CannaRoyalty is a fully integrated, active investor and operator in the legal cannabis sector. Our focus is building and supporting a diversified portfolio of growth-ready assets in high-value segments of the cannabis sector, including research, consumer brands, devices and intellectual property. Our management team combines a hands-on understanding of the cannabis industry with seasoned financial know-how, assembling a platform of holdings via royalty agreements, equity interests, secured convertible debt, licensing agreements and its own branded portfolio.



Mr. Lustig holds MSc and MBA degrees from McGill University. He began his professional career in the pharmaceutical industry at Merck & Co. In 2000, he started his capital markets career in institutional equity research in the Life Sciences sector at Orion Securities. For the next 14 years, Mr. Lustig worked as a senior producer at GMP Securities L.P. and as Head of Capital Markets at Dundee Capital Markets before becoming Principal at KES 7 Capital. Mr. Lustig founded Cannabis Royalties & Holdings Corp. in early 2015.

 

 


Cautionary Note on Forward-Looking Statements

Certain statements contained in this interview may be “forward-looking statements” within the meaning of the Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. They are generally identified by words such as “believes,” “may,” “expects,” “anticipates,” “should” and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company’s beliefs and assumptions. The Company’s actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and MD&A filed with the United States Securities and Exchange Commission and applicable Canadian securities regulators (copies of which may be obtained at www.sedar.com or www.sec.gov ). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


Thank you Marc, for taking time to participate in this Q&A. 

MR: There’s a myriad of cannabis stocks for investors to choose from, many of which are focused solely on growing and selling cannabis. How is CannaRoyalty’s business model different, and why have you chosen this model?
 

ML: I don’t care what anyone says, growing cannabis is an agricultural commodity. And while everyone claims to have a “proprietary process” and be the “greatest grower” its still a commodity which means lowest cost per unit at a good standard wins. This is not a game CannaRoyalty is interested in playing. Our model is to build assets which enhance the value of the cultivated product whether its through extraction processes for oil derivatives or through development of formulations and brands or investment into the next cannabis based therapy for medical treatment. So instead of an investor buying into a one-dimensional grower (licensed producer) we are giving investors a broadly diverse platform of assets to invest in which they would probably never have got the opportunity to invest in themselves.


MR: While it’s early in the Company’s history, are there “wins” that validate CannaRoyalty’s business model?

ML: Lets put it this way: Im not aware of any of our assets which haven’t already either created value for shareholders or are not on the cusp of generating revenue growth and synergistic effects with other assets in our portfolio. From early ownership in assets like Anandia (leading Canandian cannabis analytics and genetics), WagnerDimas (pre-rolled joint manufacturing IP), Bodhi Research (medical research into cannabis treatments for concussion), Resolve Digital (medical device innovator of what I think is a revolutionary vaporizer) to all of our other investments and royalties across Canada, the US and Puerto Rico I feel great about how things are starting to come together. I could go on for a long time on my view of our wins that validate our model but my guess is we’re still only scratching the service when I consider our pipeline of opportunities.


MR: What attributes or characteristics do you look for in cannabis-related companies that make you say yes, this is a company we want to make a strategic investment in?

ML: Character, business acumen and cannabis passion in the partner or management team of an investee company combined with strategic assets which when “plugged in” to the CannaRoyalty model or into CR Brands leads to appreciable and sustainable value for shareholders.

MR: In April, the Canadian government announced legislation to legalize marijuana for recreational use by June 1 of next yearwhich, (if passed), will greatly expand demand in Canada. Meanwhile, the U.S. has a patchwork of differing state and local laws for medical and recreational use, and there is zero support atthe federal level for recreational legalization. Given where the two countries are right now in the legalization pathway, why are the majority of CannaRoyalty’s assets are based in the United States and not Canada?

ML: Firstly, as mentioned earlier in our interview, we seeing growing cannabis as an agricultural commodity. The over-concentration of fully-valued cultivation assets compared to exceptional value opportunities in the US in more advanced, dynamic makes this equation much more attractive from our perspective. Some will be quick to point out the obvious difference in federal legislation between Canada and the US – with cannabis still a Schedule 1 narcotic in the US. However we believe that because of how careful we are about structuring our deals strictly and categorically in compliance with legal US markets we minimize this federal vs state risk. And all of this at a time in the cycle that the public support – because of the general benefits of cannabis compared to alcohol, tobacco and marginal pharmaceutical products or because of the job growth and the economic impact of this sector – continues to grow beyond the point of recision.

Secondly and a bit surprisingly I don’t think people comprehend how strong our asset base is in Canada. Our significant ownership in Anandia, Resolve Digital, Bodhi Research together with our strategic royalty relationship with Aphria one of the leading Canadian licensed producers make for a remarkable suite of assets in Canada. Whats more is we expect to grow the Canadian asset base going forward as asset values become more realistic for us to acquire or invest – all at a time that the Canadian recreational market opens up.

MR: One of the most crucial elements of success for any company is the strength of the management team. How would you describe the team you’ve assembled at CannaRoyalty and is the team complete, or do you anticipate expanding it to meet current or future needs?

ML: I’m very lucky. We are building a dynamic company in a high growth exciting sector which has attracted top tier talent and created a very cool culture where people are proud of what were doing and are obsessed with achieving our goals. Today we are 26 direct employees of CannaRoyalty across management, legal, finance, marketing/social media, sales and operations. Is the team complete? Not even close. The way were growing and the opportunities we have in front of us I have no idea how big we’ll get. All I know is we continue to attract phenomenal talent which makes me look a lot smarter than I am proving my belief in the “8s hire 10s” philosophy….


MR: What investments has CannaRoyalty made that you believe will have the greatest impact on revenue growth during the remainder of 2017?

ML: In no particular order our REIT-like investment in state of Washington, our partnership with Rich Extracts in Oregon, our strategic relationship with leading cannabis distribution company River in California, product revenues in key markets by our brand company CR Brands, sales of our cartridge hardware by our wholly-owned Dreamcatcher Labs company and the new deals that we expect to add throughout 2017 will drive the largest impact on revenues this year.


MR: CannaRoyalty finished Q1 with cash and cash equivalents of $11,946,417 and closed a bought deal financing for aggregate gross proceeds of $15 millionIn the Q1 press release, you stated that CannaRoyalty is “well positioned to continue to deploy capital and build on initiatives that will enhance shareholder value.” What verticals are you looking at deploying this capital in and why?

ML: We have built a strongly synergistic base of assets in key markets like California. Our pipeline of prospective deals in Canada and growth markets in attractive cannabis markets like Nevada, Arizona, Maryland and Massachusetts continues to grow. In terms of verticals, our product arm CR Brands will continue to develop or acquire licenses for innovative leading cannabis brands. In parallel our focus will be on the compliant, highest efficiency manufacturing processes and impactful distribution assets in focus markets.


MR: What do you see as key drivers for shareholder value in the coming 6-12 months?

ML: Current assets combining with new assets in new key markets combining synergistically to grow revenues and earnings.


See Also:

CannaRoyalty Q1 Financial Report

CannaRoyalty (CRZ.C) grows multi-million-dollar asset base over 800% in nine months (Equity.Guru)

Spotlight on CSE:CRZ – Upside from recent deal opportunities remain nascent (Viride Research Partners)

CannaRoyalty June 2017 Investor Presentation

CannaRoyalty News/Press Releases



CannaRoyalty Marc Lustig
  • CannaRoyalty Corp. (CNNRF) and (CSE:CRZ), has a unique business model in the cannabis space that minimizes risk and maximizes reward
  • Has 22 strategic, diverse cannabis assets throughout North America
  • Just one $850,000 investment in one cannabis asset now valued at $7.1M
  • Exceptionally strong management team and board of directors positioning company to capitalize on high-growth cannabis market

This article will provide an overview of CannaRoyalty’s intriguing business model and distinguished management team, and identify the company’s diversified cannabis assets. A future article will take closer look at the CannaRoyalty assets and determine a valuation range for the company.


CannaRoyalty Corp. at a glance:

Tickers: (OTC:CNNRF), (CSE:CRZ)
Shares outstanding: 42.5 million
Recent Price 4/17/17: $1.82 USD
Market cap: $78.6 million
Float: 31.4 million
Insider ownership: 20%
Web site

 

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CannaRoyalty Corp. is a fully integrated, active investor and operator in the legal cannabis sector. The Company’s focus is to build and support a diversified portfolio of growth-ready assets in key segments of the cannabis sector, including research, consumer brands, devices and intellectual property. CannaRoyalty’s management team combines a hands-on understanding of the cannabis industry with seasoned financial know-how, assembling a platform of holdings via royalty agreements, equity interests, secured convertible debt and licensing agreements.

CannaRoyalty was formed in late 2014 and began trading publicly on December 8th of 2016.


CannaRoyalty’s $850,000 Investment in Resolve Digital Health Grows to $7.1M Asset

CannaRoyalty’s December 2015 $850,000 investment in Resolve Digital Health is a perfect example of an early win for CannaRoyalty and the company’s business model.

Resolve Digital is launching the world’s first smart inhaler for medical cannabis to help patients suffering from cancer, arthritis, migraine headaches, chronic pain and other diseases. The company’s Breeze Smart Inhaler connects with the user’s smart phone to deliver rich information and integrated care. CannaRoyalty Smart Breeze Inhaler

 

The system uses color-coded, modular Smart Pods with preloaded extracts or dried herb tuned to users’ specific health condition. Together, the Breeze Smart Inhaler and Smart Pods create a complete system that patients and health care professionals can rely on to assure well-monitored, well-informed and holistic cannabis treatments.

 

CannaRoyalty Smart Pods from Resolve Digital Health

In late March, Resolve Digital Health announced the completion of a $5M Series A financing that values the company at just over $25.6 million CAD. See also “Resolve Digital Health Lands $5M to Launch First Smart Inhaler for Medical Cannabis.”

As a result, CannaRoyalty’s $850,000 investment in Resolve Digital Health back in December of 2015 now has an implied value of $7.1M, with CannaRoyalty owning 27.2% of existing shares. 

Marc Lustig, CEO of CannaRoyalty stated:

“We are thrilled about participating in the closing of this financing. It provides third party validation of our initial investment in Resolve at a significantly higher valuation. It is an example of the success of our business model that includes identifying high-value cannabis assets, partnering through investment and assisting in the growth and commercialization of brands, products and devices – while increasing value for our shareholders.”

Resolve Digital is launching the Smart Breeze medical device this spring at exclusive dispensary partners in California before expanding into additional key markets across the U.S. and Canada throughout 2017 and into 2018.


The North American Cannabis Market: High Growth with High Risk

The North American cannabis market is expected to achieve a whopping compound annual growth rate of 25% thru 2021 when the market will top $20 billion, according to a January 2017 article in Business Insider.  This growth estimate is bolstered by recent news that the Canadian government is beginning work on legislation that will legalize recreational marijuana by July 1, 2018, if not sooner. Meanwhile, in the U.S., recent additions of populous states like Florida, New York, Illinois, Pennsylvania, and Ohio, mean almost 200 million Americans live where they may qualify to use cannabis as medicine. That’s well over 60 percent of the US population, with multiple states still expected to either begin or expand medicinal and/or recreational marijuana legalization this year.

I believe this is a space any risk-tolerant investor should be involved in, however, pitfalls abound. Not only do companies in the cannabis space face the same risks as companies in other industries (competition, financial, market forces, product/service efficacy, etc.) but cannabis companies must deal with varying legal and compliance risks across state and national borders. Moreover, due to the flood of licensed producers, wholesale marijuana prices declined from $2,500 to $1,000 per pound last year, with some dispensaries offering recreational ounces as low as $65 according to Forbes. With margins squeezed thin, non-pharmaceutical grade marijuana is rapidly becoming another commodity, like corn or wheat.

Beyond the risks associated with legitimate cannabis companies, publicly-traded frauds have been launched by crooks and scam artists who will do anything to separate investors from their money. Most recently, the SEC charged a California-based marijuana consulting company formally called Medbox, as a complete fraud. The Medbox stock price ranged from a low of $2.50 to an all-time high of $205 between August 2012 and December 2014…those shares are now at 0.0003. Ouch!

Unfortunately, Medbox wasn’t the first pot stock scam and they certainly won’t be the last.


CannaRoyalty’s Unique Business Model Mitigates Risk, Maximizes Reward

There are many dozens of cannabis stocks trading in the U.S. and Canada, but only CannaRoyalty features a combination of diversified investments in the cannabis space in both countries that minimizes investment risk while maximizing reward.

With over 20 cannabis assets in the areas of research, devices and intellectual property, early stage strategic investments, and consumer brands, investors in CannaRoyalty have reduced risk exposure to any one company.

Furthermore, the potential for outsized gains originating from multiple assets is very real. The future valuation of Resolve Digital Health as a publicly-traded company is just one potential home run for CannaRoyalty. Of course every asset in CannaRoyalty’s portfolio won’t be a home run, but if just a handful of the company’s holdings (outlined below) are successful, investors in the company should reasonably expect to see strong returns on their investment over time.


Management to Successfully Execute Business Model

Having a great business model is meaningless if you don’t have the right people in place to carry it out and drive results. CannaRoyalty’s management team and board of directors possess deep and successful management experience in the areas of finance and capital markets, pharmaceutical development, health care, corporate strategy, marketing, brand development, and more.

This is a group that can not only identify winning assets in the cannabis space, they can provide the necessary support and expertise in key areas of genetics, cultivation, extraction, post-processing and branding for the assets to maximize their potential.


CannaRoyalty’s Investments

CannaRoyalty is a stakeholder in 22 different diverse, cannabis-related properties in four broad areas:

  • Research (3 properties)
  • Devices and intellectual property (3 properties)
  • Early stage strategic investments (4 properties)
  • Consumer brands (12 properties)


CannaRoyalty’s investments in RESEARCH

Research investments target health and wellness applications including:

 

CannaRoyalty / Anandia Labs logo
ANANDIA LABORATORIES
Vancouver, Canada

CannaRoyalty has a 20% equity stake in Anandia.

Anandia Labs is a leader in cannabis testing, extraction and genetics, using genomics and modern plant breeding approaches to develop innovative products and next generation varieties. The company holds key intellectual property positions including cannabinoid pathway patents and is the only independent Canadian testing facility specializing exclusively in cannabis. With its Health Canada dealer’s license in hand, Anandia Labs has the seal of approval to undertake research and development, and to develop products beyond those currently permitted for licensed producers under Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR).

Anandia Lab’s expertise in cannabis testing is essential to ensuring that patients are receiving safe and effective products in the Canadian cannabis sector. In combination with the company’s ability to leverage its dealers license to develop its expertise in developing and producing cannabis extracts, Anandia Labs has positioned itself as a leader in the Canadian cannabis industry.

CannaRoyalty bas-research
BAS RESEARCH
California
CannaRoyalty has a secured convertible loan outstanding with BAS and has concluded a strategic partnership agreement with BAS, assuring the ability to tailor product to CannaRoyalty’s specific needs.
BAS Research is a science-based company of senior PhD-level researchers and chemists, positioned to leverage its first-mover advantage. BAS is developing pharmaceutical-grade cannabis medications, and advancing quality and safety through its Purity Certified™ testing services. Their unique strengths lie in advanced tissue culture and genetics, as well as ailment specific research and product development. BAS produces high-purity extractions plus innovative post processing.

CannaRoyalty bodhi-research
BODHI RESEARCH
Toronto, Canada
CannaRoyalty has made a strategic seed capital investment in return for an equity position in Bodhi Research with an option to increase its equity stake.

CannaRoyalty wagner-dimas-logos
WAGNER DIMAS
California
Through processing, packaging, and targeted brands, Wagner Dimas is adding significant value to producers and a premium user experience for customers.

 

 


See Terms of Use/Disclosure

Cautionary Note on Forward-Looking Statements

Certain statements contained in this interview may be “forward-looking statements” within the meaning of the Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. They are generally identified by words such as “believes,” “may,” “expects,” “anticipates,” “should” and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company’s beliefs and assumptions. The Company’s actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and MD&A filed with the United States Securities and Exchange Commission and applicable Canadian securities regulators (copies of which may be obtained at www.sedar.com or www.sec.gov ). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


Emblem Corp logo

Emblem Corp. is licensed under the Access to Cannabis for Medical Purposes Regulations (the “ACMPR”) to cultivate and sell medical marijuana. Emblem carries out its principal activities producing marijuana from its facilities in Paris, Ontario pursuant to the provisions of the ACMPR and the Controlled Drugs and Substances Act (Canada) and its regulations.

 

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See also: Emblem April, 2017 Investor Presentation


 

MicrocapResearch: Congratulations on the successful public launch of Emblem Corp (TSX-V: EMC.V) and (U.S. OTC: EMMBF). Can you give investors an overview of your past experience with Purdue Pharma, and how it has prepared you to function as the President of Emblem’s pharmaceutical division?

John Stewart: I was President & CEO of Purdue US from 2007 – 2013, President & CEO of Purdue Canada from 1991 – 2009 and Regional Director for Purdue for Canada, Australia and New Zealand from 2000 to 2009. Among other things, these positions provided me with an in- depth understanding of inter-country differences in healthcare systems, drug regulatory agencies and pharmaceutical reimbursement paradigms – as well as public perceptions of the value of the pharmaceutical industry. These companies were of significantly different sizes in terms of employee numbers, annual revenues and mandates – which certainly impacts daily activities and leadership style. I was fortunate to be able to lead each through period of multiple new product introductions and significant growth.

Prior to becoming President to Purdue Canada, I served as VP R&D, in which I was responsible for formulation R&D, pre-clinical & clinical development of new drugs and regulatory affairs. It was in this position that I saw first-hand the significant importance of pharmaceutical dosage forms in terms of improving healthcare outcomes. I could provide numerous examples, but none is more telling than Purdue’s development of MS Contin (controlled-release morphine sulphate) – the first long-acting opioid which was approved for marketing by Health Canada in late 1985. Within two years MS Contin was recognized as one of the most important new analgesics agents for treatment of chronic moderate to severe pain.

It was also during my time as VP of R&D for Purdue that I first became aware of the therapeutic potential of cannabinoids. One of my UK Colleagues headed clinical drug development activities, and he encouraged the company to initiate a cannabinoid research program targeted toward management of pain and movement disorders.

Purdue did not pursue the opportunity, and that colleague subsequently started what has become a very successful company in the field.


MicrocapResearch: With dozens of other cannabis companies to choose from, what drew you to Emblem?

John Stewart: The executives at Emblem were familiar with the healthcare industry and already invested in healthcare-related businesses. They agreed with me that the therapeutic benefits of cannabinoids are real, but that they would not be fully achieved if the only way the product could be administered (taken) was by smoking or vaporization. They were immediately supportive of the company establishing a “pharma” division, to research the medical benefits of cannabinoids – and help identify which strains have the greatest evidence for benefit in particular conditions. An equally important component of the Division’s activity is the formulation and development of pharmaceutical dosage forms (e.g capsules, inhalers, modified-release tablets)  containing specific cannabinoids – which for a variety of reasons will be both more acceptable and effective than currently available dosage forms.


 MicrocapResearch: Emblem Corp is divided into three distinct operating divisions: Emblem Cannabis (the production division), the division you head at Emblem Pharmaceutical, and GrowWise Health (marijuana education for patients and physicians). How will the three divisions complement and build on each other’s strengths operationally?

John Stewart: The Production Group is in a sense the lead in importance, since their responsibility is to continually and consistently cultivate at the highest quality the cannabis strains we identify as being of the greatest therapeutic impact.  They need to ensure that our core strains have the same cannabinoid profile, irrespective of the time of year they are cultivated. Only via this consistency will the pharma division be able to produce advanced formulations that reach pharmaceutical industry levels of potency and purity.

Cultivating cannabis may be seen as simple and straightforward, but in reality it is far, far from that. One of my CEO Colleagues made this clear when he said, “This my be a simple process, but it is not at all easy”. One need only look at the recalls of cannabis due to excessive microbial levels or the presence of pesticides, to realize that this is a complex process that requires detailed attention and responsible oversight.

The GrowWise Group is comprised primarily of healthcare practitioners, whose activities directly support prescribers and patients achieve optimal therapeutic benefits from cannabis. They conduct research and support the research efforts of others, and greatly assist patients in the initial process of selecting and registering with one of the Licensed Producers.  In the years ahead, they will have much more in the way of important information to share.


MicrocapResearch: What indications are cannabinoids currently used for, and where do you think we might see expansion in the near future, say 12-24 months?

John Stewart: I have seen survey results indicating that the most common reason cannabinoids are used is for the treatment of pain, which is not surprising since pain is among the most common of reasons why individuals visit physicians. In addition, although there have been meaningful advances in analgesic therapy – there remains substantial room for improvement. The Canadian Pain Society was among the first of the professional organizations to formally recognize the efficacy of cannabis in pain management. Back in 2014 they published a Consensus Statement on the Management of Neuropathic Pain – which recommended the addition of cannabis therapy to patients who were experiencing inadequate pain relief from a combination of gabapentinoids and opioid analgesics.

Much more recently, the US National Academy of Sciences published an extensive report on the health effects of cannabinoids and concluded that there is substantial evidence of efficacy in chronic pain, as an anti-nauseant and for improving spasticity symptoms in patients with MS. They noted that there is moderate evidence for efficacy for improving sleep outcomes in patients with sleep disorders and more limited evidence for efficacy for improving symptoms of anxiety and increasing appetite/weight gain.


MicrocapResearch: Medical marijuana is typically taken by inhalation by the end user, either through smoking or vaping. Is this the best delivery method, and is Emblem Pharmaceutical developing other drug delivery options?

John Stewart: From the perspective of reliable and consistent efficacy, it is difficult to imagine a less appropriate method of administration than smoking or vapourization of dried cannabis.  With smoking, a person is inhaling combustion byproducts along with the cannabinoids – certainly undesirable and likely in some ways harmful. With vaporization, there is less in the way of combustion byproducts – but dose to dose consistency remains extremely difficult. The amount of cannabinoids that reach the body depends on the depth of the inhalation, how long one hold the inhalation before exhaling – combined with the crop to crop variability in the cannabinoid content of dried cannabis.

Like pharmaceutical products, our formulations will contain a known amount of cannabinoids (e.g. THC, CBD) measured in mg and this amount will be consistent from batch-to-batch, and supported by stability data. In addition we will have bioavailability and pharmacokinetic data to hep prescribers select the optimal dose for each of their patients.

We plan on bringing to market numerous dosage form, designed to optimize performance depending on the intended use. For example, we will have rapid onset formulations for use by patients seeking an immediate effect as well as long-acting formulations designed to provide for once-daily or twice-daily dosing for patients with chronic condition looking for continuous effects.


MicrocapResearch: What are the variables and key drivers for cannabinoid growth in Canada going forward?

John Stewart: The use of cannabinoids for medical purposes has shown exceptional growth since the Licensed Producer regimen was brought forward under the direction of Health Canada, but the number of individuals being treated is very, very low when compared to the number of patients being treated with existing prescription drugs. I believe that the advanced pharmaceutical formulations we are bringing forward will significantly improve patient and healthcare professional acceptance of cannabinoid therapy, and also help maximize their therapeutic benefits.

Another significant factor will be the willingness of provincial healthcare benefit plans to cover the cost of cannabinoid therapy. I have seen clinical trial data demonstrating equal, and in some cases improved, efficacy from cannabinoid therapy than traditional pharmaceuticals. However, no province currently pays for medical cannabis – leaving patients and their physicians with somewhat of a dilemma. Hopefully this will change, and the provincial healthcare ministries will come to recognize the overall cost-effectiveness of cannabinoids.


MicrocapResearch: What is the current size of the Canadian medical marijuana market, and how big do you believe it will be in 5 years?

John Stewart: Accurate information on the size of the overall MMJ market is not readily available, but on the basis of their being some 130,000 patients registered under the current ACMPR Program, i would estimate that 2016 sales were in the range of $200 million.

Looking at the prescription pharmaceutical market for therapies used for the conditions in which cannabinoids are now recognized as being effective, it is entirely reasonable to see the medical marijuana market being between $1 billion and $2 billion in 5 years time – and note that this does not include sales in the forthcoming Recreational Use Market.


MicrocapResearch: What developments specifically at Emblem Corp. can investors look forward to over the next 12-24 months?

John Stewart:Too many to cover in the short time of this interview. At a high level we will see a very significant expansion of cultivation capacity and advances in cultivation techniques, dedication of a completely new extraction and formulation development laboratory and impressive additions to the nature of information and services available from the GrowWise Operation.


MicrocapResearch: Thank you John, for taking time to update investors on the Canadian marijuana market and Emblem Corp.

John Stewart:

You are welcome, and thanks for the opportunity to connect with your important audience.


Emblem Corp.

DarioHealth Corp. (DRIO) picked at $3.86 (see 2/21/17 report), and  MassRoots Inc. (MSRT) picked at .81. (see 3/16/2017 report) have significant news out this morning.

 


dariohealth-logoDarioHealth Launches Insurance Coverage Option for U.S. Consumers

This morning, DarioHealth announced that it is now offering a 3rd party insurance coverage option for U.S. consumers who want to have their DarioHealth products reimbursed by insurance.

According to the press release, DarioHealth has signed strategic alliance agreements with partners across the U.S. who will be able to verify insurance coverage benefits, and if approved, will supply and bill the customer’s insurance for their Dario™ Blood Glucose Monitoring System and test strip supplies. During DarioHealth’s pilot phase of this insurance coverage option, partners were able to verify benefits for customers covered by Aetna and various Blue Cross Blue Shield plans.

 

Erez Raphael, Chairman and CEO of DarioHealth, stated:

“We are extremely excited with this new opportunity and will continue seeking out partnerships to expand our insurance coverage reach. Our customers asked about this, and we are happy to be able to provide this option to them. Many of these customers are already paying significant out of pocket cost for a variety of healthcare needs, so lowering their financial burden is tremendously gratifying and a big win for everyone in our community.”


Until now, U.S.-based customers paid out of pocket for DarioHealth’s products. Despite that fact, DRIO grew sales by 172% during Q4 of last year, with 67% of quarterly revenues derived from recurring sales of test strips and other consumables.

Insurance coverage is a major win for DRIO and should rapidly accelerate growth in the Company’s major market, the U.S.


About DarioHealth Corp.

DarioHealth Corp. is a leading global digital health company serving tens of thousands of users with dynamic mobile health solutions. We believe people deserve the best tools to manage their treatment, and harnessing big data, we have developed a unique way for our users to analyze and personalize their diabetes management. With our smart diabetes solution, users have direct access to track and monitor all facets of diabetes, without having the disease slow them down. The acclaimed Dario™ Blood Glucose Monitoring System all-in-one blood glucose meter and native smartphone app gives users an unrivaled method for self-diabetes management. DarioHealth is headquartered in Caesarea, Israel with a regional office in Burlington, Massachusetts. For more information, visit http://mydario.investorroom.com/.

 

See also:

DarioHealth February 2017 Investor Presentation

Rodman and Renshaw Report: DarioHealth BUY $12 PT

Joseph Gunnar & Co. Report: DarioHealth BUY $8 PT

 


massroots-logoMassRoots Launches New Website and Accelerates User Acquisition

On the heels of last week’s announcements that MassRoots has registered more than one million users on its platform (press release), and that Google Play has approved its mobile application for distribution to Android devices (press release), the Company has launched a new web site at MassRoots.com.

 

Powered by more than one million registered users, MassRoots enables consumers to rate products and strains based on their efficacy (i.e., effectiveness for treating ailments such back-pain or epilepsy) and then presents this information in easy-to-use formats for consumers to make educated purchasing decisions at their local dispensary. Businesses are able to leverage MassRoots by strategically advertising to consumers based on their preferences and tendencies.

MassRoots Chairman and CEO, Isaac Dietrich stated:

“MassRoots’ new website enables us to broaden our audience and more effectively monetize our users and web-traffic. We are already seeing hundreds of thousands of unique page views per month and are confident that the significant functionality and SEO improvements in MassRoots’ new website will enable us to accelerate our user and web-visitor growth. At the same time, we have greatly expanded the inventory and targeting options available to MassRoots’ advertisers, which will have an immediate and direct impact on our revenue.”

As the 4/20 holiday season rapidly approaches, MassRoots is committed to rapidly growing its market share of cannabis consumers and effectively monetizing them to further drive shareholder value.


About MassRoots


MassRoots is one of the largest technology platforms for the regulated cannabis industry. The Company’s mobile apps enable consumers to make educated cannabis purchasing decisions through community-driven reviews. MassRoots is proud to be affiliated with the leading businesses and organizations in the cannabis industry, including the ArcView Group and National Cannabis Industry Association. For more information, please visit MassRoots.com/Investors.

See also:

MassRoots in the media

MassRoots December 2016 Investor Update


DRIO

Disclaimer/Disclosure/Terms of Use


 

  • MSRT shares lost 30% in recent weeks due to uncertainty in how the new administration in Washington will deal with the rapidly growing legalized cannabis industry in the U.S.
  • However, Attorney General Jeff Sessions took a much more pragmatic stance on the cannabis industry in the U.S. just yesterday
  • Expect shares of MSRT to rally in the coming days/weeks on yesterday’s clarification that erases much of the uncertainty that the market hates
  • MSRT shares are bouncing off the 200-day moving average of .78 and look prime for a breakout
  • MSRT is experiencing high sales growth and expects to be cash-flow positive in near term

 

MassRoots chart

 


Cole Memorandum and Legal Cannabis in the U.S.

Essentially, the Cole Memorandum states that jurisdictions that have legalized marijuana in some form are less likely to be a threat to the federal priorities under the CSA if they have implemented strong and effective regulatory and enforcement systems to control marijuana growth and distribution. The Cole Memo also gives wide prosecutorial discretion whether to prosecute state legal marijuana enterprises and hinted that it is probably not efficient use of federal resources to focus enforcement on state legal businesses.

In an appearance yesterday before local, state and federal law enforcement officials in Richmond, Virginia, Attorney General Jeff Sessions stated that:

“The Cole Memorandum set up some policies under President Obama’s Department of Justice about how cases should be selected in those states and what would be appropriate for federal prosecution, much of which I think is valid.”

See:  Jeff Sessions Suggests A Crackdown Isn’t Coming For Legal Weed

Sessions also indicated that the Justice Department doesn’t have the resources to enforce federal prohibition in states across the country.

This is a major shift from the Attorney General’s previous statements on legalized cannabis in the U.S., statements which strongly contributed to a weakness in MSRT shares.


MassRoots Overview

massroots-logoMassRoots Inc. (web site) is one of the largest and most active technology platforms for cannabis consumers and businesses with over 900,000 registered users. It’s “Yelp for Cannabis” mobile applications aim to connect its passionate community with the best products and dispensaries in their neighborhoods.

We see exciting opportunity ahead for this business considering:

  • 28 states have legalized marijuana for medical purposes
  • MSRT is targeting a $7.2 billion cannabis market that is expected to grow to $23 billion by 2020
  • rapidly growing advertising revenue stream now count Uber and Univision as paying advertisers
  • 900,000 registered user base is growing around 30,000 new users organically per month, which does not consider new product roll-outs about to occur, the Ohio market opening up next year, or the wave of new states to join the legalization trend
  • per month costs are currently running $300,000 per month with $150,000 of revenue, but the gap is on track to close by year end 2016
  • a vast array of ancillary business opportunities for the management team, as demonstrated by the recent Flowhub investment

We believe MassRoots will grow rapidly to over $120 million in market capitalization versus the $65 million current market cap considering the business has over 900,000 users and is experiencing extremely rapid growth. Weedmaps was valued at $300 million with only 750,000 users. Leafly was valued at $425 million with only 1 million users.


MSRT at a glance:

Shares outstanding: 78.9 million
Approximate float: 40.5 million
Current Price 3/16/2017: .81
Market Capitalization: 65.2 million

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Market Opportunity

The legal marijuana market is a booming industry that is experiencing record growth. States continue to expand both medical and adult use in the US. According to ArcView Market Research, the US. cannabis market was $5.7 billion in 2015 and is expected to reach $7.2 billion at the end of 2016. By 2020 the market is estimated to reach over $23 billion with a compound annual growth rate of 32%.

The 2016 elections put in place new cannabis laws affecting 22% of the U.S. population, a fundamental growth catalyst for MassRoots.

MassRoots legalized states

 

More States Expected to Legalize Medical and Recreational Cannabis 

Isaac Dietrich, Chairman & CEO of MassRoots stated in a December letter to shareholders,

“Throughout the next two years, we expect five additional states will pass medical cannabis laws: Texas, Louisiana, Utah, Nebraska and South Carolina while an additional five states will pass recreational cannabis laws: Michigan, Maryland, Vermont, Connecticut and New Jersey. We expect that, with the exception of Michigan, these laws will be passed through the state legislature which is a fraction of the cost of running a statewide ballot initiative. Sitting at the intersection of healthcare on the medicinal side and a vice industry on the recreational side, we believe the cannabis industry can continue to grow in any economic climate.”

In a very short period of time, MassRoots has grown its user base to over 900,000 and adds approximately 30,000 users per month. The massive community of the world’s top cannabis enthusiasts collectively engage over 300,000 times per day on the network. Average daily mobile users is 1750,000. The website gets about 200,000 unique visitors per day, and we are told the platform can easily handle 1 billion unique visitors/day. The company has 10-15% of the addressable market in Colorado. Ohio is coming online next year and the company is eager to expand. Customer acquisition costs have been around $0.80 but are now lower. Revenue per user is targeted to soon be running around $1.00.


MSRT Recent Positive Highlights

  • Retired All Remaining Convertible Debt

  • Raised over $2.9 million through warrant exercises so far in 2017, almost entirely from the exercise of the Company’s $0.90 warrants, giving MassRoots its strongest cash position in corporate history

  • Reinstated in Google Play and the launch of display ads on its Andriod applications in February 2017, growing the Company’s revenue channels.

  • Completed acquisition of DDDigtal, d.b.a. “Whaxy,” an online order-ahead and menu management platform. Since launching in May 2016, Whaxy’s online ordering platform has processed over $7 million in volume across 60,000 unique transactions

  • Added Mr. Tom Angell as the Company’s Senior Political Correspondent in early February 2017 and has since increased its blog traffic by nearly 18% and received comment from White House Press Secretary Sean Spicer
  • Plans to launch its revamped website in early March 2017, in anticipation of its annual web traffic surge ahead of the 4/20 cannabis holiday
  • Targeting market share to 25-35% of cannabis consumers in regulated cannabis markets during 2017

 


Valuation

By focusing on community-driven reviews rather than static information, MassRoots believes it will enable users to find the best products in the shortest amount of time. MassRoots’ recurring usage and the ability to push additional services as features rather than standalone apps presents a superior value proposition to users than both WeedMaps and Leafly. WeedMaps a dispensary locator founded in 2007. It has 750,000 users (as of April 2015), a valuation of $300 million (as of June 2014) and $25 million estimated revenue for 2016 (as of April 2015). Leafy a strain resource guide founded in 2010. It has 1 million users (as of October 2015), a valuation of $425 million (Privateer Holding company of Leafly raised in April 2015) and $16 million estimated revenue for 2016.

 


Conclusion

Shares of MassRoots (MSRT) were hit hard in recent weeks due to market uncertainty in how the new administration in Washington would approach the cannabis industry in the United States. Clarity from Attorney General Jeff Sessions yesterday is a welcome development, and MSRT shares should find support at the 200-day moving average of .78. With continued strong sales growth, near term expectation to turn cash-flow positive, retirement of all convertible debt, and the strongest cash position in corporate history, MassRoots has a solid financial footing to execute its business plan.


See also December 2016 Investor Presentation


massroots gary signature

 

 

See site wide Terms of Use/Disclosures/Disclaimer

Green Organic Dutchman logo

The Green Organic Dutchman (TGOD) grows the highest quality Organic medical cannabis in small batches using craft growing, all natural and organic principles. With experienced, passionate growers with over 8 years of MMAR growing experience, 120 acres of land, and immediate revenue from wholesale market.

 

Green Organic Dutchman expects to generate $90 million by 2018.

 


The Green Organic Dutchman, (IPO expected in Q3), is announcing a second round of financing following a heavily oversubscribed initial round.

Green Organic Dutchman is backed by the same financial team that brought together the successful IPO of Emblem Corp. Emblem’s last financing round prior to its 12/12/2016 IPO on was priced at $1.15. We rated Emblem a STRONG BUY prior to the IPO in this article. Shares opened at $2.99 on December 12th and closed last week at $3.65. No doubt, investors in Emblem’s non-brokered financing are very happy.

 

Accredited investors can now access what I strongly believe will be another very successful cannabis IPO in The Green Organic Dutchman

  • First round of financing was oversubscribed by 300%
  • Offers investors the opportunity to invest in a licensed medical cannabis producer before it goes public
  • Experienced, accomplished, and successful management team with experience in structuring large JV transactions
  • Early mover in high-demand 100% certified organic space will translate into strong demand under a recreational model
  • Retailers want more organic choices for customers
  • Patients demand quality and pay a premium price for organic product over irradiated products
  • Rob Anderson is the financier who was instrumental in the $47 million in Emblem financing, taking it to a $450 million valuation since it debuted, and will be the CEO and Director of The Green Organic Dutchman. This deal is his legacy project

 


Financing Details

The Green Organic Dutchman Holdings Ltd. (“the Company”) is pleased to announce that it is conducting a best efforts equity financing to raise aggregate gross proceeds of $10,000,000 (the “Offering”) through the issuance of common share units (the “Units”) at a price of $1.15 per Unit. Each Unit will consist of one common share of the Company (a “Common Share”) and one common share purchase warrant of the Company (a “Warrant”). Each Warrant is exercisable into one Common Share (the “Warrant Share”) at the exercise price of $2.15 per share for a period of 24 months from the closing date (“Closing Date”) of the Offering. It is intended that the Warrants will be transferable and will be subject to acceleration in the event that the volume weighted average price of the Common Shares is equal to or greater than $2.80 over a period of ten consecutive days. The Common Shares and Warrants will be subject to a 6 month contractual escrow period from the date the Company’s common shares (or derivative thereof) are listed on an exchange (“Listing Date”). The Warrant Shares will be subject to a twelve-month contractual escrow period from the Closing Date.

“This is a unique retail shareholder driven financing, that allows as many potential patients to participate as an investor, in the upside of our Company,” states Rob Anderson, CEO of TGOD.

Recent Development Highlights:

  • The company successfully completed a heavily over-subscribed $13,200,000 initial financing announced in December 2016.
  • TGOD has secured an additional and contiguous 75-acre property bringing the incumbent land package to 100 acres. This additional land sets TGOD apart from much of its peers, allowing for large-scale and accelerated expansion plans.
  • The company has added significantly to both the corporate, operational and project management teams. (See corporate presentation for details and full bios — http://www.tgod.ca/)
  • Engaged Larssen Greenhouse Engineering, who specialises in the technical design and building of the most modern and sophisticated hybrid greenhouses in the industry.
  • Engineering and design for Phase 1 Expansion of 145,000 sq. ft. commenced in January. This expansion will increase the current annual productive capacity from 1,000KG’s to over 14,000KG’s.

 

Phase I Expansion:

Engineering and design for Phase 1 expansion are well underway, and management anticipates construction to begin late in Q2, 2017. The Company has expedited its original plan, increased its size and scope, and will be executing a 2-part expansion of Phase 1:

Hybrid Expansion:

  • A 125,000 sq. ft. of state-of-the-art, automated, hybrid facility
  • Additional annual capacity of ~11,000KG’s
  • Anticipated Q2 2018 initial harvest

Enclosed Expansion:

  • A 20,000 sq. ft. state-of-the-art indoor facility
  • Additional annual capacity of ~2,000KG’s
  • Anticipated Q1 2018 initial harvest

Following the completion of the Phase 1 expansion, TGOD’s production capacity is expected to be ~14,000KG’s annually.

The Company has built a team of highly experienced power, energy optimization and construction professionals to ensure this expansion is delivered not only on-time and on-budget but also completed to the highest possible standards, potentially setting a new standard for the industry.

“This is our last planned pre-IPO financing, and fully funds the first stage of our expansion plans,” states Marc Cernovitch, President of TGOD.


Phase 1 facility expansion underway + newly acquired adjoining 75 acre property

god-production-license1Production license received on 8/17/16

god-annual-capacity1,000 kg annual operating capacity

god-wholesale-contractsWholesale contract agreements in place

god-25-acres 25 acres of potential facility footprint + newly acquired adjoining 75 acre property

god-level-8-vaultLevel 8 Vault holding up to 625Kg

god-production-expansionPhase 1 expansion ready to commence

 


Licensed to Produce by Health Canada as of Aug 17, 2016

Green Organic Dutchman is licensed under the access to cannabis for medical purposes regulations (ACMPR) to cultivate medical marijuana. Green Organic carries out its principal activities producing marijuana from its facilities in Ancaster, Ont., pursuant to the provisions of the ACMPR and the Controlled Drugs and Substances Act (Canada) and its regulations.


3 Pillar Marketing Strategy

god-marketing1

Wholesale

  • Significant demand from fellow LP’s for organic product
  • Forward sale agreements allow for immediate revenue in early stages of development while retail following is being built
  • No fulfillment and minimal shipping costs
  • Wholesale platform operates at high margin with low overhead

god-marketing2

Retail

  • As patient acquisitions increase and as recreational market comes on line, sales will shift from wholesale to much more profitable retail/recreational
  • Patients demand quality and pay a premium price for organic product over irradiated products
  • Developing Strategic partnerships with marijuana clinic networks, pain clinics, and veteran networks

god-marketing3

Joint Ventures

  • In discussion with significant distribution partners: LPs, drug stores, pharma companies, liquor stores, & dispensaries for recreational
  • Creates instant distribution to the much more profitable retail/recreational market
  • Management team has significant experience in structuring large JV transactions

Proven and Experienced Leadership Team, Backed by the Financiers of OrganiGram and Emblem Corp.

jeff-paikin-green-organic-dutchmanJeff Paikin
Chairman of the Board – Green Organic Dutchman

Mr. Paikin is the president and founder of New Horizon Development Group. In 2013 he was named RBC Distinguished Citizen of the Year for Hamilton. He is very active in the home building industry as a past president of the Hamilton Halton Home Builders’ Association and a former board member of both the Ontario Home Builders’ Association and the Canadian Home Builders’ Association. Jeff is a member of the Hamilton Tiger- Cats advisory board and the Hamilton Bulldogs Community Foundation board, as well as being the current Chair of the Hillfield Strathallan College Capital Campaign and past Chair of the board of both Hillfield Strathallan College and the Canadian Accredited Independent Schools (CAIS.ca).

Rob Anderson
CEO & Director – Green Organic Dutchman

Mr. Anderson brings 20 years of experience working with micro-cap companies in a broad range of sectors. Having spent 12 years in the Canadian brokerage Industry with one of Canada’s leading independent firms, and having financed hundreds of micro-cap companies he has an impressive track record of success, with multiple companies reaching market valuations in excess of $1B. Mr. Anderson is a strong advocate for retail shareholders, believes in a staged financing to address a company’s capital requirements, as well as advising on the development of business plans, recruiting management, negotiating transactions, joint ventures, and supporting management during the company’s growth cycle. Value of Investment into Green Organic Dutchman: $1,000,000.

scott-skinner-green-organic_dutchmanScott Skinner
Co-founder, Director & COO – Green Organic Dutchman

Mr. Skinner is a cofounder and COO of The Green Organic Dutchman. Scott engineered, designed and oversaw the construction of the Green Organic Dutchman’s production facility. This state-of-the-art facility now houses over 35 varieties of Cannabis. Scott’s current ongoing projects are the research and development of LED based Light Spectrum Optimization Technology for best cannabis production yields along with the development of Tissue Culture Propagation Protocols for the rapid cloning of cannabis plants.

Dave Doherty
Director – Green Organic Dutchman

Mr. Doherty brings over 20 years of investment and finance experience to the company. Mr. Doherty was an investment adviser with Canaccord Capital, Canada’s largest independent securities dealer covering the North American capital markets specializing in developing, structuring and financing venture and growth companies in the Resource sector. Mr. Doherty has sat on numerous boards including Organigram Holdings and presently is on the Board of Saber Capital, to be renamed Emblem Cannabis. He holds a degree from Simon Fraser University, with a major in finance. Value of Investment into Green Organic Dutchman: $900,000.

marc-cernovitch-green-organic_dutchmanMarc Cernovitch
President – Green Organic Dutchman

Mr. Cernovitch brings over 20 years of investment and corporate finance experience to the company. Marc studied Economics at McGill University and has focused on corporate development, funding and building companies primarily in the resource and energy technology fields. He has a strong background in corporate governance and finance. For the past 20 years, Mr. Cernovitch has been providing capital markets advisory services to companies across both public & private sectors. In this capacity, Mr. Cernovitch has served as a director and advisor to numerous small and mid-cap companies contemplating and/or executing financing and M&A transactions. Value of Investment into Green Organic Dutchman: $600,000.

jeannette-vandermarel-green-organic_dutchmanJeannette Vandermarel
Co-founder – Green Organic Dutchman

Mrs. Vandermarel grew up on a commercial scale fruit farm in Southern Ontario and learned about agricultural business management. Jeannette’s daughter Breanne passed away in 2003 as a result of Dravet Syndrome, a severe seizure disorder. Breanne spent most of her 8 years of life on powerful anticonvulsant drugs that did little to control her seizures and unfortunately caused serious side effects. She was never given cannabis. Around 2008, anecdotal reports began showing potential for cannabis based medicines. Jeannette, while caring for children with severe seizures in the Paediatric ICU became aware that some children were having great seizure control by using cannabis medicines.


Founders and Management Heavily Invested

As mentioned above, the CEO, Rob Anderson, is heavily invested in The Green Organic Dutchman, as are other founders and the management team.

Shares held by the Lines Founder Group and Green Organic Dutchman Founders account for nearly 40% of outstanding shares, and will be held in escrow for a full 36 months from the start of trading. This is a strong vote of confidence in the future success of the business.

# of shares % of shares
Green Organic Dutchman Founders* 11,500,000 12.4%
Lines Founder Group* 24,750,000 26.7%
Management Team 21,450,000 23.1%
Retail Investors 35,050,000 37.8%
Pre-money valuation $106,720000
Cash $12,500,000
Options outstanding 9,280,000
Debt $0

*Shares have a 36 month escrow period from the start of public trading

 


How to Participate in the Financing*

Accredited investors can email Brett Allan at: Placement@tgod.ca   

See also Green Organic Dutchman Presentation @ http://greenorganicdutchman.com/dl/TGOD.pdf

Corporate site: www.tgod.ca

*If the Emblem Corp financing and initial round of Green Organic Dutchman financing are any indication, this deal will be oversubscribed.


Best wishes for profitable investing!

Green Organic Dutchman - gary

 

 


Disclaimer: The information above is not a recommendation to buy shares of The Green Organic Dutchman. The publishers of MicrocapResearch.com are not registered as Investment Advisors in any jurisdiction whatsoever. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. Investing in nanocap, microcap, and small cap stocks is highly speculative. See full disclaimer.

Disclosure: The publishers of MicrocapResearch own shares of The Green Organic Dutchman

Shares in Emblem Corp. now trading in U.S under ticker EMMBF


Emblem shares were expected to open between $1.15-$1:50 CA when trading began in Canada on Monday. But due to high demand, shares opened just under $3.00 CAD and rocked up to $3.98 CAD before settling into a trading range between $3.10-$3.40 CAD. Emblem has a float of about 6 million shares, and that float was effectively traded on Monday alone.

Expect that interest to continue as US-based investors can more easily buy Emblem shares now.


One of the most highly anticipated stocks to begin trading in the cannabis space is Emblem Corp.

  • Pre-trading interest from investors in Emblem Corp. was extremely high with shares oversubscribed
  • Emblem shares began trading this week on the TSX Venture Exchange (TSX-V: EMC) and today is quoted in the U.S. market with ticker EMMBF
  • The Emblem Pharmaceutical division is led by John H. Stewart, who launched 11 new products, including OxyContin while he was President and CEO of Purdue Pharma, one of the largest privately held pharmaceutical companies in the world

 


 

Emblem Corp. logoEmblem Corp. (EMMBF) (web site) is a licensed producer of Medical Marijuana in Canada, led by a team of former HealthCare & Pharma Executives who have built & run multi-billion dollar companies and have invested heavily into the company themselves.

 

 

Shares issued and outstanding: 65 million
Approximate float: 6 million
Estimated opening share price range: $1.15-$1.50

 


Booming Medical Marijuana Market

While many sources confirm the hyper-growth of Canada’s medical marijuana industry, the most telling is from the government’s own Health Canada site that reports over 220% growth in registered clients in the Medical Marijuana Program between September of last year to September of 2016.

Data in table below is from Health Canada Market Data: Marijuana for Medical Purposes

Quarter Ending September 30, 2015 Quarter Ending September 30, 2016
Dried Marijuana
Amount sold to clients (kilograms) 1,873 4,733
Amount produced (kilograms) 2,142 5,734
Amount in licensed producers’ inventories at end of quarter (kilograms) 7.312 13,246
Cannabis Oil
Amount sold to clients (kilograms) N/A 2,420
Amount produced (kilograms) 9 3,116
Amount in licensed producers’ inventories at end of quarter (kilograms) 7 3,330
Total number of clients registered at end of quarter 30,537 98,460

Health Canada expects clients enrolled in the Medical Marijuana program to grow at a CAGR of 30% over the next 8 years.


Deloitte Sees Potential $22 Billion Recreational Market

Going beyond medical marijuana, the Canadian government has stated it plans to legalize recreational marijuana by the spring of next year.

Just how significant is this?

In Recreational Marijuana Insights and Opportunities, Deloitte estimates the Canadian recreational marijuana market has an absolute base retail value of $5 billion/year with potential upside to over $22 billion/year when license fees, paraphernalia, tourism revenue, etc. are included.

emblem-cannabis-market-growth-deloitte

 

 


Emblem Corp: The Perfect Management Team and Business Model to Build Shareholder Value 

There are two factors that strongly differentiate Emblem from a multitude of other marijuana stocks available to investors; a management team that’s second to none in the space, and a very compelling business model.

Emblem raised approximately $38 million between the company’s founders, early investors, and investors in brokered and non-brokered private placements. The October private placement at $1.15/share sold out in days and was oversubscribed.

Management

A major reason why Emblem’s October capital raise sold out in a matter of days is summed up in one word: Management.

When you look at the senior management team Emblem has assembled, it’s easy to understand the attraction investors have. No other cannabis stock has a pharmaceutical division headed by someone who launched a drug as big as OxyContin, the most popular opioid of the 21st century. Emblem has that in John H. Stewart, who was President and CEO of Purdue Pharma in 1996 when OxyContin was launched.

 

See: Ex-big pharma executive behind OxyContin sells medical marijuana

 

emblem-cannabis-corp-founders

 

The founders above own a significant percent of the company and understand the importance of share structure. They also exchanged their original shares for Management Performance Escrow shares with a voluntary, 18 month escrow period. Founders, management, and employees have invested ~ $6 million in Emblem Cannabis Corp. to date.


Business Model

Emblem operates three distinct divisions which can create value for each other: Emblem Cannabis (the production division), Emblem Pharmaceutical, and GrowWise Health (marijuana education for patients and physicians).

emblem-cannabis-3-prong-model

I’ll discuss each of the three divisions and the competitive advantages Emblem has in each of them, below.


Production Division: Emblem Cannabis

emblem-cannabis-production

 

Emblem received a marijuana cultivation license from the Canadian government in August 2015 with initial sales beginning in July of this year.

The Company has invested $11 million to date to build a state of the art facility about 60 miles southwest of Toronto, (in Paris, Ontario), which consists of two buildings situated on 4.1 acres of land and includes 14,500 sq. ft. of total cultivation space.

Each grow room is outfitted with dedicated CO2, humidification, & custom HVAC units to provide ideal temperature, humidity, and climate control. With two high quality grow rooms yielding 100% medical grade product, Emblem is testing different methodologies for the Company’s phase 2 expansion to create the ideal balance of quality and quantity.

 

  • Phase 2 expansion is fully funded, and expected to be complete in February, 2017 for a running capacity of 2,100 KG
  • Phase 3 expansion is expected to be completed by Q3 2017 for an additional 9,500 KG of production capacity for a total 11,600KG potential running capacity from all phases
  • Phase 4 expansion (completion expected in 2018) is planned to meet additional demand from the recreational market. Phase 1-4 would have potential capacity of 21,100KG and generate $179.3 million in sales according to the company
  • Most significant for investors is that phases 3 and 4 bring production levels into a range that rivals OrganiGram Holdings (market cap $284 million), Aphria Inc. (market cap $553 million), Mettrum Health (market cap $345 million) and Canopy Growth (market cap $1.2 billion).

-click on graphic for high resolution enlargement

emblem-cannabis-production-capacity-1

 

 

Keep in mind Emblem has just 37 million shares outstanding, so even at $5/share, the market cap would still be far below its peer group.

 


Medical grade marijuana is preferred, and sells at premium prices. Emblem has a wide variety of strains and categories for sale now, with new product launches pending.

 

-click on graphic for high resolution enlargement

emblem-cannabis-strains


emblem-cannabis-oils-picEmblem has invested $1 million into oil production, and sees demand for cannabis oils, especially high CBD oil, rapidly increasing. This higher cost product, (with estimated 90% operating margin), increases the shelf life of medical cannabis and is attractive to consumers who prefer not to inhale smoke and are looking for an easily controlled dosage.

Emblem estimates potential revenue from a single growth room dedicated to high THC and CBD strains that are ideal for extraction to exceed $23 million @ $135/bottle.

 

For a tour of Emblem’s new facilities, see:  “An Inside Look At One Of Canada’s New Licensed Cannabis Producers

 


Emblem Pharmaceutical Division

emblem-pharma-division-logo

 

The second of 3 divisions at Emblem is the Pharmaceutical Division, headed by John H. Stewart.

Stewart, (who has invested about $1 million in Emblem), launched 11 new products, including Biphentin, MS Contin, Zytram and the $2B/year blockbuster, OxyContin.

Beginning in Q2 of next year, Emblem will launch cannabinoid-based medications in strict pharmaceutical dosages in liquid form, gel caps, oral sprays, and inhalers.

 

 

 

Pharmaceutical Division Rational & Opportunities

  • Cannabinoids Have Real Therapeutic Value with Cesamet (THC – Lilly), Marinol (THC – AbbVie) and Sativex (THC & CBD – GW Pharma) approved as prescription drugs by Health Canada
  • Pharma Companies actively developing NCE’s that target the Endocannabinoid System
  • Over 1,000 medical / scientific papers have been published pertaining to the use of cannabinoids
  • Evidence of efficacy in patients with chronic pain, neuropathic pain, muscle spasms, nausea, palliative care and PTSD
  • Canadian Pain Society recommends cannabinoids as third-line treatment for neuropathic pain

Pharmaceutical Division Advanced Dosage Forms

  • Overcome the significant limitations of smoking or vaporization of dried flower
  • Provide for dose-to-dose and lot-to-lot consistency, quality and effects
  • Change the dosage regimen from grams of dried flower per day to mg per dose / mg per day
  • Allow for dosage forms to be targeted to specific purposes- Creating sustained release, and rapid release for pain and sleep respectively
  • Opportunity for dosage form related intellectual property
  • Will greatly increase both patient and prescriber acceptance of cannabinoid therapy

 

While the majority of patients currently taking medical marijuana are seeking relief from pain, anxiety, and sleep disorders, there is exciting evidence that marijuana may prevent cancers from spreading (see Scientists Find Cannabis Compound Stops Metastasis In Aggressive Cancers).

And while scientific research is still needed to confirm some of the health benefits of medical marijuana, there is an abundance of anecdotal and early research results that cannabis has great therapeutic value in as many as 50 different conditions (see 50 Unexpected Benefits of Cannabis).

While many publicly-traded cannabis companies are little more than “growers of a commodity” plant, Emblem fully recognizes the potential for medical marijuana going forward, and has the expertise to capitalize on this market opportunity with an early mover advantage.

John H. Stewart explained:

“Cannabinoids and other components of marijuana have real therapeutic value. Emblem is identifying the marijuana strains with the greatest evidence of benefit in various conditions, cultivating those strains at medical grade and developing advanced dosage forms to provide patients with accurate, consistent, high quality and convenient to use cannabis formulations.”

and in a great interview that I strongly urge investors to read, The Next Big Cannabis IPO“, John Stewart notes that:

“Our high quality cultivation with our pharmaceutical development brings not only the right cannabinoid strain and content to the formulation, but also makes available the formulations best suited for particular therapeutic outcomes.”

Again, having a separate pharmaceutical division headed up by a former President and CEO from big pharma is a huge difference in Emblem vs. marijuana grow companies from an investment perspective.

Consider potential joint ventures and collaborations with global pharmaceutical giants, and you begin to see the potential Emblem offers investors.


Emblem Marijuana Education Division

 emblem-grow-wise-logo

The third division of Emblem Corp. is GrowWise Health, (web site) and is focused on marijuana education to provide a solution for both physicians and patients in the medical marijuana industry. It is a joint venture with White Cedar Pharmacy, one of the largest dispensing pharmacies on Ontario.

While dispensaries sell marijuana from unknown sources directly on site, cannabis support clinics like GrowWise offer support, education, and help on using medical marijuana and choosing a licensed producer.

GrowWise Education Centers operate in medical clinics and receives referrals when patients are prescribed marijuana. Here, nurses counsel patients on safety and strain selection, and assist patients in registering and placing orders with a licensed producer.

GrowWise has partnered with several preferred licenced providers, and is also expected to be another reliable, consistent source of patients for Emblem.

 

GrowWise operates two platforms:

  • Education centres within incumbent medical clinics
    Currently operating in 4 chronic pain clinics & one rehabilitation center, with three additional education centers to be added by end of this year.
  • Stand alone medical cannabis clinics
    First referral-based cannabis clinic opened in November, 2015, have received referrals from nearly 100 different doctors to date, and is opening two more clinics in 2016.

The GrowWise Health/Education Division will be a source of additional, independent revenue flow from new patient acquisition/referrals at other licensed producers, while also feeding into Emblem’s pharmaceutical and marijuana production divisions.

The GrowWise Health division is a strategically astute business model that allows Emblem to draw additional revenue from several preferred provider competitors while driving internal sales at the same time.


Positive Cash Flow Projected by Q4 2017

Due to the quality and strengths of Emblem’s products, management, and business model, Emblem is conservatively projecting to be cash flow positive by Q4 2017. 


The good folks over at Equity.Guru summed up Emblem’s potential very well:

Stewart’s Big Pharma experience is necessary in the Big Cannabis world, now more than ever. With doctors still hedging on prescribing cannabis as medicine (some 98% of doctors in Canada still refuse to prescribe, despite law changes allowing it as a treatment), with large mergers now taking place, such as in last week’s Canopy-Mettrum $430m deal, and with rules changing quickly that will likely see institutional investment in the weed space as it sheds its illegal persona, having a legit pharma boss at the helm of the Emblem Pharma division will make that company an attractive target for bigger fish, and a likely revenue winner.

If you were designing a cannabis company from scratch, I defy anyone to tell me who would be a better pick for a pharma CEO than a man who had been President and CEO of a multi-billion dollar pharma company that exploded in revenues under his leadership and launched 11 new products, including one of the most successful medicines in modern history. In terms of dealing with doctor acceptance, clinical trials, handling regulators, and generating profits, I can’t think of a more qualified option.

And that my friends, is why EMMBF is one to watch.


Best wishes for profitable investing,
Blue Line Protection - gary

 


See also: Emblem Corp. Investor Presentation December, 2016

 An Inside Look At One Of Canada’s New Licensed Cannabis Producers 

Sitewide Terms of Use/Disclosures/Disclaimer

 

Canadian marijuana stocks have been on fire recently, and one of the most highly anticipated stocks to begin trading in the space is Emblem Corp.

  • Pre-trading interest from investors in Emblem Corp. has been extremely high with shares oversubscribed
  • Emblem shares begin trading this week on the TSX Venture Exchange (TSX-V: EMC), with an OTC listing in the U.S. pending
  • U.S.-based investors can buy shares of Emblem on the TSX Venture Exchange with major online brokers. Buying shares prior to the initiation of trading on the U.S. OTC market in the coming weeks could prove to be extremely profitable, as a large increase in demand for a float of just 6 million shares will be felt when trading begins on the OTC market in the U.S.
  • The Emblem Pharmaceutical division is led by John H. Stewart, who launched 11 new products, including OxyContin while he was President and CEO of Purdue Pharma, one of the largest privately held pharmaceutical companies in the world

 


 

Emblem Corp. logoEmblem Corp. (TSX-V: EMC) (web site) is a licensed producer of Medical Marijuana in Canada, led by a team of former HealthCare & Pharma Executives who have built & run multi-billion dollar companies and have invested heavily into the company themselves.

 

 

Shares issued and outstanding: 65 million
Approximate float: 6 million
Estimated opening share price range: $1.15-$1.50

 


Booming Medical Marijuana Market

While many sources confirm the hyper-growth of Canada’s medical marijuana industry, the most telling is from the government’s own Health Canada site that reports over 220% growth in registered clients in the Medical Marijuana Program between September of last year to September of 2016.

Data in table below is from Health Canada Market Data: Marijuana for Medical Purposes

Quarter Ending September 30, 2015 Quarter Ending September 30, 2016
Dried Marijuana
Amount sold to clients (kilograms) 1,873 4,733
Amount produced (kilograms) 2,142 5,734
Amount in licensed producers’ inventories at end of quarter (kilograms) 7.312 13,246
Cannabis Oil
Amount sold to clients (kilograms) N/A 2,420
Amount produced (kilograms) 9 3,116
Amount in licensed producers’ inventories at end of quarter (kilograms) 7 3,330
Total number of clients registered at end of quarter 30,537 98,460

Health Canada expects clients enrolled in the Medical Marijuana program to grow at a CAGR of 30% over the next 8 years.


Deloitte Sees Potential $22 Billion Recreational Market

Going beyond medical marijuana, the Canadian government has stated it plans to legalize recreational marijuana by the spring of next year.

Just how significant is this?

In Recreational Marijuana Insights and Opportunities, Deloitte estimates the Canadian recreational marijuana market has an absolute base retail value of $5 billion/year with potential upside to over $22 billion/year when license fees, paraphernalia, tourism revenue, etc. are included.

emblem-cannabis-market-growth-deloitte

 

 


Emblem Corp: The Perfect Management Team and Business Model to Build Shareholder Value 

There are two factors that strongly differentiate Emblem from a multitude of other marijuana stocks available to investors; a management team that’s second to none in the space, and a very compelling business model.

Emblem raised approximately $38 million between the company’s founders, early investors, and investors in brokered and non-brokered private placements. The October private placement at $1.15/share sold out in days and was oversubscribed.

Management

A major reason why Emblem’s October capital raise sold out in a matter of days is summed up in one word: Management.

When you look at the senior management team Emblem has assembled, it’s easy to understand the attraction investors have. No other cannabis stock has a pharmaceutical division headed by someone who launched a drug as big as OxyContin, the most popular opioid of the 21st century. Emblem has that in John H. Stewart, who was President and CEO of Purdue Pharma in 1996 when OxyContin was launched.

 

See: Ex-big pharma executive behind OxyContin sells medical marijuana

 

emblem-cannabis-corp-founders

 

The founders above own a significant percent of the company and understand the importance of share structure. They also exchanged their original shares for Management Performance Escrow shares with a voluntary, 18 month escrow period. Founders, management, and employees have invested ~ $6 million in Emblem Cannabis Corp. to date.


Business Model

Emblem operates three distinct divisions which can create value for each other: Emblem Cannabis (the production division), Emblem Pharmaceutical, and GrowWise Health (marijuana education for patients and physicians).

emblem-cannabis-3-prong-model

I’ll discuss each of the three divisions and the competitive advantages Emblem has in each of them, below.


Production Division: Emblem Cannabis

emblem-cannabis-production

 

Emblem received a marijuana cultivation license from the Canadian government in August 2015 with initial sales beginning in July of this year.

The Company has invested $11 million to date to build a state of the art facility about 60 miles southwest of Toronto, (in Paris, Ontario), which consists of two buildings situated on 4.1 acres of land and includes 14,500 sq. ft. of total cultivation space.

Each grow room is outfitted with dedicated CO2, humidification, & custom HVAC units to provide ideal temperature, humidity, and climate control. With two high quality grow rooms yielding 100% medical grade product, Emblem is testing different methodologies for the Company’s phase 2 expansion to create the ideal balance of quality and quantity.

 

  • Phase 2 expansion is fully funded, and expected to be complete in February, 2017 for a running capacity of 2,100 KG
  • Phase 3 expansion is expected to be completed by Q3 2017 for an additional 9,500 KG of production capacity for a total 11,600KG potential running capacity from all phases
  • Phase 4 expansion (completion expected in 2018) is planned to meet additional demand from the recreational market. Phase 1-4 would have potential capacity of 21,100KG and generate $179.3 million in sales according to the company
  • Most significant for investors is that phases 3 and 4 bring production levels into a range that rivals OrganiGram Holdings (market cap $284 million), Aphria Inc. (market cap $553 million), Mettrum Health (market cap $345 million) and Canopy Growth (market cap $1.2 billion).

-click on graphic for high resolution enlargement

emblem-cannabis-production-capacity-1

 

 

Keep in mind Emblem has just 37 million shares outstanding, so even at $5/share, the market cap would still be far below its peer group.

 


Medical grade marijuana is preferred, and sells at premium prices. Emblem has a wide variety of strains and categories for sale now, with new product launches pending.

 

-click on graphic for high resolution enlargement

emblem-cannabis-strains


emblem-cannabis-oils-picEmblem has invested $1 million into oil production, and sees demand for cannabis oils, especially high CBD oil, rapidly increasing. This higher cost product, (with estimated 90% operating margin), increases the shelf life of medical cannabis and is attractive to consumers who prefer not to inhale smoke and are looking for an easily controlled dosage.

Emblem estimates potential revenue from a single growth room dedicated to high THC and CBD strains that are ideal for extraction to exceed $23 million @ $135/bottle.

 

For a tour of Emblem’s new facilities, see:  “An Inside Look At One Of Canada’s New Licensed Cannabis Producers

 


Emblem Pharmaceutical Division

emblem-pharma-division-logo

 

The second of 3 divisions at Emblem is the Pharmaceutical Division, headed by John H. Stewart.

Stewart, (who has invested about $1 million in Emblem), launched 11 new products, including Biphentin, MS Contin, Zytram and the $2B/year blockbuster, OxyContin.

Beginning in Q2 of next year, Emblem will launch cannabinoid-based medications in strict pharmaceutical dosages in liquid form, gel caps, oral sprays, and inhalers.

 

 

 

Pharmaceutical Division Rational & Opportunities

  • Cannabinoids Have Real Therapeutic Value with Cesamet (THC – Lilly), Marinol (THC – AbbVie) and Sativex (THC & CBD – GW Pharma) approved as prescription drugs by Health Canada
  • Pharma Companies actively developing NCE’s that target the Endocannabinoid System
  • Over 1,000 medical / scientific papers have been published pertaining to the use of cannabinoids
  • Evidence of efficacy in patients with chronic pain, neuropathic pain, muscle spasms, nausea, palliative care and PTSD
  • Canadian Pain Society recommends cannabinoids as third-line treatment for neuropathic pain

Pharmaceutical Division Advanced Dosage Forms

  • Overcome the significant limitations of smoking or vaporization of dried flower
  • Provide for dose-to-dose and lot-to-lot consistency, quality and effects
  • Change the dosage regimen from grams of dried flower per day to mg per dose / mg per day
  • Allow for dosage forms to be targeted to specific purposes- Creating sustained release, and rapid release for pain and sleep respectively
  • Opportunity for dosage form related intellectual property
  • Will greatly increase both patient and prescriber acceptance of cannabinoid therapy

 

While the majority of patients currently taking medical marijuana are seeking relief from pain, anxiety, and sleep disorders, there is exciting evidence that marijuana may prevent cancers from spreading (see Scientists Find Cannabis Compound Stops Metastasis In Aggressive Cancers).

And while scientific research is still needed to confirm some of the health benefits of medical marijuana, there is an abundance of anecdotal and early research results that cannabis has great therapeutic value in as many as 50 different conditions (see 50 Unexpected Benefits of Cannabis).

While many publicly-traded cannabis companies are little more than “growers of a commodity” plant, Emblem fully recognizes the potential for medical marijuana going forward, and has the expertise to capitalize on this market opportunity with an early mover advantage.

John H. Stewart explained:

“Cannabinoids and other components of marijuana have real therapeutic value. Emblem is identifying the marijuana strains with the greatest evidence of benefit in various conditions, cultivating those strains at medical grade and developing advanced dosage forms to provide patients with accurate, consistent, high quality and convenient to use cannabis formulations.”

and in a great interview that I strongly urge investors to read, The Next Big Cannabis IPO“, John Stewart notes that:

“Our high quality cultivation with our pharmaceutical development brings not only the right cannabinoid strain and content to the formulation, but also makes available the formulations best suited for particular therapeutic outcomes.”

Again, having a separate pharmaceutical division headed up by a former President and CEO from big pharma is a huge difference in Emblem vs. marijuana grow companies from an investment perspective.

Consider potential joint ventures and collaborations with global pharmaceutical giants, and you begin to see the potential Emblem offers investors.


Emblem Marijuana Education Division

 emblem-grow-wise-logo

The third division of Emblem Corp. is GrowWise Health, (web site) and is focused on marijuana education to provide a solution for both physicians and patients in the medical marijuana industry. It is a joint venture with White Cedar Pharmacy, one of the largest dispensing pharmacies on Ontario.

While dispensaries sell marijuana from unknown sources directly on site, cannabis support clinics like GrowWise offer support, education, and help on using medical marijuana and choosing a licensed producer.

GrowWise Education Centers operate in medical clinics and receives referrals when patients are prescribed marijuana. Here, nurses counsel patients on safety and strain selection, and assist patients in registering and placing orders with a licensed producer.

GrowWise has partnered with several preferred licenced providers, and is also expected to be another reliable, consistent source of patients for Emblem.

 

GrowWise operates two platforms:

  • Education centres within incumbent medical clinics
    Currently operating in 4 chronic pain clinics & one rehabilitation center, with three additional education centers to be added by end of this year.
  • Stand alone medical cannabis clinics
    First referral-based cannabis clinic opened in November, 2015, have received referrals from nearly 100 different doctors to date, and is opening two more clinics in 2016.

The GrowWise Health/Education Division will be a source of additional, independent revenue flow from new patient acquisition/referrals at other licensed producers, while also feeding into Emblem’s pharmaceutical and marijuana production divisions.

The GrowWise Health division is a strategically astute business model that allows Emblem to draw additional revenue from several preferred provider competitors while driving internal sales at the same time.


Positive Cash Flow Projected by Q4 2017

Due to the quality and strengths of Emblem’s products, management, and business model, Emblem is conservatively projecting to be cash flow positive by Q4 2017. 

 


Potential Answer to Skyrocketing Opioid Abuse

The revenue projections above do not include the potential revenue from collaboration or JV with government or big pharma in curbing opioid abuse. As we know, high levels of opioid abuse is a growing problem in the U.S. and Canada. There may be a light shining in the darkness of the present opioid abuse tunnel however. The American Journal of Public Health recently published a study that revealed opioid use was reduced in states with legalized medical marijuana (see Study: Opioid Use Decreases in States that Legalize Medical Marijuana). Additionally, Massachusetts has reported success in reducing opioid abuse by utilizing medical marijuana, (see Opioid Addiction Being Treated With Medical Marijuana in Massachusetts)

There is no cannabis stock with a management team as proficient in opioid analgesics as Emblem, and I think this is something both retail and institutional investors will come to realize in the near term.


Expect Surge of Interest & Volume When Shares Begin Trading on U.S. OTC Market

As mentioned earlier, U.S.-based investors can easily buy shares of Emblem Corp. via major online brokers. In most cases the ticker will be EMC.V or EMC:CA. Buying shares early, and prior to the initiation of trading on the U.S. OTC market in the coming weeks could prove to be extremely profitable. There will be an increase in demand for a float of just 6 million shares when trading begins in the U.S.

I’ll be a buyer of EMC.V shares tomorrow and look forward to updating subscribers on the company in the weeks and months ahead!


Best wishes for profitable investing,
Blue Line Protection - gary

 


See also: Emblem Corp. Investor Presentation December, 2016

 An Inside Look At One Of Canada’s New Licensed Cannabis Producers 

Sitewide Terms of Use/Disclosures/Disclaimer

 

Blue Line Protection Group logoBlue Line Protection Group (web site) is a leading security and risk mitigation solutions provider for retail businesses and financial institutions serving the legal cannabis industry, is now providing a complete compliance, transportation and cash processing solution for banks and credit unions looking to enter the cannabis industry.


BLPG Shares Record Big Gains on Record Volume

Last week, shares in Blue Line Protection Group (BLPG) rose from .035 to an intraday high of .09 on record volume.

Blue Line Protection

 

Shares pulled back on profit-taking on Thursday and Friday, making a nice entry point here.

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Demand for Banking Services from Legal Cannabis Industry Increasing

Some might believe that the expansion of legal of cannabis use in more states would reduce demand for Blue Line Protection Group’s legal cannabis banking services.

However, according to this article in Bloomberg last week, the opposite is happening. While nine more states will vote tomorrow on whether to legalize some aspect of marijuana use, banks willing to provide services to cannabis companies are still hard to find.

See: See America’s Legal Pot Economy Is Forced Underground


For those new BLPG, we recommended it here at .04/share:

see: Banking The Cannabis Industry: A Groundbreaking Moment Comes Into Focus (August 1st)

and

Video Interview with CEO of Blue Line Protection Group (BLPG) (August 9th)

and

First-Mover Advantage and Strategic Partnerships: Who’s Your Blue Line Bank? (August 17th)

 


Last week, BLPG provided an update on the company’s operations which includes the opening of a new vaulting and cash processing facility in Denver, Colorado.


With 9 states voting to legalize some form of marijuana use tomorrow while traditional banks willing to provide services to cannabis companies remain few, shares in BLPG may just be starting to light up here.


Blue Line Protection - gary

 

 


See Disclosures/Disclaimer/Terms of Use

massroots-logoMassRoots Inc. (web site) is one of the largest and most active technology platforms for cannabis consumers and businesses with over 900,000 registered users. It’s “Yelp for Cannabis” mobile applications aim to connect its passionate community with the best products and dispensaries in their neighborhoods.

We see exciting opportunity ahead for this business considering:

  • targeting a $7.2 billion cannabis market that is expected to grow to $23 billion by 2020
  • rapidly growing advertising revenue stream now count Uber and Univision as paying advertisers
  • 900,000 registered user base is growing around 30,000 new users organically per month, which does not consider new product roll-outs about to occur, the Ohio market opening up next year, or the wave of new states to join the legalization trend
  • per month costs are currently running $300,000 per month with $150,000 of revenue, but the gap is on track to close by year end 2016
  • a vast array of ancillary business opportunities for the management team, as demonstrated by the recent Flowhub investment

We believe Massroots will grow rapidly to over $100 million in market capitalization versus the $44 million current market cap considering the business has 900,000 users and is experiencing extremely rapid growth. Weedmaps was valued at $300 million with only 750,000 users. Leafly was valued at $425 million with only 1 million users.

Legalization of marijuana for medical use, or expansion to include recreational use is on the ballot in Florida, California, Nevada, Maine, Arizona, Massachusetts, and Arkansa. Polls indicate legalization likely to pass in most, or even all of these states. 


MSRT at a glance:

Shares outstanding: 52.7 million
Approximate float 19.1 million
Closing Price 10/26/2016: .81
Market Capitalization: 42.7 million

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Market Opportunity

The legal marijuana market is a booming industry that is experiencing record growth. States continue to expand both medical and adult use in the US. According to ArcView Market Research, the US. cannabis market was $5.7 billion in 2015 and is expected to reach $7.2 billion at the end of 2016. By 2020 the market is estimated to reach over $23 billion with a compound annual growth rate of 32%.

MassRoots CEO Isaac Dietrich recently stated:

“The 2016 election cycle has the potential to significantly increase MassRoots’ subscriber and revenue growth. When a state passes a medical or recreational cannabis law, MassRoots is able to start registering users and businesses in that state with minimal marginal cost.  At the same time, our financial model is not tied to the success of a particular location, brand or a particular ballot initiative – we believe we will have a significant percentage of all dispensaries and brands on our platform, making MassRoots a play on the industry as a whole.”

 


Revenue Outlook

For six months ended June2016, MassRoots generated $585,000 in revenue primarily through digital advertising for dispensaries and cannabis brands in Colorado and California. The company expects to be able to scale its annual revenues to millions of dollars as additional states regulate the production and sale of cannabis.


Strong Recent Additions to Highly Respected Management Team

The company’s leadership is well regarded. The management team, board as well as designers and engineers hail from leading companies such as: Salesforce, Microsoft, Skype, Motorola, Target, Barracuda, Blizzard Entertainment, The Walt Disney Company, Snapchat, Mashable, Coca Cola, and more.

MassRoots’ team is extremely qualified with the tools to build upon a great business in a thriving industry. Most recently, the company added a new CTO from Salesforce and a new board member from Mashable.


Recent $5 million financing completed

This occurred just this month October 2016. The fact that the equity was raised demonstrated strong commitment from investors to the company. It also highlights the bright outlook the market sees for the company heading into this year’s voting cycle.


Advertising Revenue

This revenue stream was launched in August 2015. The problem out there is that cannabis companies can’t advertise on Facebook or Google, and the “enthusiast” cannabis demographic is incredibly hard to target. MassRoots provides a self-service advertising portal that enables cannabis-related businesses to reach cannabis enthusiasts through MassRoots, social platforms, and cannabis-related websites. The advertising packages offered range from $2,000 per month to $25,000 per month. Advertisers can list on the company’s blog, it’s Facebook page, or through other forms.


Data Sales

Another angle to the business is quickly developing, data sales. Dispensaries don’t know what to stock their shelves with. Growers don’t know what to produce. New companies entering the space don’t know where to spend R&D. MassRoots has a business dashboard featuring MassRoots’ proprietary product data in easy-to-use, actionable formats. We suspect customers are going to love soon being able to pinpoint what product is best for back pain versus nausea and so on. Moreover, robust product level data is a key stair step for the company to move into other arenas long term, such as facilitating commerce between users and dispensaries, after all MassRoots is tracking all the inventory, with opportunities for loyalty programs as well.


Tremendous User Growth

massroots user growth

In only a short period of time, MassRoots has grown its user base from nothing to over 900,000. The company adds approximately 30,000 users per month primarily through organic growth. The massive community of the world’s top cannabis enthusiasts collectively engage over 300,000 times per day on the network. Average daily mobile users is 1750,000. The website gets about 200,000 unique visitors per day, and we are told the platform can easily handle 1 billion unique visitors/day. The company has 10-15% of the addressable market in Colorado. Ohio is coming online next year and the company is eager to expand. Customer acquisition costs have been around $0.80 but are now lower. Revenue per user is targeted to soon be running around $1.00.


Flowhub Investment

In May 2015, the company invested in Flowhub. Flowhub is building a dispensary point of sale system. Since formally launching in June 2016, Flowhub has facilitated more than 250,000 transactions across dozens of dispensaries in Colorado and Oregon. Through its point-of sale and grow management software, Flowhub automates and streamlines business operations for cannabis dispensaries and cultivators. MassRoots believes Flowhub is at a critical inflection point, poised to scale from dozens of dispensary locations using its platform now to hundreds of locations by the end of the year. Within the next few months, the company believes a significant percentage of all transactions occurring in the regulated cannabis industry will occur on the MassRoots/Flowhub platform. In our view, we really like the company’s effort to expand upon the legacy advertising revenue into other forms of more recurring revenue.


Valuation

By focusing on community-driven reviews rather than static information, MassRoots believes it will enable users to find the best products in the shortest amount of time. MassRoots’ recurring usage and the ability to push additional services as features rather than standalone apps presents a superior value proposition to users than both WeedMaps and Leafly. WeedMaps a dispensary locator founded in 2007. It has 750,000 users (as of April 2015), a valuation of $300 million (as of June 2014) and $25 million estimated revenue for 2016 (as of April 2015). Leafy a strain resource guide founded in 2010. It has 1 million users (as of October 2015), a valuation of $425 million (Privateer Holding company of Leafly raised in April 2015) and $16 million estimated revenue for 2016.


Execution

We spoke to CEO Isaac Dietrich. One impressive fact was how he has been nimble and willing to make changes to drive results. For instance, the company now has 3 sales reps. A new sales director will be starting soon. The sales force is paid a 10% commission. Gross margins are 93%. The sales force model is critical to monetizing the company’s assets. Though it just isn’t so easy. 8 months ago the company had now sales force. Then the time came to try to ramp revenue and headcount was increased to 33. Though as always in business not everything works out as planned. Dietrich had to lead an effort to reduce staff to 19. He wisely kept the engineering team the same size and scaled down other areas. He cut several hundred thousand dollars per month out of the budget. The sales force situation described above is now concentrated on top performers and repeating best practices that are behind the results. We think all of the above describes a savy entrepreneur in Dietric. With Ohio about to roll-out 1,000 to 1,5000 dispensaries next year and the country-wide legalization unfolding, we want management personal just like Dietrich at the helm who are taking big risks and course correcting along the way.


Legal Map

Below is our tracker of where cannabis is legalized, where cannabis is legalized for recreational use, and where there are now laws legalizing cannabis.

massroots-legal-map

 

The following states will be voting this year to further advance their laws: California, Nevada, Maine, Arizona, Massachusetts, Florida, Arkansa.

Recent polling indicates a rapidly expanding map for MassRoots to leverage following the November 8th elections:

That’s a lot of  new “mass” for MassRoots to expand into!

Based on recent high growth rates + even greater accelerating growth in both users and sales, now is a great time to average into a position inMSRT.

 


See also June 2016 Investor Presentation


massroots gary signature

 

 

See site wide Terms of Use/Disclosures/Disclaimer