The U.S. cannabis industry could be worth $35 billion in 2020 if all 50 states legalized the drug and the federal government ended its prohibition, according to a report from GreenWave Advisors. Even if the federal government doesn’t end prohibition and the trajectory of legalization continues on its path, the industry could still reach $20 billion in size by the analyst’s estimate.
American Cannabis Company Inc. (OTC: AMMJ) provides the end-to-end solutions needed by aspiring and existing participants in the cannabis industry as legalization efforts continue to gain steam. Through its two subsidiaries, the company provides consulting services to help companies navigate the complex industry and a group purchasing organization to help businesses run smoothly and profitably.
Management’s goal is to provide a win-win-win value proposition for the industry by helping clients navigate the tricky regulatory and operational landscape, providing patients with great products and medicines, and generating value for shareholders by profitably growing its operations over time. Combined, these attributes could make for a compelling investment opportunity in the space.
Consulting, Management & Operations
American Cannabis Company helps clients generate a comprehensive strategy based on market need and growth opportunities by addressing everything from site selection and design to license procurement and facility build-outs. With the industry’s dynamic regulatory landscape and financial limitations, these services are invaluable to companies looking for a smooth entry into the industry.
Once its clients receive regulatory approval, the company provides ongoing yield analysis, workflow evaluations, and growth strategies to be responsive to changes in law, address consumer demand, and seize new opportunities. The firm also helps with equipment purchasing, recruiting, irrigation, and any other aspects of the growing process that could benefit from its management expertise.
Finally, the company’s Trade Winds division provides access to all of the operational supplies needed through its group purchasing organization. These products include The Cultivation Cube for highly efficient, self-contained growing operations, SoHum Living Soil for an organic growing medium, and automated irrigation systems to prevent overwatering and save on critical resource costs.
Profitable & Growing Operations
American Cannabis Company differentiates itself from many other cannabis companies with its profitable and growing operations. During the third quarter of 2014, the company reported revenue of $482,000, up from $20,605 a year ago, and net income of $75,238, compared to a year-ago loss of $(181). The firm also maintains a positive quick ratio with shareholders’ equity of $40,573.
In its latest 10-Q filing, the company reported growth in its client base and volume of operations as its business has matured. Consulting services represented about 64.8% of its total revenue, while products and equipment accounted for 35.2%. These dynamics suggest growth in its consulting client pipeline that could translate to increased business for its products and equipment in the future.
Deferred revenue of $184,000 suggests that the company’s backlog has been on the rise, while costs and staff additions show that it’s gearing up for ongoing growth. In the press release announcing the quarterly earnings, management indicated that it is strategically managing its assets to support revenue growth while maintaining maximum gross and operating margins to bolter profitability.
Management’s Stake in the Game
American Cannabis Company has an experienced management team with significant skin in the game. Chief Executive Officer Corey Hollister was co-owner of a Colorado-based medical marijuana center, providing him with invaluable insights into the industry. In addition to his experience in the cannabis industry, Mr. Hollister also managed advertising projects for major brands like Puma and DHL.
Chief Development Officer Ellis Smith has over 15 years of horticulture experience, eight years of owning/operating businesses, and two years of international business in Kyrgyzstan Central Asia. Chief Operating Officer Trend Woloveck and Chief Technology Officer Anthony Baroud round out the executive team with significant experience in operations, finance, technology, and business development.
It’s worth noting that these executives own significant stakes in the company and haven’t sold shares in any recent Form 4 filings with the SEC. Mr. Hollister and Mr. Smith both own 31.38% stakes, while Mr. Baroud owns 11.77% of the company, which amounts to 74.53% of the company. With a relatively small float, the stock could see quick upside if management’s successful in achieving its goals.
There are many different commercial-stage opportunities for investors in the newly legalized and rapidly growing cannabis industry, including Tweed Inc.’s (OTC: TWMJF) (TSX-V: TWD) Licensed Producer status under Canada’s MMPR program, Vaporin Inc.’s (OTC: VAPO) $1.4 million in revenue, and GW Pharmaceutical plc’s (NASDAQ: GWPH) play on the medical side of the industry.
American Cannabis Company provides an alternative play on the consulting side of the business, providing end-to-end solutions to bring cannabis operations from idea to commercialization. With profitable and growing operations, investors may want to take a second look at the company, particularly given management’s qualifications and skin in the game at an early stage.
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Disclaimer: Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may be compensated for its services in the form of cash-based compensation or equity securities in the companies it writes about, or a combination of the two. For full disclosure please visit: http://www.cannabisfn.com/legal-disclaimer/.