1
1
Investor Presentation
DISCLAIMER
This Confidential Presentation (the “Document”) on the proposed financing (“the Transaction”) by Mettrum Ltd. (“Mettrum” or the “Company”) has been compiled by management of the Company solely for information purposes. The Document has been prepared and dated as of October 3, 2014 and the information contained herein is current as of such date only. The Document is for the confidential use by the recipient in order to assist such recipient in deciding whether to proceed with an in-depth investigation of the Transaction contemplated herein. The Document is not, and under no circumstances is to be construed to be, an offering of securities. Neither this Document, nor its delivery to the recipient shall constitute an offer to sell, or the solicitation of an offer to buy the assets described herein. It is provided solely for use by prospective investors in considering their interest.
The information contained herein has been prepared to assist interested parties in making their own evaluation of the Company and its business and does not purport to contain all the information that prospective investors may require. Prospective investors should conduct their own investigation and analysis of the Company and its business and the information contained in this Document as well as any additional information provided by the Company.
This Document includes forward-looking statements within the meaning of certain securities laws, including the “safe harbour” provisions of the Securities Act (Ontario) and other provincial securities law in Canada. These forward-looking statements include, among others, statements with respect to our objectives, goals and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words “may”, “will”, “could”, “should”, “would”, “suspect”, “outlook”, “believe”, “plan”, “anticipate”, “estimate”, “expect”, “intend”, “forecast”, “objective” and “continue” (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. The Company strongly cautions readers not to place undue reliance on these statements, as a number of important factors, many of which are beyond our control, could cause the Company’s actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: general economic conditions; pending and proposed legislative or regulatory developments in Canada including the impact of changes in laws, regulations and the enforcement thereof; reliance on funding models in Canada; operational and infrastructure risks including possible equipment failure and performance of information technology systems; intensifying competition resulting from established competitors and new entrants in the businesses in which the Company operates; insurance coverage of sufficient scope to satisfy any liability claims; fluctuations in total patients and customers; technological change and obsolescence; loss of services of key senior management personnel; privacy laws; structural subordination of common shares; leverage and restrictive covenants; fluctuations in cash timing and amount of capital expenditures; tax-related risks; unpredictability and volatility of the price of the Company’s securities; dilution; and future sales of the Company’s securities.
The foregoing list of important factors that may affect future results is not exhaustive. When reviewing the Company’s forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by Canadian securities law, the Company does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the Company or on the Company’s behalf. Such statements speak only as of the date made.
The forward-looking statements contained in this Document should not be relied upon as representing the view of the Company or its management as of any date subsequent to the date of this Document. Neither the Company nor its management is under any obligation, and neither undertakes, to update any of this information at any particular time. Neither the Company nor its management assumes any obligation to update or revise forward-looking statements should circumstances or estimates or opinions changes.
None of the Company or its affiliated or related partnerships and corporations or their respective directors, officers, partners, employees, agents or representatives makes any representation or warranty as to the accuracy or completeness of the Document or any statements, estimates or projections, and none will assume any liability for any representations (express or implied) contained in, or for any omissions from, the Document, or for any other written or oral communications transmitted to prospective investors in the course of their evaluation of the Company and its business. An investor will only be entitled to rely on those representations and warranties contained in the definitive agreement or agreements which constitute the financing.
Use of this Document is restricted to parties to whom the Company delivers the Document and the recipient and its representatives shall keep confidential all information contained herein or otherwise provided in connection with the proposed financing which is not already public or which is not subsequently made public, and will use the Document only for the purpose set forth above. In addition, each recipient will not copy, reproduce or distribute the Document in whole or in part to others, at any time, without the prior express written consent of the Company.
NON-IFRS MEASURES
There are a number of non-IFRS measures used in this Document, including EBITDA (earnings before interest, taxes, depreciation and amortization). For the purposes of this Document, EBITDA is calculated as revenue less cost of sales and operating expenses. The Company believes that these non-IFRS measures are appropriate measures of the operating performance of the Company. The Company’s calculation of these measures may differ from the methodology used by other issuers and, accordingly, may not be comparable to such other issuers. The Company believes that these measures are appropriate measures of the Company’s operating performance because they facilitate an understanding of operating performance without giving effect to certain non-cash and overhead expenses. None of these measures are equivalent to net income or cash flow from operating activities determined in accordance with IFRS
3
METTRUM – AT A GLANCE
LISTED
TSXV-MT
Established
•
October 2012
Facilities
•
3 Facilities Licensed Under MMPR – Bowmanville (2), Creemore
•
1 Facility Licensed to Produce and Sell Industrial Hemp Products – Barrie
Licensed Capacity
•
Current licensed production capacity of 3,500 kg per annum
•
License to produce and sell cannabis oil
•
Potential for expansion to 12,000 kg in current facilities
Number of Clients
•
6,145
•
Continued robust referral and patient registration growth
•
Over 1,400 physicians have referred their patients to Mettrum
Recent Share Price
•
$1.53 (May 25, 2016)
Shares Outstanding
•
39,561,275 (Basic)
•
43,174,795 (Fully Diluted)
Market Capitalization
•
~$61 MM (Basic)
•
~$66 MM (Fully Diluted)
Insider Ownership
•
~30%
Cash & Cash Equivalents
•
~$11 MM (as at December 31, 2015)
Debt Capacity
•
~$3.5 MM (~$3.5 MM drawn as at December 31, 2015)
MILESTONES ACHIEVED TO DATE
Oct. 2, 2014
Commences trading on TSXV
650
Dec. 12, 2014
Receives production license for
Creemore
1,150
Jan. 15, 2015
Increase in licensed sale capacity
to 1,200 kg
1,150
Feb. 4 , 2015
Enters hemp cannabis based
functional foods market (Oilseed
Works)
1,150
Mar. 16, 2015
Launch of physician / client
portal & online store
1,150
Jul. 20, 2015
Increase to production capacity
at Creemore
2,350
Licensed
Production
Capacity (kg)
Event
Aug. 31, 2015
Receives cannabis extraction
license
2,350
Sep 23, 2015
Launch of Mettrum Originals
2,350
Dec. 17, 2015
Receives license for Bowmanville
South facility
2,350
Dec. 24, 2015
Receives license to sell cannabis
extracts
3,500
Jan. 26, 2016
Launch of premium cannabis oils
product line
3,500
May 10, 2016
Share offering raised $8.6M
3,500
Licensed
Production
Capacity (kg)
Event
5
2016 OBJECTIVES
5
Achieve cash flow break-even
Stabilize cost of sales in the $2.00 - $2.25 / gram range
Pursue recreational / retail strategy pending legislation
Leverage Mettrum Originals brand for increased retail sales
Rapidly expand client growth now that all facilities are licensed
15,54516,632 17,046 18,512 20,277 22,004 23,930 26,010 27,928 30,537 33,838 36,594 12,000 20,000 28,000 36,000 Dec. 14 Jan. 15 Feb. 15 Mar. 15 Apr. 15 May 15 Jun. 15 July 15 Aug. 15 Sep. 15 Oct. 15 Nov. 15 P a ti e n t C o u n t 313 292 374 415 430 526 577 599 696 761 797 200 300 400 500 600 700 800
Jan. 15 Feb. 15 Mar. 15 Apr. 15 May 15 Jun. 15 July 15 Aug. 15Sep. 15 Oct. 15 Nov. 15
K
g
S
o
ld
THE INDUSTRY IS GROWING RAPIDLY
29 licensed producers; ~1,300 applications received
5 licensed for production + sale of extracts
Already grown to ~$70 MM market
Patient Growth (2015)
Kg Sold (2015)
•
Patients growing on average at
8.2% month-over-month
•
Up 135% year-over-year
•
Product sales growing at
10.2% month-over-month
7
10,000 565 1,591 1,644 1,915 2,514 3,036 4,331 5,032 6,145 0 1,000 2,000 3,000 4,000 5,000 6,000Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Feb. 23, 2016
# o f C li e n ts
CLIENT & SALES GROWTH ACCELERATING
7
Accelerating patient and sales growth with consumption figures normalizing
‒
2016 YTD net client additions of ~29 / day vs. ~12 / day in 2015
(1)
Ending Clients Production Capacity
Capacity: 650 kg
Capacity:1,150 kg
Capacity: 2,350 kg
Capacity: 3,500 kg
Capacity
Constrained
Capacity
Constrained
(1)
Estimated based on number of working days since Jan. 1, 2016 (YTD) and between Jan. 1, 2015 and Dec. 31, 2015 (2015)
PRODUCTION CAPACITY – POISED FOR GROWTH
Licensed
Built Capacity
Fully Developed
(current structures)
Expansion Potential
Production Capacity
3,500 kg
6,000 kg
12,000 kg
26,000 kg
Implied # of Clients
(1)
~14,000
~23,000
~45,000
~100,000
Implied Revenue
Potential
(2)
$25 - $30MM
$45 – $50MM
$90 - $100 MM
$200 - $210 MM
(1)
Estimated based on 0.7 grams per client per day for 365 days per year
(2)
Estimated based on 0.7 grams per client per day for 365 days per year at a sale price of $7.90 per gram
Total potential expansion capacity of 26,000 kg at 3 licensed facilities
‒
Currently licensed for 3,500 kg of 6,000 kg of capacity
9
Mettrum is the most physician centric, research, technology
and data-driven LP.
The Mettrum Spectrum™
A simplified, responsible, dialogue
between physicians, their patients and
Mettrum
’
s CSR
Ranks products based on relative THC and
CBD content
Proprietary Cannabis EMR and Rsrch Tool
Simplifies paper work redundancy and
streamlines patient registration
Manage and update patient profiles for
easier collaboration
Data capture for research purposes
Mettrum CEMR
OUR APPROACH - PHYSICIANS
OUR APPROACH - CLIENTS
Mettrum
Dried Cannabis available in both 5g and
15g bottles
Differentiated strains grown and
hand-trimmed to perfection
Vapourizers and extracts
Mettrum Extractions
If you choose cannabis for your health, Mettrum helps you
“live your way”.
July 2015: Health Canada issued guidelines
allowing licensed producers to produce and
sell cannabis oil and fresh marijuana in
addition to dried marijuana (extracts)
Mettrum received its license in December 2015
and began to produce and sell extracts in
January 2016
Implications for Mettrum:
Increase the Market
Greater Efficiency
Topline Growth
Standardization
Market Awareness
Reinforces the Mettrum
11
NEW: METTRUM ORIGINALS
11
30 SKU Product line launched: September 2015
Mettrum Originals is currently available in approximately 2,000 stores across
Canada / U.S.
Locally sourced, and designed with a focus on nutrition and great taste
$110
Average Monthly
Revenue/Person/Month
$4B
Canadian Market
(3.6mm adults: ~13% of
adult population)
US$3.9B Annually
Canadian Market is 6.5x Colorado
US$50mm
Colorado Estimated July 2015 Revenue
LEGALISATION – WHAT COULD IT MEAN ?
Aggressive timeframe: two years (although interim expansion of MMPR could be sooner)
‒
In the meantime, the medical market will continue to grow and possibly accelerate
due to greater cultural and political acceptance in the interim
‒
Medical market will operate in parallel to the retail market when established
Mettrum is exceptionally well positioned with existing available
capacity to service a retail cannabis market
13
LEGALISATION – POTENTIAL SCENARIO
13
Federally regulated production and
provincially regulated sales and
distribution with a possible parallel
federal distribution system similar to the
current MMPR mail order system
Continue to be highly regulated to
ensure safety, quality, protect vulnerable
populations, educate and to prevent and
deter diversion to the illicit market
Packaged goods industry with similar
guidelines for advertising / packaging,
distribution and promotion as alcohol
Highly taxed – Greater local enforcement
of regulations. Illegal grow operations
will be shut down. Colorado will collect
over $125 mm in taxes this year; Canada
is 6.5x population
It will not be sold in corner stores
(according to Liberal Platform) or in
dispensaries as they currently exist
(however, normalisation of dispensaries
through lack of enforcement could
challenge this position)
Canada will continue to lead the way with
best practices. We think it will look more
like Washington and Oregon (LCBO
model) than Colorado (dispensary model)
given our geography and much larger
population
Grow your own? – Colorado yes (up to 5
plants) Washington no. Either way, not a
significant impact on the market
24 100 108 95 115 161 212 231 0 50 100 150 200 250
Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15
K
g
S
o
ld
SALES GROWTH WITH CAPACITY
Sales Growth
Accelerating sales growth with increased capacity
Capacity Increase
Capacity Increase
15
REVENUE ACCELERATING; CASH FLOW IMPROVING
15
Quarterly Revenue & EBITDA
~193% YoY revenue growth for quarter ending Dec. 31, 2015
‒
Improving cash flow profile: operating leverage & lower costs
$848 $1,249 $1,711 $2,017 ($1,522) ($1,612) ($1,622) ($1,338) ($1,700) ($1,650) ($1,600) ($1,550) ($1,500) ($1,450) ($1,400) ($1,350) ($1,300) ($1,250) ($1,200) $0 $500 $1,000 $1,500 $2,000 $2,500
Mar-15 Jun-15 Sep-15 Dec-15
E B IT D A ( C $000) R ev en u e ( C $000) Revenue (C$000) EBITDA (C$000)
COST & MARGIN PROFILE IMPROVING
Cost of Production Per Gram & Gross Margins – Last 4 Quarters
(1)
Declining cost of sales resulting in improving gross margin profile
(1)
Production cost per gram includes the cost of production excluding fair value gain on biological assets, amortization, laboratory testing and packaging; gross margins are on a
$3.48 $3.16 $3.21 $2.55 42% 45% 48% 55% 40% 45% 50% 55% 60% $2.40 $2.60 $2.80 $3.00 $3.20 $3.40 $3.60
Mar-15 Jun-15 Sep-15 Dec-15
G ro s s M a rg in % P ro d u c ti o n C o s t / G ra m
