Biome Grow Inc. (BIO) Earnings Call Transcript & Summary

We got to vote on the matter, so. It will carry, but we need to vote on the matter.

We had a couple of people dialing in, I think they're late to dial in, are we going to do this. On this one, James, can the -- one of the Board of Directors do it? Or is it -- I know they can on the next one.

We just got a second, we just got a second. So yes, we just now when you vote -- we just need to vote on the matter, which would carry, yes.

Okay, fair enough, so. Sorry. You have heard the motion as moved and seconded. Is there any discussion on the motion? All in favor? All opposed? [Voting]

Okay. I declare the motion carried. Next item of business will be the election of directors of the corporation. The nominees of management for election are stated on Pages 6 through 9 of the information circular sent to the shareholders. The Chair will entertain a motion nominating 3 directors for the elections of the -- from the floor for the ensuing year. So Jack, if you can start?

So I approve the motion.

And it will be -- just sorry to clarify its Mark Lievonen and Khurram Malik, that's me, and Steven Poirier, who have been Directors in the past as well. Are there any further nominations? There are no further nominations, I will entertain a motion that the nominations be closed.

I move that. Jack, can you second?

I second the motion.

Right. I declare the motion carried. I declare the motion of nomination closed. I would ask somebody move and second the resolution for the election of the 3 persons nominated Directors and Director need to cast a single ballot for such election. So Jack?

I approve that, is that a second or approve that motion?

Not the first.

I'll second that.

Great. The 3 persons nominated be and hereby elected Directors of the Corporation to hold office until the next AGM or until successors are elected or appointed. And the Chairman of the meeting be and he is authorized to cast single ballot such election. You've heard the motion as moved and seconded. Is there any discussion on the motion? All in favor? All opposed? [Voting]

I declare the motion carried and those nominated have been duly elected as directors of the corporation to hold office until the next meeting of shareholders or until their successors are elected or appointed, right. So this concludes the formal part of the meeting, which is now over, the Chair will now entertain a motion that the meeting now be terminated.

I approve that motion?

Thank you. Is there a second?

I second.

Fantastic. All in favor? All opposed? I declare the motion carried. It is now my pleasure to bring everyone up to speed on the -- what the corporation been up to. I know you have been fairly quiet, so I'm looking forward to sort of giving you -- take that I haven't had a chance to be able to directly on a one-to-one basis. So we had sold our primary operating business in the fall of last year to MYM Nutraceuticals. And the thinking there was just to give you some additional context, since it's been a bit of a while is we needed to clean up our books. We had a really good asset, which was our Highland Grow asset out of Nova Scotia. We just figured out that we had to monetize that to clean up our books and then have still quite a bit of monetary value left over by taking some cash and primarily stocks in another cannabis company, which is also a public traded called MYM Nutraceuticals. They had a facility in Quebec as well, so gave them some additional in-house productions that it's flying on as much third-party production as it were previously. So that went pretty well. The stock subsequently moved up from the low single digits -- sorry, low double digits to over $0.25 at its peak. It allowed us to partially clean up our books and then around April of this year, MYM decided -- announced that they're going to sell themselves to even a larger corporation, which is IMC (sic) [ IM ] Cannabis. As IMC (sic) [ IM ] Cannabis trades on the CSE as well as the NASDAQ in the U.S. So the way to sort of look that company is it's primarily the international concern, they've got some assets here in Canada. And -- but it's primarily Israel based as well as a European based where they've got a distribution hub in Germany. Prior to the MYM acquisition being announced, they had acquired Trichome, which was sort of a fund that invested and let money here in Canada and which also owned a pretty large cannabis production facility, which is over 100,000 square feet here in Ontario, that they had taken over through a variety of mechanisms. So what MYM did for them and it's primarily our asset that we've given to MYM, which is Highland Grow, allowed them to have distribution channels and brand name over a variety of different markets. So Highland is primarily focused on the superpremium flower market and also the slightly sub-premium flower market as well. And they rely -- at least when we were in charge, they rely on over 80% of the production coming from third-party producers. So this allows them to add another very large production asset in Canada and also international sort of operations involved, which I think were the bulk of their growth that's going to come, because at the end of the day, there's only so many people in Canada. Small market, there's a lot of supply, but it just gives them a basic product portfolio, which can be leveraged through the Highland Grow, distribution channels in that -- pretty much every province, which is hard to get. The way to sort of look at the cannabis sector encountered now is there are producers, which is a skill set. There's distribution houses and channels and brands, highly segmented, which is what as the sector matures, should happen instead of one person doing everything well or trying to do everything well, it's a bit of challenge. So this amalgamates a bunch of different really well-run assets, or really good distribution asset, a good internal production asset. And try to be a larger production asset and then you marry it up with international assets that actually want Canadian product. So supports exports as well. So another way of looking at it is this what Biome ultimately should have been, or what the original plan was, we kind of backload into it this way. We're, I believe, the largest independent shareholder of MYM, prior to the deal. The MYM IMC transaction closed on the ninth of this month, which was more or less on schedule. There was a few things that delayed it, primarily are due diligence to approve the deal with, I think, the main factor otherwise it would have closed sooner. And -- so now we hold shares in IMC (sic) [ IM ] Cannabis -- MYM prior. Based on the current stock price of IMC as of today, our shares are worth about $17 million. We do have hopes and aspirations that it will go up. It was trading at a higher value when the deal was announced, but then the whole sector went through a bit of a correction and then it's very seasonal as well, how these stocks generally perform. So if they -- does move up, we'll be in even a better position. The plan still is to sell some shares to clean up our books and then have the rest left over to do something attractive with. And I'll walk you through few scenarios, which I'm sure will be part of the Q&A section. Then I'm happy to dig into it deeper if anybody wants to or they call me directly after the meeting. So here are a couple of scenarios that we're sort of envisioning internally. Once the books are cleaned, we seek something else into the company, which is a clean shelf, sitting with a bunch of cash or a bunch of IMC shares. We've had conversation with some pretty interesting companies that can go public, or most of these have significant cash flows, looking for our public listing. So that's one option. In my opinion, at least at this juncture, probably the least likely the challenge with these ones are, they have a certain defined period when they want to go public. And because of the IMC transaction acquiring MYM and a few other things we can't control, we can't exactly tell them when we'll have a clean balance sheet to work with, or they can amalgamate into through an RTO process. So the more likely scenarios -- and by the way, all these scenarios will require shareholder votes, everyone will have a say in the matter. We'll be -- us pivoting out some amount of the IMC shares to shareholders, so they can then decide what they want to do with them, and they'll have shares in the international -- diverse platform, which is a mid-cap, it's much more liquid. And the market gives you higher multiples and valuation relative to cash flow for mid caps versus the micro cap, small cap that we have been living with and incubating. So it will be -- so either we dividend down all the share is not a clean shelf, and we have given out some percentage of the shares and have a clean shelf to put something else into it. Obviously, you'll get a piece of everything. Or we can -- the more nuanced one is create a couple of baby Biomes for some smaller opportunities and then still dividend out a good chunk of the shares, a half or 3 quarters or whatever it is. So somewhere from all the shares being dividend out to a very significant amount of shares being dividend out to shareholders, is the likely scenario. Now in terms of cleaning up our books, it really depends on what the IMC shares do. I mean, our goal here is to make sure we keep as many shares as possible while we're cleaning up our books, not dumping them all at once, we're killing the stock quote, but doing it in a judicious manner, which was what we're doing with the MYM shares previously there just less liquid paper, so it was challenging, so it took a while. So I mean, currently, I'd like to think we can get it done in less than 6 months. But -- that will likely be a -- require the IMC shares to cooperate. But so far, we feel pretty good about it and they should have additional information coming out. I think the [indiscernible] IMC is, if provided, they stay on track as a fairly quickly growing company both organically and through acquisitions, it's a bit of a roll-up play. And there's a certain market value attached to that. And they keep growing at the rate they're growing and to put a few more quarters out, we do anticipate providing bit of an overall market correction again to markets will recognize that. And that is what the hope is, in the interim, we will be very careful in how we get all the shares. And we hope that we're selling to the strength, but the goal is to clean up the books as efficiently and as quickly as possible. So that ends the -- my quick little [indiscernible] on this. I'll open it up to questions if anybody has any. If not, you can call me directly. My cellphone number is 416-875-8395, and I'm normally pretty available towards afternoons and towards the end of the day. Okay, gents I think that's the end of it.

Thank you, everyone.

Appreciate it.

Thank you, everyone. We'll have a more formal structure next time, hopefully with COVID [indiscernible]. I hope to see many of you in person.

Thank you.