INLB - Item 9 Labs (INLB) - Further Expansion into Colorado
The Acquisition. Hot on the heels of the announced Reg A offering, Item 9 Labs' is acquiring The Herbal Cure, a medicinal and recreational dispensary and cultivator in Denver. Herbal Cure had revenues of $5.4 million in 2021, and will be transitioning over the Unity Rd. brand over the next six months, pending approval from Colorado's Marijuana Enforcement Division (the "MED") and the City of Denver. Terms of the deal were not released.A Path for Item 9 Products. With a 3,000 square-foot medicinal and recreational cultivation facility, The Herbal Cure will enable Item 9 Labs to introduce its award-winning cannabis products to the Colorado market in the year ahead. Item 9 will have a built-in base of three dispensaries through which to sell its product and the potential to penetrate non-Unity Rd. dispensaries.Continuing the Strategy. Item 9 is continuing their strategy of acquiring dispensaries and cultivation facilities to fuel growth, while also providing national development of the Unity Rd. brand. Being able to offer in-house brands through owned dispensaries will help drive margins higher. We expect to see further acquisitions in the future with the Reg A capital raise and a continued aggressive push towards national brand recognition of Unity Rd.Unity Rd. This acquisition now gives Item 9 three dispensary locations in Colorado, with the Adams County store still being in a transition state. The operating model calls for the owned dispensaries to be transitioned to a franchise partner later on. Item 9 Labs has agreements with nearly 20 entrepreneurial groups in various stages of development on its dispensary franchising, and is currently targeting states like Arizona, Michigan, and Oklahoma for further expansion. Maintaining Outperform and $4.00 PT. We are maintaining our Outperform rating and $4.00 12-month price target on INLB shares. Item 9 is combining a traditional cannabis cultivation operation with an asset light franchise dispensary model to expand across the nation. We believe the combination creates a differentiated business model that offers premium products and distribution through an expanding network of dispensary franchises. Read More >>