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Preparing for Green Wave 3.0: The Shopping List (HEMP, CGRW, GTEH, CGC, TLRY, MJNA)

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You know it’s coming. It’s just a matter of when, not if.

Stocks in the hemp, CBD, and cannabis space are oversold, overly beaten down, and sorely undervalued on a macro basis given the big-picture process underway driving the mainstreaming of this formerly niche market. This is 5th grade arithmetic. It doesn’t take an Ivy League MBA to see the inevitability of the long-term trend.

The only real drama here is whether it starts this month or in April, or June.

We’re talking about an end-market that is set to grow by triple-digit percentage leaps every year for the next half decade at least. This is the sound of inevitability. And that sound needs an investor shopping list. We submit the following: Hemp Inc (OTCMKTS:HEMP), Cannagrow Holdings Inc (OTCMKTS:CGRW), GenTech Holdings, Inc. (OTCMKTS:GTEH), Canopy Growth Corp (NYSE:CGC), Tilray Inc (NASDAQ:TLRY), and Medical Marijuana Inc (OTCMKTS:MJNA).

 

Hemp Inc (OTCMKTS:HEMP) just announced that its wholly-owned subsidiary, Industrial Hemp Manufacturing, LLC (IHM), is now fulfilling a $1 million dollar sales agreement for its DrillWall, the company’s proprietary kenaf-hemp blend natural Loss Circulation Material (LCM) product for the oil and gas well drilling industries.

According to the release, “the Company has executed a sales agreement to sell $1 million worth of DrillWall(TM) over the course of one year. According to Hemp, Inc. CEO, Bruce Perlowin, IHM received its first $30,000 payment and shipped the first batch of DrillWallTMout about a month ago. Yesterday, another $60,000 payment was received for the second batch of DrillWallTM. IHM is based in Spring Hope, North Carolina, and is the production facility for DrillWall(TM), along with other industrial hemp products.”

Hemp Inc (OTCMKTS:HEMP) was founded in 2008. The company has a reputation as one of the more controversial enterprises, even by the standards of either the OTC or the cannabis patch, which certainly paints a picture.

In any case, the company is making strong strides toward reshaping its image as a legitimate emerging leadership play in the industrial hemp space. Hemp Inc understands its mission to be a provider of “green solutions that help make the world a better place to live. We support products that are eco-friendly, organic, healthy and solutions that replace many petroleum-based products.”

“Hemp Inc.’s wholly-owned subsidiary Industrial Hemp Manufacturing, LLC purchased the largest decortication plant in North America, which is located in Spring Hope, North Carolina. The plant is housed in a 70,000,000 square foot warehouse on 9 acres. The company will start producing fiber, loss circulation materials (LCM) and absorbents from kenaf and later from hemp.”

That narrative continues forward to include the concept that “Hemp, Inc. will produce a product for drilling rigs called “lost circulation material” (LCM), which is used for maintaining the seals when drilling for water, oil, gas, and any other liquid or gas. This product alone is capable of producing millions of dollars in revenue since some of the largest oil companies in the world will be our primary customers.”

 

Cannagrow Holdings Inc (OTCMKTS:CGRW) recently announced that Category One Botanicals, LLC (C1B), the licensed grower at the Colorado Buffalo Ranch Grow Facility, has undergone a change of ownership. Dr. John P. Janovec, Ph.D., has acquired 100% ownership of C1B. This acquisition by Dr. Janovec includes the State Cultivation License, the current sub-lease agreement with CannaGrow Holdings Inc., and all equipment owned by C1B.

Delmar Janovec, CEO, stated, “This change of ownership with our tenant, Category One Botanicals, is another step in a carefully thought out master plan. Dr. Janovec’s production, processing, and team leadership expertise has placed him at what many view as the top of the Cannabis Industry in the State of Colorado. Under his direction of operations rooted in a scientific outlook, the production, yield, and quality of C1B product at the Colorado Buffalo Ranch Facility have reached the top tier.”

Cannagrow Holdings Inc (OTCMKTS:CGRW) trumpets itself as a company that develops, designs, and builds grow facilities for the legal cannabis industry in the State of Colorado.

It offers design, permitting, development and construction, site management, staffing, research, and other professional services.

CGRW has had a rough past week of trading action, with shares sinking something like -12% 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.

Cannagrow Holdings Inc (OTCMKTS:CGRW) managed to rope in revenues totaling $275K in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 20.3%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($16K against $4.8M, respectively).

 

GenTech Holdings, Inc. (OTCMKTS:GTEH) is a likely candidate for surprise of the year in the CBD space in 2020. The company is just about to launch its new subscription premium and CBD-infused coffee package product offering. That space is potentially huge and rapidly growing based on the research at this point. And there really isn’t any obvious and defined market leader – which means that GTEH is a candidate for precisely that role.

One of the other key points to make here is that the company just announced a contractual partner capable of helping GTEH ramp up its subscription coffee package without taking balance sheet risk up front. According to the release, the company announced the signing of a contractual deal with a leading West Coast CBD Food and Beverage company to handle storage, preparation, packaging, and shipping of all coffee products associated with the Company’s exciting new “Secret Javas” premium coffee subscription package.

“This contractual relationship will allow us to deal with rapid subscriber growth without having to scale up recklessly or inefficiently as the orders start to come in,” remarked David Lovatt, CEO of GenTech. “They have the capacity to handle that rapid growth. They also have the facilities to work with our premium coffees, which means we don’t have to compromise on quality or customer experience as the number of subscribers grows. The terms of this arrangement present our shareholders with tremendous value and no frontloaded balance sheet risk along the way.”

GenTech Holdings, Inc. (OTCMKTS:GTEH) will pay a minor monthly fee to the Contract Partner, who will also keep 8% of total sales and several pennies per package shipped. GenTech will keep the rest of the proceeds. GenTech will supply the coffee. The Contract Partner will provide storage, preparation, packaging, and shipping to accommodate all customer subscription orders.

“We know this is a huge and rapidly growing market, and we want to leverage that growth to drive shareholder value,” continued Lovatt. “But at the same, we don’t want to introduce new dilution or balance sheet risk to achieve that goal. This contract means we don’t have to invest heavily in the warehousing and setting up of a location to package and box and ship our monthly subscription orders. Given we are expecting there to be many thousands of subscribers, we didn’t want to scale up too quickly. This is an ideal arrangement to jumpstart growth in this segment.”

 

Canopy Growth Corp (NYSE:CGC) recently announced that it has submitted its final documentation for its beverage facility to Health Canada in late June 2019 and subsequently received the license in late November 2019.

According to the release, in the seven weeks since receiving the license, the Company has made meaningful progress towards scaling the production process for its cannabis beverages from lab scale to commercial scale.

“Canopy has had seven weeks to work with THC in the brand new beverage facility to scale processes and IP it has developed in the R&D environment,” said David Klein, CEO, Canopy Growth. “In order to deliver products that meet our customer’s high standards we are electing to revise the launch date while we work through the final details.”

Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.

According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.

CGC managed to take in revenues of over $90M in its most recent quarterly data – which represents a rate of top line growth of nearly 250% on a year/year basis. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.2B against $372.8M).

 

Tilray Inc (NASDAQ:TLRY) has moved to expand its global senior leadership team with two strategic hires: Jon Levin as Chief Operating Officer, who was formerly with Revlon, and Michael Kruteck as Chief Financial Officer, who was formerly with Molson Coors and Pharmaca.

The fortification of its executive leadership team is welcome news given the company’s clear failure to execute over the past 18 months – a period featuring more than a 95% drop in the value of the stock due to skyrocketing debt-servicing costs relative to unimpressive organic growth and a sense of unfulfilled hype.

According to the company’s release, Mr. Kruteck’s appointment will be effective immediately after filing the Annual Report on Form 10-K for the year ended December 31, 2019. Mark Castaneda, Tilray’s current CFO, will take on the role of Strategic Business Development and continue to advise the company and assist in Kruteck’s transition.

Tilray Inc (NASDAQ:TLRY) has been hit on debt-servicing costs, but short interest appears high and a return of momentum in the CBD theme should pay off here.

The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.

Tilray Inc (NASDAQ:TLRY) pulled in sales of $51.1M in its last reported quarterly financials, representing top line growth of 408.6%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($122.4M against $130.2M, respectively).

 

Medical Marijuana Inc (OTCMKTS:MJNA) is one to avoid like the plague as a dilution monster that massively overhypes its model and makes wild and wholly unsubstantiated claims about its financial performance without ever producing regularly audited financials or uplisting off the pink sheets despite many years of apparently “raking in millions”. None of that makes any sense at all. As we said, avoid this stock like the plague.

To add to the story, the company just announced that Daniel Miller has joined its subsidiary Kannaway. According to the release, Miller, in partnership with Kannaway as their new spokesperson, has created the world’s first cannabis fitness program and is developing a new fitness-based product line to support that program.

Medical Marijuana Inc (OTCMKTS:MJNA) casts itself as an investment holding company that operates in the medical marijuana and industrial hemp markets. Its products range from patented and proprietary based cannabinoid products to seed and stalk or isolated high-value extracts manufactured and formulated for the pharmaceutical, nutraceutical, and cosmeceutical industries.

MJNA’s subsidiary, Kannaway, LLC, is a network sales and marketing company specializing in the sales and marketing of hemp-based botanical products. Kannaway currently hosts weekly online sales meetings and conferences across the United States, offering unique insight and opportunity to sales professionals who are desirous of becoming successful leaders in the sale and marketing of hemp-based botanical products

MJNA licenses its proprietary testing, genetics, labeling and packaging, tracking, production, and standardization methods for the medicinal cannabinoid industry. It engages in the research and development of cannabinoid-based pharmaceuticals; and marketing and distribution of cannabidiol hemp oil-based products.

In addition, MJNA provides management support and services to cooperatives, collectives, health and wellness facilities, and medical clinics; and consulting and securities services to businesses and individuals in the legal cannabis industry. Further, it focuses on the treatment of pain and other medical disorders with the application of chewing gum-based cannabis/cannabinoid medical products, sportswear and more.”

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American Green Inc (OTCMKTS:ERBB) Achieves Breakeven In 2020, The First After Entering Cannabis Sector

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American Green Inc (OTCMKTS:ERBB) has reported operational breakeven in 2020. It is the first after entering the cannabis space. David Gwyther, president of American Green, said the company is putting in significant efforts to achieve self-sufficiency for several years while availing the funds from outside to meet the requirements. With this breakeven, the company needs to borrow less for operational needs and improve the bottom line.

Begins the sale of One HD Seltzer Water

American Green commenced the sale of One HD Seltzer Water through its one CBD store. The company expects to add additional retail stores in California, Nevada, and Arizona. Vice President (Sales – Worldwide) of American Green, Kevin Davis, said the company spent almost year in search of a 12 oz Can of CBD Seltzer/ Sparkling Water that comprises 25 mg of pharmaceutical grade CBD and zero THC for sale through its AGM Smart Vending Machines. The company also plans to sell CBD Seltzer/ Sparkling Water via its online stores to the customers directly.

Maintains highest standards for all CBD products

American Green shall always strive to maintain the highest standard for all the CBD products. The company will maintain a crisp and clean taste and consistency of pharmaceutical grade CBD in every CBD can. Davis said One HD Water meets all the requirements. It has even exceeded expectations.

One HD’s founder – Mike Falcione said he is thrilled that American Green has One HD Sparkling Seltzer Water for the distribution. He further said the company is aware that American Green is becoming one of the reputed brands in the nation to offer high-quality CBD products. One HD will extend all the necessary support to American Green to achieve the sales targets. Davis said the company is in discussions with Mike for the distribution of One HD CBD Seltzer Water. He looks forward to working with Mike and his team.

CBD as a viable solution to manage pain

The demand for CBD is very high because Americans consider it as a viable solution to manage and relieve pain. According to Nielsen, the leading data measurement authority, the market for CBD will reach $2.75 billion this year.

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Why ISWH May Be a Prime Turnaround Opportunity in the Making

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For those in search of speculative turnaround potential in the small and micro-cap market space, you could do a whole lot worse than International Spirits & Wellness Holdings, Inc. (OTCMKTS:ISWH). The big picture here is a diversified branding play with commercial-stage operations already in place in the CBD, Wellness, Home Healthcare, and Spirits industries, and development stage operations in the Renewable Energy and Supply Chain & Logistics markets.

Based on recent financial performance, the company may have recently gotten past the point where its operational cash flows can start to fully support its future growth investments. For any micro-cap, this is the golden point in the investment cycle: when growth becomes non-dilutive. ISWH is either at or very near this point, posting EBITDA profitability and triple-digit topline growth in Q3 and Q4 of 2019.

ISWH recently completed a shareholder-friendly restructuring and reverse stock split to better align its price-per-share quote with common standards for investor perception.

Pro-tip: In our experience, when a company has this much going for it, and then does this type of restructuring and realignment, it’s typically in front of a lot of major positive news. The shift in structure and share price is to set the stage so that the company’s existing long-term shareholders can get the most bang for the buck on new strong announcements set to roll out over coming weeks and months.

In other words, the stage is set for some big happy news for ISWH. Take note.

In the words of the company’s President and Chairman, Alonzo Pierce: “A shareholder-friendly restructuring was necessary to strengthen our relationship with capital markets, pursue a near-term uplist to a higher exchange tier, and set in motion our operational strategy for 2020. We have a number of very compelling catalysts set to roll out, but we needed to provide a viable context – to lay a foundation for that success – as an initial step. We have achieved that with our restructuring and reverse split last week.”

That just about says it all.

The Foundation

The foundation for ISWH right now is its two main commercial-stage growth drivers: CBD-based products and the company’s rapidly growing home healthcare business.

The CBD products segment is positioned for rapidly accelerating growth this year following the signing of its defining partnership agreement with BioPulse Labs, a nationally-recognized brand development and manufacturing leader in the nano-infusion of CBD products. The BioPulse agreement provides for effectively a starter package in product development and marketing for the fresh launch of five new CBD-based wellness products. That will effectively push a restart button for the company’s P19 brand of CBD-based products.

The company also has an edge through this partnership due to the fact that it will be that rare CBD products brand able to boast that all of its products are formulated and produced in FDA compliant and registered facilities. This is becoming a huge issue in the current world of garage-band CBD producers. Consumers don’t know what they’re getting when they purchase CBD products. And they’re starting to figure that out.

The Home Healthcare segment is rapidly expanding as well. This division saw quadruple-digit percentage growth during the back half of 2019, and the company has implied that this trend is set to continue in Q1 2020.

Home healthcare spending is expected to reach more than $186 billion in 2027, according to a recent analysis from the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary. This vastly surpasses any other category of health care service spending, even including hospital inpatient care, physician and professional services, nursing facilities, prescription drugs, retail sales of medical products and anything else you can think of.

ISWH has put in place a strong operational footprint in this rapidly expanding market, and we would look for continued strong performance throughout 2020.

Conclusion

With this foundation in place, a possible inflection toward non-dilutive growth in the quarters ahead, and now standing on the other side of the company’s recent shareholder-friendly restructuring, ISWH is an extremely interesting speculative opportunity, especially given our assumption that the company is getting ready to add some very strong new catalysts into the mix in coming weeks.

ISWH management drove this same sense home in its latest release: “This is truly all about embracing a very aggressive growth-oriented future path at ISWH,” continued Pierce. “We have put in place a winning framework as a genuine disruptor in the health and wellness space, and we continue to see dramatic growth in that endeavor, including strong financial performance over recent quarters. We are also entering several new markets, with a true edge already in place, and will be providing details on those strategic moves over the very near term. Long story short: we have some very exciting announcements ahead and we wanted to provide a solid structural foundation in the stock ahead of those catalysts for the benefit of our committed shareholders.”

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ANVISA Authorizes Khiron Life Sciences Corp (OTCMKTS:KHRNF) To Import Medical Cannabis Products Into Brazil From Colombia

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Brazilian Health Regulatory Agency (ANVISA) has authorized Khiron Life Sciences Corp (OTCMKTS:KHRNF) to import medical cannabis products on an individual patient basis. Khiron can now apply for a license to export medical cannabis products to Brazil with this authorization. The company also needs the nod of TSX for the commercialization of cannabis in Brazil.

Khiron achieves a milestone

Director and Chief Executive Officer of Khiron, Alvaro Torres, said the company achieved another milestone on receiving the regulatory nod from ANVISA to introduce its medical cannabis products in the largest Latin American market. It allows the company to serve the patient population in that region. He further said Khiron work towards achieving authorizations in Peru and Colombia and improves its network in Brazil.

A regulatory framework to import medical cannabis

ANVISA has established a regulatory framework that involves a comprehensive procedure for the production and importing the medical cannabis products into Brazil. The medical cannabis products are prescribed by the physicians and marketed through pharmacies. Therefore, patients get safe access to legal medical cannabis products.  Cannabis is beneficial for regulating oily skin and helps to fight aging.

The market for medical cannabis

The demand for medical cannabis in Brazil expects to reach 1.4 billion in the next three years. Also, the patient base that comprises patients with chronic conditions in Brazil will increase to 3.4 million. The request for medical cannabis products in the nation almost tripled since 2015. Around 1,100 physicians are prescribing medical cannabis products to the patients.

Chairman of Khiron resigns

Sidney Himmel, chairman of Khiron, has resigned to pursue other interests. Following his resignation, Alvaro will act as interim chairman of the company. Deborah Rosati will head the audit committee.

Khiron formed a JV with Dixie Brands to focus on the development of cannabis products. As per the terms of the pact, Dixie will also engage in the manufacture and distribution of kuida brand CBD cosmeceuticals targeting Hispanic population in the US. The joint venture with Dixie Brands gives Khiron exposure to the US market.

Chris Naprawa is a president at Khiron. Before joining Khiron, he worked as MD at Primary Capital and as a partner at Sprott Capital Partners.

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