New legal markets came on the scene in 2018, further bolstering the potential of the North American cannabis sector. As regulations in Canada and the USA continue evolve, multistate operator (MSO) companies with capital in hand, expertise, and crucial infrastructure will be the first to cash in on the pot bonanza.
Our research and due diligence has led us to highlight the following company: CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP), a junior cannabis company, with a knack for securing prime cannabis real estate for producing both THC and CBD products.
Newly legalized markets are sprouting up across North America to the benefit of the cannabis sector. With each new jurisdiction comes its own set of unique hurdles and regulations to steer through, requiring a special type of expertise for new growers and brands to succeed.
The result for the market has been the rise of the multistate operators (MSOs). Companies undeterred by learning the legalese of each new state, and getting in to secure cultivation real estate before the herd arrives.
One such MSO is CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP), which has successfully planted itself in California, Nevada, and Washington, with deals in place that could lead to an even wider footprint.
The company has secured an early advantage over much of its competition, especially in Nevada, where high tourism numbers drive cannabis demand beyond what growers can supply.
In the first full year of legal sales, Nevada’s cannabis industry far exceeded expectations. Dispensaries sold nearly $425 million in recreational cannabis products, and earned the state nearly $70 million in tax revenue.
With 1,350 acres under pivot in Nevada, CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP) is set to become the only major grower of both THC and CBD products in the state. So far they’ve completed Phase 1 for 80 acres of cultivation of medicinal and recreational cannabis. Across California, Washington, and Nevada, the company has hundreds of thousands of square feet of growing space planned and/or under construction.
ENGAGING MULTIPLE MARKETS — Earnings Projected for BIG GAINS
Even though the entire country of Canada has legalized, and California has completed its first year of legalization, the cannabis market’s true potential is still only beginning to take shape. At the opening of 2019, the 33 US states have legalized medical marijuana, and 10 have legalized it recreationally.
With access in California, Washington, and Nevada already, we have focused our attention on CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP). Given its junior market cap, we see the company as an MSO with plenty of growth potential left to look forward to.
The company straddles multiple states, and is developing the ONLY major outdoor farm in Nevada for the purpose of extraction. With this massive outdoor growing space, CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP) should be capable of growing over 1.8 million square feet of space, while also operating a greenhouse to address the flower market.
When cannabis was legalized in Washington State, where CROP already has two greenhouse projects, total sales have grown exponentially: $31 million in 2015, $323 million in 2016, and $696 million in 2017. Consumer purchases in 2018 hit $2.58 billion, driving up state revenue by an additional $709.6 million.
In California, where CROP is developing its Humboldt Farms operation, the state had an estimated $1.5 billion in sales in 2015, $2.7 billion in 2016, and is forecast to have hit approximately $5.3 billion in 2017-18. CROP has also worked its way into the retail California cannabis retail space, through the acquisition of its Emerald Heights retail chain, with locations in San Bernardino and West Hollywood.
CROP has also signed a toll processing agreement with a California manufacturing company to produce oils, crumbles, and distillates for sale in the California market. The raw material will be finished cannabis from CROP’s Humboldt County farm where the cannabis is awaiting sale, being trimmed or drying.
As of late 2018, the farm was flowering 10,000 sq ft of canopy for a late stage harvest and is working on the permitting for its 2019 expansion, including a proposed 30,000 sq ft automated greenhouse facility.
In addition, a distribution agreement is now in place for the cannabis which will be sold under the company’s Hempire brand for estimated gross revenue of approximately $1,600 per pound of flower. The farm has allocated 750lbs of inventory to be sold under the Hempire brand.
The distributor has offices in Oakland and Orange County. Their distribution network consists of approximately 350 licensed cannabis stores across California.
GROWING BEYOND 2019 — The Year Cannabis Truly Breaks Out
Some of the more important takeaways in 2018 pointed towards a future date for federal legalization. The departure of former Attorney General Jeff Sessions, who was unabashedly anti-cannabis, later paved the way for President Donald Trump to sign a historic Farm Bill in December, effectively legalizing hemp.
It’s progress like that seen in 2018 that thrusts the market into anticipation of what could still be on the way. While Canada’s legalization instantly gave access to a market of nearly 37 million people, California’s legalization alone at the beginning of the year brought in a population of over 39 million.
There are many other potential target markets ripe for the picking that are not small—Medical marijuana legal Florida has 21 million, newly legalized Michigan brings in 10 million, Washington has 7.8 million, Massachusetts has 6.86 million (greater New England is 14.4 million), and cannabis pioneering Colorado has 5.5 million.
CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP) brings a unique strategy to the cannabis sector, by merging its cannabis cultivation and branding expertise, with real estate acumen. CROP is building state-of-the-art infrastructure, marketing popular brands, and developing new cannabis-infused products.
Cannabis MSOs are either large enough to muscle their way into each major market as they arise, or wise enough to get in at the beginning and setup operations before the crowd. While many of our comparables are the former, we’ve chosen to focus on CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP), which falls into the latter category.
FEATURE COMPANY: FOR COMPARISON
CROP Infrastructure Corporation
Market Cap: $34.141 million
Crop Infrastructure Corp. invests in, constructs, owns, operates, and leases greenhouse facilities in California, Nevada, and Washington. The company was incorporated in 2011 and is headquartered in Vancouver, Canada.
Cannabis MSO Comparables: CROP as a Potentially Undervalued MSO
The following stocks represent some of the leading players in the cannabis sector with operations spanning multiple markets. All have made major advancements including breaking into new markets, and earning steady incomes.
Aurora Cannabis Inc.
Market Cap: $6.765 billion
Despite not yet officially having any assets in the USA, news of the US Farm Bill was significant for Aurora Cannabis. The massive grower has been aggressively expanding its international footprint, including purchasing the largest organic hemp company in Europe, back in September 2018, and Mexico’s Farmacias Magistrales which distributes to 80,000 retailers and 500 pharmacies and hospitals in Mexico. In a late 2018 earnings call, Chief Corporate Officer Cam Battley pointed at his company’s growing large presence in the CBD space, signaling Aurora is embarking on a CBD-focused strategy that covers the entire value chain from supply through genetics, research and clinical trials to produce and distribute products to multiple international markets.
Canopy Growth Corporation
Market Cap: $14.558 billion
Canopy Growth is a leader in the cannabis space, with considerable sway, and known for its ability to acquire assets and build massive greenhouses. However, up until the US Farm Bill’s announcement, the company has been cautious regarding entering the US market. Immediately after the Bill’s passage, CEO Bruce Linton confidently said that the Farm Bill is the “first step to active” involvement in the US for his company. Canopy recently bought Colorado-based hemp researcher, Ebbu, which specializes in the purification and study of cannabinoids for product development. Backed by a massive deal with partners Constellation Brands, many eyes are on Canopy to develop new cannabinoid-infused beverages in the near future, upon the legalization of THC and/or CBD food products.
Green Growth Brands Ltd.
Market Cap: $872.757 million
After making a bold statement with its hostile takeover bid of Aphria, newcomer Green Growth Brands didn’t stop its acquisition spree. Led by a team of retail experts, GGB has amassed a portfolio of dispensaries, including its flagship The Source stores, and a handful of cultivation licenses/sites. Through relationships formed by CEO Peter Horvath’s experience to-date, the company recently announced a deal to sell its Seventh Sense CBD-infused products in DSW locations (a company in Horvath’s extensive history). The company has a footprint in multiple states, including Nevada and Massachusetts.
Acreage Holdings, Inc.
Market Cap: $1.213 billion
Operating 15 cultivation facilities and 78 dispensaries in 19 states, Acreage Holdings has the largest footprints of all MSOs operating in the US. Among the company’s brain trust is former Republican House Speaker, John Boehner, who announced his joining of the board of directors back in April 2018. Unlike Jeff Sessions, the former anti-cannabis advocate Boehner officially has admitted that his views on cannabis have evolved. Boehner isn’t the only prominent member of the board, as later in October, former Prime Minister of Canada, Brian Mulroney, also joined the team. Acreage Holdings also has the former CEO of Time Warner Telecom, and the former CFO of IBM among its upper ranks. Having so many heavyweights on board likely has something to do with the company’s successful entry into so many North American markets.
NEVADA RISING — Setting Up Shop in the Silver State
Launching into 2019, CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP) announced that its 49%-owned subsidiary Elite Ventures has already graded and cleared its Nevada THC farm, with construction on its security wall soon to follow.
Set to be completed in time for 2019 outdoor planting, which is forecast to yield in excess of 80,000 pounds. Already chosen for the project are the strains Blueberry, 9lb Hammer, Gelato, Tiffany CBD, Insane OG, Blue dream, Durban Poison, and Purple Kush.
As well, CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP) is also working with lease financiers to build a 60,000 sq ft greenhouse facility on the property for the purpose of producing higher quality flower. The company is now accepting 2019 off take orders and supply agreement requests from processors, distributors and retail outlets.
Overall, the company has a 1,000-acre cannabis farm, and 2,115 acres of CBD farms, and extraction in Nevada.
On the outdoor cannabis operation, CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP), Phase 1 development is set to cover nearly 1.73 million sq ft of outdoor cannabis cultivation, and 60,000 sq ft of greenhouse on the 1,000-acre cannabis farm.
Phase 2 will be to triple the size and output of the farm with the addition of over 5.2 million sq ft, including an additional 120,000 sq ft of greenhouse. The project sits on 1,000 acres of unincorporated land 3.5 hours north of Las Vegas on Highway 95 where outdoor and greenhouse growing is permitted.
Michael Yorke, CEO of CROP, stated, “CROP will now bring our style of low-cost Cannabis cultivation to Nevada tenants, giving residents and visitors of Nevada a superior product at a lower price and giving processors access to better priced feedstock.”
Beyond mass cultivation, CROP is also involved with research and development within Nevada which could significantly advance the sector. Through its co-owned subsidiary Elite Ventures, a new 1,600 sq ft genetics, tissue culturing and micropropagation laboratory is near completion at the company’s Nevada Farms.
The objective of the team and the lab will be to provide 10,000,000 plant starts for the company’s 2,115 acres of CBD farms. By propagating in the lab, the company will save approximately $3.0 Million in seed and planting costs for the 2019 season.
The laboratory team’s objective, beyond saving on planting costs, is the mandate of developing proprietary genetics to maximize yield and provide the company a Global edge with specific attentions paid to the over 100 other photocannabinoids beginning with cannabinol (CBN) and cannabigerol (CBG).
CBD POTENTIAL — Mainstream Appeal Rising
Projections for the legal marijuana market are quite large in the years to come. Grand View Research pegs the legal marijuana market to reach $146.4 billion by the end of 2025, at a growth rate of 34.6% CAGR. Grand View points at the very high demand from consumers and increasing legalization happening around the globe.
But it’s the potential for hemp-derived cannabidiol (CBD), a non-psychoactive cannabinoid that’s growing rapidly in popularity. In fact, the term “CBD gummies” reached No. 3 on Google’s most popular search terms at one point in 2018.
According to New Frontier Data, the hemp-derived CBD market is set to triple by 2022.
With the signing of the 2018 Farm Bill, industrial hemp has been restored to a legal status federally—allowing production for the first time since WWII.
New Frontier Data’s Hemp Business Journal estimated that, in leading all hemp product categories, the hemp-derived CBD market will grow from a $390 million market in 2018, to a $1.3 billion market by 2022. Even more optimistic are cannabis industry analysts, The Brightfield Group, who estimate the hemp-CBD market alone could reach $22-billion by 2022.
With the new US Farm Bill now including critical provisions on hemp, CROP already announced on October 23rd, a 3-year, 1,500,000 pound, CBD biomass supply agreement in the US worth $18-28 million USD per year—depending on CBD content. The company is now focusing on allocating 2019 CBD Isolate supply agreements both domestically and internationally.
CROP Infrastructure Corp.’s (OTC:CRXPF/CSE:CROP) CBD assets are not limited to the United States. Through a joint venture with XHemplar S.R.L., CROP co-owns an 87,120 sq ft CBD greenhouse facility in Italy.
Together, the joint venture is currently working with Italian agencies to import new and unique, high-CBD genetics to populate its upgraded facility—which are expected to command premium prices.
“Our unique, high CBD strains, will position CROP as a low-cost and high-quality pure CBD provider, both domestically in North America , and throughout the European market,” said CROP CEO Michael Yorke. “The joint venture’s CBD products will be branded under the XHemplar and CROP brands Tiffany CBD and Hempire Italia.”
CROP has also developed a portfolio of cannabis-infused assets including Canna Drink, a cannabis infused functional beverage line, US and Italian distribution rights to over 55 cannabis topical products and a portfolio of 16 Cannabis brands.
CROP INFRASTRUCTURE CORP. HIGHLIGHTS
Standout points for CRXPF/CROP.CN:
- Potentially undervalued multistate operator (MSO), operating in three major legalized markets: California, Nevada, and Washington
- Developing a 1,000-acre Nevada cannabis farm, with the potential to grow yields in excess of 80,000 pounds
- Significant CBD projects, including 1,865 acres of CBD farms, extraction in Nevada, as well as an 87,120 sq ft joint venture CBD greenhouse facility in Italy
- Building out a 1,600 sq ft genetics, tissue culturing and micropropagation laboratory at the company’s Nevada Farms, with the objective of providing 10,000,000 plant starts for the company’s 2,115 acres of CBD farms
- CROP has also developed a portfolio of cannabis-infused assets including Canna Drink, a cannabis infused functional beverage line
- With 1,350 acres under pivot in Nevada, CROP is set to become Nevada’s only major outdoor grower of both THC and CBD products
If you want more information on CROP Infrastructure Corp.’s multistate business model or just to stay on top of the company’s advances, you can join their email list at https://cropcorp.com.
USA News Group
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