Investors Seek Pot of Gold in Legal Cannabis Boom

According to a report from New Frontier Data, 95% of Americans live in states where there is some form of legal cannabis.

Legal cannabis has a foothold from coast to coast, and the social attitude regarding legalization continues to evolve. 

In total, 30 states and the District of Columbia have legalized some form of cannabis use, while polls indicate 59% of voters nationwide favor legalization.

By 2021, the legal cannabis market in the United States is expected to balloon to $21 billion, up from just $6.7 billion in 2016. And by 2030 the market could reach $75 billion, according to analysts at Cowen & Co.

As this budding industry continues to mature, some investors stand to make millions.

But in a market environment that is changing so rapidly, and coming from a long era of prohibition, investing in the cannabis space doesn’t come without risks.

But where there is risk, there is also opportunity for reward.

While some cautionary flags remain, recent signs indicate 2018 could be an important year for the industry, possibly sparking the next wave of consolidation and growth.

Positive Industry Developments Bode Well for 2018 and Beyond

According to Marijuana Business Daily, recent deals show the financial markets are warming up to the cannabis industry.

In January, Ontario-based Canopy Growth Corporation (TSX: WEED) became the first cannabis company in Canada to enlist BMO Capital Markets, a subsidiary of the Bank of Montreal, a major Canadian bank to lead an equity-based funding.

And in March, licensed producer Cronos Group (NASDAQ: CRON) said it was looking to raise up to $78 million through BMO Capital Markets, as the second cannabis company in Canada to conduct an equity-based financing. In March, a Southern California cannabis cultivator received a payout of well over $1 million from an unnamed insurance carrier in the United Kingdom. The payout was for crop damages that the grower suffered during the massive Thomas Fire this past December and January.

It’s believed to be the largest insurance award ever given to a legal cannabis business, and industry insiders see the event as another indicator of how rapidly the legal cannabis industry has matured, and how much corporate America’s take on cannabis companies has changed.

Change is even happening politically at the federal level in the United States.

Disregarding Attorney General Jeff Sessions, who rescinded the Cole memo (which protected cannabis companies operating legally under state regulations), President Trump confirmed a deal with Colorado Sen. Cory Gardner in April. According to reports, Trump is now willing to let states make their own legalization decisions.

Also in April, John Boehner, former speaker of the House, who championed anti-legalization efforts while in Congress, joined the advisory board of Acreage Holdings, a three-year old cannabis operation covering cultivation, processing, and dispensing across 11 states.

Vertically-Integrated Operation Set for Explosive Growth

We’ve discovered a public company still unknown to big Wall Street investors, yet recent news indicates it’s well on its way to becoming an industry leader.

Green Spirit Industries Inc. (OTC: GSRX) began trading in 2017, and in less than a year it has raised millions of dollars in new capital and established diverse operations in two key markets for legal cannabis: Puerto Rico and California.

GSRX’s first retail medical cannabis dispensary in Puerto Rico began generating sales in April, and in the coming months at least another four dispensaries are expected to open on the island. With a limited number of licenses available and a requirement that cannabis cardholders shop at one branded shop, GSRX could easily become the leading brand on the island.

With millions of tourists flocking to the Caribbean paradise annually for holiday, and reciprocity laws with cardholders from other legal cannabis states, GSRX has the potential to generate big profits from its Puerto Rico operations.

But this is just one piece of a much larger enterprise.

In addition to expanding its business in Puerto Rico, GSRX has focused its sights on what is by far the largest market in the United States: California.

California’s New Gold Rush is Green

California’s medical-cannabis industry dates to 1996 with the passage of Proposition 215, also known as the Compassionate Use Act, which allows patients to obtain and use cannabis for any illness so long as they obtain a physician’s recommendation.

In 2016, California voters, by a vote of 57% to 43%, passed Proposition 64, legalizing the sale and distribution of cannabis in both dry and concentrated form for any use. The law became effective on January 1, 2018, and experts believe the market will grow rapidly in the months and years ahead.

Recognizing the opportunity, GSRX management has made substantial investments through a series of joint ventures in California this year.

In March, GSRX acquired a majority stake in an established manufacturer of cannabinoid (CBD) products, Spirulinex.

Spirulinex has developed an all-natural, patent-pending method of suspending cannabinoids in water to create aqueous solutions, thereby eliminating the need for oils, butter, or synthetic lipids.

This proprietary method enables GSRX to develop and offer products in which cannabinoids are scientifically dosed for consistency and quality assurance.

Spirulinex has developed a slate of cannabinoid ingestibles that includes drinkable vials and gummies and other edibles, as well as the popular, proprietary sublingual flakes product, DragonGlass Flake and Bake™.

Commenting on the deal, CEO Les Ball stated, “With our majority stake in Spirulinex, Green Spirit has now added a major link of the rapidly growing cannabis product supply chain to the Company’s portfolio of businesses.”

Another key link in the development of its vertically-integrated operation was announced in February, when GSRX entered a joint venture with the well-known Bay Area grow brand, Sunset Connect.

Sunset Connect produces top-shelf indoor flowers and a portfolio of branded extractions, including crumble, shatter, wax, and rosin. Its products are available in dispensaries and delivery services throughout the region.

Plans to expand the business in the near-term include adding up to 20,000 sq. ft. of cultivation space. Lease terms for the new space are already in negotiation.

GS Essentials plans to run a mix of volatile and non-volatile closed-loop extractions as well as an ethanol-distillation process to allow the company to manufacture a broad spectrum of products, including topical applications, cartridges, oils, wax, shatter, crumble, and oral for sale in California.

“The public appetite in California for cannabis in forms other than flower continues to grow,” Ball said. “Our investment in GS Essentials puts our Company in a unique position to profit from multiple revenue streams, as GS Essentials develops and manufactures a varied menu of high-quality cannabinoid products to consumers eager for alternative delivery choices.”

In addition to its deals for grow and manufacturing operations in California, GSRX has entered the retail distribution end of the business in the state.

In April, GSRX announced it had acquired and begun the day-to-day operations of The Green Room, an established retail cannabis dispensary in the popular seaside town of Point Arena in Northern California’s Mendocino County.

Management expects the recent move to recreational sales, and a previously unused delivery license, could lead to strong growth for the operation in 2018.

Highly Experienced Management

GSRX is led by CEO Les Ball.

Dan Gardenswartz, Managing Director at Sage Capital, a leading private equity firm, called Ball one of “the most talented and capable managers in the retail industry.”

Ball spent more than two decades in key leadership positions at R.H. Macy, including president of Macy’s East, President of Macy’s Wholesale, President of Macy’s South, and Chairman and CEO of Macy’s Midwest.

Before joining GSRX, Ball was CEO of the largest retailer of western-inspired apparel and footwear, Corral West Ranchwear.

As CEO of GSRX, Ball will play a critical role in the Company’s growth over the next 24 to 36 months.

Management is always an essential component in the success of small-cap stocks, and GSRX has what few in this industry have: the experience to execute at scale.

Watch our latest interview with Ball to learn more about this exciting opportunity.

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