A year ago I wrote an article, "Four Long Term Penny Stock Picks For A Profitable 2017" that I published on my blog. At the time I wrote that I felt "confident that these stocks were on track to give long term investors significant gains in 2017" and I wasn't wrong. Combined, $1,000 invested in each of these companies on January 1, 2017 would have returned a 354% cumulative profit as of the close of business on 12/29/2017, the year's last trading day. While the article was intended to be published by January 3, the first trading day of 2017, due to publishing and editorial delays it didn't reach print until January 12. During the interim, several of these picks began an impressive run. Had you waited and invested only after seeing my article, you would have still realized gains of 295%.
It's now time to take a fresh look at these four companies and their prospects for 2018. I would have written an update back in June but I was waiting for more information from Omni which was virtually silent and secretive prior to a little over a month ago. Until they released a deluge of plans and forecasts starting with a letter to shareholders on November 14, they really had nothing to report on. Now, I'm happy to report that all four companies still look to make impressive gains in 2018.
InMed Pharmaceuticals (OTCQX:IMLFF)
Last year I called this company a "sleeper" since they, like Omni this year, had been very miserly in communicating with their shareholders during 2016 while their share price stagnated. That changed late that year as InMed launched a branding campaign and continued it throughout 2017. Since clinical trials of their first drug candidate were over a year away, I had predicted gradual growth through the first six months of 2017 with an accelerated climb toward the end of the year as we got closer to the trials. In fact, Inmed shareholders got taken on a roller coaster ride as the entire cannabis sector rallied during the first quarter on expectations of gains, as Nevada started recreational sales, only to have the wind taken out of their sales with the federal crackdown scare surrounding comments from Attorney General Jeff Sessions. After reaching a low of $.177/share on August 14, a steep climb did begin as InMed peaked at $1.18/share on the last trading day of the year and settled back to $1.06.
Several catalysts drove the price through 2017. The first one occurred on January 10, when CFN Media aired an interview with the company's CEO, Eric Adams, in which he described the company's biosynthesis process. This allows the company to produce any of 90+ cannabinoids, that are bioidentical to those produced from the plant, using genetically engineered bacteria similar to the process used for producing insulin. All but three of these appear only in trace amounts in the cannabis plant and are costly and difficult to extract. He also indicated that he was targeting an uplist to NASDAQ within two years.
Trading accelerated a few days later when the company announced the appointment of Martin Bott, VP of Corporate Finance and Investment Banking at Eli Lilly & Company, to the InMed Board of Directors, further improving the credentials of an already stellar management cast.
On March 27, InMed received another boost from it's paid media consulting company, CFN Media, as they managed to publish an article in Forbes.com (see "InMed Pharmaceuticals Is More Than Just Another Cannabis Drug Company") about InMed's Bioinformatics software and how it allows the company to map "the different compounds of cannabinoids to the various diseases that it can address". The article indicated that InMed was already receiving inquiries from other companies about tapping into their software.
Following the spike driven by these catalysts, the share price slowly drifted down through the second and third quarter until on September 12, the company announced that it had filed for a provisional patent on it's biosynthesis process. The prospect of InMed cornering the market for producing 90+ hard to isolate pharmaceutical grade cannabinoids was enough to trigger a 200%+ rise in the share price over the next several months.
While some have criticized InMed's use of paid media consultants, CFN Media and later Network Newswire, to promote themselves as evidence of a pump and dump, this would be an oversimplification. One has to distinguish between third party promoters who load up on a company's stock and trumpet how it will make you rich within months, only to sell off their shares when the stock price peaks, and legitimate companies trying to interest investors in their accomplishments and brand. Start up pharmaceutical companies, particularly those in the cannabis sector where it is difficult to get institutional funding, must rely on touting their potential for huge gains in order to attract investors during the years long process of getting their first drug candidates approved. For example, GW Pharmaceuticals (GWPH) has yet to turn a profit, even though its share price ran from under $9 in mid 2013 to $235+ on the potential of it's cannabis drug Epidiolex, which will not hit the market until sometime next year. The price appreciation was almost exclusively due to marketing and branding.
Looking forward, while there has been some dilution, as would be expected with any growth company, it has been kept manageable and hasn't impeded the appreciation of the company's share price. I expect they'll issue more shares in the coming years but the number of shares required to fund their growth will shrink as the share price continues its rise.
In their Investor Presentation, Inmed states that the company's first drug candidate, INM-750 for the treatment of Epidermolysis Bullosa, a rare and painful genetic skin disorder with no known cure, is expected to go into clinical trials sometime in 2018. We could also see a partnership on their INM-085 glaucoma medication as well as continued progress on INM-405, a topical pain treatment. However, the main catalyst for 2018 may well be some form of commercialization of their biosynthesis process. In September, the company hired Ben Paterson, another Eli Lilly alum, "to assist in defining the pathway for the scale-up, purification, and manufacturing strategies for InMed's cannabinoid biosynthesis program".
In order for a new drug to pass muster with the FDA, a company must be able to prove that they can produce their formula on a consistent basis with the same potency, purity and quality. This becomes difficult when the ingredients are derived from plant material. In addition, planting, growing, harvesting, extracting and purifying huge quantities of plants can become prohibitively expensive, particularly when most of the 90+ cannabinoids are only found in trace amounts in each plant. A number of companies working on cannabinoid medications, including Axim Biotechnologies (OTCQB:AXIM), GW Pharmaceuticals (GWPH), and Zynerba (ZYNE) would find InMed's process very attractive. Even without near term demand from pharmaceutical companies, licensing a partner to simply produce pure CBD and THC for the recreational and dispensary markets could be a lucrative venture for InMed.
I expect we'll see action on the commercialization of Biosynthesis, and perhaps Bioinformatics, this year as well as the beginning of clinical trials for INM-750. In an article published on December 19, Cannabis News Wire noted...
InMed’s INM-750 for Epidermolysis Bullosa, an orphan disease characterized by extremely fragile skin, has potential global market revenues estimated at $1 billion per year. Another candidate in the pipeline, INM-085 for Glaucoma, has a global market potential in excess of $5 billion, and the company’s development of INM-405 targets the $36+ billion pain market.
...It also declared that...
Leveraging its proprietary technologies, InMed is rapidly expanding its pipeline of novel cannabinoid therapeutics for a variety of medical conditions. Historically, biotech companies are valued at about three times the peak annual sales of a company’s lead candidate. With a market cap around $100 million, InMed may be significantly undervalued based on its capabilities.
Based on this information one could conclude that InMed is potentially worth in excess of $20/share just from projecting future sales of INM-750, not to mention it's other drugs and processes. This prompted even Inmed to offer a disclaimer the next day to dampen any over enthusiasm from the market.
InMed’s clarifies that the revenue numbers quoted were directed at the revenue potential for the disease category and not the revenue potential for InMed’s therapeutic products. The article was not paid for by InMed nor was any compensation provided.
Nevertheless, I still view this company as having the potential to overtake GW Pharma in a few years as the premier medical cannabis pharmaceutical company. Consequently, I'm recommending shareholders continue to hold on to InMed and take advantage of dips to increase their holdings.
mCig, Inc (OTCPK:MCIG)
Of all of my picks, mCig was the most active in 2017. The company had a great run starting in September 2016, moving from under $.03/share to close above $.19/share on December 31, 2016 on the strength of its grow facility construction division. It continued its rise in 2017 after my article was published, peaking several times above $.49/share before starting a decline to a more reasonable valuation on February 6. Rumors surfaced of a shakeup in their construction division in September. Their 1FQ18 10-Q was published several weeks late and while it showed mCig had a record quarter of $3.17 million, fueled primarily by construction ($2.7 million), the earnings ($76K) were disappointing. With little news of construction progress, the share price subsequently shrank to a new low of $.125/share on November 6. Shortly afterward, mCig CEO, Paul Rosenberg, issued a PR announcing a new $5 million construction contract in California and confirmed that something had happened with construction...
Our Grow Contractors division was very busy in the last few months, finishing old construction projects, bidding on a new ones, and most importantly, changing its business model. The division took some time to restructure and clean up past projects, including canceling some non-performing operations in order to move forward. We look forward to our expanded presence in California and more to come. Expect many more construction, management, and exclusivity announcements from Grow Contractors.
This was followed by a succession of new revenue enhancing announcements over the next two months that pushed the share price back to close at $.392 on December 31. That was a gain of 104% for the year.
While most of the excitement was concentrated in October, November and December, the groundwork was laid in a PR in April that barely moved the share price and was met with as much derision as praise. Rosenberg announced that he had hired an elite group of programmers from the team that had developed one of the most successful file sharing, streaming and ad serving websites of the early century, MEGAupload, MEGAclick and MEGAvideo.
The sites served approximately 50 million users per day over 6500+ servers, monetizing over a quarter billion USD in advertising and subscription revenue.
The company also announced a new cannabis and adult oriented social network, news and cannabis job search website, 420Cloud.
mCig shareholders, most of whom had bought into the company based on its strength in construction and promise to eventually get into marijuana cultivation and production, couldn't see much revenue potential in a new social networking site. Under the covers, however, the mCig developers where developing a state of the art targeted advertising network, cryptocurrency wallet and merchant processing system while honing their skills in blockchain programming. This became more clear in a series of announcements in the fall.
In October, the company announced the rollout of its eHESIVE ad network, a blockchain consulting partnership with Renderpayment as they did an Initial Coin Offering (NYSE:ICO) of their RPM cryptocurrency, and the dividend spinoff of their technology division into a new company called OBITX.
In November, mCig announced an exclusive deal with Flair Networks to market their eHESIVE ad network in the EU and incorporate it into their web hosting offerings. While it hardly caused a ripple in the share price this was a powerful statement of confidence in mCig's ability to compete in the $200 billion + worldwide market for digital advertising from a company that had, according to the PR...
over 20,000+ professional accounts comprised of multiple companies, web agencies and conglomerates / client websites and traffic, hosted from the company's multiple data centers and a multi-layered network with capability over 700Gbps bandwidth.
Finally in December, mCig CEO Paul Rosenberg announced he was investing $500,000 of his own money in OBITX so that they could deploy a new, first of its kind, state of the art cryptocurrency ATM. Their initial order for 125 ATM's is scheduled for delivery in January. By comparison, California, which is the lead state in bitcoin ATM installations, had only 107 machines installed as of last March. According to Rosenberg...
It is projected that over 10,000 ATMs will be installed in dispensaries and mainstream locations over the next few years.
Then on December 19, just prior to releasing their 2FQ18 financials, mCig announced that they had formed a new blockchain and Initial Coin Offering consulting group, ICOMethod, LLC that would service both cannabis and non-cannabis businesses. Blockchain, the technology underlying all cryptocurrency offerings, is arguably the technology industry's next big thing. One company, On-Line Plc, with no previous experience with blockchain programming, recently saw it share price increase more than 400% in two days by simply changing its name to On-line Blockchain Plc. But there is more here in this announcement than meets the eye. Silicon Valley is eyeing ICO's as a way to fund startup companies, just like an IPO. A recent article in Recode, "Silicon Valley is obsessed with ICOs — here’s why", discussed this phenomena...
The drive to discover alternate ways for a new company to raise money has birthed many experiments, but none more prominent than the 2017 rise of so-called Initial Coin Offerings, or ICOs.
The decades-old, tried-and-true way for a technology company to raise cash: A company founder sells some of his or her ownership stake in exchange for money from a venture capitalist, who essentially believes that their new ownership will be worth more in the future than is the cash they spent now.
But over the last year — and especially over the last four months — a new craze has overtaken some influential subsets of the technology industry’s powerbrokers: What if companies had a more democratic, transparent and faster way to fundraise by using digital currency?...
...It can feel like ICOs are everywhere — at least a few typically begin every day. Buyers during a presale period might email a seller and personally conduct a transaction. Later on, a purchaser tends to use a website portal, hopefully one that requires an identity check, explained Emma Channing, general counsel at The Argon Group.
“I don’t think that there’s been an obsession of Silicon Valley that has overtaken seed and angel investing in a single year,” said Channing, who helps companies execute ICOs. She argues: “I don’t think Silicon Valley has ever seen anything quite like ICOs.”
Channing said it is possible that more than $4 billion will be raised through ICOs this year. But she advises that ICOs are typically only successful for the very small number of companies that have “blockchain technology at their heart.” ICOs commonly fail when that’s missing or when the marketing and message are poor, she warned.
It's very likely we may see mCig itself raising capital through an ICO in the near future, thus eliminating any need to issue more shares to fund the company's future growth. With the impending spinoff of OBITX and it's new subsidiary ICOmethod, mCig shareholders will receive a very promising share dividend. Rosenberg expects the new company to uplist to NASDAQ within 12 to 18 months. This raises the question, what will happen to mCig's share price and how will the company make up the lost revenue.
I intend to delve into these questions further in a future article. For now, we have to go back to several other PR's since last summer. On July 17, the company announced that it was expanding its supply division into California. Since the announcement, the division has registered a 47% increase in revenue and is forecasting sales of $2 million per year from Nevada alone, with another $3 million from California. Construction, with its new contract for a $5 million project in San Gabriel Valley, CA will continue to bring in new contracts that promise a higher profit than those it has discontinued. mCig is also about to enter the marijuana cultivation segment. With the purchase of land in California City, CA, the company has applied for cultivation, production and distribution licenses in that state. Once in production, the company expects the facility to produce $2.4 million per month ($28.8 million per year) in revenue. However, the biggest short term new revenue source could be from mCig's entry into industrial hemp cultivation. The company has already started the cultivation process and was initially estimating $10 million revenue in its first year. However, just a few days ago, CEO Paul Rosenberg announced...
The initial goal had been to grow hemp on 40 acres of land; this has since expanded to 90-120 acres of land for the first harvest. MCIG is currently also looking at other opportunities to acquire additional acres of land for extended hemp projects.
Extrapolating from the earlier estimate, this would mean over $20 million in first year revenue. Adding up all of the non-OBITX revenue projections, mCig would expect to generate over $58.8 million in revenue based on what we know today. Based on these expectations,a valuation of over $1/share would not be unreasonable even without OBITX. Consequently, I'm again recommending a buy on mCig shares for 2018.
Omni Health, Inc. (OTCPK:OMHE)
Last year I called InMed Pharmaceuticals my sleeper since they were somewhat stingy releasing any information. This year that title goes to Omni.
The year started well with an announcement that Andrey Soloviev was named CEO followed in quick succession by release of their long overdue 1FQ17 and 2FQ17 financials. For the first quarter Omni reported an impressive $1.08 million net income...
OMHE Chief Executive Officer, Andrey Soloviev, stated, "We are in the final stages of becoming current with our filings and will seek immediately to move from OTC Pink to OTCQB. Since the acquisition of Malecon Pharmacy we have been organizing and structuring a 40 year private business into a public market. While our transition has been longer than anticipated, we remain diligent to our shareholders and seek to improve communications with them as we move forward."
OMHE Interim Chief Financial Officer Michael Hawkins went on to say, "The Company has seen incredible improvement in sales as compared to the same period last year seeing a 767% increase in sales and a 543% increase gross profit."
Other key financial indicators reported by OMHE included:
- $5.0M in Assets
- $233K in Cash
- $1.3M in Current Assets (cash, accounts receivable, and inventory)
- $330K in cash provided by operating activities
The second quarter financials were also impressive. The company reported $1.6 million in pro forma net income, although $1.1 million was a one time bonus from the sale of it's VitaCig product line back to mCig...
OMHE Chief Executive Officer Andrey Soloviev stated, "More important than the numbers reflected in the quarterly report is OMHE becoming current in its filings. We will immediately seek to move from OTC Pink to OTCQB. We thank our shareholders for their patience during this transition."
Shortly after the second quarter financials were published, Soloviev issued his first "Letter to Shareholders"...
...we plan to rapidly expand our operations to include new divisions in the areas of specialty pharmaceuticals, anti-aging brands, and therapeutic cannabis products and licensed medical marijuana cultivation. Currently, we are in the final states of several strategic acquisitions to accelerate our bold expansion. Our pipeline of new products and breakthrough innovation has never been more robust.
This was the first confirmation from the company of any strategic plan.
Omni did get it's 3FQ17 financials out on time, reporting $1.4 million in sales from its Malecon Pharmacy operation but it actually had a loss of $90k for the quarter even though it's net profit for the year was still a respectable $915,000.
The most momentous announcement for Omni shareholders occurred on April 3, but the market hardly took notice...
MIAMI, FL--(Marketwired - Apr 3, 2017) - Omni Health, Inc., ( OTC PINK : OMHE ) a cannabis and biotech pharmaceutical company, specializing in health and wellness products utilizing cannabis and biotech engineering, filed a Form 8K today to inform its shareholders of the restructuring of OMHE. Andrey Soloviev, the company's Chief Executive Officer and Chairman of the Board has converted 556,890,449 shares of common stock into 5,600,000 Series A Preferred Stock. In addition, 50,000,000 shares of common stock are to be converted into 5,000,000 shares of Series B Preferred Stock by several large shareholders. The actions reduce the outstanding common stock of OMHE by 62% to 368,938,292 shares of common stock.
Reducing the OS from roughly 976 million to 369 million shares, under normal circumstances, should have the effect of more than doubling the share price as it increases the Earnings Per Share (preferred shares are not counted in the calculation). However, to date, the restructuring has not shown up on the OTC Markets or any other websites. Consequently, the market hasn't responded. The company has since been silent about the matter and shareholders have been hoping that the actual restructuring has just been delayed to take effect when there's more positive news to report.
Several announcements in May and June then caused a brief uptick in the share price. On May 3 they announced that they had raised $1 million from a private placement, which, according to Soloviev...
The Company expects to use the proceeds from the transaction primarily to advance its pipeline into several healthcare related fields with diverse and global growth potential, including specialty pharmaceuticals, anti-aging brands and therapeutic cannabis products.
This was followed in relatively quick succession by announcements that Omni had opened a new biotech research lab, recruited a Scientific Advisory Board, and was rolling out their anti aging product line with their flagship product Celeb Cream. The last announcement indicated that they expected about $2 million from sales of Celeb Cream and $10 million total revenue for the fiscal year ending on April 30 2018.
Then there was silence!
The due date for their annual 10-K financials came and went, so did the due date for their first and second fiscal quarter reports. For roughly 5 months shareholders heard nothing. Then on October 27, they filed an SEC Form 15 indicating that they wanted to deregister from SEC reporting requirements and be considered an alternative reporting company. At roughly the same time they released an annual report (in lieu of a 10-K) for their financials accompanied by an attorney letter vouching that the financials were both current and accurate. This was followed by a quarterly report for 1FQ18 thru 7/31/17 (again in lieu of a 10-Q) and another attorney letter. The annual report showed revenue through 4/30/17 of $4,695,292 which was close to their $5 million estimate for FY2017, with net income of $1,265,639. The quarterly report, however, was much less positive. It showed revenue of $900,021 with a loss of $443,156. The share price drifted down to a low of $.0087 on November 10.
What was going on. After so many promising PR's, shareholders were left wondering if the company had imploded. Why were the financials so late? What had happened to the CEO's plan to uplist to OTCQB. How would all this affect the plan to restructure their shares. Shareholders have yet to get a full explanation. Speculation revolves around some problem with the annual audit. In all fairness, many issues can arise during an audit and they don't need to involve something unscrupulous. In any event, the attorneys letters seem to put to rest any such idea. However, the CEO's inability to offer an explanation can only harm investor confidence in the company
Finally, on November 14, the company broke its silence with another CEO shareholder letter that included the following...
I am delighted to report that we reached the end of a long process that began over ten months ago, culminating in the several high-profile developments we will soon be announcing. There have been extensive negotiations that we have not talked about publicly, but as we are now in the final stages of these negotiations, we can now speak more openly about two important developments that will bring the Company to a completely new level of success.
The first, which we can share now, is development in the sphere of a cannabinoid based drug-development. In collaboration with Dr. Karyemaitre Aliffe, MD, Omni Health is finalizing a regulatory path to commercialization of a breakthrough, proprietary compound agent with the potential to treat chronic pain.
High profile developments? Negotiations? Perhaps the drop in revenue and increased costs were the result of management shifting its focus to a new business plan. But the kicker was this new proprietary compound for treating chronic pain...
The global market for pain management will grow from nearly $36.1 Billion in 2017 to $52.0 Billion by 2022. Recent stringent regulations regarding the usage of opioids and a number of opioid pain drugs being pulled from the market create an additional opportunity to fill the void left by the withdrawal of these drugs. As such, there is a significant potential for cannabinoid biotherapeutics to truly seize the day in the treatment of chronic pain and other debilitating conditions. We are currently in negotiations with several private investor groups to raise sufficient capital for this initiative.
The market took notice and the share price began a steady rise. Three weeks later, on December 5, shareholders got more details. The company was planning to compete in the pharmaceutical space within three years...
“By employing an FDA regulations-savvy, ‘fast-track’ pipeline strategy, Omni Health will quickly be in a position to partner our new drug for late-phase development,” said Omni Health’s CEO, Andrey Soloviev. “Our projections set this target date at roughly three years out. It will be a strong competitor in a lucrative medicinal niche populated by a limited number of pain management products at exponentially higher valuations. Peer analysis shows these valuations to be in the range of $100 Million to $140 Million.”
Moreover, they planned to have an over the counter medication available much sooner...
Additionally, Omni Health is in the final stages of development of non-prescription CBD analgesic creams and ointments with fast absorption properties which we are able to rapidly deploy to the market.
Simultaneous to the FDA application for this new drug, the Company will commence by manufacturing OTC analgesic creams and ointments containing CBD with rapid absorption and optimal bioavailability profiles. Given the potency of these analgesics, they will be marketed and distributed exclusively to doctors’ offices, clinics, and hospitals to ensure appropriate patient support and product usage. As per the current schedule, it’s anticipated that this product will be introduced to the North American market during Q3 2018. Based on current market trends and competitor analysis, Omni Health projects generating a recurring annual revenue exceeding $7 Million.
So beginning next summer, Omni expects to be generating $7 million/year in revs just from their new over the counter medication. This was reiterated in a PR on December 12 when the announced the launch of a new Consumer Goods division...
Omni Health’s Consumer Goods Division will be operating via a subsidiary, Celebrity Brands Inc. Celebrity Brands will bring an entirely new reach to Omni Health’s operations with a new set of investment priorities and a sharpened set of portfolio choices to accelerate growth and performance. The company will also focus on strengthening its portfolio by acquiring a number of consumer, revenue-generating brands, and by creating a platform for future acquisitions that scale the distribution of company’s existing brands. The Company anticipates this new division to bring a gross revenue of over $7mln in 2018 with a very high margin EBIDTA.
Celebrity Brands’ first wholesale order is from Amerimark Direct for Celeb Cream – one of the Company’s innovative anti-aging products. Amerimark Direct is one of US largest mail order and direct marketing companies operating ten catalogs and seven websites and specializing in cosmetics, diet and weight loss, personal care products, and As Seen on TV products, among others.
This was followed the next day with an announcement that...
its consumer products division Celebrity Brands, Inc. has entered into a €3,700,000 distribution agreement with MediCann - a premier distributor of CBD products in Europe.
This new distribution agreement represents the latest step towards Omni Health multi-year plan of making its next-generation anti-aging CBD products available for global distribution. Under the terms of the agreement, Omni Health will be developing and reformulating some of its existing products for distribution in more than 22 countries in Europe commencing on March 2018.
“This €3,700,000 deal is one of several now in works for further global distribution and licensing of a very strong portfolio of formulations Omni Health has developed over the past 4 decades. We are pleased that there is much here for us to build upon to develop new market and application opportunities.”
€3,700,000 euros translates to roughly $4.5 million dollars. So, for fiscal year 2019 commencing on May 1, 2018, adding...
$4,500,000 MediCann deal
+ $7,000,000 OTC Pain Medication revs
+ $5,000,000 Ongoing revenue from Malecon Pharmacy
...we should expect FY2019 revenues of approximately $16.5 million+. This does not seem to take into account any revenues from future new products and acquisitions.
The succession of announcements at year end has apparently rehabilitated this stock in the eyes of its shareholders. However, we're still waiting for financial results from 2FQ18 (thru 10/31/17) which are again two weeks late. The market needs more transparency from the company's management. Why can't they get financial results out in a timely manner? When will they resolve their auditing problems and become fully reporting with the SEC again? Why haven't they consistently communicated with their shareholders? Hiring a new CFO with experience running a public company might be a good start. Mike Hawkins, who held that position with mCig and the old VitaCig company before it was taken over by Omni, had apparently agreed to continue on for a year with the new company. He left last June to about the time the long silence began. As far as we know the position is still vacant.
Nevertheless, the company ended 2017 in better shape than they were in a year ago. They may be competing with InMed for a pain medication in three years. While I would probably side with InMed in that battle, Omni might be first to market with branding if they successfully launch their over the counter product.
I believe that this company, as of today, is significantly undervalued. If they are on path next summer for $16.5 million in revenue, I would target them for a pps of at least $.13/share. It could be more than double that if they complete their share restructuring. If we start seeing some real progress on their pharma grade drug, share appreciation could be huge. Consequently, I am again recommending them for a long term hold.
Players Network (OTCQB:PNTV)
Players Network had already experienced a mini rally going from under $.003/share in late August 2016 to close at $.015 on the first trading day of 2017. The market had noticed that they had a cultivation license in Nevada which was going recreational in June. The anticipation gradually drove the pps above $.07 in May before it was announced that its Green Leaf Farms facility had passed inspection and had met all requirements to commence operation. This was enough to drive the share price to a year high of $.231 on July 12. Unfortunately, the reality that their first harvest wouldn't take place until December or January 2018 started sinking in to shareholders. That, combined with a complex private equity placement which was never consummated but needlessly raised dilution fears drove the share price back down to $.052 on October 9 before the anticipation of that harvest, as well as a positive settlement in their lawsuit against Comcast brought it back to $.129 on December 29.
According to management, part of the reason for the long harvest delay was that they wanted to ensure the purity of their brand by planting from seed and cloning the first crop. We also learned in October that a further delay was caused when some of their HVAC equipment was backordered. Prior to June, they had bought plants from another facility and used them to produce extracts which were ready for market when Nevada went live with recreational sales. However, their third quarter financials, released on November 20, showed only a paltry $38,000 in revenue thru September 30.
Fortunately, a settlement in the company's $150 million lawsuit against Comcast was announced on the same day. While the amount awarded to PNTV remains confidential (we should see some indication on their 4Q2017 financials sometime in February), it was enough to neutralize the results from the third quarter. In any event, shareholders weren't expecting significant revenues from Green Leaf Farms until at least 1Q18 anyway. Plants grow on their own schedule and nothing management can do can make them grow faster.
Since June, shareholders have seen a barrage of PR's about PNTV's media business. PNTV was a media company long before it entered the marijuana space and management was making it clear that they still harbored thoughts of creating a media empire. Besides, there's only so much you can say about a growing crop. This caused a great deal of confusion and anxiety on the message boards as shareholders who had bought in on the Nevada marijuana rush started thinking that company management had lost focus on marijuana as they pursued their own interests.
The reality is that while PNTV expects to do extremely well on their marijuana cultivation initiative, they expect to do even better with their media business. This is made clear in their media and technology report which they published on their website...
Compare the marijuana industry to the California Gold Rush. A few miners hit it big, but the ones who really struck it rich provided the picks, shovels and other supplies. Perhaps the best example is Levi Straus. While we fully expect Green Leaf Farms to be one of those that “hit it big”, the true Gold Mine is PNTV’s Proprietary Technology and Media Properties such as “WeedTV” that position PNTV to “strike it rich” as the “Levi Straus of the Marijuana Rush”.
The report gives readers, particularly those who've invested in the company for the opportunity to participate in Nevada's recreational marijuana market, an interesting new perspective as it outlines PNTV's long history with innovation in the media sector and prospects for monetizing their newly developed technologies. It discusses how PNTV
created a number of firsts in gaming, technology, and distribution systems.
Players Network operated the first private network broadcast in casino resorts. This private network carried casino and Vegas information as well as teaching guests how to play slots and various casino games. It was originally broadcast on VHS tape that ran in a loop. In 1993, PNTV replaced videotape with file servers – highly innovative at the time.
Each of these servers, produced by Seachange International, was the size of a refrigerator, weighed 427 pounds and housed a 4 x 9 gigabit hard drive capable of storing only 2.5 hours of MPEG 2 video content. Players Network’s in-room gaming network became the world’s first tape-free digital television network. Within a year, almost every major cable and broadcast network fully automated their systems, converting their tape-based playback to what PNTV was first to innovate – a fully digital system.
The company now hopes to be a leader in media innovation again...
We will not reveal our specific market and technology approach to our business until next year when pending patents are in place and prior to launching our wholly-owned channels, “WeedTV” and “VegasOnDemand”.
When you go to “WeedTV.com” today it is only a placeholder of video and news feeds. Please don’t confuse this with what is coming soon in its next generation. The technology and business approach we are referring to is targeted for deployment in the first quarter of 2018 after we complete a number of provisional technology patents.
So what is this new technology that they are bringing to the media world? The report gives some tantalizing hints...
To better understand PNTVs business model of synergizing a physical business such as Green Leaf Farms and a digital business such as “WeedTV”, let me outline the characteristics of our model and technology.
For the consumer:
- The ability to filter out unwanted video content
- Receiving only desired connections and offers
- Uncluttered selection of relevant content with a modern intuitive user interface
- Premium vetted content, as well as user generated content
- The ability to interact and engage as much or little as they wish with their peers
- Accessible on any device.
For the network;
- The ability to converge a physical business with digital extensions
- Access its audience on a hyper-local, targeted basis
- Built in marketing and branding tools
- Ownership of its own customer database
- knowing the individual lifestyle behavior of each customer
- GEO target customers within regions and hyper-locality
- assistance in building its database and analytical information
- Content creation, management and distribution tools
- Social Media marketing automation
- An integrated virtual economy system embedded in media applications
- Extremely cost effective with a proven, quantifiable ROI
- Integration into Realtime retail POS systems
- Easy to use and manage
I won't pretend to be an expert in the media sector, however, PNTV has the background and experience to be credible in their claims. We've yet to see any revenue estimates for media but the company's website shows that they expect to generate $35 million in the second year of operation for Green Leaf farms. We should see much of that coming in during 2018. There's also the likelihood that the City of Las Vegas will grant them one or more dispensary licenses sometime this year. Again, the probability of progress on their business plan leads me to recommend them as a long term hold for 2018
Disclosure: I am/we are long IMLFF, MCIG, OMHE, PNTV.
Additional disclosure: I have never received any compensation from any companies that I cover. All readers should do their own due diligence before purchasing any security.