Conference Call Notes:
General Company and Revenue
1) Pzoo company e-commerce platform on its website is being updated to be more user friendly. Products to represent pzoo are available for purchase
2) Revenue Verticals
a. Company website (currently producing)
i. Ad revenue, merchandise, etc
b. MA& Associates Nevada lab (open, not testing yet)
i. Testing pending confirmation of the state pesticide requirements
ii. Secured letters of intent 150,000 sqft of grow space
1. 70,000 committed for 2 years
c. Harris Lee Oregon lab (not currently open)
i. Signed lease is in place, meeting with architects is already occurring
ii. Building requires very little buildout (planning phase now)
iii. Already secured some grower letters of intent
d. Harris Lee Colorado lab (open, testing and generating revenue already)
i. The final stage getting Marijuanna Enforcement Division approval of license transfer
ii. Date has been secured, but Pazoo is trying to move this up (not noted on the call)
iii. Purchased a functional lab
e. Cannabis King (revenue generating beginning this quarter)
i. Accuvape sales have begun bringing in revenue in 4 states and the sales force is being expanded to capture more of the market
ii. A referral came from a shareholder after reading the accuvape press release which resulted in a $3500
iii. Other products: just added a water conservation product
f. All of the labs should be testing in the 4th quarter, starting with CO
3) Based on current information, all 3 labs will be profitable starting with the first quarter 2016.
4) Cannabis King revenue projection for 2016 (too early to tell)
a. Tough to tell because this is our first quarter
b. Accuvape reorder rates have been 90%+ most being larger orders
c. MJ Payments- multiple clients in several states awaiting setup
d. Anti-Microbial product- marketing labels have been approved by the states where it will be sold
e. Water conservation product- patented and only product of its kind with very wide usage range (large buildings, plant nurseries, grow operations, etc)
f. New products are being considered and will be added going forward
g. Currently NO extra staff has been added on payroll (only commission), so no additional expenses have been incurred other than commissions
5) Fundamental Valuation
a. IN THEIR OPINION, Highly undervalued in comparison to our main competitors and their stock prices
i. Substantial cost barriers to entry in the MJ market, specifically in testing
b. Timeline of accomplishments this year
i. January 2015- acquired 100% interest in Harris Lee
ii. March 2015- Master agreement with Steep Hill including first right of refusal for the remaining states in the US
iii. March 2015- Harris Lee signed binding agreement to purchase Front Range facility in Colorado
iv. May 2015- Cannabis King formed to sell non-hemp related products; company was created out of demand and relationship with Steep Hill
v. June 2015- acquired 100% interest in MA & Associates
vi. July 2015- Legal documents with Front Range Labs completed for purchase of the CO facility
vii. July 2015- Cannabis King signed 3 different products to distribute
viii. August- Oregon facility lease signed and buildout planning begun
6) Reporting
a. Annual reports are audited
b. Quarterly reports are reviewed (slightly less aggressive than an audit)
7) Uplisting
a. Goal is to be listed on the NASDAQ
8) Paid Promotion
a. Paid promo was not for dilution and there were no shares converted at that time
b. Closing price on Thursday and Friday was nearly the same
c. Over 30 new members were added to the FB page, new shareholders were gained, there was a substantial amount of visibility and networking connections, and most importantly it brought in a direct investment into the company
9) Preferred share conversions
a. 1.1m shares were converted last quarter and more info can be found in Q2 financials
10) 728 million shares float is 645 million shares
Financing
11) There have been many accusations regarding substantial dilution. OS at the end of June was roughly 670 M and now it is at 730M. There has been approximately 40M shares added to OS since the end of Q2.
12) The funding for the rest of the year will be provided from direct investments into the company. No more convertible debt will be issued!
13) No private placement is being offered, only direct investment
14) Dilution for the rest of the year
a. Convertible notes due in the 4th quarter, but the plan is to pay them off prior to conversion; just like they did previously
Lab Operation
1) LV lab has 4 employees, CO lab has 5 employees, OR has 1 employee who is waiting to be put on payroll
2) All employees who are going to use the testing lab equipment are required to have a bachelor’s degree and 4 years of experience or master’s degree and 2 years. Most of the employees have substantial testing experience on top of the requirements. Lab directors that are hired have experience setting a up lab from scratch
3) Tests by lab
a. LV - 6 different tests required by the state
b. CO- 4 tests
c. OR- 5 tests
4) LV lab
a. Only 1 dispensary open, not much testing that can be done and it’s not worth the cost to do those couple tests
b. Need certificate of occupancy
c. Waiting for one more piece of equipment and equipment calibrations
5) Lab testing is mandatory for all 3 states
6) $1,000,000 per 100,000 of growspace
a. This number is based off of lab projections in Nevada (which has the most stringent testing requirements)
b. 6 tests per sample, per every 5 lbs
c. 1/3 lb per sqft, per crop, 4-5 crops per year
7) Revenue per sample is lower in CO
8) Charges per sample
a. Depends what you are testing for and how many tests
b. CO per sample- $150-200
c. NV per sample- up to $500
d. OR- tbd in between but would be at least $250
9) Tests per day
a. Depends on amount of equipment, but around 100/day at most
10) Competition
a. CO
i. CanLabs
b. LV
i. Digipath
ii. Ace analytical
iii. G3 Labs
c. OR
i. TBD, but there are no main competitors there yet
11) Market share
a. NV- TBD
b. OR- TBD
c. CO- Canlabs has indicated they have 50%+ of the market share for now
12) Market Size (geographically)
a. CO- 90 mi radius
b. LV- at least 75mi radius
c. OR- at least 60mi radius
13) Market Size
a. A grower can Varies from 3000 sqft to 200,000 sqft
b. A grower with a space between 6,000-20,000 sq ft would make significant revenue
c. As growers are converted from letters of intent to contracts, they will be announced
14) Growing
a. First crop takes 90 days, after that 55 days with some time in between crops
b. Expectation is 4-5 annually
15) Biggest growth will be in Nevada
a. Recreational use is on the ballot and expected to pass
b. Testing regulation is more stringent and testing fees are higher per test
16) Quickest growth CO
a. 350-400 accounts in the territory
b. OR: will be quick and big as they require 5 tests and through Cannabis King contacts there are several growers who want to use the steep hill technology for their testing once we are operational
What can you do to help?
- Refer people to the website, buy merchandise, check out cannabiskinghq.com and MOST importantly be active on social media
- Please feel free to always reach out to the company with any questions that you might have; as well as David will make himself available to do conference calls with shareholders who would like for him to explain Pazoo to other potential new shareholders
- If you have any potential leads for cannabis king, please feel free to email pazoo. I.E. landed a $3500 sale for accuvape based off a referral from a shareholder; landed several letters of intent for MJ payments from a referral from a shareholder.
