We sat down with Cannatrek's Chief Financial Officer Brett Schwarz to learn more about the company's goals, as well as their ongoing equity campaign.
Cannatrek is a growing Australian cannabis company that is currently running an equity crowdfunding campaign that rewards medicinal patients. Following up on our previous interview with the company's CEO, Tommy Huppert, we recently sat down with Brett Schwarz, the CFO & Corporate Advisor of Cannatrek, to learn more about the company's trajectory.
Cannatrek is currently running an equity campaign with OnMarket, how is that going?
The equity campaign with OnMarket has been very successful to-date. We raised the minimum of $500k within the first 24 hours in the private deal room, and hit $1M in just over one week, on the day that the offer was opened to the public. As we speak, we have raised just over $2M with 8 days still to go to the close date of 15 December 2020, so we are confident we should raise the $2.5M, possibly even prior to the close date.
This has been from only 550 investors, so we have had a very positive average investment of just under $4K. Once we have raised more than $2M, this would make our equity crowdfunding campaign offer the largest in Australia in 2020, which is a testament to the quality of the offer, in what has not been a "normal" year.
Why did Cannatrek choose the equity crowdfunding route?
To-date, we have had very good success from raising capital via wholesale rounds from sophisticated s708 investors totalling just over $17M, including the most recent raise of $5.73M, where the minimum was $5M.
The key reason for doing an equity crowdfund with OnMarket was to be able to open up the opportunity to invest in Cannatrek for the first time ever to the growing inbound retail investor interest, to own a part of Cannatrek as one of the leaders in the Australian medicinal cannabis industry.
Not only have we achieved great brand awareness with the campaign, but even more specifically, we are opening this up to our growing patient base to own part of the company that they get their medicinal cannabis supplies from, and offering a Shareholders Rewards Program.
We want our patients/customers to share in our growth and success and to be part of our journey to create a better quality of life to many Australian's with this wonderful medicinal resource.
Why should investors/medical cannabis patients invest in Cannatrek?
We want our patients to have the opportunity to own a piece of Cannatrek who supplies their medicinal cannabis needs.
By owning part of the company, hopefully, the discounts they can receive over the next few years as part of the Shareholders Rewards Program and also from hopefully future capital gains in the share price, they will be able to recoup their initial investment and possibly even some of what they spend on medicinal cannabis products over the years.
We recently covered the digital platform that Cannatrek plans to release, featuring Cannatrek Plus, Access and One, can you elaborate on these platforms?
This has been a very exciting development for Cannatrek which we have been working on during 2020 to ensure we can execute on our "Seed to Patient" business model, and make sure we make it as easy as possible for patients, doctors, pharmacists, as well as logistics companies, the regulator (TGA) and us as suppliers, to have an efficient supply chain of data between all stakeholders.
CannatrekACCESS has recently been launched (https://access.cannatrek.com/) as an online booking service, providing users with easy access to doctors specialising in medicinal cannabis and an online referral service for telehealth consults and e-scripts.
CannatrekPLUS will be launched shortly and will be a fully-integrated IT platform that manages and processes approvals/e-scripts/payments/delivery and secures health data in one place securely.
CannatrekONE will be launched in the coming months as a patient monitoring app and analytic resource that provides valuable data for patients and doctors to collaborate, to record and evaluate the best healthcare journey.
Cannatrek, through a supply agreement with Nimbus Health, has just become a major supplier of cannabis to Germany, and more broadly to Europe. Can you tell me more about this recent deal, and Cannatrek's plans for global expansion?
Cannatrek has always considered that in order to be a successful operator, we can not only rely upon selling into the growing Australian market, but that Europe in particular, as well as Asia, are markets that we need to be selling into, as these are much larger.
Thankfully, Australian product is very highly regarded in these markets for quality ("brand Australia") and our mutual recognition agreement (MRA) with Europe helps us with the superhighway into Europe.
We are well progressed with getting GACP and EU GMP certification to open up numerous opportunities in the UK, Germany, Poland, Italy, the Czech Republic and other European countries that are approaching us for supply in large quantities well into the future, with opportunities in Asia including Malaysia, Thailand, Japan, Korea, and even Sri Lanka and India not far behind.
The deal with Nimbus is very exciting given Germany is the fastest growing country for medicinal cannabis in Europe, and the fact that Nimbus currently has a market share of roughly 25% of the German medicinal cannabis market. This is a multi-year supply agreement and partnership with Nimbus Health, with an initial 200kg in dried cannabis to be exported in early 2021 and the ability to increase to much larger commercial quantities to Germany and other European countries.
How are Cannatrek's product sales going?
2020 has been a great year for sales growth for Cannatrek. We keep on hitting record monthly sales each and every month, with sales in November 2020 totalling over $550k and the last twelve months $2.8M.
This has come from the sale of imported product to the Australian market, but we are now starting to pivot to product grown at our facility in Queensland which will cost much less than the imported product.
With the offtake supply agreements we are securing with both local and export partners, we expect to see sales growth continuing well into the future.
What are Cannatrek's goals for the next 5 years?
Cannatrek's goals are as follows; to be profitable and self-sufficient as soon as possible. To be a major GLOBAL supplier of quality medicinal product, including in Europe and Asia.
We aim to have our site in Shepparton, Victoria constructed over phases and underwritten by securing of bankable longer-term supply agreements with both local and overseas partner.
We are also on track to be well funded, which is a goal of ours.
And lastly, to be involved in clinical studies and trials in Australia and overseas to continue to generate data that doctors can rely upon, and that will also aid in product development and registration.
What does Cannatrek's pathway to profitability look like?
Based on the current sales growth, we're quietly confident that we will be breaking-even and even profitable at some stage in the next 6 months, which is nearly unheard of in Australia and by Canadian and North American grow operators.
Are equity campaigns going to be a regular method for Cannatrek to gain funding, or does the company intent to apply for different grants/ utilize debt to continue progressing until profitability?
The company will look at all funding avenues including future equity capital raises, but also non-dilutionary grants from state and federal government, traditional debt from banks and other debt funders, as well as convertible notes.
Capital raising is a very intensive process, so we look to ensure that we will be well funded so we can focus on growing the business here and abroad.
The company will look at doing an IPO on the ASX at some stage in the next 12 to 24 months, subject to commercial traction and market conditions, most likely to fund the next phase of the Shepparton facility build.
Any final comments?
We look forward to continuing to grow well into the future, and are excited to have investors and partners to get on board the Cannatrek journey.
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