Bottom Line\r\n48North (TSXV: NRTH; OTCMKTS: NCNNF) is not unique with a disappointing outdoor harvest in 2019.\r\n\r\nMultiple industry players are also harvesting far less than they originally planned, telling us the 2019 harvest was a learning year more than anything else.\r\n\r\n\r\n\r\nInvestors should learn two things from the 2019 harvest results\r\n\r\n \tAlways assume the outdoor yield will be lower than what management expects. Outdoor introduces many variables that make growing more of a challenge, not to mention its management's job is to sell you a positive story so you buy their stock.\r\n \tCompanies are not giving up, and have big plans for the 2020 harvest with at least 350,000 kg of cannabis scheduled to be planted based on our tally. Outdoor could become the investment theme in 2020.\r\n\r\nOutdoor cannabis is here to stay and will only become a larger percentage of supply in the years to come due to a superior cost advantage over growing indoors.\r\nOutdoor Cannabis Much Cheaper to Grow\r\n\r\n\r\nThe growth in the outdoor harvest will have far-reaching implications for prices and the viability of indoor and hybrid greenhouses built in the last few years.\r\n\r\nThe outdoor cannabis story is just beginning and we think investors can potentially generate some big gains by owning the stocks of outdoor growers with ample cash and a route to put their flower on store shelves in 2020.\r\n\r\n \r\n48 North Proves Outdoor Cannabis Is Not Just for Extraction\r\nAlmost more important than a disappointing harvest was the news that 48North will sell the outdoor harvest as is and not for trim to be made into cannabis concentrates.\r\n\r\nOutdoor flower making its way onto retail shelves was always the final outcome in our opinion, but many other self-interested industry players said it would never happen.\r\n\r\nWhen 48North first announced their outdoor license the chatter was mainly "This low-quality supply is only fit for vape pens or brownies and will never be sold as flower".\r\n\r\nThe reality is that consumers will have the last word and will vote with their wallets.\r\n\r\nIf there is a place on store shelves for outdoor flower, the industry will provide it regardless of industry infighting about "quality".\r\n\r\nAs we would expect given the cost advantage, 48North plans to price their outdoor brand Trail Mix below most other grams on the market.\r\n\r\nInvestors should watch closely for news that outdoor flower is a hit with consumers because if it is, retail prices are headed lower.\r\n\r\nThe oversupply of flower is already here in Canada and outdoor supply will only speed up the price declines we expect to see over the next 6-12 months.\r\n\r\n \r\nMore Details About the Harvest\r\n48North Cannabis Corp. today released its fiscal Q1 2020 financials covering the period ending Sept. 30 as the company ramps up outdoor grow operations and prepares for the launch of cannabis 2.0 products.\r\n\r\nThose quarterly numbers were notable both for the overall low cost to produce, and for a significantly lower than expected production amount. 48North has harvested 12,000 kg of dried cannabis from outdoor sources so far during the past year.\r\n\r\nThat number is a marked reduction from the company\u2019s previous statements that outdoor grow operations had the potential capacity to yield more than 40,000 kg of dried cannabis.\r\n\r\n48North cited delays in the\u00a0availability of licensed drying space for the discrepancy, with\u00a0production\u00a0capacity expected to increase in the coming months.\r\n\r\nThe company previously inked supply agreements for outdoor grown cannabis to be sent to the\u00a0Ontario Cannabis Store, Soci\u00e9t\u00e9 Qu\u00e9b\u00e9coise du cannabis, and the Alberta Gaming, Liquor and Cannabis agency.\u00a0 As of the end of September, 48North is still on track to meet those agreements despite the reduced output.\r\n\r\nProduction costs were listed as $0.25 per gram at an outdoor harvest with the Good:Farm location, significantly beating out Aurora\u2019s $0.85 per gram production cost\u00a0cited during the same period.\r\n\r\nThe Q1 2020 period saw incoming revenue of\u00a0$1.6 million for 48North, more than tripling from the company\u2019s previous quarter revenue of\u00a0$484,000.\r\n\r\nThe end of September saw the company with\u00a0$40 million in cash on hand, $99.23 million in total assets, and $8.3 million in overall liabilities.\r\n\r\nDiscussing the release of the quarterly numbers, 48North Chief Executive Officer\u00a0Alison Gordon commented:\r\n\r\n\r\n\r\nAfter the end of the fiscal Q1 2020 period, 48North acquired Sackville & Co. Merchandising Ltd, finished construction at the\u00a0Fume Labs extraction facility for producing vape products, and inked a licensing deal with\u00a0APCNA Holdings LLC to sell cannabis topicals.\r\n\r\nNCNNF was down slightly to $0.27 a share this morning, and has lost more than 75% of its value from the high point of $1.20 it sold at back in early March.