CA - Organigram CEO Beena Goldenberg - Expanding Beyond Canada (Transcript)

Summary

• Organigram CEO Beena Goldenberg talks the changing (and challenging) Canadian cannabis market.
• Balance sheet strength and British American Tobacco's significant investment in OGI.
• Looking towards the US and beyond.
• The importance of regulators helping educate consumers.

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Transcript

Rena Sherbill: Okay, Beena. Welcome back to the Cannabis Investing Podcast. Thanks for coming back on the show.

Beena Goldenberg: Well, it's a pleasure to be here.

RS: Well, it's a pleasure to have you on. We were just saying last time you were talking supreme cannabis. Now, you're talking Organigram, a company that many investors probably have been following since near the beginning of their time of following the industry. I think where I wanted to start was maybe talk about that journey a little bit from moving from Supreme ( SPRWF ) into Organigram ( OGI ). What was the catalyst behind it? Was it – did you know your time at Supreme was going to be maybe on the shorter side going in? Kind of thoughts how you got here?

BG: Yeah, sure. So listen, when I joined Supreme, it was my first entry into the cannabis space, and it was made clear to me when I joined that they had, sort of a one-year runway in terms of cash. And so, you know, we did a lot of things when I first got there to cut costs, to streamline, so we would lengthen the time. But it was the right time to look at other partners because what was clear was our stock price was range bound by the fact we were only listed on the TSX, that the companies that were driving value had the – whether it was the NYSE or Nasdaq listing, that made a difference. And so when the opportunity came up to look at a transaction, it was best for our shareholders.

It was probably faster than I expected to make the change, but, you know, in hindsight, it was the best move we could have done for our shareholders because of where the cannabis market has trended since that time. Right. This was, you know, the market had a – it was quite a flush back in early 2021 right after the Democrats got into power, got, you know, in the U.S., got hold of the Senate. Like the – there was a lot of interest stock prices went up. It was a perfect time to take that exit. I think for me, once I went through that, I really found that I enjoyed the cannabis space.

It's a very exciting, very challenging market to be in, but it's a growing market. And so, I had the opportunity to really revisit – if I was going to stay in cannabis where did I want to go? And I was a little bit more selective perhaps, the second time around having been in the space, I understood it a lot more. And I was much looking for companies that had a cleaner balance sheet that had more runway, that have that U.S. listing and that have the potential to make it. You know, there was a lot of companies in my mind having my experience at Supreme that said, you know what, capital markets are tightening up. There's going to be less access capital.

The guys who have the cleanest balance sheets are the ones that are going to be able to, you know, make it past this, sort of dip in the valuations of the cannabis space. And, you know, Organigram had the great benefit of the investment from BAT, British American Tobacco ( BTI ), so a significant investment in March of 2021, which changed the complexity of Organigram's balance sheet. Gave us currently the cash to do the right kind of things for our own business today. So, over the last year, we invested a lot of money in our facilities. We expanded our facility in Moncton.

We've added automation into our facilities. We've added new environmental enhancements that added, you know, that drove our yields up. All those things are, you know, they're cash intensive, but they got us to the right kind of margins to become a low cost producer. They have to be in a market that is price compressed. So, I think, you know, we had the luxury to have the cash to do those investments, a lot done in the last year. We started to see the results of those investments through our gross margin improvements that we announced last quarter.

And so, really, for me, it was about finding the right cannabis company that I thought was in it for the long-term that has, you know, a couple of very key priorities for me. The understanding of the cannabis industry is, it starts with understanding the consumer, it then becomes the ability to innovate quickly because this is a market all about bringing new to the market, and so I think finding a company that is able to drive new product development, but also has the retail sales execution excellence that you could get the market, the product into market effectively. These are all things that I think Organigram has. So, it was really an easy decision for me to join

RS: Yeah. I think I mean, speaking to your points of having a nice balance sheet and having enough cash to do what you want to do. I think any analyst talking right now, even maybe the not so good ones are even saying this that you really have to focus on cash generation right now and that, you know, focus on growth is really not where companies are going to be surviving or certainly thriving at this point. And I would say many people point to Organigram as an example of a company that has a really strong balance sheet in that regard, really strong cash to debt profile.

So, I want to get into that and I want to pick it apart a little bit, but I also want to stay for a second on the broader picture of Canadian retail. You mentioned just now some points that you mentioned also, like, on the earnings call, and you know, points to celebrate in the Canadian market. And then we also see reasons to be concerned. We hear of companies like Canopy Growth getting out of, you know the Canadian retail space. How are you thinking? And how are you talking to investors about the retail picture? About the Canadian cannabis market?

BG: Yeah. So, I think the retail environment is changing just like the license producer environment. I mean, there was a lot of proliferation, a lot of independence out there, but what has been happening is, there's been consolidation happening there where, you know, you have some of the retailers that are becoming more regional or then even the regional ones coming more national, increasing their scope, their scale, that drives efficiencies for them. But at the same time, they want to deal with licensed producers that could supply them consistently that they could depend on, you know, there's a lot of independent start-up cannabis companies that have a great cultivar, but they sell it in and then they don't have anything to back it up.

It's a harder thing to supply to the broader market when you have bigger customers. So, I think this is happening. You've got a certain trend in the value segment. No different than in the cannabis space overall, you know, and probably not surprising given the inflationary market, the value retailers are becoming stronger. They're offering lower prices and they're attracting the consumers. So, that – they're getting more than their fair share of the volume as a result of that change. I think Canopy ( CGC ) getting out of the retail market, I know they were challenged by having some retailers that wouldn't carry their products because they saw them as a competitor because they were also in the retail space. And I saw that clearly when I was transitioning the Supreme business over to Canopy that business that we had at Supreme in certain retailers, we lost as we became part of Canopy, because those retailers wouldn't carry the product.

So, while being vertically integrated is exactly what happens in the U.S. and is quite lucrative in the U.S. It was an issue for Canopy to have to try to be in both places. So, I think the retail environment will continue to evolve. I think you will have a couple of key national players and some strong regional players. And there will be a role for independents, but it'll be a much smaller percentage. And, you know, I would say similar dynamics to what I believe will happen on the LP side where right now, again, the LP is highly fragmented, you know, the Top 5 LPs. The market share continues to decline for the Top 5 LPs as you have lots of, you know, new licenses being issued and more players coming into the marketplace. But over time, I think this is just a dynamic that is going to change over time as the market matures.

You can't have all these independent guys because it's too hard for the boards to maintain the number of SKUs they have in their portfolio, and they're not as, you know, dependent. And you need to have somebody who's always going to be at the table in your, you know, being able to deliver the customer service they want and be able to bring the consumer insights they want. And at some point, category management is going to come in to play at the board level something that I've seen in my whole career in the consumer packaged goods industry is going to come to cannabis. It's just, you know, we're still not there yet.

And so, that's okay. I, you know, the nice thing, like I said, about Organigram is, we're in it for the long-term. We have the balance sheet to get us past what might be a turbulent year this year while, you know, capital markets remain tight. And you know, I think we're going to keep playing in the marketplace and keep driving our plans to drive our growth, but I think there is going to be some players that don't make it.

RS: Would you say that there is too many licenses at this point?

BG: Oh, way too many. There's way too many licenses. And, you know, the government's issuing licenses and the sad part is, you've got, you know, people who are putting their life savings into these licenses and trying to get into the place and it it's a very crowded market. It's very, very crowded and it's tough and some will make it. And there will be a thriving independent craft producer market, you know, and liking Craft Beer. Craft license producers should represent, I don't know, 15%, 20% of the market, the same [way they are] [ph] craft beers and the same way the independent retailers should make it, but there will be a smaller percentage of the total market. Because that's just how industries consolidation drives industry changes.

RS: Yeah. I'm curious your thoughts, how you articulate your thoughts around the investment from BAT and how you see the industry growing, and I'm curious what the relationship there is between tobacco and cannabis, and you know, how they think about it, how you think about the partnership, interested to hear your thoughts there?

BG: Yeah. So, a couple of things. Listen, I'm not a spokesperson for British American Tobacco, so I'll talk on, you know, from Organigram standpoint, we are very excited to have a strategic investor because what we have is an investment behind our product development collaboration. And it's a, you know, over a $60 million investment that that the two of our companies combined. And we created a center of excellence in Moncton to really do longer-term research on cannabis and on innovation. And I think that's really important in this space. I mean, you could one-off with happening in the illicit market all the time, but at some point, we want to get to a place where you can make claims in the marketplace that help consumers understand what this product is going to deliver to them or that?

And the regulations say, we don't have enough research to make those claims. Well, we're doing the research. We're undertaking the clinical trials. We're doing some innovation work on better bioavailability, things like faster onset, you know, predictable offset. There's a whole lot of work that's going on at our center of excellence. And this is important for the long. Again, we're not playing the short-term game of what's, you know, what's the price I could sell my product for in the market today. It's the long-term game. And I think that, kind of investment that BAT provided and that we could share in it is helping us for that long-term. I think, you know, in the case of BAT, they, you know, there is an exciting segment in cannabis that's become being legal.

Now, they're, you know, in the UK and so far in the UK, there's no legalization. And so, they have to be very careful as they look around the world and they partnered or they not partnered, they invested in Organigram as a way to get into the market and understand the space while participating with a company in a legal market. So, that's why it was a great arrangement. And we have a lot of – we talk to them all the time. They have great insight into regulations around the world. They obviously are, you know, have that scope on their tobacco sites. So, they have great government relations, great insight into consumer research. All that is beneficial. That helps. But to me, the biggest benefit of the strategic investment is the product development collaboration that we have with them.

RS: Can you talk a little bit about that? Like, the people that you have, you know, I'm trying to say the word like less and I find that I'm not really succeeding. Can you talk a little bit about the people that you have working on that discovery and the research there?

BG: You know what, listen, we had some [indiscernible] from British American Tobacco that have come over to Moncton that are working in the labs with our team that that were some came from the Organigram and some were recruited. We brought in, you know, scientists and product developers from other markets around the world. We brought them into Moncton. Really, the design of the work is about ultimately what we're hoping to accomplish, which, you know, in terms of the study and the research around as I said, the bioavailability about how to predict onset and offset.

There's work that's happening and clinical studies that are being put in place and so that we could get the research that we could submit to the government over time. So, that to me is the exciting part. So yes, I mean, BAT is involved by providing us some other scientists, and it's been a great collaboration. And we're working well together. We're leveraging some of the things that that work is developing today.

We're leveraging it in some of the new products we're launching right into the market as Organigram. Right? We have access to the IP for certainly, for Canada and really, we share the IP for anywhere else in the world. So, right now, as you know, Organigram is really only selling predominantly in Canada. We do have some export business to Israel and to Australia, but it's, you know, the opportunity to take that IP and introduce it in some of our innovation coming up in the next couple of years, we think it will be a leader in this space.

RS: I'm curious from the personal side, do you see, and you don't necessarily have to have an answer to this, but do you see, I guess, a rejuvenation in people's approach, for instance the people coming from BAT working on researching cannabis? Is there an enthusiasm around researching cannabis as opposed to working on tobacco?

BG: Listen, again, I'll tell you, I do think that there is an interest for British American Tobacco to expand beyond tobacco, and I think cannabis is a great opportunity. I'm not going to speak on their behalf. Maybe they have other segments they're looking at as well, but certainly there is excitement in this new growing space and interest in understanding the legalization, you know, timelines in different markets and what the regulations say and how to operate within those regulations. So, there is energy being put there beyond what they're doing with us. And I think that's good. You know, I think that we're excited because we're part of an ecosystem that British American Tobacco is building in this space and it will be – and will be a key player in that space for them.

RS: Also, in terms of the research, would you say that you have a lot of faith in the beverage side of the market in terms of bioavailability and quick onset? That's also some of the research being done there?

BG: Yes. So listen, I think today the biggest problem with the beverage segment and the reason why it remains such a small segment of the overall cannabis market is because the products don't taste good. And the reality is in food, you know, foremost, you know, the product has to taste goods. So, food or beverages, you got to get to the taste profile. So, there's work that needs to be done there, but I think also you're at the point where the predictive onset is slower. Same issue we have with edibles where, you know, people are saying, I take a gummy and then I don't feel the effects for, you know, an hour. By that point, they're taking the second one, and that's not necessarily good, right?

And so, the ability to get more predictive, you know, how much you should take when and to get what effect? Those are things that are important. I think it's going to be important with gummies, and it's important with beverages. But for me, the beverages, it's about getting to a product that delivers on its promise. And we're just not there yet. Sorry, I'll also say that, I think there's something about consumption lounges. That we're just, you know, I think that is an important aspect that is currently not allowed, but I think that having people try product in a place where they’re – they could become educated, that it's not as overwhelming, that they could experience and know what they like, so they know what to go out and buy.

This is, we're in a really difficult market where the experienced user has access to more product than they're using more. And the inexperienced user are still challenged in this market because they don't understand it. They can't, you know, they're not necessarily comfortable walking into dispensaries right now and asking a lot of questions. I think that whole area of finding a way to help consumers understand space, the education behind space in those kind of environments will make a huge difference to this sector.

RS: Do you see consumption lounges coming to Canada anytime soon?

BG: I don't see it anytime soon, but I think that it's on, you know, it's something that we need to be talking about. I think where we are today in terms of talking to the government around the Cannabis Act Review. And as you know, it's late. It was supposed to start in 2021, it only because of COVID started a year later in 2022, and they still have a, you know, they said it'll take 18 months to come back on, you know, the act itself. I think we've put forward a couple of very fundamental asks in that review. And one of them is about finding way to better communicate and educate consumers. And there's communication required distinguished between the illicit market and the legal market. That is today very difficult for a consumer that's not in the space to understand.

They don't understand, they can walk into a store that isn't a legal store and buy product, which they believe is legal, and that they're buying from the illicit market. I mean it's, consumers don't understand the distinction, they don't understand that that the legal stores have the blacked out or the opaque windows that you can't see in. You know, you go downtown Toronto, you could get into a store that is, you know, that is an illicit store that's selling, that's open 24/7 that's a beautiful layout store and why would they know the difference? Or they go online and they buy product online and the sites, the illicit product sites are beautiful sites and they buy product and they don't know.

So, this way of communicating to consumers about the distinction between the two and how could they tell and why it's safer product because, you know, we've had it tested, and, you know, it doesn't have to pesticides, it doesn't have the micro when because we're regulated to deliver against all these things. Really, the government’s goal was to have a safe supply out there and better educating consumers about that distinction is important. And especially we see it in the edibles segment where, you know, there are articles that come out all the time about, you know, increased childhood poisoning because of edibles. And whenever they do the report, they show packages that look like Skittles or, you know, and that – we know that's coming from the illicit market because we're not allowed to do that.

And all of our packaging has got child resistant closures and had no colorful packaging. And there's all these requirements and yet, you know, what gets, you know, the story ends up being all about legalized cannabis and look at what happened. Instead of helping people understand, hey, if you bought it and it looks like this, it's not legal. And you shouldn't be buying it. You should be buying product that has child resistant packaging or whatever. Like, there's an education piece and we've been talking to the government about the amount of money they're making both from excise taxes and regulatory fees and say, you got to use those funds to start educating consumers.

Educating on a lot of these things and removing some of the restrictions you've put, you know, so we have a 10 milligram cap on edibles because they're worried about people like taking too much or children getting access to it. And yet, they don't explain the difference between, you know, illicit product that doesn't have any of those precautions. So, we've said to them, look, you know, you're sending people to the illicit market by putting that cap of 10 milligram on edibles, and yet you're not educating. So, this is part of the discussion. There's a lot of things we're talking to the government about through this act.

Obviously, the excise regime and regulatory fees and like, there's many things, but I believe communication with consumers and helping them understand when they go into a store, even a legal store, what does one offer versus the other, and why they should pick one over the other. Right now, it's truly at the discretion of the budtender, and you know, consumers don't have that data to rely on to be able to make an informed choice. Lots of opportunity to keep. You know, this is what keeps me excited about being in this cannabis space because it's still so nascent. There's still so much that we could do to help build it. And I do think the market will grow, and there'll be lots more opportunity.

RS: No, it's such a great point and such an important point. And I'm glad that to hear that you're articulating that to the government. I mean, we're seeing it in New York also that consumers have no idea what they're in. And I think that most people are very shocked to know that there's only actually two legal storefronts, and that's just very recent. So, you know, I think to your point, it's very true. Would you say that the government speaking to your point of being a nascent industry, would you say that the government is simply, I mean, you could say this more to Canada because they were – they're older in in terms of rolling it out. Feel like New York maybe should have known a little bit better in some ways. Do you think it's governments learning their lesson? What do you think is the, I guess, hurdle to better regulations?

BG: Yeah, I think the government, the challenge we have is that they don't really want to increase the consumption of cannabis. Right? Even in in Canada…

RS: we'll stick with opioids, thank you very much.

BG: I know, I know. I don't really understand it, but that is their overall objective. I've sat at roundtables with Health Canada, with industry and scientific development areas. And they don't want to increase it. What they want is to make sure that what's available is a safe quality product that's regulated. And so, when we get into conversations about consumer education, there's a fine line. They don't want to talk about advertising at all or promotions at all because that might promote more use. But they do appreciate the fact that helping people understand the differences between the illicit and legal market is important.

So, we're finding little places where we align on what the need is and hoping to drive that forward, but I agree with you. It's, you know, this is an interesting challenge, and you're right. Maybe New York should have understood a little bit more what Canada is dealing with. I think change is slow. I'd love to see regulations change faster, but it's going to happen. It has to happen. And, you know, there's more and more interest in listening to us. I've been down in Ottawa for several meetings. We have – what I think is a really good industry voice with the Cannabis Council of Canada, where most of the major licensed producers are part of it. And we're going in with a one-voice message on the changes we need to see.

The challenge is the expert panel that was put in place of the review are all, like, doctors. And, you know, they're coming from a different point of view. There's no industry representative on this Cannabis Act Review. They're doctors who would prefer no use, you know, or, you know, recognize there might be a use in certain circumstances, but that's it. And so, that's the balance. Important to drive, you know, healthy options within the space. Look, alcohol is out there. There's lots of stories about [what alcohol] [ph] – to your point about opioids, you know, we have different set of rules. This one is just struggling to get a fair shake.

Cannabis in terms of what it could do for people. And there's some great results, like, when you talk about support for you know, cancer patients or patients with MS and what or PTSD and what these products could offer on the, you know, medical side of the equation. And I say medical because, you know, in Canada, people are just self-medicating and going in and learning about the product because there's so little we could tell them about it. But this is going to change, right? It's just, again, for me, it's waiting it out. It's watching lots of incremental little steps till we finally get to a place where it's going to make a difference.

RS: Yeah. Do you feel that when you – I mean, I know that this is more an American, you know, occurrence, what happened with the FDA in terms of coming out with CBD that it's not categorized as a dietary supplement. Does that affect your conversations? Does that impinged, do you think on what Canadian regulators are thinking about?

BG: I think it will certainly influence what the Canadian regulators are thinking about it. I know that in the past, because we've often looked at CBD players in the U.S. as a way to enter the U.S., obviously, we are interested in entering the U.S. market, especially now that we've got our Canadian foundation strong enough, but we have made a decision that the CBD market is not an attractive way to enter. Many of our competitors have done that in the past, but it's highly fragmented and you've got a whole lot of, you know, the Delta-8 going on there and, you know, in the end, it needs FDA regulation to be able to get into the big, you know, opportunities where you could get onto the store shelves of a Walmart or a Target and get into the supplements or dietary supplement space.

And the latest, kind of decision by the FDA that they can't find a path and they went back to Congress means it's just delayed further figuring this out. So, CBD is less interesting path for us because until it's regulated, I don't really see it getting to a place it needs to go. So, you know, we turn our attention to the U.S. market and there might be other ways to get in that are still compliant with our listings and we will look at that. But in terms of your question, does the impact of the FDA statement impact Canada? I'm sure it does. I'm sure we've had Cannabis Health Products.

So, CHP has been on the table for a couple of years. And we were all very excited about it. Myself included because this is, if you recall, I spent 15 years in the natural and organic space And this is where I saw the great opportunity to get some of the CBD products into pharmacies, into natural health stores. And I couldn't wait till I got decoupled from THC in Canada so that we could access consumers that won't shop in the cannabis retail stores. And I think it's a huge opportunity. And yet, I think this ruling in the U.S. will set us back a little bit in terms of the CHP regulation change. I still believe it's – it will come in time. It's the right thing. And, you know, there's huge opportunity when it gets there, but it will be slowed down based on this slightest [ruling] [ph] for sure.

RS: Yeah. Definitely not an inspiring decision. Would you say that when you're looking at U.S. optionality, do you feel like you have a sense of where you're going at this point or is it still something that you're deciding on?

BG: Listen, I think the answer is, we would like to have some kind of U.S. optionality. The challenge has been how to do it in compliant way, not only to deal with our Nasdaq listing, on our TSX listing, but also because VAT coming from the UK has very clear requirements that we are obviously compliant in those markets. They, you know, they have the proceeds of Prime Act in the UK that they have to respond to.

So, even as an investor in Organigram. They are interested in ensuring, you know, that we're on-side with as we are, but it's just another layer of importance for us to make sure that we are compliant. So, all that to be said, how do you enter the U.S. market? We're watching what Canopy has done. You know, it'll take another year to see where Canopy USA gets to and whether it gets through the NASDAQ or not, and we're going to watch that because it's obviously a different approach.

You know, a lot of our competitors have done have taken out options in U.S. companies and in hindsight probably paid too much for the option given where the market has evolved. And we specifically didn't go down that route because the fear of how long will it take till legalization occurs and what could happen in the market until then. So, the auction was not something we'd be interested in doing, but there are companies investing in U.S. cannabis companies, you know, convertible loans or just investments that are an opportunity in the short-term. So, I wouldn't rule out those kind of things.

We'll continue to look at the right – at the right place. I don't think a year ago we were ready for this move because we still had some things we had to do to establish a strong foundation in Canada, but we're ready and we're looking at the U.S., but to be honest, we're looking at other markets, right? Germany is a very interesting market. And, you know, we saw draft regulations that came out the end of last calendar year that said, they're going to be requiring domestic production for their adult rec business legalization. And you know, right now, they don't – there isn't a lot of domestic cultivation in Germany, not enough to meet the adult rec requirement.

And we believe we come in with an expertise on how to cultivate, how to be a low cost producer. We've learned, maybe made mistakes along the way learned from our mistakes. I think we could leverage that knowledge into some ability to leverage that as the German market starts looking at cultivation. So, it's an interesting market for us. And, you know, until such time, no one – it's still a long ways away before it becomes legal, but, you know, building a cultivation infrastructure takes a long time.

So that's, kind of interesting to look at that market in more detail. And, you know, we continue to build our international business through exports. We just expanded our facility in Moncton, so our annual flower production is 85,000 kilos of product. We needed that expansion because we were a bit hand to mouth in the Canadian marketplace. Now, we're able to supply all of our customers in Canada. We're able to go out and expand our international partnerships, and you know, have great quality product to get us into those markets.

RS: Would a deal or some kind of partnership or deal in Germany, would that be mutually exclusive to anything happening in the States or do you think about it as dependent on what it is?

BG: No, I think they are two different things. I think, you know, the rules right now, we're in a situation where the regulations are different than every jurisdiction. And in the U.S., it's even more complicated because their rules are different in every state. So, until it gets federally legalized, so it's complicated. We're looking at these opportunities and understanding the regulations and understanding where we could fit and how we build upon our knowledge base, right.

I think we have cultivation knowledge base. We have a great gummy facility in Winnipeg, we have a great hash facility in Quebec. So, we have knowledge on driving both cost down, but innovation in those categories. So that's, you know, that that helps us explore new opportunities. But I think, you know, for us now, it's about where do we go and how do we build outside of Canada, and leverage the expertise we have from Canada and other markets.

RS: I was also interested in the deal that you have with InterCure ( INCR ), Canndoc in Israel. Mostly because it's a company that we've talked a lot about as being one of the strongest players out of Israel. Were there any other companies that you were thinking about doing a deal with or anything that you want to say about that?

BG: Yeah. Listen, we have had a long-term relationship with InterCure, with Canndoc. We've been, you know, we had a previous agreement that we, you know, we used up the agreement in terms of the volume that they would import from our operations. And we sat down and started to talk to them about a new arrangement that we finally got out completed back in November of this past year. And it was really, you know, we changed to 10,000 kilos of product, to a maximum of 20,000 kilos of product over the course of the next three years. That compares to the previous agreement that was like 3,000 kilos of product.

So, just shows how that the business has grown together, how the Israeli market has evolved, how Canndoc has built their business in that market and how we're working together on making sure they have the right cultivars that are selling in their market. Obviously, there is a lot of domestic production in Israel. So, what makes our product work with Canndoc is because we're indoor grown and the product is labeled as such on the packaging, you know, Canadian indoor grown, sort of seen as premium offering in the space. And so, we're proud of that relationship, and continue to build with Canndoc in Israel. But in terms of, you know, growing new customers, I mean, we've added customers in Australia.

We had a long-term relationship with Cannatrek, but have added [med can] [ph] to our portfolio. We're talking to other customers. We're also talking to customers in Germany. Right now, you could supply into Germany in the medical market. It's just the legal adult use market will require domestic production based on draft regulations. But until then, you know, now that we have the [flower] [ph] and the quality and the capacity, we'll continue to look at where we could expand our reach very excited in the opportunities to bring in some of our brands into some of those markets.

So, it's something we're exploring as well. In Canada, we have one of the largest retail brands with our shred brand. It started as just the Milled Flower brand, but we've been able to expand the brand beyond. We have gummies under that brand, we have vapes under that brand. We continue to build out that portfolio. We are just launching a hash product under the Shred brand. So, that brand is over a $150 million in retail sales in Canada. It has strength and we believe there's opportunity to license that brand in other markets as well, based on our knowledge of the consumer, based on how we're performing in the Canadian marketplace.

RS: Alright. So, speaking about the financials for a little bit, the interview that I had before I had with you was with Alan Brochstein , an analyst that you may have heard of. And your Organigram is one of his top holdings and he was speaking about why and smart acquisitions and strong cash to debt profile and all these things that we've been talking about. A, I'm curious, how you articulate to investors, why is now the time to invest and how you talk about the share price and when that meets up or matches fundamentals more.

BG: Right. I'd love to be in a position where our business fundamentals is reflected in our share price. We obviously don't believe that's true right now. I think, again, part of the nascent part of this industry is that there are sector tailwinds and headwinds that impact all companies that are especially those dual listed and listed in the U.S. So, back in December with the SAFE banking that didn't get passed, that was a huge hit to the overall sector. And most stock prices took a pretty bad tumble in December when the SAFE Banking didn't pass. And, you know, nothing to do with our performance, nothing to do with the fundamentals.

We had a great first quarter reporting. Our margins were up, really strong positive EBITDA and we're sucked into the sector headwind that was caused. I think, you know, there is – this is going to be the swings that are going to happen. We're going to have, for now, headwinds and tailwinds and not differentiate between companies. But it's about, you know, what I've learned over my career in a publicly traded company, it's about consistent delivery of results.

Quarter-over-quarter, and it's just going to take time. And, well, you know, eventually, hopefully the ones that can deliver that over time will get recognized for their fundamentals. And I hope that that's the case. I believe that we should be recognized for it. It's just – it really comes down to the fact that we've got a series of retail investors.

We don't have the institutional investors that have – that are looking at the results and are making that, sort of projection based on the results. We have emotional retail investors that are reacting to the latest news. And sometimes the news is great, and the stock price goes up. Nothing to do with us. And I'll take that. And sometimes news isn't good, and we take the loss there in the short-term. But, you know, I've said this earlier, we're not in this for a short-term. This is a long-term gain. I think longer-term, it will.

The fundamentals will reflect in our stock price. And right now, my team, and we tell ourselves all the time. It's about consistent delivery. We need to drive the top line growth, but not at the detriment of the bottom line. This is about driving to free cash flow. It's delivering consistent positive EBITDA there are several of our competitors that are still burning cash, still in negative EBITDA. We want to stand out apart from that and we'll continue to do the right things in our portfolio to drive that.

RS: I'd say there's more than a couple competitors running through cash. Would you say, in terms of, you know, there's a lot spoken about institutional investment not coming because that most cannabis companies, certainly in the U.S., aren't on major exchanges. You guys are on Nasdaq, would you say that there's lack of institutional investment solely because of the federal legalization picture that it's not federally legal?

BG: You know, I think that that is one component. I think the performance of the sector, kind of has the institutional investors sitting on the sidelines. And waiting for the time where maybe the dip is over. And, you know, it hasn't been a rewarding investment in the sector other than, you know, the early hay days in Canada, back in just pre-legalization, legalization, but things turned in 2019. And I think it continues to be a market that until it gets settled out and matures, I think the institutional investors or, you know, they're not losing out by waiting. And I think that's part of the problem, right.

They'll have an opportunity to get in when the time's right, and they'll be able to understand who are the right players to get behind, right. There were a lot of players and several of them aren't around anymore, and many more aren't going to be around, you know, in the next year or two. It is quite a price compressed market. Capital markets are tight. There are going to be some consolidations. There's going to be some bankruptcies. This next year is going to be a turbulent year. And then I think we might turn the corner. And when we turn the corner, I do think that's when some of those institutional investors might dip back into this space. So, you know, it's just going to take time.

RS: So, you would say turning the corner isn't necessarily federal legalization being the catalyst, it could be just the market shake out, the general market improvement, etcetera?

BG: Yeah. I think it's both. I think there will be a step of general market improvement performance improvement and shakeout that will get some in back interested in investing. Certainly legalization will open the doors in a different way, but, you know, between now and legalization, there are so many of these initiatives in the U.S. whether it's, you know, let's get Safe Banking across, let's get, you know, there's the [climate] [ph] that maybe allows some more of the U.S. entities onto the Nasdaq, like, there's or there's different ways even pre-legalization federally.

You know, I'm interested to see what happens with the whole rescheduling of cannabis and moving it, you know, from a schedule 1 to schedule 3 and how does that change things? You know, different companies and different institutions are going to have different levels of comfort of getting into this space. And any one of these changes, they're incremental changes. Not all the way to full legalization, but I think there'll be more interest coming with each one of them.

RS: Yeah, do you want to speak about the Nasdaq compliance listing that went out around Organigram?

BG: Yes. I mean, I could say, yeah, reiterate what was said in the press release. I mean, Nasdaq has a requirement of maintaining the, you know, minimum dollar share price. And we had 30 days, especially around the lack of safe passing that dropped us below the dollar. You know, we have a 180 days to get into compliance and we have confidence in our performance, in our growth strategies, in our margins. There's no need to act right now. We believe at some point the fundamentals might kick in and help remedy the situation, but if not, we have issued in our management information circular that if we have to do a share consolidation, to rectify, we will.

So, there's no concern about losing our listings at Nasdaq. We're really not interested in doing the share consolidation. We believe we certainly are undervalued to our intrinsic value, but we've got time to show our results and hopefully see, sort of the market improve from the bad news in December, and you know, get us back over the dollar, and then, you know, it's a non-issue anymore. And that's certainly our position. We have a lot of great plans over the next balance of this year and into next year, and we do have confidence in our ongoing fundamentals. So, that's all I'm going to say about that.

RS: Fair enough. Fair enough. Any thoughts on the whole Canopy USA and Nasdaq trying to get listed there?

BG: Yes. So, I mentioned that a little bit earlier. I think we're watching with interest on what Canopy is doing. Happy to let them take the lead and figure this out and spend the monies on the lawyers and take the time. And they're still, you know, their whole transaction as they announced is going to take the balance of this calendar year to get through all the steps. So, it'll be interesting to see where they land with NASDAQ, and we're watching it. And it's important because it'll pave the road for other companies to come in and do something similar in terms of looking at the U.S. market. So, as I said earlier, we're interested in getting into the U.S. market.

We're trying to understand how to do it in a compliant way. We're happy to watch Canopy figure it out and then take advantage of that. Similarly, we're, you know, there's other companies. I mean, you've got Sundial ( SNDL ) invested in a lot of the U.S. companies through just sending money, you know, through investments and other companies that are investing in the U.S. market. And we know the U.S. market is tight on cash. And we have cash. So, we're looking at different ways, but in terms of Canopy, we're watching them, and we're watching to see what happens.

RS: And my final question for you and happy for you to share anything that you feel like you want after this or the thing that we missed. Is around, kind of the future of the industry we've been talking about, kind of the headwinds coming at us, but do you see a time in the near or long-term future of share repurchases in the industry or coming from where you're coming from?

BG: You know, I think there could certainly be an opportunity. I think it's still early days. So, I do think that's longer-term. I think getting more predictive results out of this industry to a point where, you know, like traditional CPG when you can give guidance and delivery of guidance, then then those kind of things become an opportunity. It's still early days there's still like swings happening, massive swings from quarter-to-quarter in terms of market share and who are in the top 10 and what's happening and all those things make it too volatile in the short-term.

So, I think right now you want to have your cash, you want to invest in the opportunities like we're looking at in whether it's the U.S. or in Europe or equally even though our foundation is very solid in Canada, the right tuck-in opportunity in Canada that – we've done a couple of successful acquisitions with Winnipeg that got us as a good player in the gummies. We're the number of 3 player, we invested in Quebec.

Got us the number 1 player in hash in Canada. If there's an opportunity to build out our strength in our portfolio with a tuck-in acquisition in Canada, we would look at that as well. But we see that as the better use short-term for cash than going [indiscernible] share repurchase, but in a longer-term, as those opportunities get established and we start seeing the results of them, I think like any mature industry that becomes an option to look at.

RS: Very good. Anything you feel like we missed or any way that investors can get in touch with you or Organigram?

BG: Yes. I mean, certainly, they could get in touch with Organigram. You know, we have, on our website, a way to reach out on Investor Relations and we'll answer any of those questions that come our way. Love to have a chance to update you, you know, in another six months or so on how we're doing it. I think this is so much changes between within six months. I mean, this industry is so dramatic in terms of the swings and the changes that six months is a long time. I'm very happy with, you know, just to recap the move to Organigram. I'm very happy with what we've accomplished since I've been at Organigram.

And I think the future is bright. I think there's lots of things we could do. And it starts, as I said from the beginning, a solid balance sheet, a great team with great execution, both on the retail side execution sales excellence, but in cultivation and in production, you know, as we have with our gummies and our hash. I mean, we've got a great foundation. And now it's about expanding outside of Canada, and we're looking forward to updating on how we progress there.

RS: Awesome. Look forward to hearing the updates, look forward to following along and nice to see cash generation. So, we'll look forward to see how the months play out. Thanks, Beena. I appreciate it.

BG: Thank you, Rena.

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