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2019-10-22 05:03:52

Editors' Note: This is the transcript version of the podcast we published last week on Helix TCS (OTCQB:HLIX). We hope you enjoy it.

Rena Sherbill: Welcome again to the Cannabis Investing Podcast where we speak with the C-level executives, scientists and law and sector experts to discuss the present and the future of Cannabis Investing. I'm your host Rena Sherbill.

Today I am happy to be joined by Garvis Toler, who very recently was named President of Data Services at Helix TCS, a publicly traded cannabis technology provider. Previously, Garvis was the Global Head of Capital Markets at the New York Stock Exchange, and prior to that, held senior roles at MSCI and J.P. Morgan.

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Garvis, welcome to the Cannabis Investing Podcast. It’s great to have you.

Garvis Toler: Thanks for having me.

RS: So, as I said in the intro, you very recently came to Helix. Can you talk to me about your path to the cannabis sector, and specifically, to Helix?

GT: Sure. I had a pretty diverse background on Wall Street and in financial technology, and for me, this was really about taking a step back and figuring out what I want to do with my career, and looking at the industries that you tend to be attracted to; a, you want something with – that’s a growth industry; and that; two, that your background can actually make an impact and change something; and then; three, specific to Helix, I wanted to work for a company that was really – had the background, the team and the ability to change and make an impact in the world.

So, it sounds a little cheesy, but that – you know that’s really what it is about for me. I've known the management team at Helix through my [prior life] for many, many years. I’ve watched them from afar. And so, when I look at the characteristics of the Cannabis sector and of Helix, this was a great fit for me.

RS: So, tell me a little bit about what your role there is? What it entails?

GT: Yes. So, my chief responsibility is going to be help build out and grow our Data Services business. As you can imagine from our – the security side, from our software and point-of-sale services, we generate a gigantic amount of data. So, part of my charge is to help the company grow that and commercialize that data to a very rich data set we think that the marketplace is going to be really excited to get their hands on a lot of the data that we’ve been able to provide and we want to productize that.

RS: And what kind of data are you tracking?

GT: So, everything from a pricing data, data all along the supply chain. Our software is used throughout the [seed-to-sale] process, so you can imagine taking a decade of that data and productizing that for our customers is going to be pretty powerful.

RS: And in terms of, you know, the sector at large and kind of all the volatility that's going on, do you see a way in through the technology side as opposed to just relying on, you know, the growing or the cultivation? Do you see this – even though there is some volatility in the sector at large, do you see this as a healthy and kind of [quash] that volatility?

GT: Well, look, volatility is natural. We were at the stage of the life cycle of this industry. In any growth industry, you’re going to see some volatility in the early days and that's precisely what makes it exciting and a lot – where the opportunity is going to come from. Clearly, this is an exciting space with a lot of growth, but that growth needs to be fueled and supported by infrastructure and Helix exists to help providing grow that infrastructure.

So, to your point, I do think it should certainly help the – to calm down some of the volatility, but I think volatility is very natural as the industry grows and matures. It's a very fragmented industry; lots of different players. As you know, this industry is largely governed state-to-state, so there's a lot of differences there. I think over time that settles down as you see the regulators get their arm around this a little bit more, but absolutely, technology is certainly a key part of the infrastructure in the industry’s development.

RS: So, speaking to your point a little bit in terms of the sector at large, the fact that you’re coming from Wall Street, so you see this phase as, you know, just a part in the trajectory of the sector much like – you know, a lot of comparisons are made to the dot com era and this is right before, you know, the bubble gets bigger. Where do you see it? What’s your timeline? Given your background, how do you see it playing out in terms of the regulatory process and the calming down?

GT: I still think its early days. I don’t have a crystal ball and I don’t want to pretend to be able to predict the future. But certainly, when you look at – I think that’s a great comparison to look at the dot com era. You had, in the early days, lots of people with lots of ideas and the sexy part of the business, and all types of businesses popped up. It was probably very difficult to predict who was going to succeed and fail, but as an important part of the process, it was able to shake out the strongest players.

But the commonality of the companies that did well and that survived and that exist to this day were those that were investing and developing their infrastructure that we still all live with today and lot of us take for granted. So, I think you’ve seen in almost any growth industry this process play out. So, I don't know precisely. Are we talking decades? I don't think so. I think we’re talking years, but it’s a very exciting time to be involved in this space.

RS: So, Helix has won some awards this year, you know, for innovation and technology. Do you guys have patents pending? Is that the plan? I know you have proprietary technology?

GT: Yes. Not to get into any – too much detail on this specific technology, it is a huge part of what we do. And so, we do spend quite a bit of time and effort managing our research and development to make sure that we are on the cutting edge. And, yes, it is a very – look, one of the things that made this move very attractive for me is just looking at the team and the brainpower at Helix and how they are brining that to bear for the betterment of the industry.

RS: Can you talk about specifics in terms of the staffing? What makes that so exciting? Or what they have that’s unique?

GT: Helix is a combination of few different companies, and in my short of time there, I’ve gotten to know folks from each of these divisions, and there are a lot of experienced folks who have been in and around different parts of the industry, people that are technology veterans, and Scott and Zack are the co-founders. I’ve certainly had a long career of success in other entrepreneurial efforts. And so, you just look at the quality of the Board and the management team and down to the security guards, these folks are -- take a lot of pride in what they do and have really done a great job in building a special team, and the culture is one that really promotes that, and individual contributions are really appreciated.

RS: So, earlier this year, obviously, before you came on, Helix acquired Amercanex International Exchange, which is, you know, a blockchain company. Can you speak to that, the role of blockchain in this industry and where you see that heading?

GT: So, I have a bit of experience in blockchain as well. It’s a – it really, to be frank with you, is a – become a lot more of a buzzword then the actual and the right technology. I think it's an exciting technology, but it is just that, it is a tool. I think all businesses are kind of trying to come to grips in getting their arms around what blockchain is actually good for and purpose built for.

There are obviously some applications that are really exciting. I don't think it should be, you know, shoehorned into every application just because it's a – it happens to be a buzzword. But in terms of this acquisition, yes, I do think that we are seriously looking at how a blockchain can be applied to this space and certainly their technology is very exciting for that.

RS: And is the plan to do more acquisitions, more partnerships?

GT: Yes. The approach that Helix has taken is really to do the best that we can at both worlds, really to try and grow and develop through our own in-house R&D or organically, which we’ve done very well. But certainly, one of the things you’ve seen over the life of Helix is the ability to attract and acquire fantastic companies, and integrate them in a seamless way. So, it’s very exciting. I anticipate that will be part of the strategy going forward as well.

RS: And also, internationally?

GT: Absolutely. I mean that's one of the things that is so exciting. Again, it's really early days, but when you begin to think about the international applications to more of federal – federally or friendly regulatory framework, I think that's going to have huge applications internationally as and we’re very excited about that and thinking and planning about that move.

RS: I know – speaking internationally, I know Vicente Fox is on your Board now. We talked to the guys from Khiron (OTCQB:KHRNF) a couple months ago and he’s on their Board as well. I'm wondering what that lends you in terms of kind of his expertise on the international regulatory markets, but also in terms of bringing things to product or bringing things to different markets. How does your Board kind of effect or influence decisions that are made in that regard?

GT: Well, like any well-run company having a dynamic Board with experienced folks is really important and I think this is a great example of that. You’re going to find very few people who are more steamed and connected internationally than Mr. Fox. We’re very excited to have him as part of the team. And again, as a well-run company, your Board is there to help guide your strategy, make connections and we’re excited about the Board that we’ve put together and continue to try to grow that.

RS: Can you talk about any of the other members aside from Vicente Fox, like what they bring to the table?

GT: I'll just say, in general, it’s a great combination of financial and industry experience that we think is going to continue to position us very well. Without, you know, getting into specific people, it is a, you know, a purposefully curated Board that's designed to help us drive growth.

RS: So, you – Helix recently reported the quarterly earnings. I don’t know how much you have to do with this given that you just came on and also your role, but I was wondering there was no Q&A at the end of the call, was that deliberate because you guys are not wanting to announce things right now? What was the thinking behind that?

GT: So, again, that happened before my time, so I don't want to get too much in detail. I think these calls and communications; they may vary from time-to-time, so I don’t know the specifics of that particular situation. But what we do hope we’re able to do going forward, and I think our track record shows that we’re very keen on communication with our investors and the public and we’re going to continue to try to improve and communicate our story because it’s a great story.

When you look at financial performance and how we’ve been growing revenue, it’s a really exciting story and we think that there are a lot – the best is ahead of us. So, it is important that we effectively communicate that to our investors and we will continue to try to do that.

RS: So, you said that – on the call that or not you, but Zachary and Scott said on a call that Helix reported 142% revenue growth. As you said, you guys are growing and improved cash flow from operations by 39%. Can you speak a little bit to investors about where do you see it going now and what would you say to investors, especially, as somebody that just came to the company?

GT: Well, look, I – all the reasons that I pointed to why I’m here should be also very good reasons for investors be interested in our company. You know one of the things that – as you know, when you look at the stocks of our sector, they tend to travel together for – you know, for better or for worse and there are lots of moving parts as to what drives the price. What we are is focusing on driving growth and doing it well in a sustainable fashion, and I think if we do that, we’ll, you know, get recognized with further interest in our company and our stock.

RS: So, growth just in terms of taking on more partnerships, growing the business, getting more customers?

GT: Absolutely. You know, you have new states coming online all the time. We have a dominant market share position in many of the states that we are in, but we can always serve our customers better and develop better products and new products. And so, these are -- you know if we stick to our knitting and continue to do that, I think we’re going to be just fine in there and we’re very excited about that.

RS: Okay, great. Well, if you have any other pieces of advice for people looking to get into this sector? You know, a lot of people are talking about branding that that’s, you know, the big thing. Obviously, your play is coming from the technology side. What will people have to look for in terms of a technology company in this sector? How do you look at what differentiates one from the other? What do you think are the main things to look at there?

GT: Yes, that’s a great question and I think the answer is one that every startup and every technology company has to ask themselves. I'm not just going to try to, you know, build God’s gift to the world and hope everyone will buy it, but really talking to customers, really understanding the industry.

There are a lot of gaps, I mean a lot of things that are opportunities that I think if folks really get smart on the sector and think about what the capabilities really are, and then just, you know, do the small things every day to grow and build a company, I think that's what Zack and Scott has done very well and I’m looking forward to helping them continue that process. So, those – the advice I would have is just to really, I mean, know what your abilities are, but really take an honest look at the sector and there are new opportunities popping up every day that are gaps in the infrastructure.

RS: What do you think Helix – what was one of the first gaps that they tried to address?

GT: Clearly, the nature of this business presents lots of security challenges. And so, that's really - the company was really trying to track that problem. Scott and Zack had some previous experience in the security space and they built a very dominant market share position there early on. But really, you know, as they say in hockey or one of the famous quotes is skate to where the puck is going, not where it’s at. So, I think the other thing that they looked and saw was that, you know, the – a lot of the softwares and other services that, you know, businesses and other industries take for granted, probably just don't exist with the unique regulatory framework and where the industry – where the cannabis industry is.

And so, if you're looking at what it takes to run a successful legally – a legal cannabis business, there were lots of pieces that were missing or just not done as well and one of the things that we then did was through acquisition and again through growing new products really try to address those. And so, I think that’s part of why we’ve been successful to-date and hopefully we can continue that process.

RS: Okay. We can kind of end with this question. I’m curious also touching on your background, you know, previously in the Wall Street world, where do you see the future of this sector heading? Like do you see the big players now staying the big players? Do you think pharma and tobacco and alcohol industry, do you think they are going to become the big players?

How do you see it shaking out? Or do you see technology companies like Helix kind of building and building and growing more incrementally, but then having kind of a bit innovation on their side that they can kind of do something bigger than they’ve done up until that point?

GT: Well, I think the answer is yes, both. I mean – you know I like – I’m a kind of a history buff. When I look at other industries over the years, the pattern has been really smart and entrepreneurial companies grow, buying some success. In some cases, you’re going to find that the – they make a lot of -- lot more sense in the portfolio of a larger company. In other cases, they grow into monsters and we see lots of companies today that are gigantic companies that grew up as startups. But some of them also were acquired, and so, I think it's – both scenarios are going to happen. Again, I think if you focus on your customer, you focus on the industry and your employees, you’re going to be able to grow and have fine success in either path.

RS: Alright, Garvis. I really appreciate you taking the time. It’s been really an interesting conversation. Thanks for coming on.

GT: Great. Thanks so much for having me.

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