The Marijuana Company of America (OTCMKTS:MCOA) has been basking in the glory of a massive share price increment as the chart below shows:
This price increment is in line with our expectation of the company as depicted in our last review of the stock back in October. As such, we have taken a step back and are now trying to assess how high this stock is expected to climb. Moreover, we will assess whether the strategies it has adopted will ensure it gets to this level.
This piece, therefore, is an assessment of the feasibility of the company’s value proposition.
Background to MCOA
Marijuana Company of America Inc was founded by Donald J. Steinberg and Charles Larsen on October 4, 1985, and is headquartered in Bonsall CA.
MCOA is an American company that operates in the regulated hemp and cannabis industries. The company markets and distributes medical and adult use of Marijuana products. Its products consist of the following brands, Budzplus, clubHarmoneous and HEMPSMART.
Its activities include researching and developing hemp-based consumer products under the HEMPSMART brand. In the consumer segment, MCOA largely targets consumer health and well-being market. MCOA also engages in affiliate marketing programs to promote its hemp-based consumer products that contain cannabidiol (CBD). The company also leases real property to businesses engaged in production and sale of cannabis.
The company boasts of a market cap of over 300 million dollars.
Developments Affecting MCOA
The company has an eye on the Canadian market as there is a high chance of legislation going through to allow extraction of cannabinoid from hemp. The legislation changes may expand Canada’s hemp and cannabis markets and create an exciting revenue opportunity for MCOA.
It is in light of the aforementioned that a joint venture has been mooted between MCOA and Global Hemp Group Inc as announced on September 5, 2017, that will see the rollout of a hemp project in Canada’s Brunswick province. Under the joint venture agreement, Global Hemp will help MCOA to set up a commercial hemp production facility in Brunswick. Brunswick is one of the provinces in Canada that are at an advanced stage in legislation to legalize recreational Marijuana in 2018. In readiness for the regulation of the Marijuana industry, the provincial government of New Brunswick has created a crown corporation that will oversee retail distribution of recreational Marijuana in the province.
Global Hemp Group Inc. (GBHPF), the partner company in the Joint Venture, is headquartered in British Columbia, Canada and also has operational bases in Montreal and Southern California. GBHPF is focused on production and processing of hemp and cannabis and carries out its activities through partnerships, joint ventures, and acquisitions. In an announcement made in late September, the two companies want to tap into the expertise of Space Cowboys to cultivate and produce hemp rich in cannabinoids especially CBD and CBG.
Donald Steiner who is the MCOA CEO said he is pleased to have Space Cowboys join them in production as they have some wealth of experience in this area which is an added advantage in the rollout of the Brunswick project. In early August the company entered into a financing agreement with Tangiers Global LLC. Under the agreement, MCOA is expected to receive $5 million from Tangiers. Apart from equity financing MCOA has also secured a bridge loan facility of $250,000. MCOA expects to use the acquired funds to finance working capital and continue to pursue Acquisitions and other expansionist programs.
According to the CEO Donald Steinberg the company has in 2017 completed hemp trials in New Brunswick, Canada together with the partner in the joint venture Global Hemp Group and intend to start commercial production in spring 2018. The company successfully filed a patent application with the US Patent and Trademark office for full patent protection on its proprietary CBD formulation: ‘hempSMART’ Brain.’ The wholly owned subsidiary hempSMART released two new products ‘hempSMART’ Full spectrum Drops,’ (orange, mint, lemon, and strawberry) and hempSMART ‘Pain capsules.’ Several more products are in development phase, and it is hoped that they will be released in the first quarter of 2018.
On 30th November 2017, MCOA announced the launch of a partnership with Honeybee Healthy Living to develop convenient Hemp Martin, LLC’s ‘BeniHemp’ branded products targeting convenience stores for CBD product distribution. MCOA has invested $100,000 into the start-up project for an equity stake of 25%.
Donald Steinberg the company CEO observed that this will be a very attractive method more so for small CBD operators to generate additional revenue with minimal costs.
Finally, in mid-December 2017 the subsidiary company of MCOA, hempSMART announced the introduction of its new personal care product hempSMART pain. The pain capsules are formulated with non-psychoactive cannabidiol(CBD) per serving derived from industrial hemp. HempSMART has demonstrated a commitment to formulate a synergistic natural personal care product. This new product will make market penetration much easier and increase overall sell-ability of hempSMART products.
The Expected Future Outcome
MCOA and GBHPF in their January report having entered into a partnership in 2017, intend to cultivate a close working relationship this year. In 2017 they mainly grew hemp for Research purposes as this was the first time in twenty years that hemp was grown in the region. The objective was to reintroduce hemp into the area to ensure that it could be productive under New Brunswick growing conditions, before increasing acreage under crop and build a hemp processing facility in the region.
The partners have their focused trained on the next planting season and have recruited farmers where they plan to put a minimum of 125 acres under crop and progressively increase the acreage to 1000 within a three-year period. The first commercial crop will focus ON CBD extraction and partners are trying to locate a site in North East New Brunswick for the processing facilities. Discussions are ongoing to purchase extraction equipment for Cannabinoids, and straw processing equipment for building materials. The companies expect the plant to be up and running in time for the next harvest in October.
MCOA is engaged in partnerships that have set it up for success. Through these, we see the company’s future price rising even further. Their growth trajectory is visible, and it only leads upwards.
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Disclosure: We have no position in MCOA and have not been compensated for this article.
Image courtesy of Martin Abegglen via Flickr