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I trade mainly on sentiment & leave the more technical aspects to other Wolves, but I do chart. I have a group of traders that pool resources & $$$ to make the #Wolf-Fund. My persona on twitter @wolfofweedstreet only discusses Marijuana related stocks. I Am the Wolf of Weed Street and... More
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  • Part 2 GBLX: Risks & Rewards... 2 comments
    Jul 28, 2014 2:21 PM | about stocks: GBLX

    GrowBLOX Sciences Changing the landscape for the Marijuana Industry

    There's no doubt that the marijuana industry is booming with new opportunities both from a business development stand-point and from an investment approach. The current market landscape has opened up many options but the bottom line is this: if dispensaries can't get product, IE marijuana, there's really no market to be had. More importantly for states like New York, Florida, and Illinois which have all just put medical marijuana plans in place, the necessity to have a consistent medical grade product is paramount to the entire market within those states.

    After looking through the industry, I've found that there is, in fact, a company that focuses solely on medical grade marijuana production in order to deliver an effect and consistent strain with each and every crop. GrowBLOX Sciences, Inc. (OTCQB:GBLX) is a "research and biotechnical development company setting the gold standard for manufacturing medical cannabis producing technology, as well as discovering, developing, and commercializing proprietary strains of cannabis to treat a broad range of serious medical conditions." Based on its unique technology, individual proprietary cannabis strains for treatment of specific medical ailments, and the company's four revenue drivers, GrowBLOX has the ability to become a key player in the industry.

    Early Foothold in the Growth and Dispensary Market

    To date, GBLX has begun to build a footprint within the medical MJ space in several key states. First, in May the company was up for approval as one of Nevada's "elite 18"; only a little more than a handful of companies that were granted special use permit licenses for medical marijuana dispensaries. The GrowBLOX chamber has gained the attention from the marijuana community for its ability to successfully produce consistent strains of medical grade marijuana in a fully enclosed, climate controlled medium.

    GrowBLOX has remained steadfast in the companies approach to build revenue through in state partnerships similar to the operations in Nevada via GB Sciences, NV. As of recent, GBLX has applied for 2 additional licenses within the state and if approved, will have dispensaries in high traffic areas within the Las Vegas market, which will utilize the GrowBLOX technology to provide a consistent product across the state to thousands of residences and millions of tourists who fall within its boarders.

    In addition to Nevada, GrowBLOX has also begun to establish itself within the Florida market via a wholly owned subsidiary, GB Sciences Florida, LLC. According to the company in a recent press release discussing the move, GrowBLOX Sciences recognizes Florida's high standards for quality in medical marijuana cultivation as a perfect match for their GrowBLOX™ cultivation technology. GrowBLOX CEO, Craig Ellins, said, "In an effort to safeguard Florida's medical marijuana patients, Florida's legislators have crafted some of the country's most stringent quality standards when it comes to the safety and efficacy of the medical marijuana grown in their state. They want medical solutions, and that's exactly what our GrowBLOX™ does, it makes medicine."

    Florida will soon hold a vote this November where voters will be able to have their chance at being part of Florida's approval of the Florida Right to Medical Marijuana Initiative, commonly known as Amendment 2. State projections of sales already range from $138 million to $5.6 billion, with projections of tax revenue ranging from $8.3 million to $338 million based on the number of medical marijuana patients, the amount of pot they may use and the price per ounce. IN any case, the market for medical marijuana in Florida could become a strong revenue driver for GBLX if Amendment 2 passes.

    A third highlight that continues to support GrowBLOX as a market disruptor is recent press that was released Friday afternoon (7/25). GBLX announced the execution of a binding Memorandum of Understanding with LaurelCo, LLC, an Illinois limited liability company formed to pursue the acquisition of both cultivation and dispensary medical marijuana licenses in the state of Illinois thus allowing GBLX its entry into a 3rd state. Through the agreement GBLX will provide the growing chambers to Laurel in exchange for a 10% equity interest. Additionally, after the Illinois company opens "one or more dispensaries", GrowBLOX will not only begin to receive an accelerated payback of actual costs but it will also realize a 10% royalty from products created in the chambers and sold by the LaurelCo, LLC licensed entity thus immediately achieving several revenue streams within the Illinois market.

    "With the formalization of our relationship with LaurelCo, LLC in Illinois, we are setting a standard for our growth into states in which GBLX does not have resources in place to operate a medical marijuana business by seeking out great partnerships who will operate the local business and be part of our nationwide plans."

    -Craig Ellins, CEO, GBLX

    So just on the product side, GrowBLOX has an open channel for revenue from 3 states just beginning to legalize medical marijuana. Since making these announcements, GBLX share price has increased from lows of $1 a little over a week ago, to highs this past Friday of $1.25 just before closing the week at $1.20. The marks a 20% rebound in less than 2 weeks and could be the first indication of positive sentiment beginning to flood into the market once again.

    Financing Activities

    To sustain growth operations, GBLX has brought on Lazarus Investment Partners LLLP. Not only has this firm invested over $1Million into the company but as of July, Lazarus also purchased more shares in the open market and significantly higher prices that its original investment. Recent press shows that this company "has acquired an additional 269,632 shares in the open market for an additional $322,000 investment. Lazarus, which already holds a 3,000,000 share investment at a price of $0.50, averaged up their position acquiring 199,632 shares at $1.19, 50,000 shares at $1.21, and 20,000 shares at $1.20 over a three day period from June 30, 2014, to July 2, 2014." The fact that this investment firm is cost averaging up should indicate its opinion on where it thinks GB Sciences is headed in the future. Furthermore, the most recent shareholder update reveals that GBLX closed a $5 million private placement with institutional and accredited investors. The financing included warrants which, when fully exercised, amount to a $30 million financing. These warrants expire between 3 to 5 years depending on A or B warrants thus posing little dilution risk in the near term.

    Risk Factors of GBLX

    Market risk is an obvious factor here. Volatility in a small cap marketplace poses greater risk for long-term investors as compared to high frequency traders. In the case of GBLX, it has seen consolidation over the last 60 days going from a high price of $3.49 to a low of $1. I believe future operations of GBLX will determine the stock's to be more or less volatile. In addition to this, the company is both top-heavy in funding activities while not posting a single dollar in revenues. Obviously it is building the framework to begin generating revenues as soon as possible but in the interim, this is still a developing situation. Third, as with the marijuana market as a whole, state legislation poses probably one of the biggest risks for the company's success.

    If Florida's vote fails and Illinois does not pass its medical marijuana law, GBLX can say goodbye to the "potential market" and will only be limited to the select few medical users the current state laws allow. Finally, potential dilution also poses as higher level of risk for investors specifically. The company has obvious dealing with firms like Lazarus partners as well as other institutional investors. Should these backers decide to pull the plug so to speak, there are enough freely tradeable shares in their hands that it could potentially be disastrous to the share price. Just as an example, Lazarus Investment Partners holds a 3,000,000-share investment at a price of $0.50, a price per share far lower than the current market price. Assuming this firm is as savvy as diligence would suggest, this scenario probably wouldn't happen but it still poses a risk in the event that it does so investors should be completely aware.

    Conclusion

    GrowBLOX as a company has been working to become a market leader within the quickly growing medical marijuana space. Through several operating agreements between the company, its subsidiaries, and partner entities, GBLX has begun to establish a presence in several of the "up and coming" medical states who all have laws up for vote as it pertains to full legalization for medical use. Though there are several key risks that investors should pay attention to when undertaking their diligence, the fact remains that GrowBLOX has a system in place not only for streamlined cultivation processes but also for building & expanding into new markets. Based on these reasons, I believe GBLX and its technology to be market disruptors and allow the company to become potential market leader if and when these new states go online for legalized medical sale by the end of 2014 and into the beginning of 2015. This groundwork is a vital piece for GBLX and any marijuana company looking to realize increased revenues in the very near term. So for GrowBLOX, being first to market has been a key strategy to build the framework for its future endeavors within the space and in conclusion, I personally think that GBLX warrants further diligence.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Comments (2)
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  • a1jimmy
    , contributor
    Comments (4) | Send Message
     
    Was the recently announced shipment by $GBLX to Las Vegas for ONE Growblox unit??? Investors are hungry for more info on these units. Why doesn't $GBLX show some photos of it's manufacturing of these units?
    3 Aug 2014, 06:08 PM Reply Like
  • WolfofWeedStreet
    , contributor
    Comments (39) | Send Message
     
    Author’s reply » probably because companies that need to post pictures of one or two units are B*llsh*tters...
    3 Aug 2014, 08:13 PM Reply Like
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