Some good information to knowOne positive take away from the recently published PHBI promo video came at the end of it with the recommendation to: “always conduct your own due diligence on any stock traded in the public domain”. So after considering averaging WAY down on a high cost per share I have taken that advice. Regarding the proposed/pending live rosin project slated for what is most probably developing in India, based on assumptions made from the CEO’s representations on X and in the company’s press release on 10/10/2024, it states: “While these revenue projections are grounded in extensive market research and current industry conditions,”. The company has been forthright in stating that the success of this project is ‘dependent on the successful completion of several key milestones.” Milestones indeed, as well as overcoming significant legal issues and barriers to market entry on any level. The following are the results learned after a review of pertinent current industry conditions in India and the EU along with a medium dive on some market research.
In particular, assuming this project does come to fruition, like all shareholders, I wish it could and would. Without giving any consideration for the ability of company management to complete this project, given their lackluster track record over the past decade, and then to potentially achieve any meaningful product sales or the lack thereof, the sales projections mentioned by the company are a secondary consideration if worthy of any consideration at all at this point in time. Sure its always good to ponder on what could be if the stars all aligned, but unless I am missing something, which I agree wouldn’t be the first time, unless there is some PHBI secret sauce that can override the following, great. If not, there appears to be a fly in the rosin.
As the release states: the key milestones ‘include securing cannabis production and processing licenses, export/import permits from foreign governments, land leases, and the necessary funding to establish the cannabis farm and processing facility, as well as ensuring market access for product sales.” Here is what I found:
1) ‘securing cannabis production and processing licenses’: In short – doable. The baseline law in India on the national/federal level, according to “The current Narcotic Drugs and Psychotropic Substances Act, 1985”, commonly referred to as the NDPS Act, and an Act of the Parliament of India, prohibits the production, manufacturing, cultivation, possession, sale, purchase, transport, storage, and/or consumption of any narcotic drug or psychotropic substance and that includes the sale and production of cannabis resin and flowers, and any contravention of this Act is a criminal offence that carries fines and prison sentences.” The good news is that there are 28 states in India and each one is allowed to develop their own regulations on medical cannabis, a sort of similar situation in the US, that there are many of them that permit what the federal law denies.
2) “export/import permits from foreign governments”: As far as the EU goes it is illegal for any EU country to import or export cannabis under a medical or research license unless it meets the criteria of hemp/less than .3% THC content and that includes processed CBD consumables but most definitely does not include rosin, resin or any other derivative THC extracts. In Germany on February 23, 2024, the Cannabis Act was enacted legalizing the possession and cultivation of whole cannabis plants for recreational purposes. Although it is the most liberal legal approach to cannabis on the continent, there are many gray areas. For example there is no distinguishable regulation regarding personal possession of specific products, particularly concentrates. But it does prioritise a non-profit approach and precludes legal market mechanisms i.e. “Delivery, marketing and sponsoring not allowed’
https://www.sciencedirect.com/science/article/pii/S2666776224000966 Importing rosin to India or exporting rosin from India - not possible, unless of course, maybe, if you play golf twice a week and do an occaisional ‘netflix and chill’ with Prime Minister Modi.
And like India, all countries impose prison sentences and fines for suppliers of any product that doesn’t meet required criteria. Several draft laws have been proposed to some EU country national parliaments in the last few years, as well as some initiatives in regions or cities but they were rejected when taken up to the national level for consideration. Therefore comments made about the lucrative EU market where (illegal) live rosin commands a high price are moot.
3) “Securing land leases, and the necessary funding to establish the cannabis farm and processing facility, as well as ensuring market access for product sales.” All possible/doeable except for ‘ensuring market access for product sales’. Like most countries, it’s a matter of meeting the qualifications for the permits required and in many cases, also who you know and if you pass the vetting process. It certainly can’t hurt having the highly qualified Indian-born ex-pat COO Fawzia Afreen, PhD involved in the process.
4) The Market In India: In the most recent reported studies on-line state in ‘The Ministry of Social Justice and Empowerment's "Magnitude of Substance Use in India 2019" survey found that 2.83% of Indians aged 10–75 years (or 31 million people) were current users of cannabis products, with 10% of that population considered to be using cannabis "in a dependent pattern". Given the fact that these numbers are dated by 5 years, one has to assume/acknowledge that those numbers have most likely increased, but the ratio probably remains constant +/-. So for arguments’ sake let’s say there are now 40 million regular users. There are no numbers available stating how much that group consumes, but for the sake of considering the possible revenue produced annually by this group, let’s assume on average that individually they ingest at least 2 grams a week. 1 gram of illegally grown cannabis currently costs $0.10 USD, therefore that generates an annual black market revenue of approximately $416 million. The illegal cannabis cultivation universe in India is very large and although there are no numbers available on just how many acres are under illegal cultivation, there are 811.4 million acres of land and according to the International Narcotics Control Board, India is one of the countries with the largest extent of illicit cannabis cultivation and production in the world. It is reported that approximately 82,690 acres of illegal cannabis cultivation was destroyed across the country from 2020-23 alone; Law enforced eradication programs in most countries usually and typically only access 20% of the total in operation, as new growing operations pop up as soon as others are destroyed, so you can pick your own number.
5. Legal Products: “CBD oil is legal for both medical and recreational purposes as long as it does not contain other prohibited substances or THC in a concentration higher than 0.3% ”. That notwithstanding, there are now 168 companies of varying sizes and ranges of products and a rapidly a growing number of licensed on-line sellers (based in province-friendly locations) offering a wide range of cosmetic and medical cannabis products for humans and pets along with THC and CBD/THC tinctures/liquids, oils, creams and salves with THC levels that are quite high. All products containg THC above the .03% threshold, are available only by a licensed MD issued prescription. The arguable leader in the on-line licensed sales arena is The CBD Store but the focus on product presentation leans heavily on the classification of these products being purely for medical purposes and compliance and the fact that this cpmpany has 21 doctors on their medical staff is evidence of that.
https://cbdstore.in/collections/csin-medical-experts The use of the words ‘recreational cannabis’ isn’t even in the vocabulary of a medical marijuana licensee and they won’t even discuss it, it simply does ‘not exist’. Approving the legalization of any cannabis product classified as recreational on a national or individual state level would require an unprecedented siesmic shift in current federal laws, guidelines, a consensus forming from all corners of India society like law enforcement agencies, federal and state level administrations and from all levels and the various segments of the medical communities. The following excerpt from an abstract written by 8 contributing psychiatrists, 5 of which are with the
National Institute of Mental Health and Neuro Sciences in India, was submitted to the India Journal of Social Psychiatry, in January of this year, They clearly report that the challenges with even ‘medical cannabis’ from a consumer healthcare and administrative perspective are primary concerns and reading between the lines, approval of recreational marijuana would in their collective opinion, cause more harm than benefit to any one other than the product producers/sellers:
Legalization of Recreational Cannabis: Is India Ready for it?
“The authors conclude that, India is perhaps not enough prepared to legalize cannabis for recreational use. India's existing criminal justice and healthcare systems are overburdened, finding it challenging to control medicinal use, which is often the first contact point for cannabis-related concerns.”
Indian Journal of Social Psychiatry 39(4):p 325-331, Oct–Dec 2023. https://theleaflet.in/it-is-high-time-we-legalise-and-regulate-cannabis-in-india/ Use of cannabis seeds as a food source and leaves with a THC content of less than 0.3% are permitted and the leaves are consumed in a product called ‘bhang’. Traditionally the leaves are ground into a paste which can be added to foods or for a beverage it is mixed with milk and filtered, then often flavored with
kusha grass, sugar, fruit, and various spices. From a viable commercial perspective there is zero bang for the buck in bhang.
https://indiahemporganics.com/blogs/general-blog/ever-wondered-if-cannabis-is-legal-in-india#:~:text=Laws%20on%20Cannabis%20In%20India,are%20exceptions%20to%20the%20rule.
www.indiahemporganics.com The project seems to be focused on the idea of wholesaling live rosin and utilizing existing product distributors, which from a ‘barriers to market’ entry, the burden of brand building and maketing perspective makes the most cost effective and administrative sense. And if those distributors had the opportunity and decided to add live rosin to their inventory menus and even if they could get that product at a wholesale price of 1.00 US per gram, their marketing challenges would be significant, as they would need to be successful at convincing as many of the 40,000,000 regular users of illegally produced cheap high-level THC product to open an online account, pay a doctor a fee of 600 to 800 rupees ($7.00 –$9.00USD) for a consultation and issuance of a prescription that needs to be renewed evey 90 days; the need for a credit card to buy product; the need to pay at least 20 times more at $2.00 USD per gram (if a seller marks up the product 100%); the need to pay product shipping costs and on top of all that, explain and convince them why smoking/’dabbing’ or eating rosin is worth going through that process and why it’s a healthier choice for consumption. The existing medical THC product customers could/would arguably be an easier conversion away from their regular medical product choices, if it was available.
Medical Cannabis/Current Revenue
‘The licensed India CBD, medical marijuana and pharmaceutical cannabis market which includes topically applied CBD, CBD/THC based creams, salves, lotions, balms, and ingested pastes, edibles, oils, capsules and tinctures generated a total revenue of USD 8.8 million in 2023, It is expected to reach USD 190.5 million by 2030. In terms of the medical marijuana product segment, the ingested pastes, edibles, oils, capsules and tinctures was the largest revenue generating product group in this sector in 2023 with CBD/THC, THC oils and THC tinctures being the most lucrative product segment registering the fastest growth during the forecast period.
https://www.grandviewresearch.com/horizon/outlook/medical-marijuana-market/india#:~:text=The%20India%20medical%20marijuana%20market,revenue%20generating%20product%20in%202023.
Therefore being generous you could assume that 80% of that $8.8 million in revenue or $7,040,000 +/- is representative of products containing THC of that sectors’ sales. As earlier mentiond there are approximately 15 prominrnt medical cannabis on-line companies in India with multiple SKU’s in that sector so on average they each arguably receive $469,000.00 in annual gross revenue. So the big questions are:
1. Why are they not exporting any of their already branded legal CBD product that meets the legal requirements is because quite simply it’s a regulatory pain in the butt and ‘everybody’ is making legal CBD in their own countries in the EU which makes the possibility of achieving any market share that would justify the exercise and costs of building a bridge to nowhere, especially when there is a population in your own back yard of 1.44 billion people compared to the EU’s 450 million. Statista reports different revenue projections for CBD and medical cannabis growth but what is of interest is they report that growth in CBD users and revenues to 2030 in India far exceeds products containing THC by substantial degrees.
https://www.statista.com/outlook/hmo/cannabis/india#users
2. Why don’t any of the 165 cannabis product producing/selling companies in India have resin or rosin (called ‘Charas’ in India) on their product menus? Because Charas is illegal no matter how you classify it and is not considered medical under federal or state law. Buffalo Extraction Systems, one of the top fully licensed cannabis extraction/processing companies in India, located in Maharashtra, India
www.buffaloextracts.com recently weighed in on the matter:
‘states can make their own laws for regulating activities related to cannabis, except for Charas, (aka hash, resin/rosin). Permitted activities include farming, manufacture, production, transport, possession, inter-State export and / or import, purchase, use, or consumption. NDPS Act criminalizes the farming, possession, transport, and sale of the following forms of cannabis:
Ganja is the fruit and / or flower section of the cannabis plant.
Charas is the resin separated from the plant. Hashish or concentrated Charas is also illegal (as is)
Any mixture or drink containing ganja and charas.’
https://www.buffaloextracts.com/knowledge/legal-status-of-cannabis-in-india/#:~:text=The%201985%20Narcotic%20Drugs%20and,flowers%2C%20fruits%2C%20and%20resin.
The one thing you can be assured of, if ‘live rosin’ ever gets approved and designated as a ‘medical’ product, the already-positioned extraction/processing/product producing sales companies that rule the market in India will be headed for the live rosin finish line faster than you can say Mahatma Gandi. I hope this all works out.