The California cannabis industry ecosystem is in a state of complete disarray. An industry that has been projected to generate more than $6.5 billion (Arcview Market Research) in revenue by 2020 remains grossly inadequate in terms of services provided throughout its ecosystem. Shortcomings in the cannabis industry in the state are apparent in a wide range of service sectors including branding and design, transportation and logistics, and sales.
TransCanna Holdings, Inc. (CSE: TCAN) (Frankfurt: TH8) is a cannabis branding, transportation, and distribution company in California that assists cannabis cultivators and manufacturers in attaining market recognition by end-users and consumers so that they can become profitable and financially stable companies.
TransCanna Holdings Company Overview
TransCanna specializes in assisting clients who are farmers and manufacturers to find matching customers based on their place in the cannabis value chain. The company currently delivers branding and design services and expects to launch distribution, transportation and sales services by the end of the first quarter of 2019. By providing a full array of services, TransCanna fulfills critical elements of the cannabis ecosystem and provides clients with a competitive edge.
CEO & Chairman James Pakulis has three decades of experience working with public and private entrepreneurial companies in a variety of emerging and high growth sectors. Previously, Mr. Pakulis was chairman and chief executive officer of General Cannabis Inc., which wholly owned WeedMaps. Mr. Pakulis oversaw the growth of General Cannabis from zero revenue to over $16 million in annual revenue in less than two years. He is also the former president of Lifestyle Delivery Systems (CSE: LDS) (OTCQX: LDSYF), a vertically integrated cannabis related entity operating in California.
Partnership and Collaboration
TransCanna’s services are entirely focused on connecting cannabis growers, manufacturers, and end-users and customers. The company’s supply chain and branding team are dedicated to forging relationships and closing contracts with clients in order to put TransCanna in a pivotal role in the California cannabis ecosystem. By year-end 2018, TransCanna had reviewed more than 450 cannabis companies and performed advanced due diligence on 48, showing its commitment to choosing only the best partners and candidates who can leverage TransCanna’s services to reach industry leadership status.
California Cannabis Industry Overview
California is the most populous state in the United States, with 39 million residents and 240 million visitors per year. The state’s cannabis market is larger than the markets of seven western cannabis states combined, and legal marijuana sales in California totaled $2.5 billion in 2018 according to analyst GreenEdge. The total sales number for 2018 in California is lower than anticipated by most organizations for the simple fact that most entities as of January 1st, 2019 were not yet state licensed. As an example, at the end of December, a manufacturer could sell their products to approximately 2,500 dispensaries in California. Starting in January, that number was less than 50. However, eleven months later, as of February 2019, there are now 640 state-licensed dispensaries. Nevertheless, the statewide cannabis industry still suffers from a lack of integration across its supply chain that would provide growers, manufacturers, and customers with optimal efficiency and quality to help the industry reach its full potential. TransCanna goal is to meet the need for integrative services in California and beyond, proving its model, providing value to customers, and delivering returns to its investors.
Competitive Advantage and Strategy
TransCanna is establishing its sustainable competitive advantage across its range of services. It is doing this through a combination of organic growth led by its management team and through their strategic acquisitions of known brands and their relationships.
Phase 1: Branding
TransCanna offers cutting-edge branding and design to its customers, having entered into an agreement to acquire 23 exclusive Branding & Design contracts in April 2018. This is a catalyst allowing the company to offer distribution, transportation, marketing, and sales to its new manufacturing clients, pending receipt of appropriate licenses and permits.
Phase 2: Distribution & Transportation
TransCanna anticipates creating a distribution network throughout California where any client in the state will be within an approximately three-hour drive from one of its hub facilities. TransCanna has targeted the following strategic locations for their future facilities: North San Diego; Adelanto; Culver City; Los Angeles, and Sacramento. In December 2017 TCM Distribution Inc. (“TCMD”), an affiliate of TransCanna, received its medical marijuana distribution and transportation permit from the city of Adelanto, and a temporary distributor license from the State of California in January 2019.
Phase 3: Geographical Expansion
TransCanna is not limited to California and anticipates taking its knowledge of proven infrastructure and services to other states with similar market dynamics that have taken hold in California. Upon demonstrating its value in the largest state in the U.S., the management team will apply its knowledge readily once familiar with relevant legal and logistical differences in markets in the West and elsewhere.
TransCanna has issued 16.9 million shares on the CSE, with all investor shares from previous financings on 6-month hold from the IPO date. The company has issued 7.35 million warrants, with 2.725 million exercisable at CDN$1.00 and the remainder exercisable based on attainment of revenue targets. TransCanna has also issued 1.5 million options at CDN$.50.
The company completed its IPO and began trading on January 9th. The IPO price was CDN$0.50 and closed on the first day of trading at CDN$0.95. As of the close of Friday, February 1st the Company closed at CDN$2.37.
Comparable listed companies include KushCo Holdings Inc. (OTCQB: KSHB), CannaRoyalty Corp (CSE: OH) (OTCQX: ORHOF), Ianthus Capital Holdings Inc. (CSE: IAN) (OTCQX: ITHUF), Planet13 Holdings Inc. (CSE: PLTH) (OTCQB: PLNHF), and Nutritional High International Inc. (CSE: EAT) (OTCQB: SPLIF), all of which have more than 4x the number of outstanding shares compared to TransCanna.
TransCanna (CSE: TCAN) 1 Month Chart
Image source: Shutterstock
Chart source: Barchart
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