Creative Edge Nutrition (
OTO:FITX,
Stock Forum), which used to brag it was building the ‘world’s largest medical marijuana grow facility’ until it became clear it was only permitted to build 60,000 sq. ft at its Lakeshore Ontario facility, has hit the news for all the wrong reasons again this week.
A Creative Edge insider, Randy Hamdan, has reportedly filed a lawsuit against SeekingAlpha blogger Matt Finston for
stock manipulation and fraud.
The filing, which cost Hamdan $400 and was made in the U.S. District Court in the Eastern District of Michigan, demands a jury trial.
Creative Edge stock slumped on the news, dropping 3% on the day, but has traded marginally higher each day since.
This isn’t the first time Creative Edge insiders have gone after Finston. Previously, CEO Bill Chabaan
appeared to make threats to the blogger over social media, telling him he knew where ‘his sister lived.’
FITX has lost nearly half its value in the last three months as critics allege insiders, including the CEO, are engaging in ongoing selling of the stock while asking shareholders to go long. Indeed, while the stock has risen every day of the last five, each of those days has seen at least one period of dramatic price drops as someone continues to profit-take.
One thing I think most people would agree on, whether they hold FITX or think it a rinky dink disaster waiting to happen, is that lawsuits are bad news, whether you’re launching them or having them launched at you.
Personally, I think Finston could fight off the lawsuit with a dictionary, a LegalZoom.com account, an energy bar and a free Sunday morning, and I wouldn’t be surprised to see him throw out a nice countersuit dragging CEO Chabaan into the fight. If he really wanted to tie the company in knots and chase away what I see as a SLAPP suit (a lawsuit intended to silence a critic of a company, something that’s not considered good business by the courts), using the discovery process to demand access to internal FITX paperwork, emails, shareholder registers, financial disclosures from directors and management, and calling many witnesses at the company would really put Creative Edge in an awkward spot, and likely see a quick exit from the case.
But hey, I’m no big city lawyer.
Moving on:
Supreme Pharmaceuticals (
CSE:C.SL,
Stock Forum) has completed their 5 for 1 consolidation, and the result has been no drop at all.
Negative pundits have, as they always do, prophesized much doom and gloom that they think follows any rollback, but there’s a difference between a rollback needed to avoid death and a rollback needed to position the company properly going forward so it can be acceptable to institutional investment.
Supreme stock opened the day of consolidation at $0.075 (equivalent to $0.375 under the new measure), and dipped early as confused holders looking at a 440% rise likely sold their stake. It closed at 0.41 with the ask sitting at 0.44 when value-hunters came in late to vacuum up cheap stock.
Result. The share price has hovered around the same level since, sitting on $0.40 today.
Now the company is priced at a still low market cap, has a tight float, room to move, and has no legacy overhang for future investors beyond the need for an MMPR.
The lesson for other companies in this is to get your house cleaning done not when you’re in desperate times, but when your investors are lined up for the next forward push.
Naturally Splendid (
TSX:V.NSP,
Stock Forum) has taken possession of the first production run on its hemp-based Omega 3 product HempOmega.
The product – a metric tonne of it – will arrive at NSP’s warehouse mid-month.
CEO Craig Goodwin is saying it’s taken several years of testing to get the product ready for prime time, and says it has applications in breads, cereals, dairy alternatives, even pet food. The goal longer term is to get the product into aquaculture and livestock feeds, which is a potential many million dollar market.
Product lines based on the new HempOmega line will be coming in Q4 2014, with samples already being sent to major food brands.
I started actively talking about NSP in March or so. Stock has climbed nearly 100% since then, and it remains one of my top 5 most interesting plays, with a tight share structure and a solid retail push.
At any medical marijuana conference, the Natera hemp protein and seed products are the things most widely carried by conference-goers. That ongoing market research demonstration shouldn’t be ignored by clever investors.
Satori Resources (
TSX:V.BUD,
Stock Forum) announced the bringing aboard of my consulting partner, Tegan Adams, former COO of Affinor Growers, this week as an advisor who will throw her infinite levels of operational expertise and due diligence digging at Satori’s projects over the coming months.
This is a great move for Satori. They’ve suffered in the markets because they have refused to sign a deal for the sake of a share bump, wanting instead to be sure that any move they make is the right move, and the constant hectoring from the TSX that they not get too deep into the weed sector lest they get trade halted for a Change of Business has also been a factor in dragging out progress.
To be clear, as I mentioned some time ago, I bought a little (keyword: little) Satori a few weeks ago, and said I wouldn’t write about them as a result, which is my general rule.
But I get more questions about what Satori is doing than I do on any other topic and can see from the Bullboards that there’s a lot of confusion out there, so I figured it was time to discuss what I know, with the disclaimer that I have a little shares in it made fully and up front.
A further disclaimer – since I started writing this piece, I bought more. Significantly more.
The company has a small team, and that combined with ongoing TSX chest-thumping has made it hard for them to move at the pace they would have liked in terms of doing due diligence on projects. The stock has limped around the 5c mark for some time, and the 40m shares out have made it hard to sustain a surge when news has been there.
I had spent several months kicking Satori around early this year, saying they have assets of ‘a ticker symbol and a prayer,’ and coining the nickname SadStori Resources. My battles with CEO Jennifer Boyle online over this often saw the fur fly.
But the sign of a good junior company is in realizing what they don’t know and seeking help from people who can fill those knowledge holes, and so it was that Boyle duly dropped her gloves, dragged me aside at the Vancouver Greenrush conference, and asked “Alright, smart guy. What would you do in our situation?”
I said I’d spin the weed play off to the CSE and give shareholders one share for each five V.BUD shares they own, thereby tightening the share structure of the spinco, keeping the mining side rolling and investors there happy, avoiding any TSX Change of Business halt and, going forward, I’d steer clear of grow plays. Because, in general, ew.
I also said they needed a gear-turning ops person to zero in on the right project, and fast. Not a mining retread but a legit gearhead.
Boyle considered all of those suggestions, and bid me farewell.
At the Toronto Greenrush conference, we talked again. This time it was more indepth. We talked about some of her project options, and she brought in some of her team to discuss the pros and cons.
Last month, I agreed to follow the Satori group through a potential BC project recently, a project that would have been a nice catalyst for a share bump in the short term if they’d jumped on it, but ultimately didn’t make sense to push forward on over the long term. I could see they were tempted, but it wasn’t the right deal. Cooler heads prevailed.
That allowed me to see up close that that they’re looking to build an actual company, not a spiking daytrader shell.
They could have thrown some shares down to make an LOI deal as a weather balloon to test investor sentiment. But they didn’t. They walked away. The deal wasn’t right for them – maybe it will be someday soon, but not right now - and there are other potential deals out there that will be better fits.
When Tegan became available, I walked the Satori group up to her and said ‘hire this person.’ They quickly did, albeit on a short term deal.
Having access to Tegan adds an operational beast to the Stori team right at the time when it’s important to have all the wheels turning. She will gauge what’s needed to turn a blue sky deal into a genuine boots-on-the-ground revenue-raising product and give the company a full plan of how to get there properly – and she’ll be doing that without triggering any Change of Business trade halts.
So what’s she going to look at? Project one is something Satori’s already got its mitts into: The Jourdan Resources (
TSX:V.JOR,
Stock Forum) phosphate project.
I’ve recently talked to several people on the mining side about that deal over the last few months and general consensus is the phosphate project could turn into something good. There are a lot of pieces to the puzzle that could turn out to be central revenue generators if things go right.
One local mining player now working with a B.C. weedco told me, off the record, “I’ve been hoping Jourdan will run out of cash because I’ve had my eye on that project for some time. Walking around picking red stuff up off the beach – I could get used to that. It’s a nice play. It’s not a bullshit play.”
Jourdan is in the middle of a test project with ChroniCare Medical Marijuana, testing their phosphate for use in marijuana production. If the results are good, that would be a nice first customer of many.
Satori is in for a chunk of that deal, and still owns a gold mine that could bring a few bucks if they flipped it (I get the sense they won’t), or provide long tail value if gold starts to surge.
But they need more. They’ve talked internally about a lot of options that have been brought to them. They’ve talked about importing vaporizers. They’ve talked about creating cannabis oil-based medical products. They’ve talked about dispensaries and grow ops and labs. These would all bring a bump in share price so the daytraders can play, but the last thing they need to do is to throw a dice.
They need wheels turning. On the market side, today the wheels have begun to creak forward.
The Tegan announcement didn’t see a rise in share price, but it also didn’t see a drop, something Satori had been dealing with fairly regularly, bouncing around between $0.045 and $0.05 every day for many.
Today, the ask was slapped several times. Bids are building, still at the $0.045 level, but the stock touched $0.055 several times and was only a few thousand bucks away from gapping up to $0.06 – a 33% rise on the day.
At close, there's 673k volume on the $0.045 bid and 335k (basically $18k) on the $0.055, with nothing in between. There's another 584k waiting at $0.06, and then it's slim pickings ramping up to $0.10.
To be sure, there are a lot of long holders who’ll happily take $0.055 and walk away. The Satori promise has been a long time from materializing.
But when the difference between the current price and a double is the ticket price of a second hand Winnebago, that's something to look seriously at.
I’m looking forward to Tegan getting into Jourdan’s project and talking to ChroniCare and figuring out what the reality of the project is, what’s needed to progress it, and what’s the potential on the revenue side, both in Canada and the US. Because if she raises a thumb on it, $0.05 stock is value. That’s why I went in today.
And if you think there’s money in growing weed, think about the potential of taking a few cents out of every sale in return for the fertilizer needed to get the product out quickly, healthily, and with an effective end result.
It may, of course, go the other way. Tegan could very well finish her DD on Jourdan and shake her head. That’s the risk Satori has taken, but it’s a good risk to take. They need to know whether to go full on phosphate, or if there’s a better deal to be had. And you, if you’re an investor, need to know the path the company is taking has been checked, double-checked, and locked down.
Remember, nobody has kicked this company around as hard as I have. But any upward move right now is going to be a significant one, and I’ll back Tegan every day to find where that revenue potential is.
Health Canada news: Tweed (
TSX:V.TWD,
Stock Forum) was one of the first to respond to
Health Canada’s recent notice that the 13 licensed growers in Canada are pushing their luck with their marketing, with Executive VP Mark Zekulin saying, ““We all clearly understand that it means you cannot take out a TV ad during a Stanley Cup game [..] but you’re allowed to have a Twitter feed. There’s a question of what’s allowed in the middle.”
Organigram, Tilray and Bedrocan were also quoted. The article really presses on a topic that will be ever important going forward – how does a company realistically drive sales without being able to contact consumers? Sure, doctor education is important, but doctors usually write a prescription you can take to London Drugs to get filled. Sending patients home with a URL is more challenging, especially with the older, more likely to be on disability crowd.
One solution, which I’ll go into in more detail shortly, is a patient referral network. There’s one that’s been building for a while, which will be listing publicly soon, and which I think will be pounded with acquisition offers by the big growers VERY quickly.
Stay tuned.
A
dispensary was closed in Vancouver this week when Police say they were told patrons were reselling weed to local youth. The story says 40 dispensaries are doing business in Vancouver - something Health Canada does not permit, but which is carrying on because Health Canada's new rules are still set aside by the courts.
If the injunction is removed and the new rules go into force some time soon (I hear end of the year is most likely), those facilities become illegal. Of course, setting up a dispensary is about the cheapest sort of retail outlet outside of a fireworks store, so it's probably worth the punt.
Where I think there's a big problem in Vancouver is city officials have put no rules in place about dispensaries. They're not doing background checks on staff, owners or landlords, and they appear to be free to set up next to any other business.
And when the city refuses to regulate, you get establishments being raided by cops. Black eye for everyone.
The
Mettrum/Cinaport (
TSX:V.CPQ.H,
Stock Forum) financing has closed with $34.5 million stashed in the bank.
Comark, GMP, Paradigm and Jacob Securities held hands on the deal, which puts the MMPR-holding Mettrum into the public space at last.
Mettrum is offering a
30/30 discount program, giving users a 30% discount on their first 30 grams ordered, with
seven strains available, ranging from high THC to high CBD, with a $6.60-$9.60 price-tag.
Finally, Organigram invited CTV cameras into their Maritimes facility today. You can see a
still from the cutting room here.
On the personal front, have had several companies reach out to tell their story this past week. Matica Resources management said hi on Twitter, MedCannAccess is in the mix, I'm hoping to hear from Southbridge/Vodis in the coming week, and private MMPR holders MedReleaf touched base today.
And lastly, emailed to me anonymously, in the style of Elton John’s Goodbye Yellow Brick Road:
Good-bye, yellow Tweed load,
Such a waste of an MMPR,
Oh, you bought a brand new greenhouse,
Because your stuff tastes like miles of dirt road…
There’s more, but it gets crueler (TWD stands for The Walking Dead, as an example) and I'm down for the comedy, not the gutkick.
Tweed was up today after several days of drops. Now
two strains for sale, but the price for one has dropped from $7 a gram to $5.60. I’m guessing the price drop has nothing to do with oversupply…
The company says it will add 'up to'
18 new strains over the next few months, which will allow it to turn on new customer registrations again.
THE MOVERS:
--Chris Parry
https://www.twitter.com/chrisparry