AGTK : Agritek Holdings Analysis and Research Report

2017-11-25 - by Asif , Contributing Analyst - 122 views

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Corporate History

Agritek Holdings, Inc., was initially incorporated under the laws of the State of Delaware in 1997 under the name Easy Street Online, Inc.

In 1997, the Company changed its name to Frontline Communications Corp. (“Frontline”) and operated as a regional Internet service provider (“ISP”) providing Internet access, web hosting, website design, and related services to residential and small business customers throughout the Northeast United States and, through a network partnership agreement, Internet access to customers nationwide.

On April 3, 2003, the Company acquired Proyecciones y Ventas Organizadas, S.A. de C.V. (“Provo Mexico”) and in December 2003 the Company changed the name to Provo International Inc. (“Provo”).

In 2008, Provo changed its name to Ebenefits Direct, Inc., which, through its wholly-owned subsidiary, L.A. Marketing Plans, LLC, engaged in the business of direct response marketing. The Company’s principal business was to market and sell non-insurance healthcare programs designed to complement medical insurance products and to provide savings for those who cannot afford or qualify for traditional health insurance products.

On October 14, 2008, Ebenefits Direct, Inc. changed its name to Seraph Security, Inc. (“Seraph”).

On April 25, 2009, Seraph acquired Commerce Online Technologies, Inc., a credit and debit card processing company.

On May 20, 2009, Seraph Security, Inc. changed its name to Commerce Online, Inc. to more accurately reflect its core business of merchant processing, and financial services.

As of February 18, 2010, Commerce Online, Inc. changed its name to Cannabis Medical Solutions, Inc. (“CMSI”) as a provider of merchant processing payment technologies for the medical marijuana and wellness sector.

On March 8, 2010, the Company completed the acquisition of 800 Commerce, Inc. (“800 Commerce”) a Florida Corporation incorporated by the Company’s Chief Executive Officer. The company issued 1,000,000 shares of common stock to 800 Commerce for all the issued and outstanding stock of 800 Commerce, Inc.

In June 2010, 31,288,702 shares of common stock were issued as dividend shares (the “dividend”) to all existing shareholders of common stock of record.

On June 14, 2011, Cannabis Medical Solutions, Inc. changed its merchant name to MediSwipe Inc. (“MWIP”) as a result of its focus on the processing and financial services related to medical marijuana business.

On June 26, 2013, the Company formed American Hemp Trading Company, a wholly owned subsidiary.

On June 26, 2013, the Company formed Agritech Innovations, Inc. (“AGTI”), a wholly owned subsidiary. On September 3, 2013, AGTI changed its name to Agritech Venture Holdings, Inc. (“AVH”).

On November 12, 2013, the Board of Directors of the Company approved a 1-for-10 reverse stock split (the “Reverse Stock Split”) and a decrease in the authorized common stock of the Company to 250,000,000. Pursuant to the Reverse Stock Split, each 10 shares of the Company’s common stock automatically converted into one share of Company common stock.

On November 12, 2013, the Financial Industry Regulatory Authority (“FINRA”) approved the Reverse Stock Split with an effective date of December 11, 2013. All the share amounts in this annual report on Form 10-K reflect the Reverse Stock Split.

On April 23, 2014, MWIP changed its name to Agritek Holdings, Inc. (“AGTK”) to more properly reflect the Company’s current business model.

On May 27, 2014, AVH changed its names to Agritek Venture Holdings, Inc. (“AVHI”).

On August 27, 2014, American Hemp Trading Company changed its name to Prohibition Products, Inc. (“PPI”)

On May 23, 2016, the Company filed a certificate of amendment (a “Certificate of Amendment”), increasing the authorized capital of the Company to 1,001,000,000 shares of capital stock; consisting of 1,000,000,000 shares of common stock par value $0.0001 and 1,000,000 shares of preferred stock, par value $0.01. The majority of the Company’s shareholders consented to the Certificate of Amendment increasing the authorized capital.

On November 7, 2016, the Company issued 5,000,000 shares of common stock and completed the stock purchase for the acquisition of Sterling Classic Compassion, LLC. (“Sterling”). The two (2) year old California based non-profit set up to do business specifically for the cannabis sector in California, now a wholly owned subsidiary of the Company. The company has begun the process to seek licensure in California under new recreational legislation set to begin in 2017. The Company named entertainment guru, Russ Regan, a 50 year veteran of the music and film industry, as Sterling's President and Director, as well as to the advisory board of the Company. With over fifty years in the entertainment industry, Mr. Regan has played a major role in the careers of the biggest names in the music industry. Luminaries such as Elton John, Neil Diamond, Barry White, and Olivia Newton-John all credit Regan as a major force behind their success.

On December 1, 2016, the Company signed a Manufacturing Services Agreement with a third party, for the manufacturing and distribution of the Company’s California Premiums brand. The Company will provide packaging and use of the brand name to the manufacturer, licensed in the regulated jurisdiction of California. The manufacturer will distribute the product and pay the Company for the packaging and use of the brand name.

Description of Business

Agritek Holdings and its wholly-owned subsidiaries, MediSwipe, Inc., Prohibition Products Inc., and Agritek Venture Holdings, Inc. provide turnkey support solutions to the legal cannabis industry. The company provide key business services to the legal cannabis sector including:

  • Funding and Financing Solutions for Agricultural Land and Properties zoned for the regulated Cannabis Industry.
  • Compliance Consulting and Certification Solutions
  • Dispensary and Retail Solutions
  • Commercial Production and Equipment Build Out Solutions
  • Banking and Payment Processing Solutions
  • Multichannel Supply Chain Solutions
  • Branding, Marketing and Sales Solutions of proprietary product lines
  • Consumer Product Solutions

The Company is expanding throughout California, Colorado and Puerto Rico and presently intends to bring its’ array of services to each new state that legalizes the use of cannabis according to appropriate state and federal laws. The company's primary objective is acquiring commercial properties to be utilized in the commercial marijuana industry as cultivation facilities in compliance with Colorado and additional jurisdictions including California, Nevada and Puerto Rico in accordance with state law. This is an essential aspect of its overall growth strategy because once acquired and re-zoned, the value of such real property is substantially higher than under the previous zoning and use.

Once properties are identified and acquired to be used for purposes related to the commercial marijuana industry as provided for by state law, and the company plan to create vertical channels within that legal jurisdiction including equipment financing, payment processing and marketing of exclusive brands and services to retail dispensaries

Agritek’s business focus is primarily to hold, develop and manage real property. The Company shall also provide oversight on every property that is part of its portfolio. This can include complete architectural design and subsequent build-outs, general support, landscaping, general up-keep, and state of the art security systems. At this time, Agritek does not grow, process, own, handle, transport, or sell marijuana as the Company is organized and directed to operate strictly in accordance with all applicable state and federal laws. As the legal environment changes in Colorado, California and other states, the Company’s management may explore business opportunities that involve ownership interests in dispensaries and growing operations if and when such business opportunities become legally permissible under applicable state and federal laws.

Services and Markets

To date, Agritek Holdings has purchased eighty (80) acres approved for licenses and cultivation in Pueblo, Colorado. Agritek Holdings has also entered a Letter of Intent to purchase an additional thirty-five (35) acre property in Pueblo, Colorado. Agritek Holdings has multiple manufacturing and service contracts in place in areas in the following sectors:

Funding and Financing Solutions

The company's goal is to become the funding and financing service partner of choice in the legal Colorado and California cannabis market before expanding nationwide if and when applicable state and federal laws allow it to do so. The company offer financing and financial aid to cultivators, collectives, dispensaries and product businesses in the legal cannabis industry with alternative funding and financing solutions. In the evolving legal cannabis industry, where traditional banking opportunities are grossly limited, the company step in to provide the “traditional” bank lending services; lines of credit, property financing, and/or commercial loans. Businesses and individuals seeking funding and financing solutions are qualified and scored based on their experience, current operations, financial records, and compliance grades given by its proprietary banking partners and credit lines that comply with all state governance rules.

Agritek Holdings Certification and Compliance Solutions

The company guide its clients through the complex and ever-changing legal landscape regarding the legal cannabis industry. Legal cannabis retail, production, and product manufacturers must comply with all regulations in the highly governed legal cannabis industry, as local and state laws dictate different business requirements. Since complying with applicable laws can be complex, the company help service its clients through each jurisdiction with its team of legal, accounting and technology partners who are experts in areas such as entity selection, internal bookkeeping, government reporting, and inventory and patient records tracking in order to help its clients be compliant.

Commercial Build Out and Dispensary Solutions

The company offer turnkey build-out and commercial services to its clients. Whether it is financial assistance, real estate consulting, operations design, or building construction, its Company can design and rollout customized services for its clients. The company also offer traditional business services to dispensaries as well. These services include infrastructure investment, technology partners, donation accounting, payment processing and succession strategies. It is important to note that Agritek Holdings is not a “one size fits all” organization, but are committed to custom tailored solutions for legal cannabis industry participants.

Finance and Real Estate

Real Estate Leasing

The company's real estate leasing business primarily includes the acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities will range in size from 5,000 to 50,000 square feet. These facilities will only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants will provide certain requirements that permit it to continually evaluate its tenants’ compliance with applicable laws and regulations.

As of the date of this report, the company own one cultivation property that is located in a suburb of Pueblo, Colorado (the “Pueblo West Property”). The property consists of approximately eighty (80) acres of land. The property is currently zoned for cultivating cannabis and is expected to be leased to a medical cannabis cultivator or manufacturer this year. Agritek Holdings is currently evaluating strategic options for this property.

**Shared Office Space, Networking and Event Services **

In January 2017, the company leased two floors located in downtown San Juan, Puerto Rico 00901, which Agritek Holdings has branded as GreenWorkx . The building consists of a 6,056 square feet, which will be converted to serve as unique shared workspace for entrepreneurs, doctors, professionals and others serving the cannabis industry. Clients will be able to lease space to use as offices, meeting rooms, lecture, educational and networking facilities, and individual workstations.

The GreenWorx facility will hold up to 25-30 tenants. Puerto Rico recently has passed favorable medicinal cannabis laws combined with multiple tax incentives for residents and public companies.

The company plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants include media, internet, packaging, lighting, cultivation supplies, and financial services. In exchange for certain services that may be provided to these tenants, the company expect to receive rental income in the form of cash. In certain cases, the company may acquire equity interests or provide debt capital to these businesses and eventually acquire a specific business as a wholly owned subsidiary of Agritek.

Industry Finance and Equipment Leasing Services

The company plan to lease cultivation equipment and facilities to customers in the cannabis industry. The company expect the company will enter into sale lease-back transactions of land zoned for cultivation, green houses, grow lights, tenant improvements and other grow equipment. Since Colorado State law does not allow entities operating under a cannabis license to pledge the assets or the license of the cannabis operation for any type of general borrowing activity, the company intend to provide loans to individuals and businesses in the cannabis industry on an unsecured basis. Equipment will only be leased to tenants that possess the requisite state licenses to operate such facilities. The leases with the tenants will provide certain requirements that permit it to continually evaluate its tenants’ compliance with applicable laws and regulations.

Agritek Holdings is exploring lending opportunities in Colorado, California, Nevada and Puerto Rico. The company's finance strategy will include making direct term loans and providing revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products. These loans will generally be secured to the maximum extent permitted by law. The company believe there is a significant demand for this financing. Agritek Holdings is pursuing other finance services including customized finance, capital formation, and banking, for participants in the cannabis industry.

Competitive Strengths

The company believe the company possess certain competitive strengths and advantages in the industries which the company operate:

Range of Services: Agritek Holdings is able to leverage its breadth of services and resources to deliver a comprehensive, integrated solution to companies in the cannabis industry – from operational and compliance consulting to security and marketing to financing needs.

Strategic Alliances. Agritek Holdings is dedicated to rapid growth through acquisitions, partnerships and agreements that will enable it to enter and expand into new markets. The company's strategy in pursuing these alliances are based on the target’s ability to generate positive cash flow, effectively meet customer needs, and supply desirable products, services or technologies, among other considerations. The company anticipate that strategic alliances will play a significant role as more states pass legislation permitting the cultivation and sale of hemp and cannabis.

Industry’s Access to Capital. In February 2014, the Treasury Department issued guidelines for financial institutions dealing with cannabis-related businesses, (see “FinCEN” under “Federal Regulations and The company's Business” of this document). In March 2015, legislation was introduced in the U.S. Senate proposing to change federal law such that states could regulate medical use of cannabis without risk of federal prosecution. A key component of the proposed Compassionate Access, Research Expansion, and Respect States Act (the “CARERS Act”) is to reclassify cannabis under the Controlled Substances Act to Schedule II, thereby changing the plant from a federally-criminalized substance to one that has recognized medical uses. Many banks and traditional financial institutions refuse to provide financial services to cannabis-related business. The company plan to provide finance and leasing solutions to market participants using the FinCEN guidelines as a primary guide for compliance with federal law.

Regulatory Compliance. The state laws regulating the cannabis industry are changing at a rapid pace. Currently, there are twenty-six U.S. states and the District of Columbia that have created a legislative body to manage the medical cannabis industry. There are also five states that have allowed recreational use. In Colorado and Washington states, cannabis is heavily regulated. It is a critical component of its business plan both to ensure that all aspects of its operations are in compliance with all laws, policies, guidance and regulations to which Agritek Holdings is subject and to provide an opportunity to its customers and allies to use its services to ensure that they, too, are in full compliance.

Industry Breadth. The company continue to create, share and leverage information and experiences with the purpose of creating awareness and identifying opportunities to increase shareholder value. The company's management team has extensive knowledge of the cannabis industry and closely monitors changes in legislation. The company work with partners who enhance its industry breadth.

Intellectual Property

On November 17, 2016, the company filed with the United States Patent and Trademark Office (“USPTO”) a federal trademark registration for “Hemp Pops” in the category of Staple Food Products.


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