Earlier this month, we highlighted Hemptown USA as one of the next big hemp opportunities and today, we want to provide an update on the company as it gears up for its initial public offering.
Hemptown is led by a management team with a proven track record of success and we are bullish on the growth prospects associated with the existing operation. Over the next year, the company plans to significantly increase the amount of production capacity through acquisitions and strategic partnerships and we are favorable on how the team has been executing on this aspect of the business.
One of the reasons we are excited about Hemptown is due to focus on the production on high-value cannabinoids. In 2019, the company plans to cultivate more than 500 acres of rare high-cannabigerol (CBG) genetics. Although we have heard a lot about cannabidiol (CBD), only a few companies have been focused on CBG, which is the pre-cursor cannabinoid to CBD and THC.
During the last year, we have seen a significant increase in the number of companies focused on the CBD market and expect to see significant price compression as a result of this. By focusing of CBG (as well as CBD), we expect Hemptown to be better protected against future price compression. There is significant demand for CBG and we want to provide a breakdown on this burgeoning opportunity.
An Established Leader that is Focused on Growth
Hemptown has established operations in southern Oregon which is not too far from the California border. The company has eight years’ experience operating in the region and has a 40,000 sq. ft. harvest processing facility. Currently, Hemptown is utilizing proprietary technology to cultivate hemp in Colorado, Kentucky, and Oregon. Last year, the company dried and stored 110,000 pounds of hemp and expects to dry and store more than 3 million pounds in 2019.
With three states, Hemptown will cultivate on 1,500 acres in 2019 and expects this number to jump higher on a year-over-year basis. In 2019, the company expects to produce 1 million pounds of CBG and 200,000 pounds of CBD. Next year, Hemptown will enter the California market and we are favorable on the growth prospects associated with this opportunity.
Previously, we stated that we were favorable on the growth prospects associated with the existing operation and want to provide more context on this. Currently, it costs around $20,000 per kilogram of CBG and this is significantly higher than the $4,000 price tag associated with a kilogram of CBD. Next year, the cost per kilogram for both CBG and CBD are expected to decrease and Hemptown will benefit by focusing on the production of hemp that is high in both cannabinoids.
HempTown Acquires Turn key Nutraceutical Business
In July, Hemptown announced the acquisition of Kirkman Group acquiring the assets comprising the FDA licensed, cGMP certified operating nutraceutical business of the Kirkman Group based in Lake Oswego, Oregon. The transaction includes all of the management team, production equipment, formulations, proprietary intellectual property, current sales channels, and fulfillment centers. We find this acquisition to be quite intriguing as it adds scale to a major vertical and is essentially turn key.
Among the Acquisition Deal Highlights:
- Fully operational FDA licensed, cGMP 25,000 sq. ft. nutraceutical manufacturing facility, with over 1,200 SOPs.
- Kirkman has been in FDA good standing and operation, supplying world class formulations for children with autism and special needs, for 70 years.
- Kirkman has $6M in existing annual revenue and is growing.
- Former owner and Chairman David Humphreys, a board member on the American Academy of Cannabinoid Medicine (AACM), will remain with Hemptown in a role to be determined by the parties, guiding Hemptown’s direction within the community of doctors who focus on cannabinoid medicine.
- The Kirkman facility is comprised of state-of-the-art formulations and equipment to facilitate precision dosage CBD & CBG liquid fill tinctures, creams and topicals, gel caps, and gums/edibles.
- With the existing management team and formulation experts still employed, Hemptown will make a seamless transition to fast-track CBD/CBG product formulations into Consumer-Packaged Goods for wholesale and retail markets.
There are immediate synergies that Hemptown can create by leveraging Kirkman’s Ultra Tested ® protocols for testing all raw ingredients. Ultra Tested® is the highest standard of purity testing in the nutritional supplement industry, and no other supplement company in the world offers this degree of purity testing. Hemptown will be one of the first companies to offer product liability insurance on all future Consumer Packaged Goods produced at the facility.
Highlighting the Expansion and Extraction Opportunity
In Kentucky, Hemptown has been nothing short of an execution story and has secured 19 contract farming partners in the state. Over the next year, we expect to see the company secure addition farming partners across the US and expect the work that the company has done on the genetics side of the business to play a big part in this.
Hemptown provides all of the genetics that are being used by their partners and we believe this is crucial when it comes to maintaining consistency. We believe that this provides the company with a significant differentiator when it comes to securing additional farming partners and we are bullish on this aspect of the story.
An important aspect of the story is related to the extraction opportunity and this is something that our readers should be aware of. Hemptown is the process of constructing a primary extraction facility in Kentucky that will mirror the operation in Oregon. This company extracts cannabinoids from its state-of-the-art cGMP (current Good Manufacturing Practices) facility and ISO standard clean rooms which provides a significant competitive advantage when it comes to looking at Hemptown as a strategic partner.
An Execution Story to be Watching
Going forward, the name of the game for Hemptown is execution and we have a high conviction level when it comes to the management team’s ability to create value for shareholders. During the last year, there have been several major new listings coming out of the US and Hemptown is one to be aware of.
At 1,500 acres, Hemptown could generate upwards of $200 million in revenue which would make it the largest hemp company in the world. Going forward, the company plans to significantly increase production capacity and the number of acres it is cultivating on. Hemptown has a strong balance sheet and is well positioned to take advantage of inorganic and organic growth opportunities.
To learn more about how Hemptown is positioned to be a CBD leader, please email firstname.lastname@example.org.
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