Isracann looks to be a first mover in the Israeli cannabis boom

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In Canada, if you were one of the first companies to be granted a license from Health Canada, you would have benefited from the rising demand of legal cannabis and you would probably be worth more than $1 billion.

Having the ability to being prepared is a key trait of any successful person or business so we are not surprised by the massive increase in the number of companies competing for an Israeli cannabis license. Having an early mover advantage is extremely significant and this is especially true when it comes to the cannabis industry.

Earlier this year, the Israeli government approved the export of cannabis raw materials, such as oils and tablets. Regulators are currently drafting specific rules and regulations that will guide the implementation of the legislation. Many experts believe that these new regulations could come into effect in the fourth quarter of 2019 and this would significantly benefit the companies that are levered to this market. This development came shortly after the Israeli Parliament passed the 16th amendment to Dangerous Drugs Ordinance that concerns the governance and regulatory aspects of exporting medical cannabis from Israel.

When you actually analyze the cannabis export opportunity in Israel, the numbers are very impressive. Early estimates from leading cannabis experts suggest that the Israeli export market could be more than $1 billion per year. This represent a huge growth opportunity and we believe that the country’s plan to issue a limited number of licenses will be a major catalyst for the companies that have leverage to this emerging cannabis market.

During the last year, Isracann Biosciences has been working tirelessly in order to be granted an Israeli cannabis license and gain an early mover advantage on a cannabis market with very attractive economics. When it comes to analyzing companies, you want to look into the amount of revenue generates as well as the cost to generate that revenue.

When it comes to cultivating cannabis, water and power are the two most significant expenses. Israel has the optimal climate for cultivating premium cannabis and this is probably the most attractive aspect of this market. When you look at the economics associated with cultivating cannabis in Canada, you will see that it costs approx. $1.50 to $2.00 (on average) to produce each gram of cannabis. In Israel, producers are able to grow cannabis for approx. $0.40 per gram and this is significant for a business that aims to be profitable.

Highly Focused on the European Cannabis Market

Isracann has been working on further strengthen its balance sheet through a private placement, having fully funded the buildout of 232,900 sq. ft. of cultivation facilities that can produce approx. 23,500 kilograms of premium cannabis on an annual basis. One of the most important aspects of Isracann pertains to its facility and how it will allow them to capitalize on the international cannabis market. The company’s facility is planned to be an IMC-GAP/GSP certified facility that has been constructed to meet all regulatory standards and we find this to be significant.

Management expects these facilities to be completed by the end of the year with an initial production capacity of 11,500 kilograms per year. In the long-term, the management team plans to double production capacity to 23,500 kilograms per year. We believe that the hybrid greenhouse model has several advantages over indoor purpose-built facilities (i.e. precise environmental controls and containment) and we are favorable on this aspect of the story.

Although the domestic cannabis  opportunity is significant, the company’s long-term goal is to become a leading supplier to European markets and we believe that this is the right approach. We are favorable on this strategy as the European Union’s population is greater than that of the US and Canada combined. When compared to the market in North America, cannabis in Europe tends to command a higher price and we find this to be significant. Over the next year, we expect to see the company report several significant developments and are favorable on the management team’s strategy when it comes to targeting specific markets.

An Opportunity with Significant and Visible Catalysts

In Q1 2020, Isracann expects to complete its first harvest and plans to ramp up its production levels from there. The facility offers the company significant room to expand and we are favorable on this. We expect to see increasing demand for Israeli cannabis products and the focus on increasing production capacity is important for the company’s growth potential

During the last year, Isracann has significantly advanced its fundamental story and this is an opportunity that we are watching. With a massive cultivation footprint and a four-pronged business plan, Isracann could begin generating revenue in early 2020. We are going to monitor how the team continues to execute on its expansion and will monitor how it further positions itself to capitalize on the European opportunity.

Isracann is uniquely positioned to become a leader in Israel’s emerging cannabis industry. The country’s long-term potential to be a leader in R&D and a well-positioned exporter to Europe makes this a company to watch. Over the next year we expect to see Isracann secure several major export cannabis products to the European Union and we have been highly favorable on the German market.

Isracann is raising additional capital to further expand its position in Israel and is one of the few companies to have legitimate leverage to the Israeli market.

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