July 3, 2018 MJ Shareholders
July 3rd, 2018
The legal cannabis market has seen the introduction of many innovative products and brands. Lighthouse Strategies is a portfolio management company that maintains investments within traditional businesses as well as vertically-integrated cannabis operations in addition to a brand development company that owns several unique brands, including the popular Brewbudz line of cannabis-infused coffee pods. The company recently announced their plans to introduce the world’s first non-alcoholic cannabis infused craft beer.
CFN Media recently spoke with Lighthouse Strategies CEO Michael Hayford at the Institutional Capital and Cannabis Conference in Los Angeles, where the team was serving up Two Roots Brewing Co’s (non-infused) versions of their IPA and Wheat style beers.
CFN Media: What is the history of Lighthouse Strategies?
Lighthouse was formed in 2016 to serve as a holding company by the founders of two state of Nevada licensed cannabis enterprises, which included established and respected Las Vegas professionals consisting of (2) attorneys, (3) medical doctors including a OB-GYN, a nephrologist, a neurologist, and a PhD and two entrepreneurs, who together founded Las Vegas Releaf and Silver State Wellness. Las Vegas Releaf opened in October 2015 and was the first dispensary to open in the City of Las Vegas, in October 2016 Silver State Wellness opened the largest dedicated Marijuana Infused Products operation in the State, and who today has a 67,000 sf cultivation center in development which is expected to open later this year, under the dba Cannabiniers.
Initially, Lighthouse negotiated the exclusive U.S. rights to (2) two patented cannabis delivery technologies, those being Brewbudz, a 100% compostable single serve beverage platform, and Bask Extended Wellness a topical technology from Ovation, formerly (“Skinvisible”) (OTCQB: SKVI) which is being transitioned from the pharmaceutical industry, to the cannabis industry with patented time release technology.
In parallel, the founder began to explore expanding operations into the California market, and in early 2017 we identified a number of acquisitions, which included one each of a City of San Diego licensed cultivation and production; and over the second half of 2017 management finalized both acquisitions, we well as the acquisition of a wholesale and retail tea company, secured a 41,000sf facility to support a vertically integrated cannabis enterprise “San Diego Releaf Research and Wellness Center”, and finally integrated a craft-brewery into the business plan, complete with a sea side craft beer tasting room to support the development and introduction of Two Roots Brewing Co. which may be the world’s first commercially available non-alcoholic cannabis infuse craft beer.
CFN: Which areas of the market are you in?
MH: Over the course of 2014 to today, Lighthouse has amassed 141,000sf of operations, supporting dispensary, cultivation and manufacturing as a hand’s on (touching the plant) cannabis operations, with an additional 10,000sf of traditional beverage and craft brewery operations across Nevada and California. In addition, we have established Cannabiniers as
our brand management company or ancillary cannabis enterprise (non-plant touching), and as a non-plant touching enterprise Cannabiniers we will develop the distribution channels required to establish ours brands nationally and internationally. Today including our CA and NV operations, we have a total of (8) states under agreement for the manufacturing and distribution of Cannabiniers Brands.
CFN: Tell us about Two Roots, the first non-alcoholic cannabis-infused craft beer?
MH: Well, the inception of Two Roots Brewing began more than two years ago, I can remember it now, it was January 2016 I was reading about Constellation Brands acquisition of Ballast Point Brewery, and at that moment I recalled that the CEO of Constellation Brands had been interviewed in November 2015 while attending the Las Vegas Cannabis Expo. It was at that moment that we began our exploration and research into how to produce a high quality Southern California Craft Beer that was non-alcoholic.
2016 represented a period of research, with 2017 representing a period of progress, in that after almost a year’s research we released our order for technology that would take almost a year to receive and implement, the order which represented the first system to enter the U.S. Once we placed the order we moved to determine where we would install and operate it, quickly we realized that if we were to work with large amounts of traditional beer, wine and or champagne we would need to integrate a brewery into our plans. This realization resulted in our alignment with an award-winning San Diego craft brewery.
To ensure that we began the process with the highest quality craft beer we recruited the head brewer from one of San Diego’s largest breweries, where he was responsible for a 100,000 bbls per year brewery; and together San Diego’s rich craft brewing industry came together to support the development of what some have hailed as “The Alcohol Killer”.
Two Roots Brewing Co. represents a truly normalizing cannabis platform, as a responsibly micro-infused beverage, 2.5mgs per 10oz serving (adult use), 10mgs – 25mgs per 10oz serving (medical) has been formulated to emulate the effects of alcohol, with rapid 5 – 10 min onset, and dissipation within 1.5 – 2 hours.
It is funny, has anyone really been judged for drinking a Heineken vs. Ballast Point? Of course not, name a bbq or gathering you attended where there wasn’t multiple beer brands or alcohol products present and being enjoyed without consideration or recourse for them being different. We believe that Two Roots as a micro-infused cannabis beer would be accepted just as another responsible adult beverage, one that can be enjoyed openly, accepted as an adult beverage; with no recourse for being different.
Even more powerful, can you imagine if you were suffering PTSD or you just had a session of chemo and radiation, or suffering from Parkinson’s; what would be better than a delicious craft beer as part of your treatment? You’re not going to be ostracized because you went and lit a joint, you’re not going to have to sneak it. Pour it into your glass, drink it from the can, cheers, and toast to somebody who’s fighting the good fight! What better way? If I was a vet and someone said, “Here’s a beer, toast to you” and it could help me with PTSD, wouldn’t that be a beautiful thing?
A study came out recently where two universities did a ten-year study on alcohol sales in medical cannabis markets and between 2006-2015 alcohol sales fell on average 15% in those markets. The beer industry of the United States is $108 billion annually. We see the beverage sector of the emerging cannabis industry being an underserved market, we believe that the change in consumer discretionary spending from alcohol to cannabis the tip of the iceberg and that the future of the cannabis industry will be responsibly produced, delicious beverages that integrate within our lives socially and medically.
This is why companies like Molson/Coors and Constellation Brands are making or planning moves into the cannabis industry, they understand they’re losing market share to cannabis and they have $108 billion in annual revenues at risk, 15% of that is a big number. And if the future looks like 27% in an adult-use state, and 15% in a medical state, there’s a lot of opportunity for the cannabis beverage market to grow.
CFN: Are you currently raising capital? Why should potential investors consider Lighthouse?
MH: In February we closed our series A round and we raised $19.3 million between founders and the A raise. The target was actually $20 million but we pulled up short because we recognized that with the launch of Two Roots, Just Society our Cold brewed coffee and tea line and Bask our Patented Pharmaceutical Topical line that our valuation would see a very real inflection and decided to close the round early.
We released our Series B raise on June 5th, at minimum of $25 million and maximum of $50 million. Those funds are going to be used to complete some of our California developments but also principally to launch national distribution of our ready-to-drink beverages and our patented topicals.
We’ve recently signed an LOI with a very large and established brewery that I can’t mention, but they’re very well-known and very identifiable, the raise will fund the acquisition of the 125,000BBL brewery, which is will support national distribution. Currently, we’ve locked up a total of eight states. We’re expect that once we introduce Two Roots in CA and NV we will quickly secure as many as 20 states before the end of 18’.
CFN: What are your projections for growth?
MH: In 2015, we generated $250,000 in sales, in ’16 we generated $3.3 million, in ’17 we generated a little over $11 million, and we’re forecasting in excess of $50 million for 2018 and the numbers continue to grow from there. In 2017 at $11 million, we had less than 30% of our operations active; the other 70% was or is in construction. So, if you imagine that we generated $11 million with 30%, the idea that we could reach $50 or $55 million between our brick-and-mortar operations coming online as well as launching our beverage and topicals is aggressive but realistic.
We have very aggressive goals beyond ’18 that will see the numbers increase significantly. In May this year we applied for a vertical license in an Eastern US State, supported by a 70,000sf facility. We’ve already been approached by multiple groups out of Canada with interest in bringing our products and brands to Canada once they’re legalized, this includes Mexico, and just from the New Orleans MJBiz NEXT show a group out of Australia has approached us with interest to bring the products to Australia. On top of this we expect significant growth from our traditional brands and our CBD developments.
CFN: What should potential investors know about Lighthouse Strategies?
MH: Great question, first I would want investor to know that Lighthouse was founded by a respected group of Doctors, Attorneys and Entrepreneurs who each had very personal drivers to enter the legal cannabis industry, and it is professionals that drive our culture and character as an organization.
Second, I would like investors to recognize and value the scale and diversity Lighthouse has established as a multi-state (direct operations in CA & NV, with an additional (6) states under distribution agreements), multi-disciplined (cult., manf., dispense, distribute), multi-market (cannabis, CBD Only, alcohol and traditional wholesale and retail); as at any given time markets can and do change and when they do, diversification creates stability under unstable market conditions.
Third, we would want investors to recognize and value the first mover innovations that Lighthouse has and will continue to deliver, whether that be committing to sustainable environmental practices and products that are “Good for the Earth”, or healthy, lifestyle integrated products that provide the highest possible efficacy, and are “Good for You.”
And that management is committed to building Lighthouse to be a national organization, with an outlook to take the company in late 2018 or early 2019.
Lastly, we would want investors to recognize how well positioned Lighthouse is as a diversified first mover, and as a cannabis company, a beverage company and a bio-pharmaceutical company. We would want investors to identify that the EBITDA multiple valuations for (18) of today’s leading public cannabis companies suggests 2020 and 2021 forecasted multiples of EBITDA maintain a mean of 11.32x and 9.09x and a median of 6.96x and 7.28x, respectively. In contrast, biotech trades at 21x, life science at 20x, healthcare at 17x and beverages at 18x. with the conclusion that a diversified valuation of Lighthouse nets an average mean and median of 17x for both 2020 and 2021.
About Rachelle Gordon
Rachelle Gordon is a Minneapolis-based writer. She was the president of her college’s chapter of Students for Sensible Drug Policy and worked in Amsterdam for a brief time. Find her online at www.rachellegordon.net.
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