Canbiola, Inc. Vertically Integrated CBD Company With Strong Revenue Growth

Canbiola, Inc. (OTCQB: CANB) develops, produces and sells products and delivery devices containing Cannabidiol (CBD). It is important to note, Canbiola manufactures THC-Free CBD Isolate products such as oils, drops/tinctures, gels, creams, moisturizers, chews, and capsules. THC free means Canbiola’s CBD is made from hemp and not cannabis. End Quote

(1888PressRelease) January 31, 2020 - Canbiola posted revenues of $1,760,761.00 for the first nine months of FY 2020, up 374% from the first nine months of fiscal 2019 revenues of $371,553.00.

Canbiola manufactures organic, non-GMO CBD products in their own manufacturing facility in Lacey, WA. Their 100% legal CBD products are distributed through doctors, retailers, online, and proprietary vending machines.

Canbiola owns 51% of Green Grow Farms, which is licensed by New York under the Hemp Research Pilot Program, has two hemp farms, and yields 12,000 pounds of dried biomass.

Canbiola's Duramed subsidiary provides patients a wearable low-intensity ultrasound bioelectronic device utilizing CBD that aids healing of musculoskeletal injuries and reduces chronic pain without opioid pain medication.

Canbiola recently entered the private labeling business and will utilize $40 million worth of wholesale manufacturing capacity in its Lacey, WA facility, so other retailers can enter the CBD market.

Canbiola, Inc. (OTCQB: CANB) develops, produces and sells products and delivery devices containing Cannabidiol (CBD). It is important to note, Canbiola manufactures THC-Free CBD Isolate products such as oils, drops/tinctures, gels, creams, moisturizers, chews, and capsules. THC free means Canbiola’s CBD is made from hemp and not cannabis. This means Canbiola’s products can be sold in all 50 states. Many competitors’ products are made from cannabis CBD. Since cannabis is still illegal on a federal level, these products are illegal in most states. https://canbiola.com

Not only are Canbiola’s products legal in all 50 states, they are made in the Company’s state-of-the-art manufacturing facility in Lacey, WA, they are organic, and they are certified for purity and accuracy by third-party laboratory verification. Canbiola management holds the company to a higher standard and all of their products are non-GMO, free of impurities and contaminants, and formulated with the finest ingredients to the highest manufacturing standards. Canbiola management has set its standards higher than what they anticipate the forthcoming government regulations will mandate and has a goal of getting only the best products in the hands of the consumer. Any good business person will tell you that quality is critical to satisfying your customers and retaining their loyalty, so they continue to buy from you in the future. In our opinion, quality products make an important contribution to long-term revenue and profitability and enable a company to charge and maintain higher prices.

Important Corporate Developments

There are two recent corporate developments of key importance. First, Canbiola has announced plans to apply for a NASDAQ listing. Obviously, the Company is moving towards this aggressively since the board approved a reverse stock split and added several new directors in order to have an independent board. Both of these developments are paramount in satisfying the criterion for a potential NASDAQ listing. The second point is that on January 15, 2020, Canbiola, Inc. and H.C. Wainwright & Co., LLC executed a Letter Agreement pursuant to which Wainwright agreed to provide certain exclusive financial advisory services to the Company in connection with a debt financing contemplated by the Company. This is important, since many investors shy away from companies that do a reverse stock split. The reason most companies do a reverse stock split is that there is a convertible debt holder driving the price down. This is not the case with Canbiola. Canbiola will be reversing their stock to meet the NASDAQ requirements and doing a financing with a well-known tier 2 investment banking firm. In my opinion, this could provide significant market support for the stock. Canbiola is planning to go NASDAQ. In my opinion, I do not believe investors will see a significant post-split decline in the stock price.

Key Financial Highlights

I do not see a reason to reinvent the wheel when the wheel is working great, so I am going to post some numbers straight from a press release Canbiola did on January 16, 2019. Canbiola did a fantastic job of investor transparency in this release reviewing 2019, which, in my opinion, is something we rarely see in a small cap company. Keep in mind these numbers are not fiscal 2020 numbers. Canbiola is on a calendar fiscal year, so these numbers are the first three quarters of fiscal 2020. The fourth quarter and year end should be out soon. In my opinion, these numbers are impressive, since they show several hundred percent growth and expanding profit margins.

Q1 2019 revenues increased quarter over quarter from the prior year by 741% to $517,160 with a gross profit margin of 49%.
CANB posted an operating loss of $1.2 million for Q1 2019, which included $0.8 million in non-cash stock-based compensation.
Q2 revenues increased quarter over quarter from the prior year by 311% to $633,579 with a gross profit margin of 52.8%.
CANB posted an operating loss of $1,435,289 for Q2 2019, which included $959,948 in non-cash stock-based compensation.
Closed $3,936,700 cash raised subsequent to the end of the quarter in a Reg D offering.
Q3 2019 revenues increased quarter over quarter from the prior year by 277% to $615,422 with a gross margin of 77%.
CANB posted an operating loss of $935,264 for Q3 2019, which included $602,823 in non-cash stock-based compensation.
Canbiola posted revenues of $1,760,761.00 for the first nine months of fiscal 2020. Many investors are looking forward to Q4 and fiscal 2020 year-end revenues, which should be out any day. It is my opinion that Canbiola could hit a lot of radar screens on Wall Street if the Company's growth continues. Canbiola is trading at a lower multiple than many other CBD companies. Just last fall Canadian cannabis company Cronos Group Inc. (NASDAQ: CRON) bought U.S. CBD startup Lord Jones for $300 million, which was 75 times the young company’s 2018 revenue of $2 million. Another example is Charlotte's Web Holdings, Inc. (OTCQX: CWBHF), which is currently trading 9.34 times trailing 12 months revenues.

Products and Marketing

Based on the growth in revenues, Canbiola management is obviously pursuing an aggressive growth strategy. This strategy is being executed through the continual development of Canbiola proprietary products and the expansion of its offerings via strategic acquisitions in the healthcare and CBD industries. Canbiola has created several innovative CBD product lines, marketed through targeted channels. One of these channels is the Canbiola clinical line, which is marketed and promoted through healthcare practitioners in the medical setting. Doctors across the country are trying to manage pain amid a national opioid crisis and have limited options when treating patients and attempting to avoid addictive opioids. CBD has emerged as a product that is safe, does not have drug reactions, and does not have sedative type effects. Many doctors are giving patients CBD and the patients are having great results.

Canbiola also has a consumer brand named Pure Leaf Oil and a spa brand named Seven Chakras. Pure Leaf Oil was acquired from Pure Health Products LLC in December 2018, while Seven Chakras, Inc. came from an Asset Purchase Agreement finalized in 2019. Both lines are sold through online and brick and mortar retail outlets. Canbiola's Radical Tactical LLC subsidiary produces CBD products in other forms including vapes and gums.

State of the Art Manufacturing

In my opinion, the one transaction that set Canbiola head and shoulders above all other CBD companies was the acquisition of Pure Health Products LLC. The transaction included the laboratory and production facility located just outside Seattle Washington in the city of Lacey. The facility is a full-on development laboratory and a fully integrated production facility whereby all formulations, processes, and materials are vertically integrated in the production process. There are no third-party vendors and the company controls the process at each step of processing to insure 100% quality control and product purity. Additionally, Canbiola purchased all of the automated processing and packaging equipment and the Company took on no debt to complete the transaction. Fast forward a little over a year and just a few days ago Canbiola announced it had signed its first significant white label contract for CBD products for a multi-unit operator in the Eastern United States. This is huge, since Canbiola has a state of the art lab and now they can put someone else's name on the bottle. In this particular case, the white label customer was not disclosed; however, the company is required to report the name. Even though it was not in a press release, we should know the name as soon as an 8-K is filed, which should be the end of the week. Canbiola currently has manufacturing capacity of up to $40 million at wholesale in its Lacey, Washington R&D lab and production facility. Private labeling for deep pocket clients will help them fill that capacity up in a hurry. Canbiola is letting customers know they are buying lab-tested, high-quality natural products at a great price.

Duramed - Sustained Acoustic Medicine (SAM)

Have you ever found a $10 or $20 bill in the pocket of a jacket you have not worn in a while? Canbiola's Duramed subsidiary turned out to be a similar financial windfall. Duramed provides products designed to improve people's lives and reduces their use of opioid substances through the utilization of durable medical devices. This product line has really taken off for Canbiola and includes a wearable low-intensity ultrasound SAM (Sustained Acoustic Medicine) device delivering multi-hour treatment intended to accelerate healing, improve function for musculoskeletal injuries (muscle, tendon, ligament), and reduce chronic pain without opioid pain medication.

You can find more information on Duramed at https://duramed.us. According to the Company's website, Duramed specializes in providing best of breed solutions that combines State of the Art Medical Devices combined with healing powers of CBD to help our clients live a healthy and fulfilling life. Wellness and injury recovery is more than being free from illness: it is a process of change and growth towards a mentally and physically healthy lifestyle. Duramed provides wearable bioelectronic devices for the delivery of sustained acoustic medicine (SAMs). The proprietary miniaturized ultrasound platform is designed for the treatment of acute and chronic musculoskeletal conditions, and clinically proven to enhance tissue recovery, accelerate the natural healing processes, and relieve pain. The SAM family of products is the only FDA-cleared wearable devices for multi-hour continuous low intensity ultrasound therapy. SAM has a CE Mark, Canada Licensed, and is a Class II medical device in Malaysia and Singapore.

Green Grow Farms

Also this month, Canbiola, Inc. announced the Company closed an all-stock transaction to acquire 51% of Green Grow Farms Inc. Green Grow Farms Inc. is licensed by New York State to grow hemp under the Hemp Research Pilot Program and grows industrial hemp for grain, flower, and CBD. Green Grow Farms has successfully grown and harvested 6 Acres on two farms in Calverton, NY this year, yielding in excess of 12,000 pounds of dried biomass. The current New York inventory consists of Suver Haze and Sweetened varieties with CBD content ranging from 13% to 16%. You can find out more about Green Grow Farms at https://www.greengrowfarmsinc.com.

Canbiola management is anticipating the extraordinary demand for CBD related products to continue, so Green Grow Farms is expanding into extraction and processing. By owning its own farm, Canbiola is furthering its full vertical integration goals. Green Grow Farms will provide Canbiola the hemp necessary to manufacture its Pure Leaf Oil, Seven Chakras and Canbiola products in its company-owned production facility in Lacey, Washington where all products are manufactured, and white label services are provided.

Summary

CBD is a hot topic. Just about everyone reading this article either uses CBD, or knows someone who uses CBD. There are a lot of publicly traded CBD companies, some of which say they are a CBD company, even though they do not have any products on the market. As CBD get bigger and more mainstream, it is my opinion that a vertically integrated CBD company like Canbiola will get a lot of notice. Maybe investors will go crazy and the stock will get bid up to a euphoric price? Maybe Canbiola continues its pattern of growth and a much larger company decides they want to be in the CBD business? Canbiola would be an ideal acquisition candidate, since they can harvest a hemp plant, extract the hemp, put it into a top quality product, and get it into the customer’s hands. In the restaurant business this is what they call Farm-to-Table. In the case of Canbiola, it is just a really smart business strategy. Canbiola management has plowed profits back into the company and created a growth oriented company. This is obvious in the 200% and 300% year over year growth in revenues Canbiola turned in for the first three quarters of fiscal 2020. The stock is trading off of a low and should, hopefully, be listed on NASDAQ soon. In my opinion, this all adds up to a big reason to buy the stock. Huge upside, limited downside, and a liquid market you can sell into if you decide you want out. Put Canbiola (CANB) on your quote screen and make sure you stay on top of this great little company.

Disclosure: I am/we are long CANB.

Additional disclosure: Disclosures / Disclaimers: This is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this article. I am not a financial advisor. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this article. I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter. Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional. I wrote this article myself, and it expresses my own opinions. I have been compensated six thousand dollars and one million shares of Canbiola stock restricted under rule 144 for the preparation of the content in this article and to perform investor relations services for Canbiola, Inc. OTC Stock Review and its affiliates expects to be compensated by Canbiola. The information in this article is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action. The primary purpose of this blog/forum is to attract new contacts with professional industry expertise to share research and receive feedback (confirmation / refutation) regarding my investment theses.

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