Organic Cannabis Report

EXECUTIVE SUMMARY
• The global market for organic products is currently worth $160 billion and is
forecast to grow to $323 billion by 2024, a 15% annual growth rate. Organic
sales have been strong for decades growing at 12% a year since 2000.
• In the near term we estimate the Canadian cannabis market is worth $5

billion and organic demand will ultimately make up 20% of the market
creating a $1 billion revenue opportunity. On a global basis, demand for legal
organic cannabis is already running at US$16.6 billion a year with the
potential to grow to US$42 billion over the next five years. This would equal
medium term demand potential of $8.5 billion for organic cannabis.
• By 2020 there will only be four certified organic producers operating globally
and their supply will struggle to keep up with rapidly growing demand. The
fact that 83% of millennials identify as organic consumers and consume
cannabis at 2-3x the rate of those 45 or older speaks to the huge untapped
opportunity for organic cannabis.
• We estimate the three publicly traded organic cannabis stocks offer 310%
upside on average with a range of 267% for 48 North up to 377% for The
Green Organic Dutchman. All three stocks trade at deep discounts to the
cannabis group average, even though organic supply and demand trends are
much more favorable.
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................... 1
AN INTRO TO ORGANICS ................................................................................... 4

WHAT IS THE DEFINITION OF ORGANIC AND WHO DECIDES IF A PRODUCT
IS ORGANIC? .............................................................................................................. 4
THE CANADIAN ORGANIC STANDARDS ...................................................................... 4
ORGANIC CONSUMER TRENDS ARE VERY POSITIVE .................................................. 5
IN THE EYES OF THE CONSUMER WHAT ARE THE BENEFITS OF ORGANIC?............... 7
HEALTH CONSIDERATIONS MATTER TO CONSUMERS ............................................... 7
PESTICIDES ................................................................................................................ 8
HEAVY METAL CONCERNS ......................................................................................... 9
OIL CONCENTRATION ................................................................................................ 9
CHEMICAL PYROLYSIS OF TOXINS ............................................................................11
ARE THESE CONCERNS WARRANTED? ......................................................................12
SOCIETAL AND SUSTAINABLE CONCERNS ................................................................14
CONSUMERS ASSOCIATE ‘ORGANIC’ WITH ‘CRAFT’ ..................................................16
ORGANIC PRODUCTS SELL FOR A SIGNIFICANT PREMIUM TO NON-ORGANICS ........16
SIZING UP THE MARKET FOR ORGANICS ......................................................... 17

NORTH AMERICAN ORGANIC MARKET EXPLORED ....................................................18
EXPLORING CANNABIS-SPECIFIC ORGANIC MARKETS .............................................20
ORGANIC ALCOHOLIC BEVERAGES ...........................................................................20
ORGANIC FRUITS AND VEGETABLES .........................................................................22
THE TOTAL CANNABIS OPPORTUNITY IS WORTH AT LEAST $200 BILLION
BY 2024.....................................................................................................................23
POTENTIAL SIZE OF THE ORGANIC CANNABIS MARKET ................................. 29
ORGANIC CANNABIS HAS A FEW CHALLENGES LEFT TO OVERCOME ............. 33

WILL ORGANIC CANNABIS BE PROFITABLE? .............................................................33
ORGANIC GROWING PROCESS INCREASES COSTS BUT CREATES A BARRIER
TO ENTRY .................................................................................................................34
ORGANIC GREENHOUSES COST MORE, BUT THE COST PREMIUM IS SHRINKING
RAPIDLY ....................................................................................................................35
AS ORGANIC GROWERS GAIN EXPERIENCE GROWING AT SCALE, GROWING
COSTS WILL FALL RAPIDLY .......................................................................................36
CAN ORGANIC CANNABIS BE GROWN AT SCALE? .......................................... 37
WAYS TO INVEST IN THE ORGANIC CANNABIS OPPORTUNITY ....................... 40

ORGANIC STOCKS ARE ACQUISITION TARGETS ........................................................41
WHISTLER MEDICAL MARIJUANA COMPANY .................................................. 42
[2] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

CONCLUSION ............................................................................................................42
OPERATIONAL REVIEW..............................................................................................42
RUBICON ORGANICS ........................................................................................ 44

CONCLUSION ............................................................................................................44
48 NORTH ........................................................................................................ 46
CONCLUSION ............................................................................................................46
THE GREEN ORGANIC DUTCHMAN (TGOD) ...................................................... 48

MASTER GROWER IS AN ORGANIC CANNABIS EXPERT .............................................48
SERIOUS CONSUMER PACKAGED GOODS EXPERIENCE .............................................50
BRIAN ATHAIDE ........................................................................................................50
CSABA REIDER ..........................................................................................................50
PREM VIRMANI .........................................................................................................51
LONGEST TRACK RECORD OF PUBLIC EXECUTION ....................................................51
BEST ORGANIC STRATEGIC FOOTPRINT ...................................................................52
NORTH AMERICA ......................................................................................................52
EUROPE .....................................................................................................................54
CARIBBEAN ...............................................................................................................54
COMPETITIVE ADVANTAGE THROUGH IP AND HIGH COST OF ENTRY .......................54
THE MOST RECOGNIZED ORGANIC BRAND ...............................................................55
HIGHLY FAVORABLE VALUATION ..............................................................................56
MULTIPLE UPCOMING CATALYSTS ...........................................................................57
CONCLUSION ................................................................................................... 59
APPENDIX ........................................................................................................ 60
OPERATING EXPENSE ASSUMPTIONS.......................................................................63
TGOD DCF ASSUMPTIONS .........................................................................................65
SENSITIVITY ANALYSIS TO TEST CERTAIN ASSUMPTIONS ......................................66

AN INTRO TO ORGANICS
WHAT IS THE DEFINITION OF ORGANIC AND WHO DECIDES IF A
PRODUCT IS ORGANIC?
Before discussing why the organic market has and will continue to be financially
attractive, let’s define what organic farming means.
Generally, ’organic‘, refers to the agricultural techniques used to produce a product.

Traditionally, people think of organic products as those grown without chemical
fertilizers, pesticides, antibiotics or hormones. While generally correct, the true
definition of organic according to the International Federation of Organic Agricultural
Movements is:
“Organic Agriculture is a production system that sustains the health of soils,

ecosystems and people. It relies on ecological processes, biodiversity and cycles
adapted to local conditions, rather than the use of inputs with adverse effects.”
This definition includes sustainability, an important aspect that ensures the products
are healthier for the environment as well as for consumers.
THE CANADIAN ORGANIC STANDARDS

In Canada, for a product (food, seed, animal, etc.) to be labelled organic, it must meet
the strict requirements outlined by the Canadian Organic Regime (COR). According to
the Government of Canada website, commodities such as cannabis plants do not fall
within the scope of the COR and therefore cannot receive the official Canada organic
logo. However, the products themselves can still be certified to an organic production
standard by accredited bodies according to the same strict standards of the COR.
Under the Safe Food for Canadians regulations, this standard is controlled by the
Canadian Food Inspection Agency, where the agency has specific accredited certification
bodies across the country that help monitor and enforce the COR. These bodies
themselves are also faced with strict regulations, where conformity verification bodies
exist for the sole purpose of their oversight. Needless to say, obtaining and maintaining
organic certification is an arduous process and using the label of organic in Canada
carries significant weight.
CANADA’S ORGANIC REGULATIONS ARE SOME OF THE STRICTEST

STANDARDS IN THE WORLD.

This is beneficial for Canadian consumers and producers. In particular, businesses
certified organic in Canada will have little issues obtaining organic certification for their
product in other regions. In fact, Canada already has equivalency arrangements for
organic standards with the United States, European Union, Switzerland and Japan. This
means a producer with an organic certification in Canada will have little trouble labeling
their exported product organic to other jurisdictions.
In contrast to Canada, cannabis producers in the U.S. are not allowed to use the term
“organic” as it is a federally controlled term and cannabis is still illegal on a federal level.
As an alternative, companies have turned to ’trusted‘ certifiers in order to prove to
consumers their products ’have been grown with organic methods‘ (the terminology
they can use). This regulatory challenge has reduced the incentive for U.S. operators to
produce organic cannabis and gives Canadian organic growers a head start.
ONLY IN CANADA CAN CANNABIS BE CERTIFIED ORGANIC BY A

GOVERNMENT APPROVED BODY GIVING CANADIAN ORGANIC
GROWERS A BRANDING ADVANTAGE OVER THEIR U.S. PEERS.
Without a government approved organic certification in the U.S., domestic players don’t
have the same incentive as Canadian peers to invest in a purely organic cannabis
company. As a result, Canadian players face less competition when meeting organic
demand in Europe and elsewhere. Given the organic cannabis market is expected to be
worth over $300 billion globally by 2024, this is an extremely valuable head start.
ORGANIC CONSUMER TRENDS ARE VERY POSITIVE

Consumer spending on organic products in general is increasing. A recent survey found
that over two thirds of Canadians report purchasing organic products once a week.
According to a 2018 Nielsen study, the number of organic products purchased in the
fast-moving U.S. consumer goods segment grew by 8%, reaching $21 billion in sales. On
top of the unit growth, consumers were also willing to pay more causing the average
price of organic goods purchased to increase 9%. Increasing volumes and prices are a
powerful combination.
The two main reasons behind the surge in organic demand are increased
availability/awareness and superior health perceptions. Consumers have more organic
choices to choose from and are better educated about organic options than ever before
due to a marketing push from organic suppliers. Armed with better knowledge and
access, consumers are increasingly prioritizing foods that are perceived as higher

quality, healthier and ultimately better tasting. Consumers crave greater transparency
in the products they purchase – they want to know where the product comes from and
how it is good for their health and that of the environment.
Looking forward, we see the organic segment continuing to grow faster than the overall
consumer goods market as the purchasing power of millennials and Gen X’ers, the two
largest organic purchasing consumer groups, increase. These two generations have
already shown a greater willingness to pay a premium for organic products compared
to older generations. As their wealth increases over time, they will demand even more
organic products.
As an example, in the U.S., millennials spent 14% more on organic products in 2018
compared to 2017 while baby boomers only spent 7% more.
GROWTH IN ORGANIC SPENDING BY GENERATION
Source: Nielsen - Tops of Organics 2018
Further support for the organic trend was found from an American survey that showed
organic purchasing decisions are very personal for consumers and not made simply out
of convenience or to follow a fad. The survey of U.S. household families found that
organic purchasers are driven by a belief that selecting organic products makes them a
better parent. This powerful positive sentiment towards organics brings with it a
willingness to pay a premium.
According to a Nielsen report, over 40% of consumers surveyed said they would be
willing to pay a premium for an organic product or a product that is known to be of
higher quality. Early indications from the cannabis market support the view that
consumers are willing to pay extra for organics. Whistler, an organic cannabis grower
sells a 3.5 g package at a 90% premium to the average market price. While we don’t

expect this level of premium to hold, it demonstrates how strong the preference for
organic is among some consumers.
WHEN YOU CONSIDER 83% OF MILLENNIALS IDENTIFY AS

ORGANIC CONSUMERS AND THE USAGE RATES OF CANNABIS FOR
PEOPLE AGED 24-44 ARE 2-3 TIMES HIGHER THAN FOR THOSE AGED
45+, IT’S EASY TO SEE WHY ORGANIC CANNABIS DEMAND SHOULD
BE ROBUST GOING FORWARD.
IN THE EYES OF THE CONSUMER WHAT ARE THE BENEFITS

OF ORGANIC?
It’s not difficult to imagine the social synergies between organic products and cannabis
culture. The “hippie” culture around cannabis values organic products for the same
reasons as the “yuppie” soccer mom. While these cultural similarities are amusing, we
think there are two tangible factors that will drive significant demand for organic cannabis.
• Consumer perception is that organic products are superior: Across the globe
consumers are buying greater amounts of organic products because they
believe organic is better for their health. We think it is likely this trend is even
more pronounced in the cannabis industry.
• Sustainability of the process: With concerns over the well-being of the planet
growing, consumers are demanding that the products they buy are more
sustainable. Organic products naturally meet sustainability criteria.
ADDITIONALLY, Organic products are perceived to be “craft” or “small batch” amongst

consumers. This perception of scarcity and quality supports premium pricing.
HEALTH CONSIDERATIONS MATTER TO CONSUMERS

The primary driver of demand for organic cannabis will be consumers’ health concerns.
Looking at general consumer trends, we see a strong preference for organic products.
Consumers are voting with their wallets. Looking at the cannabis market in particular,
there are some unique concerns that are causing consumers to put health
considerations front and center.
In the cannabis industry, demand for organics is driven by consumer’s health concerns
over the use of synthetic pesticide, fertilizers and oil-based extraction methods. When
you factor in the body of evidence indicating these chemicals are even more harmful to
humans when smoked or extracted, we can begin to understand why the market share
of organic cannabis could be larger than organics in other industries.

Further, when you consider a significant portion of cannabis consumers are medical users
who already have health complications, exposure to toxins can be extremely dangerous.
We believe medical users will show a very strong preference for organic cannabis.
Ultimately, in the early days of the legal cannabis industry when the safety and purity of
non-organic cannabis is far from assured, we expect consumers will turn to organic
cannabis as the safer solution. When the difference in health outcomes between organic
and non-organic is potentially large, it gives consumers even more of a reason to pay
more for organics to mitigate the potential health risks from regular use.
Below we are going to address some of the specific health risks that can be discovered
in non-organic cannabis.
PESTICIDES
The legal cannabis industry faces a few challenges when it comes to regulating the use
of pesticides and other chemicals. The first, is the fact that legal cannabis is a completely
new market and cannabis supply is transitioning from an unregulated illegal market, to
a legal one. This can create instances where growing practices are at odds with
regulations meant to minimize negative human and environmental impacts. Many
illegal growers have been using pesticides for decades and do not want to shoulder the
increased costs and education required to comply with strict regulations.
Additionally, there is no financial incentive for the black-market to follow regulations, as

profitability is driven by maximizing crop yields for the lowest cost. The black-market
cost advantage creates economic pressures on legal producers as they try and compete
for consumer dollars. In the past, certain Canadian legal producers failed government
pesticide tests leading us to question if some are willing to risk their licenses to increase
profitability which ultimately erodes one of the main reasons consumers would choose
legal cannabis over the black-market - safety.
The U.S. is even more of a wild west than Canada. Cannabis is not yet federally legalized,
meaning the Environmental Protection Agency (EPA) does not have rules in place for
measuring pesticide levels or even for testing cannabis. This has left the creation and
enforcement of proper regulations to the states, creating differing levels of safety and
enforcement and ultimately a lack of transparency and consumer trust.
While testing issues in the U.S. do not directly impact the Canadian legal market, it is
easy to picture the indirect effect it could have on consumer behavior. Additionally, U.S.
news stories about pesticide tainted cannabis and the serious health problems it can
cause could easily turn public opinion against non-organic cannabis. If this does happen,
apart from consumers growing their own cannabis, organic supply will be considered
their only safe option.

There are three main factors related to cannabis that explain the importance of avoiding
contaminants in the growing process:
1. Cannabis plants are hyper-accumulators of metals and readily absorb any

heavy metal contaminants present in the soil.
2. In the process of extracting cannabis flower, chemicals present in and on the

plants are concentrated into the oil, which increases the presence of these
dangerous molecules.
3. Smoking or vaporizing cannabis leads to inhalation of the chemical

fertilizers and pesticides which is much worse for the body than if the
cannabis is ingested.
HEAVY METAL CONCERNS

According to the Government of Canada website, “Cannabis plants are hyper-
accumulators of metals and will take up heavy metal contaminants present in the
nutrients solution either via the root system or foliage above the level they need to
grow.” This can lead to high levels of heavy metals within the product and ultimately
lead to higher risks that cannabis users ingest or inhale the heavy metals.
In line with these concerns, in 2016 the U.S.-based Association of Public Health
Laboratories released a report that recommended testing for heavy metals in cannabis
be performed alongside testing for solvents, pesticides and microbiological
contaminants. This speaks to the severity of the problem. Certain heavy metals are
known to be carcinogenic and can also lead to a variety of diseases if they accumulate
in our bodies.
Concerns around heavy metal contamination and effective government testing is one
more reason consumers will likely favor organic cannabis in the early days of legalization.
OIL CONCENTRATION
A second factor that exacerbates the concerns of any chemicals or heavy metals is their
concentration into THC or CBD extracts or concentrates from the cannabis plant.
Essentially, whatever compounds are present in or on the cannabis plant (nutrients,
desired end-products, chemicals, heavy metals, etc.) all end up in the concentrate.
Studies have shown that these concentrates can contain extremely high levels of
contaminants in the final product that ends up being inhaled or ingested. To give a
specific example, the degree of concentration of Piperonyl Butoxide (PBO) was
investigated in cannabis using EPA tolerances. They found that while 14% of the flowers
would fail, nearly half of all concentrates would fail.

Looking at Piperonyl Butoxide (PBO) and a second pesticide, Bifenthrin, researchers
found that the average concentration level in concentrates was roughly 10 times higher
than in the flower. While their presence is not surprising given pesticides have similar
chemical properties to cannabinoids, this 10X factor is significant considering that the
cannabinoids are only concentrated 2-5X. While there was no definitive explanation
provided by researchers, their possible explanations included: extraction techniques
are more efficient at concentrating pesticides than cannabinoids, chronic contamination
of equipment and solvents may lead to cross contamination and, the practice of making
concentrates from “trim”, which could be more heavily contaminated than the flower
(which are sold and analyzed separately).
PESTITCIDE CONCENTRATIONS IN FLOWER AND CONCENTRATES
Source: CSI Pesticides Whitepaper
To make matters worse for non-organic producers, the expected trend of consumption
is towards greater amounts of concentrates and edibles. Considering the concerns over
contaminant concentration, this could lead to a greater demand for organic products
and ultimately lead to a greater market share for organic cannabis.

CANNABIS SALES ESTIMATES BY PRODUCT TYPE
Source: Bank of America Estimates
CHEMICAL PYROLYSIS OF TOXINS

The two health concerns described above, though serious, make this third factor
significantly more problematic. If there are higher than normal concentrations of
heavy metals, pesticides or other toxins, or if consumers use concentrates or extracts,
then the health concerns around chemical pyrolysis (burning and/or vaporizing) are
further exacerbated.
Inhaling a chemical, whether THC or some undesirable chemical, presents a different set
of risks than ingestion. The first concern is pyrolysis, the chemical process of
decomposition when exposed to high temperatures, where chemicals such as pesticides
and fertilizers break down into different compounds that can have high toxicities, or if they
don’t break down, can volatize into the smoke stream. Through inhalation, these
compounds can directly enter the bloodstream without undergoing any sort of metabolic
process that might remove or filter the unwanted compounds. This often leads to higher
concentration levels of these compounds within the body than when ingested orally.
A study that looked at the percentage of a chemical transferred into the smoke stream
found that pesticides could be transferred with efficiencies as high as 60-70% in cases
where the smoke wasn’t filtered. Notably they found that the filtration process, either
water or a standard cigarette filter, did reduce the transfer efficiencies. While a
positive sign for tobacco smokers, cannabis smoking methods often do not contain
any filtering devices.

% OF PESTICIDES IN THE PLANT THAT REMAIN WHEN SMOKED
Source: Determination of Pesticide Residues in Cannabis Smoke
ARE THESE CONCERNS WARRANTED?

Though laboratory tests are important in understanding the possible effects of
pesticides and heavy metals, it doesn’t say anything about the actual rates of
contamination. For that we must look towards real-world examples.
In a recent study performed by CannaSafe (a cannabis testing company), 20 popular

CBD products were tested in California. It was found that only 15% (3 products)
contained what the label stated, while some others contained “dangerously high” levels
of solvents.
In a report released by the Government of Oregon in January of 2019, the results weren’t
promising either. A summary of the pesticides with the top failure rates show producers
failed to meet required limits well over 50% of the time. In other words, if a company
chose to use the pesticide, they were more likely to exceed the allowed limit than meet
it. On a more promising note however, it was found that failure rates are showing a
decreasing trend over time.

% OF PESTICIDE USE THAT EXCEEDED LEGAL LIMITS
Source: Government of Oregon
Although these are localized examples of pesticide and solvent issues with a relatively small
sample size, even small missteps can have serious health consequences for consumers.
Looking at examples within Canada, in 2017 Health Canada regulators performed

random tests on cannabis after recalls related to unauthorized pesticide use. From the
seven producers they tested, two failed. This prompted Health Canada to mandate
licensed producers test all cannabis products destined for sale for unauthorized
pesticides. In addition, Health Canada announced they would be continuing random
product testing.
It would appear stricter testing and regulations in Canada mean less risks for
consumers. Canada’s Pest Management Regulatory Agency maintains an active list of
pesticides that can be used on commercial cannabis, and any cannabis found to be in
breach of regulations can be recalled, crops can be destroyed, or producer licenses can
be revoked.
However, the young age of this industry means that consumers don’t yet completely
trust the purity of the cannabis products they are buying. Consumer sentiment knows
no borders meaning continued instances of compliance failures in the U.S. will no doubt
influence consumer trust throughout North America.
We think consumer concerns about contamination whether well founded or not will
allow organic cannabis to capture far more market share than compared to other

industries. Ultimately, it is on the non-organic cannabis producers to build trust with
consumers and they haven’t done a great job so far.
SOCIETAL AND SUSTAINABLE CONCERNS

A second important driver of demand for organic products comes from the known
benefits of using a production process that is positive for society and the environment.
From minimizing the environmental impact by avoiding the spread of harmful
chemicals, to creating positive change through supporting local industries, the examples
are endless. Today, consumers are becoming more aware of these issues, and more
likely to consider these factors when making a purchasing decision.
A 2015 global study by Nielsen looking at the willingness of consumers to pay extra for
products linked to positive societal and environmental impact found that the vast
majority of consumers aged 10-35 are willing to pay more for a sustainable product.
Even older baby boomers value sustainability with half of those surveyed reporting they
are willing to pay more.
WILLINGNESS TO PAY MORE FOR SUSTAINABLE PRODUCTS
Source: Nielsen - 2015 Global Survey
Most importantly these results demonstrate that many consumers willingness to pay a
premium for sustainable products is only increasing. This is a positive sign for the
organic cannabis market and suggests non-organic producers may need to invest
outside of their core business to create a brand associated with positive social impact.

These consumer studies also found people are willing to pay more for sustainability or
environmental claims even when offered deals or coupons to buy alternative products.
The organic purchasing decision is a very personal choice for consumers, supporting our
view that organic and sustainable options will exist and thrive in all consumer verticals.
The chocolate industry provides a powerful example. Within the U.S., chocolate
products with a sustainability claim grew sales 16% compared to 5% for a standard
product in 2018. The graph below helps illustrate the reasoning more specifically.
Chocolate products that claim they contribute to a positive impact on society or the
environment perform significantly better than the industry average.
SUSTAINABLE CHOCOLATE OUTPERFORMS COMPETITION
Source: Neilsen - 2018 Sustainability Report
As society’s disposable income increases and consumers become more aware of the
social and environmental impact of products and services, consumers are growing
more mindful of their purchases. Organic producers are very well positioned to meet
this demand.
The organic cannabis market uses all-natural inputs and by its very nature is sustainable
Additionally, organic production processes are generally more labor intensive, creating
a greater economic impact for the local community.

CONSUMERS ASSOCIATE ‘ORGANIC’ WITH ‘CRAFT’
We believe another factor that deserves an honorable mention is the preferred taste of
a ’craft‘ or ’premium‘ product. We believe this premium segment will be a significant slice
of the overall cannabis market and will prevent the commoditization of cannabis for
those quality producers. Organic producers are often looked at as a type of ’craft‘
producer and are able to charge a premium. The claims that organic products taste
superior and ’burn smoother‘ are easy to find from producers and consumers alike.
ORGANIC PRODUCTS SELL FOR A SIGNIFICANT PREMIUM TO NON-

ORGANICS
In 2015, Consumer Reports completed a study looking at the premiums paid for certain
organic fruits and vegetables sold in retailers including Amazon Fresh, Price Chopper,
Walmart, Safeway and Whole Foods. Premiums varied from as little as 20% for organic
carrots to as high as 110% for organic zucchinis.
ORGANIC PRICE PREMIUM FOR ASSORTED PRODUCE
Source: Consumer Report - 2015
Based on these price premiums and the growth shown within the organic fruits and
vegetables market, its clear consumers aren’t deterred by higher prices. Consistent
organic premiums make it likely that organic cannabis suppliers will also be able to
command premium prices for their product.
Further, as growers bring down growing costs, giving them room to cut organic prices,
lower prices should increase sales and consumer awareness generating even greater
consumer preference for organic.

SIZING UP THE MARKET FOR ORGANICS
Starting with historic trends, global sales of organic food grew approximately 640%
between 1999 and 2017, good for a compound annual growth rate (CAGR) of over 10%.
For the last five years of that study (2013-2017), sales increased by 40% from $68.5
billion to $97 billion, a CAGR of over 9%.
This suggests the emergence of the organic market isn’t a fad. It is an increasingly
prominent consumer trend and likely to continue showing strong growth.
A study by Zion Market Research projects the global organic food and beverage market
will grow from $124.7 billion in 2017 to $323.1 billion by 2024, an annual growth rate of
14.6%. These estimates are in line with other market research studies while being on
the conservative side.
Comparing the global food and beverage market (organic and non-organic) to the
organic market, we can see that the market share of organics is forecast to double from
2017 to 2024. It’s clear the market for organic products is growing at a faster rate than
non-organics and we expect this strong growth to continue with organic’s only making
up 3% of the market five years from now.
FORECASTED SIZE OF THE GLOBAL ORGANIC PRODUCT MARKET
Source: Zion Market Research

The Zion report attributes the growth of the organic market to increased consumer
awareness of the health benefits from eating organic as well as increased accessibility
and convenience. North America leads all continents, generating 40% of organic
revenues, while Europe is a close second at 33%.
With almost 75% of global organic revenue generated in regions leading the cannabis
legalization movement, the organic cannabis market is well-positioned for growth.
NORTH AMERICAN ORGANIC MARKET EXPLORED

North America comprises the largest segment of the global organic market, with a focus
on the Canadian market, given it is the first market to offer legal organic cannabis.
The organic market has seen significant growth in Canada. Tia Loftsgard, the Executive
Director of the Canada Organic Trade Association stated in 2017:
“Organic is the fastest growing category in agriculture in Canada and has

consistent sales growth across all product categories… Canadians are demanding
more and more variety in their organic purchases which is driving the market to
keep up with this next generations’ desire for more organic.”
We believe this trend will apply to cannabis as well and expect to see significant demand
for the product over both the short and long term.
In 2017, the organic food and beverage market in Canada was valued at $4.4 billion
according to a study by the Organic trade Association. This equaled an organic market
share of 2.6%, up from 1.7% in 2012, representing market growth of 9% per year. The
Canadian food and beverage market is expected to grow 2.5% a year over the next 5
years and if we assume organic continue to gain market share at the same rate, organic
revenue would hit $9.5 billion by 2024, more than doubling from 2017.

FORECAST SIZE OF THE CANADIAN ORGANIC PRODUCT MARKET
Source: Zion Market Research
Looking at the United States, we see a similar growth trend for organics. The graph
below illustrates organic revenue trends from 2008-2017 as reported by the Organic
Trade Association. With similar growth to the global organics market, organic sales in
the U.S. have been growing as much as 5% faster than the total food and beverage
market in recent years.
U.S. ORGANIC PRODUCT MARKET SIZE
Source: Organic Trade Association's 2018 Organic Industry Survey

In 2018, the entire U.S. organic market broke through the $50 billion mark and was up
6.3% year over year. This growth was much faster than sales of non-organic products.
Specifically, organic food sales reached $47.9 billion in 2018, 5.9% growth compared to
only 2.3% growth for non-organic foods. Organic non-food product sales were up 10.9%
in 2018 to $4.6 billion compared to growth of 3.7% for non-organics.
Whether you look globally, or more locally in Canada and the U.S., it’s clear consumer
demand for organics is growing much faster than demand for traditional product
categories. This data paints a very encouraging picture of the pent-up demand for
organic cannabis. In our view, increased availability of organic products will serve to
increase the relevance of organics in the eyes of the consumer, driving increased
demand for organic alternatives across all market segments
EXPLORING CANNABIS-SPECIFIC ORGANIC MARKETS

After looking at the macro picture, we wanted to focus in on specific segments that
compete directly with cannabis for consumer dollars to understand how the organic
cannabis market could develop and to estimate the potential market opportunity.
Specifically, we looked at organic markets for:
1. Alcoholic beverages, to understand preferences in a category which has

societal similarities to cannabis.
2. Fruits and vegetables, to understand how mass-market consumer

preferences are changing over time.
ORGANIC ALCOHOLIC BEVERAGES

Demand for organic wine and beer is expected to be robust over at least the next three
years according to industry forecasts. Demand for organic wine and beer will be growing
14% a year while overall non-organic wine and beer sales are barely growing, up only
2% in any given year.

ORGANIC AND NON-ORGANIC WINE AND BEER SALES FORECASTS
Source: IWSR Organic Wine Report
The organic segment of the wine and beer market is taking significant market share
away from traditional offerings growing to 1.7% of the market in 2022 from 1.1% today,
a 45% increase over 3 years. There is still lots of room for above average growth in
organic demand as the organic wine and beer segment will still make up less than 1%
of total beer and wine sales by 2022.
This relatively small market share is likely due to the limited availability of organic
selection over the last 10-15 years. Initially, there were serious supply chain limitations
procuring organic hops, making it extremely expensive to produce organic beer. More
recently, supply has improved, and organic beers are gaining popularity with sales
growing at 13.5% annually
Within Canada, a quick glance at the top organic beer brewers is all you need to see this
industry category is thriving.
In 2015, one of Canada’s largest beer producers, Labatt Brewing Company, purchased
Mill Street Brewery. Back in 2002, Mill Street was responsible for brewing Ontario’s first
organic beer and has become synonymous with organic beer. They’ve come a long way
and are now reporting average sales growth of more than 15% per year over the past
several years. A second organic leader is Beau’s, a B Corp certified organic brewer. While
a small operation, Beau’s has been growing sales at 45% a year for over a decade.

Moving on to trends in U.S. spirit sales, consumers are definitely showing an appetite
for costlier premium brands. This has important implications for organics as both
products are usually priced at over a 20% premium. Between 2015 and 2016, premium
spirit volumes grew 9% compared to only 2.7% for non-premium. The faster growth of
premium brands over value brands has been going on for some time now, since at least
2012. Projections expect this trend to continue with premium spirit brands growing
sales as fast as 23% a year compared to growth of only 2.9% for non-premium spirits.
REVENUE GROWTH OF DIFFERENT SPIRIT CATEGORIES
Source: Distilled Spirits Council; Beverage Information Group, L.E.K. research and analysis
ORGANIC FRUITS AND VEGETABLES

The organic fruits and vegetables market is showing the same market leading growth as
other organic categories. The graph below shows the forecast market size of organic
and non-organic fruits and vegetable sales out to 2021.

ORGANIC AND NON-ORGANIC SALES 2013-2018
Source: Organic Trade Association - Organic Industry Survey 2014-2018
In 2018, 14% of all fruits and vegetables sold in the U.S. were organic, worth over $17
billion in value. Over the same time period, the organic market grew at 8% compared to
2% for non-organics – almost four times faster.
The market share growth of organics in this category has slowed in recent years, but
this was to be expected as organics now make up a significant share of all fruits and
vegetables sold. Even with slower growth organic fruit and vegetable sales are still
growing by $500 million every year.
Now that we’ve explored the size of the global market for organics, we can start to
estimate the potential size of the organic cannabis market.
THE TOTAL CANNABIS OPPORTUNITY IS WORTH AT LEAST $200

BILLION BY 2024
With cannabis legalization marching across the globe, its clear consumer sentiment
towards cannabis is changing everywhere, and Canada is leading the way. The value-
creation generated by these changes is substantial.

Our research suggests the global cannabis industry will be worth over $200 billion by
2024, incorporating both consumer and medical products including dried flower, oils
and edibles. Longer term, cannabis has the potential to disrupt significant pieces of
existing industries worth $5.3 trillion by 2035. Bottom line, the future is bright for the
cannabis industry.
In the near-term Bank of America Merrill Lynch projects the total global cannabis market
(legal and illegal) is worth $166 billion in 2019. With 5% annual growth, the market
should hit ~$210 billion by 2024. The Canadian market is projected to be worth $4.9
billion this year growing at a rate of 3.5% to $6 billion by 2024.
MORE IMPORTANT THAN THE TOTAL SIZE OF THE CANNABIS

MARKET IS THE FACT THAT LEGAL DEMAND IS TAKING SIGNIFICANT
MARKET SHARE AWAY FROM THE BLACK MARKET AS COUNTRIES
LEGALIZE CANNABIS. WHILE THE TOTAL MARKET MAY BE GROWING
AT 5%, DEMAND FOR LEGAL CANNABIS IS GROWING FAR FASTER,
20%-100% A YEAR DEPENDING ON THE COUNTRY.

FORECASTED SIZE OF THE CANNABIS MARKET
Source: Bank of America Merrill Lynch Estimates
While the size of the cannabis market looks like a lucrative opportunity, demand is only
one side of the equation. When we look at the potential supply of cannabis, particularly
in Canada, it is evident the market will be oversupplied.
Estimates vary; however, we believe legal supply is likely to meet legal demand by 2020
at the latest and will surpass it by 2021. Globally, rules and regulations may adapt to
allow Canadian cannabis exports at scale, however it is more likely Canada will resemble
mature markets like Colorado or other western states where excess supply pushed
down prices.
As an example, cannabis prices in Colorado held steady for the first 2.5 years of
legalization. However, as supply surpassed demand, prices fell rapidly. Wholesale prices
went from $4 per gram to under $1.70 in two and a half years, a 30% annual decline.

WHOLESALE CANNABIS PRICES VS SUPPLY (COLORADO)
Source: Colorado Department of Revenue
Another important factor to consider is the rate at which the legal market can capture
market share from the illegal market. Current estimates based on sales data from the
Government of Canada shows that the legal market is around 15% of the total
consumer demand. The legal markets share of demand is expected to grow over time
but the pace of this increase is uncertain due to the slow rollout of legal cannabis in
Canada. Bank of America estimates legal market share will grow over 40% per year,
reaching 66% by 2022.
At Capital 10X, we believe these market share values are reasonable. While the legal
market has been slow to develop so far, we see this changing rapidly as new product
formats (edibles, vape pens) are released in late 2019 and legal prices fall due to fierce
competition and the coming oversupply.
OVER THE NEXT 4 YEARS WE THINK THE LEGAL MARKET’S SHARE OF

SALES COULD REACH 65% BY 2023 IN CANADA. THIS WOULD BE IN
LINE WITH LEGAL MARKET SHARE IN COLORADO TODAY OF
AROUND 68%.
On a global basis, the overall cannabis market is large, however, the legal market is
expected to be much smaller in comparison as it will take time to push aside an

established black market. Estimates put the legal market share of the global cannabis
market at a fraction of Canada. Legal growth outside Canada will also be much slower
as significant regulatory hurdles remain.
LEGAL MARKET SHARE IN CANADA AND WORLDWIDE
Source: Capital 10x Estimates, Bank of America Estimates
Adding it all up, global cannabis market should grow from $166 billion this year to $210
billion by 2024 while the market in Canada will go from $5 billion to $6 billion over the
same time period.
In Canada, with conservative wholesale pricing of $4 USD, legal demand is estimated to

grow from 185,500 kg in 2019 to 1.175 million kg in 2024. While prices will fall over time,
we are using an average price for illustrative purposes.
To put this demand into perspective, when adding up the funded capacity of just the
top 10 licensed producers in Canada, we arrive at supply of 2.2 million kg by 2022. This
is a truly huge amount of supply and will surpass demand by 2x-10x.

FORECASTED LEGAL CANNABIS SUPPLY AND DEMAND (CANADA)
Source: Capital 10x Estimates, Bank of America Estimates
To understand the size of the global market, we have assumed a similar price for
comparative purposes (though cannabis prices globally are expected to vary
significantly due to currency and cost of living differences). Global demand is
somewhere around 4 million kg this year growing to 10.5 million kg by 2024.
While there is certainly enough global demand for cannabis produced in Canada, the
ability to successfully export at scale has yet to be demonstrated by any Canadian
company. Even market leaders Aurora Cannabis and Canopy Growth, send less than 5%
of capacity abroad.

POTENTIAL SIZE OF THE ORGANIC
CANNABIS MARKET
Now we will tie the trends in organics and in cannabis together to forecast the potential
size of the organic cannabis market. We will also explore the potential supply and
demand dynamics for organic cannabis and lastly forecast what price premium
investors are willing to pay long term.
Initially, the organic alcoholic beverage market seemed like the right market to drive our
cannabis estimates, however, organic alcohol penetration is very low even though
growth is robust. We believe the low market share stems from entrenched consumer
brand preferences. Consumers have only just started to weigh the importance of health
and environmental concerns over familiarity of a brand. Looking at its 12.5% growth
rate of market share, it’s easy to see how the organic segment could triple to $6 billion
in value over the next decade.
Organic fruits and vegetables, unlike alcohol have captured a significant chunk of the total
market with sales running at 14% market share and growing 5% a year. At this growth rate
organic sales would represent 20% of all fruit and vegetable purchases by 2024.
ULTIMATELY, WE THINK THE SUCCESS OF OTHER ORGANIC

MARKETS BODES VERY WELL FOR ORGANIC CANNABIS. WE SEE THE
ORGANIC CANNABIS MARKET PLAYING OUT SIMILAR TO THE
FRUITS AND VEGETABLES MARKET WHERE ORGANIC DOMINATES.
We believe the organic cannabis market will look similar to the organic fruits and
vegetables market for three reasons:
1. Other developing organic markets (beer, wine, etc.) haven’t yet overcome
entrenched brand preferences, leaving them with a small but growing
market share. Organic fruits and vegetables are different however.
Consumers don’t have a favorite apple or asparagus brand and this has
allowed organic fruits and vegetables to capture a much larger market
share. We think organic cannabis is in a similar position. The organic
cannabis market is less than a year behind the non-organic market where
brand preferences aren’t yet entrenched, allowing organic brands to
capture a market share in line with organic fruits and vegetables. Organic
cannabis is in an even better position in other countries that haven’t yet

legalized as it will come to market at the same time as non-organic supply
once legalization hits.
2. Most consumers will be aware of the health risks associated with

consuming contaminated cannabis and this will increase their desire to
consume organic product. The potential health risks around non-organic
will drive a higher market share for organics when comparing the
cannabis market to beer and wine.
3. Millenials and Gen X’ers are the largest cannabis consumer group and
they have demonstrated a clear preference for organic and sustainable
products. As their buying power increases, demand for organic cannabis
will grow as well.
ULTIMATELY, WE BELIEVE CONSUMER PREFERENCE FOR ORGANICS

WILL DRIVE A 10% INITIAL MARKET SHARE FOR ORGANIC
CANNABIS, EXPANDING TO 20% BY 2024 DRIVEN BY FALLING
PRICES AND BETTER CUSTOMER AWARENESS AND EDUCATION. WE
ASSUME PRICES FALL BY 15% A YEAR ON AVERAGE, IN LINE WITH
PRICE CHANGES FOR PREMIUM CANNABIS IN THE U.S.
We expect organic cannabis demand to grow from ~19,000 kg in 2019 to 384,000 kg by

2024, an 80% annual growth rate. From a supply perspective, organic supply will fail to
meet demand in 2019 as growers ramp up, but by 2020, supply should meet or exceed
domestic demand. With much of global organic cannabis demand outside Canada, we
think it is likely any excess supply can be exported to Europe, South America or parts of
Asia to keep the market in balance through 2021.
After 2021 organic demand will continue to grow but a lack of planned expansions
leaves a gap in supply. Organic market dynamics are much more favorable than what
we are seeing in the non-organic cannabis market. Canada has a monopoly on certified
organic cannabis for at least the next two years and will be the main beneficiary of any
supply shortage.

FORECASTED ORGANIC CANNABIS SUPPLY AND
DEMAND OUTLOOK (CANADA)
Source: Capital 10X Estimates, Bank of America Estimates
Based on our research into the market share of organic foods, we think organic cannabis
will capture 10% of the cannabis market globally growing to 20% over the next 4 years.
A 10% share is 4 million kilograms today, growing to 10 million kilograms by 2024,
compared to less than 200,000 kilograms of planned organic supply.
CANADIAN ORGANIC GROWERS EFFECTIVELY HAVE THE WORLD

MARKET TO THEMSELVES RIGHT NOW AND THE PRODUCERS WITH
THE RIGHT INTERNATIONAL STRATEGY COULD MEANINGFULLY
EXCEED MARKET EXPECTATIONS.
Below is our forecast of organic supply in Canada. We have discounted the planned
capacity promised by management teams due to the challenges and uncertainties of
growing organic cannabis at scale. Supply is estimated to reach 70% of planned capacity
due to the challenges of growing organic cannabis. 48 North must deal with the
uncertainties of organic cultivation while also managing an unpredictable outdoor
environment, however early signs from the 2019 harvest look very promising. TGOD and
Rubicon in contrast, are growing in custom built indoor or greenhouse facilities where
every aspect of the environment is closely managed and controlled. Their chances of
success are definitely higher.

FORECAST ORGANIC PRODUCTION BY COMPANY
* 48 North production discounted by 30% in 2019 to account for uncertainties of outdoor. We give them full credit for outdoor
capacity in later years as we assume they will increase planted acreage. Source: Company Filings, Capital 10X Estimates

ORGANIC CANNABIS HAS A FEW
CHALLENGES LEFT TO OVERCOME
The organic cannabis market is looking like it will be far from a niche market, potentially
reaching annual sales of $6 billion by 2024. From the price premiums, to near-term
supply/demand dynamics and long-term growth potential, all signs point to a lucrative
segment of the cannabis industry.
However, investors still possess a healthy dose of skepticism that organic cannabis can
truly be grown at scale and grown profitably. This skepticism is the driving factor holding
the organic stocks back from generating significant returns for investors, not to mention
outperforming non-organic peers.
This section will explore the two risks keeping investors from diving all in on organic
cannabis and explain how industry dynamics and management learnings are quickly
overcoming these challenges.
WILL ORGANIC CANNABIS BE PROFITABLE?

We think organic cannabis has a very high chance of generating positive and potentially
even superior returns than middle of the road non-organic supply. The main driver of
this thesis is the strong price premium organic cannabis demands in the market today.
Whistler Medical, the first certified organic cannabis grower, sells the strains BC Rockstar
and Nukem for $18 per gram. With retail cannabis selling for $9.50 on average according
to Health Canada, Whistler commands a 90% price premium over non-organic supply.
Keep in mind the actual premium to non-organic flower is likely even higher as the $9.50
selling price we quoted is for more expensive oil as well as cheaper flower.
WHISTLER BC ROCKSTAR STRAIN PRICING
Source: B.C. Cannabis Store

WHISTLER PRICING COMPARED TO THE NON-ORGANIC RETAIL AVERAGE
Source: Health Canada, B.C. Cannabis Store
ORGANIC GROWING PROCESS INCREASES COSTS BUT CREATES A

BARRIER TO ENTRY
The first step to defining the challenges organic growers face is to understand the
organic certification process. Cannabis growers must be compliant with the Canadian
standard for organic production, basically the same standard that applies to organic
produce in the local supermarket.
The entire organic certification process has multiple steps and can last months. We’ve
laid out every step below to demonstrate that obtaining an organic certification is no
walk in the park and does endow any company willing to endure the process with a
tangible advantage over non-organic peers.
First the grower is required to fill out an application certified by a third party that
includes a detailed operational plan.
1. The certification body reviews the application looking for any initial non-
compliance issues.
2. Next the certifier inspects the operations, including:
3. Verification the system plan is being maintained.
4. A search for evidence of contamination or non-compliant products

(inspects and tests fertilizers, demands proof of purchase of products).

5. An audit of the different components making up the nutrient balance to
ensure what you are yielding can only be produced from approved
nutrients and not non-compliant inputs.
6. Once a full review of the inspection results are completed, the grower is
notified of any non-compliance issues. Growers then have a set time
period to fix the issues and to prove they have done so.
7. Lastly, the certification committee reviews the results of the entire process
and decides whether to grant, extend or revoke a certification.
8. Ongoing surveillance and enforcement are carried out, including routine

audits. Instances of non-compliance can lead to sanctions or at a worst a
loss of the organic certification.
Though lengthy, this strict approval process creates a competitive advantage for organic
growers. The costs to comply with the organic certification for a greenhouse or indoor
facility can increase upfront construction costs by 50%-100%. The commitment of extra
man hours, not to mention extra construction costs provide barriers to entry for those
growers that choose to attempt an organic certification.
These barriers to entry will allow organic growers to maintain price premiums for longer
and could aid producers in avoiding the same level of price compression non-organic
growers will likely face.
ORGANIC GREENHOUSES COST MORE, BUT THE COST PREMIUM IS

SHRINKING RAPIDLY
Looking at construction costs for a long list of greenhouses including The Green Organic
Dutchman’s (TGOD) Hamilton facility, we can see that costs to build organic facilities (in
blue) are at the high end per square foot. However, what is interesting is that future
construction costs, TGOD’s Quebec Facility, are estimated to be the same per square
foot as other non-organic facilities from competitors.
ORGANIC PRODUCERS ARE LEARNING AND ADAPTING RAPIDLY

AND WE SHOULD SEE BOTH GROWING AND CONSTRUCTION COSTS
PER UNIT FALL SIGNIFICANTLY OVER TIME, OFFSETTING ANY FALL
IN RETAIL SELLING PRICES.

CONSTRUCTION COST PER SQUARE FT
Source: SEDAR, Company filings and Presentations, Capital 10X Estimates
AS ORGANIC GROWERS GAIN EXPERIENCE GROWING AT SCALE,

GROWING COSTS WILL FALL RAPIDLY
In any industry, as employees gain specialized knowledge and learn from their mistakes
and as equipment and processes are standardized, efficiency and costs fall. The legal
cannabis industry as we know it today is only two years old and both builders and
growers have a lot to learn.
As greenhouse builders discover the optimal design for growing and harvesting and
cultivators grow larger, healthier plants in less time, costs will fall. Organic cultivation
will likely remain more expensive than non-organic, but as the industry matures the
costs differences should become immaterial.
At the end of the day, we think consumer’s strong preference for organic products and
willingness to pay a premium will lead to higher margins for organic cannabis compared
to non-organic, even if we take higher growing costs into account.

CAN ORGANIC CANNABIS BE GROWN
AT SCALE?
Growing agricultural products at scale can be incredibly challenging. Not to mention
agriculture is already a closely regulated industry requiring a high degree of control by
cultivators to meet stringent quality standards. Organic growers must deal with a
number of challenges: unpredictable soil, more precise management of air quality and
stronger equipment to handle the additional weight requirements of dealing with soil.
Though these challenges are significant, they all can be overcome with knowledge,
planning and capital.
Of all the factors that will lead to organic success at scale, soil is the most important.
Unlike competitors, organic growers can’t juice their crops with regular fertilizer if they
are struggling to reach yield targets or if plant disease sets in. As a result, the most
important tool in an organic grower’s toolbox is called “living soil”. Living soil is exactly
as it sounds, a microcosm of bacteria, fungi and other organisms that live through
symbiotic cycles to break down organic matter and produce nutrients for the plants.
Living soil brings agriculture back to its roots.
Living soil is integral to maintaining key nutrient levels and to keeping crops healthy and
disease free. Ask any organic farmer and they will all tell you living soil is the key to
growing organic.
A LIVING SOIL MICROBIOME
Source:The Future of Organic Cannabis Production at Commercial Scale

Living soil, unlike inorganic growing medium changes over time providing tangible
benefits to the growing process.
For example, as the soil builds up a rich collection of bacteria and organic matter, the
yield of the plant increases over time. This yield change can be meaningful. One organic
grower we spoke to is targeting 40 grams per plant but sees a tangible pathway to
achieving 60-80 grams per plant as the soil matures. The company has already achieved
60-80 gram yields going as high as 120 grams per plant but not on a consistent basis. As
growers gain experience cultivating organic cannabis, increasing yields will contribute
to lower growing costs and better profitability. 40-80 grams per plant would be
competitive with non-organic yields across the industry, meaning organic growing costs
could potentially also compete with non-organic over time.
MANAGEMENT YIELD ESTIMATES BY COMPANY
Source: SEDAR Filings, Company Guidance
Air quality is another key factor that determines success or failure in an organic grow.
Yes, organic cannabis is more susceptible to pests, mold and other diseases compared
to chemically treated plants, but with the right air filtration system in place, these risks
can be mitigated. The larger organic growers in Canada have invested in top of the line
HVAC systems enabling effective filtering of the air and allowing the growing
environment to be tightly controlled. At the end of the day with the right air quality
system in place the risks around organic growing can be successfully managed.

The final challenge to overcome with organic is the weight of living soil. Non-organic
growing is typically done with rock wool which weighs about 50% less than soil. The
extra weight of the soil requires more robust and expensive equipment to grow and
harvest organic cannabis. However, similar to the air quality issues, this is a problem
that money can fix. The Green Organic Dutchman, the largest organic grower, has
already invested in heavy duty growing tables and harvesting equipment to make sure
they can handle the increased soil weight as efficiently as competitors handle rock
wool. So, although organic cultivation increases equipment costs, as long as the
grower has the capital, the weight difference won’t pose a long-term risk to a
successful organic harvest.
Apart from enabling organic growth at scale, living soil also provides a significant taste
and production advantage. Cannabis ’connoisseurs‘ have consistently stated it produces
the best tasting cannabis, bar none. Living soil is an organic producers intellectual
property, more valuable than the strains or facilities, it is the secret sauce that sets their
organic product apart.
In summary, growing organic cannabis at scale is feasible, it just requires the right
facility design, grower experience and the funding needed to pay for more costly
capital expenses.

WAYS TO INVEST IN THE ORGANIC
CANNABIS OPPORTUNITY
To help investors take advantage of the structural growth ahead for the organic
cannabis market, we scoured public and private markets to find the companies best
positioned to become organic leaders.
The following section covers the assets, growth plans and rough valuations for the
organic growers closest to commercializing their products.
The potential upside for each stock is summarized below. On average, we see 311%
upside to play for in the publicly traded organic producers. This is very attractive upside
even if the risk is higher as these companies are still in the early stages of cultivation
and are not yet selling their products at scale to consumers.
POTENTIAL UPSIDE FOR ORGANIC STOCKS
*TGOD’s HemPoland subsidiary adds $5mm of EBITDA. 48NORTH’S outdoor product is expected to be sold for oil conversion and
dry flower at a lower price. EBITDA margins of 30% based on the guidance from the majority of Canadian LPS EBITDA multiple
(15x) in-line with beer, wine, and spirits companies.
Source: Company Filings, Capital 10X Estimates

ORGANIC STOCKS ARE ACQUISITION TARGETS
Organic stocks already have significant upside based on fundamentals, but we think
these stocks could generate even larger gains from potential buyouts down the road. If
organic cannabis really does become a hit with consumers, larger licensed producers
like Canopy, Aphria, Tilray or Cronos will be falling all over themselves to buy an organic
grower. It would be much more difficult and costly to start an organic business from
scratch based on what we know about the significant challenges of growing organic.
The open market value of organic has already been set by the acquisition of organic
grower Whistler Medical by Aurora Cannabis earlier this year. Aurora paid $35 per gram
of funded capacity. This multiple is a huge premium to where the stocks trade today and
offers upside optionality on top of the already attractive fundamentals of these stocks.
IF WE APPLY WHISTLER’S PURCHASE MULTIPLE TO TGOD, RUBICON

AND 48 NORTH, THE STOCKS HAVE 4X-7X UPSIDE.
POTENTIAL UPSIDE FROM M&A
Source: Capital10X Estimates

WHISTLER MEDICAL MARIJUANA COMPANY
CONCLUSION
Whistler is the only producer so far to prove they can grow organic cannabis at a
medium scale and sell successfully to the public. Whistler’s products have been available
since 2014 and sell for almost $18 a gram, a 90% premium to the market average,
enabling the company to generate above average margins. Compared to peers, they
have had a head start developing an organic cannabis brand. While their operations are
small relative to the planned capacity of other organic producers, Whistler provides a
valuable glimpse of what organic cannabis companies can achieve.
However, Whistler is not an investable organic cannabis opportunity now that the
company is part of Aurora Cannabis, a much larger non-organic grower. Whistler’s
production capacity is less than 1% of Aurora’s total capacity, diluting the value of Aurora
as an organic cannabis play. Aurora paid a pretty penny for Whistler, $35/gram of
capacity, showing the market has an appetite for organic growers.
Unfortunately for investors, Whistler remained a private company throughout its

growth and then was acquired by Aurora Cannabis earlier this year making it impossible
to own the stock or benefit from its success.
OPERATIONAL REVIEW
Whistler Medical is the pioneer of organic cannabis and operates in Whistler, British
Columbia. In 2013 they were the first licensed producer to obtain organic certification
for their facilities. They have since been acquired by Aurora Cannabis at a $175 million
purchase price valuation that includes stock, cash and performance-based
compensation. The majority of the original founding grow team has since departed for
other organic cannabis companies, leaving only Chris Pelz with the company.
Whistler Medical currently operates two licensed indoor production facilities. The first
facility, Alpha Lake, has been in operation since 2014 with a capacity of 500 kg/year.
The second facility, Pemberton, is an EU GMP-certified indoor facility with a planned
capacity of 5,000 kg/year. Current operating capacity of Pemberton is 1,200 kg/year,
with the remaining capacity expected to come online by the end of 2019 in Phase 2 of
the expansion.
Both of their facilities conform to International Organic Growing Standards and are
certified by the Fraser Valley Organic Producers Association (FVOPA), a government
approved certifying body.

As the pioneer of organic cannabis, Whistler Medical has developed a strong organic
brand in the minds of consumer, where their products command an impressive 90%
premium ($18/gram) over non-organic supply. To date, they have commercialized over
30 dried flower and oil products from 150 strains of cannabis. While no public financial
statements have been released, according to information released by Aurora through
the acquisition, Whistler Medical has been cash flow positive since 2015 with EBITDA
margins in excess of 30%.

RUBICON ORGANICS
CONCLUSION
The team behind Rubicon has a solid history of growing organic cannabis. Jesse,
McConnell, the founder of Rubicon, was also a co-founder of Whistler Medical, the first
and currently largest certified organic cannabis grower globally. Rubicon also hired the
architect of the Canadian organic standards, giving them second to none experience in
understanding and complying with organic regulations. Rubicon is planning to grow
11,000 kg of organic cannabis in the medium term with the ability to expand to 67,000
kg longer term. 11,000 kg would make Rubicon twice as large as Whistler Medical but
much smaller than the 200,000+ kg of capacity planned by The Green Organic
Dutchman. We know Rubicon is looking to raise funding to expand capacity even further
and we have given the company credit for an expansion to 22,000 kg longer term.
Rubicon looks like a well-positioned pure play organic investment but is at an earlier stage
in its growth than peers like TGOD and Whistler, adding some execution risk. First harvest
was expected before June of this year, but the public rollout of retail products won’t be
until Q3 2019 at the earliest and the company won’t reach full output until sometime in
2020. Having received their organic certification from FVOPA in July 2019, they are ready
for to distribute certified organic products once their first crops are processed.
From a valuation standpoint Rubicon stock is pricing in an outcome where 20% of

Canadian capacity gets built. This is more than TGOD where there is upside if more than
10% of capacity is built. Rubicon still offers significant upside if management
successfully brings capacity online and is a hit with consumers, but more needs to go
right than for the other organic pure play in the space.
OPERATIONAL REVIEW
Rubicon is a licensed producer with primary operations based in Delta, British Columbia.
Rubicon’s key team members include founder Jesse McConnell, a co-founder of Whistler
Medical, and Peter Doig (as Chief Science Officer), who is the individual helped write the
first Certified Organic Cannabis Standard in Canada.
They are a certified organic grower ramping operations with a planned capacity of
11,000 kg/year in 2020 using hybrid greenhouse operations in Delta, BC. They also own
production facilities and brands in Washington state, which they lease to state-licensed
producers and processors. Rubicon owns two separate growing facilities in Delta, British
Columbia and Ferndale, Washington. The company has stated that it has proprietary
intellectual property that enables them to grow “super-premium” organic product with
production costs as low as C$0.50/gram.

Canadian operations will have 11,000 kg/year of annual capacity with organic
certification and first harvest expected by the end of Q2 2019. A full consumer rollout is
scheduled for the third quarter of 2019. Rubicon is projecting $30 million in EBITDA
($2.73/gram) for 2020, based on $5/gram gross profit. They would be trading at only
4.7x EBITDA if they hit $30 million of EBITDA compared to non-organic cannabis
companies at 21x.
RUBICON ORGANICS UPCOMING VALUE CATALYSTS
Source: Rubicon Organics Corporate Presentation August 2019
The U.S. operations have a capacity of 4,500 kg/year and were designed by Thomas Larssen
the engineering firm behind the Aurora Sky facility. These facilities are fully operational, and
Rubicon estimates they will generate $5 million in EBITDA in 2020. Notably, this would yield
$1.11/gram of EBITDA, or a 60% reduction compared to Canadian operations, indicating a
lower flow through margin on their U.S. licensing businesses.
Within U.S. operations, they also license CO2 oil extraction facilities in Bellingham,
Washington for the purpose of supplying oil to two of their U.S. cannabis brands. One
of their brands has been recognized with “Best Oil” awards in 2017 and 2018. As recently
as June 2019, they announced an exclusive license deal with Cookies, a California
cannabis brand, to be the exclusive supplier of Cookies cannabis products in
Washington state.

48 NORTH
CONCLUSION
48 North has significant upside potential but also the most risk among organic growers.
The company is planning for significant production growth in the short term from a
40,000 kg outdoor grow this summer and should have very low operating costs as a
result. However, we have three concerns that in our view handicap their upside:
1. Given their lack of control over the growing conditions, which is very
important for successful organic cultivation, we have reservations about their
ability to maintain the health and quality consistency of the crop. Plant yields
and product quality could be significantly reduced, which would hurt the
pricing they receive and ultimately their total revenue. Permitting delays and a
wet spring delaying planting and could hurt the ultimate yield in 2019.
2. Operations aren’t currently certified organic and the timeline for organic
certification is uncertain. Given they plan to harvest the outdoor crop by
September at the latest, this doesn’t leave much time to achieve the organic
certification before they have to package and sell the product. The organic
seal of approval allows them to sell product for much higher prices.
3. The margin they generate depends if the organic flower goes into value added
products or is sold as is. We forecast a 40% EBITDA margin that is an 80/20
mix of value add/flower ultimately.
For these reasons, we don’t consider 48 North to be a top organic producer yet. In the
future if they demonstrate they can produce quality outdoor cannabis that is also
certified organic, they will warrant serious consideration. Watch this stock closely.
OPERATIONAL REVIEW
48 North is a licensed producer with indoor and outdoor growing facilities based in
Ontario. They are the first licensed producer to receive Health Canada certification for
an outdoor facility and although not yet certified-organic, they plan to bring online the
40,000 kg/year outdoor facility for organic cannabis production in the summer of 2019.
So far a rainy spring and permitting delays are leading to a late planting season, but
updates from the field make it seem like the crop is coming along nicely. They have two
other indoor facilities, located in Brantford and Kirkland Lake, each with 2,500 kg/year
capacity. The company is led by CEO, Alison Gordon, a cannabis and marketing veteran.

Their primary production facility is the 40,000 kg/year outdoor grow located in Brant
County, Ontario. Leveraging the lower operational costs associated with an outdoor
facility, they expect growing costs to be as low as $0.25/gram, which would be the lowest
in the legal industry.
48 NORTH MILESTONES
Source: 48 North Investor Presentation September 2019
While growing costs are at near rock-bottom levels, they also expect to sell the product
at lower prices due to the variability in quality from their outdoor grow. They will
primarily focus on producing cannabis for use in derivative cannabis products such as
edibles, vape pens and beverages.
They are setting up their Brantford facility to follow GMP standards and to obtain
organic certification. They have also signed an agreement with distributor Humble +
Fume to build and share an extraction facility and packaging line with an annual capacity
of over 30,000 kg. This will allow them to conduct CO2 extraction to produce their oils,
distillates and isolates at their Brantford facility.
As of June 2019, they have secured supply agreements with SQDC in Quebec (1,200 kg),
AGLC in Alberta (2,460 kg), OCS in Ontario (1,200), and Humble + Fume (6,000 kg). This
locks up 10,860 kg of demand or just under 25% of their total production capacity.

THE GREEN ORGANIC DUTCHMAN (TGOD)
Ultimately, we think TGOD is the best positioned of the organic growers. When we
looked at the organic landscape, TGOD has the lowest operational risk, along with big
potential upside. TGOD has a longer track record of execution (construction, branding
and cultivation) than any of its publicly traded peers, decreasing the risk they fail to grow
at scale. TGOD also is aiming for true scale, with ambitions to not only be the largest
organic grower, but one of the largest growers period. Most importantly for us, the
company trades at a very compelling valuation that in our view provides investors a
large margin of safety.
TGOD stands out to us for the following reasons.
1. A proven ability to design and operate organic cannabis growing facilities;

a. Master Grower trained by organic pioneer, Whistler Cannabis.
b. Significant experience successfully managing consumer packaged
goods (CPG) companies.
c. Longest operating history among publicly traded organic growers.
2. Strong strategic positioning:

a. Peer leading domestic and international footprint.
b. Competitive advantage though IP and high cost of entry.
c. The most recognized organic brand giving them a sales and
marketing advantage.
3. Highly favourable valuation:

a. Only 10% of capacity (22,000 kg) needs to be sold to justify the
current stock price, a milestone they should reach in 2020.
b. Multiple important catalysts in 2019 as the company rolls out a full
product lineup into the recreational market.
MASTER GROWER IS AN ORGANIC CANNABIS EXPERT

The upside for TGOD investors will be significant if the company can successfully scale,
making it even more important than usual that investors understand the caliber of
people working behind the scenes.
Organic cultivation at scale takes the right people and the right facilities and from our
research it looks like TGOD has both. Of the 2-3 people most adept at growing organic
cannabis under a legal regime, TGOD’s Master Grower, David Bernard-Perron is one of
them. Bernard-Perron is VP of Growing Operations, making him responsible for organic
cannabis production across the organization.

Bernard-Perron’s educational background, a BSc’ in agriculture and a MSc’ in organic
agriculture from McGill, is impressive but more important for us is his real-world
experience. Bernard-Perron was one of the pioneers of organic cannabis at Whistler
Medical Marijuana Company. At Whistler he was the lead agronomist, helping develop
the organic growing program from scratch including soil science, plant genetics and
plant physiology. He was one of the few people responsible for the organic certification
and successful output of Canada’s current largest organic cannabis producer.
At TGOD Bernard-Perron led the company through three separate government

approved third-party organic certification processes with EcoCert and Pro-Cert. He now
has substantial experience obtaining and maintaining organic certifications and has a
good relationship with the certifying bodies as a result. With a compliance expert like
Bernard-Perron on the team we believe TGOD has a leg up over competitors as it tries
to gain organic certification in Europe and elsewhere.
Bernard-Perron’s intimate knowledge of the growing process also allows him to react
quickly to make sure the plants and soil are being optimally managed. As a result, the
plant yields and flower quality will be higher, both very important to the economics and
success of the business.
We spent an entire day talking all things cannabis with Bernard-Perron and judging from
what we heard and observed, he is the best person TGOD could have hired to make
sure they can successfully grow organic cannabis at scale.
TGOD’S MASTER GROWER IS THE MOST EXPERIENCED PERSON

IN THE WORLD AT OBTAINING ORGANIC CANNABIS
CERTIFICATIONS AND ONE OF THE PIONEERS IN GROWING
ORGANIC CANNABIS LEGALLY
TGOD’s approach to building out greenhouse operations provides another layer of

support for the master grower to successfully grow at scale. TGOD built greenhouses
custom designed for growing organic cannabis allowing them to create efficiencies that
wouldn’t be possible with retrofitted operations. One example is equipment rated for
higher loads so they can handle the added weight of natural soil compared to lighter
rock wool typically used for non-organic growing.
TGOD also used the same engineering firm that built Aurora’s Aurora Sky facility
allowing them to improve their facilities on the fly. TGOD was able to learn from the
engineering changes made in the Aurora Sky construction process because they were
still designing their facilities while Aurora was constructing Sky. The ability to see the

inside of a pioneering cannabis construction project likely saved TGOD a significant
amount of money and time. From an investor’s point of view there is now less of a risk
that TGOD will run into design problems as they scale up.
SERIOUS CONSUMER PACKAGED GOODS EXPERIENCE

Successfully growing organic cannabis is only one piece of the puzzle. The other
important piece is being able to create products consumers want and to ensure these
products have wide distribution to reach as many consumers as possible. We are
encouraged that TGOD looks to have hired three specific employees with deep
experience creating and distributing consumer products.
BRIAN ATHAIDE
INTERNATIONAL CPG
TGOD’s Chief Executive Officer, Brian Athaide has significant experience working in
large consumer facing organizations. He will likely scale well with the business due to
his past experience.
At Proctor & Gamble, Athaide moved through progressively more senior roles across
Europe, Latin America and Asia. His responsibilities included managing acquisition
integration, strategy development and managing political and economic challenges in
high volatility markets. He moved his way up to Director and CFO of the company’s
entire business in Russia, Ukraine and Central Asia.
More recently, he worked as the CFO and VP of Human Resources for the largest publicly
traded wine and craft alcohol producer in Canada. Considering TGOD’s goal to be the
global organic cannabis brand, Athaide’s experience working with global supply chains
and managing a global operation will allow him to successful manage the company’s
rapid growth.
CSABA REIDER
INTERNATIONAL CPG
Csaba Reider has extensive experience in consumer beverages including, soda, juices,
energy drinks and water. His experience likely explains why TGOD is focusing initial
resources on taking over the market for cannabis beverages instead of focusing mostly
on edibles and vape pens like most other licensed producers.
Reider has served as CEO, a member of the board and a senior VP for a number of
companies including Sun Pac Foods, a major distributor of juices, teas, sports drinks and
sodas, Xyience, one of the largest energy drinks brands behind Monster and RedBull
and served on the board of Associated Brands, a beverage conglomerate. Reider built

nationwide distribution infrastructure for multiple brands and will likely be the one who
makes sure TGOD products are on as many retail store shelves as possible.
PREM VIRMANI
CHAIR OF BEVERAGE SCIENCE
Prem Virmani looks to have extensive experience creating soda formulations in the
retail channel. He was the point person in formulating Sam Cola for Walmart and PC
Cola for Loblaws. He will likely lead product development of all the types of cannabis
and hemp-based beverages TGOD has planned including sports drinks, the category
with he largest potential in our view.
Having an executive with so much experience creating and testing new drink formulations
and possessing deep relationships with traditional drink distribution partners will be key
for TGOD. Virmani will likely be instrumental in testing to see which formulation
consumers prefer and then quickly putting the product into wide distribution.
LONGEST TRACK RECORD OF PUBLIC EXECUTION

Whether organic or non-organic, no company in the legal cannabis market has yet
proven they can grow at scale in one greenhouse facility, defined as annual output over
100,000 kilograms. Even though licensed producers haven’t scaled yet, they still have 9
months under their belt successfully selling thousands of kilograms to the public.
Organic peers by comparison are just now rolling out products to store shelves. Organic
producers lack an operating history and investors are right to be skeptical.
Of the publicly traded organic producers, TGOD stands out as the company with the
longest operating history. A longer operating history is important because it gives a
company time to learn and improve. After spending a significant amount of time talking
with organic and non-organic growers and management teams, we are convinced
growing success is a matter of trial and error. The industry is attempting to grow at a
scale that has never been attempted before and every grower, no matter how
experienced, is charting new territory.
TGOD has had at least two years to test different organic growing techniques which is
far longer than peers. The company also successfully worked through many issues in
the design and constriction phase of their custom greenhouses. While peers earlier in
construction and design are likely to face the same challenges in the future, TGOD has
put these issues behind them leaving a smoother operational runway.

BEST ORGANIC STRATEGIC FOOTPRINT
Among organic peers, TGOD has far and away the best distribution infrastructure and
agreements in place. Growing high quality organic cannabis is one thing, but if you can’t
move the product from the greenhouse to retail channels, the rest doesn’t matter.
They have set their sights set far beyond Canada, including other markets in North
America, Europe, Latin America and the Caribbean. TGOD looks to be putting in place
partnerships that will allow the company to grow and distribute cannabis all over the
world. We like a diversified distribution footprint because it gives the company access
to more consumers, increasing the chances of success.
Below is a description of the company’s distribution assets.
MAP OF TGOD DISTRIBUTION ASSETS
NORTH AMERICA
VELVET MANAGEMENT – (CANADA)
In Canada TGOD secured an exclusive supply agreement with one of the top wine
distributors in Canada, Philippe Dandurand Wines. Through a Dandurand subsidiary,
Velvet Management, TGOD will have access to an experienced distribution partner with
relationships already established across the provinces. Based on the agreement, TGOD
will be the exclusive supplier of organic cannabis for Velvet Management.
Having a strong sales and distribution partner within Canada is imperative for TGOD to
create a national brand. Philippe Dandurand has extensive experience working with the
various alcohol monopolies in Canada, where one in ten bottles of wine imported into
Canada is sold by Dandurand. They bring an experienced, high quality sales team to the

table, with a presence in all ten provinces. Having won awards from the Liquor Control
Board of Ontario (LCBO) as the ’Partner of the Year‘ in the wines category, they have
demonstrated that they are an industry leading distribution partner.
TGOD has already secured supply agreements with the Ontario Cannabis Retail Corp.
(OCS), the BC Liquor Distribution Branch (BCLD) and the Alberta Gaming, Liquor &
Cannabis (AGLC) giving them access to ~64% of the Canadian population. This is more
than enough demand to sell all their capacity in 2019. Another agreement with Quebec
is in the works, potentially giving them access to over 85% of the Canadian population.
Through partnering with an experienced distributor like Philippe Dandurand, TGOD can
focus on their core business of growing cannabis while trusting their partner to make
sure the product is sold online and in prime retail shelf space.
CALIFORMULATIONS (UNITED STATES)
Califormulations, a joint venture between TGOD and German company Symrise, will
focus on infused beverage product innovation and supply chain development to help
companies quickly bring product to market for their clients.
The purpose of the partnership is to develop and scale infused beverage technology
within the organic segment (formulation development, pilot scale production,
manufacturing coordination). At face value, the company will help TGOD expedite the
launch of organic CBD infused beverages within the U.S. and Canada, however, looking
beyond that, this partnership is an opportunity to develop and produce organic
beverages that can be shipped internationally as well.
TGOD will also benefit from the distribution infrastructure of Symrise, a $12 billion
company. Symrise has relationships with beverage distributors across the globe
which TGOD can leverage to make sure their CBD or THC infused beverages gain
wide distribution.
LLACA GRUPO IMPRESARIAL (MEXICO)
TGOD formed a 50/50 partnership with LLACA Grupo Impresarial and officially
entered the Mexican medicinal cannabis market in 2019. This partnership will create
sales and distribution channels in Mexico, where LLACA has access to 4,500
pharmacies and 3,100 supermarkets.
TGOD sees this as the first step towards building out their presence in Latin America. As
their production capacity ramps, we expect to see TGOD form other similar partnerships
to improve their LATAM distribution channels.

EUROPE
HEMPOLAND (POLAND)
In the summer of 2018, TGOD acquired a 100% ownership stake of HemPoland, a CBD
oil producer. HemPoland owns CannabiGold one of the top CBD brands in Europe.
HemPoland was also the first company in Poland to obtain a state license for hemp
cultivation and CBD oil derivatives and is also licensed in Poland to grow cannabis.
Working closely with TGOD’s team, they are now a certified organic grower.
HemPoland recently signed a distribution agreement with Mediakos UG to distribute

thier products to the German market. Mediakos distributes products to more than
15,000 pharmacies in Germany, the fastest growing cannabis and hemp market in
Europe. As a result of this partnership HemPoland products are available online and in
pharmacies across Germany.
CARIBBEAN
EPICAN (JAMAICA)
TGOD has entered into a strategic partnership with Epican Jamaica, where they own
49.18% of the company. Epican has a current capacity of 1,300 kg, with a planned
capacity of 14,500 kg, utilizing only 5% of the available 100-acre site.
The company is the first fully integrated cannabis company to obtain two retail licenses
within Jamaica. They currently have two dispensaries open in Kingston and Montego
Bay, two of the highest traffic cities in the country, with three additional dispensaries
planned for opening throughout 2019.
The goal with this partnership is to create an opportunity to export TGOD branded
Jamaican cannabis products to select international medical jurisdictions. TGOD also has
the opportunity to stock their Jamaican dispensaries with their own organic products
once production ramps up.
COMPETITIVE ADVANTAGE THROUGH IP AND HIGH COST OF ENTRY

Based on our conversations with different growers, it is clear experience is extremely
valuable when growing organics. We believe TGOD will have two main advantages once
they ramp up to production; their R&D capabilities and unparalleled scale.
The first advantage is the IP TGOD has already developed from their growing operations.
From the development of the living soil recipe to strain development to yield
maximization, they are quickly becoming the de-facto experts on growing quality
organic cannabis. The internal knowledge TGOD’s growers have developed will take
significant time and expense for any other competitor to copy.

Through their partnerships with companies like Califormulations and Knud Jepsen,
TGOD is demonstrating a disciplined approach to developing high quality products.
They keep their focus on growing organic cannabis, while allowing experienced
product development and genetics experts to assist them with their R&D. This will
allow them to achieve higher quality, more consistent products faster and with a lower
capital investment.
TGOD is also set up to have a first mover advantage in any jurisdiction. At their scale
and with the distribution agreements they have in place, breaking into and supplying
new markets in other countries will be possible. TGOD already has a distribution
foothold in significant markets like Europe and Latin America and is learning more about
these markets every day. As legalization in those markets progresses, they will be
prepared to deliver organic supply from day one.
Overall, the results from TGODs R&D and the strategic advantages provided by scale
gives them a significant head start over other organic growers or new entrants to the
industry in our opinion.
THE MOST RECOGNIZED ORGANIC BRAND

At Capital 10X, we believe developing a top cannabis brand known for quality and
consistency will be one of the most understated, but difficult challenges each
company will face. With so many companies, products, and strains to choose from,
consumers will choose the brands they know the best, as long as the quality and
consistency are there.
The effects this can have on market share capture can be significant. According to a
recent study by BDS Analytics, the top 5 brands in Colorado account for 50% of sales.
Washington and Oregon are similar where the top 5 brands capture between 20%-70%
of the market depending on product-type. When widening the range to the top 10
brands, the market share rises to 60%-95% across all categories. The market share
advantage branding provides is significant.
TGOD is well positioned to become the organic market leader given it already has the
most recognized organic brand, even before the product has been widely released.
Search the web for ’organic cannabis‘, and The Green Organic Dutchman is the first
company website to appear. TGOD built such strong brand awareness through a unique
fundraising strategy.

MANAGEMENT FOCUSED ON RAISING MONEY FROM AS MANY
SMALL INVESTORS AS POSSIBLE, INSTEAD OF FROM A FEW LARGE
INSTITUTIONS, KNOWING THESE SAME INVESTORS WOULD LIKELY
BECOME FUTURE CUSTOMERS. THEY GENERATED SIGNIFICANT
BRAND AWARENESS IN THE PROCESS. THIS FUND-RAISING
APPROACH CREATED A GROUP OF EVANGELISTS WHO ARE
INCENTIVIZED TO PURCHASE TGOD PRODUCT TO BENEFIT THEIR
OWN INVESTMENTS AND WHO NOW REFER FRIENDS AND FAMILY
TO THE BRAND.
Based on the scale of TGOD’s operations and the limited number of organic
competitors, the company is poised to dominate the Canadian consumer market. We
think it is realistic to see TGOD capture 50%-75% of the organic cannabis market share
in Canada if they can reach the 200,000 kilograms of capacity they are targeting.
Even if non-organic producers decide to grow organic flower to take advantage of

consumer demand, it will still take them 2-3 years to catch up to TGOD’s institutional
knowledge of growing techniques and strain specific intellectual property. TGOD along
with most of the other organic producers have a significant head start to say the least.
HIGHLY FAVORABLE VALUATION

The valuation of TGOD got us interested in the stock in the first place and is what we
keep coming back to when talking to investors about why we like the stock. Here at
Capital10X we don’t just look for absolute upside, we focus on both the risk and
reward. When we looked at the organic landscape, we found companies with more
absolute upside, but only if you ignored the significant operational risks these
companies must navigate.
TGOD IS OUR FAVORED WAY TO INVEST IN ORGANIC GROWERS AS

THE STOCK IMPLIES THAT ONLY 10% OF FULLY FUNDED ORGANIC
CAPACITY IS BUILT, COMPARED TO 20% FOR RUBICON ORGANICS
AND 15% FOR 48NORTH. TGOD HAS THE BEST CHANCE OF
MEETING AND EXCEEDING MARKET EXPECTATIONS IN OUR VIEW.

SCENARIO ANALYSIS USING TRADING MULTIPLES
Source: Capital 10X Estimates, Yahoo Finance, See appendix for more details
Based on our sensitivity analysis it looks like there is significant upside potential in TGOD
stock even if results do not live up to our expectations. To augment this assessment, we
followed up with a discounted cash flow analysis (DCF) that would allow us to test the
underlying assumptions behind TGOD’s business model. In general, our DCF analysis lined
up with the results of our multiples valuation. The fact that these two valuation methods
came up with similar stock prices give us comfort our assumptions are reasonable.
SCENARIO ANALYSIS USING DISCOUNTED CASHFLOW
Source: Capital 10X Estimates, See Appendix for more details
MULTIPLE UPCOMING CATALYSTS

Seasoned stock market investors know that just because a stock is cheap, doesn’t mean it
can’t stay cheap for a very long time. That is why catalysts are so important. A catalyst is a
fundamental factor such as the rollout of a new product, completion of a cash generating
asset or new interest from investors that can drive an undervalued stock higher.

In the case of TGOD we think the stock offers not only an attractive entry point but also
has multiple catalysts upcoming in 2019 and 2020. These catalysts will likely begin to
change the market’s opinion about the chances of TGOD achieving organic growing
success at scale. The key upcoming catalysts to watch are summarized below.
1. TGOD just recently started rolled out its products to the general public. In the
second half of 2019 TGOD will start rolling out products to a much wider user
base. They can finally benefit from customer and budtender reviews and
word of mouth which has historically driven strong sales for other popular
cannabis brands. Investors have been waiting a long time for a public rollout
meaning the distribution of TGOD products into the retail stores will be very
positive for investor sentiment towards the stock.
2. The company will benefit from operational and licensing catalysts. The first
facility in Hamilton is nearing full completion and will be ramping up output
over the rest of 2019. The Valleyfield facility is still in construction but will have
the first phase completed by early 2020. The stock will likely benefit from the
achievement of GMP certification and a sales license at Valleyfield.
3. TGOD joint venture Califormulations will be rolling out CBD beverages in the
U.S. and providing flavor profiles that will be incorporated into cannabis
beverages in Canada once they are rolled out, starting in December 2019.
TGOD’s management team has a deep background in beverages and the
stock is not pricing in any revenue from the U.S. CBD business or the partial
ownership of Califormulations. A release of more details around the potential
of beverages and Califormulations could serve as a catalyst for the stock in
the next 12 months.
4. There is a substantial discount built into the stock due to investor concerns
the company will not be able to cultivate organic cannabis at scale. The
company is finally at a point where it can rebut these concerns with actions
instead of promises. As the company scales up the Hamilton greenhouse and
expands distribution across Canada it should serve as a catalyst to remove
much of this discount to peers.

CONCLUSION
After doing a deep dive into non-cannabis organic markets, we’ve come away convinced
that there will be large scale consumer demand for organic cannabis. We think organic
cannabis demand should grow 20x over the next 5 years from 19,000 kg today to
384,000 kg by 2024, leaving lots of demand for the growers to meet. With U.S. organic
certification impossible until federal laws are changed, organic growers in Canada have
a good chance to become market leaders.
Strong demand will allow organic producers to navigate any cannabis oversupply better
than their non-organic peers. However, not all organic stocks are created equal. Upside
exists in all the pure play organic names due to attractive market dynamics, but with the
recent share price weakness we think TGOD offers investors significant upside, with less
risk than early stage peers. A longer public track record, global footprint and low
investor expectations make TGOD our preferred way to invest in a potentially lucrative
new cannabis market.
More risk-averse investors could also do well buying a basket of organic producers to
spread operational risks around with an estimated 310% upside on average for the
three publicly traded organic producer stocks.
Ultimately consumers will vote with their wallets and we are already seeing the legal
market fracture into a craft vertical and ultimately an organic vertical. There is very little
demand for generic ‘conveyor belt cannabis’ at current price points. Investors will do
well if they simply follow the consumer.

APPENDIX
CONSERVATIVE CASE
LONG-TERM SALE PRICE OF $4 CAD PER GRAM. THIS DECREASE IS

BASED ON A WORST-CASE OVERSUPPLY SCENARIO. WE ALSO
INCORPORATE A DECREASE IN MARKET SHARE THAT FORCES
ORGANIC PRODUCERS TO DROP PRICES TO BE MORE COMPETITIVE.
TGOD PRODUCES AND SELLS 50% OF THEIR FUNDED CAPACITY.

WE EXPECT FALLING PRICES WILL SPUR DEMAND, ALLOWING
50% SELL THROUGH.
BASE CASE
LONG-TERM SALE PRICE OF $6 CAD PER GRAM.
TGOD WILL BE ABLE TO PRODUCE AND SELL 70% OF THEIR FUNDED

CAPACITY DUE TO A MARKET OVERSUPPLY. THIS ASSUMPTION IS
BASED ON THE ORGANIC MARKET SHARE ASSESSMENT THAT
SHOWED LONG-TERM ORGANIC DEMAND AT JUST OVER HALF OF
THE ORGANIC SUPPLY.

UPSIDE CASE
LONG-TERM SALE PRICE OF $6 CAD PER GRAM.
TGOD PRODUCES AND SELLS 100% OF THEIR CURRENT FUNDED

CAPACITY. THIS ASSUMPTION COULD BE REALIZED BASED ON ANY,
OR A COMBINATION OF, THE FOLLOWING FACTORS:
• Rules and regulations in other jurisdictions favor international

cannabis export.
• The organic segment captures a larger market share than

currently projected.
• TGOD owns a disproportionate share of the organic market

relative to peers.
• The legal market share increases faster than currently projected.
QUARTERLY PRODUCTION ESTIMATES
Source: Capital 10X Estimates

Based on current pricing and conversations with investor relations we see organic
pricing for the entire industry starting at around $9 per gram wholesale. The retail price
with taxes added on should be higher at around $15 in store. For the base and upside
case, we see prices decreasing 6% per year down to $6 per gram wholesale by 2024. In
our conservative case, prices decline 12.25% per year down to $4 per gram wholesale
by 2024.
ORGANIC PRODUCT PRICING ESTIMATES
The following graph illustrates the revenue generated based on the production and
pricing above. As revenue from HemPoland cannot reasonably be priced on a per kg
basis, we assumed the current quarterly production was maintained for the rest of 2019
and increases 35% per year up to 2024, for a final value of $38.5 million in revenue. We
believe this is a very conservative estimate, given the performance-based incentive with
the acquisition is set at a goal $42.5 Million in EBITDA by 2021. Further, we assumed an
gross margin of 60% was maintained, consistent with Q1 2019 results.

TGOD REVENUE ESTIMATES
OPERATING EXPENSE ASSUMPTIONS

1. Sales & Marketing (S&M) expenses at $0.35 per gram decreasing at 5% per
year up to 2024
2. General & Administrative (G&A) expenses at $0.55 per gram decreasing at

10% per year up to 2024
3. Research & Development (R&D) expenses at 3% of sales, decreasing at 5% per

year up to 2024
4. Annual depreciation expenses at 3% of assets
5. Greenhouse spending completed in 2021.
Our assumptions are driven by the most recent quarterly results for the two largest
cannabis growers, Aurora Cannabis and Canopy growth.
Finally, we assumed the remaining greenhouse capital expenses will occur within the
next three years, while we assume investing and other financing expenses are equal to
depreciation plus an additional 30%. This implies TGOD is replacing the value of their
assets at the same rate they use them and includes additional buffer for other financing
or investing activities. Notably, we assume zero acquisition expenses as these would, in
theory, be a net positive addition to their bottom line and cannot be accurately
estimated. Based on the above revenues and expenses, their EBTIDA and margins can
be estimated to turn positive by the end of 2020.

TGOD EBITDA ESTIMATES
TGOD EBITDA MARGIN ESTIMATES

Including the other expenses as shown above, TGOD’s net income is estimated to turn
positive by 2021.
TGOD NET INCOME ESTIMATES
TGOD DCF ASSUMPTIONS

1. Weighted average cost of capital (WACC) of 8%
2. Terminal growth of 3%
3. Risk free rate of 3%
Conservative case: assumed TGOD would reduce expenditures due to an

underperforming market. This led to the following changes:
1. S&M expenses reduced to $0.175 per gram decreasing at 7.5% per year up
to 2024
2. G&A expenses at $0.275 gram decreasing at 15% per year up to 2024
3. R&D expenses at 1% of sales, decreasing at 7.5% per year up to 2024
4. Other (investing and financing) expenses equal depreciation

SENSITIVITY ANALYSIS TO TEST CERTAIN ASSUMPTIONS
To further analyze the effects of some of the key factors, we manipulated certain
variables to see the underlying effect on the upside. The results are summarized
in the table below. Please note, the factors are being manipulated from the base
case scenario.

RISKS TO OUR OUTLOOK
If TGOD is not able to successfully navigate shifting cannabis regulations, the company may struggle to acquire or retain state or
federal operating licenses.
If cannabis prices end up being lower than we are expecting, TGOD’s profitability could suffer.
If TGOD is unable to fund future expansions from internally generated funds, it could delay expansion plans or cause management
to raise money from the capital markets, potentially diluting current shareholders.
If Canada ends up suffering from an oversupply of cannabis, TGOD may struggle to sell all of the product it grows.
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Organic Cannabis Report

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Organic Cannabis Report

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EXECUTIVE SUMMARY

• In the near term we estimate the Canadian cannabis market is worth $5

EXECUTIVE SUMMARY ....................................................................................... 1

AN INTRO TO ORGANICS ................................................................................... 4

SIZING UP THE MARKET FOR ORGANICS ......................................................... 17

POTENTIAL SIZE OF THE ORGANIC CANNABIS MARKET ................................. 29

ORGANIC CANNABIS HAS A FEW CHALLENGES LEFT TO OVERCOME ............. 33

CAN ORGANIC CANNABIS BE GROWN AT SCALE? .......................................... 37

WAYS TO INVEST IN THE ORGANIC CANNABIS OPPORTUNITY ....................... 40

WHISTLER MEDICAL MARIJUANA COMPANY .................................................. 42

[2] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

RUBICON ORGANICS ........................................................................................ 44

THE GREEN ORGANIC DUTCHMAN (TGOD) ...................................................... 48

[3] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

Generally, ’organic‘, refers to the agricultural techniques used to produce a product.

“Organic Agriculture is a production system that sustains the health of soils,

THE CANADIAN ORGANIC STANDARDS

CANADA’S ORGANIC REGULATIONS ARE SOME OF THE STRICTEST

[4] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

ONLY IN CANADA CAN CANNABIS BE CERTIFIED ORGANIC BY A

ORGANIC CONSUMER TRENDS ARE VERY POSITIVE

[5] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

GROWTH IN ORGANIC SPENDING BY GENERATION

Source: Nielsen - Tops of Organics 2018

[6] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

WHEN YOU CONSIDER 83% OF MILLENNIALS IDENTIFY AS

IN THE EYES OF THE CONSUMER WHAT ARE THE BENEFITS

ADDITIONALLY, Organic products are perceived to be “craft” or “small batch” amongst

HEALTH CONSIDERATIONS MATTER TO CONSUMERS

[7] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

Additionally, there is no financial incentive for the black-market to follow regulations, as

[8] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

1. Cannabis plants are hyper-accumulators of metals and readily absorb any

2. In the process of extracting cannabis flower, chemicals present in and on the

3. Smoking or vaporizing cannabis leads to inhalation of the chemical

HEAVY METAL CONCERNS

[9] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

PESTITCIDE CONCENTRATIONS IN FLOWER AND CONCENTRATES

Source: CSI Pesticides Whitepaper

[10] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

Source: Bank of America Estimates

CHEMICAL PYROLYSIS OF TOXINS

[11] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

Source: Determination of Pesticide Residues in Cannabis Smoke

ARE THESE CONCERNS WARRANTED?

In a recent study performed by CannaSafe (a cannabis testing company), 20 popular

[12] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

Source: Government of Oregon

Looking at examples within Canada, in 2017 Health Canada regulators performed

[13] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

SOCIETAL AND SUSTAINABLE CONCERNS

WILLINGNESS TO PAY MORE FOR SUSTAINABLE PRODUCTS

Source: Nielsen - 2015 Global Survey

[14] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

SUSTAINABLE CHOCOLATE OUTPERFORMS COMPETITION

Source: Neilsen - 2018 Sustainability Report

[15] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

ORGANIC PRODUCTS SELL FOR A SIGNIFICANT PREMIUM TO NON-

ORGANIC PRICE PREMIUM FOR ASSORTED PRODUCE

Source: Consumer Report - 2015

[16] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

FORECASTED SIZE OF THE GLOBAL ORGANIC PRODUCT MARKET

Source: Zion Market Research

[17] INITIATION REPORT: THE ORGANIC CANNABIS MARKET

NORTH AMERICAN ORGANIC MARKET EXPLORED

“Organic is the fastest growing category in agriculture in Canada and has

[18] INITIATION REPORT: THE ORGANIC CANNABIS MARKET