AmeriCann, Inc. (OTCMKTS: ACAN)

As the legalization of cannabis continues to mature and gain momentum (not just in the U.S., but worldwide) the industry is entering a dynamic new phase of growth and development. As more states adopt legal cannabis a picture of what the industry is going to look like in five years is emerging.

The following trends are now clear:

  • Large-scale energy efficient greenhouse cultivation combined with high tech processing pharmaceutical grade laboratories.
  • More plant science and R & D.
  • Nutraceutical grade cannabis products with multiple smokeless options for the expanding first cannabis user market. Far fewer but much larger companies beginning to emerge with plans to dominate the industry.
  • Home, office and assisted living facility delivery of cannabis products will expand the user base and replace the need for many storefront locations.
  • AmeriCann,Inc. (ACAN OTCQX) is a Colorado based publicly traded company that has emerged as the national leader in the design and development of large-scale cannabis projects that will benefit from all these trends.

Informed investors seeking an interesting name in the cannabis stock space for long-term appreciation may want to take a serious look at ACAN. A proven strategy to build wealth is to invest in companies that are involved in super fast-growing industries that provide essential pieces to the industry development process.

This is where ACAN fits in as a company that can achieve tremendous growth in an industry expected to eclipse $20 billion in the year 2020, with additional market growth expected to surpass $45 billion annually (30% larger than the U.S. wine market) within 10 years. This number only represents the cultivation and sales side of the equation. Tens of billions more will be generated with supporting equipment, products and infrastructure.

ACAN management has been aware of this multiple billion dollar overlooked segment of the cannabis industry since 2013, and has been preparing to fully capitalize on this opportunity. In 2014 the company assembled a high profile team, including advisory board) that has developed its Cannopy system for advanced cultivation and processing.

The company does not cultivate, process or distribute cannabis, but provides the specialty facilities and expertise in partnership with local licensees to serve patients in their communities. Company revenue will be derived from the base lease plus an attractive long-term override on revenue created from the plant. Their business model projects a 18-month payback on the CAPEX of one of their facilities and meaningful positive cash flow by early 2018.

More information about the Company is available at: http://americann.co

The company has assembled a portfolio of land suitable for cannabis use and is preparing for development of over 1,000,000 square feet of new cannabis developments. ACAN has to-date invested over $1 million in each of 4 cannabis developments in three states (Colorado, Massachusetts and Illinois) and has plans for aggressive expansion into other states.

As legalized medical cannabis continues to sweep across our nation, state-by-state, the infrastructure required to meet this demand is the area investors should focus on for the exciting possible returns with the lowest risk.

This $45 billion number only represents the cultivation and sales side of the equation. Tens of billions more will be generated with supporting equipment, products and infrastructure. As cannabis markets continue to open and expand, the larger players in cultivation will have the inherent ability to take advantage of mass-market production with lower costs to produce and higher profit margins due to economies of scale. Smaller competitors will likely need to combine their efforts for survival.

ACAN designs and is preparing to develop a whole new generation of advanced, large-scale energy efficient greenhouse medical cannabis facilities to produce the best possible medical cannabis products—in the most efficient pharmaceutical grade laboratories with sustainable environmentally friendly practices.

Investment Highlights

  • Strong management team with a proven track record and over $5 million in personal funds invested in the company. Early entrant into cannabis in Colorado-“the Silicon Valley of the cannabis business” in 2013-have investments of $1 million+ in three states.
  • Exciting business model that provides extremely attractive returns on CAPEX and value creation with revenue and meaningful projected cash flow in early 2018.
  • National leader in the strong trend toward large-scale, energy efficient greenhouse cultivation. Modest but solid balance sheet with attractive assets and positive cash position.
  • Expertise and technology that AmeriCann has developed is scalable and can be replicated in other states with the same design and team in place.
  • Early mover advantage into and strong footprint in the robust Massachusetts cannabis market.

Marijuana Industry Growth

The legal marijuana industry is emerging in the United States (and globally) at a rapid and accelerating pace. Cannabis prohibitionists are beaten and on the run. A whole new high tech industry is being created. And it will employ thousands and make the world a better place.

Not only have 28 states now adopted legalized cannabis in some form, but 25 nations have also signed up for cannabis, most all within the last two years. GreenWave Advisors expects the retail market to reach $30 billion by 2021, which represents a 5-year CAGR of 35%, and $45 billion annually by 2025.

While the nationwide cannabis industry is waiting for a statement from the Trump administration regarding their policy on cannabis, the industry is proceeding ahead at a fast pace. There is widespread consensus while uncertainty persists about the nature, extent, and timing of universal legalization, change is coming, and investment opportunities in the burgeoning marijuana industry are and will be substantial.

Based on their first hand experience in their own state of Colorado, ACAN management believed Massachusetts would provide the same growth trajectory and in 2014 optioned and designed, and received entitlements on the ideally located 52-acre parcel in Freetown, Massachusetts for one million square feet of cannabis business park. ACAN completed the purchase of the 52-acre site from Boston Beer (SAM-NYSE) for $3,550,000 cash in September 2016.

With the continued assent of the cannabis industry, and especially the voter approval of full adult use recreational in November 2016, this aggressive investment in Massachusetts (in both time and money) has proven to be extremely wise and result in a classic case of “right place, right time”.

If investors were to look at Massachusetts as a case study, it demonstrates ACAN positioned itself as a leader in cultivation and processing there. In Massachusetts alone, cannabis related revenues are now forecasted at over $1 billion annually by 2021 to a continuously larger consumer base. The Massachusetts market will be extremely robust for the next several years and ACAN has a very strong position.

Massachusetts Market

The MMCC project represents a significant development that is projected to create revenue and positive cash flow to AmeriCann by 2017 with dramatic increases in future years as the project expands. The MMCC project has been designed to become the largest and most technologically and environmentally advanced cannabis cultivation facility in the nation. AmeriCann believes it will set the standard for quality product and energy efficiency in future cannabis infrastructure worldwide.

ACAN’s MMCC flagship project will set the standard for the cannabis industry of the future-blending biotech and agritech to create the most consistent, highest quality cannabis products in the industry, with the least environmental impact possible. Upon build out the plant will employ an estimated 300 workers with green, good paying jobs.

In Massachusetts, ACAN recently engaged Campanelli Construction, one of the most respected commercial developers and builders in the northeast, to build its Massachusetts Medical Cannabis Center (MMCC), on 52-acres in a business park 47 miles from Boston, Massachusetts. (Campanelli has committed to moving into other states with ACAN to replicate their advanced MMCC model.)

ACAN is now finalizing working drawings ready for bidding and preparing for a groundbreaking for the first phase of the development, a 30,000 square foot greenhouse cultivation center, infused processing laboratory, and cannabis research and development center capable of producing $30,000,000 in annual revenue to the licensee when completed and operating.

MASSACHUSETTS MEDICAL CANNABIS CENTER (MMCC): RENDERING

ACAN Facility

The first phase alone is projected to provide a very attractive return to AmeriCann from lease payments and more importantly from a percent of revenue from the facilities.

Based on this time schedule it is not unreasonable to believe that ACAN could experience its first meaningful revenue and earnings in early 2018. As the MMCC project is expanded, the cash flow to the company is expected to increase proportionally.

Plans are to break ground on the first phase in the first quarter of 2017 with first cannabis sales in early 2018. The company is highly confident it can arrange the financing needed to complete the first phase and will add additional greenhouses as the robust Massachusetts cannabis market expands.

Thus, ACAN, with a large footprint ready to build, has the opportunity to provide the cultivation facilities at MMCC that will produce a large percent the cannabis that will be required for fast developing Massachusetts market over the next two to three years.

AmeriCann And The $45 Billion Market

While most investors believe that the growth in the cannabis market will continue into the next decade, many are ignoring one of the most critical questions of how all of this cannabis is going to be cultivated. Having the real estate and facilities to grow premium cannabis is the most important part of the process.

If the market is going to grow into that $45 billion revenue estimation, an infrastructure of immense proportion-- with estimated costs of $27 billion-- needs to be put in place to meet the cultivation demand.

ACAN is going to be the early winner in this market, as they have already established their large footprint in Massachusetts, perhaps the most attractive market for demand of new cultivation in the industry, and have land in two other states with eyes on several more.

AmeriCann is one of only a very few cannabis companies in the nation that has positioned itself to benefit from the coming insatiable demand for infrastructure in the industry and the decision appears to have been a very good one that will likely provide exceptional returns for shareholders for years to come.

ACAN is focused on purchasing land and getting it designed and entitled for developing the complex and expensive high tech real estate properties that will be needed to support and contribute to the cultivation, processing and distribution of marijuana products.

As legalized medical cannabis continues to sweep across our nation, state-by-state, the infrastructure required to meet this demand is the area investors should focus on for the exciting possible returns with the lowest risk.

The massive infrastructure needs will be spread across the nation over the next two years, with 28 states (and surprisingly 25 other countries) now allowing legalized medical or recreational cannabis.

And a slate of additional states that are working through legislation efforts to allow both medical and recreational use, adding to the eight states already approved for recreational use. Bolstered by voter sentiment, with some polls showing that 89% of U.S. voters support medical marijuana and roughly 54% supporting the legalization for adult use, it becomes more obvious that ACAN is in a very enviable position.

Strong Management Team and Advisory Board

The ACAN management team is solid, with extensive experience in developing both public and private companies, from inside and outside of the cannabis industry. President and CEO Tim Keogh has experience in real estate development, having led marina projects in Florida and has specific cannabis experience in Massachusetts, having been the managing partner of a group that was awarded one of the coveted Massachusetts medical licenses. He has become a respected and well-known leader in the national cannabis scene.

Ben Barton, a successful venture capitalist, and Founder and CFO of ACAN, brings extensive experience from his co-founding of Synergy Resources (NYSE: SYRG), an oil and gas land company that has successfully achieved a market valuation of over $1 billion and is traded on the NYSE. SYRG investors realized a 10x return. Mr. Barton has directly invested over $5 million into the building of AmeriCann.

The ACAN highly respectable advisory board (three Ph.D.’s and one MD) includes horticulture and medical advisers, a cannabis genetics and breeding specialist, an extraction and infused product specialist, and a licensing and compliance adviser to compliment the strong business side of the team. This management and advisory team is in place and was largely responsible for the CANNOPY cultivation system ACAN is using for their MMCC project.

The management team is environmentally aware and ACAN has become the only public cannabis company that has achieved the coveted B Corp certification-given to those companies that demonstrate corporate and social responsibility and environmental excellence.

ACAN’s New SOLANNA line of advanced cannabis infused products

As infused cannabis products have become an integral part of the emerging cannabis industry AmeriCann has created “SOLANNA”, a new proprietary comprehensive line of nutraceutical-grade cannabis infused products. The line of products will be put into final development at their MMCC first phase R & D facility. AmeriCann will license the intellectual property and formulas for SOLANNA to tenants of their facilities and will focus on providing a large selection of healthier smokeless alternatives that include:

  • Capsules,
  • Topical lotions and balms,
  • Sublingual tinctures,
  • Oral dissolving film,
  • Trans-dermal applications
  • Oil cartridges for vaporizing.

These proprietary ACAN SOLANNA products are designed for pain, calm, and sleep.

The Company plans to expand the SOLANNA product line to include edible products, health drinks, and branded concentrates. The products are designed to allow consumers to manage dosage through micro dosing and to improve efficacy by incorporating blends of other plants, essential oils and other supplements that enhance and compliment the benefits of cannabis.

More new and discriminating cannabis consumers seek quality, consistency and value for all products. The need for a brand that instills confidence and reliability for consumers is even more important for the emerging cannabis industry. As more patients and consumers are introduced to cannabis for the first time, the availability of a trusted brand is particularly important.

The plan is to make SOLANNA an iconic national brand of premium cannabis based products produced in each state where ACAN has a cannabis facility. The SOLANNA line expands the value of the ACAN business model by creating a valuable line of superior infused products upon which they will likely have significant long-term revenue to ACAN from overrides.

Massachusetts Market Potential

The Massachusetts cannabis market is widely considered to be one of the most attractive in the nation for a number of reasons:

1. Large, highly educated population of 6.7 million.

2. Full vertical integration- seed to sale.

3. Limited number of cannabis license holders.

4. Lowest tax on cannabis in the nation (6.5% plus 3.75 % excise).

5. Delivery to homes and assisted living facilities allowed.

6. Consumption at approved locations.

Currently, the state is reporting an existing medical cannabis patient population of 37,000 people, and that number is expected to surpass 125,000 within the next ten years. The problem is that that Massachusetts simply does not have enough cultivation infrastructures to support the needs of its medical patients.

Add to that the implementation of recreational cannabis in January 2018 and it becomes apparent there will have to be millions of square feet of cannabis cultivation space built and it will need to be largely greenhouses.

In the designing and processing of the giant MMCC project, ACAN was meticulous in maintaining regulatory compliance and good will with city and state officials by receiving site plan approval, host community agreements, storm water, wetland studies and environmental permits, traffic impact and access studies, and civil engineering assessments.

What Can Propel ACAN?

ACAN investors have a lot to look forward to, capitalizing on the increased momentum of legalization. The industry is highly fragmented with several leaders beginning to emerge. It appears ACAN will be one of the national leaders. While the current position in Massachusetts is important to ACAN in building value in, the company is in a prime position to accelerate its growth by taking advantage of its management strength and design and development team.

The company management believes there are as many as 8 states that it considers prime for the MMCC prototype. With its multi-market strategy and national expansion already underway, ACAN is primed to replicate in other states what they are currently preparing to build in Massachusetts. With the knowledge gained from this and their other projects, ACAN certainly has the potential to become a dominant and efficient builder of cannabis infrastructure projects as they enter into markets in Florida, California, Nevada, and Maryland.

Capitalization and ACAN Stock Trading

The capital structure at ACAN is also a contributing benefit to investors. The ACAN management team is stock market experienced and has structured the company with a tight capitalization (with no cheap options or toxic convertible notes like many cannabis companies).

The company has only slightly over 20 million shares outstanding, with 62% of those shares being tightly held by insiders. Additionally, interest in the company has expanded significantly recently and ACAN trades on the OTCQX (highest OTC market below NASDAQ) with some liquidity, averaging over 85,000 shares in trading volume per day, 10x the trading volume in 2016, and currently sports a market cap of approximately $80 million. Trading at just over $4.00 per share, the stock is well off of its lows for the year and is currently trading at a near 52-week high. Institutional ownership and interest is small but growing.

Based on numerous U.S and Canadian cannabis stocks that have valuations of from $200 million to over $1 billion, a major increase in the ACAN market cap appears to be reasonable and the ACAN stock offers potential for significant increases over the rest or 2017 and into 2018.

Canopy Growth (CGC.TO) at $9.85 has a $1.2 billion market cap with just $24 million in annual revenue. Aurora Cannabis (ACBFF) at $2.00 has a $500 million market cap with just $3 million in annual revenue.

ACAN In 2017

An investment into a company like ACAN has the very real potential to deliver long term value by not only allowing investors to take advantage of the explosive near term growth of the cannabis industry, but also by taking a position in a company that will likely be an essential part of the industry for many years to come.

With the groundbreaking of the large scale MMCC project scheduled in the first quarter 2017, expected cash flow and earnings by early 2018, replication of the Massachusetts model in other states and a possible up listing to the NYSE or NASDAQ market, plus likely greatly increased publicity and market awareness, ACAN could have a very interesting 2017.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in ACAN within the next 72 hours.

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Hey everyone, I'm Joshua Rodriguez. I'm the founder of CNA Finance as well as several other sites. If you'd like to connect with me, follow me on or Twitter! I'd love to see ya there. Also, if you're looking for top quality content for your blog, news outlet, or any other website for that matter, please reach out to me at Info@CNAFin.com! Legal Disclaimer - CNA Finance is NOT an investment advisor. All investment decisions should be well thought out and made with the help of a an investment advisor. For our full legal disclaimer, please scroll to the bottom right of this page.

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