KALY: A SWIFT, IMPRESSIVE EVOLUTION
Company Has Quickly Executed Major Moves
When we last left Kali, Inc. (OTC – KALY – NR)dba/Kali-Extracts, Inc. in January 2019, the Company was full of promise and in our view, well-positioned to emerge as a future leader in its key segments of the CBD arena. Seven months later, KALY has dramatically exceeded our expectations with respect to revenue and new business, along with product development and its overall industry positioning. The successes on the product development and commercialization fronts appear to serve as potential catalysts to favorably impact KALY’s stock and valuation, thus affirming the value of its current and future IP.
A Short Primer
KALY is a health and wellness company that generates revenue from its patented cannabis extraction technology through overlapping go-to-market strategies that include the licensing of its patented cannabis extraction technology to multiple companies in the wellness and pharmaceutical industries. With promising preclinical data along with development and commercial agreements behind it, Kali-Extracts commercializes its unique and valuable IP targeting multi-billion-dollar markets.
We divide the Company’s multi-pronged approach into three target categories: Extraction, Pharmaceuticals and Wellness. Most firms in the space have difficulty succeeding in one; KALY has succeeded in all three.
In the pharmaceutical space, Kali-Extracts has completed studies to evaluate the impact of its pharmaceutical grade cannabis extracts in combination with other therapies on COPD patients. The release of favorable results of a recent physiological study have prompted the future launch of a next phase of research. Leveraging this event, KALY has filed a new patent application specifically on its CBD formulation for symptoms associated with COPD and other similar respiratory conditions. KALY has also filed for a trademark on the name RespRx as the brand name for its CBD formulation to treat the symptoms associated with COPD and other similar respiratory conditions. The World Health Organization estimates 65 million people worldwide are afflicted with moderate to severe COPD and GlobalData forecasts that the COPD treatment market will reach $14.1 billion by 2025. KALY is also in the early stages of preparation for conducting Phase One development and trials for compounds targeting cancer pain management, type 2 diabetes and epilepsy, representing $170 billion in combined markets.
In the wellness arena, the early affirmation of its extract’s efficacy occurred via sales of Puration Inc.’s (OTC – PURA – Speculative Buy) CBD-infused product which is based on Kali-Extracts’s IP. Various joint ventures and new product introductions in which Kali-Extracts has engaged are expected to serve as likely sources of near-term revenue for Kali-Extracts in the CBD-infused product market. According to the Brightfield Group, the hemp—based CBD market is slated to reach a whopping $22 billion by 2022. Plus, these relationships could result in additional business opportunities going forward.
Earlier this year, Kali-Extracts reported that it believed it could generate $5 million in revenue from specific endeavors with current partnerships. In recent months, the Company has secured new extraction business, including innovative mobile extraction services. All told, management now believes that top line could reach as much as $15-20 million in CBD Extraction Contracts revenue in 2019 alone. Based on management’s forecasts, it appears that beginning in 2H19, KALY could report total sales that assume an estimated annual revenue run rate of as much as $20M in total sales this year. Considering that most firms in the space trade at multiples of revenue, KALY’s shares would appear to have a very high ceiling and could trade to the $0.05 level. This is especially the case due to the Company’s operating profitability, which is a major differentiator in the CBD industry.
It should be noted that based on industry feedback, management believes that as a cannabis extraction biopharmaceutical development company, it is poised to offer solutions on par with, if not superior to, those of GW Pharmaceuticals (NASDAQ – GWPH – NR), due to its industry-leasing extraction capabilities. GWPH is the cannabis biopharma bellwether and trades at a market cap of over $4 billion. While this proclamation may be overstated, its notion of prospective leadership status appears to be based on sound science and is affirmed by its recent contracts.
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