is leading a group called Indigenous Bloom and Indigenous Bloom is setting up a regime and ability for Indigenous communities to create cannabis businesses however that is outside of the licensing health Canada and provincial jurisdictions and part of it I think is because our First Nations have the right of self-determination and self-government so they're saying hey we will set establish your own program. It's going to be very interesting we want to watch this space because we're going to have to see how the indigenous model mirrors reflects ensures that some of the policy things around safety around product testing quality is managed and maintained. I suspect though that this may come up to some friction points with Canadian regs and it'll be very interesting to see how this moves forward. Now I want to make sure that after seeing that the audience doesn't think that's what all our First Nations neighbors and friends are doing that's not the case. There are a number of them who said you know what fine we'll go through the health Canada licensing regime. We see this as an opportunity for our communities that extend beyond our communities and we want to be able to sell into Canada we also want to be able to participate as the industry continues to iterate and build out. Like many things back to our quintessentially Canadian slide these things are developing and they will take some time to work their way into some sort of equilibrium. Let's keep moving. Some of the things that really unfortunately become obstacles is this slide. On the left the original farm and I always give these guys a shout out because you can't go into their stores now because they're closed but this is a beautiful store. This is literally their Douglas street store space in Victoria and it's beautiful. You walk in there, people are knowledgeable, lots of education absolutely no pressure whatsoever. They have the ability for intake and all sorts of different products etc. This was before October 17th. What they did was in advance of legalization they shut down. They said you know what we're going to apply, we're going to do it the right way we're going to be legit operators. They were really good operators to begin with. They actually held for example one of their other locations education sessions for adults. You come in any evening and sit down and they walk you through the different strains, the cannabinoids their use is, what research was available etc. They're still waiting for their application and I'm not going to put our colleagues on the spot to say where are they. But suffice it to say they're the folks that stopped, still pay rent try not to lay off their people, sold or destroyed their old inventory which was under the gray market or illicit market and then they run into things like the bullet points on the right which kind of makes you go okay guys we can do better here. And I can't think across the three levels of government, these are some of the things where the red tape that trips people up, folks who are holding on paying rent, still paying their employees but not getting any revenue. I think this is some of the head slapping moments where you kind of go can we be smarter about this. Hello let's keep moving. This is George Robinson George is very active in the cannabis space and he's predicting that we could have five years shortage and I'm not sure it'll drag out that long but here's what's going to happen when edibles come into play. Right now we have a shortage of extracts, concentrates isolates, everything that you can get out of the cannabis or the hemp plants. The active ingredients mean THC and CBD so CBD is the one that's calming more sort of pain related and THC being the one that's more uplifting and give people the psychoactive high. Two drivers of this is low amounts of those which are key inputs into edibles manufacturing whether it's chocolates, cookies, gummies, you know, cells and tinctures for your hands or whatever it is. The other thing is the big LPs and even the medium sized ones are driving a strategy to have an export capability because in a lot of those countries we see Germany, Australia, etc. Right now the medical regime under GMB or good manufacturing practices many of our LPs are able to achieve that and have export capabilities and they get guaranteed government supply contracts so there's the toss up. Do I sell into our medicinal regime here in Canada? Sure. Do I sell into our retail regime where I lose some margin? Do I, yeah, you know what, I should. We are Canadian and we want to supply the adult recreational market but those government supply contracts in Europe are very lucrative. So there's going to be a constant pull on the amount of available inventory and then like I said when edibles are open again those inputs are going to be needed to be able to produce edibles so another big pull on that inventory, on that capability to produce. Production methods I leave this up here. You can read this at your own leisure but the reality right now is most people are working on the left costs are higher, right, but you get better yields. What's going to kick in at some point even in Canada is outdoor growth, so yes, in fields. There are people applying for those right now and there's also a lot of outdoor growth on an international scale. At the last live conference when I was there walking the floor and I've been to all the conferences over the last couple years here in the US etc. I was surprised at how many international visitors we had. Not just oodles of Americans that's awesome, but Colombians, Koreans South African, you name it they were there trying to understand people from India. Understanding investment opportunities, technologies, how to build joint ventures and export agreements like it is moving very fast. Why do I share this with you? Because there are jurisdictions that the cost of production is ridiculously low. We're not even talking about dollars, we're talking 10, 15 cents per gram, and so that cost differential creates an arbitrage opportunity, especially if at the end of the day your input is just extractive oil. You don't really care about the quality of the bud, you just want to get the active ingredients out of it. So we are on the cusp of seeing something shift with edibles coming into play. And in a moment I'll give you Peter's editorial comment on that before we end this session. I want to keep going because I know we're pressed for time. This slide gives you a sense of what the cost of a gram of weed is across Canada. This is government data. We don't know for certain there may be some black market data baked into some of this, but you know the prices aren't really interesting. Saskatchewan is high, Manitoba is high. What we do know that is that in the retail regime for the retailers to make a decent margin, they tend to mark up their product and if there's an equivalent government retailer. So in BC if you walked into the government store in Amloot, you would pay one price. If you walked into the private retailer in Kimberly, chances are if the same product was on the shelf it would be a little bit higher. And understandably so the private sector is looking for obviously a decent return on their investment. This will start continue to shake out as supply becomes less of an issue and as more and more retailers get on board. I'm just stuck here. Give me a second folks. So let's get into the industry opportunities and segments. We show this because it's not all about cultivation and growing. Extraction is becoming very big and will become even bigger. Yesterday I had the pleasure of spending a whole day, a whole afternoon at Quadram Canada Tech, a publicly traded extraction machinery company and they actually have multiple segments. They want to extract, they want to consult, they want to help producers and other participants build their extraction facilities. They want to develop their own product lines, etc, etc. So they are trying to bridge what I call industry 1.0 or cannabis 1.0 which is all about growing and getting the legalization to cannabis 2.0 which is all about everything else on the screen and then stuff that we haven't even thought about. So let's get into it. There is growing but then there is the end product. Right now the end product is oil and dried flour but soon you will see so many more products and in the slides that follow you'll get a sense of that. But don't forget about all the facilities, the services that are required around this. Let me pick one off this slide banking and finance. Up to about 6 months ago pretty much no financial institution would touch cannabis producers. Sure Bank of Montreal led a big round for canopy but that's arguably that's easy because established health Canada regulated big dollars investment banking yada yada yada. But the reality with many of the LPs is they raise funds and they go through dilution rounds of their shareholders is sometimes they just want a little bit of credit and I'm not talking about the pile in the back, I'm talking about mortgage debt line of credit and the bankers were not stepping up with the exception of one out of Ottawa which is alternate credit union and alternate bank. And alternate interesting enough is the credit union for the federal civil servants. Interesting. But the CEO saw this as an opportunity and he saw that with health Canada licensing the know your client, know your customer due diligence he had something that he could rely upon and so he was able to go out and bank a lot of the early entrepreneurs. The good news is many of the banks are coming on board. The schedule, the big schedule one banks, the TDC, CIBCs are still a little hesitant. I still hear stories about people either not getting banking and I'm talking about basic deposits like a checking account to lending or sometimes they find out they're in cannabis or a related business and they say sorry we don't want your business. That's still happening. But it's becoming less and less frequent thankfully and more credit unions are stepping up. So like for example the first less family of credit unions which is Envision in the Old Canalgan Now so Envision in the Lower Mainland, Valley First in the Old Canalgan and Island Savings we actually sat in an executive team meeting and talked about the industry so they could develop their strategy. Don't just think about cultivation. In fact cultivation becomes one of several things in what I call the value chain of the cannabis industry and it's all the ancillary services. I mean hey your favorite little accounting firm. We've been working with this industry of life in the beginning. There's a reason why. Not only is an industry interesting but there's a lot of opportunity and a lot of revenue to be had. I break it down even further. This is a bit of an eye chart. We are a consulting firm so we always have to put something like this out to our clients and our audiences but just have a look at that and see in the key value chain pillars as we go from left to right some of the things that are the services or the products that can be sold into this. So if you think about the cannabis industry in Canada about being 5 or 6 billion just on cultivation the multiplier on that I think is at least 4, 5, 6 maybe even more times that just because of the spinoffs. And we're seeing in many of your communities you're seeing that already you know construction folks, general contractors, engineers, architects working on these facilities. These are new purpose-built facilities so they have to learn. Transportation supply chain to get to the retail elements. And of course the burgeoning push to try to get branding and design even though right now the regulations don't allow that but a lot of people are iterating trying to figure out how do I get my message up to the consumers. Hey Peter. I'm going to break in. We've got a couple of questions and then I want to let Terry and Joshua have a go at it and then we'll have four time afterwards. Hopefully a couple of questions. One of them I'm going to put two questions together here. How long does the process take to get a health Canada license and is it possible to complete the application independently and spend less than 85K on consultants? Let me do the last one. You don't have to spend 85K. You can go out alone. There are other consultants out there that don't charge 85K. 85K is coming from one of the big national consulting firms that does this. The reality of consultants is the more you do the less they do the less they charge. But there's also a reality of a critical mass of knowledge and templates that they bring that can accelerate that. Let's talk about the wait time for Health Canada. There's an article a week ago that says the wait just keeps getting longer and that's a reality. Here's what's happening. There's still licensed producers, so the big ones submitting applications. Some of those don't have their license to sell yet, so you have to get license produced, license to sell. So they're going through iterations with Health Canada. When the Feds announce that levels are going to be legal in October, Health Canada knew that it would have to make a shift because now the processing license, the ability to extract and handle materials to put into cookies or whatever you're making, could be gummies, that requires licensing oversight and obviously people to review those applications. And then you have multi-micro cultivation kicking in. So Health Canada can't hire enough people. They're being stretched in different ways and so that reality is creating a slow down in license review and approval. So to tell you how long, I have no clue these days. Just every day is a different day. Okay. So you mentioned cannabis oil now a couple of times. It's slated to become legal with edibles. I'm not an expert. Yeah, and so the oils themselves, you can get oil now except there's not a lot of it on the shelves. That's the problem. But then what the next iteration with edibles is you're going to get tinctures, delivery devices that you can spray in your mouth or drop under your tongue. There could be more capsules. They could be combined with other things too and obviously then all the food manufacturing stuff will kick in as well. So the key issues with oils and extracts right now as I said earlier is they can't convert enough because they can't grow enough biomass. They can't convert enough and therefore there's not enough out there for sale to the public and to go into other products that may be around the corner. Okay. There was a question about what is a ready jurisdiction? I'm going to let the folks that follow answer that one. Okay. Alrighty. And there was another question about one of your slides but what I'm actually going to do for the person who asked that question is I'm going to send Peter your question and he can respond to it because I want to move on to Terri and Joshua. So thanks everyone. Keep those questions coming. I will change the presenter back to me briefly and we'll get Terri and Josh are going to get fired up here so get their PowerPoint slides up and running and I'm going to unmute them just because that'll make it a lot easier. There you go. Now you're unmuted. For those of you who can see my name is Terri. I'm the director of communications and stakeholder relations with the liquor and cannabis regulation branch and for some of those of you around who are in the invite list have been around for a while have dealt with us in the past we used to be called the liquor control licensing branch so in fact we're the same same outfit and I'm the manager of licensing here in charge of both cannabis licensing and liquor licensing. So without further ado let's launch into our presentation. Now we've been asked to talk specifically about the application process in the province so it's pretty straight forward and shouldn't take a lot of time. So a few things we'll be covering here on the screen end-to-end application and licensing process, the local government's role and the indigenous nation role in licensing. A couple or three major tenants to get a license complete as you see on the screen. They're complete applications LG and IN have to be ready and the fit and proper which consists of financial integrity assessment and a security screening all have to be complete to get to a successful license. Now somebody mentioned earlier about the fact what's a ready local government? Well a ready local government is one in our view that well technically it's when they say they're ready to receive notifications for us about an application but they're fully ready of course they'll have their bylaws in place and their processes in place to actually review these applications we send them. Not all local governments are there yet. And here is the timeline of what our process is. So first an applicant will apply through our online portal they will submit to their payment their $7,500 fee and they submit all required documents. After that one of our staff will go through the documents make sure that they are complete doesn't necessarily mean they're correct at that moment but we have all the documents are there. Once all the documents are there it we check with the local government to see whether or not they're accepting the application. If they're not the application is terminated at that time with the refund if they are accepting we will send referral to the LG or the IN and then start the financial integrity the security screening and of course the LG IN processes started currently with that for most jurisdictions it should be noted that some jurisdictions wait until the fit and proper piece is done this of course the little asterisk at the bottom can make the process a little bit longer. At the top you see license application review that little bar should actually go all the way to the end. It's reviewed the whole time concurrently with the fit and proper financial integrity and security screening. Once we get past the fit and proper so there were all good where there's no organized crime there's no issues with their security screening or their financial integrity we will send a little note to LG or IN saying we're done now so that for the jurisdictions that are waiting for that then they start their process to see whether or not the zoning or the public input is in place. I should note that once we send it off to local government and fit and proper no refund so once we determine the application is complete and the LG is accepting we're now starting our process and we won't issue any refunds after that place. Yeah that's because we're a cost recovery branch right so as soon as staff here start doing the work on thing no refund. Okay and then once all those pieces have been complete the financial integrity the security screening the LG IN recommendation which is giving us the thumbs up they're recommending a positive recommendation we move to AIP which is approval and principle means that all regulatory requirements have been met and sometimes now the establishments need to be filled or they're not quite ready to open their door or for further final inspection. After so they'll schedule a final inspection with an inspector we'll go down there to ensure that all the documents they provided us match up with what's actually in the establishment the floor plans are absolutely they say they are the security cameras are there everything that they said was in places in place if that's good we then move right to like the fish one. Sure yeah so a notice of application as Josh said we review the application to make sure it's complete so a local government is not going to be notified that there's an application until the two things are met all the documents we've asked for are uploaded and they've paid $7,500 feet and as Josh said all the documents might be uploaded doesn't mean they're correct because our staff will work back and forth with them to make sure that they provide all the correct information. So then we notify the local government and the local government does their business now there's some interesting things here first of all the local government can choose whether or not to even hear recommendation or to even entertain it at that point we tend to wait we will not work on something until we hear back saying that we the local government or indigenous nation is going to actually entertain looking at this application if they say we're not going to then there's still an opportunity for the for the applicant to have a refund of their $7,500 so that's the first step if the local government chooses to provide not to provide a recommendation then the application is terminated and that's that if the local government decides to provide a recommendation their requirements they must meet they have to consider the location they have to assess the community impact gather the views of residents that's actually quite key they have to demonstrate that they've done that they have to tell us how the residents views were gathered so in other words they can't kind of cheat and it's just like well we put up a couple of notices and nobody said anything and then they have to provide the recommendation to us yes or no we support this application and the rationale they have to do this in writing now different than in the liquor world we don't care in fact the law doesn't care how they do this in writing some local governments will do this through a process what do you call that a resolution etc but really we felt government felt that that sort of hampers the discretion of a local government or indigenous nation so the reality is they have to do this back to us in writing in any way or manner that they choose to do provided these requirements are met and the key part of this is that we don't have the authority to issue a license without the positive recommendation that's right so the we're not going to issue a license if the local government says no however the caveat to that is if the local government or indigenous nation says yeah we support this application there might be some reason we've discovered on our process why we shouldn't issue the license so at the end of the day the general manager of this branch has the discretion to issue or not legally so the local government but in practice we're not going to issue a license if the local government doesn't agree to it but yet we're not bound to issue a license even if the local government does agree to it there might be some reason why we wouldn't the local governments of course their regulatory powers are very similar to people who are familiar with a lot of the liquor issues they can impose restrictions on store locations in their zoning bylaws they can charge applicants for fees for their work in assessing the application so they and most local government sort of cost recovery thing as well municipalities note municipalities but not regional districts may limit the hours of operation or impose other conditions like they might have certain bylaws with signage and these powers all of what we're talking about also apply to future relocations of existing stores so down the road at some point there's going to be a cannabis store that is going to relocate to within a community or to another community and I still have to go through all of this process indigenous nations role in life thing is very similar generally everything we just told you applies as well except for some key differences the process and regulatory powers are similar but because and I think Peter touched on it earlier indigenous there are unique rights of indigenous nations based on federal and provincial statutes that are beyond the statute here you know so the cannabis control licensing act aligns with that by giving the province the ability to enter into agreements with indigenous nations that can vary the requirements under our act so in other words if an indigenous nation wants to regulate cannabis stores somewhat differently or based on the needs of their own nation the province must enter into an agreement with them on that and come to some sort of resolution an indigenous nation itself can also apply for a cannabis retail license in its own name without being an incorporated business that's different because you know generally if you go to our website we list the corporations like a society or you know private corporation public corporation all the normal stuff but an indigenous nation can apply as the nation to be the licensee of a non-medical cannabis retail store completely outside of that and if anyone chooses to do that then they we actually because there's no one size fits all in that case we will as a branch work with them directly in fact mostly it will be Josh working on a case by case so as the slide here says if an indigenous nation applies for a license in its own name we'll work closely with them and their partners and again there's no one size for both local government or indigenous nation recommendations there's a recap just as a reminder and this is really important we retain our general manager of this branch retains the discretion whether or not to issue a license but must consider the recommendation so we'll but we cannot we will not issue a license without a local government or indigenous nation providing a positive recommendation also we can issue a license with conditions so we decide yep from our perspective license is good to go they're fit and proper they should be people who run a such a store and they maybe have asked us for certain operating hours but maybe the local government has decided no we don't like those operating hours so we can issue the license with conditions based on some of the needs of the local government as an example with the restriction of hours if the local government or indigenous nation recommend recommendation back to us does not fully meet the regulatory requirements we the branch will reach out to the local government or indigenous nation and help them provide us the information we need sorry I'm going fast but I'm just talking to them at a time answering common misconception applications aren't time stamps people somehow think they are somebody applies to us there's a time stamp it's not the time stamp is only they've completed uploaded everything that we require correct or not and they paid the fee and we will be considered that that's submitted when we notify the local government that's a bit as close to a time stamp as we have but we don't technically have a time stamp there's no another misconception is local governments or indigenous nations do not have a deadline to provide recommendations back to us if they want to change it sit on a on a recommend you know we we sent them an application in progress and they decided well you know wait a second we need to actually change some bylaws around this and it takes them a year doesn't matter we there's no statutory deadline for a local government indigenous nation to get the recommendation back to us that freed them up to do the process that suits their needs the best and again the method for how they provide a recommendation is entirely up to them which is kind of new if they're used to dealing with liquor number of stores the province is not setting any sort of cap on the number of stores there's no moratorium like there's a moratorium on private liquor stores you can't apply for a new private liquor store license but there is no such cap for cannabis stores there's also no provincial distance criteria a lot of people we get a lot of questions about that because there is with private liquor stores and government liquor stores now however the local government and indigenous nation can set their own limits based on their own community needs they can say we're only having three stores in total in our community or that we're going to have them but they're going to be half one two kilometers apart they can do that if they want to we should mention on that too but although there's not a cap there is no one person or entity can hold more than four stores that's this slide oh perfect this is actually don't blame Josh for that I added this slide last minute you haven't seen it because he reminded me yesterday maybe we should talk about that the number of stores continue a licensee can hold as he said or have an interest in a maximum of eight cannabis retail store licenses and that limit is going to be reviewed in 2021 now the curious thing about this limit is what we consider interesting we'll talk about it here it'll take too much time but there's a formula of what we mean by an interest so if a corporation is trying to determine what you know so maybe there's a store where you have one shareholder key shareholder or one partner out of four partners that maybe has 20% interest in another store to account that well there's a formula and there and licensing staff here will work through the applicants to help determine what that is to detail to get into here it is it should be noted that this is well because it are hard cash so it's in the regulation of the general manager must not issue right to a person that holds more than four stores yep and for the purposes of this license cap a franchisor generally cannot have more than eight franchisees and another thing I just threw this in because people ask this a lot at this time federal federally licensed producers of cannabis are not eligible to be a cannabis retail store licensee and that's it we motored through here's some useful links for those of you who get this electronically the local government role and the indigenous nation role in licensing is spelled out in detail in those links more information is found on our website now I tinkered with giving you all our direct phone numbers but here's the reality there's so many varied questions so many we just hit on the tip of the iceberg that it's easier to put a this email address here which my staff triage so I would encourage you to use this email address if you have a specific question because we can then easily triage to the various experts around the branch and that's we can better serve anybody that way in getting the right answer in a timely fashion so I don't know if there's time for questions I know that we're past we do have time for questions I'm here, Josh as the manager of licensing knows a lot more about the licensing process and what they're experiencing so far than I do but if there's a question that I can't answer I will commit to we'll get an answer okay thanks John fabulous so we have a couple of questions for you guys what requirements does a retail licensee have with respect to property ownership or rental agreement before applying their retail license and yeah that's a good question and is it becoming onerous for small business owners well okay so that's a complicated question because the easy part of the question is in order to when you apply for one of these licenses through the application process you have to show that you have valid interest that's a legal concept it's in our act and regs same thing with liquor, valid interest is that you either have a legitimate lease not like I'm renting on a month by month basis like I have a lease that's a year longer or I own the property they have to demonstrate that it's not a fly by night operation in that sense like a off-up store or something so they have to have an actual lease or prove to us that they own the property and that's called valid interest and then they cannot apply for the license without that they won't get a license without that if at any point while they have a license they lose valid interest like landlord kicks them out says you know we're going to redevelop the property you're on so we just tore up your lease they lose valid interest technically they lose the license but we have a mechanism for cases where it's beyond their fault where they lose their valid interest where they can go into dormancy and find another place to be so we're not to me as we're just going to take away their license in terms of whether or not this is hampering businesses I think as the regulator it's kind of outside our role to answer such a question I know that the licensing process can take quite a while especially sometimes checking into backgrounds is taking longer than expected or the local government piece is taking longer than expected and we certainly cognizant that that means that somebody out there is maintaining a lease probably on a property waiting to open that's costing them money but the reality is that the legal requirement is the legal requirement and so however I feel about that personally I can't say as the regulator valid interest is a piece that must be met and that's that well and also I would imagine that coming from a local government perspective it's pretty hard to do a zoning process if you don't know for sure which piece of property you're zoning so in order to consult with local government you have to give them an address and they have to be relatively certain that that is in fact the address that is being discussed so coming from my local government background that makes sense we've run into situations where people are the local government so do we really need to know where they're going to be we just know they're going to be in a particular area like oh well we still legally need to valid interest before we can carry on with licensing nothing really nothing to do with the local government a local government can argue with us don't worry about valid interest we'll make sure they have a place later or we the local government are going to provide a place so it doesn't matter they need valid interest because it's in our legislation or regulation okay cool sure okay under what statutory authority do local government limit the number of stores that would probably well it's not under ours we're not technically the caveat to this is that technically in a program area we're not to talk about other people's program areas because of their jurisdiction but you know we're talking about local government act and community charter stuff right yes that would be my understanding of it it would be under the community I'm pretty sure it's under the community charter once again not my program area but a little birdie told me put it that way when we were creating legislation and regulation to allow this to happen we had to look at things like other issues that might limit us so for instance the reason why indigenous nations have certain rights is because there's a federal statute that we can't go against the reason why we don't allow edibles and bc is because the federal federal cannabis act doesn't get allowed the reason why local governments can make those own rules themselves is because they have certain powers under local government act so our legislation can't go against those things or at least we've chosen for it not to in some cases they can be some cases we chose for it not to I've got a couple more questions here that I'm not sure if you can answer Peter might be able to so I'm going to unmute both of you and ask the questions and we'll see how we go we've got about seven minutes left on today's webinar we've got about four or five minutes of announcements at the end so let's see how we can pack it in can you confirm or what is the role if any of the province and local governments in regulating micro cultivation or microprocessing of medical cannabis federal it's totally federal remember that chart where I had sat there across the three in the left that's all federal regime so what Terry and his teams doing and the LDB and folks like Michael Tan they're dealing with a wholesale and retail licensing and actual distribution of consumer product to the end user question is there a limit on how much land can be used to grow cannabis the answer is no but in the application process you have to specify that when you get into the land use question though it drops from the federal licensing regime because that that plan has to be there but it really gets down to local government zoning I know that there are applicants having to deal with the ARR conversations as well and that becomes again local government regional district and ultimately some legislative issues of it is ARR so it gets very complicated isn't a quick and simple answer to that. Okay, those were the questions so far there's a couple of other questions that came in that I'm going to share with their speakers one by one and I just want to thank you guys both for putting all the time that you put into sharing your knowledge with us and being on the webinar this is definitely one of our most popular webinars to date but we have some more exciting things coming up so I'm just going to take a minute to talk about some of those things and as I do this I want to introduce my new colleague Ben Kennedy and I'm going to unmute him and I'm going to get him to stick his you've muted yourself I'm going to get him to stick his head over here in front of the webcam so Ben is going to be producing the rest of the webinar series the spring I'm going on a temporary assignment there's Ben, there's Ben. Hi everyone yeah so when Sue's off on this temporary assignment we've got three more webinars upcoming but I think it will be pretty interesting so I'm just they're up on the screen there so you can access them by those links and then they'll be thrown up on our site in the coming days but basically we've got on March 21st accessing capital in small communities that'll be looking at how to help businesses in your community get the equity they need to grow and we've got a few presenters on that webinar David Ballester and David Wallace from Investment Capital Branch here at the Ministry of Job, Trade and Technology and Ian Wong the COO of the BC Immigrant Investment Fund so that's on March 21st at 10am then Building Resilience through Community Economic Development is April 4th and to speak for that Jeremy Stone is the Director of Community Economic Development at Simon Frazier University he'll be introducing the basic concepts of Community Economic Development and how they can be incorporated into your economic development work and just rounding out this section is Post Wildfire Marketing Messages for Communities so that's on April 18th and Kayleigh Penner from Destination BC will share recent research that looks at what messaging works to maintain positive perceptions of the areas hit by wildfires and how to encourage visitation through those messages so make sure you tune in if you see some relevance field community studies webinars and I look forward to speaking to you then thanks Thanks Ben Okay and as usual we have a couple of things coming up we don't want you to miss any of the webinars if you didn't find out about these from emails you can sign up for our webinars email list which is at this URL you can always go to gov.bc.ca-economic-development and that will give you all the links you need finally here we go we'll advance this slide one more time we have put together a feedback survey the questions are different this time both of our speakers want your feedback on their presentation so it'll pop up for you when you complete this webinar and it'll also get emailed to you in the link in about an hour so please complete that and send your feedback to us so we can share it with the presenters once again this has been recorded so it'll be posted in about a week to our website you can go there and find it under the past webinars link and also for upcoming webinars so I just want to say thank you to everyone who's joined us the speakers today and all the speakers we've had I'll be lurking in the background you'll see me on some upcoming webinars and thanks thank you for joining us it's been a slice have a great day everybody thank you okay welcome back everyone we finished the webinar but Peter graciously agreed to come back and finish his presentation Peter was on slide 23 talking about spin-off industries from cultivation of cannabis and some of the growth areas in say construction of processing plants and marketing for retail companies so we're going to throw it back to Peter and let him finish off. So thanks again Ben for having me back apologies for running a little over the other day what I wanted to pick up now in the presentation is what I see not only in terms of the grow and the extraction of the retail we covered that already but also what are some of the spin-off industries what are the other opportunities and things where I've been calling it sort of cannabis 2.0 or industry 2.0 and I think it has particular relevance to the folks on this webinar whether you're in a local government in an economic development role or considering being an entrepreneur yourself or finding ways to support this huge explosive growth of a branding industry that's emerged upon us and in BC we create a different conversation just because of our sort of familiarity and our craft and our understanding of cannabis and related products and services so with that let's pick up where I left off it's slide 23 and you know what are some of these spin-offs and you know you can see them on the page yourself but I wanted to pick up a couple now first of all the photo of the guy with the dark glasses and a gentleman in the back looking like he's either packing or unpacking a tote the reality right now is third party logistics and delivery so that supply chain fulfillment for the cannabis industry is a huge opportunity in fact it is right now a very sore spot in the post-legalization phase because a lot of the cultivators did a really good job in building out the cultivation facilities but unfortunately it's not their area of expertise of thinking after I harvest it, trim it package it and frankly some of them don't even know packaging very well what does that look like how do I get it you know the right types of packaging to need health care to the rights how do I put the CRA excise tax label on it oh yes and how do I pack it into skids and get it to the LDB in this province and how do they distribute it to the end retail outlet whether it's the government stores or the private stores all of that for many producers is a well-defined gray area that has to be built out and so that's a really good photo of the reality of supply chain logistics and of course the tough looking eye of the sunglasses is also another ancillary industry which is around security, security around the supply chain physical security and with a lot of the grow operations and the extractions and the supply chain whether it's your own supply chain or third party warehousing third party logistics it's also logical security around data information you know patient lists all those things you know consumer sort of profiles and any sort of intellectual property that need to develop so just in that alone in getting the flour dried flour to market you can see where the spin offs are the other one that's really interesting is the little one that looks like an iPhone app there there is so much technology being built there's such a huge demand for technology because if you think about it a requirement in this regulated industry healthcare in the regulated industry right now is the ability to track what they call seed to sale so the ability to know where your product is in the whole life cycle of the product where it's being stored where it's been shipped etc etc why just like in food just like in pharmaceuticals there is a need to be able to track through that supply chain in case of product issues recalls etc so again the technology the processes the standard operating procedures all that create the need for that expertise and those services and so those tools to be developed or to be customized for some of these specific companies with that I'm going to move to the next slide and this one is a very lively conversation around BC it's about craft cultivation and they are coming in fact Health Canada is getting tons of applications and the next slide will unfortunately talk about again the whole bottleneck issue but right now this become a very viable alternative for a couple of factors one it's for a lot of our growers in BC who've been doing this and are real artists real craftsmen real horticulturalists real geneticists in sort of breeding and growing cannabis I mean if you think about track back to you know anybody who's studied biology you know the monk Gregor Mendel breeding peas you know in the start of sort of modern genetics there are a lot of people practicing in this area and BC as you know it's a hotbed for that and so the ability for a lot of those people to transition from the illicit market into the legal market in micro cultivation to continue to practice and hone their craft I think is a wonderful opportunity and certainly for throughout BC you know as we know the Kootenays the Okanagan Lower Mainland up and down the island it's a real business opportunity it's a real it's a reality actually there are lower cost there is still licensing licensing costs again aren't for the faint of heart some just the consulting alone is probably anywhere between $50,000 and $100,000 the challenge right now is the time to license and remember there's a backlog of licenses going in and so between that and the cost of escalating around physical facilities to be able to create these opportunities for our craft growers to build up their own businesses the good news on that though is there are a lot of entrepreneurs those who for example come from real estate and construction who have real estate available who want to participate in the cannabis industry are not quite sure they want to lay down the capital required to build their own license large license production license cultivation facility and some of them are creating what I call cannabis parts to allow multiple units and micro cultivators to basically operate in those units and so it's a bit of a win-win in that for the landowner for the real estate guy or gal they get some revenue from rental they also get hopefully a share of the revenue from any product sales but it creates an opportunity for these artisans to get together and perfect their craft share ideas but have a place to call their own the additional play that's a win-win is the sales of the product whether it's the end flower leaf or the reality to process that to the end product and it could be an extractive product is also a reality that's being built in terms of it's a shared processing facility so whether it's a shared ownership almost like a co-op model or the land owner also owns that processing and then there's an ability to create some critical mass to go to other LPs or for example other government wholesalers and distributors to say you know what we'd like to sign an offtake agreement for our product across all these craft cultivators so you know it is very much and again in DC we understand this a community based co-operative model and I'm really excited about this as a way for a lot of people to participate who are already doing that and done it for years but to do it in a license fashion and again back from a policy perspective that's a good thing right because we want to have people emerge into the light of this new industry so let's talk about the backlog a little bit this article was published you know two weeks ago or maybe three weeks now and it is an uphill battle there aren't enough resources to go through the micro cultivation push real opportunity but as everybody starts putting more and more applications into the system it really does bog it down so rather than getting upset it's a reality we hope and we know healthcare is trying to bring up more resources but this is somebody who can just read a checklist and say is it complete or not you have to have some knowledge and ability to understand the regulatory regime and understand the business and because it's a new industry and a new business you know there's a little bit of a chicken and egg happening here so it's going to take some time to take root but I see this going through the reality of weights probably if you're trying to get an application now in you're probably well over a year almost 18 months to two years and therefore there is the need for entrepreneurs and those who are supporting them to be patient to know that there's going to be capital and carrying costs throughout this and so you know in my previous slide when I talked about the cannabis park and potentially a shared operating model that helps reduce the risk of you know somebody trying to go it alone having to sit out for 18 to 24 months waiting for licensing to happen and therefore not being able to operate and therefore not be able to generate revenue. Let's go to the next slide I want to touch again a little bit on the regulatory regime and something that I think is really going to further drive cannabis 2.0 and that is what's highlighted in light green fall 2019 so our liberal government the feds said in December edibles are coming Bill Blair just this week reiterated that he thinks October 17th 2019 so literally a year after cannabis was legalized for adult recreational use last year we will have edibles. Now there's probably the reality of supply chain and the various provinces getting there sort of ducks in a row so even if it becomes legal in October 17th of this year there's probably a build out period that still needs to follow but nevertheless there's a commitment from the feds to make it legal. Interesting enough right after they make it legal we're all going to the polls federally to vote so there's a timing issue here and I think there's obviously some political low power but again that may change and politics is not something none of us are the crystal ball on that but what's really interesting is on edibles and concentrates the growth of that is incredible and what we learn from other jurisdictions especially in the US the states that have legalized Colorado Nevada, Washington, California the switch from smoking the product to ingestion in other ways to tincture cells when those hit the shelves it was a huge shift. In some places the shift was so much that they had excess biomass that they had to figure out how to convert into extracts so they could be inputs to create these other products. We don't expect anything different here and in fact if you think about it as most adults if you're a consumer cannabis are you really interested in putting smoke in your lungs anymore? Probably not and as the market matures and goes older we have demographic data that's showing that one of the fastest growth segments is the above risky segment and another segment is the middle age women who often make wellness decisions for their families you can start thinking about how that will drive the marketplace of demand for products other than combustion of flower so it's very exciting and people are building businesses right now. So what does it look like to launch an edibles business? New market full of opportunities that we talked about but there's some challenges and just like the iterations and the starts and stops towards October 17th of last year we're going to see the same thing this year. The position paper has been put out by the government regs it's open for common period but there's some things in there I think you kind of scratch your head a little bit. For example dosing right now is so low at .5 milligrams that you kind of go because that even makes sense right per unit and I want to jump on this one a little bit and it's a bit of a soapbox issue but as I explained to you I think most people understand it so one of the reasons why you want dosing to be low is with edibles the key mantra is go low and go slow and that's smart frankly it's smart for anything you're going to put in your body but if that's our mantra and you give it so low that it almost has no effect then you can see a consumer eating one nothing happens second when nothing happens and they say well this ain't happening and what if they then grab a handful aren't we isn't it counterintuitive to what we're trying to do with policy the other thing is when you make the dosing so low per unit those units likely are going to have to be packaged separately child proof container so there's multiple levels of packaging so the cost per unit goes really really high so from a public policy perspective of promoting responsible adult use and enabling a business like an economically viable business that dosing decision almost runs counter current to it the other reality is as we are Canadians proud that our cannabis legalization regime is being looked upon across the world and being copied and being lauded and CNN and talk shows and everything we are doing a great job in slowly releasing the genie out of the bottle but the reality is the genie was out of the bottle last October now with edibles as you would if you were going through a retail location which retail is here it's totally legal consumer preference needs to kick in and with sort of some of these legislative requirements my concern is what we're trying to do is promote responsible use in some controls and what we end up doing is stifling consumer preference and demand which further drags on the marketplace and really frankly destroys a lot of efficient use of capital and the other reality is other countries already here in Canada competing and my next slide will show you that so these are all products you can get in the United States Dixie elixirs is a client of ours Canadian security exchange they are based out of Colorado literally built because of the state you have to do it state by state because it's federally illegal they have built the same company in Colorado, California Nevada and Maryland and they've come here and frankly we're like the 51st state so look at their product line on their left there and so imagine the Canadian equivalent is all playing sterile packaging we label on it with a little bit across the skull bones warning because it contains THC or CBD how does that enable consumer preference demand to take hold so there's a reality here that we will have to iterate and figure out and hopefully as the ranks come out and people comment on that it will allow the business to flourish and allow us to maintain that leadership position that we have in the world without destroying capital without taking our own choice, taking choice out or really trying to legislate responsible use because at the end of the day all of us as adults we have to be accountable for what we choose in this marketplace so forgive me for the editorial comment but back to edibles I think you need to understand that if you're thinking about investing in supporting or going into this side of the business exciting as it is there's some realities that are still things that have to be figured out and potentially overcome. In Canada we also have a very sophisticated food and regulatory machine one of the world class ones right Canada's food inspection agency is world class our ability to deal with food issues is incredibly quick you know and it's a wonderful parallel to what's coming through health Canada the Nazi distant future that the regimes will have to look at each other and merge right now they're separated right now one of the pronouncements or one of the ranks is you can't co-locate so if you're a CFIA inspected everything food manufacturer you can't just go well I'm going to go and do health Canada licensing and I'm going to just swap out you know tooling on my machinery you can't co-locate and there's probably a reality that it's allowing the industry to emerge slowly on control but also it prevents again some of the efficient deployment of capital on one hand for the big food processors but on the other hand it supports the small entrepreneurs and trying to get their feet under them so you know you can decide but again that's another interface and friction point that has to be figured out. The other realities are you know caffeine, alcohol, nicotine and THC you can't mix them okay but there are people who are smart and trying to figure this out as well and we're also trying to learn for example Colorado will be the first event they went too fast so the Canadian approach is much slower I think some of that is a little too slow but it's allowing this to emerge but it will be slow and steady and it won't be all figured out come this October but it will be legal so notes on Canadian expansion I'm going to take a moment to talk about beverages these are some landmark deals and landmark conditions so to say that the alcohol giants are involved is to kid yourself what's not on this slide is Anheuser-Busch has a joint venture research agreement $50 million in with Tilray and Tilray as you know has big facilities on the island so can it be growth? Tilray, EXO all being licensed producers all of us recognize the brands out there from beverage alcohol and I'll talk about province brands in a minute they are a client of ours based out of Toronto but why did the alcohol giants move in and invest in consolation was the first mover and most aggressive and by the way tobacco giants have done the same because of the fact that we are seeing a substitution effect not this New Year's but the previous New Year's in Colorado there was a news article that said over New Year's the sales of recreational cannabis in I think one of the ski destinations probably Vale outpaced that of alcohol that should catch your attention and it certainly caught the attention of these folks and with these investments it put not only capital into each of these licensed producers and what they're doing but it also signals in a marketplace that big liquor brands, alcohol beverage brands are in and it also put a very strong exclamation point on the industry and the valuations in the industry so with each of these investments obviously you saw jumps and share prices of the public you traded on. Now province brands is really interesting they're trying to brew beer using cannabis so they know about the whole THC and alcohol thing and so they're trying to figure that out. There are other brands as a company again out of Toronto called Hill Street beverages they make the alcoholized beer and wine it's available out there right now they're trying to figure out how to infuse that because they don't have to deal with the alcohol and cannabis THC CBD so again a lot of exciting developments see more in this space but then I come back to how does consumer preference get to play a hand or lend a voice to this if everything is in plain white packaging. These brands the reason you recognize them right away is because they're in our faces we see them on TV, we see them in ads, we see them at sporting events and so there's a reality of that fine balance that has to be struck as we emerge into the edible space. I wanted to kind of share with you our thoughts on what you need to do if you're thinking about going into this. It's common sense but if everybody had a dose of common sense I'd be out of a job and we wouldn't need regulators. So the market research to understand is critically important. We see a lot of companies coming in saying oh we've been making chocolates our whole life. We think we should go into cannabis edible it's like you know we make great fudge so let's do THC fudge. Well no it's not that easy there's something called licensing again you can't co-locate you gotta get dosing right all the things that we would expect to see you know like imagine this was a can of soda, a pop you'd want to see on the label like you know number of calories, active ingredients that stuff you'd expect to see that so there's a reality to building this that still has to happen. The business model itself are you going to get a license what does the product mix look like what does machinery to produce, brew package you know all those things what is your distribution model because at the end of the day right now with the exception of Saskatchewan everybody has to sell to the provincial government right if you are already a branded company what does it do for your current brand it's a bit of a mad gold rush opportunity mentality right now for this opportunity because everybody and his brother and sister thinks like hey if I'm already growing cannabis man I should be making animals really you're good at growing we've already talked about the supply chain challenges a lot of growers have had switching over the capital intensity to create basically a food and beverage line is that easy or should you stick to growing obviously stay informed the legislation is changing the regs are out for comment it will change between now and October obviating risk or mitigating risk remember my cooperative model but if you think about those previous slides where you had the big alcohol junkies working with a large licensed producer they're collaborating sharing risk and of course shameless plug but you know get some advice you can't figure it out all by yourself this is a brand new world and it's an intermingling of existing industries as well as new industry regs and players so I'm getting to close I want to talk a little bit of a tech boom I talked about it earlier about that app there is so much some of the grow buildings I've walked into some of the best ones like one of our clients, Tantalus Labs here in Maple Ridge purpose built a greenhouse they didn't just buy an old greenhouse and retrofit it they graded it purpose built it they angled it because their value proposition and you can understand it especially from a VC perspective they wanted sun grow organic they want to know exactly what is touching the plant and so they've even angled it to maximize the traverse of the sun some of the materials reflect so they bounce light throughout the greenhouse and they have IOT devices measuring not only water but all sorts of nutrients go right to each individual plant so they've got internet of things in there incredible technology and that is just the beginning there's so many people iterating on this whether it's the growing side whether it's the back office enterprise resource the ERP side whether it's oh my god the boring finance and accounting side all of this is coming together and creating new technologies that we haven't seen even things like ventilation fans etc that's also being built out and being innovated right now as we speak off grid grow ops the outdoor grows the ability to harness natural sources of energy unbelievable and for those who say well Canada is too cold we can't do outdoor grows check your thinking there are people applying for those licenses right now right now and if you think about it what are they likely to grow do you think they're growing biomass to create the the most high-end customize you know the sort of Don Perignon of cannabis no they're growing mass quantities at low cost because they're going to sell into industry 2.0 or cannabis 2.0 which is the edible space because that input is still required and even you know my apologies it's not meant to be derogatory but you know like basic kind of boring industries like compost and fertilizer my goodness somebody in trade shows we see somebody in those players we see people working on pesticides we see people working on iterating on naturally controlling pests using insects to control other insects and again the goal is to build into this industry organic is huge I don't think I need to spell that out to the BC crowd the ability to integrate in a responsible way it's so hard of what we do and so many people in this industry and the ability to extract I spent time at a publicly traded extraction manufacturer extract company excuse me extract machine manufacturer called quadrant can attack in Langley run by this incredible woman lawyer cannabis activist activist she's the CEO her name's Rosie Monden and it was interesting just seeing the innovation and the technology they put into their machines but not only their machines and selling machines to help people do or ethanol extraction but also the in silvery services and the potential to build their own product line and already companies and entrepreneurs and executives are looking at multiple ways to participate in the industry in so many different ways so with that I hope this has been helpful for everyone I really appreciate your attention and opportunity to come back and present the rest of my slides here my contact details shoot me a note always happy to chat and Ben thank you again for the opportunity thanks a lot for that Peter that was really informative and interesting presentation and yeah look forward to seeing what happens in the future thanks very much have a great day