The evolution of Empower Clinics to become an integrated healthcare company - and why CEO Steven McAuley chose to partner with Fobi.

Listen to Fobi Insider - Episode 5: Rising to the Challenge

The following is a transcript of the conversation between Fobi Marketing Director Devon Seidel and Empower Clinics CEO Steven McAuley.

Empower Clinics CEO Steven McAuley: What's happening with Empower Clinics, we're ideally positioned for the pandemic and beyond and really I've been thriving during that time. Yet, on the other hand, I'm witnessing tourism and hospitality get obliterated. I'm witnessing a hotel that hasn't been closed once in 37 years, having to close its doors for three months and put boards on the doors in downtown Vancouver. And that's most of the hotels in and around Canada and North America. Many of them will not reopen. The negative COVID 19 test result is now as valuable as your boarding pass and your passport. It's a document that you must have. We couldn't have predicted that.

Fobi Marketing Director Devon Seidel:  A lot of people look at Loop as just contact tracing solution, but really at our core, we're a data intelligence company. We're literally the glue that's connecting existing infrastructure like a hub and spoke model. And that partnership with you is so important because now we have testing that's integrated with notifications, exposure tracing, vaccination validations, that really creates a solution that's going to provide that safety for the industry and allow us to reopen.

Steve: It's going to be very interesting to watch the next couple of quarters for both companies, as we gathered data together, that is verifiable, undeniable. We're now talking about thousands of people, tens of thousands of people being processed through the technology or through the testing layer as part of it.

Devon: Hey, you're listening to the Loop Experience podcast. Join want us for exclusive interviews, behind the scenes updates and all things Loop. Coming at you from the head office storage room, I'm your host Devin. Welcome back. Went to the Loop Experience podcast.

Our guest today is Steve McCauley, chairman and CEO from Empower clinics. We've been working with Steve from Empower for a while now on multiple different projects. It's good to actually sit down and talk to you. We've been on a ton of Zooms together, back and forth with emails. I think together we'll be able to really discuss for our listeners that power between Empower Clinics and Loop Insights. So I'm excited to have you on the show today.

Steve: Yeah. Thank you, Devin. It's a great to be on, I fortunately get to do a lot of interviews and shows, but this is the first time for the Loop Insights podcast. I'm very grateful for Loop Insights and our partnership. And I think one thing I think all listeners should know is, we have a lot of who are original Loop Insight shareholders who took positions in Empower Clinics. So very honored to have that crossover in shareholder base.

Devon: Awesome. Thank you for that. And also I'd like to congratulate you on hitting the dollar mark for your stock, that's very exciting.

Steve: Yeah. Yeah. It's quite a milestone. It really is something that I felt was really within our grasp. It's always hard to predict how markets will react from one day to one week, but we've really have been building just such an incredible new following. It feels like in the last year that we've turned over the entire shareholder base. I know that we haven't, but it just feels like we have a tremendous amount of new followers who are coming in and picking up on the story. I think it's a combination of just the kind of execution that we've been able to get done. I think it's a lot of the PR work that we're doing. I think it's the benefit of doing the interviews or podcasts like this and finding the methods to communicate openly and transparently and often to our shareholders, it helps calm the nerves of shareholders. It helps me clarify kind of exactly where we are, reaffirm our direction. And so I'm committed to continue these formats going forward. It's just something that I believe that someone in my position needs to do.

Devon: Yeah. And you have a ton of great content, like you said on your website. So it's great that we can bring that same content and a bit about your background and your story of how you developed Empower Clinics to our listeners as well. And like you said, we have a very connected investor audience together, so I'm sure they're going to love to hear what we're talking about today. So why don't you give me a little bit of background on the development of Empower Clinics?

Steve: Yeah, it's really quite an interesting story. So I took over January 4th, 2019. So we've just passed the two year mark. And frankly, it was a very troubled asset. It was a public company. I'm definitely a public company guy by experience and background and some of the investment bank groups behind the original Go Public event back in 2018 had asked me to come in and take a look. It just generally was not working. After some extensive due diligence, we decided to kind of make the move start to arrange some funding for the company. It was in desperate need of working capital. Basically kind of rearranging and fixing some legacy issues.

So it was really challenging, especially early on, but we managed to make some important changes. Closed out a number of underperforming clinics in the Pacific Northwest because I was concerned about the negative cashflow that was happening. And as I look at clinic operations and really any of our operations, I really fundamentally need to have them be self-sustaining and to be a contributor to the ultimate public company. And that's the goal I always strive for. Just pure fundamentals of operating a business.

So the first kind of major thing that we did was we identified the Arizona clinic group called Sun Valley Clinics. And we did a real nice acquisition in May of that year. Concurrently, we did a $4 million raise and that helped really boost and kickstart at least the changes that we were starting to move toward. And so we just continued on that path. Sadly in Canada, particularly the whole Canadian cannabis LP market really get obliterated in the latter part of 2019. And that affected us along with so many other stocks. And we were at that point in time, more focused on our CBD opportunities, still leveraging our clinic layer and our physicians, which is something that we're really known for.

And so we went into 2020 kind of back in survival mode again, and then the pandemic shows up and our clinics in the US are deemed essential services. And then all of a sudden, we started to thrive. All operations, whether it was in the Pacific Northwest, and particularly in Arizona we're really performing. March, April, may, June, July, August were just great months. And we made some really important strategic decisions back at that time. And, and the first of it was, we felt that we could leverage our clinic assets, physicians, med techs, admins, technology to enter into COVID-19 testing. And we started out in our clinics in Arizona providing testing services. And we learned that we could shift into that type of service. Fast forward, almost a year, the demand on those services has gone beyond crazy.

So as we got a little later into the summer, the one thing that I felt from a scale standpoint was you can't really be a reseller of PCR tests through clinics and really make a lot of money because ultimately most of it is, are going to the labs themselves that are doing the processing. So we quickly investigated, should we set up a lab in one of our locations in Arizona? We determined that it was going to take nine to 12 months to get that done with all the certifications that are required. So then it quickly became, we've got to go buy a lab, that's the fastest route that we can get to market. And so we started hunting around and we landed on Kai Medical laboratory out of Dallas, Texas. Really liked the team, liked the equipment, liked their R&D capabilities, and we managed to get a transaction completed and we closed on October 6th. And then away we went.

That integration went far better than I ever anticipated. And, we just gave them the working capital, gave them the business support, helped them focus in certain areas that needed some assistance and really got them doing what they do best, which is, be scientists. Be lab techs and frankly process specimens. So to the extent that we can support human resources, business side of things, accounting, facility management, and make it a little bit easier for the leadership team, well, that focus started to pay off. And October was a record month for them. November they doubled what they did in October. December, they tripled what they did in October. And we just had really an amazing fourth quarter. And so we'll get just about a full quarter of contribution to 2020 results because of the timing of the close.

And then the last thing that we did was we were at that time already in due diligence on the Canadian clinic group acquisition, and we worked through that. We were able to get that closed before year end. And that was a big goal of mine was to not to let it roll over. Get it closed on the books for December and be ready to come out of the gate January 1st with our Canadian footprint, our healthcare footprint in Canada. And that kind of brings it to today and things have really continued to thrive for us and take off. And so we're really proud of our efforts, but boy, we've got so much to do. We're still frankly, at the early stages of all of this journey.

Devon: And I think that just speaks to such great strategy and being able to recognize the market, seeing what's happening in the industry around the world and being able to pivot and react quickly. I think you guys did such an amazing job of that, and you're still doing, and just in a short amount of time. Also coming on at a time when you had to develop a team, develop what your strategy is going into 2019, and then be like, oh, wait, there's this opportunity, let's pivot everything and move forward with this while still maintaining the original goals as well as the company. I just congratulate you. I think that's a great job that you did there.

Steve: Yeah, Dev, thank you. And as this was all developing in early 2019, I looked at it as, although it was a troubled asset, I had confidence in our ability to leverage capital markets, having access to the investment banking community, that when the time was right, I could go back my colleagues and friends and start to lean on those relationships to start to build it up. Now, the one thing that happens, if I communicate a lot, I get a lot of communication back. One has to realize that it's kind of a double edged sword. So it can be time consuming, but it certainly makes me aware constantly on our market perception and really what the market expects of us.

And as I looked at that perception in and around June, July time period, it was very evident that our look and feel such as our investor deck the website at the time really was a reflection of where we were before. And it was not a true reflection of where we're going. And so I had to quickly update the messaging, that was evident. I had to quickly improve the website. I had to overhaul the investor relations deck to make sure that my commentary about where we're going also matched our content that was available publicly, so that this concept of being an integrated healthcare company, and this was before the Canadian clinic acquisition and before the medical diagnostics lab. Although we had that vision, we still didn't have it yet, but it was important that the narrative changed.

And once it did, we were able to start to drive liquidity, because in the absence of liquidity, you're never going to get stock price movement. So you've got to start with liquidity and figure out how to get liquidity. And so we started to generate quite good liquidity, and we were very strategic about updating the market on our news. And by late third quarter, September time period, we'd already announced our letter of intent for the medical laboratory. And shortly after that, we were able to do the same thing for the Canadian clinic acquisition.

So the market knew that that stuff was coming and we had our kind of new messaging and our new look and feel, liquidity was high. And we started to get some price movement, although we were stalled. There was kind of like this technical blockage in and around the 8 cents mark, 8.5, maybe 9 cents. And you could see if we were able to find that explosion through that technical blockage, it was smooth sailing beyond that. And that's exactly what happened and we busted through on a Friday and had massive liquidity.

We woke up Monday and it was even crazier. We just kind of couldn't believe how much liquidity we had, but that price bust just took place. And I think we hit 39 cents on the day. I think we closed somewhere around 34. So from a period of Thursday, two trading days later, we're from 7.5 cents and we're sitting at 30, 34 cents. We've never looked back from there. We fundamentally are a different public company where we sit today, and again, grateful for it. It means we get to look at larger transactions. If the time is right, when the time is right, we can do much larger financing rounds at substantially better valuations, again, giving us more strength, better balance sheet and again, the ability to make more moves.

Devon: Yeah, that's great. I want to come back to kind of that connection between Loop and Empower Clinics, but I also want to touch on, you have a lot of family experience in the hospitality industry and specifically some local hotels here in Vancouver. Tell me a little bit more about that.

Steve: Yeah. My wife and her family owned the Wedgewood hotel here in Vancouver. It's a five star luxury hotel and five star restaurant. And it's really into the dichotomy. What's happening with Empower Clinics, we're ideally positioned for the pandemic and beyond, and really have been thriving during that time. Yet, on the other hand, I'm witnessing tourism and hospitality get obliterated. I'm witnessing a hotel that hasn't been closed once in 37 years, having to close its doors for three months and put boards on the doors in downtown Vancouver. And that's not just our hotel, but most of the hotels, all the hotels in and around Canada and North America. And the concept that you have to lay off in excess of a hundred staff, that affects their families directly and just watch that happen. And there's some government wage subsidies and there were programs, but it doesn't replace what's going on.

So this pandemic, if people don't fully believe it, there is significant direct economic harm and a negative impact to millions of people, to hundreds of thousands of businesses just in Canada. In hospitality and tourism, many of them will not reopen. There's a number of properties in downtown Vancouver that have shut for good. They're not coming back. And many of the large properties since last March have still remained closed, affecting hundreds of workers in the properties, restaurants that might sublet space, coffee shops that might sublet space. Weddings, events, concerts, all just destroyed. And, and even now with the properties back open again, they're running at a fraction of their normal volume. Average daily rates are distinctly lower than they would be in normal times. There are no US travelers coming to Vancouver, there are no international travelers coming to Vancouver.

We're thankful for the local markets, the staycations that are taking place, but it's a different time and a very difficult one. And so that underscores the tremendous importance of the work that you and your team and Rob at Loop are undertaking in partnership with us and figuring out how two Vancouver based public companies can leverage their assets and capabilities to reopen Vancouver, reopen BC, reopen Canada, provide data that there is a method to get the economy reopened in a way that meets the guidelines of health and safety, yet still allows operations to come back to sort of normal state, whatever our new normal looks like. And this new normal is not temporary.

I mean, listeners need to just understand what these executive travel orders mean around the world. Where people may recall the events of 9/11 oh so many years ago, and then the security protocols that were put in place in airports and travel in response to 9/11 that were only meant to be temporary at the time. Well, are we 19 years on? And those security protocols have not changed. They haven't lifted. The negative COVID-19 test result is now as valuable as your boarding pass and your passport.

Devon: Yep. Yep.

Steve: It's a document that you must have. We couldn't have predicted that. I certainly did feel that the R&D capabilities that we discovered through due diligence at Kai Medical were critically important to the market going forward. I just didn't realize that we would land under these executive orders, but we did invest quickly and heavily to get Kai the resources to get these new products to market. And which is proving to be a great step on our part because our new Kai saliva PCR test that is meant for home use is an ideal product for the traveler. And we're seeing that demand right now.

Devon: Yeah. And travel is such a main one, and I think that's why we're starting to work together on the Reopen Vancouver initiative. I mean, looking at the numbers globally according to United Nations Conference of Trade and Development, they're expecting a $3.3 trillion loss in revenue from just tourism alone. And Vancouver tourism is such a major part of our revenue because it supplies jobs, it brings in people that are purchasing in our areas. And I mean, we have people coming in through cruise ships. We have people coming in through airports. We're such a travel destination. So to lose that piece out of our economy is a major impact.

Steve: Well, just look at the work that we've been doing with the port of Vancouver and the cruise lines to try to figure out how to help them reopen the Vancouver Alaska run. And, unfortunately government intervention came in to block that, but that's a $3.2 billion economic impact to the city of Vancouver just for the season, which runs about five and a half months. And it's responsible for over 15,000 local jobs.

Devon: Yeah.

Steve: It's devastating. It's devastating. And so I just feel that together, Loop and Empower and my divisions, it's an imperative for us to figure this out. It's more than just Hey, we're doing right by the shareholders of our respective companies. I think we have a bigger responsibility than just that. It's beyond the dollars and cents. It's to be part of the change that sadly, we just don't see the city provincial and federal governments and agencies coming with viable solutions. And it's why Rob and I have been so active locally with large constituents who have a vested interest in any form of reopening to lobby and find a method using our private sector resources to get this going again.

Devon: You mentioned the cruise ships there. I know that they're restricting the entry. There are options out there though to prove pilot programs. Are you able to talk a little bit about what that Loop and Empower relationship looks like and potentially looks like as a pilot program?

Steve: Yes. So there's the technology piece and wallet pass technology and all the capabilities of wallet pass. But one of the other important strengths of Loop is the ability to map the appropriate workflow for check-ins so that the application of the wallet pass technology is deployed correctly for the scenario. So whether it's embarking on a cruise line, disembarking on a cruise line and figuring out those logistics or it's running an NC2A event bubble in Las Vegas and managing three to 4,000 people over a short period of time, with multiple entry and exit points to an arena.

And so when you bring in our testing capabilities, whether it's our rapid tests to our saliva tests or our standard PCR, but then the other piece that we have is the healthcare worker or med tech capability. Because we have the human resource, you need someone to collect specimens. Now, when you've got our new saliva tests, you don't need a med tech to do it, but any other form of rapid or standard PCR, by rule requires a healthcare worker to administer that's a specimen collection. So the one thing that I can tell you and confirm is that the cruise lines don't want to be in the business of contact tracing and building tech platforms. They don't want to be in the business of healthcare administration or in the testing business. But they know it's necessary to have that working together because the CDC is telling them that.

The International Cruise Line Association is requiring them to do that. And we all know that the cruise lines suffered greatly early on in the pandemic because they didn't have the knowledge or awareness or the processes in place to deal with identification and then quarantining. So they've learned, but frankly that it's going to take a combination of a Loop and Empower to to get it done for them, if they want to have any kind of opportunity to get back to business again.

Devon: Yeah. And I think that's a great point that you pointed out there. I think an important thing to know and what we kind of get categorized with as we've seen the rise with COVID in our implementations with COVID is, a lot of people look at Loop as just a contact tracing solution, but really at our core, we're a data intelligence company. With what we're doing and working with cruise ships or other recent implementations, the main solution we're solving is creating an interoperable data solution. So in layman's terms, we're literally the glue that's connecting existing infrastructure, like a hub and spoke model with Loop at the center.

So that means if there is existing infrastructure, I mean, we can use the reopen as an example. There's the Arrive Canada app. There's the COVID alert app. These pieces sitting alone aren't valuable, but as soon as they're connected to a solution that's integrated with hotel check-ins, cruise ships, testing that really creates a solution that's going to provide that safety for the industry and allow us to reopen. So Loop sits there and is able to plug in all those pieces together. And that piece where we fill the holes and gaps, like you brought up the wallet pass, we're looking at, okay, so what's the process, what's the solution? What are those pieces in between that are really needed? And those are kind of the services that we've developed to fill in there.

I think that kind of gets misconstrued because we've done so many successful implementations with contact tracing public. People are, this is great. It's a contact tracing company. Maybe we're moving away from contact tracing, Loop isn't as valuable now, but really our main core is that data connectivity. And I think that's the thing that we bring on such a great level. And that partnership with you is so important because now we have that integrated testing, notifications, exposure tracing, and then now how we're moving towards vaccination validations, showing that through the passport and the integration between that. I think that's such a large piece that people don't really see because we haven't experienced this before. We don't know what the steps are, we kind of just expect it to just kind of pop up, but there isn't that connectivity there in the industry.

Steve: Yeah. You're right on. And I think the other thing that's wonderful about the partnership that we have is, you have business development folks, I've got business development folks, you're opening up doors and opportunities, we're opening up doors and opportunities. And we literally just kind of cross populate in every case because, as example, I'm working on US government RFPs right now and they're frankly massive opportunities. In each and every case, when we go through the discovery of the search, which is we're looking for COVID-19 services or product bids, and when those bids come to us, in each and every case, either on the headline or somewhere down in the requirements, you see this add on of oh, and contact tracing if available. Which is just quickly flip it over to the Loop team, have you guys take a look at it and then incorporate your material as a value add that together we're bringing to the table.

I feel like we've got as good a shot as anybody at getting one or two of these or however many. But that complimentary nature of the partnership continues to show up every single day. And in fact, the demand is increasing. I don't even know how to explain it fully. You just have to see my email inbox to understand how much demand is coming our way. This is not just about Canada anymore. It's not just about the United States. The international markets are finding us as well, just as Loop is being found on international markets also. So we've kind of just exploded out of our borders and it's going to be very interesting to watch the next couple of quarters for both companies as that reach takes place as together, we gathered data that is verifiable undeniable.

We're not talking about PowerPoint presentations or, Hey, we think this might happen, we're now talking about actual relationships, event bubbles, partnerships that thousands of people, tens of thousands of people are being processed through the technology or through the testing layer as part of it. So I mean, I'm definitely optimistic about what's going to happen for both companies because I feel the demand. Again, you just have to look at my WhatsApp and my messages and my inbox of not only myself and my team members, the demand is not slowing down. It's only increasing.

Devon: Yeah. And like you said, there's no playbook. There's maybe a small use cases, but on a scale of what these industries are looking for and the solutions that they're asking for, I feel like sometimes they don't even know what they need. They know that they need a solution. So with your conversations all the way from restaurant groups to large industry leaders, how have those conversations been? Do they kind of know what they need? Have they looked at what other companies are needing and asking if you can provide that or are they just coming to the table and saying, "Hey, we need help. What do you suggest?"

Steve: I think you have a variety of scenarios that take place. In some cases, if you're the cruise line industry, you've got challenges because of policy. Cruise lines, the CDC are governing them internationally on what the standards should be for reopening. Each province has its own rules and regulations. Each state does as well in the US federally, it's complicated. It's complicated federally in Canada also. So in speaking to various groups, some groups frankly don't know what to do. It's not that they're not thinking about it and potentially not investigating it, they are looking to government, public sector agencies for assistance, but there's not really much that's forthcoming. They get policy and rules from those agencies, but not solutions and certainly not funding for these problems.

In the US the flow of funding is certainly much stronger. They are getting the money to the businesses. The second round of the PPP program is underway in the US and I think there's still a little bit of debate going on, but that's, I think a $1.9 trillion stimulus package that will come out of the Biden administration. So some of the groups that we speak to have put their own task force together to figure out a plan, but it's certainly a challenge. But I can say that collectively, everyone that we have talked to appreciate what we're doing as private sector companies and bringing our assets to bear. And in every single case, they want the follow-up. They want additional data. In my case, for testing, they want to look at our technical specifications, they want samples.

In Loop's case, they want workflow documents, demos, proof of concept, or a mini pilot. So across the board, I think our solutions are all very positively received. And so it's incumbent upon us to keep pushing. I would expect that we're going to see some more pilots and event bubbles showing up in the near future.

Devon: Add one piece. I want to touch on there with the government. I want to make it clear in no way are we ever pushing against the government and saying, Hey, don't forget what they're saying, let's reopen. We're paying attention too, as soon as these mandates come in, we're looking at, okay, so what is the mandate? How do we work with this? How do we enable this to actually happen? And we're talking with all levels of government, peer hack, different pieces and looking at, okay, this is what they've sent as a guideline, how do we work with that and how do we make that capable? How do we enable, for example, hotels, cruise ships to follow that mandate with this assistance of technology?

I think that's a big piece with this whole reopen is, how do we look at what the government is implementing? And then create that, enable that to happen at scale and in a timely manner as well, too. I think a timely manner is a key piece in that too.

Steve: The challenges that they have in the public sector, if you're the ministry of health, put ourselves in their shoes and try to help them with the decisions, give them the data and the information and the tools to enable them to come to the table with us and go, Ah, your helping us. You're helping society. You recognize the challenge that we're all under. And, I think again, both Rob and I get that, the people that we kind of are working with from a lobbying standpoint, understand it. And we're listening, we're taking guidance on how best to you work through these scenarios, but we're not going to sit idly by, we will continue to push the agenda for sure.

Devon: Great. And just want to kind of wrap up here. This is kind of a question that we've been asking all of our guests. What's one thing that you really learned during this pandemic? And I mean, it doesn't have to be a business related topic, but maybe what's a hobby or a new skill that you picked up on your downtime. So what's something that you really got to take away and a benefit of COVID for you?

Steve: The concept of downtime, frankly, doesn't exist. My 15 hour days just continue that way because there's too much at stake. There's no time to slow down. I think the thing that I have learned, and this is very important, the thing that I've learned through the pandemic is that healthcare and the delivery of care can change and can improve. Where states and provinces had restrictions on virtual care and telemedicine pre pandemic, all of a sudden we've all realized that it's a very effective way to improve the delivery of care. Not only for the patient, but also for healthcare workers and physicians.

There are so many services, routine healthcare services that can be done through telemedicine and through a phone call. And so as, as we look at our business model of integrated healthcare going forward, and the delivery of care, it is improving and will continue to improve. And it can't go backwards from here. We have to leverage the change that has been allowed. And so that's my big takeaway from the last sort of 10, 11 months is, we can be part of that change and the improvement of the delivery of care and the improvement of empowering people to take more control of their own healthcare.

And this where initiatives like our direct to consumer platform at kaitests.com, which is about to go live, will be so important. Our first test will be the Kai saliva PCR test, but we fully intend to make other home-based test protocols available again, with a goal of speeding up the whole supply chain and the delivery of healthcare and enabling people to take more control of their own care.

Devon: That's awesome. Well, thank you for taking time out of your I'm sure, very busy day today to hop on and just explain to our listeners a little bit more about the connection between Empower and Loop and a little bit more insight into all the great things that Empower is doing.

Steve: Yeah, thanks.

Devon: Sorry, Steve, go ahead there.

Steve: I'm just saying, yeah, thank you, Devin. I appreciate the time. This is important. We've got to communicate our message to the collective shareholders and new followers. So it's a great forum and I appreciate you having me on the show.

Devon: Awesome. And thank you to our listeners. We'll see you again next week. Have a great day.

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