The Canadian cannabis sector has been one of the hottest places for investors to put their money over the last two years and we think this sector is in the early innings of a major growth cycle.

As we approach the end of the year, we want to highlight companies that are well positioned for growth during 2018.

One company we have been watching closely is Harvest One Cannabis Inc. (HVST.V). The company operates a unique and attractive business model that controls operations across the entire cannabis value chain through three business units.

Harvest One serves as the umbrella company over its horticultural arm, United Greeneries, as well as its medical arm, Satipharm AG. We are favorable on this structure and believe that the divisions can create value for each other as well as improve the value proposition of the entire company.

United Greeneries: A Strategic Opportunity

In June 2016, United Greeneries has previously received the authorization to cultivate cannabis under the ACMPR and commenced growing operations after successfully importing 32 commercial cannabis varieties from Europe.

In mid-October, United Greeneries Ltd. received the amendment to sell dried marijuana to registered patients by Health Canada under the Access to Cannabis for Medical Purposes Regulations (ACMPR).

When United Greeneries received the sales license, they had 220 kilograms of dried cannabis in its inventory and ready for sale. The company has focused on increasing capacity and will be able to sell its inventory. We are favorable on this aspect of this business and expect it to provide a significant revenue stream in 2018.

Signs LOI to Expand Production Capacity

The United Greeneries division is the one we are most favorable on since it received a Canadian medicinal cannabis cultivation and sales license, making it able to commercially cultivate and sell cannabis in a federally regulated environment.

Last month, United Greeneries signed a letter of intent with a third party to lease a property to accelerate and expand production capacity. The facility is very well suited to be retrofitted into an indoor cannabis cultivation facility.

Due to the facility’s existing infrastructure, United Greeneries expects to commence cultivation activities in 2018. The initial facility design can produce approx. 8,000 kilograms per year and is fully funded with the company’s current cash balance.

We are favorable on this property due to the existing infrastructure and size of the property. The letter of intent provides an option to expand by 8 more acres on the property, which could ultimately produce more than 35,000 kilograms per year when fully built out.

In the Middle of a Major Expansion

The day after Harvest One announced the letter of intent, the company entered a revised engagement letter with Mackie Research Capital and a syndicate of underwriters that included Haywood Securities and Eight Capital to increase the size of the previously announced bought deal.

Under the new agreement, Harvest One will sell $17.5 million worth of convertible debenture units. The offering can generate more than $20 million in gross proceeds if the underwriters exercise its over-allotment option. The company intends to use the net proceeds for working capital and general corporate purposes.

We are favorable on the upsized offering and believe that it will provide Harvest One with the capital it needs to execute.

Satipharm’s Enters Australia’s CBD market

Last month, Harvest One’s wholly owned Swiss subsidiary, Satipharm AG, made a significant announcement after its Melbourne-based distribution partner, HL Pharma Pty Ltd, started to distribute Satipharm’s Gelpell-CBD capsules to approved patients in Australia.

Satipharm is focused on developing cutting-edge dose delivery technology for pharmaceutical-grade cannabis products providing physicians and patients with consistent and reliable dosing each and every time.

This is a milestone since the capsules are one of the first medical cannabis products available to patients in Australia. The commencement of Satipharm sales is part of a comprehensive strategy to expand the international distribution of its products for commercial and clinical research purposes.

Currently Satipharm is selling it’s proprietary capsules in the EU as a food supplement and has increasing sales month over month. In August Satipharm received a “Free Sales Certificate” in Germany removing any impediments to trade within the EU resulting in further demand for the product from large Pharmacy chains throughout Europe.

A Stock to Watch

We are favorable on Harvest One’s leverage to international markets and believe the stock has flown under the radar. Investors need to keep an eye on Harvest One as its subsidiaries continue to execute and work to create significant value for the company.

One of the biggest potential catalysts for Harvest One will be the granting of a Dealer’s License from Health Canada to be able to import its capsules to Canada and sell under its ACMPR license. We are favorable on this opportunity as it will significantly enhance the company’s fundamental story.

The shares have come off its highs and we believe this has created a great opportunity for new investors. The recent developments have significantly advanced Harvest One’s fundamental story and we will be closely watching how the company executes fro, here. This is a stock to watch and please reach out to support@technical420.com if you have any questions about the company.