For those who have followed our picks recently, we have had some very good success picking stocks trading in Canada that are in the Cannabis realm without being growers themselves. In July we picked Isodiol International (LAGBF) (ISOL.CN) in our articles
Isodiol: 10x Undervalued Cannabis Stock Inks Deals With Canopy and
Isodiol: A Profitable Cannabis Company. ISOL has moved up nearly ten times since then, hitting a high of $2.14 in Canada from $0.23. In November we picked Global Cannabis Applications, or GCAC, (FUAPF) (APP.CN) in our article
A Cannabis and Blockchain Story. GCAC has more than doubled in a month and we think it has a lot more room to go, especially after what we have found out researching today's news.
GCAC announced that it has
partnered with a leading Israeli pharmaceutical company to provide medical cannabis data to blockchain. That company is called SciCann Therapeutics and its CEO Dr. Zohar Koren was a co-founder of Cannabics Pharmaceuticals (CNBX). What we found interesting is that a firm called ThreeD Capital (BWSOF) (IDK.CN) has made a
private equity investment in SciCann Therapeutics with a fair value of $100,000. ThreeD Capital recently invested in GCAC as well through private placements, and is up substantially on that investment so far. ThreeD Capital is only a small firm with a market cap of around $10 million, but it's led by Sheldon Inwentash, a famous Canadian multi-millionaire investor who specializes in small cap ventures. Clearly he is the one behind this relationship between GCAC and SciCann. It looks like he is trying to build a weed tech empire.
If you are reading our reports for the first time and have missed out on ISOL and the rest of the explosive weed industry, GCAC may be a second chance for you to score a big gain. Even though it has more than doubled since we first called it, it is still lagging ISOL and the rest of the weed players, many of which have more than quintupled this year. During the decade-long gold bull market we saw earlier this century, what made investors more money? Barrick Gold? Or Caterpillar? Here's a stock price comparison of ABX versus CAT since 2001 when gold began its decade-long bull run in case the point we are trying to make isn't clear:
ABX has decreased 12% since 2001 and CAT has increased 421% during that time. Even when gold was hot, ABX and CAT performed about the same then really split off once gold pulled back from $1,800 an ounce. This doesn't even consider the dividend yield. CAT's yield is 2.3% and ABX is only 0.9%. Long-term CAT investors have made in excess of five times their money (a $3 dividend on a 2001 CAT cost basis of $30 is a 10% annual yield) and ABX investors have struggled to get a return that beats a t-bill.
Why is this? Other than poor management decisions at ABX, gold is a commodity product and there are a lot of companies out there trying to look for it or dig it out of the ground. However, there are only a handful of companies out there that make the equipment to dig mineral resources out of the ground. They have been the ones to benefit the most from any gold rush. Cannabis is a commodity product and there are many growers out there. But there are only a handful of companies looking to service the industry in other ways. One could argue that cannabis isn't traded like gold is and the weed companies would not be susceptible to dips in its price. But how long will that last? Cannabis is an agricultural product just like wheat, corn or beef so it could eventually trade on futures markets.
GCAC doesn't touch the leaf but is a Caterpillar to the weed industry. It describes itself as the "
Only technology driven cannabis tech company to offer an end-to-end data aggregation and user delivery solution". What does all that mean? More on that later, or look at the investor presentation from where that quote came from.
Whether weed stocks are trading at their speculative peak like gold in 2010 or still have a lot more to go like gold did in 2005, we don't know. But odds are that companies that find unique ways to service the cannabis industry and can successfully execute while trading at stock prices reflective of being undiscovered, overlooked or misunderstood by the market, they will outperform the growers at this point in time until the market catches on and stretches their valuations in a similar way. This is another reason why we picked Isodiol. It is a profitable company that found a unique way to service the cannabis market and would be a big winner in the event of legalization for recreational use.
GCAC is on whole other level when it comes to OTC speculative risk compared to Isodiol. It doesn't have any revenues yet and a minimal balance sheet, although the recent private placements that included strategic investment by Sheldon Inwentash and his investment firm gave it some cash. When you're the CEO of a company with no revenue and a minimal balance sheet, all you have to bring to the table is your word. And so far GCAC's CEO Bradley Moore has been a man of his word. What GCAC has is a concept that is turning into a reality.
GCAC's CEO has made promises to get things rolling in Q4 and has so far delivered. In November, the company updated its website and created a
new investor presentation. The bigger accomplishment came from the
listing of the CannaLife app on the Google Play store. The app has been listed since November 15 and has gotten a total of 100-500 installs. This isn't a lot but GCAC has an actionable plan to acquire a lot of users quickly. The CannaLife app was made by GCAC's subsidiary, Foro Technologies. Foro Technologies is also the developer of
Foro Student Marketplace, an app where university students can buy and sell goods with fellow students on campus. The app has 50,000-100,000 installs and a reasonably good 4.2 rating. About one-quarter of young people are cannabis users, so GCAC could use Foro as leverage to quickly grow CannaLife's user base to about 25,000. Foro is also available in the Apple Store, and CannaLife recently became available for iOS. In the investor presentation, GCAC claims that it has over 300,000 subscribers who fit the Citizen Green target demographic.
Having scrolled through CannaLife ourselves, we found one user with nearly 4,000 followers. So there is a lot more users than what is being reported on the Google Play store.
FUAPF currently trades at a market cap of $16 million and around $20 million CAD under its Canadian symbol APP. GCAC
had a feature in the CannaInvestor Magazine for October which goes into great detail of its business plan as well as gives it legitimacy having been featured in a cannabis industry magazine. The CannaInvestor article starts off with the company mission statement:
"
Global Cannabis Applications Corp. is a global leader in designing, developing, marketing, and acquiring innovative data technologies for the cannabis industry. GCAC's Citizen Green technologies include mobile applications, blockchain infrastructure and artificial Intelligence. These technologies facilitate the proliferation of digital conversations by like-minded people in medical cannabis. Managed by digital and cannabis industry experts, GCAC is focused on viral global expansion by providing the best digital experience in the cannabis market."
The article then goes on to talk about the company's Citizen Green platform, which GCAC proposes will be the only one in the world the can offer an end-to-end data aggregation and user delivery system for the cannabis industry. It can be broken down into four parts:
This platform starts with the newly released CannaLife, a social media app that users can use to rate their experiences with various forms of medical cannabis. It seeks to develop a community environment which might not be possible on more mainstream social media platforms where cannabis is considered controversial.
Prescriptii also allows for the rating of cannabis products but sounds more like a Yelp type of business rather than an actual community like CannaLife. GCAC is looking to roll out Prescriptii in North America before the end of the year and internationally shortly after that. It looks like both CannaLife and Prescriptii will be used to aggregate user feedback data so members can gain access to this global knowledge bank and make informed purchasing decisions.
The company looks to be using AI algorithms to ensure that the data entered meets a certain standard and falls within regulatory guidelines.
The information gathered will be put into blockchain to ensure the safety and integrity of this sensitive medical data. The most exciting part from a stock promotion perspective might be the initial coin offering, or ICO. The company may be able to raise substantial amount of cash from this and we would expect this ICO to be popular because it promotes a niche cause in "normalizing" a marijuana industry that is just on the cusp of gaining mainstream acceptance and global legality, but prior to that was very fragmented and seedy. A large problem with medical marijuana has been its inconsistency with quality and effectiveness. The Citizen Green platform looks like it could be a way to solve that issue. The ICO will also fund a token loyalty program on the app. Users will get tokens for participating on the Citizen Green platform which can be redeemed for products. This ensures continued participation by members and the addition of timely information to the data bank.
This all sounds fine and dandy, but what would stop a larger company with more resources from doing the exact same and surpassing GCAC's Citizen Green? The company outlined what it believes is its market advantages in the CannaInvestor feature.
Basically GCAC believes that it has such a head start with the data, it will be difficult for another company to catch up. Even if the competitor has a more functional app. Think of it in terms of this example. Even if a company came out with vastly superior phones to iPhone, the iOS ecosystem is what drives brand loyalty to Apple. If Citizen Green is the storage of the best information out there, who cares about the functionality of the app, it's the data that people care more about.
The promises of CEO Bradley Moore haven't stopped with the CannaInvestor feature or individual talks with investors. The investor presentation has him taking it up a notch with key milestones and revenue projections over the next 18 months.
In only six months, GCAC is forecasting 650,000 users on Citizen Green apps. By the end of 2018, GCAC is forecasting a $1 million per month revenue run rate, increasing to $1.4 million per month by May 2019 and quickly growing. If GCAC can achieve this goal, revenue will be around $6 million for 2018 and approaching $20 million in 2019. With these types of numbers, it's clear that the company would be valued at much higher than an $8 million market cap. We are assuming these numbers are in Canadian dollars since that is GCAC's home base.
Buying in now assumes the risk of requiring GCAC's successful execution in order to benefit from the extremely high upside. GCAC is assuming a $1.00 ARPU per month for an app that is free to the user. GCAC's presentation mentioned "revenue and user growth achievable from numerous sources" and that there will be multiple revenue/fee streams from dispensaries, pharmacies and online retailers. GCAC did not make the revenue drivers very clear beyond this and we suggest that the company should do so in future investor communications. However, we can take a reasonable guess at a few of them:
1. Data generated on Citizen Green can be accessed by the dispensaries through a fee structure, possibly by location, so they can better manage their inventory.
2. Online retailers pay for advertising/listing on Citizen Green in relevant locations. Like a Yellow Pages for medical marijuana, the user turns to the appropriate "page" for their ailment and the retailers who sell the strain meant for that ailment show up.
3. Collecting a fee from the digital rewards token program.
4. Drug companies pay for the anecdotal medical data generated on Citizen Green for research and development purposes.
5. Generate enough value on Citizen Green that a large player in the medical marijuana industry buys the company out. This would be a long term scenario after several years of operations so don't expect a buyout overnight.
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Disclosure: We are long FUAPF
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Microcap Millionaires Free Video: Cheap Gold Miner Set to Soar in Fall 2017
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