Sproutly Canada Inc. Technology-Powered Cannabis Products Company - Corporate Presentation October 2020
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Sproutly Canada Inc. Technology-Powered Cannabis Products Company (CSE: SPR) (OTCQB: SRUTF) (FSE: 38G) Corporate Presentation October 2020 www.sproutly.ca
Notice to Reader Certain information set forth in this presentation contains “forward-looking Although forward-looking statements contained in this presentation are based upon information”, including “future oriented financial information” and “financial outlook”, what management of Sproutly believes are reasonable assumptions, there can be no under applicable securities laws (collectively referred to herein as forward-looking assurance that forward-looking statements will prove to be accurate, as actual results statements). Except for statements of historical fact, information contained herein and future events could differ materially from those anticipated in such statements. constitutes forward-looking statements and includes, but is not limited to future M&A Sproutly undertakes no obligation to update forward-looking statements if activity and completion of Sproutly Canada, Inc.’s (“Sproutly”) projects that are circumstances or management’s estimates or opinions should change except as currently underway, in development or otherwise under consideration. Forward- required by applicable securities laws. The reader is cautioned not to place undue looking statements are provided to allow potential investors the opportunity to reliance on forward-looking statements. We seek safe harbor. understand management’s beliefs and opinions in respect of the future so that they may use such beliefs and opinions as one factor in evaluating an investment. This presentation and the material contained herein are confidential and are not to be disclosed to the public. This presentation is for information purposes only and may not The material assumptions upon which forward-looking statements in this presentation be reproduced or distributed to any other person or published, in whole or part, for are based include, among others, assumptions with respect to: the Company's ability any purpose whatsoever. This presentation does not constitute a general to access financing on favorable terms to continue with its expansion plans and advertisement or general solicitation or an offer to sell or a solicitation to buy any develop its business; the Company’s ability to obtain or maintain the required securities in any jurisdiction. Such an offer can only be made by prospectus or other regulatory approvals; the Company's ability to attract and retain customers; the authorized offering document. This presentation and materials or fact of their continuation of executive and operating management or the non-disruptive distribution or communication shall not form the basis of, or be relied on in connection replacement of them on competitive terms; and stable market and general economic with any contract, commitment or investment decision whatsoever in relation thereto. conditions. The Company makes no representation that reasonable business people in The information in this presentation is not intended in any way to qualify, modify or possession of the same information would reach the same conclusions. Although we supplement any prospectus, listing statement, information circular or other believe that the assumptions underlying forward-looking statements are reasonable, information disclosed under the corporate and securities legislation and stock they may prove to be incorrect and we cannot assure that actual results will be exchange policies of any jurisdiction relating to Sproutly, Inc. No securities commission consistent with such statements. Given these risks, uncertainties and assumptions, you or similar authority in Canada or any other jurisdiction has in any way passed upon the should not place undue reliance on these forward-looking statements or the adequacy or accuracy of the information contained in this presentation. information contained in such statements. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements, including the Company's requirement for additional funding to continue its expansion plans in Canada and the United States; the Company’s failure to obtain and/or maintain the required regulatory licenses for its businesses; the Company's failure to retain key personnel and hire additional personnel needed to develop its business; And the Company's business practice reputation being negatively affected by client or user complaints or negative publicity. NOT FOR DISTRIBUTION; NO OFFERING Sproutly (CSE:SPR) | 2
Technology company focused on discovering and commercializing innovative, science-based cannabis and hemp technologies. Exclusive licensee of Infusion Biosciences patent pending APP Technology in Canada, Europe, Australia, Israel & Jamaica. Developing a new paradigm in the cannabis industry Sproutly (CSE:SPR) | 3
Technology-Enabled Cannabis Products Company Truly Whole-Plant Naturally Water- Fully-Licensed Cannabis 2.0 2.0 Products Soluble Technology Production Facility Product Roll-Out _______ _______ _______ _______ Only technology able to Exclusive licensee of 16,600 sq.ft. facility with Asset-light, technology deliver truly strain-specific Infusion’s patent-pending APP cannabis cultivation, focused business model for effects available without Technology in key regions processing, and flower and increased scalability smoking 2.0 product sales licenses. Controllable onset of effects Sales license for Cannabis 2.0 enabling launch of Significant advantage in within 5 mins and offset of APP Technology installed and differentiated products delivering novel Cannabis 2.0 effects within 90 min operating commercially at providing greater margins and Products scale unit economics Sproutly (CSE:SPR) | 4
Developing a New Paradigm in the Cannabis Industry Traditional Extraction Methodology Proprietary APP Extraction Ability to deliver whole plant/strain effects Unable to deliver strain specific experience Effectively deliver whole plant/strain effects Full spectrum of phytochemicals? Limited to selected cannabinoid & terpene oils Not limited to selected cannabinoid & terpene oils Strain-specific effects availability Only available by smoking dried bud Available without smoking Ability for accurately controlled dosages None Available Solvent base Artificial chemical formulations All-natural solvents Delivery format Multiple delivery formats in artificial products Multiple delivery formats in all-natural products APP extraction technology provide enhanced end-product benefits as compared to traditional supercritical & other methodologies Sproutly (CSE:SPR) | 5
Focused Product Strategy Cannabis 1.0 Cannabis 2.0 Cannabis 2.0 Flower Product Edible Products Beverage Products _______ _______ _______ Leverage current output capacity of licensed Completed R&D APP runs and derivative product Formulation and product development complete facility, THR to produce high-quality cannabis manufacturing flower Completed analytical testing development for Developing sales launch plan Infuz2O Continue to develop sales channels and brand equity for ultimate launch of derivative products Sales license for Cannabis 2.0 Products Received In discussions with co-packing options Oct 2020 Sales license for Cannabis 2.0 Products Received Continued development of Q4 2020 Q1 2021 flower sales channels Commercial Launch Commercial Launch Sproutly is executing on a three-pronged approach to providing superior cannabis and derivative products to the Canadian market Sproutly (CSE:SPR) | 6
C$2.7 billion Cannabis 2.0 Market Opportunity in Canada Cannabis 2.0 Expected to Surpass Flower Sales Cannabis 2.0 – Increasing Profitability through Value Chain Colorado – Historical Canada – Projected Market Share Market Share 45% 45% 65% 71% Profit Margin 76% 84% 92% 55% $12.63 55% 35% 29% $6.49 Revenue / $ of Production $4.19 2014 2018 2019 2022 Cost Concentrates, Edibles, Flower Dried Flower Concentrates Edibles Beverages & Other & Beverage Cannabis derivatives products projected to surpass flower market share and grow to C$2.7bn annually as the Canadian legal market matures. This opens up the untapped market for higher-margin cannabis derivative products. Source: BDS Analytics, RBC, Grizzle, Deloitte Sproutly (CSE:SPR) | 7
Large and Growing Canadian Cannabis Market Opportunity Potential Canadian Cannabis Beverage Market: $1.4 – $3.0 bn “With regard to the potential size of the cannabis market in Canada, if you take an average, then it suggests that this market may be somewhere between $7 billion and $10 billion in market value, with beverages somewhere between 20% and 30%” Mark Hunter, President and CEO Potential Canadian cannabis beverage market estimated at up to $3.0 billion at maturity. This does not account for additional market growth created by naturally water-soluble based cannabis beverages and the recent vaping illnesses. Source: Molson-Coors Sproutly (CSE:SPR) | 8
Cannabis Strains Deliver a Wide Array of Unique Effects Grandaddy Purple Berry White Blue Dream Calming Balanced Energizing Each strain carries a unique profile that is otherwise lost during traditional extraction methods. APP’s water-soluble and BioNatural Oils retain the characteristics of the mother plant in its natural form Sproutly (CSE:SPR) | 9
Whole Plant Extraction - Only way to Capture Strain Experience ✓ ✓ ✓ Starting Biomass Profile Extracted Infuz2O Content Profile Extracted BNO Content Profile ✓ ✓ ✓ THC Cannabinoids ✓ ✓ ✓ THCV ✓ ✓ ✓ CBN ✓ ✓ ✓ CBD ✓ ✓ ✓ CBG ✓ ✓ ✓ a-Pinene ✓ ✓ ✓ 8-3-Carene ✓ ✓ ✓ Terpenes a-Terpine ✓ ✓ ✓ Terpineolene ✓ ✓ ✓ Isopulegol ✓ ✓ ✓ Guaiol ✓ ✓ ✓ A-Bisabolol ✓ ✓ ✓ Vitamin B1 Vitamins ✓ ✓ ✓ Vitamin B2 ✓ ✓ ✓ Vitamin B3 ✓ ✓ ✓ Vitamin B6 ✓ ✓ ✓ Calcium ✓ ✓ ✓ Phosphorus Minerals ✓ ✓ ✓ Sodium ✓ ✓ ✓ Potassium Magnesium ~30% Recovery Rate of ~60% Recovery Rate of Water-Soluble Cannabinoids Oil-Based Cannabinoids APP Technology retains the full spectrum of cannabinoids and phytochemicals found in the cannabis starting material Sproutly (CSE:SPR) | 10
Cannabis 2.0 Products: Industry Challenges Prolonged Offset/ 1 Unpredictable and Lengthy Onset 2 Lack of Single Form Dosage 3 Flavour and Formulation Challenges “We think onset time is going to be one of the critical “Many in the industry believe that the key to “Developing cannabis drinks has been a challenge in factors in the next stage of cannabis-infused mainstream acceptance of cannabis beverages is part because when the active ingredients are beverages “ creating a “session-able” beverage” concentrated it forms an oil, which is tough to mix with water into a beverage.” - New Frontier Data - Bloomberg “When you put CBD or THC into a beverage, it has a tendency to degrade over time... And so we've “The problem of onset time is one of the biggest figured it out, but we didn't figure it out for THC yet.” challenges facing makers of cannabis beverages” - Jorn Socquet, CEO of Fluent Beverage Company - Bloomberg (Tilray-AB InBev JV) Producers of hemp and cannabis beverages are constrained by incumbent approaches that do not meet consumer preferences today Source: Bloomberg, CIBC, New Frontier Data Sproutly (CSE:SPR) | 11
Infuz2O – Solving the Onset and Offset Challenge Infuz2O Characteristics Hemp and Cannabis Impact Over Time: Inhaled vs. Ingested ✓ Predictable – less than 5 mins to feel effects, less than 90 to wear off ✓ Experience – Superior effects comparable to smoking and vaping ✓ Desired Effects Safe Discrete Consumption – odorless and smokeless without adverse effects of smoking/vaping ✓ Formulation Versatility – numerous end-user applications including ‘functional’ beverages ✓ Precise Dosing – ability to deliver a measurable amount of cannabis ✓ Strain Specific – APP Extractions retains the full suite of cannabinoids and terpenes in the biomass, Highly Desired Quick Onset, Infuz20 Time in Hours Quick Offset Profile Technology delivers a truly natural water-soluble liquid with fast onset and offset, without the need for formulation techniques such as emulsification or encapsulation, that mimic those of inhaled hemp or cannabis Source: Aphria Inc, Management Estimates based on 100+ user feedback Sproutly (CSE:SPR) | 12
Infuz2O vs. Status Quo Formulations Sproutly Select Cannabis Beverages in the Canadian Market Competitor B Competitor A Infuz2O’s true water-solubility allows the solution to fully-dissolve in water, creating a clear finished product. ‘Water-compatible’ cannabis beverages currently in the market show obvious signs of clouding and residue. Sproutly (CSE:SPR) | 13
Premium Cannabis Brand: Caliber CALIBER: High Quality Cannabis Products for Connoisseurs Product and Brand Prototype Caliber is Sproutly’s flagship brand for its premium, high-quality cannabis products. 1st place 4.4 Stars – 2018 – Cannabis Leafly Brand leveraged across flower and Cannabis 2.0 Products Cup Premium Flower Edibles Beverage Topicals Caliber is positioned as premium, high-quality brand amongst experienced cannabis users known as “connoisseurs”. Sproutly (CSE:SPR) | 14
Diverse Set of Revenue Streams Sproutly Brands Sales Revenue Flower Recreational Internal Cannabis Beverages Sales Revenue Innovative THC Sproutly Brands Products Infuz2O Hemp-Derived Partner Brands Beverages Medicinal Tonics Proprietary APP Edibles Extraction Sales Revenue Sproutly Brands Health/Wellness BioNatural Oil (BNO) Partner Brands Sprays Purchased Cannabis Wholesale Revenue Wholesale BNO Softgels/Tinctures Sproutly (CSE:SPR) | 15
Sproutly Capitalization Cap Table & Balance Sheet Highlights Cap Table(1) Sproutly % F.D. Basic Shares Outstanding 267.7 62% Options(2) 20.8 5% Warrants(3) 15.6 4% Convertible Debenture Warrants 87.3 20% Broker Convertible Debenture Units 1.2 0% Broker Equity Warrant Units 1.6 0% Infusion Biosciences Loan 31.1 7% Infusion Biosciences Debenture 8.1 2% Fully Diluted Shares Outstanding 433.4 100% Balance Sheet(2) C$ Millions Cash 0.2 Other Current Assets 1.1 Current Liabilities 8.5 Non-current Liabilities 3.1 (1) As at September 28th, 2020 (2) As at May 31st, 2020 Sproutly (CSE:SPR) | 16
Appendix Sproutly (CSE:SPR) | 17
Why ‘Whole-Plant’ Extraction Matters For Cannabis Oil CO2 Ethanol APP Technology Examples Distillate/Crude Distillate/Crude BNO Minimally Processed No High Pressure Uses GRAS Food Grade Ingredients No Chemical Solvent All Natural Process Retains Natural Terpene Profile Retains Natural Vitamins Retains Natural Cannabinoid Profile Retains Beneficial Plant Oils Maintains Strain Specificity Minimal Heat Homogeneous Complete Spectrum No Alcohol & Chemicals Used Whole Plant/All Natural Products Similar Experience to Smoking APP is a safer, all-natural process that extracts everything from the plant in its natural form. Nothing is removed, nothing is re-engineered. Sproutly (CSE:SPR) | 18
Proprietary APP Technology “Naturally Water Soluble “ - Infusion Biosciences’ Proprietary APP Technology 2 Step “Soak and Strain” Method: Patent pending process that uses custom GRAS certified reagents formulated for different plant materials (no artificial chemicals, no harsh physical treatments) Step 1 Step 2 Soak in proprietary water Soak plant material strained from step 1 in reagents; strain/filter to recover proprietary natural oil reagents; strain/filter naturally water-soluble entourage to recover free oil entourage “Water Compatible” – In the Market Today Competitors APP yields two truly unique cannabis extract products, including the world’s only naturally water-soluble cannabis liquid without the use of artificial chemicals and harsh physical treatments. Sproutly (CSE:SPR) | 19
For Additional Information Please Contact Dr. Arup Sen Chief Executive Officer investors@sproutly.ca (CSE: SPR) (OTCQB: SRUTF) (FSE: 38G) www.sproutly.ca
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