We caught up with Brad Moore, CEO of Global Cannabis Applications Corp., to talk about the recently announced acquisition of a stake in South Africa’s first cannabis-specific insurance company.
The deal licenses Efixii blockchain-powered technology to insured cultivators ensuring the highest standards at every point in the supply chain. As growers in South Africa, Lesotho, and Zimbabwe focus on export markets, Efixii certification enables improved access to markets worldwide.
The strategy aligns with GCAC’s acquisition policy, potentially bringing 10 million grams of cannabis under license in 2022.
Q: From the press release, it looks like GCAC acquired one of the only cannabis cultivation insurers in southern Africa, is that the case?
A: Yes, we acquired 33% of a South African Cell Captive. This is a super addition to the GCAC balance sheet as it ensures that all cannabis being insured by us has followed the Efixii cultivation process, and the products that downstream consumers are ingesting can be trusted. Successfully integrating our acquisitions can significantly increase value for our shareholders.
Q: How many grams could be insured in Africa for the calendar year 2022?
A: We’re striving to have 10 million grams covered in 2022. Our cultivator’s insurance premium is reduced when they use Efixii in their cultivation, transportation, and distribution, as Efixii dramatically reduces the product risk. Lower insurance lowers the per gram cost for a grower, which is key to allowing the grower to absorb the software-license cost for Efixii. So, their batch-cultivation costs reduce on the one hand and slightly increase by C$0.15 a gram on the other. The African cultivators that we insure are very export-focused, and if we look at cannabis exports to Israel, Efixii is well known there. Israeli importers will be confident with Efixii-aligned cannabis due to its superior cultivation disclosures. So, our exporters naturally move to the top of the list for cannabis imports.
Q: How are the 4 million new shares issued, and are they free trading?
A: We will issue 4 million new shares, at 5c a share, to a business that we own 33% of. The shares will appear on the balance sheet of our insurance business as $200,000 worth of collateral for underwriting our cannabis insurance risk. This greatly expands the number of insurance policies we can offer to our Efixii cultivators. Should the insurance business’s cash-flow reach $200,000, the shares are returned to GCAC’s treasury for cancellation. We do not expect these shares to ever be registered for secondary trading.
Q: Does GCAC have an overall acquisition strategy in the cannabis sector?
A: All public companies are on the lookout to acquire synergistic businesses. We’re no different. There has been tremendous interest in GCAC amongst our old and new partners since we started attending conferences and showcasing the Efixii technology in 2021. We have met many interesting potential customers, partners, and acquisition targets. If our board’s selection and evaluation of a target align with our overall corporate strategy to grow Efixii revenues and capture market share, then we engage.
Q: Don’t acquisitions generally mean dilution?
A: Not for us. We leverage our public listing to offer new shares as collateral to the acquisition target. All our agreements will contain a buyback clause whereby the company may recover the newly issued shares and cancel them. This is usually linked to a mutually agreeable growth target. When we bring the power of Efixii, and our target brings their value, the combined-company value will exceed the sum of the parts. This is what our rigorous target evaluation process looks to achieve. Our strategy is that it is essential to stay involved in our customers’ direction and align ourselves with their long-term needs. We look to get involved early in upcoming acquisition targets where our synergies will drive mutual growth.
