Vertically-Integrated Cannabis in the US
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Captor Capital Corp. (CSE:CPTR,FWB:NMV,OTCQX:CPTRF) is a vertically-integrated, multi-state cannabis investment company in the US. Under its business model, Captor Capital acquires cannabis companies across all levels of the supply chain. Captor Capital provides recreational and medical cannabis products through its Chai-branded dispensaries in California. The company is also pursuing cultivation, manufacturing and extraction facilities in California and Michigan.
Captor Capital has two California Chai-branded dispensaries, in Santa Cruz and Castroville, that are expected to generate between US$10-15 million in revenue annually. The Santa Cruz location alone generates over US$700,000 per month in sales. As the Castroville location is integrated into the company over 2019 it is expected to generate approximately US$5.5 million in gross revenues with an adjusted EBITDA of 25 percent.
Captor Capital has also signed an LOI for a third dispensary location in Santa Barbara County, which is expected to include a delivery service. The company has begun offering delivery services through its Chai retail brand as well.
Captor Capital recently entered the Michigan cannabis market through a joint venture agreement with Green Buddha Group LLC. Green Buddha, which has received licenses to operate twenty dispensaries – with two already open and generating revenue – and is simultaneously developing its cultivation and manufacturing facilities in Michigan.
Captor Capital has also acquired Mellow Extracts, a fully equipped extraction and concentrate processing facility with $500,000 per month in pending orders as soon as additional the facility and additional state of the art equipment upgrades are finalized.
Captor Capital is also acquiring another extraction facility in California that possesses an annual volatile manufacturing license with trim supply and distribution agreements already in place. The facility has been in operation since January 2019 and is expected to generate US$15 million in revenue in its first year. The facility is expected to generate approximately US$45 million in revenue annually once at full capacity.
- Captor is active across the North American cannabis market, an industry projected to grow past $47.3 billion within a decade.
- Captor is operating in California, where the cannabis market is expected to generate $50 billion by 2026
- Michigan cannabis market to generate up to $1.7 billion in annual revenue over the next few years.
- After averaging USD $3-mil in annual revenue, Chai Cannabis stores are projected to generate up to US$10 million in revenue annually
- Santa Cruz dispensary generates over US$700,000 per month in sales.
- Castroville dispensary to generate approximately US$5.5 million in gross revenues with an adjusted EBITDA of 25 percent.
- Acquiring third dispensary in Santa Barbara County, California.
- MainStem has sold over 6.5 million products to over 3000 customers and has over 10,000 SKUs.
- Mellow Extracts has US$500,000 per month in pending ongoing orders.
- Acquiring California extraction facility that will be able to generate approximately US$45 million in revenue annually.
- Acquiring 20 retail locations, a 325,000-square-foot cultivation facility and a manufacturing, processing and extraction facility in Michigan.
North America’s Cannabis Market
In North America alone, legal cannabis sales reached $9.2 billion in 2017. Within a decade, that total is projected to grow past $47.3 billion. California is the largest cannabis market in North America, boasting over 30 percent of legal cannabis product sales in the region. Following the legalization of the recreational market on January 1, 2018, the California cannabis market hit a total of $2.5 billion in 2018 and is expected to reach approximately $50 billion by 2026.
California has a history of being at the forefront of the cannabis market as it was the first state to legalize medical cannabis in 1996. Over the years California has become a knowledgeable and sophisticated medical market. In a legal recreational market, companies that are already profitable have the opportunity to leverage a growing consumer base in the Golden State.
Michigan is the third largest cannabis market in the US and is the tenth state to legalize recreational cannabis. According to Marijuana Business Daily, the cannabis market in Michigan is expected to generate up to $1.7 billion in annual revenue over the next few years.
Michigan offers cannabis companies the potential benefits of first-mover advantage as it is the first state in the American Midwest to legalize cannabis. Michigan has also adopted a more business-friendly approach to its regulations, which will allow for home delivery services.
Captor Capital’s Business Model
Captor Capital is acquiring established and profitable cannabis companies in order to develop a vertically-integrated business model. The company’s initial focus is on California’s cannabis market and it intends to extend its operations into other states as regulations allow. Captor Capital is currently working with a leading branding agency on the development of a separate e-commerce brand as well.
By becoming a vertically-integrated cannabis company, Captor Capital will be able to generate a reliable source of revenue as it builds out its operations. The company plans on adding to its operations by exploring opportunities in synergistic industries such as the hemp-based CBD market. Captor Capital’s vertical integration strategy rests on its retail, cultivation, manufacturing and distribution facilities in California, Michigan and Washington.
Chai Cannabis Co.
Captor Capital’s wholly-owned retail locations are branded under Chai Cannabis Co., which operates two California dispensaries in Santa Cruz and Monterey. Chai offers affordable, high-grade medical and recreational cannabis through its California locations. Before the acquisition, the stores generated approximately US$9 million in revenue between 2014 and 2017 and are expected to generate up to US$10 million in revenue annually for Captor Capital.
Each Chai store offers a stylish and comfortable setting designed for consumer education and enjoyment. Chai is also known for its award-winning strains and concentrates as well as high-quality indoor-cultivated cannabis. The company recently sold over USD $100,000 in cannabis seeds at the Emerald Cup, northern California’s premier cannabis destination. Captor Capital is seeking out additional opportunities to expand its footprint throughout California.
The Santa Cruz location is one of the most popular dispensaries in the area and generates over US$700,000 per month in sales. The dispensary has a delivery license that can serve the greater Santa Cruz area. Since acquiring the dispensary, Captor Capital has doubled the size of the showroom to carry a broader range of cannabis products such as flower, extracts and edibles.
Chai Cannabis Co. also has operations in Castroville, California. The dispensary is popular and the company has the option to secure a delivery license. The Monterey dispensary is located in a high traffic area in Castroville, which is a tourist hub in Monterey County. Monterey County is home to 500,000 people as well as world famous wineries, huge festivals and the Big Sur coastline. The dispensary can offer a wide variety of cannabis products throughout Monterey County. The dispensary is on track to generate approximately US$5.5 million in gross revenues with an adjusted EBITDA of 25 percent.
Captor Capital has also signed an LOI for a cannabis dispensary in Goleta, Santa Barbara County, California, making this the company’s third dispensary in the state. The dispensary has a pending application for retail and delivery licenses. Goleta is known for its proximity to the University of Santa Barbara, Santa Barbara Campus.
Michigan Joint Venture
In April 2019, Captor Capital signed an LOI with Green Buddha Group LLC to form a joint venture partnership in Michigan. Green Buddha currently operates 20 revenue-generating dispensaries and is developing its cultivation and manufacturing facilities in Michigan.
Under the terms of the agreement, Green Buddha will transfer its licenses over to the new joint venture company. Green Buddha has licenses to operate 20 medical retail dispensaries, two licenses for its cannabis manufacturing, processing and extraction facility and eight licenses for its 325,000-square-foot cannabis cultivation facility. Captor Capital will provide a loan for the build-out and operation of the processing and cultivation facilities.
Manufacturing and Distribution
Mellow Extracts is an extraction facility located in Costa Mesa, California. The facility’s Conditional Use Permit (CUP) covers a distribution license which could allow it to tap into the cannabis industry segment with high margins. The lab has US$500,000 per month in existing orders.
California extraction facility
Captor Capital is acquiring a Type 7 volatile solvent extraction facility in California with an annual volatile manufacturing license. The facility has been in operation since January 2019 and is on track to generate US$15 million in revenue in its first year. At full capacity, the facility will be able to generate approximately US$45 million in annual revenue. The 4,000-square-foot facility has trim supplier and distribution agreements already in place to produce a premium-quality THC distillate oil.
“We are very excited to add another manufacturing operation to our company which will provide us with substantial production capacity as we enter the highly lucrative branded product market,” said Captor Capital CEO John Zorbas. “Given Captor’s growing retail presence under the Chai brand, we are in a strong position to manufacture and sell our own products which will materially improve our operating margins and EBITDA growth. Furthermore, with the substantial productive capacity of the facility we do not estimate any further significant capital expenditures in the near to medium term.”
John Zorbas — President and Director
John Zorbas is an entrepreneur with a proven track record in the metals exploration and development industry and the investment banking. He has held senior advisory positions in various facets of business including operations, marketing, sales, strategic planning and structured finance. He has been with the company since June 2008.
He also serves as URU Metals Ltd. (Captor Capital investment) Chief Executive Officer since June 2014. He was appointed Chairman of Management Resource Solutions PLC in April 2017. He also served as the President of MGM Productions Group Inc. a company focused in media and retail investments, as well as Director of both ZorCorp Capital Holdings and Starline Capital Holdings Infrastructure Fund. He served as the Chief Executive Officer and a Director of Monchhichi PLC (former: Mercom Capital PLC) until 23 December 2016. Zorbas also served as a Director of Stratton Capital Corp. until 20 October 2016. He is a founding shareholder of Asian Coast Development Ltd. He holds an Honors Bachelors in Economics from the University of Toronto.
Shawn Groshans — Head of Business Development
Shawn Groshans has approximately 20 years in merchant banking and corporate finance with experience in private equity investing, advising companies on mergers and acquisitions, capital raising, business development and restructuring. Subsequent to his experience in banking, he took a role as Head of Business Development for a global intelligence and cyber-security firm, in addition to his involvement in entrepreneurial ventures which includes the cannabis industry.
Groshans serves as a Non-Executive Director for Tower Financial and he has previously worked for Salamanca Group, Richmond Park Partners, S-RM and PwC.
Matt Longo — Director of Manufacturing and Cultivation
Matt Longo has over 15 years operating experience in the cannabis industry and has extensive agricultural and supply chain knowledge. Additionally, he has years of experience in general agriculture, and held various operational roles at Anheuser-Busch.
Longo has guided the set-up of Prop 215 compliant businesses in California and navigated the complex and multi-layered regulatory environments. He has owned and operated two cultivation facilities with a total of 20,000 square feet and employed roughly 100 employees. Prior to his role with Captor, he owned and operated a dispensary and was involved in three other cannabis-related business ventures across the US, including a 70-acre hemp production farm in Franklin, Texas and a 22,000-acre licensed hemp farm in Madisonville, Kentucky. Both farms are licensed by the Department of Agriculture and subject to stringent protocols as a hemp producer.
Oliver Summers — Director of Retail Dispensaries
Oliver Summers has been a Los Angeles Medical Cannabis advocate since 2005, speaking and promoting cannabis numerous times on behalf of patients. He has owned and operated three dispensaries in LA since 2006 and is an experienced grower of boutique cannabis strains.
Summers is an original member and moderator of the Greater Los Angeles Collective Alliance (GLACA), a member of Americans For Safe Access (ASA), Marijuana Policy Project (MPP) and Patients Advocacy Network (PAN). He is also a former member of the South Robertson Neighborhood Council, Pico Neighborhood Council, Melrose West Neighborhood Council and UFCW Local 770.
Jeffery Berkowitz — US Legal Counsel
Jeffery Berkowitz has practiced corporate, business and tax law for over 35 years. He has extensive experience in a wide variety of transactions in many industries, with particular emphasis on structuring complex transactions, including entity organization, financing, mergers and acquisitions, real estate and US-Canada cross-border transactions. Since 2013, he has been actively involved with the rapidly-growing cannabis industry, assisting clients in obtaining financing, securing licenses and acquiring cultivation facilities and established dispensaries. Earlier in his career, he practiced as a Certified Public Accountant.
Wayne Lipschitz — COO of California Operations
Wayne Lipschitz founded a professional firm that provides outsourced back office accounting and CFO services to the restaurant and retail industries since January 2012. He also served as the outsourced President and/or CFO for several restaurant concepts. Prior to this, he held various CFO and controller positions with private, public and private equity backed companies such as Spectrum Clubs Inc. (Spectrum Athletic Clubs), Grill Concepts Inc. (Grill on the Alley and Daily Grill), San Manual Band of Mission Indians, International Coffee & Tea LLC (Coffee Bean & Tea Leaf), The Cheesecake Factory and Wolfgang Puck Food Company L.P. In addition, Lipschitz is a CPA and has worked for a national CPA firm, Laventhol & Horwath. He holds a BS degree in Accounting from California State University, Northridge.
Henry Kloepper — Director
Henry Kloepper is a former Chief Executive Officer of Frontier Lithium Inc. and has worked in investment banking and structured finance throughout a 30 year career. He has a rounded knowledge of the capital markets, strategic growth and investments. In the past, he has worked in executive positions with JP Morgan, Citibank, Bank of America and North American Trust in Canada, the US and Europe. Currently, he is a director of a number of public companies listed in Canada and the US, which are involved in consumer finance, merchant banking, manufacturing and distribution.
His responsibilities range from lead independent director to chairing audit/compensation committees. Notable directorships include: Award Capital (Spot Coffee – food and beverage), National Construction, Mogul Energy (Oil and Gas), DealNet Capital (Consumer finance/merchant banking), Gilla Inc. (E cigarette manufacturer/distribution), Sofit Mobile (App. and technology incubator) and Pacific Software Inc. (Metal Fabrication).
Kyle Appleby — Director
Kyle Appleby is a member of the Chartered Public Accountants of Canada and Ontario, and President and Chief Executive of CFO Advantage Inc., a company that provides CFO and other financial accounting and compliance services to companies in various industries including junior mining, manufacturing and distribution. He is currently CFO of a number of reporting issuers in Canada. He lives in Toronto, Canada.
Alexander Dementev — Director
Alexander Dementev is an independent geophysics researcher. He provides technological solutions and services to companies in various industries including manufacturing, distribution and mining. He holds equivalent of Master Degree in Applied Physics from Rostov State University and Postgraduate Degree in Analytical Chemistry from the Institute of Analytical Chemistry and Geo-Chemistry (both in Russian Federation). Dementev is currently the Chief Technology Officer for Klimov Design Bureau, leading several international hydrocarbons conversion projects. He lives in Toronto, Canada.
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The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Captor Capital Corp. and seek advice from a qualified investment advisor.