The Cannabis Industry Dream Team
With a vision and a strategy to see it through, backed by a selection of the cannabis industry’s leading thinkers and doers, Chemistree Technology Inc. set out to become a major player in the cannabis space. Already, in its early stages, the company has proven successful, developing a replicable business model and demonstrating its expertise as the cannabis industry dream team.
Chemistree is a cannabis-driven publicly traded investment company backed by cannabis industry experts that is establishing its market presence through the acquisition and vertical integration of its strategically positioned assets, facilitated by its conservative approach and replicable business model. The company represents the coming together of the best and brightest in the cannabis industry, from cultivation to processing, supply and beyond – the who’s who of the sector. With visionaries like founding member and strategic advisor Dennis Hunter – who has built several successful cannabis brands such as Absolute Extracts, Care by Design and Satori Chocolates and was named one of the 100 most influential people in cannabis by High Times magazine two years running – the expertise, passion and experience contained within the company’s leadership runs deep.
The team includes Director and Chief Cannabis Officer Sheldon Aberman, who brings extensive experience designing and building grow facilities, and board member Nicholas Zitelli, otherwise known as Nico Escondido, Director and Chief Cannabis Officer of Trans High Corporation (THC), parent company of High Times, as well as founder and CEO of the Cannabis Genetics Institute (CGI).
Backing the industry experts is a robust capital markets and finance team that has an equal amount of experience and success in public markets. This includes Director and President Karl Kottmeier, Chief Financial Officer Doug Ford, Advisor Kirk Gamley, who serves as President and CEO of Contact Financial Corp, along with branding and digital marketing professional and founder of Chemistree, Jeremy Deichen.
Speaking with Karl Kottmeier, it is evident that Chemistree understands the market well, and as a result, knows what it takes to be successful at a time when others have fallen victim to failure. Together, they are like a cannabis industry dream team where the whole is stronger than the sum of its parts.
Mr. Kottmeier provided some insight into Chemistree’s strengths: “We raised the right amount of capital to put us in good financial shape just before the downturn of the market, which is great because we’ve got more than sufficient working capital for what we’re working on for the foreseeable future,” he said.
“Operationally, we have succeeded by virtue of our knowledge base, by virtue of our people,” he added. “We sort of capitalized on operating successes. We’re not overstretched. We didn’t spend too much money on things we really were not entirely convinced we could manage ourselves very well; we have a disciplined approach to investments.”
Pleased with the way the team has responded and proud of the replicable business model it has developed, Mr. Kottmeier noted that the focus has primarily been on the cultivation space, which is where the company hopes to expand its capacity and reach. Through acquisitions, the goal is to own and operate licensed cultivation, processing, retail and distribution facilities across a wider geography, expanding its already diverse portfolio where it makes sense to do so in existing markets like Washington State and California, and into states like New Jersey, Massachusetts and New York.
Chemistree currently owns assets in Washington State where its Sugarleaf brand is based and 9.55 acres of land that was purchased in the Desert Hot Springs Cannabis Cultivation Zone in California in July 2018.
While Chemistree is headquartered in Vancouver, British Columbia, much of its focus has been on the United States. Mr. Kottmeier explained that he and his business partners “shared the view that Canada, at the time, was overpriced and overserved, but the opportunity in the United States was exponentially larger and really, due to the restrictions legally in the States, it was very much a dynamic and growing environment.”
When the company acquired its Washington State assets, including the global branding and marketing rights for Sugarleaf in May 2018, it quickly demonstrated what Chemistree’s team could do when presented with the right opportunity.
Mr. Kottmeier explained, “That was a pre-existing brand that had failed, and the facility had really just ended on a downward trend. We came in as a partner to the Washington State licensee, recapitalized their efforts, put some money into various physical operating equipment, cleaned up the facility and supported them, and now have brought in a new licensee to run the facility.” Results are evident as since April, sales of Sugarleaf are up 30 percent, crop yields are up 36 percent and there is 100 percent increase in new client stores.
He credits Sheldon Aberman and Jeremy Deichen for providing key performance indicators and standard operating procedures and success metrics against which progress could be measured. This information was used to bring this facility to a high operating standard using procedural guidance and reporting mechanisms, an overhaul that can be replicated in other facilities.
“We’re pleased with what the guys at Sugarleaf have done. The brand is back, penetration into the Washington State market is fantastic and growing. We’re right at the point now where we’re looking at expanding the facility when most people are contracting or going out of business and our guys are selling more than they can purchase,” said Mr. Kottmeier.
Leveraging the relationships its team has built throughout their decades in the cannabis space, Chemistree has what Mr. Kottmeier referred to as “a huge trap line,” one which has been positive for the company and which will be leveraged to expand the reach of the Sugarleaf brand.
Chemistree is actively looking to expand the Sugarleaf brand into California where it has longstanding relationships across the state. The latter plan includes two 64,000 square foot greenhouses and a 40,000 square foot manufacturing and distribution facility expected to produce 50,000 pounds per year. Likewise, through its relationship with Nicholas Zitelli and Applied Cannabis Sciences (ACS) in New Jersey, which was established in April 2019, Chemistree is breaking into the East Coast market where a medical marijuana expansion bill was recently passed to better address demand in the state.
Chemistree purchased a ten percent stake in ACS with the option to increase that share upon licensing, an application which shows great promise for approval. “They are very well experienced in the state and their application is extremely strong. The evolution of the legislation in New Jersey provides an opportunity,” explained Mr. Kottmeier.
“We’ve been very patient, particularly in the last year, not understanding why people are paying multiples that you can never recoup and knowing that these multiples are going to contract, which they have done,” Mr. Kottmeier explained. Cannabis might be a relatively new industry, but it still operates on the same business principles as other sectors.
“You have to bring a fundamental business logic to things,” noted Mr. Kottmeier. “One being an eye for how the business is going to succeed in and of itself, and two, how is this going to make a good investment for a public company so that the value of that investment can be reflected in your market capitalization?”
While there is great opportunity, Mr. Kottmeier heeded warnings that the market requires caution right now. “We see it’s been on a very serious downturn, but I think there are some value opportunities being provided in the space. You’ve got companies whose market caps, like Chemistree, have been significantly compressed and to me, that is when you buy stocks.”
Looking ahead, it will be more of the same for Chemistree, making wise investments to expand its reach into new states where opportunity is ripe. With its growing proprietary and investment assets, it will gain greater liquidity in the market, what Mr. Kottmeier referred to as, “a one-two punch” for the company.
As he explained, “We’re not looking at states where in a few years it may go from medical to recreational. We’d like to be a little closer to where you can really see your opportunity or your market expand in order to take the first step.” From there, Chemistree can continue to take its brands and the industry forward.