Core One Labs, Inc. (CSE: COOL, OTCQX: CLABF), formerly Lifestyle Delivery Systems, changed its name on Aug. 15, 2019 to better reflect the Marijuana company’s plans in becoming a fully integrated business. The Board of Directors also approved a 6-to-1 reverse, which lowered the issued and outstanding shares from 139,465,194 to 23,244,199 shares.
Earlier this summer, Core One Labs had inked a letter-of-intent to merge with TransCanna Holdings Inc. (CSE: TCAN) in a deal that would have valued Core One Labs, Inc. (CSE: COOL, OTCQX: CLABF), at $56 million (CAD). But the management of Core One Labs thought better of the deal and on July 15, 2019 withdrew from the amalgamation of the two marijuana companies – and for good reason – COOL, CLABF is worth far more than that.
As the Marijuana sector consolidates, those companies engrained in all aspects of the trade will carry a higher market value, given time to develop and deploy their plans and Core One Labs, Inc. appears to be heading in the right direction.
Core One Labs, Inc. (CSE: COOL, OTCQX: CLABF), developed a patented Marijuana product – CannaStrips, which are now being sold in 42 stores in California and Nevada. The Corporation is also working with Rise Distribution to put its product into 200 stores, according to a story post on Equity.guru.
Marijuana Consumer/Medical Products
According to a story in The Street published earlier this year, seven cannabis products are leading the pack in Marijuana consumables, both in CBD and the more-controlled THC products. Cannabis oil is at the root of this explosion in Marijuana consumables, yet its consistency in manufacturing varies, both in CBD and THC production. Core One Labs notes that its Cannabis oil is consistent in its makeup and that supports an efficient manufacturing approach that can be interpreted into controlling costs – and margins. Core One Labs starts at the seedling stage, delivering a plant that genetically has an identical makeup and once harvested, it produces a laboratory-level Cannabis oil that is consistent in its makeup.
Beauty and skincare products run a close second to cannabis oil with a diverse group of manufacturers that for the most part are niche manufacturers who compete for shelf space in the Marijuana retail sector, opting mostly for online sales. But let’s face it, few consumers think of wrinkle cream when they visit their local Marijuana dispensary. That’s not to say that beauty products infused with CBD are peanuts when it comes to their potential market. But more likely, most of those niche manufacturing and marketing companies will not survive given the consolidation in the Marijuana space. For some companies that could mean growth through acquisition or merger. For others, it could fall back on regional sales and limitations to growth.
Edibles are also growing in popularity, from drinks to chocolates and even gummy bears laced with CBD and THC have been coming on strong as more consumer options become available. Yet despite their growing popularity, few have as much of a mass appeal to Marijuana consumers than Core One Labs’ patented CannaStrips. That is evidenced by retail chains on the West Coast so readily accepting the Cannabis-laced strips, which are placed in the mouth and enter the bloodstream through the mucus membrane. In just minutes, consumers feel the benefits.
Cash is King
In 2018 Core One Labs generated over $4 (CDN) million in revenue. The bulk of those sales came in the fourth quarter, generating over $3.1 (CDN) million. COOL, CLABF CEO, Brad Eckenweiler, credited much of the increase to both the City of Adelanto and the state of California reducing its tax on Cannabis. “The taxes on cultivation, manufacturing, transportation, distribution and sales in 2018 amounted to a significant portion of the cost of sales, said Eckenweiler. We believe that our numbers in 2019 will be significantly better.”
While Core One Labs lost $1.6 (CDN) million in fiscal 2018, its acceptance by Cannabis store operators of its CannaStrips could put the Company in the black. Yet costs are still being incurred as COOL, CLABF looks to open its first store in Adelanto, California later this year.
Core One Labs obtained permission to build its Marijuana dispensary from the Adelanto City Planning Commission earlier this year. Yet construction of the dispensary has yet to be completed, though the Highway 395 Cannabis dispensary appears to be moving forward. The City Counsel is the last authority to grant COOL, CLABF its license and with the City’s cooperation in aiding the fully integrated Marijuana company it is unlikely that the Hwy 395 Dispensary will stall in its opening.
“The establishment of the Highway 395 Dispensary will allow the Core One Labs subsidiaries a significant marketing advantage to more than twenty million Southern California customers for in-store shopping as well as home delivery,” said Eckenweiler.
Ready for Market
Eckenweiler and his management team have been gearing up for expansion, having subleased 10,000 sq ft of its 20,000 square foot Adelanto, Calif. warehouse to TCM Distribution Inc., a wholly owned subsidiary of TransCanna Holdings Inc.
“The 10,000 square feet that we are retaining will accommodate inventory of both raw material and finished products, even seeds and seedlings which will have specific environmentally controlled storage. The close proximity to our 9501 Commerce Way facility allows for easy and seamless coordination of transportation and distribution saving us not only time, but tens of thousands of dollars in transportation and security costs,” noted Eckenweiler.
Core One Labs, Inc. (CSE: COOL, OTCQX: CLABF), also owns a licensed transportation company, allowing Core One Labs to begin home delivery of Cannabis products when its Hwy 395 Dispensary opens.
Core One Labs boast its third event sell-out of CannaStrips shortly after announcing the sub-lease of half its warehouse space to TCM Distribution. Core One Labs President, Casey Fenwick, stated, “CannaStrips popularity continues to grow. I was personally present at the High Times 4/20 Sacramento event and the interest and acceptance of the CannaStrips product line was amazing, everyone wanted to know more about CannaStrips and details of the product line. There wasn’t a moment that the booth didn’t have multiple visitors.”
Eckenweiler noted that a local retailer at the Event sold out twice.
The production equipment COOL, CLABF uses to manufacture CannaStrips is constructed from pharmaceutical grade stainless steel and built to FDA specifications. At a 40% run rate, the equipment has the capacity to produce 500,000 CannaStrip per day.
Core One Labs, Inc. (CSE: COOL, OTCQX: CLABF), has also contracted with growers, having supplied them with enough seeds to grow 10,000 plants. That supports COOL, CLABF plans to meet demand in California where 50% of the U.S. consumption of medical Marijuana, CBD and THC products are concentrated.
The Company’s new releases show a methodical, deliberate corporate development strategy to focus on the highest consumer market in America – California – first, though COOL, CLABF’s plans of expanding distribution through the Rise Distribution group will open more of the Nevada Market for its products, where Core One Labs is currently only in one Las Vegas retail distributor.
Core One Labs, Inc. (CSE: COOL, OTCQX: CLABF), is now a fully integrated Marijuana company that can deliver a seed-to-consumer product in a capital efficient manner, which is quite a feat for an operator in the consolidating Marijuana industry and investors appear to be taking notice. Shares of COOL closed up $0.20, or 27.4%, Friday November 29th to close at CDN$0.93. While in the US, CLABF rose $0.15, or $0.32, finishing the week up at $0.625.
The Growing Case for Cannabis Global Inc (OTCMKTS:MCTC)
MCTC Holdings Inc (OTCMKTS:MCTC), now doing business now as Cannabis Global, Inc. (MCTC), is starting to look like an increasingly interesting stock in the small-cap cannabis space for a number of reasons, prompting our analysis here as part of our mission to provide insights into under-the-radar speculative opportunities in the cannabis, CBD, and hemp sector.
From a macro perspective, one can easily make a case that the overall sector has transitioned from persistent, glut-induced headwinds to post-purge structural tailwinds. In a robust long-term growth thesis, that’s the crucial moment of opportunity. It is imperative for aggressive investors to find new ways to position at this stage given this transition.
The Big Point
MCTC Holdings Inc (OTCMKTS:MCTC) demands special attention for two key reasons. First, the company is right now making the jump from development-stage operations to full commercialization of its base of proprietary IP. Second, this is one of the very few IP-heavy plays in the cannabis space, with robust R&D and a strong portfolio of patents now in process with the USPTO.
That latter point is especially important because the company’s IP continues to expand as a market-leading foundation, with a growing list of partners pining for access to infusion methods in the edibles space, and because the edibles niche is increasingly looking like the big opportunity as cannabis edges toward universal mainstream popularity.
Laying a Foundation
For example, the company just announced the signing of a definitive, five-year agreement for the production of cannabis edibles and beverages in conjunction with licensed California cannabis operator, Magnolia Extracts, LLC. Under the terms of the agreement, Cannabis Global will provide access to its trade secrets and patent pending technologies for chemical-free cannabis and hemp infusions in the production of tetrahydrocannabinol (THC) containing edibles and beverages.
“This deal represents an enormous escalation in terms of our positioning in the California cannabis edibles and beverages marketplace,” stated Arman Tabatabaei, CEO of Cannabis Global. “We will be working closely with Magnolia and look forward to a rapid path to market for these innovative products. We have strong reason to believe we will see a relatively quick expansion in distribution footprint given the prepotency of demand we are seeing among potential distribution partners already. The Magnolia site has recently been modified to our specifications and is now complete. We are looking forward to moving out of our initial stage of development and into full-scale production. This Agreement is a game-changing development with strong tangible implications for our performance this year.”
The Crux of the Matter
Remember: the big driver of this whole theme is the inexorable trend toward universal legalization of cannabis-based products. If you have any doubts, it’s time to do a personal reality check. The art of successful speculative investing is driven by forming derivative conclusions around a core idea that commands conviction. In this case, the inevitability of the long-term trend toward increasing mainstream integration of cannabis products as legal doors open step by step is that core idea.
From there, the most interesting opportunities are unappreciated and underpriced companies that have built a foundation of valuable proprietary assets that have the potential to increase in applied market value by huge leaps as they become essential in the ecosystem of the market phenomenon in question.
We see Cannabis Global, Inc. (MCTC) as precisely that kind of opportunity right now. The stock has yet to garner attention from the crowd. But it has a rapidly growing role as a core technology provider for many other companies building strong market positions in the industry.
The Only “Varin”
Aside from its formidable edibles infusion IP, the company has also recently made big strides toward establishing a new cannabinoid market with its “Project Varin”. This is potentially a huge future driver of growth for the company because it represents a segment with enormous demand possibilities and virtually no competition. That’s precisely where an IP-driven model has the most potent impact.
Project Varin refers to the company’s initiative to develop new delivery systems for varin cannabinoids. THC-V, which is one of the best known Varins, is becoming known within the cannabinoid sciences arena as the ‘Skinny Cannabinoid’ due to its purported appetite suppression qualities, and its possible use as a treatment against obesity-associated glucose intolerance
The project has already yielded strong results, including a research breakthrough in the form of a new tetrahydrocannabivarin (THC-V) delivery system providing for sustained release of the cannabinoid over a predetermined period of time and two other delivery systems for immediate release.
“While these developments add to our growing list of intellectual property, these are much more than technologies that will sit on a shelf,” commented Arman Tabatabaei, CEO of Cannabis Global. “We have already integrated both the sustained and immediate release versions into beverage products that we expect to be available to consumers next month. We believe the field of minor and exotic cannabinoids will grow substantially this year with several product introductions. We are extremely excited at the prospect of being a first mover in this emerging market segment.”
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CBD has Bottomed… What to Do Now (CVSI, GCGX, CWBHF, TRTC, MJNA)
The CBD industry has been one of the hardest hit market segments over the past 18 months. But the long-term structural growth trend continues to look robust. The disconnect is about supply. There was a glut as tons of pretenders and frauds purported to have a viable model. The bear has done its job and shut most of them down.
Now, in the aftermath, with the undergrowth burnt up in the fire, the survivors could be set to run with the structural theme still intact. That provides investors with an impetus to being to pick up the pieces off the floor and possible score big wins with a speculative mindset.
With that in mind, we take a look at some of the most promising names still standing, and expanding, as the new dawn pushes back above the horizon for CBD stocks.
CV Sciences Inc (OTCMKTS:CVSI)
CV Sciences Inc bills itself as a company that operates two distinct business segments: a drug development division focused on developing and commercializing novel therapeutics utilizing synthetic CBD; and, a consumer product division focused on manufacturing, marketing and selling plant-based CBD products to a range of market sectors.
At one point, this was the poster child for the space, ramping to over $7/share before being toppled by a Citron bear research piece related to intellectual property. It remains an interesting opportunity, but demands some extra due diligence.
The stock has suffered a bit of late, with shares of CVSI taking a hit in recent action, down about -5% over the past week. But action around the $0.45/share zone will be telling. Thus far, the stock appears to be signaling potential for a “higher low”, which suggests a longer-term bottom was put in place in March and a new upside phase is being cemented into place as fresh capital flows crowd onto the bid.
A break about the 50-day MA (around $0.54) would be a major signal.
Global Consortium Inc. (OTCMKTS:GCGX)
Global Consortium Inc. (OTCMKTS:GCGX) owns Indulge Oils (www.indulgeoils.com), a cannabis distillate which is currently being manufactured and marketed in California.
The company is also building America’s First Cannabis Mall in Sacramento, CA which when completed will house Manufacturing, Distribution, Delivery, Retail, Testing, and Cultivation all under one 64,000 square foot building. The Mall will house the largest Manufacturing facility of THC and CBD Distillate and Edibles believed to be operational in the United States. Global Consortium has leased 25,000 Square feet of the building with a purchase option, the Company is working to secure a first right of refusal for the remaining 39,000 square feet.
Indulge Oils is a premium “pesticide free” product sought after brand as it is known for its purity and high quality. Indulge Oils produces clean and pure oils that do not contain any residual particles, are non-toxic and non-carcinogenic. This is why Indulge Oils commands a premium for its oils and cartridges. Global Consortium, Inc. executed a 5-year lease with an option to purchase 25,000 square feet in Sacramento, CA.
Global Consortium Inc. (OTCMKTS:GCGX) is currently also expanding into the state of Florida.
There has been substantial progress in California with licensing and permitting. They are now ready to do full manufacturing for the Indulge Oils line. Dwyer also announced that GCGX will begin working Florida on a new CBD line, the upcoming elimination off all remaining convertible debt, and what is next for GCGX in 2020.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF)
Charlotte’s Web is perhaps the most established leader in the space in terms of the North American CBD market. The company makes 100% hemp-based cannabidiol wellness products, including CBD hemp oils, capsules, topicals, and pet products that feature CBD hemp oil extracts.
CWBHF hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Shares of the stock have powered higher over the past month, rallying roughly 27% in that time on strong overall action.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) managed to rope in revenues totaling $30.1M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 6.4%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($88.9M against $38.2M).
Terra Tech Corp (OTCMKTS:TRTC)
Terra Tech trumpets itself as a vertically integrated cannabis-focused agriculture company. The company operates in two segments, Herbs and Produce Products; and Cannabis Dispensary, Cultivation and Production.
TRTC has had a rough past week of trading action, with shares sinking something like -5% in that time. That said, chart support is nearby and we may be in the process of constructing a nice setup for some movement back the other way. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -8%.
Terra Tech Corp (OTCMKTS:TRTC) pulled in sales of $10.3M in its last reported quarterly financials, representing top line growth of 48.3%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($1.2M against $27.6M, respectively).
Medical Marijuana Inc (OTCMKTS:MJNA)
Medical Marijuana Inc bills itself as an investment holding company that operates in the medical marijuana and industrial hemp markets.
The company has been one to chronically overpromise and underdeliver, so it warrants caution. Management has been claiming big revenues for many years. Yet the stock has kept trending lower and the company refuses to move off the pink sheets or start producing audited financial data.
Those, taken together, represent some important red flags. MJNA may be best left alone despite its claims of powerhouse progress. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($6.5M against $10.8M, respectively).
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A Fresh Look at ISW Holdings (ISWH)
One stock we have covered in the past that seems to be finally clicking on a new level is ISW Holdings Inc (OTCMKTS:ISWH). Hence, we thought it was a good time to take a fresh look at the stock as it ramps higher.
The name was interesting to us late last year when we saw the vestiges of clear turnaround in play in a very speculative penny name. It’s not normal to see a stock like this starting to talk about EBITDA profitability and major sequential quarterly growth data over multiple quarters. What was starting to become clear at that point is becoming even more clear now: this company is an emerging leader in the growing home healthcare space.
ISW Holdings Inc (OTCMKTS:ISWH) characterizes itself as a diversified branding model with a range of sector targets. And we wouldn’t be surprised to see some new dimensions emerge here – for example, ISWH management has talked about developing progress in the data center and alternative energy markets, and has already developed technology with a partner (Bengala) in the supply chain management space.
But the bread and butter right now is clearly centered on its growing role as home healthcare services provider.
Real Growth, Now
According to the most recent release from ISWH, “for the year ended December 31, 2019, ISW Holdings posted revenues of $527,151. Management notes that these results were achieved on accelerating sequential quarterly growth, with nearly half of those revenues appearing in Q4. Sequential growth in Q3 (versus Q2) was 26%. Sequential growth in Q4 (versus Q3) was 29%. The Company projects Sequential growth in Q1 2020 to come in at a new record level significantly outpacing Q4 2019 results.”
The path from here, if we extrapolate, puts a top line of over $2M in play for Q2 2021, and an annual top-line of over $5M for 2021 overall. With that in mind, consider how the company’s leadership summarized the recent trend to close out its most recent release:
“We are all in this together,” commented Alonzo Pierce, President of ISW Holdings. “As far as performance, we hope current and prospective shareholders understand that we are expanding to catch up with an accelerating flood of demand in our home healthcare segment. We are on pace for easily our best year in Company history. We are also on the verge of an announcement that will qualitatively bolster that trajectory, and we will have more details on that very soon.”
That last sentence suggests something big is on the way. That anticipatory sense is also probably helping to stoke the momentum in play right now.
We won’t speculate. But we can say that the stock is almost ridiculously underpriced at its current levels according to a price-to-sales valuation method if one thinks in terms of forward sales by extrapolating its sequential quarterly growth trend.
Since that trend has been holding up successfully for at least 4 quarters at this point, that makes for a reasonable basis for extending the momentum above current levels. With a float under 2.5 million shares, any kind of upside acceleration would have the potential to feed on itself.
The main point here is this: the crowd hasn’t really found ISWH yet. But it has posted strong growth over an extended period on the back of a valid structural theme, improving market positioning, and recent talk of a multi-state expansion.
The float is small, which could serve to ignite a scramble for shares as momentum picks up. Helping to fuel that possibility, the company has hinted at a major announcement to come.
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