One speculative cannabis sector play that has started to see some ramping attention in recent weeks after potentially game-changing catalysts is MCTC Holdings Inc (OTCMKTS:MCTC), now doing business now as Cannabis Global, Inc. (MCTC).
The stock has seen its average transaction volume more than quintuple in the past month as the company transitions from development-stage to commercial-stage operations. We like to key in on this type of transition because that’s often when you see some proper directional behavior start to rear up in the trading tape. In this case, the company has noted a growing pace of major deals and a clear verticalization of operations built on a strong foundation of IP rooted in a number of patents in process at the USPTO.
As the deals pile up, the market will eventually have to start to price in the coming burst of revenue growth. Given the thin tape, that pricing-in process could have some pretty dramatic consequences for the technical posture that defines this stock at present.
The California Cannabis Juggernaut
MCTC is ultimately contextualized by a roaring cannabis market mired in a shortage of supply across products in the state of California. This state of affairs keeps popping up from different sources. The product is short on delivery. Customers are increasingly pining and unsatisfied – and probably acclimating to the possibility of higher prices.
That’s a demand-driven boom. And this is largely a commodity market in spirit. MCTC is one of the only true IP-driven stocks in that space. Management notes that this R&D advantage is beginning to generate significant revenue growth opportunities this quarter.
According to a recent corporate update, in total, the company has recently filed six patents on cannabinoid extraction technologies and delivery systems. Management is currently working with patent counsel to protect various other technologies it has developed or is currently developing, including its programs pertaining to cannabinoid glycosides, polymeric cannabinoid nanoparticles and nanofibers, and its hemp extract-based alcohol replacement technologies.
Growing Deals
MCTC has been establishing traction with a growing set of partners. As a case in point, the company recently announced the signing of a licensing agreement with Sacramento-based BudCars Cannabis Delivery Services, in conjunction with Sugarmade, Inc. (OTCQB: SGMD), whereby BudCars will make use of the Company’s unique cannabinoid infusion technologies for the production of super-premium, highly bioavailable cannabis edibles for the regulated California marketplace. BudCars recently announced that it is on pace to record more than $30 million in annualized sales of cannabis products in 2020. BudCars is also in the process of expanding into the Los Angeles regional market.
In addition, the company just put out word of the signing of a definitive, five-year agreement for the production of cannabis edibles and beverages in conjunction with licensed California cannabis operator, Magnolia Extracts, LLC of Lynwood, California.
“This deal represents an enormous escalation in terms of our positioning in the California cannabis edibles and beverages marketplace,” stated Arman Tabatabaei, CEO of Cannabis Global. “We will be working closely with Magnolia and look forward to a rapid path to market for these innovative products. We have strong reason to believe we will see a relatively quick expansion in distribution footprint given the prepotency of demand we are seeing among potential distribution partners already. The Magnolia site has recently been modified to our specifications and is now complete. We are looking forward to moving out of our initial stage of development and into full-scale production. This Agreement is a game-changing development with strong tangible implications for our performance this year.”
There are hints of additional agreements in the works.
And most recently, the company announced more verticalization to put it directly into the cannabis delivery game via the signing of an LOI with Whisper Weed Delivery of Los Angeles, a leading California cannabis delivery services provider, wherein Cannabis Global will provide management services in exchange for 51% of the operating profits derived directly from Whisper Weed’s cannabis delivery services throughout the entire greater Los Angeles regional marketplace.
“We continue to verticalize operations from an IP-driven base, stacking a core technology and R&D edge under growing manufacturing operations, and now we have added an essential piece of that puzzle: an established leadership position in cannabis home delivery in the largest municipal cannabis market in the world,” commented, Arman Tabatabaei, CEO of Cannabis Global. “Whisper Weed is cash-flow positive, profitable, and growing rapidly in terms of volume and end-market footprint. Our aggressive growth strategy continues to move forward ahead of schedule. And this expansion into the rapidly growing California cannabis delivery space is an integral part of that plan.”
Upside Potential
All of this has happened seemingly under the radar in terms of trading action in the stock. The trading action in MCTC shares has been muted, but volume is picking up, which suggests the smart money – and possibly insiders – has started to position here ahead of recognition of this progress.
Once again, the shift from R&D operations to commercial deals is the inflection point that marks the beginning of coming announcements about genuine sales growth and the monetization of the company’s core value proposition.
The cannabis space has been beaten down, but a macro view here – especially in the regional California market – seems to line up well with the idea that headwinds are becoming tailwinds. Given the timing from the top down, and the company’s establishment of tangible commercial activity, we see the potential for a prepotency in share pricing prospects over the very near term for Cannabis Global, Inc. (MCTC).
