International Cannabrands Inc. (CSE:INCB) (the “Company“) CEO Steve Gormley publishes an open letter to Shareholders on the year ahead for INCB.

Dear Shareholders,

When I wrote to you on September 26th*, I outlined the ambitious turnaround plan we were undertaking at the corporate level, and announced that we would be allocating significant resources towards a CBD initiative. As we begin the new year and continue to execute against this plan, I would like to take advantage of this opportune moment to update Shareholders on the year ahead.

2020 Outlook 

The cannabis industry is measured on fundamentals. 2019 was a tumultuous year that brought a critical reality check to the cannabis industry at large.  We are seeing the maturing of a relatively nascent industry, with stock valuations being assessed on solid fundamentals. The year demonstrated that not all business models are the same, and underlined the critical importance for a company to demonstrate strategic advantages, a strong balance sheet, and a clear path to profitability.

2020 is forecasted to bring forth a clearer, more efficient cannabis market.  Based on discussions we’ve had with those in financial markets, specifically in cannabis, we believe the sector will turn around by Q3 as companies begin to report better financial results due to rightsizing their capacity and operations.  It is our belief that cannabis companies to watch in 2020 will be the ones making early investments into a consumer driven business.

We continue to see quite a bit of M&A activity and overall consolidation, and expect this to perpetuate throughout the year as many companies have exhausted their funding and are unable to raise cost efficient capital. After more than a year of declining share prices, it appears to me that the market has bottomed out. At the same time, I see a return of cannabis investors who were sitting on the sidelines during last year’s downturn now looking to take advantage of undervalued assets. It is important to stress that investors should move into the space with the understanding that short term investments are no longer the way to go, and to regard these as long positions.

INCB Updates

In my September letter, I acknowledged the market’s demand for a course correction. Since then, we’ve taken steps to rightsize the company’s portfolio and streamline operations, and Management has made significant progress over the past few months.

Since Sept 2019, INCB has raised approximately $1 million (CDN) through private placement. All funds have come from strategic investors and at a premium to the stock price. This is unique and especially so when the sector is facing negative investor sentiment. I believe this speaks to the fact that our new investors appreciate the quality of our turn-around, growth plan, and management team. Evidence of this thinking is exemplified by the fact that Bob Yosaitis, a highly successful entrepreneur from both the cannabis and non-cannabis sectors, also joined our Board of Directors.

The company has cancelled its brokered debt financing round as well as equity credit line financing arrangements, which do not serve us at this time. We would not be able to raise money at a premium to our trading price nor would we be able to attract the type of strategic investors that have been stepping up to support INCB.

CBD represents strong growth potential for INCB, with the market’s high acceptance of cannabidiol as an important component of many wellness trends.  There are opportunities in the CBD market to create strong, relevant consumer brands that offer non-pharma solutions for today’s active consumer.  INCB has taken a traditional consumer packaged goods approach against this CBD mandate — informing everything from our product development through distribution.  I believe INCB’s unique approach in mapping to consumer trends with effective products in niche categories present the Company with opportunities to claim market leadership.

• Baseline will be the first in-house developed CBD line to be launched.  The offering has a benefit driven brand architecture with custom CBD + adaptogen formulations designed to support the user to get the most out of their day and night. Baseline is scheduled to launch in Q1 2020.
• Other CBD brand initiatives planned include a collaboration with renowned Beverly Hills plastic surgeon and INCB’s Chief Medical Officer, Dr. David Rosenberg. This branded line will be developed specifically for outpatient cosmetic procedures.

As disclosed, INCB is pursuing its options regarding its investment in La Vida Verde to effect a repricing of the transaction and pursue value for its shareholders.

2020 Objectives 

INCB continues to pursue the development and acquisition of cannabis and CBD consumer brands. A secondary emphasis is on acquiring interests in ancillary businesses that ensure product quality, supply continuity, and development agility while providing better EBITDA margins for our brands.

To further this mandate, our 2020 objectives will include:

• Build strategic partnerships that have the potential to expand our vertical integration in the supply chain from cultivation through retail.
• Integrate a range of assets sourced through our network’s portfolios, potentially to include cultivation, licenses, real estate and distribution/retail.
• To fund new brand initiatives and strategically evaluate acquisitions of high value assets across consumer brands and retail sectors.

There is much to anticipate in 2020 with regulatory action and industry consolidation, and it will certainly be a defining year for the cannabis sector and for INCB.  There is a tremendous amount of work ahead of all of us, as we streamline legacy operations and diversify the company portfolio into new sectors.  It is a daunting challenge, without a doubt, but we believe that working with the collective horsepower of our team and partners, we can make 2020 a pivotal year for the company’s expanding footprint and position in the market.

As always, thank you for your loyalty and support.

Steve Gormley

SOURCE International Cannabrands Inc.