The U.S. cannabis industry could be worth $35 billion by 2020, according to GreenWave Advisors, if the federal government ended prohibition. In a more conservative model, the analyst believes that the market could still exceed $20 billion, with 12 states and Washington DC legalizing adult-use cannabis and 37 states legalizing medical marijuana. The rapid growth and scale comes from a combination of state programs and home-grow legalization initiatives.
These massive growth rates have attracted a number of private and public companies to the space, some of which materialized overnight via reverse-mergers and compete in everything from broad consulting services to commercial grow systems. Unfortunately, many of these companies are pre-revenue with little in the way of business operations, while their financials aren’t always transparent in terms of their OTC or SEC filings.
In this article, we’ll take a look at Cabinet Grow Inc. (OTCQB: CBNT), which went public through a traditional S-1 process, generates tangible revenue by providing home-growing equipment, and has massive potential with its new commercial growing and media business segments.
Pick & Shovel Approach
Cabinet Grow was conceptualized by Sam May back in 2008 after struggling to grow personal-use medical marijuana in California. While collectives had become commonplace, there were no resources for home growers looking to grow their own medical marijuana in an effort to avoid the costs associated with buying or traveling to collectives on a regular basis.
In order to address these problems, Sam May formed Cabinet Grow in 2010 to create home growing systems that automate the process of growing marijuana as much as possible. The company also sought to fill the information gap that existed – and still exists to a large extent – within the industry when it comes to cannabis strains, growing techniques, and developing a basic understanding of what people are putting into their bodies before doing so.
Exclusive Interview: CannabisFN Speaks with CEO Sam May
Many companies have focused on developing commercial growing systems, such as GrowBLOX Sciences Inc. (OTCQB: GBLX), Abattis Bioceuticals Corp’s (OTCQX: ATTBF) Biocube Green Grow Systems, and Two Rivers Water and Farming Company’s (OTCQB: TURV) GrowCo, but no public companies have focused on the consumer side of the market. By targeting this underserved group, the company provides a unique opportunity for investors to gain exposure to the grassroots customers that form the industry, with Colorado, Washington, and many other states having legalized home growing.
The company went public through an S-1 rather than a reverse merger, which forced management to work with the SEC, FINRA, and various retail investment groups to explain the risks involved and maintain the utmost transparency for investors. Since going public, the company has grown revenues from zero to over $600,000 in FY2014, while reducing its operating cash burn to less than $100,000 during the quarter ended June 30, 2015.
Cabinet Grow has leveraged its knowledge and experience educating customers over the years to form a new division focusing on media opportunities. Known as Syrum, the wholly-owned subsidiary will provide pure and simple branding and marketing campaigns based on tested and proven methods carried out by a team of experienced professionals. These efforts are amplified through partnerships with publishers and advertisers to capture data and monetize.
“This was a great next step in monetizing the market opportunity created through this media branch to align strategic partnerships with publishers and advertisers,” said Sam May, speaking of its partnership with CannabisFN at the 2nd Annual Cannabis World Congress and Business Expo in Los Angeles. “Earlier this month, we completed our initial video for an international LED company and we look forward to growing our relationship with them.”
The platform also enables the company to lower its own customer acquisition costs by cultivating an in-house audience, rather than purchasing outside advertising. Since cannabis remains a Schedule I Controlled Substance, many companies in the space find it difficult to advertise their products and services on popular media platforms and must instead use cannabis-specific platforms like MassRoots Inc. (OTCQB: MSRT) or sites like HighTimes.
These dynamics could ultimately help increase and diversify its revenue streams over the coming quarters as it continues to build up its presence within the industry.
Cabinet Grow may be relatively established within the industry already, but the management team has big plans to grow over the coming quarters.
On the manufacturing side, the company is releasing a new sensor system and mobile app in Q4 2015 that is designed to let home growers improve their operations. The mobile app enables customers to view, adjust, record, and share their gardening experience from the convenience of their phone. Meanwhile, the proprietary hardware controls grow lighting, monitors environmental conditions, and sends alerts on triggered events.
In addition, the company plans on releasing commercial growing solutions designed to take its established home growing operations to small businesses. Cannabis growing operations will be able to leverage the technology to avoid spending $10-20 million on an entire setup and instead start small and scale up their operations over time, as they attract customers. The move could help dramatically expand the company’s customer base and revenue over time.
Cabinet Grow represents a compelling opportunity within the burgeoning cannabis industry. After going public through a traditional S-1 process, the company has built up a sizable revenue base by targeting home growers. Management’s plans to move into the commercial growing space and introduce new consumer products could unlock further value in the stock over the coming quarters as it moves these key projects forward.
As a result, investors in the cannabis industry, as well as indoor growing companies, like Urban Hydroponics Inc. (OTCQB: URHY), for example, may want to take a closer look at Cabinet Grow. It is an expanding company with real products, revenues, and the potential for growth in multiple verticals.
For more information, visit the company’s website at www.cabinetgrow.com.
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 will increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity- based compensation in the companies it writes about, or a combination of the two. For full disclosure please visit: http://www.cannabisfn.com/legal-disclaimer/.