Naturally Splendid Enterprises Ltd V.NSP.H

The other Feature article on NSP...

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Note: this is part 1 of a 2 part feature on Naturally Splendid Enterprises, (NSP.V) (NSPDF). Part 1 describes my opinion of the investment opportunity solely from the company's existing retail line of hemp-based protein powders and the highly prospective launch of hemp omega products that are 1 bulk order away from sparking a potentially explosive spike in revenues. Part 2 will feature the company's equally important play in the CBD space where it hopes to commercialize a number of CBD-based products, none of which include THC, the only part of the Cannabis Sativa plant species that enables one to get high/stoned. Part 2 will also profile in more detail the management team, Board of Directors and Advisory Board, and provide background on the handful of partnerships, research studies and relationships with esteemed academic intuitions, distributors and private companies that tie everything together. Please take a few minutes to read part 1...

I feel the pressure, the pressure to write an article as good as Chris Parry's piece on Naturally Splendid. A link can be found to that masterpiece at the bottom of this article, (so readers don't stop reading right here!). Yes, Parry is a skilled journalist and analyst and he hit the nail on the head with his company analysis. A focus of his piece was to point out that the TSX should lift the trading halt on the company. I hope to further explain this compelling investment opportunity and cover some new ground. I have been following Naturally Splendid for several months. Like most emerging companies, there have been some delays and surprises (like the stock halt), but I strongly believe management is on the right track. I have spoken with CEO Craig Goodwin 5 times. Each call lasted well over an hour. Rarely do I find a CEO so excited and one who shows such conviction. Further, he actually listens and learns from his mistakes. Most CEOs don't admit to mistakes let alone learn from them.

Naturally Splendid (TSXV:NSP) (NSPDF) is the only publicly-traded company in the world offering investors an opportunity to gain exposure to the hemp-based healthy foods and omega markets. Naturally Splendid and its partners are building an expanding portfolio of patents and proprietary intellectual property focused on the commercial uses of Cannabis Sativa, industrial hemp, and cannabinoid (CBD) compounds in a broad spectrum of applications. What does this mean? Before readers continue, I have an important spoiler alert! Naturally Splendid is not a (weed, pot) stock. It currently has no connection at all with the THC side of the Cannabis Sativa plant. For those not familiar, Cannabis Sativa is the species of a plant that can produce both THC used to get people high/stoned and industrial hemp which is impossible to get high on, but has innumerable commercial uses as well as healthy plant-based nutrition applications. For investment purposes, think of it this way, a main difference between Naturally Splendid and most, "weed" companies is that Naturally Splendid has revenues (in fact growing revenues) from a sustainable product line sold in almost 400 stores across Canada. If this were the end of the story, no one, including me, would care. This is just the beginning. Management has taken a prudent approach to make sure that its product offerings are safe, consistent and can be produced at commercial scale. As CEO Craig Goodwin says, there's 2 main problems with product launches, too little demand or too much demand that can't be satisfied. That's why Naturally Splendid took the time to secure a scalable operation that can produce up to 20 metric tonnes of product every four days.

Existing Products generate revenues and establish distribution chain

What are the products? Currently they offer a number of well packaged hemp protein powders and hemp seeds, both natural and flavored. Sales are growing each and every month even with a limited marketing budget. A key differentiating factor that users are becoming aware of is that Naturally Splendid's protein powders have as much as twice the protein content of peers. Developing a supply chain is extremely important because later this year the company plans to expand its offerings into hemp omega infused products. This is where things really get interesting. That's because Naturally Splendid has global access to what they believe is the only patented technology to extract hemp oil and convert it into a powder that's water soluble. Writing about and investing in a great deal of mining companies, my thought process has become corrupted. I'm skeptical of everything. When the CEO tells me his name I demand that he prove it. Apparently, so does the TSX, but I defer to Mr. Parry on that score...okay, okay, here's the link to Parry's piece<https://www.stockhouse.com/news/newswire/2015/01/29/medical-marijuana-update-time-for-naturally-splendid-s-tsx-trade-halt-to-end>.

So I was skeptical when I initiated due diligence on this company. The corporate presentation looks nice and the revenue projections even nicer. But I had trouble understanding what the company does. Now I know, and it's got nothing to do with THC related products, no weed or edibles. Boring right? Not at all. This company has tremendous potential in hemp omega offerings. This segment will not necessary be a big one on retail shelves, at least not initially. The #1 best part of this story is....pet food! Well, not exactly. Yes, they did secure a working relationship with The Alberta Food Processing Development Center to study the use of HempOmega™ to fortify commercial pet foods, but the key to the story is that water soluble hemp omegas appear to be safe and desirable to feed to chickens and cows. Readers at all versed in the Naturally Splendid story probably are familiar with the study that showed an increase of over 637% in the natural omega content of eggs from chickens that consumed Naturally Splendid’s exclusive HempOmega™ plant-based omega product. The study also concluded that chickens that consumed HempOmega™ not only had substantially higher omega content in their eggs but also showed an increase of over 372% in the omega content of the chicken thigh meat itself as well as lower levels of saturated fats. There, I got that out of the way, boring statistics right? No, this has the potential to be a game changer, especially for a company with a market cap of just C$10 million.

Giant food companies want access to super foods like hemp omegas

Giant food companies such as General Mills, Nestle and Kellogg are after healthier food segments. They have bought into the organic lines, but that's old news. They've largely cut out trans fats and continue to reduce saturated fats where possible. They now offer a wide range of reduced salt alternatives and have even cut back on added sugar in cereals. Protein powder is a different ball game. Sure, it's a big market, but not something that can be easy used as an ingredient in other foods. That's where the company's hemp omega stands out. The Big Food companies are now on an omega kick. Small amounts of fortified omegas in eggs reportedly allow producers to charge up to twice as much. Naturally Splendid, with its superior technology to mass produce water soluble hemp omegas into things like feed for livestock has huge global appeal. But wait, there's more. Not just foods, but beverages, supplements, infant formulas, body products and meal replacements are listed in the company's corporate presentation<https://www.naturallysplendid.com/docs/NSP_Presentation_2014.pdf>. Recall the 637% increase in natural omega content in eggs from chickens fed Naturally Splendid's hemp omega. CEO Goodwin was quoted as saying, "Naturally Splendid wants to provide real nutrition, not just a marketing strategy.” It seems to me that the current suite of omega fortified eggs are just that, a marketing strategy. Soon that may change.

To recap, Naturally Splendid's existing retail line and the roll out of hemp omega products could lead to explosive growth in revenues as soon as this year, but if not in 2015, almost certainly in 2016. This is not a mining project where hundreds of millions need be deployed over 5 years before a single dollar of revenue is achieved. This is not rocket science. It's product launches of potentially game-changing products. A company led by Goodwin, a career marketing and sales expert. On the Board there's Russ Crawford, President of the Canadian Hemp Trade Alliance. Talk about industry connections! In my due diligence, I spoke at length with Crawford. He was gracious enough to provide the following quote,

"The industrial hemp industry is experiencing unprecedented growth in the Canadian agricultural sector. Since 2007, both production and exports have increased by 1,250%. This is by far the most significant expansion of a crop in Canadian agricultural history. Until 1997 it was illegal to produce or process industrial hemp in Canada. Since then, the benefits of hemp as a source of nutritious omega, protein, minerals and other products, has propelled the industrial hemp sector beyond all expectations. And it is a very profitable and environmentally friendly, sustainable crop which to grow. As new science, markets and processing value-added techniques are discovered for industrial hemp this pattern of growth is expected to continue – possibly elevating hemp into the same level of importance as wheat and canola."

And then there's Charles Brink a huge supporter, President of Naturally Splendid USA and major shareholder. He is the Chairman of Boreal Technologies, a private company that has partnered with Naturally Splendid. Mr. Brink has invested C$ 15 million of hard cash into Boreal to date. He provided me with this quote,

"At Boreal, we believe success is achieved through an unrelenting focus on innovation and execution. There is currently a huge revolution going on within the pharmaceutical and nutraceutical industries. The approach to pain management, developing drug therapies and even creating consumer products is changing and Boreal intends to be a leader in this transformation. We have developed a very precise strategy relative to the accumulation of our unique technology and its commercial applications and are thrilled to be partnering with Naturally Splendid in developing multiple revenue streams."

The final quote for now comes from CEO Goodwin,

"We have developed an exceptional management team at both the Board of Directors and Advisory Board levels. As with any successful strategic roll out, the strength of a company comes from solid management. We have that in abundance. This is a pivotal time for the Company. We have done much of the heavy lifting in 2014 and now are positioned to monetize all the hard work. We have established a retail presence, secured innovative technology in the $35B global omega market and have the potential to be a front runner in the rapidly growing cannabinoid markets with the world's first water soluble cannabinoid patent. To think that all these opportunities originate from one plant species, Cannabis Sativa, is truly remarkable."

Of course, every company on the planet boasts a strong, exceptional, extraordinary, top-tier, world-class management team and Board. I think this team is highly impressive, but don't take my word for it, go to the company's corporate presentation<https://www.naturallysplendid.com/management.html> and make your own assessment. Remember, this calibre of people all backing a C$ 10 million company. These guys are not in it for the cushy offices and grand salaries.

Next week I will post part 2 of my feature of Naturally Splendid Enterprises (NSP.V) (NSPDF).

Disclosure: I have no prior or existing relationship with any company listed herein. I may or may not purchase shares of NSP in the open market upon resumption of trading in the stock. The opinions expressed are entirely my own. Please understand that the investment opportunity in Naturally Splendid is highly speculative and may not be suitable for all investors. Readers should conduct their own due diligence and consult with their own investment advisors.