Charlotte’s Web Holdings Inc (CNSX:CWEB) Leader in Hemp Extracted Health and Wellness Products

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Charlotte’s Web Holdings Inc (CNSX:CWEB) (OTCMKTS:CWBHF) is the category leader in hemp extracted health and wellness products in the United States. CEO Hess Moallem provides an overview of the company’s operations and 2019 goals. Moallem reveals that the company’s products are used to treat occasional stress, sleep, and inflammation issues and he believes this type of product use represents a huge opportunity for CBD extractors. Moallem notes that Charlotte’s Web is looking into possible international expansion and anticipates supply chain announcements for Western Europe in the coming year. Moallem welcomes the recent passage of the Farm Bill, noting that the new legislation opens additional markets for Charlotte’s Web and will allow the company to better manage its production costs.

Transcript:

James West:   It’s good to talk to you. You know this is a, I say Charlotte’s Web is one of the stocks that I hold that I have never sold a share of nor even really looked to yet. So happy to have you on the show. Why don’t you give our audience a background of what Charlotte’s Web is all about and a just for those who might not have heard of the company.

Hess Moallem: Sure. We’re a vertically integrated supplier-manufacturer, of CBD products and extract products that include CBD. We have been operating since 2014 when hemp became legal or differentiated from marijuana post-the 2014 Farm Bill. And we are currently the category leader and we’re very excited for the future. We listed on the CSE in August and the sky’s the limit at this point.

James West: You reported Q3 revenue of $17.7 million, an increase of 57 percent. That’s all from the sale of CBD products in the United States, correct?

Hess Moallem: Correct, yes. The majority of our products, I’d say, over 97 percent, are sold in the United States, and so this is our market, this is really our focus, and I think everybody agrees: the United States market is really where the focus is for the products that are health and wellness focused to be sold.

James West:   Sure. Is the CBD that you sell in the United States derived exclusively from hemp plants containing a THC content of below 0.3 percent?

Hess Moallem: Absolutely. So we only use hemp, we grow everything ourselves, or through contract farmers; those are controlled through our process as SOPs and protocols, and we create our own seeds. So we really have control throughout the process, we know what our plants do in terms of performance in the field, we know where the THC limits are and we’ve very cautious about making sure that they’re indeed industrial hemp.

James West:   Okay, and what are your clients buying Charlotte’s Web products for? What do they use them for?

Hess Moallem: Yeah, so anecdotally we’ve heard that the top three uses of our product are number one is stress, occasional stress; number two is sleep, and number three is occasional inflammation that our products are sold for.

We really see a massive opportunity there. I think that particularly the first one, occasional stress, is something that everybody deals with, and so our products work well for that.

James West:   Yeah, you bet. There’s no such thing as recreational CBD, is there?

Hess Moallem: That’s correct. The recreational and medicinal don’t apply to us, and oftentimes people ask us, are you recreational or are you medicinal, and we’re neither: we’re wellness, and that’s who we are. We’re a health and wellness company.

James West:   Okay.

Ed Milewski:  How much cash are you sitting on right now?

Hess Moallem: Currently we’re in the range of 70 million; it’s something that keeps us better capitalized than the rest of the competitors in the space, and it’s something that we look forward to deploying, using some of our strategies that we’ve been working on here in the last 16 months.

James West:   So then, is the strategy for Charlotte’s Web to dominate the wellness category exclusively in hemp-derived CBD products in the United States exclusively, is that your sole focus? Or are there other anticipated business expansions, business lines, in development?

Hess Moallem: Well, I’ll speak to that separately. So first, international expansion absolutely is something that we’re looking into. We’ve been working in Western Europe for quite some time in really setting up supply chain, really understanding the regulatory framework there, and look forward to making some announcements in 2019.

In terms of actual business line, what are we doing, is it wellness, is it dietary supplement, is it food – we have a lot of considerations internally, and I would say the most profound one is wellness, because I think that’s something that is a category that neither recreational or medicinal marijuana touch, and that’s an opportunity for us.

Outside of that, we see an opportunity in beverage, of curse; that’s been a big discussion. There are some opportunities in food, and we’re exploring. We’re very cautious, thoughtful, about how we approach those categories.

James West:   Fantastic. The proliferation of CBD as an ingredient in the United States, as a direct result of the expanded ability of farmers to now plant hemp pretty much continental USA-wide without any fear of repercussion legally – is that going to make it more challenging for Charlotte’s Web going forward to extract and develop products profitably, or is it not that much of a concern?

Hess Moallem: I think that’s not that much of a concern. I think that’s something that is actually something that opens markets for us. So now we get access to more farmland and more opportunity, which allows us to really look at our cost structure and be deliberate about how we’re driving forward and managing our costs of production.

James West:   Does the current legal framework in the United States give you the opportunity to import hemp-derived CBD from outside of the Unites States?

Hess Moallem: To be honest, that hasn’t been a consideration for us. We’re very proud that we have only sold product made here in the Unites States and grown here in the United States, so that’s really something we’re remaining focused on, and want to support the US agricultural infrastructure.

James West:   We’ve seen that CBD has increasingly become the focus of clinical research and university level research in terms of its potential applications for ailments ranging from cancer to epilepsy. Is Charlotte’s Web in a position to participate in the medical evolution of CBD as a pharmaceutical ingredient, should that be deemed positive, effective by the FDA going forward?

Hess Moallem: I think the opportunity is there to participate given the infrastructure that we have in place, given the knowledge of manufacturing, cultivation, extraction, that we have, but currently that’s really looked at more by the pharmaceutical companies, and we’re remaining committed to our health and wellness scope. I think that’s something that we will explore, but it’s not something that we will look at in 2019; that’s something that’s in the future of our company.

James West:   Mm-hmm. I’m looking at all of the different states and, from where we sit in Canada, it’s kind of both an opportunity for cannabis entrepreneurs in the US that gives them the ability to segment markets geographically that we don’t have so much access to, with only, of course, 10 provinces and territories. But is it going to not present more of a challenge to preserve market share for you as a national producer of a product, as all of these different producers come in and start to compete? I mean, is there not the potential for a price competition and CBD itself to drive itself, and therefore the margin of products, lower over time?

Hess Moallem: Well, we think that that’s something that is a couple of years out. The infancy of this industry is really driving that, there’s a lot of cost of setting up operations and getting going, and that’s something that we’ve been doing for the last four years. So we have a distinct advantage that people know our brand, we have the infrastructure in place, and you know, there’s so much opportunity there given everything we’ve done. Of course brands are going to come online, but they’ve got learning to do, and it’s not an overnight process.

James West:   You bet. All right, Hess, that’s a great introduction to the company. We’re going to be happy to follow the company’s progress as it develops. Tanks for joining us today.

Hess Moallem: Absolutely. Thanks for having me, gentlemen.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.