Aleafia Health Inc. (ALEAF)

[FUNMAN]

MESSAGE FROM CEO GEOFFREY BENIC

Last month, we released our first investor newsletter with the goal of providing a behind-the- scenes look at Aleafia Health. The response has been overwhelmingly positive, and it was the year’s email campaign with the highest engagement. Many of you wrote back and said that you’d like a continued focus on product development in these newsletters. That’s great, because we have lots of news to share on that front.

Here’s what to expect in this issue:

C-Suite Spotlight: We talked with our vice-president, product strategy, Jordan Rodness, who was just named to the Ontario Cannabis Store’s (OCS) Recreational Cannabis Advisory Panel. The OCS is the official government wholesaler for Canada’s largest province, which is why we are so excited about Jordan’s well deserved appointment.

Innovation Corner: The story of our cannabis-infused sublingual strips, Kin Slips, precedes us by many years. It’s been the category leader in California for a long time. Because the original vision was so important to us, we decided to share the story below from Kin Slips co-founder and chief product officer Joshua Kirby.

Behind the Scenes: I’m happy to show you a new corporate presentation

https://www.aleafiahealth.com/uploads/2020/09/2020-Q3-Corporate-Presentation-FINAL.pdf

with plenty of new content reflecting our business’ evolution. In the deck, and below, you’ll also see some of the first photos from inside our Paris, Ontario state-of-the-art product innovation centre.
I hope you enjoy the content, and sending best wishes to you and your families.

Sincerely,

Geoff

Two highlights out of the corp pres:

17,500 Active, registered medical cannabis patients

10¢ Cost per gram (outdoors)

Product strategy lead Jordan Rodness is a cannabis industry veteran, having joined Emblem in 2016. That experience led to his recent appointment to the Ontario Recreational Cannabis Advisory Panel.

ALEAFIA HEALTH: Prior to entering the cannabis space, you helped produce a major national television show. How was that experience helpful?

JORDAN RODNESS: Being in live television production means that you need to be a creative thinker and problem solver in a very fast paced environment, and that skill very much applies to cannabis. Having a non-traditional background also meant I entered the sector without any preconceived notions about how things would happen.

We often hear the false assumption that the same things that worked in traditional CPG, or alcohol, or pharma would apply to cannabis - and while that’s certainly true in some cases, cannabis is its own creature. I was able to come in at an early stage with a fresh perspective and see things through a different lens. It made me appreciate all of those transferable skills I learned in my past life.

AH: What will your role be in advising the Ontario Cannabis Store, and why did you join in the first place?

JR: The opportunity to join its advisory panel was interesting for a number of reasons. I was excited at the prospect of networking with really accomplished peers in both retail and in production, but I was even more excited by the opportunity to provide advice and insights that would lead to real, meaningful change for Ontario’s retail landscape. Ultimately, our goal will be to address some of the industry’s pain points to make the end consumer experience more enjoyable.

The timing was also exceptional in that Aleafia Health has been ramping up from building and licensing facilities to turning into a real commercial engine, particularly in the Ontario retail market.

AH: You joined Emblem before legislation to legalize adult-use cannabis had even been introduced. How have you viewed the industry evolution since then?

JR: I started up in 2016, and even though it’s been four years, I think we are still very much in the sector’s start-up phase.

While many believe that the whole Canadian cannabis ramp-up has been slow, we shouldn’t lose sight of how much has happened in such a short time. The fact that there were products available in stores on the October 2018 launch of legalization was a huge accomplishment, and again a year later with new cannabis 2.0 formats’ legalization.

With respect to product innovation, we’ve only seen the tip of the iceberg. While there are some limits from a regulatory perspective there will be more novel products coming to market over the next few years. Part of our innovation plan is to look at where the industry’s been, but also consider the different occasions that consumers interact with cannabis and cannabis-derivative products, and come up with some unique options to satisfy those consumer desires.

As more research is done on cannabinoids for therapeutic uses, there will be further innovative ways to harness the power of this plant, and to create products providing more nuanced and targeted effects for different conditions and indications.

AH: What attracted you to bringing Kin Slips to the Canadian market?

JR: The product was very intriguing in that it was very suitable for both patients and the adult-use market, which is an important factor for us when evaluating a particular format. On the medical side, it is precise, discreet, and non-combustible. That makes it a truly stigma-breaking delivery format for patients looking for cannabinoid therapy options that are more similar to traditional medicine.

From an adult-use perspective, it’s able to provide a duration of effect similar to edibles, but with an onset that’s much more rapid. There are so many features consumers would gravitate towards that it was a no brainer.

AH: You’ve been working closely on the cannabis genetics R&D program that’s running at our three production facilities. Walk us through that process?

JR: We’ve taken a measured approach to ramping up our cultivation facilities. We knew we needed to understand which genetics we would grow at commercial scale in each of our environments. Each cultivar is completely different; some are more suited to being grown outdoors, some are much more delicate, and require a climate-controlled environment.

The approach we’ve taken is a robust R&D program, where we acquired a number of genetics to grow in each of our facilities and tested them all to see what grows best in each environment. Our goal was to find unique, potent, appealing cultivars to bring to market, and we’ll start to see the fruit of that labour very soon.


Kin Slips co-founder and Chief Product Officer Joshua Kirby launched his quest to discover a new, discreet, reliable form factor in Washington State nearly a decade ago. That culminated in the launch of Kin Slips in California, and now in Canada. We caught up with Joshua to walk us through that journey:

ALEAFIA HEALTH: Josh, thanks for joining us. Tell us about the Kin Slips origin story.

JOSHUA KIRBY: I was at a stage in my career where I was looking for new opportunities and got together with some entrepreneurs who were thinking about cannabis-related startups. I then moved to Seattle and ultimately linked up with my current business partner, Ron Richards.

This was the earliest days of legalization in some states, with Colorado and Washington State just ending prohibition.

Looking forward, we thought that smoke free options would become more popular as new consumers took up cannabis. Back then, there was no CPG mindset yet. In a dispensary, you would get a brownie in Saran wrap. How could we make something that would be packaged safely and presented well?

We explored a bunch of formats starting with gum. Through a roundabout way, in the process of trying gum, we realized that we could make a very thin film cannabis-infused candy.

As we spent more time on it, we learned about sublingual absorption as a delivery method. Four years ago, we rebuilt this formulation, a dissolvable sublingual strip with custom terpene profiles to delivery specific effects, that provides the same rapid, predictable effect of smoking in a safer, more discreet format.

Since then, we’ve just improved and refined on that core product.

AH: From production to formulation, walk us through how Kin Slips are made? What elements have you improved on and changed over the years?

JK: It’s a complicated process. There are ingredients to hold the strip together. You need particles that are appropriately formulated to pass through the sublingual glands in your mouth.

An underlying part, a challenge we gave ourselves, was creating an all-natural product. That’s something that we’ve stayed with since day one. It’s a really important part of what we do.

Back in the day, we started making them in the kitchen, our version of a Silicon Valley garage. Done by hand, spreading on glass. Drying in the oven, cutting by hand. We’ve moved the entire process towards automation, to improve our scale. That’s been a big part of our work with Aleafia at the Paris Facility, to bring that large-scale production.


AH: In Canada, there are separate medical and adult-use regimes. How do you see Kin Slips fitting in each of those markets?

JK: We really see Kin Slips as for everyone, even though that’s not how you want to market anything. It’s really walking a fine line between medical and adult-use. In between the two is a wellness product.

On the medical side, we bring a familiarity with the format. Active ingredients in thin films have been around for decades. Doctors, patients are often familiar with it. So, we give patients the rapid onset, repeatability and an accessible, familiar form factor.

With respect to adult-use, this is really appealing to people who already prefer smokeless products like gummies, for many of the same reasons. For smoking and vaping consumers, they are very fast acting, but there are health risks, and you can’t light up everywhere. Kin Slips gives that discreet formula, and it can be used anywhere. And it’s different from a gummy in that it’s made with plant-based ingredients and really lends itself to health-conscious consumers.

AH: Bringing Kin Slips to Canada was not as simple as just copying the formula and packaging. Entirely different regulatory regimes and the COVID-19 pandemic presented a lot of challenges. How did you work through these hurdles with the Aleafia Health team?

JK: The biggest difference between a sublingual and an edible is how it moves into the bloodstream. Edibles enter through the stomach lining, which is why you get a slow onset time and drastically different effects depending on a bunch of factors like what you ate that day. None of that is the case with sublinguals, a significant advantage.

COVID-19 was also a huge roadblock. Normally with this type of agreement, my colleagues and I would have flown up to spend a lot of time at the Paris Facility where we could help with the set-up of equipment and work together on formulations.

Obviously, none of that was possible. As a result, we really built a strong relationship with Aleafia based on trust. COVID-19 made things more difficult and more complex, but we’re really happy with the final product. The Paris team worked so hard and were a pleasure to work with. Specifically, Aleafia’s Jordan Rodness and Marshall Lindner [Extraction Manager] went above and beyond to make this all happen.

AH: Finally, how excited are you to see Kin Slips in a new country?

JK: My business partner Ron Richards and I did a tour in 2019 and met with just about every large Canadian Licensed Producer. I think we have a great reputation in California and there were a lot of LPs that wanted to work with us. We chose to work with the Aleafia team because our values were aligned, and we believed in their vision for Kin Slips. It’s a credit to everyone and we’re really happy with that decision.


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