Green Spirit (GSRX) Stock: Can Spark An Economic Revival In Puerto Rico

Since Colorado and Washington’s legalization of recreational cannabis in 2012,1 investors seeking out the next lucrative opportunity have kept a close eye on the market. Although initially plagued with uncertainties concerning the viability of startup companies and the legal landscape, the cannabis industry has since matured to a degree that deserves the attention of any investor. As countries around the world continue to ease restrictions on medicinal and recreational cannabis, the time has never been better to begin looking into the world of cannabis stocks, as many of these early players in the market are sitting on the opportunity to stay ahead of the pack and become leaders in the industry. While business in recreational states such as Colorado and Washington has been around for nearly six years now, the chance for explosive growth is magnified further when focusing on markets that have only recently legalized the use of medicinal or recreational cannabis. In Puerto Rico, where medicinal cannabis was legalized in 2015,2 a company called Green Spirit Industries Inc. (OTC Pink Current: GSRX) (the “Company”, “Green Spirit” or “GSRX”) has taken the initiative to become the top player in the territory. Specifically, Green Spirit’s placement in Puerto Rico is a key factor that makes the company’s opportunity even greater, as the territory’s struggling economy would receive an enormous boost in revenue from a successful cannabis industry. GSRX is focused on acquiring, developing, and maintaining medical cannabis dispensaries in Puerto Rico, and the Company additionally plans to generate revenue through accretive acquisitions of already established manufacturers and dispensaries that operate in top US markets. With four pre-qualified medical cannabis dispensary permits already in place, the Company is set to take advantage of Puerto Rico’s emerging cannabis industry to generate revenue for both the Company and the territory.

Why It’s Time to Pay Attention to Cannabis

There are many factors that make GSRX such an attractive business, but first, it is important to understand the current climate of cannabis in the United States and Puerto Rico. First of all, cannabis has seen a great rate of legalization and conversion across the United States. 33 states have already legalized medical or recreational cannabis,3 and with eight states having passed laws to legalize in 2016 alone, the rate of newly legalized states appears to be increasing dramatically. In addition to this, the rate of conversion from medical to recreational seems to have also quickened, as what was a 20 year effort for California took only 12 years for Colorado, and later took only two years for Massachusetts. Of course, an increasing rate of legalization makes for a growing market opportunity as well. Importantly, public support of cannabis seems to have increased sharply since the days of prohibition, and continues to rise as more states legalize and normalize the use of cannabis. With over 77% of US citizens aged 18-34 in support of legal cannabis,4 the future looks bright for the cannabis industry. Currently enjoying a fragmented market due to the limited available locations, no company has yet to emerge as a certain giant in the industry. The increasing rate of legalization and public support thus makes this a critical time for cannabis-focused companies, as building a solid foundation now will surely allow a smartly managed company to ride the wave to the spotlight over the next few years.

For states that have legalized the use of cannabis, the money is already pouring in. In 2016 alone, over $6.7 billion was spent on medical and recreational cannabis in the United States.5 Additionally, the black market for cannabis in the U.S. is estimated at a staggering $20 billion.6 These recent trends show a high demand for cannabis, and Puerto Rico’s recent legalization of medical cannabis could generate much-needed tax revenue for the island’s troubled economy. Puerto Rico has the benefit of operating on a cannabis policy based on tried and true U.S. Regulations, which will make the experience easier for patients, dispensaries, and manufacturers alike. Puerto Rico adopted Colorado’s three-tiered model for business licensing and the state’s security protocols, Nevada’s reciprocity policy, as well as laboratory regulations put in place by Oregon and Washington.7 Another element that would likely drive sales is the availability of the island’s dispensaries to U.S. tourists who already have a medical permit. Puerto Rico’s rate of tourism doubled to 10 million tourists in 2016, which can increase sales significantly with tourists who could purchase cannabis in the territory. The sale of medical cannabis has the potential to generate significant revenue for Puerto Rico, and importantly, the island has passed initiatives to incentivize the development of the industry.

Puerto Rico’s Market Benefits

In order to encourage economic growth within the country, Puerto Rico has passed numerous laws and initiatives to incentivize the development of certain industries that can bring revenue and resources to the island. For example, Act 73, or the Economic Incentives for the Development of Puerto Rico Act, provides numerous tax exemptions and credits, as well as a 4% corporate tax rate, to businesses engaged in certain eligible activities as listed within the text of Act 73 itself, such as commercial manufacturing and lab-based research and development.8 Perhaps most importantly, Act 22, or the Individual Investors Act, provides certain tax exemptions to investors who have become bona-fide residents of Puerto Rico after January 12, 2012.9 Act 22 provides eligible investors with 100% tax exemption from Puerto Rico income taxes on all dividends, interest and all short-term and long-term capital gains accrued after the individual becomes a bona-fide resident of Puerto Rico. These exemptions are intended to attract to Puerto Rico high net worth individuals, empty nesters, retirees who currently relocate to other states and investors from U.S. and other countries, and the medical cannabis industry is eligible to benefit from Act 22. With all this in mind, it’s easy to see why Puerto Rico was dubbed “legalized marijuana’s boomtown” by The Legal Intelligencer in their article dated January 20, 2017. The question is, how is GSRX planning to take advantage of the lucrative opportunity offered by the territory?

Aiming High

GSRX intends to take hold of Puerto Rico’s emerging cannabis industry. GSRX already has four pre-qualified permits in its name, has begun physical construction on locations, and anticipates opening its first dispensary within the next 60 days. The Company continues to focus on establishing its presence and anticipates expansion into affluent, high traffic markets in order to create revenue. It is estimated that more than 50% of Puerto Rico’s tourists travel within a 25-mile radius of San Juan, and thus far GSRX has sought out a total of five locations in San Juan (2), Carolina, Dorado, and Fajardo.

GSRX is a vertically integrated operation that is able to provide a wide range of services, inclusive of operational services, market consulting, financing services, and more. The Company has placed focus on fostering business relationships with numerous potential partners to allow for easier generation of products and services in order to meet customer needs. Notably, the Company has already executed an agreement with the largest medical cannabis supplier in Puerto Rico to provide up to 36 different strains of medical cannabis for the Company’s dispensaries. Finally, the team at GSRX is knowledgeable about the industry and is dedicated to complying with the rapidly evolving legal landscape regarding cannabis, which will allow the Company to operate in a manner that maximizes profit while still adhering to all current regulations. Lead by CEO and Director Leslie Ball, the Company has proven management that is committed to bringing GSRX to the forefront of the industry.

GSRX

GSRX may be operating under a perfect storm of conditions that will launch them into the forefront of the industry. The Company is an early adopter in a currently fragmented market, and is in talks with a number of manufacturers that likely will provide a tremendous boost to the Company’s pace of expansion. Puerto Rico is an attractive market for the cannabis industry: its tax incentives10 and eager customer base provide the kind of environment to help companies like GSRX lead the movement.

The Company has the benefit of having a solid foundation already in place, and with future plans for expansion led by an experienced management team – the future looks bright for GSRX.

This article was originally featured on CNA Finance.

Disclosure – The author has no positions nor plans to open any positions in any stock mentioned herein for the next 72 hours.

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