CANN : General Cannabis Corp Analysis and Research Report

2017-11-25 - by Asif , Contributing Analyst - 291 views

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The company operate in a rapidly evolving and highly regulated industry that, as has been estimated by some, will exceed $30 billion in revenue by the year 2020. General Cannabis has been and will continue to be aggressive in executing acquisitions and pursuing other opportunities that the company believe will benefit it in the long-term.

Through its reporting segments, the company provide products and services to the regulated cannabis industry, which include the following:

Security and Cash Transportation Services (“Security Segment”)

The company provide advanced security, including on-site professionals and cash transport, to licensed cannabis cultivators and retail shops, under the business name Iron Protection Group (“IPG”), and security services to non-cannabis customers in the hospitality business, such as hotels, under the business name Mile High Protection Services (“Mile High”). The drop in wholesale prices in Colorado has negatively impacted security services in Colorado, as grow facilities and retailers seek cheaper alternatives or curtail services. The company acquired Mile High in order to expand its Colorado security business into the non-cannabis space, as the company believe that market provides an opportunity for growth. General Cannabis has opened an IPG office in California, which recently legalized recreational cannabis in addition to previously legal medical marijuana.

In states that have recently legalized cannabis, whether medical, recreational or both, license applications require a security plan and, if approved, implementation of that security plan. Accordingly, General Cannabis is assessing the opportunity to expand its security consulting business to assist companies with their application process and the subsequent implementation of compliant security services.

Marketing Consulting and Apparel (“Marketing Segment”)

Chiefton Design provides design, branding and marketing strategy consulting services to the cannabis industry. The company assist clients in developing a comprehensive marketing strategy, as well as designing and sourcing client-specific apparel and products. The company now have the capacity of a full service marketing agency. Chiefton Design also supports its other segments with marketing designs and apparel.

Chiefton’s apparel business, Chiefton Supply, strives to create innovative, unique t-shirts, hats, hoodies and accessories. The company's apparel is sold through its on-line shop, cannabis retailers, and specialty t-shirt and gift shops. In August 2017, the company added a separate managing director to focus solely on Chiefton Supply. General Cannabis is planning a winter line for the 2017 holiday season and a spring / summer line for 2018.

Operations Consulting and Products (“Operations Segment”)

Through Next Big Crop (“NBC”), the company deliver comprehensive consulting services to the cannabis industry that include obtaining licenses, compliance, cultivation, retail operations, logistical support, facility design and construction, and expansion of existing operations. The company's business plan for NBC correlates to future growth of the regulated cannabis market in the United States.

NBC oversees its wholesale equipment and supply business, operated under the name “GC Supply,” which provides turnkey sourcing and stocking services to cultivation, retail and infused products manufacturing facilities. The company's products include infrastructure, equipment, consumables and compliance packaging.

Finance and Real Estate (“Finance Segment”)

Real Estate Leasing

The company own a cultivation property in a suburb of Pueblo, Colorado, consisting of approximately three acres of land, which currently includes a 5,000 square foot steel building and a parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022.

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

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

In October 2014, the company purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as “The Greenhouse”. The building is a 16,056 square foot facility, which the company use as its corporate headquarters.

The Greenhouse has approximately 10,000 square feet of existing office space and 5,000 square feet on its ground floor that is dedicated to a consumer banking design. The company continue to assess the opportunity to lease shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients would be able to lease office, meeting, lecture, educational and networking space, and individual workstations. The company expect to continue the renovation of The Greenhouse in 2017.

The company plan to continue to acquire commercial real estate and lease office space to participants in the cannabis industry. These participants may include media, internet, packaging, lighting, cultivation supplies and financial services-related companies. 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.

Industry Finance

The company's industry finance strategy includes evaluating opportunities to make direct term loans or to provide revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products. These loans would generally be secured to the maximum extent permitted by law. The company believe there is a significant demand for this type of financing. General Cannabis is assessing other finance services including customized finance, capital formation and banking, for participants in the cannabis industry.

DB Arizona

DB Arizona produces and distributes cannabis-infused elixirs and edible products in Arizona. They previously were a licensee with a single national cannabis-infused product company, which also had significant control of operations. The relationship was terminated in September 2017. DB Arizona is currently negotiating with several new cannabis-infused product companies to become their producer and distributor of products for the medical cannabis market in Arizona. If successful, the company believe working with additional brands would allow DB Arizona to better control costs and potentially lead to increased revenues and operating cash flows. The company believe the physical plant can be best utilized by contract manufacturing and distributing for multiple brands rather than a single partner. During this transition phase the company anticipate investing additional funds for working capital.


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