month in review & outlook - s3. · pdf filewas from companies that appear to lack ......

1

September- 2016 VOLUME 3, EDITION 9

MONTH IN REVIEW & OUTLOOK August started strong and then reversed badly ending the month slightly lower and near the July lows:

The index, which was rebalanced as part of the regular quarterly process at the end of June and has 28 members, saw 6 double-digit gainers and 13 double-digit percentage decliners during the month, including 1 that lost more than 67%. The index decreased 3.6% to 33.16 during August. The 420 Opportunity model portfolio increased 7.9% in August and is up 45.0% YTD, dramatically outperforming the index, which is down 15.5% YTD. The DEA refused, again, to consider rescheduling or descheduling cannabis, though it did make a move to end the monopoly on production for research. It also issued with the FDA and USDA a statement on "Hemp Principles" that effectively bars interstate commerce of the plant, the seeds and extracts. A Western Federal Appellate Court sided with medical dispensaries against the DOJ. Arizona's legalization initiative qualified for the ballot in November. Maryland named 22

companies that received pre-license approval for 15 cultivation licenses and 15 production licenses. The Nevada Attorney General issued a ruling that would require dispensaries there to accept only patients from California with state-issued cards and not letters from doctors, reducing the pool of potential patients from California taking advantage of state reciprocity by 90%. New York is going to make improvements to its very limiting MMJ program. In Canada, Health Canada issued new rules to replace MMPR with Access to Cannabis fro Medical Purposes Regulations (ACMPR) that permit home grow. Health Canada issued its 35th license to Green Organic Dutchman. An illegal dispensary in Toronto, Tweeder, suffered an explosion related to butane extraction. Longer-term fundamentals for the industry remain positive, as legal and medical cannabis continue to expand on a state-by-state basis and as the industry moves from the black-market. The early-in-the-year explosion in demand for the stocks in 2014 led to unsustainable valuations (and a lot more supply of stock, much of which was from companies that appear to lack substance). Investors are now focused on the few companies with more visible near-term revenue opportunities, especially in Canada. The big themes ahead are likely to be the potential for the DEA to reschedule cannabis and better clarity from the federal government for banks (both part of the proposed CARERS Act and other proposed legislation), resolution of the MMAR/MMPR lawsuit in Canada, the inclusion of extracts in Health Canada's MMPR program and its continued growth in patient enrollment, potential legalization in Canada, the introduction early next year in Germany of MMJ legislation as well as continued advances in South America, progress in 2015 with respect to MMJ expansion and 2016 ballot initiatives for legal cannabis (AZ, CA, MA, ME, and NV) another MMJ vote in Florida,

2


the Presidential election in 2016, rollouts in Oregon and Alaska, congressional handling of D.C.'s attempts to legalize, and implementations of several state MMJ programs, including Florida (CBD only), Hawaii, Illinois, Maryland, Minnesota, New York, Nevada, Massachusetts, Ohio, Pennsylvania and Texas, and the implementation of the new state program in California. The slide, which began in March of 2014, reversed out the entire gains from early 2014, with the market currently well below the summer 2013 lows despite the rally since mid-February. Most valuations remain high. Positively, we are seeing some new entrants into the publicly-traded sector of higher quality, and hopefully we see more in 2016. Already, traders are contemplating some attention on the sector later this year during the election season given the likely record number of legalization ballot initiatives. Please remember that it remains the case that most of the penny stocks will not succeed. I expect that there will be just a few winners among the 350+ companies that are currently on our Broad List.

Coming Soon: GrowGeneration

A chain of 10 hydroponic stores is in the process of going public. GrowGeneration, based in Pueblo, CO, operates 9 stores in its home state and one in California and plans to double its store-count by the end of 2017. The company has successfully cleared the SEC with its S-1 filing, a process that began less than a year ago, in November and that included 4 amended filings before going effective in July. The stock hasn't yet been assigned a ticker on the OTC but is expected to receive one and begin trading this quarter. I don't find the story compelling at this point, but the stock , if it trades near the level of its recent financing of $0.70 per share, could prove to be a reasonable entry level. Background The company has roots to 2008 but was formed in its current corporate structure in 2014. It sells into several markets (not broken down in terms of percentage of sales) that include home growers and producers of organic produce for commercial purposes, do-it-yourself gardeners and cannabis growers. No customer accounts for more than 5% of sales. Key distributors are HydroFarm, BWGS and Sunlight Supply, while key products include Botanicare, General Hydroponics and Can Fan USA. The current 10 locations include Denver (2016), Colorado Springs (2015), Conifer (2015), Pueblo Downtown (2014), Pueblo South Side (2014), Pueblo West (2014), Cañon City (2014), Fairplay (2016), Trinidad (2015) and Santa Rosa, California (2015). The 2014 stores were through acquisition ($500K). The stores range in size from 1800 s.f. to 4500 s.f. for the Denver store, with all

3


but two greater than 3000 s.f. The leases tend to be $0.50-1.00 per s.f. per month, with a few outliers. The company's website is not yet e-commerce enabled, which is one area of improvement the company seeks. Other goals include adding exclusive supplier contracts with customers, create a national sales team, develop white-labeled products and continue to make acquisitions. Management

Management consists of owners investors with no apparent cannabis industry experience and operators to fill that void. CEO Darren Lampert (55) was a securities lawyer who turned to trading and then investing in 1999. His ownership includes 650K options at $0.60-.66 and 1.85mm shares. President Michael Salaman (54)has a background in media. He was CEO of Skinny Nutritional Corp. when it filed for Chapter 11 Bankruptcy in 2013. His ownership includes 400K options at $0.60-.66 and 2mm shares. COO Jason Dawson (38) was the seller of the first four stores to the company and has over 15 years of industry experience. His ownership includes 200K options at $0.60-.66 and 200K shares. CFO Irwin Lampert (84), father of the CEO, is a retired CPA and retired attorney. His ownership

includes 400K options at $0.60-.66 and 1.25mm shares. CEO Lampert, CFO Lampert and Salaman are Directors, and the Board also includes two Independent Directors, Steven Aiello and Jody Kane, both of whom have investing backgrounds. 2015 compensation was $90K salary for the CEO and for the President and $84K for the COO. The CFO took no salary. There were no other forms of compensation. The COO is entitled to an annual 100K options. The 2016 salaries for CEO Lampert and COO Salaman are $100K, while CFO Lampert will begin a part-time services compensation of $3K per month beginning in October. Financials The company has substantial sales and operates at a small operating loss. The most recent 10-Q for the quarter ending 6/30, Q2, was filed on 8/19. Year-to-date sales have been $3.45mm, which is up 145% from a year ago. Unfortunately, the company doesn't break out how much of this growth is from acquisitions or new store openings relative to "same-store" growth. The gross margin is a healthy 30.8%, though this is down from 33.4%. Operating expenses have increased 195%, which has led to a loss of $222K YTD compared to a $35K gain in the first half of 2015. The company has used $743K YTD to fund operations, with the main driver being a $829K build in inventory. The balance sheet is reasonably strong, as the company has $2.76mm in current assets, including $450K in cash and $2.15mm in inventory. Total assets are almost $3.5mm, of which $243K is "goodwill' from its acquisitions. The company has LT debt, which is secured by equipment, of just $53K. Total liabilities are $700K. Consequently, the Equity (Assets less Liabilities) is $2.77mm. While the balance sheet is fairly strong, it doesn't afford the company room to pursue its acquisition

4


strategy. Consequently, expect to see dilution, with the company selling to shares to raise cash to pay or issuing shares directly to the acquired company's owners. Valuation As of mid-August, the company had 10.05mm shares outstanding. Additionally, there are 1.872mm options with a weighted-average exercise price of $0.62 and 3.548mm warrants with a weighted-average exercise price of $0.70. There are no convertible notes. In 2016, the company has sold 890K units at $0.70, consisting of shares as well as warrants at $0.70. In 2015, the company sold 300K shares at $0.60 and 2.465mm units that included 1 share and 1/2 warrant at $0.70 at $0.70 per unit. In 2014, the company sold 1mm shares at $0.60. I expect that the stock could trade at about $1, where the market cap, including options and warrants, would be about $15.5mm. Note that the exercise of the warrants and options would add about $3.6mm to the balance sheet. The company is likely to produce sales of $4.5-5mm this year, leaving the price to sales at 3-4X assuming the $1 per share level, a valuation that is likely defensible. Conclusion It's hard to get excited about the GrowGeneration story based upon the available information. Hydroponics stores are a competitive industry, and it's not yet clear that this management team has the ability to win. With that said, the S-1 process is a big positive, and every share issued can be explained as having been issued to founders or bought by investors. If it trades near $1, the stock could prove attractive if the management team is able to continue its expansion story.

A Look at LP Margins and Cash Flow

Which Canadian LP has the best quality? Who grows at the lowest cost? The answers to these questions would be very helpful in determining which LP might make the best investment over time, but, unfortunately, we don't yet have clear answers. There are no standard quality assessments, though there are review sites, like Lift. Any sort of quality judgment is likely to be highly subjective and anecdotal. Hopefully this improves over time. When it comes to determining cost of production, it seems like it would be as easy as just looking at the financial statements. While this is a great place to start, the answers aren't so clear, especially due to some confusing rules about "biological assets". In a nutshell, when an LP grows a cannabis plant, its value increases and this is reflected in the income statement and not just on the balance sheet. There are 4 LPs that have substantial sales that have been reported, and I want to try to compare each of them on a level playing field, with a goal of comparing their margins and their cash flow generation. Keep in mind that this analysis reflects only the most recent quarter and that these companies are growing very rapidly. In any given quarter, the results may not be reflective of the long-term potential of the company. Aphria (APH/APHQF) produced sales of $2.776mm in the quarter ending 5/31/16, its fiscal Q4. The press release reported an adjusted gross margin of 74.5% of sales. Other metrics it reported included net income of $1.3mm and EBITDA of $520K. Net income was boosted by a $1.2mm income tax recovery. It reported two costs of production per gram, a $2.07 "all-in" cost and a $1.15 cash cost, both of which exclude changes in biological assets. This latter calculation

5


subtracts amortization and packaging costs from the cost of goods sold (COGS). One interesting item for the quarter was that the company had no R&D expense, as it spent its budget in the first three quarters of the year, which implies that the profitability would have been lower. Had the company's R&D been spread out more evenly, it would have spent approximately $55K. As far as Cash Flow from Operations, in Q4, the company reported positive cash flow of $347K. The bottom-line is that the company was modestly profitable and able to generate modest cash flow from operations. Canopy Growth (CGC/TWMJF) reported its FY17-Q1 ending 6/30 on 8/29, with sales reaching almost $7mm. The gross margin was 49%, but the company reported an adjusted GM of 62.5% and an all-in cost of production of $2.20 per gram. It didn't calculate a cash cost, but if I subtract depreciation and amortization (but not packaging), I get $1.73 per gram. One thing is clear: Canopy Growth is using a lot more cash to fund its operations, even adjusted for the higher volumes. In Q1, cash flow from operations was -$3.9mm. To its credit, though, a lot of this is driven by an inventory build of $5.5mm. Mettrum (MT/MQTRF) reported its FY17-Q1 ending 6/30 on 8/22. Sales of $4.17mm led to a reported gross margin of approximately 61% after excluding biological asset changes. This resulted in an all-in cost of $3.75. The company reported a cash cost of $2.00 per gram. Adjusted EBITDA was negative $346K. Cash flow from operations was negative $1.5mm, which was partially explained by an inventory buildup of $547K. Organigram (OGI/OGRMF) reported its FY16-Q3 ending 5/31 in July. The company posted sales of $1.8mm. The gross profit margin excluding fair value adjustment for biological assets was 49.5%. This lower margin may be because the company is buying product from other suppliers. Net income was reported at $368K, but this included an

adjustment of $687K for biological assets. The all-in cost per gram was $3.91. Adjusting for amortization and the company reported a cash cost per gram of $1.29. The company generated $373K from operations. The bottom line is that the company was modestly profitable. Of the four companies, the two smaller ones in terms of sales, OGI and APH, appear to be generating small profits, while MT and CGC are currently running small losses. It's not clear that profitability is a virtue at this early stage, as perhaps customer acquisition is a more important metric in the early stages. Trying to get an apples-for-apples comparison of costs of production is tough, but it appears that Aphria had the lowest costs in the last quarter, while Organigram and Mettrum were at the higher-end. Cash-costs, which exclude depreciation and amortization but also potentially packaging costs (which probably shouldn't be excluded), are at or below $2 for all four companies, which bodes well for long-term profitability as the companies scale.

6


Election Season Plays All year, I have been pointing to the election season as a potential catalyst for cannabis stocks, and it is now upon us in my view. As a reminder, this is just a trade in my view and not anything that will matter two or so months from now. Historically, the market has bounced in October over the past two years in front of key elections. In 2014, Florida was voting on MMJ, while Alaska, Oregon and Washington, D.C. were voting on adult-use. The 420 Investor Cannabis Stock rose marginally in October, though there was a nice bounce just in front of the election:

It's important to remember that the market was in a terrible sell-off at the time, and the 4.7% October gain was the first one at all since February 2014. From the bottom a few weeks before the election to the eve of the election, the index increased 23.9%. In 2015, the only election was for adult-use in Ohio. October 2015 was the first positive month for the index since October 2014, with a rally of only 2.7%. From the late October lows to the high the day of the election, the index jumped 19.7%

So far, it's hard to get excited, but this year should be much better for a few reasons. First, the overall market isn't declining. While it's down YTD, the lows from February are still intact. Second, the big run mid-year is likely to encourage speculators betting on an election trade. Finally, and most importantly, we have never seen such ballot activity. As a reminder, there are legalization votes in AZ, CA, MA, ME and NV, with MMJ votes in several other states. The number is impressive, but also the size (CA) and the novelty of two East Coast states will draw a lot of media attention. So, if one buys into the premise that there will be an election trade, the question becomes which stock to buy. This is always a tough call, in my view. I have spoken of a few attributes that I think matter, including having decent trading volume and also having a chart that doesn't look like a free-fall. Some other criteria to consider are participation in the rally earlier this year and also if the company is actively diluting (which probably would imply free-fall in the price, but not necessarily). At the same time, sometimes traders like to pick a low-float stock, which means that the number of shares available to trade is limited, making it easier to manipulate the stock.

7


With a caveat that these games are tough to call, I wanted to review not just the Focus List but also the Broad List to identify some potential candidates for the election trade I envision. I am excluding low-float plays, as I have never really figured out these squeezes until after they are already playing or played out, but I will certainly be on the lookout as they develop. This table summarizes the non-Canadian Focus List:

Taking them alphabetically, AMMJ is one that should participate, as it did previously. Low volume recently is a concern. CBIS would appear to be a prime candidate, as could be CVSI. GBLX didn't participate in the Spring rally, but it was heavy in the dilution mode then and hopefully better positioned, especially since it is a Nevada play. GWPH is obviously a different kind of stock, but I would suggest that it could benefit from all of the media, even if legalization and even MMJ have little or no bearing on the company (and perhaps, one could argue, at risk from more legalization). HEMP typically would be on the list, but I would be careful given the SEC situation. INQD has seen volume dry up, though this could change. The

stock did benefit this Spring during the rally. KSHB looks like a very likely election play. MDCL is one that stands out as unlikely to participate, though perhaps the low-float traders latch on. MJNA is one that should benefit, though the pending sentencing of Michael Llamas is an overhang (but in February, so not really an issue for now). MSRT looks now to be in free-fall and in the dilution mode with the recent offering, though otherwise it would seem to be a good play. Things could change as we get closer to the election. NMUS doesn't look like a viable bounce candidate, though SRNA seems likely to draw traders. TRTC is perhaps the very best play given its exposure to CA and NV. With its recent bounce, VAPE too qualifies for consideration as a potential bounce trade. Finally, XXII doesn't seem to be a likely play due to its limited focus on cannabis. For the name not on the Focus List, I reviewed active traders. I am sure that I am omitting several potential election play candidates, but here are a few that jump out: CANN, CBDS, GRNH, and RMHB.

General Cannabis (CANN) has ample volume, the right kind of chart, participation in the Spring rally and no clear dilution.

8


Cannabis Sativa (CBDS) has all of the same attributes as well.

Greengro Tehcnologies (GRNH) is about as "OG" as cannabis stocks get, and it too has all of the characteristics of bounce candidates.

Rocky Mountain High Brands (RMHB) rounds out my list, also having each of the four attributes. Remember, this is just a trade and only a trade. I will keep subscribers updated as things play out over the next two months, but I expect the 2016

election season to be a lot more fruitful than the prior two years.

9


Cannabis Industry Calendar

09/07-09: Cannabis World Congress & Business Expo in Los Angeles, CA 09/11-13: International Medical Cannabis Conference in Tel Aviv, Israel 09/17-18: Lift Cannabis Expo in Vancouver, BC 09/20: Elevate Cannabis Startup Conference in Oakland, CA 09/26-27: State of Marijuana in Long Beach, CA

Save 50% using code "NCV50" at www.newwestsummit.com

OTC Disclosure , SEC and Canadian Reporting Deadlines* Fiscal Year ending in June: Annual report due on or before 09/28 Fiscal Year ending October, January or April: Quarterly report due on or before 09/14 Canadian (Venture) Fiscal Year ending in May: Annual due 09/28 Canadian (Venture) Fiscal Year ending in October, January or April: Quarterly due 09/29

*Note that many U.S. companies take advantage of automatic extensions

10


SPOTLIGHT ON THE FOCUS LIST 420 Investor maintains a "Broad List" that includes over 350 companies that purport to be in the cannabis sector. At the same time, it monitors a narrower group of 22 companies, the "Focus List", which consists of what we consider the most important companies among the publicly-traded stocks, including the most actively traded as well as several that are under-the-radar but that appear worthy of consideration. We provide numerical ratings to VIP subscribers on three different measures for each member of the Focus List, including relative valuation, technicals and relative quality. I made no changes to the Focus List in August. Our relative quality rankings, which range from 1 (best) to 5 (worst) are a subjective assessment of each company relative to the entire Focus List and are based on management capability, corporate governance and transparency, execution and capital structure. The companies that we currently rank below average (4 or 5) include alphabetically by ticker American Cannabis Company (AMMJ), Cannabis Sciences (CBIS), CV Sciences (CVSI), GrowBlox (GBLX), Hemp, Inc. (HEMP), Indoor Harvest (INQD), Medical Marijuana, Inc. (MJNA), MassRoots (MSRT), Vape Holdings (VAPE) and 22nd Century Group (XXII). Here were some of the key news items for Focus List companies in August:

American Cannabis Company (AMMJ) announced that it helped an unnamed Canadian client secure a license from Health Canada. The company also removed some negative conversion features from its recent convertible note, with a floor installed. Q2 results were weak.

Aphria (APHQF) finally was approved to sell oils and closed its upsized deal, with the underwriters exercising their overallotment option, increasing it to $34.5mm. The company also announced the purchase of additional land and greenhouses on adjacent property. It also announced an agreement to supply Australian Medlab Clinical with medical cannabis for a clinical trial

Aurora Cannabis (ACBFF) replaced its CFO and announced the closing of its $23mm private placement of units at $0.40 with warrants at $0.55. The company reported a $1mm month in July as patients passed 6500 and closed the CanvasRx acquisition. The company announced a project to build a 600K s.f. closed greenhouse facility that it says could produce 7mm grams at full capacity

Cannabis Science (CBIS) filed its 10-Q, indicating almost no revenue and a terrible balance sheet Canopy Growth (TWMJF) obtained a $5.5mm financing from a commercial lender, priced a $34.5mm

bought deal at $3.65 and will be offering grow services to home growers. The company reported 20K registered patients and hired Adam Greenblatt as Head of Quebec Engagement and promoted Mark Zekulin to President of the holding company. Canopy Growth reported sales growth of 39% in Q1 compared to Q4, with EPS of -$0.04

CV Sciences (CVSI) filed its 10-Q, which showed continued financial strains GW Pharma (GWPH) reported its Q3, with no big announcements but a confirmation that Epidiolex is

on track for NDA submission in H1-17 Indoor Harvest (INQD) marketed a $500K private placement in its Convertible Preferred A, which

converts 1-1 into common but is protected against capital raises at lower prices. The offering, which includes $0.50 warrants on the common, was at $0.50 and was reported to have been bought partially by Head North, an entity that has a 60-day option to negotiate exclusively for the cannabis-related assets of the company, though the company never confirmed the closing. It also filed its 10-Q, which painted a pretty bad financial picture. The company reported sales of just $40K and a very big

11


operating loss, leaving it with very limited cash in front of a convertible note maturity next month prior to the capital raise.

Kush Bottles (KSHB) added the "Kush N Slide" child-resistant exit bag to its packaging solutions MassRoots (MSRT) reported an increase in sales but a big operating loss. It has implemented head-

count reductions and is focusing on controlling costs going forward. The company has begun to sell stock at .50 with .90 warrants

Medical Marijuana, Inc. (MJNA) former CEO, Michael Llamas, who still calls the shots unofficially, entered a guilty plea to mortgage fraud and will be sentenced to jail most likely in February

Medicine Man Technologies (MDCL) announced a pending acquisition of Pono Publications and Success Nutrients. It will issue 7mm shares, valuing the deal at $12.6mm. It reported somewhat disappointing sales and another operating loss in Q2 and announced a convertible note offering

Mettrum (MQTRF) reported sales growth in excess of 50% from the prior quarter and reduced its loss. It closed its $15mm deal with the underwriters not yet exercising the overallotment option

Nemus (NMUS) filed its 10- and reported the dismissal of a lawsuit against it by its former CEO OrganiGram (OGRMF) closed its $23mm equity raise that included a full exercise of the underwriters

overallotment option. Part of the funds raised will pay for a 10-acre land purchase and the acquisition of a 136K s.f. building adjacent to its current location

Supreme Pharma (SPRWF) refinanced its mortgage, increasing it to $4mm at 12% , and announced an additional $10.6mm capital raise,.

Surna (SRNA) reported strong sales growth from a year ago, but a decline from Q1. Strong cost controls were offset by a one-time warranty charge.

Terra Tech (TRTC) opened its 2nd Nevada and also named a General Counsel, a new position at the company. It reported its first quarter with Blum Oakland sales and had its S-3 go effective. The proxy had a proposal that could have massively diluted common shareholders if the company were to reverse-split, but they rescinded the proposal. The company continues to see heavy insider selling.

Twenty-Second Century (XXII) reported Q2, with sales in line with expectations but the loss per share a bit worse than expected.

Vape Holdings (VAPE) failed to file its 10-Q in a timely manner

12


FOCUS LIST - RETURNS FROM AUGUST:

13


420 Investor Canadian Cannabis Model Portfolio

I introduced a new model portfolio at the end of 2015 that includes the licensed producers in Canada. I select from names in the index and can include a weighting of 0-200% of the company's representation in the index. The index includes companies that operate or are invested in facilities approved by Health Canada to sell medical cannabis. The index weights are based upon holding a license with additional credit (a double-weight) given for sales in the most recent quarter in excess of $1mm. The criteria are likely to change over time. The initial index included seven companies and gave extra credit to three. OrganiGram reported quarterly sales in excess of $1mm earlier this year and is now double-weighted, while THC was added in March and SL in April following license approvals. This month, ACB earned double-weight, based on the disclosure on August 11th that sales in July exceeded $1mm. There are no cash positions allowed.

Here is the index weighting along with the model portfolio exposure from last month with the month's results:

The stocks had a big month, similar to April and July. The model underperformed substantially, with the model rising 19.0% compared to the 38.2% gain in the index. YTD, the model has outperformed by 0.8%. Being underweight ACB, EMH and especially THC while being overweight MT hurt August returns. YTD returns for the 4 names that have been most heavily weighted in the index are up in excess of 24.9% .

14


This month, I made some adjustments, increasing the relative weightings in APH by 0.4%, CGC by 3.1%, MT by 2.1% and OGI by 4.5%. I reduced ACB to zero from 2.5% last month, but note that its index weight rose substantially. (posted at 3PM ET 08/31):

My rationale for the relative exposures:

Aurora Cannabis (ACB) has a market cap that is too expensive at $272mm on a fully diluted basis (with CanvasRx shares). The fundamentals are improving, but stock is ahead of them

Aphria (APH) has a market cap of approximately $286mm and a low cost of production, with added capacity adding to growth potential. It has performed very well in 2016 and could pause as the recent supply of stock is absorbed and warrants exercised. It has some exposure to the Veterans reimbursement issue.

Canopy Growth (CGC) is the clear leader and the $460mm market cap is now more line in line with its peers after underperformance in 2016. Strong (built out) assets and brands will continue to attract investors.

Emerald Health (EMH) has a market cap of $22mm but needs to raise capital and establish its brand

PharmaCan Capital (MJN) has a market cap near $76mm. Closing Peace Naturals (and addressing two lawsuits by Canopy Growth) is essential to justify the valuation.

Mettrum (MT) has a market cap of $128mm after a recent capital raise and recently expanded capacity. Despite strong performance, it remains inexpensive to others adjusted for capacity. 28% of CGC seems too low.

OrganiGram (OGI) has a market cap of $134mm, which seems a bit expensive to Mettrum. The company has a near-term capacity issue it is addressing but is well positioned for legalization. It has some exposure to the Veterans reimbursement issue.

Supreme Pharma (SL), with a market cap of $121mm, is significantly leveraged to legalization and could emerge as one of the lowest-cost producers. Cheap to ACB with better balance sheet and similar LT prospects. Stock should rally into sales license receipt in Q4.

THC Biomed (THC) has a market cap near $33mm and needs to raise capital

15


Do you have the info you need to capitalize on the growth of the legal cannabis markets?

The State of Legal Marijuana Markets 4th Edition is the definitive source for market sizes and high-level analysis of business

trends in one of the fastest growing markets in the US.

For those of you looking to access the in-depth research in Arcview Market Research's "The State of Legal Marijuana Markets

4th Edition," I was able to negotiate a 20% discount for 420 Investor subscribers ($397 instead of $497). Use the code

"420INVESTOR" to take advantage of this offer.

ORDER

The State of Legal Marijuana Markets 4th Edition

$497 ($397 with discount code "420INVESTOR")

Purchasers will receive:

The 4th Edition

Access to Arcview Market Research webinars and updates throughout the year

90-day trial to equio™

16


ABOUT THE 420 INVESTOR – ALAN BROCHSTEIN, CFA:

I have spent decades inside the investment industry. Prior to earning my CFA charter in 1997, I worked in NYC for Kidder, Peabody, & Co. in bonds from 1986 to 1992. In 1992, I joined First Boston’s investment management subsidiary before becoming a portfolio manager with Criterion Investment Management in 1994 —co-managing $10 billion in fixed-income investments. In 2000, I made the move to stocks, joining a small firm in Houston as an analyst and portfolio manager. I remained at the firm, which grew to $550mm in assets under management, until 2006, when I left to form my own business, AB Analytical Services—working as a research consultant for several investment advisors.

In 2008, I began offering Invest By Model, a model portfolio service, to individual investors. I met Marketfy in 2013 and created The Analytical Trader, a service focused on providing swing-trading ideas. Both of these services delivered strong performance. I also became a leading contributor to Seeking Alpha. After seeing a strong need for more investor transparency among cannabis companies in early 2013, I launched 420 Investor— a service committed to providing real-time, objective information about the top cannabis companies in the market. 420 Investor has evolved into a collaborative due diligence platform, and I am proud to lead our efforts. I am also co-founder of New Cannabis Ventures, which provides curated content and other resources to help inform cannabis investors and entrepreneurs about the most exciting companies and the most influential investors in the rapidly changing cannabis industry. In the process of launching the 420 Investor, I became a much-needed ally to cannabis investors, being hailed as a leading authority in the industry as I developed a network of investors and industry professionals. In early 2014, I exited all of my other business in order to focus exclusively on the cannabis sector. I have supported marijuana legalization since 1980, when I became active in the Libertarian Party. I currently sponsor Americans for Safe Access, the Drug Policy Alliance, the Marijuana Policy Project , the National Cannabis Industry Association, NORML, Students for Sensible Drug Policy, and Women Grow. Follow Alan on Twitter: http://www.twitter.com/Invest420 Follow Alan on Facebook: http://www.facebook.com/420investor Join Alan's LinkedIn Group: Cannabis Investors & Entrepreneurs The 420 Investor Newsletter is available via annual subscription ($149/yr) and is included as part of the monthly ($42/mo) or the annual ($420/yr) 420 Investor VIP subscription.

month in review & outlook - s3. · pdf filewas from companies that appear to lack ......

Documents