LiveWell (LVWL.V) bets that CBD is not avocado toast

Cannabinoid (CBD) – a non-psychoactive isomer of THC – has become such a sizzling hot commodity that Chris Burggraeve, a former Coca-Cola (KO.NYSE) executive, recently called it the “new avocado toast”.

LiveWell (LVWL.V) is a hemp and cannabis company focused on advanced research on CBD and other cannabinoids. It also develops and distributes prescription, consumer health and wellness products.

A parade of celebrity endorsers (Mandy Moore, Willie Nelson, Dr. Sanjay Gupta) has reinforced the notion that CBD might be style over substance.

However, a tsunami of medical and consumer data suggests that CBD has real medicinal value.  Certainly, it is gaining traction in the global wellness marketplace.

The World Health Organization (WHO) recommended this summer that CBD be de-scheduled across 194 nations.  This fall, the U.S. Drug Enforcement Administration (DEA) removed CBD from Schedule 1, its most restrictive class of drugs.

We believe that investing in CBD is a wealth creation opportunity.

LiveWell has greenhouses under construction in Ontario and Québec, and is supported by business partners such as Canopy Growth (WEED.T) and Canopy Rivers (RIV.V).

On October 29, 2018 LiveWell released operational highlights from the 1st half of 2018:

  • Raised $20.1 million
  • Began trading on the TSX.V
  • Ottawa City Council gave permission to grow cannabis
  • Acquired 458 acres of land and building in Litchfield, Québec to become LiveWell’s future Research and Innovation Center.
  • Began construction of two hybrid greenhouse production projects in Ottawa, Ontario, and Litchfield, Québec.
  • Entered into a strategic partnership agreement with Canopy Growth and Canopy Rivers to support and develop the Ottawa and Litchfield projects.

On October 17, 2018 LiveWell’s researchers published a list of “17 cool facts about CBD”.

On October 5, 2018 LiveWell announced its intention to acquire Acenzia, a Natural Health Products company.

The acquisition boosts LiveWell’s product innovation platform, “to meet current and future consumer needs for hemp and cannabis health and wellness products.”

Acenzia highlights:

  • A global-patented research model for pre-clinical trials
  • Generated $2.9 million in revenue for the 4-months ended August 31, 2018
  • Generated $5.6 million in revenue for the fiscal year ended April 30, 2018
  • Health Canada-certified, NSF GMP and NSF GMP for Sport-registered manufacturing facility

Keep in mind these Acenzia revenues were obtained before the company turned its scientific braintrust to CBD.

Located 15 kilometres from the Canada-U.S. border, in Tecumseh, Ontario, Acenzia researches and manufactures next-generation natural health products, such as powders, sports drinks, functional foods, probiotics and other therapeutics.

Acenzia’s 36,000-square-foot is certified by Health Canada, and is an FDA-registered facility.

Acenzia is currently applying its global-patented zebrafish research model to wider applications, including cannabinoids.

Transaction Summary

  • Total cost is $20 million
  • $2 million cash paid at closing and $18 million in shares
  • $8 million of the $18 million in common shares will be held in escrow
  • Escrow shares will be released subject to 2019 profitability milestones

On October 23, 2018 LiveWell announced that is has hired a master grower and quality assurance and compliance manager with deep roots in the cannabis and cultivation sectors.

Gary Sidhu, Master Grower is a 20-year greenhouse vet, most recently running a large-scal Health Canada-licensed cannabis grow-op. Mr. Sidhu has been involved in numerous horticultural and floricultural research trials.

Sajjad Ahmad, Quality Assurance and Compliance Manager has a track record in molecular biology, plant breeding & genetics, and agronomy. Mr. Ahmad has two Master of Science degrees, in Plant Breeding and Genetics.

“In Quebec, which still has only one sales license, Livewell has a 1m sq. ft. hybrid greenhouse project with the first 100k due to be completed in Q4,” wrote Chris Parry this summer, shortly after the company went public.

“In Ottawa, they’re retrofitting 540k of greenhouses that are already built and operational in the growing of consumer vegetables.

LiveWell already has a deal in place with Canopy Growth Corp (WEED.T) to supply 20% of their product to them for the next twenty years, and there’s $20m available to borrow from that outfit if Livewell execs should decide they need it.”

The “avocado toast fad” has already fizzled (it’s impossible to order it without being “ironic”).

Meanwhile, demand for CBD is exploding – while the medical community climbs cautiously on board.

“Cannabidiol (CBD) passes stage 3 clinical trial for treatment of epilepsy in children.” NEW ENGLAND JOURNAL OF MEDECINE, MAY 2017

“Nearly Half Of People Who Use Cannabidiol Products Stop Taking Traditional Medicines” FORBES, AUGUST 2017, Dr. Perry Solomon, the Chief Medical Officer of HelloMD

“Autism added to the list of CBD’s medicinal benefits” THE NATIONAL ACADEMY OF SCIENCE, OCTOBER 2017.

“Either LiveWell will have an eager customer/investor/partner in the world’s largest public cannabis company for the next few decades,” wrote Parry, “or Canopy will come take them out. Either option is pretty solid business.”

The Brightfield Group of Chicago estimates the North American market for CBD could reach US$22 billion by 2022.

LiveWell is currently trading at .67 with a market cap of $87 million.

Full Disclosure: Equity Guru has no commercial relationship with LiveWell.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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