Naturally Splendid
(TSX:V.NSP, Stock Forum) has been on the edges of the rollercoaster medical marijuana sector since it became a thing with investors early last year, but a lot of investors aren’t aware that the company leans more biotech than dot.bong, and that it has been around for several years before the ganjasphere wave came along.
NSP dove into the rough and tumble world of consumer products in 2014, releasing the Natera product line of hemp protein and seeds into stores across North America (which are rabidly consumed whenever they show up in the Stockhouse offices - thanks for that), and rather than get beaten down by bigger players, managed to carve out a nice niche in stores like IGA, Save-On Foods, Price Smart and more. That line has kicked on, and now keeps a warehouse in Burnaby BC constantly busy.
But that’s not the NSP story – by a long shot. While Natera is a nice conservative retail play designed to bring in revenue going forward, the blue sky potential of their omega oil microencapsulation IP has some big players taking note.
I spoke to CEO and Director Craig Goodwin this week about what the future holds and was surprised at how far the company has gone, and what they're lining up next.
--
I imagine, Craig, that having a retail line that people see whenever they go grocery shopping helps open the door when you’re looking for new partners, investors, financiers...
Absolutely. We have established our reputation as an excellent retail partner with some of Canada’s largest natural products distributors, including Purity Life. The strategy moving forward is to leverage that reputation with our distributors and introduce; A) extensions to the existing NATERA™ line; B) introduce a hemp-based pet care line, Pawsitive FX™, to the retail market; and in a timely fashion, introduce a new omega line for the retail market.
You guys aren’t a weed company at all! This is a huge scam. Where’s the growhouses? Where’s your MMPR?
Naturally Splendid 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. Although the first omega product is industrial hemp-based (HempOmega™), the licensed omega technologies are not limited to hemp as an input source.
We’re talking obviously about your recent disclosure that you have a technology that extracts omega oils from a variety of sources – mostly hemp at the moment – and turns it into water soluble powder, which makes it something that could be added to food, drink, pet food, livestock feed, medicines… Can you take the hemp omega technology and apply it to algae omega, flax omega.. others?
Yes, absolutely. Chia, canola.. In addition, 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.
But the fact that we can change omegas (oils) into water soluble powders is just scratching the surface of the technology. The value-added business proposition, is that when converting the oils into water soluble powders, they become more than 4 times bioavailable and sustain in the body for up to 10 times as long.
Which ‘fixes’ omega oils in a way, because the common knock on omega powders is they run right through you. Yours sticks around and the goodness is easier for the body to absorb?
That’s correct.
Omega oils are obviously a massive thing in the food and health industries, so that in itself is a big deal. But a lot of people don’t think about the variety of omega oils out there, where they come from, and whether that source is sustainable, or bringing the best possible benefits for the end user. Tell me, why can’t we just rely on the existing krill oil or flaxseed oil or squid oil or walnut oil products already out there? Why is there an opportunity in hemp oil?
First, according to the World Health Organization, hemp oil has the best ratio of omega 3 and omega 6 for optimum human health. It is one of the reasons we pursued hemp first. However, not all plants have the same omega ratios and we can in fact target certain omega ratios for specific health conditions. In addition, there are several ‘types’ of omega 3; DHA, EPA and ALA. DHA has had significant scientific research done on it in regards to health benefits. Algae are rich in DHA and that is likely the second omega source we will commercialize with our technologies.
But one thing a lot of people don’t realise is marine-sourced omega 3 from fish has come under attack for several reasons, including concerns about heavy metal and mercury contamination. Environmentally, the oceans cannot continue to supply omega nutrition at the current rate, let alone with growing demand. Undeniably, the oceans are stretched beyond their abilities to provide omega resources to supply current global demands right now. Therefore, a new sustainable source needs to be cultivated. We believe that to be plant-based omegas and hemp is a real opportunity.
Am I right in thinking there’s a ton of hemp oil out there that’s worth essentially nothing to those that create it? That it’s an almost unwanted by-product of hemp processing? And if that’s the case, and you can turn it into an in-demand product that has incredible benefits and a variety of value-added uses… what is this alchemy you’re conjuring?
Not exactly. A good portion of the hemp oil is being used for lotions, shampoos, lip balms etc. However, hemp oil sales for ‘eating’, is not a very popular product in spite of its nutritional superiority. Therefore, we can maximize the yield of the hemp crop by utilizing the oil in a economically superior manner by converting into water soluble powder, thus enhancing the yield of the crop (and in fact bringing our cost per unit down.
POS Biosciences is a former government lab up here in Canada that has been around for 35 years, cranking out IP and products in the northern markets. When you went to them and said you had technology to turn omega oils into water soluble powders, what was their initial reaction?
POS Biosciences has been a great strategic partner. Initially, they were sceptical of the process. However, after working with Boreal scientists, they began to understand the process.
And once they saw the process in action?
They are now (more than) enthusiastic supporters of our omega technologies and have begun introducing us to their 600+ global clients. Obviously, POS Biosciences would not put their 35+ year reputation at stake if they did not understand and believe in the science.
I imagine you would have been happy if POSB had simply confirmed the science and tech works, but the relationship with that organization has turned into something much larger, hasn’t it?
Not only does POS ‘know’ it works, they assisted in commercializing the process so they in fact completely understand the science, process and potential. It is for this reason that they approached NSP in regards to representing the omega technologies and products globally. Our relationship with POS Biosciences continues to grow. They have invited us to their facilities to discuss growing the business relationship with additional JV opportunities.
To put together a facility with all of that POSB machinery, technology, brain power, resources, and their network of clients to call on.. If you were to have to build all that yourself, if would take many millions and many years, would it not?
The replacement cost for the facility is estimated at $125M. However, that is only the beginning of the POS value. With POS as strategic partners, we can leverage their 35+ years of international relationships and reputation to get into meetings that it could take months or even years to secure. With POS on side, we have shortened the business cycle by months in some instances and years in others.
Let’s say I’m an NSP hater and been shorting the stock. In the past year I would have been saying on the Bullboards, nobody is making money on hemp. Cannabinoids are illegal to sell. Retail is a suicide mission. Research takes a long time. You guys are stock promoters. You came from mining. What else do they throw at you?
The NSP haters refer to the lagging retail sales, which is a relatively fair statement. However, they fail to recognize that we have now established ourselves with some of the largest distributors in Canada and are in the business cycle of presenting the existing NATERA™ line to significant retailers across Canada. We will also be expanding the retail offerings.
More importantly, very little acknowledgement has been given to securing world class technologies in the world of omegas and cannabinoids. Truly disruptive technology does take time to commercialize. We have secured the necessary partnerships required to penetrate global markets. We have also been able to attract truly world class management and advisors…a fairly sure indication of the ‘reality’ of our business models.
As far as ‘coming from mining’… we are the FIRST industrial hemp food company to be listed on the TSX-V. We were NEVER a mining company unlike just about everyone else who has jumped on the MMJ and cannabinoid band wagon. Seems like these mining guys all went to Wikipedia to copy, cut and paste cannabinoid descriptions as the basis to their news releases. NSP, on the other hand, has only ever been involved in Cannabis Sativa (first industrial hemp and now cannabinoid extraction and formulation).
If I look back over the last year, many of the above knocks on NSP are -strictly speaking- true. Retail is a rough market, hemp hasn’t really delivered yet, and yet you’ve pushed through each of those attacks and turned risk into wins.
Hemp is hard work, but you’ve found a way to profit from the unwanted by-product. Cannabinoids are problematic in Canada, but you can sell them in 40 countries and most US states. Retail is rough trade, but you’ve established six lines that are selling, with one of Canada’s biggest distributors in the space, with top notch branding and packaging. And the research is playing out as promised – in fact, better than promised.
Yes, we tested its effect on chickens and found multiples-large increases in omega presence in eggs and meat, but also, to our surprise reductions in trans fat. We’re testing on dog food right now.
So now, as I see it, you’re more GW Pharma than you are Tweed, but your share price is still sitting where it was back when you were walking around trying to get baggies of hemp seeds into Safeway. What will be the tipping point? When does the stock start to break away from the weed pack?
Quite simply… the HUGE driver will be purchase orders. In the interim, many investors will see value in the continued, systematic steps we are taking to commercialize these technologies. The securing of additional Board of Director expertise; augmenting our Advisory Board; increasing our strategic relationship with POS Biosciences; additional joint venture partnerships. These will be key drivers that will serve as evidence that we are approaching the ‘promised land’ of Purchase Orders.
We’ve gone through this Q&A without talking about cannabinoids, even though that’s what half the industry is focused on. That’s by design. Yours isn’t a weed company, is it? To me, it’s a full on biotech play with weedy origins that has been taken over by people in big boy pants.
Agreed. Although we started as a Canabis Sativa (starting in industrial hemp ) company, we have expanded to cannabinoids. However, we are not limited to cannabis sativa. Our technologies allow us to enter multiple markets, with multiple products in a variety of distribution channels.
The possibilities of applying your tech to CBDs are potentially game-changing, am I right? Right now, to create the CBDs that MMJ patients need for their ailments can cost a lot of money in source materials, processing, hydro, security, and you’re navigating a regulatory maze just to be allowed to do business. In fact, a court in BC just heard from a witness in the Allard marijuana case that he needs 98 plants just to medicate himself.
But if you can get the exact same CBDs out of industrial hemp, without any THC (which is what makes regulators crazy), and hemp is – what – 1/400
th of the price of medical marijuana? And it grows outside with no security or hydro necessary? You could conceivably make the entire MMJ industry more trouble than it’s worth, overnight.
Watch this space.
Craig, thanks for your time. And readers, keep an eye out for the next Stockhouse podcast, where we go into greater detail on the CBD possibilities, how much hemp omega the company can produce right now, and who is talking to them about taking it off their hands..
-- Chris Parry
https://www.twitter.com/chrisparry
FULL DISCLOSURE: Naturally Splendid is a Stockhouse Publishing client. The author holds no stake in the company. Yet.
UPDATE (10:21am Pacific): Now I do.