Isodiol Is MJNA 2.0 - Expect Massive Dilution From Not-So-Arm's-Length Transactions

Summary

• Isodiol's management has a colorful history of affiliation with alleged pyramid and Ponzi schemes, as well as run-ins with the SEC and FDA.
• The brother of Isodiol’s chairman has received almost 20 million shares of Isodiol in the form of consulting and finder’s fees, but this is hidden through a numbered company.
• Jared Berry appears to be selling multiple entities to Isodiol, yet full disclosure is lacking. He did the same at MJNA.
• Isodiol employs at least eight ex-MJNA employees and is following that company’s playbook of being a serial acquirer of other companies. MJNA now has 1.8 billion shares outstanding.
• Isodiol’s basic shares have ballooned to ~320M from 58M a year ago (5x!). It’s uncertain if acquisitions are truly at arm's length or if related parties are benefiting.

Introduction

During the past few months, Isodiol International Inc. (OTC:ISOLF) has seen its stock price rocket up by over 300%, giving it a market capitalization of about CAD$300 million (CAD$424 million fully diluted). The company has the appearance of a rapidly growing business in phytoceuticals (plant-based health supplements) that focused on derivatives of hemp. Hemp is a cousin to the cannabis plant and is a source of non-narcotic cannabidiol (“CBD”), which is used in many nutraceutical products and is presumptively legal throughout the United States.

Revenues have also gone up exponentially at Isodiol in the past year, due largely to a plethora of acquisitions. In fact, the company actually delivered sales of CAD$5.9 million for the quarter ended December 31, 2017, which was an enormous increase over the CAD$3 million of revenue just two quarters ago. While they only eked out a small net profit of CAD$0.2 million, with that kind of revenue growth, the obvious sales pitch is that Isodiol is a rapidly growing company in the red-hot marijuana sector…even though they are not selling marijuana. Isodiol CEO, Marcos Agramont indicated his confidence in the company’s future by stating “We had another strong quarter of revenue growth and will continue our commitment to delivering high-quality hemp-derived CBD products through innovative delivery methods, which is the core of our success”.

Massive Dilution and Enrichment

The recent torrent of acquisitions at Isodiol has resulted in massive dilution, both from the shares issued directly for the acquisitions and also for fees paid to consultants related to the acquisitions. Isodiol now has ~320 million shares outstanding (~430M fully diluted), which is more than a five-fold increase from the 58 million shares outstanding a year ago. The Grumpy Bear has done some M&A in his career and wondered how a company could find so many acquisition targets, negotiate transactions, and conduct due

Analyst’s Disclosure:I am/we are short ISOLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.