Inner Spirit Holdings - Corporate Presentation
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CSE:ISH
Inner Spirit Holdings
Corporate Presentation
April 2019
LEGAL DISCLAIMER.
The information provided herein is not intended to provide financial, tax, legal or accounting advice. This Corporate Presentation and the contents herein do not constitute or form part of any advertisement, any offer to sell or any
solicitation of an offer to buy or subscribe for securities of Inner Spirit Holdings Ltd. (the “Company” of “Inner Spirit” or “ISH”) or represent an intention to induce any person to make an investment in the Company or to assist any person
in the making of an investment decision. This Corporate Presentation and the contents herein shall not form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever.
This Corporate Presentation includes statistical information that the Company has obtained from independent industry publications, government publications, market research reports and other published independent sources. Such
publications and reports generally state that the information contained therein has been obtained from sources believed to be reliable. Although the Company believes these publications and reports to be reliable, it has not independently
verified any of the data or other statistical information contained therein, nor has it ascertained or validated the underlying economic or other assumptions relied upon by these sources. The Company has no intention and undertakes no
obligation to update or revise any such information or data, whether as a result of new information, future events or otherwise, except as, and to the extent required by applicable securities laws. Readers should also be advised that the
watch, sunglasses and related accessories business of the Company is carried out through its wholly-owned subsidiary, WATCH IT! Consolidated Ltd., and any reference herein to “WATCH IT!” is a reference to such subsidiary.
FORWARD LOOKING INFORMATION
This Corporate Presentation contains “forward-looking statements” and “forward-looking information” (collectively, “forward-looking information”) within the meaning of applicable securities legislation. Forward-looking information
in this Corporate Presentation include, but are not limited to, statements or information with respect to: the Company’s intended strategy; the Company’s ability to execute its strategy and ensure success; the expected legalization of
recreational cannabis; market expectations; intended products, delivery systems and partnerships; and other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Actual
results, performance or achievement could differ materially from that expressed in, or implied by, any forward-looking information in this Corporate Presentation, and, accordingly, readers of this Corporate Presentation should not place
undue reliance on any such forward-looking information. Forward-looking information involves significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially
from those expressed or implied in any forward-looking statements and accordingly, should not be read as guarantees of future performance or results. Forward-looking information involves numerous risks and uncertainties including,
but not limited to, the ability of management to execute its business strategy, objectives and plans; that the Company will have sufficient capital to fund its business plans; general economic and business conditions; changes to laws,
regulations, rules, rulings, policies, procedures and other instruments applicable to the Company and its business; the risk of disruptions to the Company’s supply chain; risks associated with the Company’s reliance on key personnel;
and changing consumer sentiments. Forward-looking information contained in this Corporate Presentation is based on the Company’s current estimates, expectations and projections, which the Company believes are reasonable as of
the current date. The Company can give no assurance that these estimates, expectations and projections will prove to have been correct. Historical statements should not be taken as a representation that such trends will be replicated
in the future. No statement in this Corporate Presentation is intended to be nor may be construed as a profit forecast.
FUTURE-ORIENTED FINANCIAL INFORMATION
This Corporate Presentation also contains future-oriented financial information and financial outlook information (collectively, “FOFI”) including, but not limited to, prospective annual revenue, prospective net profit, prospective system
wide sales, and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this Corporate Presentation was made as of the
date of this Corporate Presentation and was provided for the purpose of providing information about management’s current expectations and plans relating to the future, and for certain illustrative purposes. The Company disclaims
any intention or obligation to update or revise any forward looking statements or FOFI contained in this Corporate Presentation, whether as a result of new information, future events or otherwise, unless required pursuant to applicable
securities law. Readers are cautioned that the forward-looking information and FOFI contained in this Corporate Presentation should not be used for purposes other than for which it is disclosed herein. The forward-looking statements
and FOFI contained in this Corporate Presentation are expressly qualified by this cautionary statement.
THIS CORPORATE PRESENTATION MAY NOT BE REPRODUCED, FURTHER DISTRIBUTED OR PUBLISHED IN WHOLE OR IN PART WITHOUT WRITTEN PERMISSION FROM THE COMPANY.
APRIL 2019 | 02
The start of something incredible.
Inner Spirit Holdings Ltd. is applying a successful franchise and retail model to the
recreational cannabis industry. With a group of over 100 franchise partners, corporate
retail cannabis locations, and a proprietary brand portfolio under various stages of
development, Inner Spirit Holdings is positioned to be an industry leader.
APRIL 2019 | 03
Investment Highlights
Leverage to Canadian legal recreational Low-cost and highly scalable franchising Strategic partnerships with premium
cannabis market. The Canadian adult use model to maximize ROI – more than 100 producers creates a fully integrated
market is currently worth up to $5.0B and corporate and franchise locations under business model
is expected to grow to $7.0B in FY22 1 development across Canada
Proprietary house brands to offer Highly experienced team with
consumers a market-leading retail significant expertise in the cannabis,
experience branding, consumer retail, real estate
and franchising industries
APRIL 2019 | 04
Meet the Team
Darren Bondar Chris Gulka Cecil Horwitz Jeremy Lee
President & CEO CFO Business Development Controller
∙ 20 years experience in retail ∙ CPA and CFA with > 26 years ∙ Extensive experience in retail ∙ Experience across financial
and franchise industries business experience sales since beginning of reporting, controlling and
WATCH IT! in 1999 finance functions
∙ Previously founded WATCH IT! ∙ President of Working Capital
in 1999 Corporate since 1999 ∙ Founder and clinical director of ∙ Previously at Big 4 accounting
Whole Family Health firms and in industry roles
∙ Bachelor of Arts from Western ∙ Founded Passport Energy Ltd.,
Ontario University and MBA and was the CFO of Rochester ∙ Cannabis advocate for both ∙ Chartered Accountant
from University of Alberta Energy Corp. health and recreational use designation in 2000
Robert Verbuck Christine Kitz Alisa Kuzmina Christine Smith
Legal & Capital Markets Operations Creative Director Marketing & Communication
∙ Corporate securities lawyer ∙ Oversees business systems and ∙ Overseas ISH’s commitment to ∙ 10 years progressive marketing &
with 20 years experience operations at ISH creative excellence sales experience with tier 1 global
companies
∙ Since 2014, actively involved in ∙ Previously held financial, strategic ∙ Significant experience working
advising businesses in the and human resources within the retail and franchise ∙ Significant experience in brand
cannabis industry positions within the retail sector industries execution allied to a track record of
excellence in delivering results
∙ Law degree from the University ∙ Degree in Communications
of Toronto with a Major in Information Design ∙ Bachelor of Management degree
with a major in Marketing from the
University of Lethbridge
APRIL 2019 | 05
Board of Directors
Darren Bondar Chris Gulka David Margolus Jeff Tung
President & CEO CFO Director Director
∙ 20 years experience in retail
and franchise industries
∙ CPA and CFA with > 26 years
business experience
∙ Former Managing Partner of
Witten LLP
∙ COO of Auxly Cannabis
∙ Formerly co-founder of CPS
∙ Previously founded WATCH IT!
in 1999
∙ President of Working Capital
Corporate since 1999
∙ Served on boards of Edmonton
Regional Airports Authority,
Management Partners
Liquor Stores N.A. Ltd., PowerComm
∙ MBA from the Richard Ivey
∙ Bachelor of Arts from Western
Ontario University and MBA
∙ Founded Passport Energy Ltd.,
and was the CFO of Rochester
Inc. and The XS Cargo Income Fund School of Business, Bachelor
of Computer Engineering from
from University of Alberta Energy Corp.
∙ Bachelor of Arts and Law from the
University of Alberta
the UBC
Larry Wosk Craig Steinberg
Director Director
∙ 15 years experience at the
Sauder School of Business
∙ Former partner at Miller
Thomson LLP
∙ 27 years in senior
management positions
∙ >10 years experience as a
private mortgage banker
and corporate counsel
President and CEO of companies
∙ across retail, real estate
development, hospitality
∙ Law Society of Alberta,
Canadian Bar Association and
and consulting Real Estate Council of Alberta
APRIL 2019 | 06
Corporate Highlights
March 16, 2017 June 16, 2017 January 8, 2018 January 29, 2018 February 6, 2018
ISH Formed CFA Membership Granted Auxly Retail Store Concept 100th Franchise and
$4.5M Equity
Inner Spirit Holdings Ltd. was Spiritleaf is first and only ISH announces cross-investment Spiritleaf unveils its concept ISH grants its 100th franchise and
founded in Calgary, AB. cannabis company granted and strategic alliance with retail store design. completes its $4.5 million private
entry into CFA. Auxly (TSXV:XLY), which closes placement equity financing.*
on February 6, 2018.
May 23, 2018 July 31, 2018 November, 2018 December 3, 2018 April 1, 2019
Newstrike Inner Spirit Holdings Ltd. Closes Franchise Store Openings Tilray Kingston Cannabis Retail Store
IPO Opens in Ontario Market
Newstrike Brands Ltd. ISH closes IPO on maximum ISH opens first 4 franchise ISH announces $4.5 million Spiritleaf opens its doors at 27
(TSXV:HIP) announces cross- gross proceeds of $3,750,000 locations in Brooks, Lethbridge, investment by Tilray, Inc. Princess Street in the historic
investment and strategic and issued 25,000,000 Units. Its St. Albert & Moosejaw. (NASDAQ: TLRY) and formation Smith Robinson building in
alliance with ISH. ISH common shares began trading of strategic partnership. Kingston, Ontario through
announces its support of the on August 1, 2018 on the CSE a branding and licensing
Gord Downie & Chanie Wenjack under the symbol “ISH”. Tilray increases investment to agreement and is one of the first
Fund (DWF) via a five-year $6 million in March 2019. brands to open in Ontario.
charitable commitment and the
establishment of a DWF Legacy
Room.
* Includes Auxly’s $350,000 equity investment on January 8, 2018, Auxly’s additional $150,000 equity investment on APRIL 2019 | 07
February 6, 2018, and Grenville’s $1M equity investment on January 18, 2018.
Canada’s New Growth Industry
$5.0B in FY18
Substantial Market X X =
1 $7.0B in FY22
Size
Population of Adult Annual Consumption Price per Gram Estimated Total Adult
Consumers Volume in Grams of Marijuana Use Market Size
per Consumer
∙ Current consumers are expected to buy nearly two-thirds of products from legal retailers
Shift Towards Legal ∙ Legalization expected to attract a more conservative experimenter – typically one who is aged 35-54, has a
2
Consumption university education, and has family or other responsibilities
∙ After legalization, current frequent cannabis consumers expect to buy products more often
∙ Current and likely consumers expect to purchase the majority of products at
Demand For Retail physical retail locations
∙
3
Experience Consumers to demand high quality products at a range of competitive price points
∙ Privacy and security when purchasing are key considerations for consumers
1 . G T R e s e a r c h , “ C a n a d i a n L e g a l R e c r e a t i o n a l C a n n a b i s M a r k e t ”, 2 0 1 8 A UAGPURSI T
L 2019
8 | 08
4
2 . D e l o i t t e , “A s o c i e t y i n t r a n s i t i o n , a n i n d u s t r y r e a d y t o b l o o m – 2 0 1 8 c a n n a b i s r e p o r t ”
The Inner Spirit Strategy
Build an iconic Canadian brand and Sell select brands together with our Utilize a low CAP X franchise and
a chain of recreational dispensaries proprietary licensed brands through streaming strategy to maximize ROI
across Canadian jurisdictions where our own retail network and other and scalability.
private distribution of cannabis is legal. distribution channels.
Franchising to maximize ROI
$25,000 upfront franchise fee
5% royalty on gross sales
1% of gross sales allocated to Spiritleaf’s advertising fund
APRIL 2019 | 09
Over 110 franchise agreements executed and 73 locations secured across Canada
Manitoba
Alberta ∙ Prequalified for the next Manitoba lottery
for cannabis retail licenses
∙ 4 Spiritleaf stores now open and operating in
Calgary, St. Albert, Brooks and Lethbridge.
∙ 46 additional sitres have been secured with
municipal permits and are in various stages
of development.
Ontario
British Columbia
∙ Opened Ontario office, and secured prime
∙ 6 Spiritleaf locations conditional on locations
municipal and provincial approvals ∙ Granted first 25 franchises and secured
leases for 16 locations
∙ Continuing due diligence on numerous
Saskatchewan additional franchise applications
∙ Kingston store opened on April 1, 2019.
∙ Moose Jaw store opened on
November 19, 2018
N O V EAMPBREI LR 22 00 11 98 || 11 01The Space
Open spaced opportunity to re-imagine the typical
retail environment of a dispensary.
The Retail Brand
Stores offer an impressive selection of products,
knowledgeable staff and a welcoming and comfortable
environment.
Franchise
First Cannabis company to receive membership in
the Canadian Franchise Association.
Best in Class
Best in class retail experience with over 100 franchise
partnerships with local entrepreneurs,
APRIL 2019 | 11Currently Anticipated Timeline
January 2019 July 2019 January 2020 July 2020
5 Franchise 2 Corporate 10 Corporate 10 Corporate
8 Franchise 27 Franchise 65 Franchise
N O V EAMPBREI R
L 2019
8 | 12
51FLOWERS / PRE-ROLLS / OILS & EXTRACTS
We Source, Create and Curate Quality
Cannabis Brands
The Spirit Joint Disposable Vaporizer
Anticipated to be one of the most discreet, disposable vaporizers
on the recreational cannabis market. 150 puffs of pure CO2
cannabis oil. No smell, no lighter, no charging, no prep, no hassle.
APRIL 2019 | 13APRIL 2019 | 14
Tilray announced its newly-formed partnership with Inner Spirit’s retail network
Key Terms
Tilray to subscribe for $4,500,000 of ISH shares, comprised of $2,250,000 in cash and $2,250,000 in Tilray common shares
On December 10, 2018 ISH and Tilray completed the cash tranche at price of $0.1985 per ISH share. The second tranche is to be
completed on June 20, 2019.
ISH and Tilray have entered into a collaboration agreement which includes, among other things:
(i) guidance for promoting High Park’s products, for each retail location of Spirit Leaf which, will represent 20% of the retail
space at each Spirit Leaf location; and
(ii) general terms for Tilray to support the charitable endeavours of ISH and Spirit Leaf.
On March 31, 2019, Tilray icreased their investment to $6,000,000 with a $1,500,000 short-term loan at 12% interest.
About Tilray and High Park
Tilray is a global pioneer in cannabis research, cultivation, processing and
distribution with operations in 12 countries spanning 5 continents
High Park is a wholly owned subsidiary of Tilray, Inc. (NASDAQ: TLRY), and is led
by a team with deep experience in cannabis and global consumer brands
APRIL 2019 | 15Strategic Partnership
Collaboration on retail initiatives including product acquisition and in-store marketing
and branding
Auxly currently holds ~14% of the outstanding ISH common shares
TSX.V: XLY
Retail distribution of Up Cannabis products, and the creation of Up Cannabis-branded
customer lounges in Spirit Leaf stores
Newstrike holds ~8% of the outstanding ISH common shares
HEXO Corp. Acquires Newstrike Brands in March 2019
TSX.V: HIP
ISH licensed to distribute and sell all High Times magazines in corporate & retails stores
ISH holds 11,000 shares of class A common stock of High Times Holding Corp.
APRIL 2019 | 16Where we’ve come from,
where we’re going.
Bringing 20 years of franchise, branding, retail, marketing & real
Experience comes estate experience to the recreational cannabis market
with time. Success Opportunity to participate in Canada’s emerging recreational
comes with passion. cannabis market
Platform to invest in a proven revenue-generating business model
APRIL 2019 | 17Trading commenced on August 1, 2018 (CSE:ISH)
Capital Structure (March 31, 2019)
Basic Shares Outstanding 193.4 million
Recent Share Price (March 31, 2019) $0.29
Top 5 shareholders own ~40%
Current Market Capitalization $56 million
Capital light business model
Warrants and Options Outstanding 46.8 million
Weighted Average Strike Price $0.26
APRIL 2019 | 28Headquarters Contact
#102, 5740 - 2nd Street SW invest@spiritleaf.ca
Calgary, AB. T2H 1Y6 403-930-9300
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