Writing this through a hangover haze that just won’t quit and might force me back into the kidney-destroying arms of Red Bull to make it through the day. If this story suddenly stops mid-word, it’ll mean I’m unconscious. Send help.
The GreenRush medical marijuana investment conference in Vancouver was a success for organisers Next Gen Metals. Exhibitor booths were sold out, there was a constant stream of foot traffic, and in speaking to several exhibitors, it seemed like deals were being done.
Naturally Splendid (
TSX:V.NSP,
Stock Forum) is a company I’ve more or less neglected in my updates because the whole hemp-fru-fru-berry bar thing, to me, was just a little outside the focus. And retail is hard. I’ve known local food processor firms with established multi-decade brands tell me their sales people have reported US competitors paying chains to toss their entire line of products out and replace them with the inferior imported option. Even if you’re not being sabotaged by foreign competitors, shelf fees are exorbitant, distribution takes a hefty chunk of every sale, and the testing phase for a new product can take an age.
That said, I kinda want in on Naturally Splendid right now.
In fact, I'm moving them into my top five stocks to watch, with Affinor, Papuan Precious, Abattis and Southbridge.
They have an hemp-based omega superfood technology going on that they’re using to infuse snacks and protein shake powders, sold in attractive packaging that isn’t covered in weed leaves, that I could see my grandma picking up at Safeway. They’ve got multiple distribution deals across North America, they’re deep in the retail infiltration phase, and their booth was brimming with interested folks.
I'm eating some of the himalayan salt hemp seeds as I type, which is making the keyboard a little messy.
Additionally, they’re low on natural competitors, so they’re likely to attract interest from major players if they can get their Natera line on shelves and sellling.
More interesting to me, the technology is applicable in a commercial food situation. In other words, if a big consumer goods manufacturer wanted to do a line of hemp protein infused breakfast cereal or nutrition bars or whatever the hell, NSP can ramp up production to provide 20 tonnes of the stuff quickly – and the hemp they’re sourcing is a great fallow rotation crop as it replenishes the soil and grows as quickly as marijuana. Scale, for these guys, will not be an issue if they hit paydirt.
The company has been around since 2011, so it’s not a desperation mining convert, and its business plan is well fleshed out and doing what they wanted it to do.
Financially, NSP stock is in a decent place. Yes, the price has been steadily rising ($0.20 on Jan. 1 to $0.33 today) but it hasn’t been playing the daytrader game so it’s at an attractive and relatively stable level, the market cap (at $11.9m) is right about where it should be and low enough to profit from on a rise, and there’s only 36m shares out.
Downside: It’s not yet in a profit situation (who among the MMJ sector is?), and cash burn looks to be around $350k a quarter over the last three quarters as it pushes into the retail sector. A Private placement is likely, which I don’t expect they’ll have trouble filling.
I do struggle with the first step of the business being retail focused, as the commercial food additive market is potentially huge on just one deal, and retail is a marketing-heavy, cash up front slog with no promises of success and margins being cut into on all fronts by middlemen and vendor demands.
But, if I were to rank the weed sector companies in terms of depth of business plan, milestones met, marketability and long term potential, Naturally Splendid hits those points well.
Full disclosure: I’m still very hungover, so do your own due diligence.
Satori Resources (
TSX:V.BUD,
Stock Forum) CEO Jennifer Boyle was in attendance and, contrary to late betting, did not come after me with a brick to the head for running roughshod over her company for the last few months.
In fact, to her credit, Boyle said, “You know what? You weren’t wrong. We got swept up in this and we’re a small company and had to tread carefully and deal with a lot of proposals coming our way and there’s been a lot of playing catch-up.”
Sufficiently certain that she wasn’t about to stick me in the gut with a bowie knife, I talked for some time to Boyle about her plans, but remained cagey. Turns out she’s had the TSX telling her they’re watching every word she puts out in her news releases, so she’s had to be careful not to say too much lest she trigger a 60-day trading halt.
The
recent phosphate deal with Jourdan Resources (
TSX:V.JOR,
Stock Forum) should shove back the regulators a little, but consider Satori yet another company that would love to be telling investors more about what they’re looking over – if the regulators would allow it. She is considering a jump to the CSE should the TSX get too bureaucratic going forward, like several companies I’ve heard from recently. They would be following a track Supreme Pharmaceuticals has already taken, and one that hasn’t hurt them much to date.
More on the Satori stori later as I’ll be interviewing Boyle for a follow-up – long story short, V.BUD is an in-demand ticker symbol and, despite early bumps in the road, is being heavily courted - on both the rocks and herbs front.
Meanwhile, formerly high flying
Chlormet Technologies (
TSX:V.CMT,
Stock Forum) is STILL trade-halted and, according to folks on our Bullboards, has
made an application to join the CSE. That’s unconfirmed mind you, but it would also be far from unexpected.
That trade halt appears to have allowed Chlormet to be louder in what they reveal of their plans. In a recent interview with
Resource Investing News, alongside the CEOs of Enertopia and Lexaria, Chlormet CEO Yari Nieken said some things a Venture company simply couldn’t get away with pre-Change of Business process.
“If we do complete the current transaction,” he said of his MMJ option,” which we fully anticipate doing if/when AAA Heidelberg receives its license, we will be looking to option out our Chuchi mining property. The 5-percent NPI in the Newton project may or may not be disposed of as well. From the company’s perspective, being engaged in businesses in very different sectors does not lend itself to the management efficiencies that shareholders deserve.”
Regarding his trade halt, Nieken said, “My comment would be that there is a marked difference between announcing you are looking at opportunities in the medicinal marijuana space or hiring a consultant to assess opportunities in the medicinal marijuana space and actually making real steps to enter the space. Personally, I believe the vast majority of companies saying they are entering the space are just trying to get some promotional mileage and really have no intention of entering the space.”
Full disclosure: I own a little Chlormet. This breaks the Stockhouse rule (and my personal conviction) of not writing about what you own, but I can’t get rid of the stock until the Venture lets the company trade again, so consider yourself about as disclosed as possible.
PMX Communities (
OBB:PMXO,
Stock Forum) is getting crushed on the market, two days announcing its new marijuana terminal (Read: vending machine) had been vetted by Colorado law enforcement and was ‘ready to launch’. The key factor causing the price to plunge? Today’s announcement that the machines would have to be ‘manned’ and, like, WON’T HAVE ANY CANNABIS PRODUCTS IN THEM.
The company
revealed in a news release, “The new PMX machines will be manned because of minimum age requirements and will dispense smoke shop items, such as pipes, smoking papers, and pen vaporizers. These terminals will not limit PMX to place them inside regulated dispensaries, as they will have no cannabis infused products.”
Let me get this straight now – the PMX machines are going to be in dispensaries, stocked with lighters and papers, which the dispensaries would otherwise have behind the counter, and there will need to be a dude standing next to them checking IDs… why does anyone need these machines?
A dispensary in East Vancouver has installed a weed vending machine, which
made all the news shows locally, but you have to show an employee your ID before you can use it, which prompts the question WHY HAVE IT AT ALL? Why not just have a shelf of weed behind the employee and remove the vending machine entirely?
A vending machine is useful only if you're eliminating staff entirely from the process, and can provide access to a product outside normal office hours. This ain't that.
If you’re into investing in vending machine suppliers who could just as easily be vending umbrellas and soda as ‘marijuana related products that don’t include marijuana and need an employee to run them’ your symbol of choice is PMXO.
And if you think that’s a great deal, I’ve got some
Psychic Friends Network (
OBB:PFNI,
Stock Forum) stock you might be interested in. CALLMENOW!
Spearmint Resources (
TSX:V.SRJ,
Stock Forum) has signed an LOI to acquire a 50% stake in a
weed payment processing ‘technology’. This, should they go through with the deal, would put them in line with Abattis Bioceuticals (
CSE:C.ATT,
Stock Forum) which has previously
announced a similar deal.
Worth noting, Spearmint’s not buying into a company, but buying a technology under development. I could get my kid to start work on an iPhone app and put out a press release saying I own “100% of a payment processing technology under development” but it wouldn’t make it real, let alone accepted by consumers and industry. Spearmint has some work to do to prove legitimacy here, as Abattis bought into an actual company in this space.
Also worth noting, when Chlormet put out a news release that mentioned signing an LOI in the weed space, like this one does, the Venture exchange trade-halted and COB’ed them.
Also worth noting, on the positive side, banking in the US medical marijuana market is HUGELY problematic, with security trucks being regularly used to move cash from dispensaries to ‘storage locations’ because banks won’t let weedcos, which are still illegal federally, open accounts.
If Abattis or Spearmint can get a payment processing system going that gets wide uptake, they’d be the Paypal of weed… the PuffPal ™, if you will.
I spoke to Abattis at the conference yesterday and asked them, if they had to make a Sophie’s Choice and only keep one of their many plays in the space, which would they keep. Their answer was not growing – but payment processing.
I agree.
Most asked question at GreenRush: What do you think of
Tweed (
TSX:V.TWD,
Stock Forum)? Answer: I'm not bullish on any play that is grow-only right now. I've said previously that I think anything under $4 for Tweed is a decent price long term, but with Bedrocan coming and others sure to follow in the mega-grow space, it's going to be squeezy soon. I also think keeping track of 80 SKUs will be hard, customer acquisition costs are going to be large, and the Creative Edge grow operation will flood a market that is already flooded with white, grey and black market weed. I think Tweed will be flat for a while.
My experience at the GreenRush conference: Just a quick note to say thanks to the organisers, who decided my speech was good enough for an encore performance in the afternoon, and the many exhibitors, industry folks, booth bunnies, drinks servers, and even the crusty activists who took over late in the afternoon, for a fun day. Two speeches, two panels, a dozen beers and a pocket so full of business cards that it drew quizzical stares from passers-by = that's a party.
You can see my speech, and some of the others, here: Cue it up to 1:13:00 in. sorry you can't see the slide presentation on it, but I'll be doing a special audio visual version of that later today.
IN BRIEF:
Creative Edge Nutrition (
OTO:FITX,
Stock Forum) announced the
adding of a director in financier Michael Clark.
Fast Company's Design portal has a
great piece about marijuana product branding and marketing that every weedco exec should memorize. In short, quit it with the weed leaf logos, make your brand accessible to moms, focus on lifestyle and quality.
NEW PLAYERS:
Just a month after changing its name to better reflect its graphite focus, and two days after announcing it had expanded its graphite land holdings,
Matica Graphite (
CSE:C.GRF,
Stock Forum) has announced it’s now looking into getting into the marijuana game because, according to CEO Boris Ziger, “The current state of the mineral resource sector is such that in order to enhance shareholder value, Matica must look at opportunities outside of the mineral resource sector.”
Enjoy that, graphite long holders.
A
company news release said Thursday, “It is the Company’s intent to pursue, source and evaluate new potential projects in the medical marijuana sector, including but, not limited to, agriculture, medical, technology, and real-estate areas of the sector.”
Matica will offer a $450,000 private placement to pursue their new opportunities, and they’re paying above market average as a finder’s fee for those that help them fill it, presumably because, for reals, there are a lot of better options out there.
THE MOVERS: