CHF's Byte-sized Review: May 1, 2024

The evolving landscape of cannabis legalization across the globe presents a fascinating shift in cultural and legal perceptions. 50 years ago, cannabinoids and similar hallucinogenic substances were not only accessible but also quite affordable, however, the risk of a criminal record thwarted innovation, especially in the medical arena. What captivates me now is the diverse range of products that have emerged recently—options that were unimaginable back then.

StickIt Technologies Inc. (CSE: STKT), a recently listed Company, has been developing innovative methods to ingest cannabinoids. They do not harvest cannabis or hemp, instead, they are researching, developing, and patenting safe, efficient, and effective ways for the delivery of cannabinoids to both recreational and medical customers.

Its first product called StickIt looks like a toothpick that can be inserted into any kind of pre-roll to get a specific dose of THC/CBD. Developed in Dalton, Northern Israel by a brilliant inventor, co-founder, and shareholder Asher Holzer, Ph.D., M.Sc., who has patented many products in the past; this device provides cannabinoid consumption without cultivation!

Pre-rolled cannabis joints offer convenience and consistency to consumers who prefer ready-to-use products. While they currently have slightly lower profit margins compared to other products, the Company’s StickIt product will improve those margins considerably.

There's a growing recognition of the potential therapeutic benefits of cannabis compounds like CBD (cannabidiol) and THC (tetrahydrocannabinol). This has led to an increase in medical cannabis use and the development of products targeting specific health and wellness needs, such as pain relief, anxiety management, and sleep aids.

StickIt's precise dosing options cater to a wide range of effects, including pain-killing, energizing, focus, sleep improvement, etc., and can be tailored to meet local preferences and regulations.

Following StickIt, the Company introduced SipIt. Now, consumers can simply use a SipIt straw, a unique, patented, applied solution, with their favourite beverage and within minutes enjoy imperceptible delivery of cannabinoids while doing so. Finally, no bitter flavours, no gummy chemicals, and no smoke - just the recreational benefits of cannabinoids.

Cannabis-infused edibles, including chocolates, gummies, baked goods, and beverages, are in high demand among consumers who prefer smoke-free consumption methods or are looking for longer-lasting effects. Edibles often have higher profit margins compared to dried flowers due to their added value and convenience. These statistics bode well for the Company’s new product SipIt.

As more countries consider or implement cannabis legalization, there's potential for significant growth in international markets. Companies are exploring opportunities to expand their operations globally, albeit navigating diverse regulatory frameworks and cultural attitudes toward cannabis.

Several factors contribute to the profitability of cannabis products, including consumer demand, regulatory environment, production costs, and market competition. While profitability can vary depending on these factors, some products tend to be more consistently profitable in the cannabis industry.

Global trends may further influence U.S. cannabis policies, making it an exciting yet nail-biting time for industry watchers and participants alike. The U.S. cannabis industry is experiencing substantial growth, driven by increasing public and political support. With recreational marijuana now legal in 24 states and Washington D.C., and medical marijuana permitted in 38 states, the market potential is expanding. Notably, public approval for marijuana legalization has reached around 90% (January 2024 Pew Research Center) signaling a shift in societal attitudes. The industry has demonstrated robust economic impact, supporting more than 440,000 full-time jobs and achieving a 5.4% growth rate in 2023 (2024 Vangst Jobs Report). Additionally, the U.S. federal landscape is evolving, with potential rescheduling of marijuana legislation expected, which could further stimulate industry growth and open new markets. This environment presents a compelling opportunity for North American investors looking to capitalize on the burgeoning legal cannabis sector.

The cannabis market's evolution is fueled by increased recognition of cannabinoids like CBD and THC for their potential health benefits, impacting industries from medical to recreational. As legalization spreads, products like edibles and pre-rolls remain popular, with innovations like StickIt and SipIt poised to enhance profitability and consumer appeal.

Disclaimer

CHF Capital Markets has prepared this blog for general information purposes only. This document should not be considered a solicitation to buy or sell securities in the companies discussed herein. The information provided has been derived from sources believed to be reliable, but cannot be guaranteed. This blog does not take into account the recipients’ investment criteria, financial condition, or financial goals of individual recipients and other issues such as jurisdictional issues and/or legal restrictions that may exist for certain persons. Recipients should rely on their own due diligence and take their own professional advice before investing.