CV Sciences Inc (CVSI)

[Deetew]

CBD leaders: CVSI and Charlotte's Web (CWEB.CA).

The industry's two leading, public, U.S.-focused, CBD pure-plays have many similar characteristics. In Q2 CV earned $3.1 (millions) on $12.3 in sales, while CWEB earned $3.7 on $17.2 in sales. Charlotte's Web has excellent name recognition, a hit product in chocolate mint CBD oils, and now is heavily cashed up. However, as investors we preference CVSI for the following reasons:

1. Better Valuation. CVSI has been trading at about 1/3 the value. A significant difference.

2. All of CWEB's hemp oil comes from their proprietary 300 acres of crop land. This is a microscopic sliver and hardly worth a premium for vertical integration, long term, we believe. 300 acres is a micro-drop of world market supply.

3. Charlotte's Web trades on the lowest Canadian exchange, was a Canadian financed IPO, with limited U.S. exposure. We fear extra risk if Canadian investors (doing what they always do) dump everything as the bubble up north deflates. We preference U.S. stocks growing their base of U.S. institutional investors, a phase CVSI is just beginning.

4. The CV management team has been together for 4 ½ years, while CWEB has a new rent-a-CEO, a lawyer, previously with an extremely over-hyped millennial/hipster "brand," one of probably hundreds, that "nobody" in the health food industry knows (based on our conversation's). That's a risk.

5. Potential for institutional "endorsement." We'd like to see CV take some serious money institutional investors are offering to expand marketing, add depth with "name" investors, plus add big-time U.S. brokerage coverage. The institutional "herd" has begun to hear of CVSI, but yet to pile in. Right now share volume seems almost entirely retail/day-trader. The timing is right: CVSI has been invited to present at Cowen's upcoming November cannabis symposium and was the only CBD player invited to CNBC's Jim Cramer's recent special event.

--Sector Expert: Frederick Lacy

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Frederick Lacy, President of Fincom Investment Partners, began as a Chicago commodity broker in 1984. In 1987 he joined Bateman Eichler, Hill Richards in Los Angeles, focusing on small to mid-cap equities, ultimately "retiring" in 2000 as a Managing Director of Investment Banking. Mr. Lacy has been involved in numerous investments, from arranging start-up capital for what became Petrohawk, which sold for $15 Billion, to mobile payments in India. Several long-time clients were founding investors of Cheniere Energy. Mr Lacy's decades in California technology includes arranging an early $13 million VC financing for "permanent ledger" software (now commonly known as "blockchain") led by top-tier fund Upfront Ventures. Other investments include 3D holographic display technology, early mobile applications, power conversion, along with multiple consumer health-related products: Canadian Glacier bottled water, Kinetin skin cream, a proprietary oxidative-stress formula, and UV purification systems. In 1989 Mr. Lacy hosted "the Venture Capitalist" which aired on (now) CNBC, and has followed the natural foods industry for 35 years.