Cannabis Producers Turn to Security Companies as the Industry Continues to Expand

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Jan 09, 2019, 09:00 ET

NEW YORK, January 9, 2019 /PRNewswire/ --

The cannabis market is growing rapidly as more countries begin to explore opportunities within the industry. Most countries are looking into the medical cannabis segment as restrictions and regulations are still enforced upon recreational cannabis. Despite the restrictions, the cannabis market is still positioned for strong growth. According to data compiled by Mordor Intelligence, the global cannabis market was valued at USD 7.7 Billion in 2016 and is expected to reach USD 65 Billion by 2023. Additionally, the market is projected to grow at a CAGR of 37% throughout the forecast period. The cannabis industry is expected to be driven heavily by the U.S. due to the number of states working to legalize cannabis for recreational purposes. The North American segment itself accounts for 95% of the global cannabis market, with the U.S. alone accounting for 90% of the North American segment. The industry is also expected to be driven by countries such as Spain, Netherlands, and Italy, who are expecting to legalize medical cannabis in the near future. 3 Sixty Risk Solutions Ltd. (CSE: SAFE), Tilray, Inc. (NASDAQ: TLRY), Aurora Cannabis Inc. (NYSE: ACB), The Brink's Company (NYSE: BCO), Innovative Industrial Properties, Inc. (NYSE: IIPR)

The widespread legalization of cannabis is magnifying the demand for cannabis-related products and has already resulted in many new players entering the market. There has been a large influx of dispensaries, cultivators, and distributors within recent years and with the growing number of cannabis players, there is also a growing demand for security systems. These include intrusion alarms, video surveillance, and armored vehicle transportation. Furthermore, numerous cannabis distributors have licensing agreements spread around the globe, making security an important part of their business. "The proliferation of both legalized medical and recreational marijuana has, not surprisingly, led to a massive boom in dispensaries - and, with that boom, increased focus on these burgeoning businesses and their increasing security needs," according to Evan Hicks of the National Cannabis Industry Association. "Getting marijuana from growers to dispensaries and shops presents another layer of security concerns. Because the product is so in-demand and so valuable, it's an appealing target for retail crime, from the minute it's harvested."

3 Sixty Risk Solutions Ltd. (CSE: SAFE) yesterday announced breaking news that it, "expects to commence trading on the Canadian Securities Exchange today under the ticker symbol SAFE. The company, which operates through its wholly owned subsidiary, 3 Sixty Secure Corp., has also provided an operational update, which includes significant progress in expanding its security consulting, guarding and secure transport business and continued growth of its consulting services business.

"I am extremely pleased with the progress that we have made in realizing our goal of going public as a means to accelerate our strategic growth plans with enhanced access to capital," said Thomas Gerstenecker, chief executive officer and founder of 3 Sixty. "We successfully raised capital in October, and we have delivered on our promise to significantly grow our consulting, guard and transport customer base, which includes many of Canada's leading LPs [licensed producers], and we continue to increase the number of customers served by our consulting service. I look forward to continued execution of our growth agenda by filling what I consider a serious gap in the Canadian and U.S. cannabis security industry as recreational cannabis supply grows and matures in Canada, in the U.S. and globally.

"Further, I would like to welcome David Hyde as president of 3 Sixty," added Mr. Gerstenecker. "David brings extensive industry experience as a security expert and the founder of David Hyde & Associates, Canada's leading cannabis security consultancy services. I am confident that we have assembled a world-class management team and board of directors, which positions the company extremely well as one of the largest and most experienced companies providing security services to the emerging cannabis industry within Canada."

Operationally, the company is pleased to report that its two major business segments experienced meaningful growth in the three months ended Nov. 30, 2018:

3 Sixty exited August, 2018, with more than 40 secure transport and guarding customers and more than 400 security consulting clients.
On a percentage basis, guarding and secure transport customers experienced the highest growth, up approximately 65 per cent following the addition of 27 new customers.
On an absolute basis, security consulting experienced the largest uptick in clients with the addition of 82, up approximately 20 per cent in the period.

Importantly, 3 Sixty successfully converted five security consulting clients from one of its predecessors, Total Cannabis Security Solutions Inc. (TCSS), into guarding and secure transport customers, an achievement that reinforces the thesis that there are significant opportunities to organically grow sales through cross-sell to the combined 3 Sixty and TCSS customer base, which has had very little overlap to date.

The company is focused on continued growth within the Canadian and U.S. cannabis industry, with numerous opportunities to expand into adjacent security services and new industry verticals and to realize international expansion.

3 Sixty is one of Canada's leading security service providers to the cannabis sector, providing a comprehensive suite of security services, including guarding and secure transport, security consulting, security management, integrated security systems, and executive protection. 3 Sixty expects to deliver significant value to its customers, shareholders and stakeholders by:

Providing world-class seed-to-sale security expertise to the cannabis industry: As a leading security company with a focus on cannabis, 3 Sixty expects to continue to grow its leadership position in core security services and security consulting. The company is led by executives with substantial experience in security services, military, police services, security consulting and NGOs (non-governmental organizations), which the company believes is unique in the Canadian and U.S. security industry serving the cannabis sector.
Leveraging the high-growth cannabis industry as the cornerstone of 3 Sixty's business: The company has been a pioneer in the cannabis industry since 2013. Deep expertise and first-mover advantage in the cannabis industry has positioned 3 Sixty favourably in a complex and highly regulated industry.
Taking advantage of significant organic growth opportunities in new geographies, verticals and industries: Canadian cannabis is at the core of 3 Sixty's business. However, the company believes that there are significant growth opportunities available by adding to the portfolio of security services offered to cannabis clients and through expansion to the highly lucrative U.S. market. Further, the company expects to add non-cannabis customers in industries that are characterized by high-value products where security is critical. Organic growth opportunities are expected to be accelerated through the use of strategic mergers and acquisitions where opportunities arise.

About 3 Sixty Risk Solutions Ltd: Sixty Risk Solutions, operating through its wholly owned subsidiary, 3 Sixty Secure Corp., is one of Canada's leading security service providers to the cannabis sector, transporting approximately $250-million of product every month. 3 Sixty provides cannabis security consulting, guarding and secure transport security services to more than 500 customers and more than 60 licensed cannabis producers, including some of the world's largest, such as licensed producers owned by Canopy Growth Corp. 3 Sixty has a staff of over 275 employees and employs a fleet of over 60 vehicles, which management believes provides a combined security footprint to approximately 30 million square feet of patrolled area."

Tilray, Inc. (NASDAQ: TLRY) is a global pioneer in the research, cultivation, production and distribution of cannabis and cannabinoids currently serving tens of thousands of patients in twelve countries spanning five continents. Tilray, Inc. recently announced the terms of a binding letter of intent to purchase hemp-derived CBD isolate from LiveWell Canada Inc., which will be sourced from the United States and Canada and utilized for distribution of Tilray-owned wellness and medical products across North America. Regulations in Canada allow for the use of hemp as a source of CBD, as long as the product satisfies certain quality requirements. These new rules will allow for wholly-owned Tilray Inc. subsidiaries, Tilray Canada Ltd. and High Park Farms™ Ltd. to potentially utilize hemp-derived CBD to increase supply of CBD medical and wellness products in Canada. "Today's announcement puts Tilray in a strong position to expand the availability of our products in existing and new potential markets," says Brendan Kennedy, Tilray Chief Executive Officer. "We're pleased about the opportunity to increase our capacity to supply high-demand CBD products in Canada."

Aurora Cannabis Inc. (NYSE: ACB), headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 500,000 kg per annum and sales and operations in 22 countries across five continents, is one of the world's largest and leading cannabis companies. Aurora Cannabis Inc. recently announced that the company, through its wholly-owned subsidiary Aurora Europe GmbH, has been selected by the Luxembourg Health Ministry for the supply of medical cannabis to that country and an initial purchase order for approximately 20 kilograms has been received. The Company has received all required authorizations (import and export licenses) and has commenced its first shipment of high-grade medical cannabis to Luxembourg's Division de la Pharmacie et des Medicaments, representing the second time the Company has received an order directly from a European government. "To our knowledge, Aurora is the first medical cannabis producer selected by the Luxembourg Health Ministry to supply dried cannabis flower," said Neil Belot, Chief Global Business Development Officer. "This is a reflection of the trust we have earned with governments and regulators around the world. We look forward to supplying patients in need in what will be the 7th European Union member country where we have exported plants or products to help meet growing patient demand."

The Brink's Company (NYSE: BCO) is the global leader in total cash management, secure route-based logistics and payment solutions including cash-in-transit, ATM services, cash management services (including vault outsourcing, money processing and intelligent safe services), and international transportation of valuables. The Brink's Company recently announced that its Brink's Canada subsidiary has entered into a multi-year agreement with Canopy Growth Corporation (NYSE: CGC) to provide secure logistics and cash management services for Canopy Growth's domestic and international cannabis operations. Based in Smiths Falls, Ontario, Canopy Growth is a global leader in cannabis production, retailing and related services. On October 17, 2018, cannabis became legal in Canada for recreational use. In addition to providing secure logistics and cash management services, Brink's and Canopy Growth will develop a cross-selling program that enables Brink's to provide services to Canopy Growth's affiliated growers and retail customers. Canopy Growth's international transportation and security needs will be provided by Brink's Global Services ("BGS"), a Brink's subsidiary that provides secure logistics for international shipments of high-value commodities. Doug Pertz, Brink's President and Chief Executive Officer, said: "The rapidly growing cannabis industry requires security solutions for its products as well as its cash, and Brink's is uniquely positioned to provide these solutions. Our partnership with Canopy Growth, a leading producer and exporter of cannabis, diversifies our customer base and leverages BGS' global network of secure logistics operations. We look forward to building a strong relationship with Canopy Growth as it grows throughout Canada and continues to enter new international markets."

Innovative Industrial Properties, Inc. (NYSE: IIPR) is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Innovative Industrial Properties, Inc. recently announced that it closed on the acquisition of a property in Barry, Illinois, which comprises approximately 75,000 sq. ft. of industrial space situated on approximately ten acres. The purchase price for the property was USD 19 Million (excluding transaction costs). Concurrent with the closing of the purchase, IIP entered into a long-term, triple-net lease agreement with a wholly owned subsidiary of Ascend Wellness Holdings, LLC (Ascend), which intends to operate the property as a medical-use cannabis cultivation and processing facility in accordance with Illinois medical-use cannabis regulations. Ascend is expected to complete additional tenant improvements for the building, for which IIP has agreed to provide reimbursement of up to USD 6 Million. Assuming full reimbursement for the tenant improvements, IIP's total investment in the property will be USD 25 Million. "We are very pleased to close on this transaction with Ascend in Illinois, marking our ninth state where we own properties," said Paul Smithers, President and Chief Executive Officer of Innovative Industrial Properties, Inc. "We look forward to supporting Ascend as their long-term real estate partner, as they launch and continue to expand their operations in a number of states to meet the tremendous demand for patient treatment."

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