TGOD: A gblobal organic cannabis leader in the making

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During the last month, The Green Organic Dutchman (TGOD.TO) (TGODF) has been under pressure and has been trading lower with the market. The Canadian organic cannabis producer appears to have hit a bottom, moving higher off its $4.88 low to close at $5.54 on Friday. TGOD is one of the top five largest licensed medical cannabis producers in Canada, with over $350 million raised to date, the largest cannabis IPO to date, and one of the most unique, differentiated strategies in the space.

The company has differentiated itself from the competition by offering craft style premium organic cannabis. This style of cannabis is healthier for the consumer and better for the company as it sells for a higher price, increasing margins.

We have been monitoring TGOD since inception and are favorable on the long-term opportunity for many reasons, including, a funded capacity of 170,000 kg’s produced from approximately 1,500,000 sq. ft. of state-of-the-art purpose-built hybrid facilities. The company boasts an international expansion across Europe and Central America, a strong balance sheet with approximately $300 million in cash, strategic partnerships with some of the largest companies in the world, and a diverse management team with a proven track record.

Focused on the Cannabis Beverage Market

In late June, TGOD expanded its focus on the cannabis infused beverage market and added a 287,245 sq. ft. purpose-built facility on its Valleyfield property. This facility will be capable of producing 40,000 kg’s of premium organic cannabis that will be dedicated to TGOD’s Beverage Division.

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This facility is being constructed to support TGOD’s previously announced Global-Strategic-Launch-Into-the-Beverage-Industry. This includes a manufacturing campus designed to conduct strain-specific studies, develop organic intellectual property, and create consumable optimized CBD/THC strains. Due to operating efficiencies within the 72.4-acre Valleyfield property, permits and cultivation licenses granted, TGOD expects a significantly reduced construction timeline and budget. The company will fund this buildout by using excess cash raised in its IPO and subsequent bought deal financings.

TGOD’s Beverage Division team has a unique understanding of the strict disciplines required for the large-scale, lean-manufacturing of base ingredients used in a multitude of higher margin products. The process begins with TGOD’s breeding facility, moves to the purpose-built cultivation facility, and is followed by the state-of-the-art 40,000 sq. ft. Innovation Centre. TGOD’s beverage production facility will fill the market’s current void and supply premium organic cannabis for R&D specific development for CBD and THC infused beverages.

An Organic Low-Cost Cannabis Producer

TGOD is led by a seasoned management team with a diverse skillset in all aspects of the company. They structured each financing, each investment, each strategic investment, the IPO, and all free trading dates to protect the company from future price compression. Not only has the company attracted significant investment from industry leaders such as Aurora Cannabis, but TGOD has secured strategic partnerships with some of the largest companies related to cannabis, such as power, construction, facility design and engineering, to significantly lower the cost of production.

The relationship with Aurora Cannabis (ACB.TO) (ACBFF) and Aurora Larssen Projects Inc. (ALPS) will provide value added services to TGOD throughout the build-out of the Canadian facilities. ALPS has almost completed Aurora Sky, so the amount of time, effort, and money TGOD will save with the help of the largest, most innovative cannabis company in the world, will be significant.  ALPS has built over 1,000 facilities around the globe, and is known for its high-technology, highly automated facility design to deliver massive capacity, production efficiency, ultra-low-cost operating costs, and strong margins.

International Angle

It has long been known that TGOD’s domestic expansion is fully funded. The company has announced a number of acquisitions and investments in countries around the world including Jamaica, Denmark, and based on their business plan of operating in 12 countries by the end of 2018 on 3 continents, we feel many more.

Another unique strategy is TGOD’s approach to licensing deals. TGOD understands how the states have become land locked, and unable to cross state boundaries with their products or technologies. However, TGOD, by signing several significant and exclusive licensing deals is able to export top US brands and technologies, to Canada. They can effectively use TGOD’s land, license, facility and team to manufacture their products legally, then ship them across Canada (once legalization for edibles, beverages, and other novel delivery methods is approved) and internationally. TGOD can own the sales and distribution channels for top US brands.

The company’s operations in Jamaica are equally impressive. Less than two weeks ago TGOD opened, with its partnership with Epican Medicinals, the countries second legal dispensary ever, and the first legal dispensary in Kingston. TGOD owns 49% of Epican, where they grow organic cannabis, extract product into oils, manufacture products, then sell to local Jamaicans. This is a completely vertically integrated company with plans to export premium Jamaican grown organic herb to global markets.

A Long-Term Opportunity

TGOD is one of the most well rounded, well capitalized and well run companies in the cannabis space. With big alcohol, big tobacco, and big pharma circling the industry, we remain optimistic at what the future holds for the Dutchman. Molson Coors and Constellation Brands have both made significant entries into the space, and companies like TGOD with a strong team, balance sheet, and focus on cannabinoid infused beverages are ripe for take-overs, or at a minimum, a strategic partnership candidate for a major.

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