MJ Pharmaceuticals Q1 10-Q

I was a little disappointed with this MJ Pharmaceuticals Q1 10-Q. Especially after reading something from Nemus Bioscience. The word cannabis appears three times, and the word marijuana twice. Text direct from the filing is in italics.

The Company under the new ownership intended to serve as an investor in and provider of e-commerce operations to the property management and property rental industries, as well as investor in and provider of e-commerce operations and other services to the marijuana pharmaceutical industry.

But then:

We anticipate we will derive our revenue from two primary sources: the licensing or sale of Medicinal Cannabis Patented Products and Cannabis Laboratory Testing.

The Company commenced limited initial operations in E-commerce Software Solutions on September 1, 2014. In November 2014, the Company suspended these operations. It subsequently determined to serve as investor in and provide of e-commerce operations and other services to the marijuana pharmaceutical industry.

As of March, 2016, the Company commenced the sale and distribution of “pen cartridges” to the medicinal industry. As we obtain licensing for the Medicinal Cannabis Products in various states, our primary source of revenues will be derived from the sale and distribution of “pen cartridges”. During the three months ended March 31, 2016, we had revenue of $8,000 from the first sale of these products.


I have no economic interest in any firm mentioned.

American Cannabis Co. Q1 10-Q

You'd think all these "cannabis consultants" emerging into the marketplace would be trying to distinguish themselves in the eyes of investors. Below, direct quotes from the filing are in Italics. They're pretty light on details about the business in this American Cannabis Co. Q1 10-Q:

For the three months ended March 31, 2016, five customers individually accounted for $514,824 of the Company’s total revenues; these customers accounted for approximately 95% of the Company’s total revenues for the period. For the three months ended March 31, 2015, three clients individually accounted for 10% or more of the Company’s revenues, and in aggregate, they comprised approximately 79% of the Company’s total revenues for the period.

American Cannabis Company, Inc. was incorporated in the State of Delaware on September 24, 2001 under the name Naturewell, Inc. to develop and market clinical diagnostic products using immunology and molecular biologic technologies.

American Cannabis Company, Inc. and subsidiary company, Hollister & Blacksmith, Inc., doing business as American Cannabis Consulting (“American Cannabis Consulting”), (collectively “the “Company”, “we”, “us”, or “our”) are based in Denver, Colorado and operate a fully-integrated business model that features end-to-end solutions for businesses operating in the regulated cannabis industry in states and countries where cannabis is regulated and/or has been de-criminalized for medical use and/or legalized for recreational use. We provide advisory and consulting services specific to this industry, design industry-specific products and facilities, and manage a strategic group partnership that offers both exclusive and non-exclusive customer products commonly used in the industry. We are a publicly listed company quoted on the OTCQB under the symbol “AMMJ”.

On March 13, 2013, Naturewell, Inc. completed a merger transaction whereby it acquired 100% of the issued and outstanding share capital of Brazil Interactive Media, Inc. (“BIMI”), which operated as a Brazilian interactive television company and television production company through its wholly owned Brazilian subsidiary company, EsoTV Brasil Promoção Publicidade Licenciamento e Comércio Ltda. (“EsoTV”). Naturewell’s Articles of Incorporation were amended to reflect a new name: Brazil Interactive Media, Inc.

On May 15, 2014, BIMI entered into a merger agreement (“the Merger Agreement”) to acquire 100% of the issued and outstanding American Cannabis Consulting while simultaneously disposing of 100% of the issued share capital EsoTV (“the Separation Agreement”). Both the merger with American Cannabis Consulting and disposal of EsoTV were completed on September 29, 2014. BIMI subsequently amended its Articles of Incorporation to change its name to American Cannabis Company, Inc.. On October 10, 2014, American Cannabis Company, Inc changed its stock symbol from BIMI to AMMJ.

I listened to a webcast with the CEO, so I'm pretty familiar with what they are trying to do.  American Cannabis Co. probably goes deeper in the 10-K. Or maybe they provide more on their website, where they aren't communicating directly to federal regulators.

Disclosure: I have no economic interest in any company mentioned in this post.

Jon Stewart - Enhancement Smoker (Half Baked)

Dixies Split

THC or CBD?

Grow Cannabis In Our Warehouses! Part II

On their website they say they are looking into properties in CA, CO, NV, etc.

From Grow Condos Inc. recent 10-Q:

"We are a real estate purchaser, developer and manager of specific use industrial properties providing "Condo" style turn-key grow facilities to support cannabis growers in the United States cannabis industry. We intend to own, lease, sell and manage multi-tenant properties so as to reduce the risk of ownership and reduce costs to the tenants and owners. We will offer tenants the option to lease, lease to purchase or buy their condo warehouse space that is divided into comparable 1,500- 2,500 square foot condominium units. Each Condo unit will be uniquely designed and have all necessary resources as an optimum stand-alone grow facility. We believe that Cannabis farmers will pay an above market rate to lease or buy our condo grow facility. We will purchase and develop buildings that are divisible into separate units to attract multiple farmers and reduce the risk of single tenant leases. In addition to our "Condo" turn-key growing facilities, we intend to provide marijuana grow consulting services and equipment and supplies as part of our turn-key offerings. We are aggressively looking for our next property in the western area of the United States where medical cannabis has been legalized and where recreational cannabis has been or is in the process of legalization. The Company is not directly involved in the growing, distribution or sale of Cannabis."

Disclosure: I have no economic interest in Grow Condos, but would love to have my own customized grow on their property.

Indeed, This Blog Is A Thing

I appreciate the article and the Tweets about SEC Filings on Weed! I wonder how many people who follow SEC filings and compliance news pick-up on the John Stewart/Half Baked movie reference. That's what makes this fun. Absurd, really.

"You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else." - Warren Buffett

A Credible Source & A Journalist

Alan Brochstein,  a former Wall Street guy and the most credible cannabis financial analyst I know of confirmed on Twitter yesterday that he thinks Kaya Holdings was the first publicly traded integrated cannabis firm in the U.S.  Then he basically said Kaya sucks. 

Whatever, I couldn't care less if they are good or not. I've never invested in a cannabis company and don't plan to any time soon. The point is Kaya was first, and I think it is cool history to be noted accurately. 

What is Debra's problem?  Alan even urged her to make an "amendment." It's the internet age. Why not just make a correction so the false information is not out there indefinitely? Marijuana Business Daily made the same mistake as her in an article they wrote and promptly made an edit when they uncovered the mistake. 

Are the journalistic standards at Forbes.com lower than those of an upstart marijuana business news provider?  The "report corrections" button is not working on the article, it doesn't seem like any comments get through and Debra blocked SEC Filings on Weed! on Twitter after getting very defensive.

I guess some people want their own facts, or something, honestly I can't figure it out.  I read corrections all the time in the media.

Both journalists probably trusted Derek Peterson's (CEO of Terra Tech) comments in a press release where he claimed for his company the "title." He is another former Wall Street guy. I'd be fact checking anything he says, obviously.

Disclosure: I have no economic interest in any firm mentioned in this post.

Jon Stewart - Enhancement Smoker (Half Baked)

Charlatans and Fraudsters

Brendan Kennedy of Privateer Holdings had this to say to The Midas Letter’s James West in an interview a while back:

James West: Okay. What do you think of all these companies that are publicly traded raising money from retail and institutional investors who have yet to gain a license even though they might have an application in…what do you think their chances are of actually getting up and running and making money and getting a license. I mean there’s over 800 license applications in
there now…how many of those do you see actually getting a license in 2014?

Brendan Kennedy: Oh…in 2014…it’s certainly less than 30. All the public companies that I’ve talked to – they have no idea what they’re doing. Most of them are run by charlatans and fraudsters.

James West: Wow. Tell me what you really think….

Brendan Kennedy: Yeah. Well we’ve been looking at this industry for four years. Been to hundreds of dispensaries around the world, I’ve been to 4 or 500 grows around the world. For some penny stock mining company to suddenly decide that they’re going to add cannabis into the description of their company and own this industry is absolutely absurd. This is a complicated industry. It’s more complicated than anyone realizes. It’s complicated from a...you know, we go moral, political, social, regulatory perspective, and you can’t just jump into this industry and start making money from day 1. I don’t understand why any company would want to go public in this industry. It just does not make sense.

Disclosure: I have no economic interest in any firm mentioned in this post.

Medicine Man Technologies Q1 10-Q

Snips from the filing:

We were incorporated on March 20, 2014, in the State of Nevada. On May 1, 2014, we entered into an exclusive Technology License Agreement with Medicine Man Denver, Inc., f/k/a Medicine Man Production Corporation, a Colorado corporation (“Medicine Man Denver”) whereby Medicine Man Denver granted us a license to use all of their proprietary processes they have developed, implemented and practiced at its cannabis facilities relating to the commercial growth, cultivation, marketing and distribution of medical marijuana and recreational marijuana pursuant to relevant state laws and the right to use and to license such information, including trade secrets, skills and experience (present and future) (the “Medicine Man Denver License Agreement”).

We commenced our business on May 1, 2014 and currently generate revenues derived from licensing agreements with cannabis related entities, as well as sponsoring seminars offered to the cannabis industry. As of the date of this report we have or have had 42 fee generating clients in 14 different states.

Intangible Asset

On May 1, 2014, the Company entered into a non-exclusive Technology License Agreement with Futurevision, Inc., f/k/a Medicine Man Production Corporation, a Colorado corporation, dba Medicine Man Denver (“Medicine Man Denver”), a company owned and controlled by affiliates of the Company, whereby Medicine Man Denver granted a license to use all of their proprietary processes they have developed, implemented and practiced at its cannabis facilities relating to the commercial growth, cultivation, marketing and distribution of medical marijuana and recreational marijuana pursuant to relevant state laws and the right to use and to license such information, including trade secrets, skills and experience (present and future). As payment for the license rights the Company issued Medicine Man Denver (or its designees) 5,331,000 shares of the Company’s common stock. The Company accounted for this license in accordance with ASC 350-30-30 “Intangibles – Goodwill and Other by recognizing the fair value of the amount paid by the company for the asset at the time of purchase. Since the Company has a limited operating history, management determined to use par value as the value recognized for the transaction. Since the term of the initial license agreement is ten (10) years, the cost of the asset will be recognized on a straight line basis over the life of the agreement. In addition, each period the Company will evaluate the intangible asset for impairment. As of December 31, 2014 no impairment was deemed necessary.


Medicine Man Technologies Q1 10-Q

Disclosure: I have no economic interest in Medicine Man Technologies.

SEC Filings w/ Weed Pics! As Only Kaya Can

Kaya's SEC filings are quickly becoming some of my favorites to read! Pics below are from their recent 10-K.

 

 

Disclosure: I don't have any economic interest in Kaya Holdings.

MassRoots Q1 10-Q

MassRoots Q1 10-Q

Snip on user growth from the filing:

User Growth and Web Traffic

From January 1, 2016 to May 16, 2016, MassRoots expanded its userbase from 725,000 to approximately 900,000. From January 1 to April 30, 2016, MassRoots’ web platform, which does not allow users to register, generated 2.26 million pageviews from 487,000 unique visitors. This resulted in MassRoots’ Alexa rating increasing from 209,848 as of December 31, 2015 to 148,282 as of May 2, 2016.

Disclosure: I have no shares in MassRoots, though we're buds, at least that is how they address me in emails. You can see my portfolio as of the middle of last month here. I'm long-term and not very active.

Nemus Bioscience Q1 10-Q

Nemus Bioscience Q1 10-Q

The following text in italics are snips from the filing. Enjoy!

Nemus Bioscience, Inc. is a biopharmaceutical company that plans to develop and commercialize therapeutics from cannabinoids through a partnership with the University of Mississippi. The University of Mississippi ("UM") is federally permitted and licensed to cultivate cannabis for research and commercial purposes.

We are a biopharmaceutical company focused on the discovery, development, and the commercialization of cannabis-based therapeutics, or cannabinoids, through our partnership with the University of Mississippi, or UM. UM has held the only contract to cultivate cannabis for research purposes on behalf of the Federal Government since 1968, and it has significant expertise in cannabis cultivation and the extraction, separation, process and manufacture of cannabis extracts. We are currently UM's sole partner for the development and commercialization of drugs derived from cannabis extracts, or cannabinoids, and the realization of this partnership will depend on the successful navigation of the complex regulatory framework for the cultivation and handling of cannabis in the United States.

In July 2013, the Company entered into a Memorandum of Understanding (MOU) with UM to engage in joint research of extracting, manipulating, and studying cannabis in certain forms to develop intellectual property (IP) with the intention to create and commercialize therapeutic medicines. Nemus will own all IP developed solely by its employees and will jointly own all IP developed jointly between Nemus and UM employees. The term of the MOU agreement is five years and the parties agree to negotiate separate research agreements upon the identification of patentable technologies as well as any deemed to be a trade secret. The agreement may be terminated by either party with three months written notice to the other party.

Research and development expenses for the three months ended March 31, 2016 were $135,358 which consisted of contract R&D fees incurred by the University of Mississippi for the CIPN research project, process development fees incurred by the Company’s contract manufacturer, and consulting and professional services fees.

Research and development expenses for the three months ended March 31, 2015, were $37,200 which consisted of option fees and contract research and development fees incurred by UM to begin studies concerning the medical utility of cannabinoids as anti-infective therapeutics for MRSA.

On September 1, 2014, the Company signed an operating lease for laboratory and office space at the Innovation Hub, Insight Park located on the University of Mississippi campus. The lease term commenced on October 1, 2014 and expires on December 31, 2017. There are annual escalating rent provisions and two months of free rent in the agreement. The total cash payments over the life of the lease are divided by the total number of months in the lease period and the average rent will be charged to expense each month during the lease period. The monthly amount charged to rent expense is $9,267.

Disclosure: I have no shares in Nemus. You can see my portfolio as of the middle last month here. I'm not a very active trader.

After My Last Post, The Journalist Blocked Me On Twitter

On Twitter yesterday, SEC Filings on Weed! asked Debra Borchardt, a contributor to Forbes, "Any comment?"  The question was in regard to a possible erroneous claim in a January piece she wrote for Forbes.  Maybe I'm the only nerd to care about a piece of history like, "Who was the first publicly traded cannabis grower/processor/retailer?" Doubt it.

She could have approached this question about 100 ways, any one of which would probably be better than how she responded. She started with an ad hominem attack, then ignoring the possible errors in her story I was blocked from interacting with her on Twitter.

Facts don't matter in some journalism apparently.  It's much easier to cut and paste a press release than actually check the facts. People will be coming across this misinformation online for years now, unless a correction was made like in this MJ Biz Daily article.

Go on about your business, who cares about an accurate history of the cannabis industry. Derek Peterson, CEO of Terra Tech made the claim, but at this point we expect cannabis companies to pump up the story as much as possible.

What is the media's role here? 

Disclosure: I have no position in any firm mentioned in this post. This is still my portfolio.

Jon Stewart - Enhancement Smoker (Half Baked)

Who Was First, Blum Oakland or Kaya Shack?

Maybe I'm missing something in the language used by these two companies, but it appears both companies claim to be the first publicly traded integrated cannabis touching producer.

See my previous post on Kaya Shack for more information on the firm. Kaya Shack says this on pg. 23 of its 9/30/15 10-Q:

"We are the first fully reporting U.S. public company to actually own and operate a vertically integrated seed-to-sale legal marijuana enterprise in the United States. Our operations include medical marijuana dispensaries ("MMDs"), that serve both medical marijuana patients and recreational customers medical marijuana grow operations ("Grows"), the manufacturing of proprietary cannabis products and the research and development of medical grade cannabis strains and extracts for pain relief and treatment of serious illnesses."

I'm currently reading through Terra Tech's recent SEC filings. Terra Tech says the following in a press release in January 2016:

"Today, we can proudly claim the title of the only US-based, publicly-traded company that touches every aspect of the cannabis lifecycle—from cultivation, to extraction, to branding, and now, with the acquisition of Blum, to retail sale"

So, who was first?

According to a January Forbes article Terra Tech's acquisition of Blum takes the title.  

But the date of Kaya Shack's filing above leads me to question that claim. 

Did the reporter for Forbes get it right, or wrong? 

She states the following in the first paragraph:

"Investors can now buy shares in the first publicly traded marijuana dispensary that handles the product from cultivation to storefront"

I question whether she did her own research on this claim, or just took the CEO's word for it.  I would welcome clarification from a credible source. Maybe there is even another public cannabis producer that we're unaware of.

I'm just sayin'...

Disclosure: I have no position in any firm mentioned in this post. You can see my portfolio as of the middle last month here. I'm not a very active trader.  

Grow Cannabis In Our Warehouses!

The following is pulled from the recent 3/31/16 10-Q of Home Treasure Finders, Inc.


NOTE 5 – LONG-TERM DEBT
On September 15, 2014, the Company entered into a promissory note for $840,000 on the purchase of three warehouse units known as 4420, 4430 and 4440 Garfield Street, Denver, Colorado. The Company is leasing each of the three separate units to licensed third party growers for cannabis cultivation. The terms of the variable interest 25 year amortization note carried by the seller of the property call for payments to seller as follows:

1. First and Second year interest rate at 7% with 25 year amortization payment at $5,937 per month.

2. Third and Fourth year at 8% with 25 year amortization payment at $6,278 per month.

3. Fifth year at 9% with 25 year amortization payment at $6,640 per month.

4. Balloon payment of $777,255 due at end of the fifth year.

The note to seller is secured by the three warehouse units.

As of March 31, 2016, the balance of the note was $821,525.

Home Treasure Finders, Inc. was formed on July 28, 2008. The founder, sole director and officer of our company is Corey Wiegand. On March 3, 2014 we formed a wholly owned subsidiary, HMTF Cannabis Holdings, Inc. to purchase properties that qualify for legal cultivation of cannabis.

Our net income for the three months ended March 31, 2016 was $5,267. We generated operating revenue from three sources, sales commissions, property management, and commercial real estate for legal cannabis cultivation. We manage approximately 60 rental real estate owned by non-related third parties. In comparison our net loss for the three months ended March 31, 2015 was $26,542.

The business plan of our subsidiary, HMTF Cannabis Holdings, Inc. is capital intensive and requires that we raise significant additional capital to acquire and improve real estate. We are negotiating with various sources for an equity infusion to match our long term capital needs.

Disclosure: I have no shares in any firm mentioned in this post. You can see my portfolio as of the middle last month here. I'm not a very active trader.

Mary Jane Group B&B's - Conference Call on Weed!

Warren Buffett has said he reads S-1's like other guys read Playboy. I listen to corporate conference calls like other guys watch online porn.

Here are some summary notes from a recent conference call for the Mary Jane Group based in Denver. I just took notes as the CEO Joel Schneider spoke, so all of the following came directly from him. I decided to put them here to save you from having to listen if you want the info or are into this cannabis bed and breakfast idea.

The audio was extremely annoying. There is a constant stream of tones indicating people joining and leaving the call, I think. He is obviously a little flustered by all the noise. I would think they could have muted those sounds. Oh well. Here is a link to the call, if you don't believe me, it was pretty rough.

Mary Jane Group is developing an interesting business focused on cannabis friendly B&B's in Colorado, but it has had it's struggles. Here is a link to see the properties.  I'd really like to check one out soon.

From what I gathered, this recording took place in July 2015. The stock is now at zero, and was basically at zero then. Filings through Yahoo! and EDGAR are here. I may try to call Joel instead of reading these filings to find out what is up with his firm. Strangely enough, I just accepted a connection request from him on LinkedIn a few days ago.  

Conference call on weed!

- Joel Schneider, CEO of Mary Jane Group speaking 

- He was a securities attorney for over 30 years, mostly represented small cap, not an innkeeper

- Lots of annoying tones they can't seem to mute 

- Joel acquired the shell corp. (with a name I couldn't understand, Pateo or Badeo Corporation?), which is now Mary Jane Group

- Sole reason for purchase was to come to Colorado to get involved with and acquire cannabis businesses 

- Joel met a man running Mary Jane Entertainment, which was a suite of companies with a bunch of different projects such as cannabis related online radio, newspaper, tours, events/lounges, glass blowing – none really operational, tried to salvage them, but ultimately they were failures

- Saw a need for cannabis lodging while living in a hotel

- Cannabis lodging did not exist before April 10th, 2014, the date when they signed a lease and took over The Adagio, the flagship property of Mary Jane Group (claim disputed by me) 

- It is “a tremendous success”

- Dissolved failing businesses, which took until late 2014, while starting to operate B&B

- Had to raise half a million dollars in debt “to run businesses that were basically running the company into the ground”, so “because of this debt the stock has gone down tremendously”

- Continued to grow B&B business by acquisition – took over Mountain Vista B&B in Silverthorne, then took over Hotel San Ayre. (In the springs) This doubled rooms to 22

- No other way to get into business other than issuing convertible debt, “had a lot of convertible debt out there”

- Discussion of shell company filings and raising convertible debt eligible to be sold into the market, which eventually caused a run on the stock

- When first conversions vested and happened in April 2015, they all started happening

- Provisions for a certain convertible debt holder that wasn't a friend allowed a decreasing conversion price as the stock fell, and started forcing price of the stock down – impetus for run on the stock

- Strong bookings on all three B&B properties operating and profitably operating

- Unable to raise all money for Adagio, landlord extended lease, but did cost company $75,000 in a non-refundable deposit

- Believes in cannabis as growth industry, looking to grow at least one property per quarter – looking at Washington, Oregon, Alaska, California, Hawaii, etc.

- Looking to expand through management agreements for hotel chain “Bud & Breakfast”

- Getting calls from other “tired” B&B owners around the country to become part of the “Bud & Breakfast” chain – to boost occupancy, rates, efficiency, etc.

- Agreements would allow taking on additional properties without huge renovation capex, such as with San Ayre and Mountain Vista

- Believes good properties are available around the country

- CannaCamp - “was real and was something we had invested in”

- Approached by others in March 2015 about starting ranch or camp, went to look at CannaCamp host ranch location and wanted to go forward

- Put out press release which gave people cold feet, dealt with that

- Property was under contract for sale, had obtained draft of lease prior to closing, showed that they were allowed to operate CannaCamp for four months from July 1st through the end of October.

- Unfortunately, press release was picked up nationally and internationally – Jimmy Kimmel, Conan, Jimmy Fallon 

- Purchaser of property got cold feet and refused to sign the lease

- Went looking for other properties in Durango, put up $75,000 to take over a 2nd ranch, partners backed out and “took us to a 3rd ranch”

- At that point MJ Group was forced to withdraw support for CannaCamp for 2015, could not be embarrassed anymore and pulled out after investing $20,000 in opening of original ranch, advertising, “cultivated spirits”, etc.

- Despite having some bookings, property partners “dropped the ball”

- Next effort will probably be called “Bud & Breakfast Mountain Resort and Retreat" - examining properties - shooting for 4/20/16, but takes things time to ramp up

- Starting with an industry that did not exist, $609,000 in revenue in first year of business, primarily from Adagio in Denver

- All convertible debt converted to equity, gone through the bad times

- Still have non-convertible debt of $350,000

- Dedicated management “crew” including management, chefs, hosptiality, etc. 

- Generating revenue 7 days a week and working 7 days a week

- Generating retail and spa revenue at properties

- Operationally running sound and will need to raise additional funds for specific projects within aggressive growth plan

- We are in that window where our stock needs to remain above $.01 per share for 10 consecutive days, otherwise gets taken down to pink sheets

- This leaves management in a quandary, does not want to do a reverse split, but a small one could be necessary

- Market is not appreciating the businesses – next year of revenue will exceed current market cap, doesn't know of other businesses like that

- Being the sole director and officer is not “correct”, looking to expand management, this will change

- Trying to expand business, he has talked to many cities and has learned a lot about which are accepting and which aren't

- CannaCamp was a “failure” that cost the company money

- Being unable to close on the Adagio was a “failure”, but “we still run that business and it gets rave reviews”

- Just scratching the surface in terms of using it as an event space, and many other revenue growth opportunities

- A very enthusiastic rah-rah growth speech (which I admit was fun to listen to (beside the beeping) because I too am enthusiastic about the industry)

- Question from investor: Do you drug test your employees? No, but they do not allow use during shifts. Encourage off shift mingling with guests, which part of not just being a hotel, but also entertainment

- Encourages guests to consume in common areas like the porches, living rooms, etc. No smoking in rooms, cannabis is highly social already

- An apology for CannaCamp failure

- Pushes his firms PR sophistication (odd, since PR blew up in his face after over hyping and under delivering, they aren't alone in the cannabis world)

- Discusses possible reality show and other unique cannabis hospitality/lodging/media/licensing opportunities

Wow! Good stuff.  I like that business model of just an awesome, unique B&B with great food nestled in a developed wine region in an adult use state.  What a country!

Disclosure: I don't own stock in Mary Jane Group. You can see my portfolio as of the middle last month here. I'm not a very active trader.

Vertical Integration in Cannabis and Wine

Having worked for an integrated cannabis grower/processor/packager/retailer I've done some thinking and research on comparable business models among publicly traded companies. Cannabis is vertically integrated to a higher degree than most other industries.

Imagine a banana company that has locations to sell bananas. An agricultural producer, a retailer and some varying degree of processing and packaging in between. As far as I can tell Chiquita doesn't do as much of that, nor does Dole, Del Monte, Driscoll Berries, Diamond Nuts, Altria, Phillip Morris, Heineken or many others. Maybe some small brewers lean in this direction. Maybe some retailers own farms or production facilities, I'm not sure.

Crimson Wine Group is one interesting company I found.

From Scottrade, which I'm pretty sure uses some subscription level of  S&P Capital IQ data and information:

Crimson Wine Group, Ltd. owns and operates boutique, estate-based wineries that produce wines in the wine growing regions of California, Oregon and Washington. The Company operates through two segments: Wholesale Sales and Direct to Consumer Sales. The Wholesale Sales segment includes all sales through a third party where prices are given at a wholesale rate whereas Direct to Consumer Sales segment includes retail sales in the tasting room, remote sites and at on-site events, Wine Club sales, and other sales made directly to the consumer without the use of an intermediary. The company through its subsidiaries owns four wineries: Pine Ridge Vineyards, Archery Summit, Chamisal Vineyards and Seghesio Family Vineyards.


They are growing grapes, processing them then selling wine. That is what we did at the company I worked for, but with a different crop and market.

Crimson does sell a lot of wine wholesale to distributors across the world, but a not insignificant amount of revenue is from direct to consumer retail/tasting room locations and wine clubs.

If you care to see it although it's not on weed, here is a link to the most recent 10-K for Crimson.

Crimson holds northern California, Oregon and Washington wine acreage, and was spun off from conglomerate Leucadia. Leucadia has a fundamental investing and insurance culture. Ian Cumming, a builder of Leucadia, still owns a high single digit percentage of the shares of Crimson. There has been major consolidation in the wine, beer and spirits industry and many would be comps are part of multi-billion dollar drinks firms. Crimson's stock is currently trading right around book value, but looks expensive compared to recent financial performance.  About $205 million market cap, with roughly $16 million in debt.

Thinking about beautiful California wine country got me thinking about my trips up to Sonoma during graduate school in SF, cannabis/wine tourism and B&B's.  We usually stayed with my wife's uncle, sleeping in a tent outside in the dense Redwood forest of northern Sonoma, on the coast near Fort Ross. You can smell the outdoor cannabis and see the farms as you stroll around in the right areas.  Usually, it was no B&B for my wife and I.  One time we drove up for a night and stayed at a great little B&B, it was quite memorable.  Some family was visiting Napa from Chicago, so it gave us a reason to splurge.  

The Mary Jane Group is now pursuing this market for cannabis tourists in Colorado. After being inspired by fond memories, Mary Jane's Colorado B&B business will be the topic of my next post. 

One last thing, just because I find it useful, is a piece by McKinsey that breaks down vertical integration of industries and companies. I like using it as a framework to think about the cannabis industry. Perhaps in a future post I'll explore that further.

Disclosure: I have owned shares in Crimson Wine Group since last August and Heineken ADR's since 2011. I do not own stock in Mary Jane Group. You can see my portfolio as of the middle last month here. I'm not a very active trader.

Jon Stewart - Enhancement Smoker (Half Baked)

Waters Corp. Makes Lab Testing and Scientific Research Equipment

From the Waters Corp. website:

Better technology furthers better science. Waters continually pushes the limits of scientific possibility, helping our customers to reach their goals every day.

Through constant collaboration with the scientific community, our customers benefit from innovation in our core technologies: separation and analytical sciences, mass spectrometry and laboratory informatics. Separately, or together, our solutions contribute to our customers’ enduring business and scientific success.

This looks like a company that may benefit in the long-run from increased demand for cannabis testing and scientific research. More financial research is underway over here at SEC Filings on Weed! Unsurprisingly, a quick Waters Corp. 10-K and 10-Q search for cannabis related terms did not turn up anything.  This could be one of those unspoken but understood opportunities.  I'd be surprised if a lot of Waters' wares weren't already in use at cannabis testing labs such as CannLabs and medical research outfits like Nemus Bioscience and their partner the University of Mississippi.

Walgreen's isn't shying away from medical cannabis, see this recent article at The Huff Post.

Disclosure:  I don't own shares of Waters Corp. I have owned Walgreen's stock since early 2012, when the whole Express Scripts brawl seemed extremely important to Wall Street.  I was hoping Goldman Sachs was on the other side of my trades. They issued a sell rating at about a $30 billion market cap around the time I was buying. Be greedy when others are fearful and fearful when others are greedy.  You can see my portfolio as of the middle last month here. I'm not a very active trader.