In an article we published the other day titled “Past, Present, & Future of Canadian Marijuana Stocks,” we mentioned a relatively new and unknown issuer by the name of Arcturus Growthstar Technologies Inc. (OTC: AGSTF) (CSE: AGS). In the article, we highlighted some of the heavyweights of the Canadian marijuana industry like Canopy Growth Corp. (TSX: CGC) (OTC: TWMJF), Aurora Cannabis Inc. (CSE: ACB) (OTC: ACBFF), and Organigram Holdings Inc. (TSX: OGI) (OTC: OGRMF) and expressed our bullish sentiment on the overall Canadian marijuana market. But it’s the future of the industry, the new up and coming players that we get the most questions about. Investors are searching for the next shining star to see triple digit gains like the heavyweights mentioned above. And it’s time to shed some light on the opportunities present for investors right now.
It is already clear which marijuana producers are leading the way in Canada. However, marijuana grow technologies and infrastructure support could be the next niche sector of the industry to gain institutional investor interest. The Canadian marijuana market and legislation is light years ahead of the United States. And we have Justin Trudeau and the Liberal Party to thank for that. But as a result, the Canadian market has started to see real institutional buying in its industry leaders. This has sparked a true rally in the overall sector. The OTC market in the United States, however, is still a retail investor based market with very little institutional support at all. And this is why we believe the US market to be a trader’s market while the Canadian market to be an investor’s market.
With that said, Arcturus Growthstar Technologies (AGS) has many of the same qualities we see in the juggernaut Canadian producers. The Company also holds a worldwide license to a patented vertical farming technology that, when compared to traditional plant production methods, generates yields up to 10 times greater per square foot of land. We believe this company could be on its way to becoming a leader in the marijuana technology and infrastructure support niche.
Arcturus is rapidly becoming a leading indoor plant growth technology company specializing in LED lighting, mobile applications and vertical farming solutions for the cannabis industry. Their experienced management team has implemented a business model that focuses on leveraging cash flows to make very selective and accretive acquisitions while developing and scaling their existing portfolio. And we LOVE this about them. This is a move by a responsible management team that protects shareholder value while increasing on book valuations.
We expect the institutional interest to begin flowing over into other niche sectors of the Canadian market. As the ongoing rally in marijuana producers continues, valuations will start to reach overbought levels causing institutional investors to search for value elsewhere in the marijuana market. Growth and production technology and support is the next logical place to look.
Part of the Arcturus business model includes acquiring and developing technologies that will further its position as leader in the evolving Controlled Environment Agriculture (CEA) market for the global production of various types of plants, with a focus on cannabis. AGS currently provides scalable, indoor CEA systems (vertical farming) that use 90% less land, fertilizer, water and energy regardless of the climate, location or time of year. There is zero chemical pesticides, zero fuel or oil for farm machinery, and zero bulk transportation costs with AGS’ CEA solution. Their system provides seed to sale security, scalability, consistency due to year-round production, cost control, product safety and purity by eliminating environmental variability. The result is a 100% pure and organic product.
Continuing on the topic of Controlled Environment Agriculture for produce production reminds us of another company considered by many to be a leader in the cannabis space, TerraTech Corp. (OTCQX: TRTC). Arcturus’ ability to diversify revenue streams to include everyday consumer produce and not be solely reliant on cannabis is similar to that of TerraTech’s. Arcturus’ ability to have produce grown in their system be sold to local retailers like Whole Foods gives them a major advantage over companies whose revenue is solely dependent on cannabis sales.
Commercial Lighting & Growing Supplies
The Company’s Growthstar brand of LED lights has been top rated for nearly five years. Their newest Chip-on-Board (COB) and Multiple-Chips-on-Board (MCOB) technologies are proving to be game changers in the world of LED grow lights with a remarkable 50% reduction in power use. AGS currently develops and distributes such LED based lighting solutions to both commercial and residential markets.
AGS focuses on delivering cost efficient lighting to North America via advanced e-commerce sites wholly owned and operated internally. Their COBGrowLights.com and LEDCanada.com websites cater to large and small greenhouses and indoor cultivation individuals as well as business-to-business customers. These online properties attract thousands of customers per month.
Future Business Development & Expanding Cash Flows
Another part of the AGS business plan is to rapidly expand by building CEA farms in urban markets across North America. At the same time, AGS will work towards identifying and acquiring additional complementary agricultural technologies. Their acquisition process is seamless AGS’ project portfolio includes standalone ventures that can benefit from a variety of technologies. Implementing a roll-up of agriculture technologies is a highly efficient and scalable model, which can reach economies of scale quickly.
AGS is already in advanced discussion with four targeted projects in the Eastern US. Each license deal is valued at over $3M. And three of the four are New Market Tax Credit (Federal Government Program) Projects in partnership with a strategic financial partner. Two of the projects are already passed the site/permitting process and are onto funding before beginning site construction.
The Tilray Touch
AGS recently announced John Sweeney as Director and COO. Why is this important? Mr. Sweeney has 16 years of direct current Good Manufacturing Practices. He has operations experience with industry leading biotech companies like Pfizer, Wyeth, Genzyme and most recently served as Vice President of Operations at Tilray. For those unfamiliar, Tilray is a 60,000 square foot federally licensed Canadian medical cannabis operation on Vancouver Island. Their facility cost $20 million to build out and at maximum capacity can produce 9,000 pounds of cannabis a year. Tilray sells their medicine for $10/gram so at maximum capacity will be generating approximately $40 million in revenue a year.
Mr. Sweeney has extensive knowledge and experience in the requirements in regulated for manufacturing for commercial and clinical products and served as liaison for auditing regulatory agencies including the FDA and EMA.
Share Structure Ripe for Investment
With 41,596,247 shares issued and outstanding and a closing price of $0.135 on October 3, 2016, AGS has a market cap just over $5.6 million. And with management and insiders holding 62% of the total outstanding, AGS could be an attractive investment for institutional investors searching for value in the Canadian marijuana industry.
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