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If MediPharm were somehow forced to only show the net revenue (I.e. treat the cost basis as contra-revenue, rather than COS) it still wouldn’t impact the bottom line, it would simply net down the revenue and COS which could look bad from a high level review but would be an easy item to explain.
I would be a little surprised if that were the case, but without researching it more I can’t really say with any high degree of certainty.
I have not researched this issue heavily, but based upon the article that was shared I will provide my thoughts.
Cronos could be taking a hit here. If I understand it, they are “selling” the raw materials to MediPharm through their subsidiary, and then buying the finished product forms, and then selling it to customers. So for Cronos, there are key considerations around the cost basis of those goods and how much gets recognized as revenue and cost of goods sold.
On the flip side, MediPharm should have a much more straightforward transaction. They buy the product from the same supplier they ultimately sell to essentially, but that doesn’t mean that isn’t valid revenue. They would record cost of goods sold equal to the purchase price, and then revenue equal to the sales price back to Cronos.
If any of my details around the transaction are wrong, please correct me.
But my concern level from a MediPharm perspective is low. Cronos could get in a bit of audit trouble if they have not been recording this transaction correctly, but that doesn’t mean MediPharm recorded it incorrectly.
Thanks for posting this. Definitely another encouraging update; it’s hard to imagine this would be done for no reason since I imagine there are costs involved.
Their Balance Sheet is a large part of the draw, along with the tech. A buyout would be a dream scenario because I’m not sure how much I believe they can grow this retail model very quickly. The next quarter or two will be very telling.
Regardless, this is laughably mispriced in the meantime. So i do think it will bounce back but I will be curious to see how far and how fast.
That would be big news then, I agree. I like it at this price but I am still trying to figure out how high I think it realistically goes.
Interesting post, thanks for sharing.
How soon do you think that will happen?
Unless you are telling me you’ve sold, you own shares here too as far as I can tell. You were celebrating green just weeks ago.
Not sure how you expect others to respect you (or how you even respect yourself) when you are investing your money in a stock you openly admit to not believing in.
And let me carry that further by saying you could have said “there is nothing to discuss, because...” and shared your actual thoughts on why the PR doesn’t matter. Unsurprisingly you have chosen to contribute nothing to the discussion.
There’s nothing to discuss, and yet here you are. That right there is the nature of the problem.
I agree. A partnership or a buyout is the golden ticket. Otherwise this could take a while to grow. But regardless of all that, with its current Balance Sheet and its internal IP (not on the Balance Sheet) this company is worth far more than the market cap it is trading at.
There is only about 7.7M in the O/S right now. So that is a market cap of about $10.8M based on a PPS of $1.40 — take a look at their Balance Sheet and see if that makes any sense at all. The reason it drives down so low is because the float is so small.
There are about 3.3M warrants to purchase stock at strike prices in the range of $4 and $5 from last summer’s issuance. Those are all still outstanding. That is about half the O/S worth of warrants that are not just out of the money, they are FAR out of the money. Some of which are held by insiders. Now whether you buy in to incentive making a difference, most can at least agree that insiders and institutions buying the stock + warrants like they did last summer is a pretty good barometer for what this is worth or at least will be worth.
I think those with an average of $5 or more need to get realistic with themselves on whether this will ever be back in the green for them, or at least recognize that it could take so long that it would be easier to recuperate the money elsewhere. But in terms of averaging down or entering at this level, my personal opinion is this is trading very cheaply right now. With that said, I wish the best to the longs and particularly those who were in pre-RS, but just sharing my honest opinion.
Your second point I think is spot on. The feeding frenzy in blue chips could potentially be over (or if not, at least temporarily sidelined) which will hopefully strengthen cash inflow into small caps and OTC’s which are my usual favorites.
Easier to sell or forgo an investment in a slow moving and/or riskier OTC when you can throw it into a blue chip and get easy returns right away.
My 401k would prefer we stayed where we were at, but the market pullback can also be seen as an opportunity for stock pickers and/or value investors. For a ticker like ALRT (which represents a good chunk of my holdings) I think there will be a silver lining to the overall market turmoil but maybe that is wishful thinking.
Was about to post that same thing. Up to 207.5k now. Very thin on the ask with only 50k shares showing below .10 so hopefully this drives us up.
Haven’t posted here in a good while now but I am still here. I am pleased with how this has been progressing. Good luck everyone.
I’m back in here. Have followed this one a while and have ridden it before. At this price being able to get back in at a market cap of about $215M (USD) is insane and there are plenty of positive catalysts upcoming as well as the full year earnings report.
I will leave it at that for now. But I have been and continue to be very impressed by these guys and at this price level it feels too good to be true for reentry.
Good luck to all! Hopefully this turns back around soon.
This is an interesting stock because there are so many bagholders locked into huge losses that won’t move on an already small float. We’ve dropped from $1.80 down to a low of $1.03 on about 700k shares traded. That is less than 10% of the O/S moving.
If you are entering now or have a low average already (sub $2) then this still appears to be a great buying opportunity. The market cap is under $10M now and there are countless warrants that are far out of the money (I.e. incentive for insiders). For those with some patience there is money to be made here, in my humble opinion. But this will probably never reach anywhere near what it was at in early 2019.
It’s got a long way to go, but will never complain about green especially during this market bloodbath.
Been very busy these past few months but I’m still holding the same position as before. Hope to put together a more in depth post with my recent thoughts in the near future if time allows.
I think it’s closer to 6 than 12. The quarter ended 12/31 will show some growth but there is a lot of ambiguity right now with how much Phase II is running right now — operations have begun but mid quarter and they are saying won’t be full capacity until end of December. We have a chance at a PPS recovery but selling here would be way too early imo.
However, the quarter ended 3/31 should be where the revenues start to take off. That is about the 6 month mark. Should have 3 full months of the 200,000 kg capacity in Canada and 1,500,000 in the US (expected to be at that run rate by end of calendar year). I think the revenue potential on that could be significant.
I am curious to see how they can do in terms of profitability though. Hopefully they are able to reach BE before the significant uptick in production with Phase III in Canada, because then that expansion would all be gravy on top.
Problem is that management is not making this easily digestible to outsiders (I.e. giving guidance) and the stock is low attention and very low $ volume. There are barely any analysts that follow it; the earnings call was less than a half hour long with no good questions from the analysts at all.
I’m not sure those who don’t follow the stock closely realize the story here is that cannabis extraction has barely even begun. So they see the current quarter revenues / earnings and call it a bust rather than realizing the value is all in the future with this one.
This is in response to both of the last 2 posts, not just yours, but this is way off base.
Understand that they have 200,000 kg extraction committed to contracts for this year and next. MediPharm just made about $43m on 300,000 kg capacity in one quarter. Not to mention Neptune has the new $10m / yr contract and whatever else they can sell in the U.S. which is incremental to the 200,000 kg Canadian capacity.
Their issues are purely related to the operational delays. Once the extraction is fully up and running (this quarter or next) the revenues will come in as expected. Not only that, but they are already working to expand that capacity to 1,500,000 kg total so they are building for growth.
They have enough cash to cover their expansion and their operations. They will be fine but this is a stock that requires some patience as they are still in the early stages of cannabis revenue generation unlike MediPharm or some of the other extractors. However, where they beat the other extractors is with their expansion. By the end of March 2020 they are expecting to have 1,500,000 kg capacity in each Canada and U.S. which will give them BY FAR the largest capacity I am aware of. There is no shortage of demand either — most of these extractors are trying to expand to keep up with demand and Neptune appears to be the furthest ahead with that despite being the most behind in terms of what they are doing today.
The unknowns are how much revenue they made on the Phase I capacity (25,000 kg) and SugarLeaf in the U.S. so there is room for surprise but I think we see another slow quarter in terms of actuals. Saving grace would be if they give guidance or some form of indication of how much they expect to be bringing in next quarter and beyond.
What bottom is dropping out exactly? When you factor in your pal AJ allegedly selling about 700k+ shares there is very little selling by anyone else in the past month or so.
The reason he was “right” was because he was the one selling all his shares and crashing the PPS.
There is no end to the nonsense he posts.
Let’s take a look at his most recent mantra he has decided to repeat ad nauseum... the “tax season sell-off” that is occurring.
This is the same person who claims to have gone from 700k+ shares down to 10k shares.
Well guess what, since the share price was last .039 on 10/3/19, up through 10/25/19 when AJ claimed to be down to 50k shares, there was only 710k in volume TOTAL.
What does this mean? Either he sold off long ago and waited months to tell us, or he is virtually the only person selling and almost solely responsible for the share price going down to sub .03 levels from about .04 previously. Yet here he is lamenting the share price and warning others of “tax loss sell offs” when he appears to be the only one doing so.
AJ - feel free to set the record straight on any of this.
He is surely stretching that PhD to its limits, huh? Letting us know that the PPS will go up if we reach a revenue deal but might not if we don’t. Years of studying and hard work well worth it.
Not sure what “advice” I was even offering or why you felt the need to post this.
Thanks for that hard-hitting analysis. I’ve got some in return for you.
Keep an eye on the weather tomorrow. If it’s hot tomorrow, look to maybe wear a t-shirt. But if it’s colder, expect to wear at least a light jacket. Good luck to all.
Looking forward to it. A lot of exciting growth here, it’s just a matter of how much and how clearly they present to us for this ER or if they stay tight-lipped.
The end customers drive the true demand curve here, and retailers are more closely linked to the end customers. End customer sales declining/improving will predict higher/lower extraction demand, not so much the other way around.
You’re right that the extractors are a key part of the puzzle to watch, but I don’t see them as canaries or beacons of the industry by any means.
I don’t really see the logic in your canary analogy there.
You could also say if cannabis sales go up in a current quarter, demand for extraction will go up the next, so that kind of goes either way doesn’t it? I’m not sure one side is more predictive than the other; they are just directly linked together.
I sold MediPharm on the recent run up. Currently I just own Neptune and it represents a large portion of my overall portfolio.
This is a small time stock right now. Low volume (especially from a $ standpoint) and low attention. Guidance catches attention and makes headlines. Leaving a trail of bread crumbs that investors have to carefully follow to realize the value does not catch attention.
Wall Street will not care until they are either realizing earnings or giving a hard number (or range) for future period guidance. Their hesitance to do that is hurting current shareholders in the short term.
At first they seemed to use the fact that HC approvals hadn’t been received or operations weren’t fully running or whatever else as an excuse. They don’t really have that anymore, because by the time they report earnings the 200,000 kg run rate that is fully contracted will also be operational and is already licensed by HC. So if they still shy away from providing context on the earnings power of that capacity, I will be disappointed (although will not sell).
The exciting part is that is only the beginning. What they are able to accomplish with SugarLeaf and the potential 1,300,000 kg expansion in Canada will be gravy on top.
PPS is not based on current numbers. They have multiple PR’s stating their 200,000 kg capacity currently (almost) available in Canada is sold out for fiscal 20 and fiscal 21. That is the value. Nobody but retail investors is going to be surprised or influenced by poor performance in the 9/30 quarter. Their well underway capacity expansion is the value. It’s not in where we are today it’s where we will be tomorrow (figuratively speaking).
And yes, i am aware the valuation can go up considerably for SugarLeaf based on earnings. But the fact that the initial consideration was so low implies they did not have a strong existing book of customers. Therefore, I would not expect them to be carrying the baton this quarter. The $20m contract they announced will be nice but won’t impact 9/30. Supposedly the contract sizes are much smaller for the U.S. customers / market (we are talking CBD there not cannabis) so the fact that they aren’t announcing doesn’t mean they aren’t selling. But nonetheless, that will take time to grow.
This ticker is actually massively undervalued so I am surprised you think it can’t or won’t hold its current level. At a minimum it should be back up around $6 USD where it was a few months back, probably higher. But again, that is not because of what they will do at 9/30 but what they will do in the next few quarters and beyond. The risk factor of their growth is low because they already have the capacity and they already have the buyers. The only element is time.
Neptune is not going to have good numbers this quarter.
They most likely were at a 30,000 kg run rate for the 9/30 quarter. They have said their Phase II expansion isn’t going to reach full run rate until end of November so I doubt it was even operating at all before 9/30.
On top of that, the Tilray and TGOD deals both said first shipments were to be received in September. So we are probably looking at backloaded sales where they didn’t earn much in July or August.
Only possible saving grace would be if SugarLeaf was able to produce a lot of revenue from day 1 but I am somewhat skeptical of that given the acquisition price.
They are still ramping up. Earnings may not be good at all. However, the way they present the future and how much clarity they give (I.e. guidance) for the future during this ER could still send this on a run.
No earnings in the books and no firm guidance given. The big $ they have locked up via purchase commitments is not being flaunted enough. Give this another couple quarters and this will be up big.
They are essentially pre-revenue when it comes to cannabis. They should have a little more in sales as of 9/30 but will be much better 12/31 and beyond.
I believe I may have just bought your 20k. Or is your sell order still out there?
My mistake then, carry on.
Less than 2,000 shares have traded today. Refer to my previous post for a breakdown of the last few weeks.
If the PPS on tiny volume matters that much, then you or AJ are welcome to buy 1,000 shares at .03501 and “save the company.”
Are we back to your argument that the sales team is savvy enough to know that their option strike is underwater but not savvy enough to know that landing a revenue generating contract would put them in the money (and then some)?
The .035 price level is not a key level for anyone except you. The logic here is pretty simple.
Exactly. The value in this stock is not in its fins or its chart (although it is massively oversold) right now. They have purchase commitments for an enormous amount of capacity already and they are well on their way to having market leading capacity with a foothold in Canada as well as the U.S.
If they finally stop shying away from giving forward guidance this will skyrocket at next ER. Otherwise, it will be another quarter or two. Currently, the key details are scattered throughout PR’s and you have to read between the lines or compare them to other companies to contextualize the value of their capacity / capacity commitments. I have a large position and plan to hold through regardless.
Investors should be prepared for the possibility that this ticker reacts poorly to the upcoming ER. If that does happen, I will probably stand pat on stock but add some call options to bolster my position.
Action on this makes no sense.
They have:
- Announced the repayment of all debt
- Announced compliance with NASDAQ
- Received FDA premarket approval
- Announced official opening / first patients treated at their retail center
And the share price currently sits lower than it did before all of that (albeit not at its lowest).
MediPharm did 24m (USD) last Q and they said at quarter end their capacity was 250,000kg. Neptune will have a run rate of 200,000 kg at their Canada plant by end of November and that capacity is fully contracted for the next 2 fiscal years. So we could easily be seeing about $20m (USD) per quarter in revenue for Neptune within the next few quarters.
That doesn’t include their US (SugarLeaf) facility which they just reiterated will have a 1,500,000 kg capacity by end of calendar year. I am unsure of what the current capacity is. The $20m contract they announced was for this plant which means it’s on top of the 200,000 kg capacity sold in Canada as well as whatever else they call sell in the US and Canada (one Phase IIIA expansion is completed).
The only thing holding this stock back is lack of transparency on earnings potential in the near term. They have balked at giving guidance the last few quarters. I am hoping that changes for this upcoming ER because they most likely will still not have much in terms of cannabis / CBD revenues for the quarter ended in September. It will be the next quarter and the one after where the revenues will ramp up significantly.
Catching up a bit on this board. See a lot of anguish and impatience over the share price coming from the same people who told me it doesn’t matter without news a few months ago.
Last 12 trading days have had a total volume of about 415k... at .035 average (let’s say) that is under $15k. Keep it in perspective folks. The influential investors (I.e. large holders) are not moving their shares.