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ABcann Medicinals Could Join the Ranks of Canadian Licensed Marijuana Producers with Rising Valuations after IPO

All eyes are on ABcann Medicinals, Inc. as it prepares to go public. The company, which is already growing rapidly, wants to expand its footprint in Canada and take advantage of potential international opportunities. Additional production facilities are planned to meet the expected supply short fall in the Canadian market when marijuana for recreational use is legalized next year. With its state-of-the-art cultivation facilities and established patient-client care systems, ABcann has the infrastructure in place to profit from that billion-dollar Canadian marijuana market.

With adult use of marijuana set for legalization by July 1, 2018, the Canadian marijuana market is expected to expand to $8 billion by 2024, according to Canada’s largest independent investment dealer, Canaccord Genuity Group. This puts it on par with the beer and tobacco markets in Canada. Canadians spend about $9 billion on beer and over $10 billion on cigarettes every year.

Coupled with the existing barriers to entry posed by the rigorous Canadian licensing regime, this presents a rare opportunity to licensed producers, like ABcann. Strict licensing requirements will slow the entry of new growers and is expected to result in a supply shortfall until around 2020. ABcann is one of Canada’s oldest license holders, a huge factor considering that only about 3% of those that apply are ever accepted.

Medical marijuana in Canada is regulated by a federal agency, Health Canada, under the Access to Cannabis for Medical Purposes Regulations (ACMPR). To be granted a license, applicants must pass a comprehensive 6-step screening program that involves extensive background checks. The Health Canada website shows just how tough it is. Of the 1,600 or so applications received since the licensing regime was instituted, only 41 have been successful, a failure rate of over 97 percent. Trying to enter the Canadian marijuana market is risky business, particularly since a license will be granted only after a facility is built.

However, ABcann’s cultivation facilities have already been approved and are in operation. Presently, its 14,500 sq ft facility in Napanee, Ontario, produces 1,000 kg annually. The proposed expansion will involve a 150,000 sq ft facility with a production target capacity of 40,000 kg per annum. The company also has a total of 65 acres serviced industrial zoned land, which can accommodate a production facility of up to 1.2 million sq ft.

ABcann’s production facilities are not just getting bigger; they are getting better. The company has been collaborating with the Controlled Environment Systems Research Facility (CESRF) at the University of Guelph since January 2014. The research program is aimed at discovering the best environment for growing cannabis, and it includes a study of lighting, temperature, air quality, and plant nutrition.

ABcann’s computer-controlled environmental system not only maintains the consistent quality required for dosing patients, it also reduces production costs. While industry averages are 60 grams per sq ft for greenhouse cultivation and 138 grams per sq ft for indoor cultivation, ABcann’s yield per square foot, based on six crops a year, has ranged from 250 g per sq foot to 300 g per sq foot. Computer control backed by ABcann’s now formidable institutional expertise has resulted in a growing system that uses less water, fertilizers, and energy, and requires no pesticides, since there are no molds and bacteria.

ABcann was formed in 2014 by Ken Clement ‘to deliver consistent, standardized medicinal cannabis that the public and patients can consistently rely on’. Engaged mostly in research and infrastructure building since then, the company commenced sales in June 2016. It compares well with its peers.

Emblem Corp. (TSXV: EMC) (OTC: EMMBF), which started trading publicly in December 2016, has a market cap of $260 million. Its production operation, at 14,500 sq ft, is the same size as ABcann’s facility. Supreme Pharmaceuticals (CSE: SL) (OTC: SPRWF), with a 16,500 sq ft production facility, is valued at $275 million. And Canopy Growth (TSE: WEED) (OTC: TWMJF), with production capacity of 665,000 after the Mettrum acquisition, is valued at $1.6 billion.

For more information, please visit www.abcann.ca

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