Not a huge news day on the junior medical marijuana scene today, but a press release out of Chlormet Technologies (
TSX:V.CMT,
Stock Forum) contained interesting information that not only outlined the future for that company, but some of the hurdles to be jumped by others in the sector.
Chlormet rose 20.4% after
Stockhouse published a breakdown of its MMJ investment target, an 8800 sq. ft grow property in London, Ontario owned by AAA Heidelberg, and the financial deal that they’re hoping will secure 100% investment in the property should it get a Health Canada license.
Chlormet has paid
$120,000 for a 16.5% equity interest in the company, and has an option to buy the remainder for 16 million common shares. Chlormet has agreed that it may need to front a loan to AAA Heidelberg before closing the deal, to aid in its licensing push.
The company also engaged an independent economic analysis of the target and the sector, which outlined the difficulty in getting a foot in the door.
“The new regulations suggest that the medical marijuana industry will be put on the same footing as the pharmaceutical manufacturing sector,” the report says. “The regulations are quite onerous in terms of production distribution and security standards. Health Canada will only issue licenses to producer/ distributors that they deem capable of meeting these detailed regulatory standards. That suggests that Canada will very rapidly evolve from a market of thousands of informal producers to one of a much smaller number of sophisticated producers."
To be considered, applicants will need to show they can invest in bringing their facilities up to high level standards, that they can be properly staffed, that they have proper corporate governance and compliance, that they will not contribute to an oversupply in a given geographical location (important, given that the licenses currently in play are overwhelmingly B.C. and Ontario-based), and that the people involved have a non-criminal background.
How one finds an experienced grower who hasn’t been skirting the law previously is part of the ongoing debate. The answer to that may come down to finding a criminal who has never been caught.
“The new regime requires a degree of supply chain and logistical sophistication well beyond the means of those who have, up to this point, grown for their personal use,” the analysis continued.
Chlormet was one of the stars of the sector Wednesday as ganja investors begin to look for evidence that one company will outlast the others.
Today’s news release from the company was detailed, informative, and up front. It showed what their plans are and the finances behind them, it pegged achievable milestones and prices and did a lot to de-risk the stock.
I don’t own Chlormet, because I’m covering the sector as a journalist, but I REALLY wanted to buy it this morning. There’s still a long way to go to prove a long term business strategy, but this company apparently understands how to present legitimacy in a marketplace crawling with carpetbaggers and snake oil salesmen. I view them as moving up to a Tier 3 MMJ play.
(For detail on how I grade MMJ companies, see
yesterday’s Medical Marijuana Update)
At the other end of the spectrum, Satori Resources (
TSX:V.BUD,
Stock Forum) will resume trading at 8am Thursday after a substantial halt imposed upon them as their
director roster dropped to two last week. The company asked for time to get back over the three-person minimum imposed by the TSX but were denied. They have brought a former director back in the interim and are hoping to move forward quickly, but the episode tied up a lot of daytrader cash and hasn’t exactly presented a good impression to the market. Until this Tier 1 MMJ company has a defined and public business plan, they will continue to yo-yo.
Maple Leaf Green World (
TSX:V.MGW,
Stock Forum) was the biggest mover on our list today, up 22% on the day and now up 1000% from where they were mid-March.
Part of the jump today was on the back of news
Maple Leaf have appointed a VP to be in charge of their medical marijuana project. Joe Wong takes the reins, having spent 30 years working on nursery production and greenhouse systems after a career started in the B.C. Ministry of Forests.
Wong gives MGW a name to enhance their MMPR license application, but it remains to be seen if his nursery knowledge will translate to a hydroponic facility.
According to the company today, “Maple Leaf's business plan for the Project, if licensed, is to grow only strains of Cannabis species that have the highest Cannabidiol (CBD) levels. The Company intends to include plans to genetically improve existing strains, thus developing its own strain brand name. If achieved, the Company could also become a commercial supplier of propagules (seeds and cuttings) with high CBD to other growers. The Company will establish high quality assurance programs, so that the product grown and sold will have the necessary concentration of CBD. The Company intends, if licensed, to also incorporate soil enhancement bio-products to increase yields and CBD.”
While MGW says it is looking at grow facilities, I see this more as an MMJ services play, where the group will look to hybridize strains, build brands, and market to other growers, which is an area where Wong would have genuine value.
To me, this, and Maple Leaf Green World’s existing revenue-generating Chinese agriculture projects, makes the company a Tier 3 play. Shift them to the legit column.
GETTING HIGHER:
Windfire Capital (
TSX:V.WIF,
Stock Forum) show up 21.4% today on low volume, moving up to $0.17 a share. The company hasn’t announced anything but that
they’re looking at the sector, but there are a lot of players in the market looking for small market cap companies with tight share structures that they can move hard for not a lot of money, in the hope others will follow – which is what Windfire is. Wouldn’t be shocked to see that money leave tomorrow morning for whatever microcap play dropped hard today, but with the current share price up nearly 800% from where it was mid-January, the trend is most definitely upward.
Thelon Capital (
TSX:V.THC,
Stock Forum) jumped 16.6% today with heavy 7.6m+ volume. No news. Total speculation play at present. I can’t say don’t buy it, because it you bought at just about any point in the last month you’re in mad profit right now, but I can say your chances of more profits are a roulette spin. For a $13m market cap company, surprisingly little is known about it, but nobody wants to miss another double.
BUZZ KILLS:
Terra Firma Resources (
TSX:V.TFR,
Stock Forum) is a rough play right now. Stock price is down, the company has appointed a medical marijuana consultant but not announced anything else, and with a ton of shares out and an ultra-low share price, it will take hard news to really push the stock in an upward direction of significance. Today? Down 20%, or half a cent. Yesterday was down another half cent. The day before up half a cent. Ignore.
Supreme Pharmaceuticals (
TSX:V.SL,
Stock Forum) dropped a half cent today, which comes to an 8.3% drop. Not statistically significant, but with 6.7 million shares traded, there’s a lot of coming and going on that stock. Someone is happily buying almost everything being sold.
INSIDE DIRT:
One junior miner is set to go public Thursday morning with confirmation they too will be entering the medical marijuana space. This isn’t necessarily news in and of itself, but what’s interesting in this case (I can’t reveal details until the company does in the morning) is that this company isn’t a forlorn out-of-ideas mining junior or an abused shell company. The company plans to continue on the mining front with a very promising play, but has spotted interesting opportunities on the weed front that it’s not prepared to ignore.
It’s a microcap company with a tight share structure and likely to fly on the news. Stay tuned.
What a difference a day makes: Yesterday Growlife (
OBB:PHOT,
Stock Forum) put out a news release titled “
GrowLife Releases Annual Report, Posts $1.9 Million in Q4 Revenue, $4.8 Million in Annual Sales”. It mentioned in passing the ‘reported net loss of the Company for 2013, on a non-GAAP basis, exclusive of non-cash one-time charges, was $2,038,907.’
What wasn’t in that news release? This, from the company’s 10-K form filed with the SEC:
Growlife Inc.'s Annual Report Shows a Net Loss of $21 million for 2013
Talk about burying the lead…
Growlife is mentioned in an interesting piece on InvestorPlace.com titled
4 Medical Marijuana Stocks to Dump Now. It’s a good read, but I can summarize for you that the stocks mentioned are basically the four biggest market caps in the US medical marijuana sector, outside of GW Pharmaceuticals (
NASDAQ:GWPH,
Stock Forum), which is actually working through FDA processes.
Cannabis Science (CBIS) says it’s going to use cannabinoids to cure cancer and HIV. Funny thing, I’m planning to do the same with bikini models and Timbits. $127k revenue and a market cap of $123 million? Pass.
Growlife sells home grow op products, which makes them the counter-legalization play. Also, see above losses. Pass.
Medical Marijuana (MJNA) is a hemp play with $8.1 million revenue and a market cap of $270 million, and hemp has nothing to do with medical marijuana at all. Pass.
And CannaVest (CANV).. well that little ball of wax is coming undone quickly, and
Forbes ripped it apart nicely this week. Pass.
THE MOVERS:
| V.MGW |
0.055 |
+0.010 |
+22.22% |
2.9m |
| V.WIF |
0.170 |
+0.030 |
+21.43% |
141.3k |
| V.CMT |
0.295 |
+0.050 |
+20.41% |
97.6k |
| V.EEC |
0.035 |
+0.005 |
+16.67% |
191.4k |
| V.THC |
0.140 |
+0.020 |
+16.67% |
7.63m |
| V.WER |
0.040 |
+0.005 |
+14.29% |
704.85k |
| V.AMS |
0.190 |
+0.020 |
+11.76% |
60.1k |
| C.AFI |
0.335 |
+0.035 |
+11.67% |
1.3m |
| V.PFE |
0.115 |
+0.010 |
+9.52% |
166k |
| V.NSP |
0.365 |
+0.020 |
+5.80% |
325.6k |
| V.SEW |
0.210 |
+0.010 |
+5.00% |
19k |
| PMXO |
0.026 |
+0.001 |
+4.49% |
24k |
| MDRM |
0.188 |
+0.008 |
+4.44% |
771.92k |
| C.GHG |
0.130 |
0.000 |
0.00% |
507k |
| V.BUD |
0.090 |
0.000 |
0.00% |
0 |
| C.SOU |
0.345 |
0.000 |
0.00% |
0 |
| V.SNR |
0.160 |
0.000 |
0.00% |
0 |
| V.PXR |
0.035 |
0.000 |
0.00% |
35k |
| V.CVN |
0.050 |
0.000 |
0.00% |
965.88k |
| V.CYX |
0.065 |
0.000 |
0.00% |
338.78k |
| PHOT |
0.601 |
-0.002 |
-0.25% |
12.59m |
| ROSV |
0.077 |
-0.003 |
-3.51% |
515.1k |
| C.ATT |
1.900 |
-0.080 |
-4.04% |
512.92k |
| V.CL |
1.300 |
-0.070 |
-5.11% |
1.9k |
| EAPH |
0.046 |
-0.003 |
-6.16% |
12.3m |
| V.MSC.H |
0.235 |
-0.020 |
-7.84% |
994.23k |
| V.SL |
0.055 |
-0.005 |
-8.33% |
6.71m |
| V.ACP |
0.050 |
-0.005 |
-9.09% |
55k |
| C.TOP |
0.700 |
-0.080 |
-10.26% |
89.15k |
| C.N |
0.445 |
-0.055 |
-11.00% |
117.44k |
| V.TFR |
0.020 |
-0.005 |
-20.00% |
326.64k |
Check back daily around market close for Stockhouse's Medical Marijuana Update.
Send questions, tips and news to chris(dot)parry(at)stockhouse(dot)com
On Twitter: @ChrisParry