CiF PRIVATE AND CONFIDENTIAL CannaIncome Fund Corporate - - PowerPoint PPT Presentation

CiF

PRIVATE AND CONFIDENTIAL

CannaIncome Fund

Corporate Presentation Q4 2018

CiF

1

PRIVATE AND CONFIDENTIAL

Disclaimer

FORWARD-LOOKING INFORMATION

This presentation contains "forward-looking information" within the meaning of applicable securities legislation. Forward-looking information is disclosure regarding possible events, conditions or financial performance that is based on assumptions about future economic conditions and courses of action. This forward-looking information is based on current expectations, estimates and assumptions concerning future events and is subject to a number

• f uncertainties and factors, many of which are outside the fund’s control, which could cause actual results to

differ materially from those described in the forward-looking information. No assurance can be given that any of the events anticipated by the forward-looking information will transpire or

• ccur or, if any of them do so, what benefits will be derived therefrom. Investors, potential investors, financing

institutions and other readers are urged to consider these factors carefully in evaluating the forward-looking information which speak only as of the date made. Except as may be required by law, the fund expressly disclaims any intention or obligation to revise or update any forward-looking information and information whether as a result of new information, future events or otherwise.

CiF

2

PRIVATE AND CONFIDENTIAL

OUR APPROACH

Investment Vehicles

Leverage our collective industry, private equity and capital markets experience to find early-stage pre-IPO cannabis companies in Canada, US, or globally, with a niche product and/or a sustainable competitive advantage. CannaIncome Fund Corporation (“CIF”) is a private investment company, which provides yield and capital appreciation upside, via valuation arbitrage opportunities primarily between private and public markets. Our goal is to work with, and advise, companies to find capital solutions which expedite their path to positive cash

• flow. Although not a requisite for all investments, our bias

is to find instruments where we rank higher in the capital structure with distributions that

• ccur

before taxes (reducing taxable events for companies).

Investment Instruments:

• Gross over-riding royalties
• Convertible debentures
• Secured debt
• Mezzanine / bridge

financing

• Preferred shares
• Common equity

CiF

3

PRIVATE AND CONFIDENTIAL

Terms

Private Placement Offering

Issuer: CannaIncome Fund Corporation Offering: Common Shares Price: $0.50 per Common Share Target Amount: Up to $50,000,000 Liquidity Target: Q1 2019 Target Annual Dividend Yield: 6% Distribution: Quarterly Management Fee: 2% Performance Fee: 20% (8% hurdle rate) Timing: Q4 2018 Targeted Fund Return: 25% Gross IRR

CiF

4

PRIVATE AND CONFIDENTIAL

Arthur H. Kwan, MBA, CFA, ICD.D President and Chief Executive Officer Arthur began his investment career in 1997 with TD Asset Management and has over 18 years of investment banking, capital markets, and private equity experience. He has held increasingly senior investment banking positions with Scotia Capital, PI Financial, and Paradigm Capital, where he was Managing Director, Investment Banking. Arthur has been involved in several early stage cannabis companies as an investor, advisor, and financier. Michael A. Zuk Vice President, Investments Michael was formerly an Equity Research Analyst for Stifel Nicolaus, a full service US brokerage and investment banking firm. He brings over 12 years of equity research experience at large US and Canadian banks, as well as executive officer roles within publicly traded companies, leveraging corporate development and capital markets experience. He has been a successful early investor in the cannabis sector. Jeremy Ross Vice President, Business Development Jeremy has over 20 years of experience in venture capital and marketing for small- to mid- cap cannabis, mining, and technology companies. He was a Director of Fission Uranium (TSX:FCU) from 2013 to 2017, during which it was named a Top 50 TSX-V company for its

• performance. He holds multiple board positions with TSX, TSX-V, and CSE listed companies,

including SpeakEasy Cannabis Club.

The Portfolio Management Team

CiF

5

PRIVATE AND CONFIDENTIAL

William (Bill) Fleming Chief Executive Officer – Mernova Medicinal / Creso Pharma (ASX:CPH) Bill is the Founder of Mernova Medicinal, an Aboriginal owned company focused on becoming a producer of legal marijuana; it was recently acquired by Creso Pharma (ASX:CPH). Previously, he was formerly the CEO of Abattis Bioceuticals (CSE:ATT), a leading diversified cannabis company, with interests in growing, extraction, and retail distribution.

• Mr. Fleming also has provided advisory services to Health Canada.

Marc Geen Chief Executive Officer – SpeakEasy Cannabis Club (CSE:EASY) Marc has been active in the legal medical marijuana industry for more than 10 years, consulting, complying with and participating in the MMAR, MMPR and ACMPR programs. Prior to co-founding Speakeasy Cannabis Club, Marc’s family founded Sun-Rype Products, and is a proud 4th generation BC farmer. Marc has also co-created a full line of cannabis extract products designed under ACMPR regulations.

Board of Advisors

Raj Grover Chief Executive Officer – High Tide Ventures Raj is the founder of High Tide Ventures and its subsidiary companies: RGR Canada, Smoker’s Corner and Canna Cabana, and co-founder of High Tide’s newest subsidiary, Famous Brandz. Raj started Smoker’s Corner in 2009 and has been operating profitably as a pioneer in the cannabis accessories industry ever since. He leads the industry in manufacturing capabilities and has built the largest network of retail stores in Canada.

CiF

6

PRIVATE AND CONFIDENTIAL

Ronan Levy, JD Chief Strategy Officer – Trait Biosciences Ronan is Co-Founder, Chief Corporate Officer, and General Counsel of Canadian Cannabis Clinics, Canada’s largest network of cannabis-specialized medical clinics. Ronan is also a co- founder of CanvasRx Inc., which was acquired by Aurora Cannabis (TSX:ACB) where he remained with the company as SVP of Business and Corporate Affairs until joining Trait Biosciences.

Board of Advisors (continued)

Ray Yue Co-Founder and Director – Canndara Ventures Ray is a Clinical Pharmacist, serial entrepreneur, and healthcare innovator. Ray is a Co- Founder and Director of Canndara, a cannabis-based apothecary operating across four

• provinces. He is also the Chairman and Co-Founder of Imagine Health and FEMME |

HOMME Medical. Ray is a member of YPO; he is a City of Edmonton Top 40 under 40 Alumni and selected as Canada’s Top 40 Canadian Entrepreneurs in 2017 by Ivey Business. Clifford Starke Chief Executive Officer – Franchise Cannabis Clifford is Chairman, President & CEO of Franchise Cannabis, a Canadian fully integrated seed-to-sale cannabis company with decades of world class genetics to develop high quality CBD and THC extracts to a rapidly growing international market, specifically Colombia, Croatia, Israel, and Uruguay. Previously, he was the 5th shareholder of Nuuvera which was acquired by Aphria for $826 million in March 2018.

CiF

7

PRIVATE AND CONFIDENTIAL

The principals of CIF were early investors in the cannabis sector; our private cannabis portfolio was up >300% in 2017 with strategic investments into early-stage cultivators and ancillary players.

Established Track Record

Tinley Beverage Company (TNY-CN) – 2017: $0.36 to $1.76 (388%) Emerald Health Therapeutics (EMH-V) – 2017: $1.34 to $5.24 (291%)

Bien Brands – Bien’s focus is the development, marketing and sale of cutting edge THC/CBD products that are “micro-dosed” to achieve consistent and reliable effects in every individual who consumes them. The CEO is founder and former CEO of Well Juicery, Canada’s largest cold pressed juice company with distribution in over 700 grocery and convenience stores. YTD return: ↑ 171% High Tide Ventures – High Tide is a privately- held, Alberta-based, downstream cannabis accessories corporation. It is among the most vertically-integrated players in the Canadian cannabis market, with several portfolio companies, including Famous Brandz, RGR Canada, and Canna Cabana. CIF is an investor in the seed round.

CannaIncome Fund is currently in advanced discussions with several cannabis companies operating in the edibles, consumables, and dispensaries sectors about potential investments in the founders or seed rounds.

Select past investments: Select current investments:

CiF

8

PRIVATE AND CONFIDENTIAL

Select Current Portfolio Investments

• The Green Organic Dutchman

has a funded capacity of 116,000 kg per year and is building 970,000 sq. ft. of cultivation facilities in Ontario and Quebec.

• In

addition, including the recently completed IPO and over- allotment option, the company has raised approximately $290 million dollars and has

• ver

5,000 shareholders.

• YTD return: ↑ 44%
• Being one of a limited number of

Licensed Dealers in Canada authorized to handle and conduct cannabinoid products, Scientus Pharma has the ability to wholesale, buy, process and sell cannabinoid derivatives, from and to Licensed Producers, as well as international markets.

• Scientus

is also a Licensed Producer (Cultivation) under the Access to Cannabis for Medical Purposes Regulations (ACMPR).

• YTD return: ↑ 33%
• Camarico

Group is a comprehensive private equity fund for the integrated investment

• f

medical and recreational marijuana interests.

• Camarico Land & Development
• Corp. is a speculative re-zoning

and phased development of 320 acres of lease land designated for the cultivation of marijuana in the County of Vulcan, Alberta, Canada.

• YTD return: ↑ 300%

CiF

9

PRIVATE AND CONFIDENTIAL

Diversified Fund Mandate / Allocations

Seed Broker Grower

Cultivator Trimmer

Distributor Maker

Baker Concentrate Maker

Packager

Graphic Designer Marketer Warehouse worker

Seller

Shop owner Receptionist Security Brand ambassador Delivery

Consumer Tester

~10% ~20% ~10% ~10% ~20% ~20%

Ancillary

Attorney Glass blower Realtor Regulator Researcher Consultant Software developer

~10%

CiF

10

PRIVATE AND CONFIDENTIAL Source: Deloitte

Industry Growth

The cannabis industry is still very much in the early-growth stage and has the capacity to rival alcohol and tobacco in terms of aggregate economic impact. We see many ways for the investor to gain leverage to the space; not least of which are vertically integrated producers (capturing the entire revenue stream) and ‘pick and shovel’ plays, supporting the cultivators.

BASE MARKET ANCILLARY MARKET POTENTIAL UPSIDE

$4.9-8.7B

Base Retail Market Value

Population of Adult Consumer Annual Consumption Volume in Grams per Consumer Price per Gram

• f Marijuana

$12.7- 22.6B

Potential upside is greater than 20B

Growers Infused Product Testing Labs Security

>$22.6B

Total Market Size Potential

Tourism Revenue Business Taxes License Fee Paraphermalla

CiF

11

PRIVATE AND CONFIDENTIAL Source: https://www.drugabuse.gov/publications/drugfacts/marijuana-medicine https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3063288 http://www.cbc.ca/news/health/marijuana-opioids-1.4602135

Medicinal Benefits

Notwithstanding the growing recreational market (alcohol sales - 13% in legalized states), current and developing cannabinoid research towards end-products is an area where CannaIncome Fund looks to invest and support the myriad of potential health beneficiaries:

• CNS Disorders

(Seizures/Epilepsy)

• Spinal Cord Injuries

(Multiple Sclerosis)

• Fibrous Dysplasia
• Alzheimer's
• Autism
• Parkinson’s Disease
• Crohn’s & Colitis
• Eating Disorders/Anorexia
• Pain reduction (avoid

Opioid misuse and addiction)

• HIV/AIDS
• Glaucoma
• PTSD
• Cancer/Terminal Illness
• Lupus
• Sleep Disorders/Migraines/

Concussions

CiF

12

PRIVATE AND CONFIDENTIAL

Key Industry Catalysts

• Unlike in the US, Canada enjoys provincial and federal

support – we see much less systemic risk north of the border, but key US states represent investment

• pportunities should the political backdrop improve.
• Investors have flooded to producers / cultivators in the

last two to three years, but margin compression remains a concern as non-cannabis farmers and / or foreign cultivators capture market share. We see this as a risk in the longer term for small cultivators, but represents consolidation potential in the short-medium term.

• As consumers become more comfortable with retail

products, we see expansion potential into cannabis- infused products (i.e. oils, lotions, pills etc.) Brand differentiation will be key, not unlike other consumables in other verticals. Retail / distribution business models will not likely see the same margin compression as cultivators.

Legalization in Canada has been slated for July 2018 but cultivators have been aggressively building facilities to meet expected

• demand. Similarly, investors have

also been positioning themselves ahead of the legislation.

CiF

13

PRIVATE AND CONFIDENTIAL

Industry Trends

Per the last page, smaller indoor facilities have been ubiquitous in Canada because of the higher quality and smaller geographic footprint, but as larger players move into the space the race to the bottom on costs will be won via greenhouses and outdoor facilities.

CiF

14

PRIVATE AND CONFIDENTIAL

Industry Trends (continued)

Vertical integration is preferred within our investment mandate: “Infused products and edibles are the fastest growing category in the cannabis industry, proving extremely popular with recreational consumers and medical patients alike. While flower still accounts for the majority of retail sales, concentrates and edibles continue to eat into flower’s share of the market with each passing year.”

• Marijuana Business Daily

CiF

15

PRIVATE AND CONFIDENTIAL

Industry Trends (continued)

The estimated demand for recreational cannabis in the US alone is estimated to reach $55 billion up

• ver 9x from 2017 sales.

CiF

16

PRIVATE AND CONFIDENTIAL

Industry Capital Requirements

• Traditional banks and/or US public markets have been reticent – this provides an opportunity for

Canadian investors to seek favorable terms.

• Public late-stage cultivators tend to trade at 10-20x multiple of private cultivators – the reward

for liquidity is significant in the industry.

CiF

17

PRIVATE AND CONFIDENTIAL

Company Size Type Innovative Industrial Properties 100.0 $ Equity Cann Group Limited 58.7 $ Equity Delta 9 Cannabis Inc. 20.0 $ Equity MTech Acuisition Corp 50.0 $ Equity/Fund GW Pharmaceuticals plc 317.4 $ Equity/IPO Surna Inc. 1.8 $ Equity Aphria Inc 100.0 $ Equity Maricann Group Inc 20.0 $ Equity Harvest One Cannabis Inc. 20.1 $ Convertible Note Baker Technologies 11.8 $ Equity Medicine Man Technologies Inc. 1.5 $ Equity ABcann Global Corporation 30.0 $ Convertible Note MPX Bioceutical Corporation 26.5 $ Equity MJardin Group (USD) 20.0 $ Equity/Convertible Fund M&A DOJA Cannabis Company Limited 17.3 $ Convertible Note Cronos Group Inc. 30.0 $ Equity Quadron Cannatech Corporation 5.0 $ Equity Emerald Health Therapeutics Inc 15.0 $ Equity Aurora Cannabis Inc 230.0 $ Convertible Note Liberty Health Services 15.0 $ Equity Hydropotheracy Corporation 149.5 $ Equity DOJA Cannabis Company Limited 12.5 $ Equity MedReleaf Corp 132.5 $ Equity Harvest One Cannabis Inc 40.3 $ Equity Maricann Group Inc 40.3 $ Equity Organigram Holdings Inc 115.0 $ Convertible Note 4Front Holdings LLC 6.0 $ Equity/Fund Canopy Rivers Corp 26.0 $ Equity/Fund Slang Worldwide 15.0 $ Equity 51st Parallel Inc. 15.0 $ Equity GrowGeneration Corp. 9.0 $ Equity Emblem Corp. 53.8 $ Equity/Convertibles Wheaton Income Corp 57.7 $ Warrants exercised Khiron Life Sciences Corp. 11.2 $ Equity Anandia Laboratories Inc. 13.4 $ Equity Canopy Growth Corporation 200.0 $ Equity Nuuvera Inc. 35.0 $ Equity Innovative Industrial Properties 26.0 $ Equity Aqualitas Inc. 8.8 $ Equity Aurora Cannabis Inc/Cannimed Therapeutics 1,100.0 $ Acquisition Newstrike Resources Ltd. 51.5 $ Equity Canndescent California 10.0 $ Equity Aphria Inc/ Nuuvera 826.0 $ Acquisition ABcann Global Corporation 74.8 $ Equity/Convertibles Maricann Group Inc 70.0 $ Equity Namaste Technologies Inc. 30.0 $ Equity Tilrary Ltd. 60.0 $ Equity Kush Bottles, Inc 6.0 $ Equity Braingrid Corporation 2.6 $ Equity Sundial Growers Inc. 56.0 $ Debt RavenQuest BioMed Inc. 26.3 $ Equity Sunniva Inc. 25.0 $ Equity Cannex Capital Group Inc. 48.0 $ Equity The Green Organic Dutchman Holdings Ltd. 100.0 $ Equity CannaRoyalty Corp. 15.0 $ Equity Green Tank Technologies 4.3 $ Equity Vangst 2.5 $ Equity Cronos Group Inc. 100.0 $ Equity Total 4,665.0 $

Funds Flow

• Significant capital flow into the vertical in the last 90

days: $4.7 billion supported primarily by institutional buying and retail diversification.

• Recent large acquisitions (~$5 billion in value) give a

leading indicator of the consolidation pending in the space.

CiF

18

PRIVATE AND CONFIDENTIAL

Sector Performance

2017 was a breakout year for the space (average up 50%), supplanting other verticals that have languished (i.e., Energy Index -14%); we see this trend continuing against a backdrop of a challenged energy macro/commodity environment.

• 40%
• 20%

0% 20% 40% 60% 80% 100% 120% 2017-04-02 2017-05-02 2017-06-02 2017-07-02 2017-08-02 2017-09-02 2017-10-02 2017-11-02 2017-12-02 2018-01-02 2018-02-02 2018-03-02

Canadian Sector Performance

HMMJ.TO XEG.TO XFN.TO XGD.TO XIC.TO XRE.TO XBM.TO

CiF

19

PRIVATE AND CONFIDENTIAL

Strong Private Deal Pipeline – Examples

Opportunity #1 Company A specializes in the production of natural molecules and their derivatives, as well as the development

• f new molecules that have the potential to

become a new generation of therapeutics.

• Unlike synthetic cannabinoids, which are made in a lab

and may not truly replicate the natural cannabinoids, scientists are able to produce the compounds at potentially a fraction of the cost using natural growth processes.

• The company is a Licensed Dealer under the Narcotic

Control Regulations of Health Canada.

• CIF sees, on average, between three to five private

cannabis companies per week.

Opportunity #2 Company B develops and supplies high quality cannabis-infused food products targeted at discriminating consumers. The company introduced its first two products in October 2017.

• Their products are now being carried in over 50 stores

in California; on average, sales have been increasing by 90% each month.

• The US retail market for cannabis products is expected

to reach $30 billion by 2021 and the Canadian retail market for cannabis products to reach $15 billion by 2022; edibles are expected to be 40-50% of total retail cannabis market.

CiF

PRIVATE AND CONFIDENTIAL

Contact Us

300 Roslyn Building 400 – 5th Avenue SW Calgary, Alberta T2P 0L6 Canada

Arthur H. Kwan, MBA, CFA, ICD.D President & CEO (403) 999-7808 ak@cannaincomefund.ca Michael A. Zuk VP, Investments (403) 604-7880 mz@cannaincomefund.ca

www.cannaincomefund.ca