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Canadian Stock Exchange Will Not

Ban U.S. Cannabis Investments

While Canada’s medical marijuana industry is leading the glob- power generation. In return, Aphria's ownership increased to 18.5% from
al movement, marijuana producers in the country have their 10%.
sights set on the United States market. Copperstate owns approximately 1.7 million square feet of greenhouses
Although the U.S. marijuana market is attractive, Canadian on its 40-acre property in Snowflake, Arizona. The company plans to start
firms levered to this market came under pressure after the TMX producing medical cannabis on approximately 348,000 square feet in the
Group said it may prevent companies from making investments in fall. Copperstate estimates that its expanded operations can produce
a country where cannabis is illegal at the federal level. approximately 18,000 kgs every year.
Now, these firms have reason to rejoice after the TMX Group Copperstate has received a special use permit for cannabis production
reported that there would not be a ban on the clearing of securi- in its entire facility and the Arizona Department of Health Services previ-
ties of issuers with marijuana-related activities in the U.S. ously approved Copperstate's initial operations located in 6,000 square
feet. They will need to approve the expanded cultivation prior to operat-
Aphria: The Greatest Beneficiary of this News? ing the expanded facility.
Canadian medical marijuana producer Aphria Inc. (APH.TO)
(APHQF) is probably the best example of an international firm BY MICHAEL BERGER Launches United States Expansion
looking to take advantage of the booming cannabis market in the Strategy and Enters Florida
United States. In April, Aphria announced the launch of its United States expansion
From Arizona to Colorado, from cultivation to technology, Aphria is levered to strategy through a lead investment in Liberty Health Sciences which will operate
some of the most attractive cannabis markets in North America. Aphria first invest- under Aphria USA.
ed in the United States through an intellectual property (IP) transfer agreement with Under the agreement, Aphria will invest $25 million into DFMMJ Investment
Arizona-based Copperstate Farms, LLC. The company purchased a 40-acre green- Ltd., a special purpose private company, to acquire the assets of Chestnut Hill Tree
house facility and is one of the largest medical cannabis facilities in Arizona. Farm. These assets will then be placed into a subsidiary of SecureCom Mobile Inc.,
(SCE.CN) (SCQBF) as part of a business combination.
Doubles Down on Its Arizona Investment The initial $25 million investment will acquire the assets of Chesnut Hill Tree
Earlier this year, Aphria’s subsidiary invested an additional $3 million that will Farm LLC, a licensed holder in Florida authorized to dispense low THC medical
help advance its capital expenditure program related to extractions, lighting and cannabis to patients. Once the transaction is complete, Aphria will own approxi-
mately 37.6% of the issued and outstanding common shares of Liberty.
As part of the transaction and upon completion of the business combination,
Aphria has agreed to license its brand to Liberty for a perpetual 3% royalty on all
cannabis and related product sales. In addition, Aphria is also licensing its intellec-
tual property of its greenhouse growing capabilities.
While Aphria’s initial investment relates to Florida, the goal of the expansion
strategy is to target states that have approved medical cannabis and entities that
meet specific investment criteria.
Outlook Is Bright
Although Aphria has been under considerable pressure, it is not unique to the
company and its peers have been facing a very similar situation. We are favorable
on the opportunity Aphria has to capitalize on the North American cannabis indus-
try and believe this is a stock that needs to be watched.
While we have concerns regarding Aphria’s greenhouse production method, the
Sun Belt tends to be much warmer and have much more sun than the rest of
Canada. Going forward, we would like to see the company expand its presence and
not be levered to one production facility.
That being said, we believe the valuation is attractive after the recent decline and
continue to see upside to current levels. Aphria is led by a management team that
continues to execute and we will keep an eye on how this continues going forward.
Michael Berger is the Founder/President of Technical 420 LLC and may be reached at
(305) 458-9982, or Michael.berger@technical420.com.

28 September 2017 southfloridahospitalnews.com South Florida Hospital News