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CVLS .44 gets SA write up!!
CVSL Is Embarking On An Ambitious Roll-Up Strategy
Feb. 20, 2014 9:09 AM ET | 1 comment | About: CVSL
Disclosure: I am long BTH. (More...)
This article was first released only to PRO subscribers. Learn More
(Editors' Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.)
Executive summary:
CVSL (OTCQX:CVSL) is a holding company led by John Rochon and embarking on a roll-up strategy for direct selling businesses.
Since 2012, CVSL has acquired seven direct selling enterprises, and is currently performing due diligence on a number of others in this sector.
CVSL recently applied for and was awarded an "uplisting" to the highest tier in the over-the-counter markets, OTCQX.
2014 is shaping up to be another transformative year for CVSL.
_______________________________
There is clearly a lot of controversy in the multi level marketing industry these days. With Bill Ackman and Herbalife (HLF) continuing to spar, there is another interesting story developing in the direct selling industry at CVSL.
CVSL describes the direct selling industry euphemistically as "micro enterprise" which allows individuals to use their social connections to sell to friends, family members or customers derived from social media.
According to the World Federation of Direct Selling Organizations, the direct selling industry accounts for ~$153 billion in global annual sales (sourced from CVSL's February 18, 2014 conference call) and is comprised of 90 million direct sellers. That figure is staggering. Do investors really believe that one hedge fund manager will collapse the entire industry based on allegations of a pyramid scheme at one, Herbalife? My money here would be on John Rochon, CEO of CVSL and the chief architect of the Mary Kay management led buyout in the 1980's which turned out to be a wildly successful investment by all measures.
In addition to being an astute capital allocator, Mr. Rochon is also intimately familiar with the micro enterprise industry having led Mary Kay through a period of terrific growth, from $500 million to $3 billion in sales over a 16 year time frame, which included significant international expansion. My educated guess is that Mr. Rochon understands the laws and regulations pertaining to this industry better than some other, more high profile hedge fund manager currently embroiled in this sector (read: Mr. Ackman).
A Bit Of CVSL History
CVSL was acquired by Richmont Holdings, Mr. Rochon's private equity firm, in September 2012. I understand that Mr. Rochon's vision for CVSL is to create a holding company "for building a growing consumer cloud." The holding company structure is intended to allow owners of direct sellers to become part of a publicly traded vehicle and derive those benefits thereof, while maintaining their unique culture, sales organization compensation plans and leveraging CVSL's infrastructure from a back office perspective.
CVSL and its shareholders benefit from a diverse and wide array of product offerings. To that end, CVSL has acquired 7 businesses since the strategy was announced in late 2012, including:
The Longaberger Company; hand-made baskets.
Your Inspiration At Home; hand-crafted spices.
Agel Enterprises; nutritional gel supplements.
Tomboy Tools; hand-crafted tools designed for women.
Golden Girls; resale of jewelry and precious metals.
Paperly; custom stationery.
My Secret Kitchen; a line of food products.
The largest acquisition candidate included Blyth (BTH) which operates under two primary segments: (1) weight loss shakes and products via an 80% share of Visalus and (2) candles via its PartyLite business. Each operating business has global scale with Visalus officially announcing its expansion into Austria and Germany. While CVSL did own Blyth shares at one point, CVSL liquidated its stake and indicated the Blyth deal was not accepted by Blyth management.
On a February 18, 2014 conference call, CVSL management indicated that while CVSL investments are opportunistic in nature, the circumstances did not lend themselves to a consummated transaction given the reference shareholders, the Goergen family, own a significant stake in Blyth and did not approve of the CVSL offer.
While the Blyth deal appears dead for now, CVSL management did indicate that under the right circumstances that it would revisit the Blyth deal. In other words, the chances are slim to none, but I wouldn't count out deal altogether. Alternatively, CVSL indicated that the pipeline of potential deals remains robust. If 2014 is anything like 2013, there could be a flurry of deals as CVSL pursues its roll-up strategy and achieves scale.
For now, the business is clearly focused on growth and cash generation. CVSL has not been profitable to date, but it is operating like a start up business and I think a reasonable valuation methodology is based on sales which will have gone from under $1 million in sales in 2012 to an estimated $140 million sales run rate at the end of 2013 (considering the 7 businesses acquired).
Catalysts
I see two important catalysts on the horizon for CVSL.
First, CVSL engaged a boutique corporate finance firm to help it raise a $500 million "war chest" to fund more acquisitions. Mr. Rochon has proven himself to be a savvy capital allocator, so $500 million in new capital can help fund a number of acquisitions, meanwhile shielding current and prospective shareholders from dilution.
Second, CVSL applied for and was awarded an "uplisting" to the OTCQX which is reserved for businesses that have the most open and transparent financial filings among over-the-counter filers. This should provide CVSL more exposure to market participants and indicates that CVSL is moving towards becoming an SEC filer as it scales its business. Investors are encouraged to review the information on CVSL's website which includes timely and informative financial disclosures and press releases.
Risks
As one can imagine, a company listed on the pink sheets is associated with "penny stocks" and is outlined as a generaly risk factor in its 2012 10-K.To that end, CVSL will likely suffer at least some association by guilt while it is still listed over-the-counter. The recent uplisting to the OTCQX though should assuage investor fears regarding CVSL's reporting standards. The financials are audited by PMB Helin Donovan. Put differently, CVSL is a real business.
Turning now to regulatory issues, the companies underlying the CVSL umbrella are party to the "anti-pyramid" laws which require direct sellers to track of sales to end users. Because the businesses acquired by CVSL are much smaller than say an Herbalife, it is likely much easier for the operating businesses to delineate end user consumption. I expect that part of the IT infrastructure that is being put in place is designed to keep close tabs on the sales organizations and sales trends. The benefit here is that Mr. Rochon and his managers have considerable experience in this industry and are intimately familiar with the FTC regulations.
Finally, in terms of financial health, CVSL is in good shape. On a consolidated basis, CVSL had about $18 million in cash and marketable securities (likely the Blyth investment) as of September 30, 2013. We know that the Blyth investment was liquidated, so I suspect those marketable securities are now cash. Turning now to the liability side of the equation, CVSL listed $10.3 million in drawn credit facilities and $27.5 million in long-term debt. Subsequent to the last balance sheet snapshot, CVSL also sold certain non-core assets (a golf course owned by The Longaberger Company), further reducing its net debt balance. In my view, the balance sheet is healthy and ready for the $500 million cash infusion from a debt raise for the purposes of acquiring more direct sellers at rational prices.
While CVSL is not without its risks described above, the company has a competent management at the helm with significant "skin in the game" and the requisite experience to drive shareholder value. Readers, though, should recognize that these shares have been, and will likely continue to be, volatile.
Conclusion
The CVSL story is just beginning. And it is happening quickly.
Given the rapid transformation and the likelihood of a number of transactions in 2014, I hesitate to model out what this business might look like twelve months from now. Having said that, bestowing a terrific and proven capital allocator / manager with a $500 million "war chest" bodes well for equity holders.
In my view, CVSL shares will likely remain volatile as investors digest the growth story and all the moving parts. That said, at the current $220 million valuation, CVSL certainly doesn't look overvalued given CVSL's operating businesses delivered an estimated ~$140 million sales run rate by the end of 2013, pricing the business at ~1.5x sales.
While the Blyth deal appears to be dead after CVSL announced it liquidated its Blyth shares, I wouldn't be surprised if CVSL revisits the opportunity given the right circumstances. That said, CVSL appears to have a healthy deal pipeline from which to curate a hand selected set of subsidiaries.
2014 promises to be an eventful year for CVSL and its shareholders. Investors get a glimpse under the hood when CVSL reports full-year earnings next month.
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Also keep HERB .68 penny under 200 dma and the cheapest weed related stock I know of based on their strong earnings, low PE, low 14.15 mil. float, 155.1 mil os, and 90% insider owned stock!!! All HERB needs is to be noticed by traders and investors to rocket higher imho....tuna
CVSL @ .44 and FTLF $3.24 closed a penny below 52wk high on strong volume....momo and want mo mono from this one...plus HIMX and CHTP may draw more interest also...GL tuna
Got weeds FSPM (fave) + NVLX (funding news) + HERB unnoticed weed play in collaboration with HEMP signed May 16 2013!! Also added CVSL an incubator style company with great folks at the helm!! And got HIMX and CHTP also...all added yesterday and held. l strongly suggest checking HERB's financials if you are not familiar with this stock....truly awesome stats and probably in the top 5 ever most under followed and undervalued stocks I've ever seen in my life!!! At least imho...tuna
FTLF $3.15 popping again....never got the $3.05 so jumped my bid to $3.08 (ask at the time) and got only a partial fill....ugh! Like this stock!!! tuna
Have bids in for more HERB @ .64 + FTLF @ $3.05 ....FTLF hit a new 52wk hi of $3.25 today!! And HERB has by far the lowest PE of any weed related stock I know of....GL all...tuna
Trying for more FTLF @$3.05 and more HERB @ .64!!! FTLF hit a new 52wk high of $3.25 earlier today...tuna
Missed weed...HERB .68 +.03 here is the info on this super low PE stock:
This collaboration with HEMP news came out back in May of 2013 and the stock hasn't rocketed yet. HERB is highly profitable...90% held by insiders w/float of just 14.15 mil shares...total of 155.10 mil outstanding. With a 52wk high of .80 and trading just a penny under the 200 moving average, this stock should be worth multiple dollars a share. If this news had come out in Jan or Feb I honestly believe it would be trading over $5 a share easily! Here is the news with HEMP from last year:
Hemp, Inc. Signs Letter of Intent with One of China's Largest Agricultural Producers, Yasheng Group
PR Newswire Hemp, Inc.
May 16, 2013 11:42 AM
NEW YORK, May 16, 2013 /PRNewswire/ -- Hemp, Inc. (HEMP) is pleased to announce an agreement with the Yasheng Group (HERB), one of China's largest agricultural producers. The signed agreement specifies that Yasheng Group will grow and process into finished product 637 mu (108 acres) of a specific cultivar of industrial hemp in China. According to Hemp, Inc. executives, the cultivar will be very high in CBDs (a non-toxicating group of compounds with proven medical benefits and no serious contraindications) with less than .05% THC. This level of THC is legal for import into the United States. Final seed products such as hulled hemp seed possess THC levels too low to have an intoxicating effect on anyone consuming it.
(Logo: http://photos.prnewswire.com/prnh/20121107/LA08133LOGO)
The harvested crop will be processed into finished products to be comprised of approximately 75,000 kilograms of top quality hemp. Hemp, Inc. (HEMP) will have final determination of the processing of the end product as the crop progresses to maturity. CEO Bruce Perlowin stated, "Hemp seed, hulled or pressed into oil has the most monetary value at market, but the possibility of providing a quality source of protein to the Chinese population that consumes a great amount of the world's food, is something we are working on. Yasheng representatives have showcased our Herbagenix hemp protein blend to interested buyers at a recent trade show in Hong Kong that could lead to a large sales presence inside China."
Hemp, Inc.'s President, David Tobias, is thrilled with the new agreement, "Yasheng Group is one of China's leading agricultural producers. They've been in business for over 30 years. We're especially proud that we've been able to join the ranks of major corporations McDonald's, KFC, Tsingtao Beer and Pepsi, who partner with the Yasheng Group."
Yasheng Group conducts business operations in China in three major segments: agriculture, livestock, and biotechnology and specializes in developing, processing, marketing, and distributing a variety of food products processed primarily from premium specialty agriculture products grown in North West China in 6 agricultural segments: field crops, vegetables, fruits, special crops, seeds and poultry.
Hemp, Inc.'s TRIPLE BOTTOM LINE
Hemp, Inc. (HEMP) seeks to benefit many constituencies, not exploit or endanger any group of them. Thus, the publicly-traded company believes in "upstreaming" of a portion of profit from the marketing of their finished hemp goods back to its originator. By Hemp, Inc. focusing on comprehensive investment results—that is, with respect to performance along the interrelated dimensions of people, planet, and profits— our triple bottom line approach can be an important tool to support sustainability goals.
CONTACT:
phone: 1-877-221-8351
email: info@hemp.com
http://www.hemp.com
This is a large conglomerate and not ONLY HEMP RELATED...but deserving of a much higher valuation....all imho! tuna
UNKNOWN LOW PE WEED: HERB .68 +.03 collaboration with HEMP but the news came out back in 2013 and the stock hasn't rocketed yet. HERB is highly profitable...90% held by insiders w/float of just 14.15 mil shares...total of 155.10 mil outstanding. With a 52wk high of .80 and trading just a penny under the 200 moving average, this stock should be worth multiple dollars a share. If this news had come out in Jan or Feb I honestly believe it would be trading over $5 a share easily! Here is the news with HEMP from last year:
Hemp, Inc. Signs Letter of Intent with One of China's Largest Agricultural Producers, Yasheng Group
PR Newswire Hemp, Inc.
May 16, 2013 11:42 AM
NEW YORK, May 16, 2013 /PRNewswire/ -- Hemp, Inc. (HEMP) is pleased to announce an agreement with the Yasheng Group (HERB), one of China's largest agricultural producers. The signed agreement specifies that Yasheng Group will grow and process into finished product 637 mu (108 acres) of a specific cultivar of industrial hemp in China. According to Hemp, Inc. executives, the cultivar will be very high in CBDs (a non-toxicating group of compounds with proven medical benefits and no serious contraindications) with less than .05% THC. This level of THC is legal for import into the United States. Final seed products such as hulled hemp seed possess THC levels too low to have an intoxicating effect on anyone consuming it.
(Logo: http://photos.prnewswire.com/prnh/20121107/LA08133LOGO)
The harvested crop will be processed into finished products to be comprised of approximately 75,000 kilograms of top quality hemp. Hemp, Inc. (HEMP) will have final determination of the processing of the end product as the crop progresses to maturity. CEO Bruce Perlowin stated, "Hemp seed, hulled or pressed into oil has the most monetary value at market, but the possibility of providing a quality source of protein to the Chinese population that consumes a great amount of the world's food, is something we are working on. Yasheng representatives have showcased our Herbagenix hemp protein blend to interested buyers at a recent trade show in Hong Kong that could lead to a large sales presence inside China."
Hemp, Inc.'s President, David Tobias, is thrilled with the new agreement, "Yasheng Group is one of China's leading agricultural producers. They've been in business for over 30 years. We're especially proud that we've been able to join the ranks of major corporations McDonald's, KFC, Tsingtao Beer and Pepsi, who partner with the Yasheng Group."
Yasheng Group conducts business operations in China in three major segments: agriculture, livestock, and biotechnology and specializes in developing, processing, marketing, and distributing a variety of food products processed primarily from premium specialty agriculture products grown in North West China in 6 agricultural segments: field crops, vegetables, fruits, special crops, seeds and poultry.
Hemp, Inc.'s TRIPLE BOTTOM LINE
Hemp, Inc. (HEMP) seeks to benefit many constituencies, not exploit or endanger any group of them. Thus, the publicly-traded company believes in "upstreaming" of a portion of profit from the marketing of their finished hemp goods back to its originator. By Hemp, Inc. focusing on comprehensive investment results—that is, with respect to performance along the interrelated dimensions of people, planet, and profits— our triple bottom line approach can be an important tool to support sustainability goals.
CONTACT:
phone: 1-877-221-8351
email: info@hemp.com
http://www.hemp.com
This is a large conglomerate and not ONLY HEMP RELATED...but deserving of a much higher valuation....all imho! tuna
Great funding news for NVLX .227 here!! Bought back in....here is the news from Briefing.com "IN PLAY":
phase clinical trials; $2 mln initial investment completed (NVLX) : Co announces that it has entered into a stock purchase agreement with Lincoln Park Capital Fund. Lincoln Park initially purchased 8 million shares of Nuvilex's common stock at $0.25 per share for $2 million and has committed to invest, at the sole option of Nuvilex, up to an additional $25 million of equity capital over the term of the purchase agreement. The proceeds from this investment will be used for Nuvilex's late-stage clinical trials in advanced inoperable pancreatic cancer, for research into the use of constituents of marijuana in the emerging medical marijuana arena and for general operating purposes.
GL all....tuna
NVLX .227 weed w/great funding news!! Investors paid .25 per share for 8 mil. shares of NVLX with the possibility for further funding....from briefing.com "in play":
phase clinical trials; $2 mln initial investment completed (NVLX) : Co announces that it has entered into a stock purchase agreement with Lincoln Park Capital Fund. Lincoln Park initially purchased 8 million shares of Nuvilex's common stock at $0.25 per share for $2 million and has committed to invest, at the sole option of Nuvilex, up to an additional $25 million of equity capital over the term of the purchase agreement. The proceeds from this investment will be used for Nuvilex's late-stage clinical trials in advanced inoperable pancreatic cancer, for research into the use of constituents of marijuana in the emerging medical marijuana arena and for general operating purposes.
Back in NVLX here in .22's.....tuna
Good info CVSL .49 +.05 HOD here:
Headlines
CVSL Inc. Begins Trading on OTCQX®PR Newswire(Wed, Feb 19)
Former U.S. Senator Kay Bailey Hutchison Joins CVSL Inc. Board of DirectorsPR Newswire(Tue, Feb 18)
CVSL INC. Files SEC form 8-K, Results of Operations and Financial Condition, Financial Statements and ExhibitsEDGAR Online(Tue, Feb 18)
CVSL Applies For Uplisting To OTCQXPR Newswire(Tue, Feb 18)
Reminder: CVSL To Hold Investor Information Call On February 18PR Newswire(Mon, Feb 17)
CVSL Inc. Information to be Available Through S&P Capital IQ's Market Access ProgramPR Newswire(Thu, Feb 13)
CVSL Names Vice President Of Finance And ControllerPR Newswire(Thu, Feb 6)
CVSL To Hold Investor Information Call On February 18PR Newswire(Tue, Feb 4)
CVSL Says It Has Liquidated Its Remaining Stake In BlythPR Newswire(Tue, Jan 28)
CVSL And Golden Girls Finalize TransactionPR Newswire(Thu, Jan 23)
CVSL Launches "Connections" Rewards Program, Hertz Is First Partner; Others To Be Continually AddedPR Newswire(Wed, Jan 15)
Sale Of Longaberger Golf Club Is Successfully Completed, Proceeds Allow Company To Further Reduce DebtPR Newswire(Mon, Dec 30)
CVSL And My Secret Kitchen Finalize TransactionPR Newswire(Mon, Dec 23)
CVSL And Paperly Finalize TransactionPR Newswire(Fri, Dec 20)
Longaberger Home Consultant Sets New Sales RecordPR Newswire(Wed, Dec 18)
» More Headlines for CVSL
Like what this company is doing...tuna
Some good info CVSL .49 +.05 HOD:
Headlines
CVSL Inc. Begins Trading on OTCQX®PR Newswire(Wed, Feb 19)
Former U.S. Senator Kay Bailey Hutchison Joins CVSL Inc. Board of DirectorsPR Newswire(Tue, Feb 18)
CVSL INC. Files SEC form 8-K, Results of Operations and Financial Condition, Financial Statements and ExhibitsEDGAR Online(Tue, Feb 18)
CVSL Applies For Uplisting To OTCQXPR Newswire(Tue, Feb 18)
Reminder: CVSL To Hold Investor Information Call On February 18PR Newswire(Mon, Feb 17)
CVSL Inc. Information to be Available Through S&P Capital IQ's Market Access ProgramPR Newswire(Thu, Feb 13)
CVSL Names Vice President Of Finance And ControllerPR Newswire(Thu, Feb 6)
CVSL To Hold Investor Information Call On February 18PR Newswire(Tue, Feb 4)
CVSL Says It Has Liquidated Its Remaining Stake In BlythPR Newswire(Tue, Jan 28)
CVSL And Golden Girls Finalize TransactionPR Newswire(Thu, Jan 23)
CVSL Launches "Connections" Rewards Program, Hertz Is First Partner; Others To Be Continually AddedPR Newswire(Wed, Jan 15)
Sale Of Longaberger Golf Club Is Successfully Completed, Proceeds Allow Company To Further Reduce DebtPR Newswire(Mon, Dec 30)
CVSL And My Secret Kitchen Finalize TransactionPR Newswire(Mon, Dec 23)
CVSL And Paperly Finalize TransactionPR Newswire(Fri, Dec 20)
Longaberger Home Consultant Sets New Sales RecordPR Newswire(Wed, Dec 18)
» More Headlines for CVSL
tuna
FTLF $3.25 new 52wk hi! Got CVSL .45 looking good and with strong leadership imho...tuna
FTLF $3.24 +.25!! Got CVSL .45 with good people leading this firm...tuna
Good info on FTLF $3.16 recently from SA:
FitLife Is Very Cheap, But Probably Not For Long
Feb. 14, 2014 10:00 AM ET | 37 comments | About: FTLF
Disclosure: I am long FTLF. (More...)
Editor's notes: Even if the company doesn't capitalize on new sales channels, shares of FTLF appear 30% undervalued. In a bullish scenario, fund manager Igor Novgorodtsev envisions much larger gains than that.
This article was first released only to PRO subscribers. Learn More
(Editors' Note: This article covers a stock trading at less than $1 per share and/or has less than a $100 million market cap. Please be aware of the risks associated with these stocks.)
Introduction:
FitLife Brands (OTCQB:FTLF) is a relatively young company. It was only incorporated in 2006 when it was a tiny nutritional supplement vendor selling to a handful of GNC (GNC) franchised stores. The company, formerly known as Bond Labs, traded as a "penny stock" in total obscurity on the OTC market for several years. The new management, led by Coca-Cola veteran John Wilson, came aboard in 2010 and decided to shake things up. FitLife simplified its capital structure by converting its preferred stock into common, did a reverse stock split to get its share price closer to $3 (a minimum starting price to list on NASDAQ), and, finally, changed its name to a more appropriate and catchy "FitLife."
At the same time, the management has embarked on a very aggressive growth strategy to expand its business abroad and start selling to GNC-owned stores. If this strategy is successful, the company will probably list on NASDAQ in a near future where it will be more appropriately valued based on its very high growth rate (39% CAGR), clean balance sheet, and simple well-understood business. Not only is the company undervalued based on its current growth, but also there are several well-known catalysts, each of which can double the stock price.
FitLife stock price has been climbing since its recap last year:
(click to enlarge)
Business strategy:
Today, FitLife brands sells only to one type of customer: General Nutrition Center (GNC) franchise stores, which total about 1,000 in the US and another 1,900 abroad. While this may look like a serious concentration risk, in reality, all franchise stores make purchasing decisions independently. Every franchise store is required to carry GNC made merchandise, which represents about 80% of SKUs, the remaining 20% are bought from other vendors to "provide choice." FitLife is very well-represented in non-GNC store inventory, responsible for 20% of non-GNC merchandise sales (3-5% overall store sales). The adoption rate of FitLife products has been tremendous: today about 800 GNC franchise stores carry its products (80% penetration rate), up from only 250 locations in 2009.
The franchise business itself is an accelerating growth driver for GNC. The franchise stores grew their revenue 22% in 2012 and 13% in 2011, with the majority of growth coming from abroad: 8.2% international vs. 5.9% domestic (per GNC's last 10-Q). GNC has not yet fully penetrated large emerging markets: it only has one flagship store in China and Russia, and a handful in Brazil. Almost all GNC stores abroad are franchises, making it a familiar market for FitLife.
Having penetrated the majority of the US franchise stores, FitLife sees two major growth opportunities: sell to GNC franchises abroad and sell to GNC-owned stores. FitLife had a falling-out with GNC corporate stores several years ago and is working to repair the relationship. They have been in discussion the past two years, after GNC saw tremendous success FitLife had with its franchisers. If the GNC corporate becomes a customer, it has a potential to almost triple revenues at once (73.5% of GNC's 2012 sales are through corporate stores).
GNC 2012 sales (2012 10-K):
(click to enlarge)
Internationally, FitLife is already selling its products in ten countries, starting with Australian GNC franchise stores in June 2012. While an incredible 39% compounded growth rate of last three years is likely to moderate, the company still projects a double-digit top line growth rate for next 3 to 5 years. FitLife has also very limited Internet sales, mostly directly from its brands' websites. There is clearly a large opportunity to expand on the web.
Products:
According to FitLife's investor presentation, they are the number one external vendor in GNC franchise stores. In my conversation with the management, they were refreshingly frank, explaining that nutritional supplement business is essentially pure marketing (just like carbonated sugary water called Coca-Cola) as they re-mix well-known ingredients to create new products. FitLife doesn't have any R&D people and outsources all manufacturing. Today, the company workforce is only 15 people and the business requires little capital. As FitLife's revenue gets larger, the economy of scale will kick in as SG&A expenses will be spread over a larger base improving operating margins.
Sports nutrition is the main focus (FitLife presentation):
There are four main lines of products with somewhat overlapping offerings:
Body-shaping work-out oriented NDS:
(click to enlarge)
Body-building focused PMD:
(click to enlarge)
Nutrition-centric SirenLabs:
(click to enlarge)
And seems to be defunct CoreActive (this brand's website is down):
Another nice thing about this business is its "speed to market." Unlike pharmaceutical companies' drugs, which require a lengthy and expensive FDA approval process, supplements don't need approval if they use well-known ingredients (per FitLife's 2012 10-K):
"…the Dietary Supplement Health and Education Act of 1994 ("DSHEA"), which established a new framework governing the composition, safety, labeling and marketing of nutritional supplements. …Generally, under DSHEA, dietary ingredients that were on the market prior to October 15, 1994, may be used in nutritional supplements without notifying the FDA. New dietary ingredients, consisting of dietary ingredients that were not marketed in the United States before October 15, 1994, are subject to a FDA pre-market new dietary ingredient notification requirement unless the ingredient has been present in the food supply as an article used for food without being chemically altered."
So, basically, FitLife can easily chase any dietary or fitness fad as long as it doesn't use new ingredients. It did fail once in 2010 in its ambitious attempt to market an "anti-hangover" drink several years ago, which can still be found on a stale Facebook page. But I still commend the management to try to hit a home-run" with a new "Red Bull"-size sales opportunity. It's still possible that FitLife may unexpectedly come-up with a "hot" product no one anticipates.
According to the management, FitLife strives to maintain a loyal following and uphold its brand reputation by "truth in labeling" practice. It displays the exact amounts of each ingredient in every serving of its products. This may not sound important for a casual customer, but these products are sold to nutrition enthusiasts, who are often fanatical about what "they put in their bodies." I am personally a bit skeptical about FitLife's (and just about any other nutrition company) marketing claims but a Google search turned generally very positive (and probably independent) reviews of FitLife products. Many reviews can be found on bodybuilding website.
I believe a significant brand equity combined with an ability to quickly bring new products to the market is the main durable competitive advantage of FitLife.
Products are continuously brought into the market (FitLife presentation):
Recent recapitalization:
FitLife has significantly changed its capital structure in the last 5 years. First, it acquired NDS Nutritional Products at the end of 2008 for only 4x EBITDA in 50% cash and 50% restricted stock transaction, including 18 months earn-out provisions. In October 2013, the company changed its name to FitLife, bought out its preferred stock with common equity and debt. Once it publishes next quarter results, its simplified balance sheet should be net cash positive and could make it a good acquisition target. There are very few warrants outstanding and almost nothing off balance sheet, so the financial statements are very much "what you see is what you get."
FitLife balance sheet prior to recap, the "yellow" items will change next quarter (2013 Q3 10-Q):
(click to enlarge)
Valuation scenarios:
Valuing FitLife is not an easy task. There are several (very positive) catalysts, which may make any relative or intrinsic valuation meaningless. It is best to provide the "base" valuation and estimate the value range of each catalyst while stating assumptions.
Base case: None of the catalysts materialize
FitLife doesn't achieve any significant international growth, apart from already existing franchises, and continues to sell to GNC franchises only. It maintains its share of sales to the existing customers but since it's already in 80% of the franchise stores, it will organically grow at the same rate as GNC's top line franchise sales at 6.8% for the next five years (per GNC's last 10-Q). If we assume that the company at its maturity in 5 years will be valued at a modest 10x EV/EBITDA and estimate 13% weighted cost of capital (beta = 2), we get about $20.4 million enterprise value or $23.4 market cap, which is 31% higher than its current price.
Catalysts 1: FitLife strikes a deal with GNC Corporate stores
GNC corporate stores today represent 73.5% of total GNC revenue. Since both franchise and corporate stores carry similar inventory and serve the same customer base, it's logical to assume that FitLife can reach the same sales volumes. On the other hand, the GNC corporate would be in much stronger negotiating position due to its monopsony position (reverse of monopoly where the buyer is the monopolist). Therefore, I assume FitLife will achieve four times the current revenue, but with the gross margins a third lower, resulting in the company losing 1/3 of its operating margin of 7.8% for new stores. This could translate in 300% immediate gross income growth, or 180% net income growth assuming a full tax rate, which will only be applied after it exhausts $20 million in net operating losses carryover.
Catalysts 2: FitLife successfully enters foreign GNC franchise market and achieves 50% penetration rate
FitLife has been very successful in "spreading the word" among GNC franchises, allowing it to achieve an 80% penetration rate in the US. Unfortunately, the foreign GNC franchise markets are much more fractured and less competitive, as one needn't usually worry about another GNC store stealing its customers because of superior product selection. I assume only 50% long-term penetration rate (in five years), but the same gross margins as today's. There are 1,900 foreign GNC franchises vs. about a 1,000 in the US. If we assume that they are equally profitable, this would translate to about 120% of additional revenue (perhaps a bit less since FitLife already has some small foreign sales). Everything else being equal, the company could be worth twice as much if it expands internationally.
Catalysts 3: FitLife is acquired by GNC (or someone else)
If FitLife becomes larger, it may become a competitive threat to GNC products as some large GNC competitor may decide to buy the firm (RiteAid, Walgreens, CVS). Since GNC's gross margin of 37% is about the same as FitLife's, I should value FitLife on the EBITDA multiple, plus an acquisition control premium. Current GNC's EV/EBITA is 12.0 vs. 8.3 for FitLife (also worth noting that GNC has significant net debt but FitLife doesn't). If we assume FitLife will be taken out at 12x EBITDA, plus a typical 40% control premium, it should be worth 88% more than its current price. The acquisition will probably not happen within the next couple of years as FitLife has over $20 million unrealized net operating losses, some of which could be lost in the case of an acquisition (see Section 382 of IRS code).
Conclusion
Even without catalysts, FitLife seems 31% undervalued. If the management of the company is successful in carrying out its expansion strategy, the company is a likely "multi-bagger" with each catalyst doubling the equity value.
Additional disclosure: Some of my prior micro-cap articles have caused unusual price volatility after their release. It's not my intention to effect short-term price appreciation as I believe this investment to be an excellent long-term choice. However, I reserve the right to reduce my long position if the price exceeds my short-term target.
This article is part of Seeking Alpha PRO and is available to you on a time-limited basis. Fund managers subscribe to PRO to discover
research & experts on 3,000+ small- & mid-cap stocks in the PRO library.
Recent on FTLF $3.20 +.21 another 52wk hi:
FitLife Is Very Cheap, But Probably Not For Long
Feb. 14, 2014 10:00 AM ET | 37 comments | About: FTLF
Disclosure: I am long FTLF. (More...)
Editor's notes: Even if the company doesn't capitalize on new sales channels, shares of FTLF appear 30% undervalued. In a bullish scenario, fund manager Igor Novgorodtsev envisions much larger gains than that.
This article was first released only to PRO subscribers. Learn More
(Editors' Note: This article covers a stock trading at less than $1 per share and/or has less than a $100 million market cap. Please be aware of the risks associated with these stocks.)
Introduction:
FitLife Brands (OTCQB:FTLF) is a relatively young company. It was only incorporated in 2006 when it was a tiny nutritional supplement vendor selling to a handful of GNC (GNC) franchised stores. The company, formerly known as Bond Labs, traded as a "penny stock" in total obscurity on the OTC market for several years. The new management, led by Coca-Cola veteran John Wilson, came aboard in 2010 and decided to shake things up. FitLife simplified its capital structure by converting its preferred stock into common, did a reverse stock split to get its share price closer to $3 (a minimum starting price to list on NASDAQ), and, finally, changed its name to a more appropriate and catchy "FitLife."
At the same time, the management has embarked on a very aggressive growth strategy to expand its business abroad and start selling to GNC-owned stores. If this strategy is successful, the company will probably list on NASDAQ in a near future where it will be more appropriately valued based on its very high growth rate (39% CAGR), clean balance sheet, and simple well-understood business. Not only is the company undervalued based on its current growth, but also there are several well-known catalysts, each of which can double the stock price.
FitLife stock price has been climbing since its recap last year:
(click to enlarge)
Business strategy:
Today, FitLife brands sells only to one type of customer: General Nutrition Center (GNC) franchise stores, which total about 1,000 in the US and another 1,900 abroad. While this may look like a serious concentration risk, in reality, all franchise stores make purchasing decisions independently. Every franchise store is required to carry GNC made merchandise, which represents about 80% of SKUs, the remaining 20% are bought from other vendors to "provide choice." FitLife is very well-represented in non-GNC store inventory, responsible for 20% of non-GNC merchandise sales (3-5% overall store sales). The adoption rate of FitLife products has been tremendous: today about 800 GNC franchise stores carry its products (80% penetration rate), up from only 250 locations in 2009.
The franchise business itself is an accelerating growth driver for GNC. The franchise stores grew their revenue 22% in 2012 and 13% in 2011, with the majority of growth coming from abroad: 8.2% international vs. 5.9% domestic (per GNC's last 10-Q). GNC has not yet fully penetrated large emerging markets: it only has one flagship store in China and Russia, and a handful in Brazil. Almost all GNC stores abroad are franchises, making it a familiar market for FitLife.
Having penetrated the majority of the US franchise stores, FitLife sees two major growth opportunities: sell to GNC franchises abroad and sell to GNC-owned stores. FitLife had a falling-out with GNC corporate stores several years ago and is working to repair the relationship. They have been in discussion the past two years, after GNC saw tremendous success FitLife had with its franchisers. If the GNC corporate becomes a customer, it has a potential to almost triple revenues at once (73.5% of GNC's 2012 sales are through corporate stores).
GNC 2012 sales (2012 10-K):
(click to enlarge)
Internationally, FitLife is already selling its products in ten countries, starting with Australian GNC franchise stores in June 2012. While an incredible 39% compounded growth rate of last three years is likely to moderate, the company still projects a double-digit top line growth rate for next 3 to 5 years. FitLife has also very limited Internet sales, mostly directly from its brands' websites. There is clearly a large opportunity to expand on the web.
Products:
According to FitLife's investor presentation, they are the number one external vendor in GNC franchise stores. In my conversation with the management, they were refreshingly frank, explaining that nutritional supplement business is essentially pure marketing (just like carbonated sugary water called Coca-Cola) as they re-mix well-known ingredients to create new products. FitLife doesn't have any R&D people and outsources all manufacturing. Today, the company workforce is only 15 people and the business requires little capital. As FitLife's revenue gets larger, the economy of scale will kick in as SG&A expenses will be spread over a larger base improving operating margins.
Sports nutrition is the main focus (FitLife presentation):
There are four main lines of products with somewhat overlapping offerings:
Body-shaping work-out oriented NDS:
(click to enlarge)
Body-building focused PMD:
(click to enlarge)
Nutrition-centric SirenLabs:
(click to enlarge)
And seems to be defunct CoreActive (this brand's website is down):
Another nice thing about this business is its "speed to market." Unlike pharmaceutical companies' drugs, which require a lengthy and expensive FDA approval process, supplements don't need approval if they use well-known ingredients (per FitLife's 2012 10-K):
"…the Dietary Supplement Health and Education Act of 1994 ("DSHEA"), which established a new framework governing the composition, safety, labeling and marketing of nutritional supplements. …Generally, under DSHEA, dietary ingredients that were on the market prior to October 15, 1994, may be used in nutritional supplements without notifying the FDA. New dietary ingredients, consisting of dietary ingredients that were not marketed in the United States before October 15, 1994, are subject to a FDA pre-market new dietary ingredient notification requirement unless the ingredient has been present in the food supply as an article used for food without being chemically altered."
So, basically, FitLife can easily chase any dietary or fitness fad as long as it doesn't use new ingredients. It did fail once in 2010 in its ambitious attempt to market an "anti-hangover" drink several years ago, which can still be found on a stale Facebook page. But I still commend the management to try to hit a home-run" with a new "Red Bull"-size sales opportunity. It's still possible that FitLife may unexpectedly come-up with a "hot" product no one anticipates.
According to the management, FitLife strives to maintain a loyal following and uphold its brand reputation by "truth in labeling" practice. It displays the exact amounts of each ingredient in every serving of its products. This may not sound important for a casual customer, but these products are sold to nutrition enthusiasts, who are often fanatical about what "they put in their bodies." I am personally a bit skeptical about FitLife's (and just about any other nutrition company) marketing claims but a Google search turned generally very positive (and probably independent) reviews of FitLife products. Many reviews can be found on bodybuilding website.
I believe a significant brand equity combined with an ability to quickly bring new products to the market is the main durable competitive advantage of FitLife.
Products are continuously brought into the market (FitLife presentation):
Recent recapitalization:
FitLife has significantly changed its capital structure in the last 5 years. First, it acquired NDS Nutritional Products at the end of 2008 for only 4x EBITDA in 50% cash and 50% restricted stock transaction, including 18 months earn-out provisions. In October 2013, the company changed its name to FitLife, bought out its preferred stock with common equity and debt. Once it publishes next quarter results, its simplified balance sheet should be net cash positive and could make it a good acquisition target. There are very few warrants outstanding and almost nothing off balance sheet, so the financial statements are very much "what you see is what you get."
FitLife balance sheet prior to recap, the "yellow" items will change next quarter (2013 Q3 10-Q):
(click to enlarge)
Valuation scenarios:
Valuing FitLife is not an easy task. There are several (very positive) catalysts, which may make any relative or intrinsic valuation meaningless. It is best to provide the "base" valuation and estimate the value range of each catalyst while stating assumptions.
Base case: None of the catalysts materialize
FitLife doesn't achieve any significant international growth, apart from already existing franchises, and continues to sell to GNC franchises only. It maintains its share of sales to the existing customers but since it's already in 80% of the franchise stores, it will organically grow at the same rate as GNC's top line franchise sales at 6.8% for the next five years (per GNC's last 10-Q). If we assume that the company at its maturity in 5 years will be valued at a modest 10x EV/EBITDA and estimate 13% weighted cost of capital (beta = 2), we get about $20.4 million enterprise value or $23.4 market cap, which is 31% higher than its current price.
Catalysts 1: FitLife strikes a deal with GNC Corporate stores
GNC corporate stores today represent 73.5% of total GNC revenue. Since both franchise and corporate stores carry similar inventory and serve the same customer base, it's logical to assume that FitLife can reach the same sales volumes. On the other hand, the GNC corporate would be in much stronger negotiating position due to its monopsony position (reverse of monopoly where the buyer is the monopolist). Therefore, I assume FitLife will achieve four times the current revenue, but with the gross margins a third lower, resulting in the company losing 1/3 of its operating margin of 7.8% for new stores. This could translate in 300% immediate gross income growth, or 180% net income growth assuming a full tax rate, which will only be applied after it exhausts $20 million in net operating losses carryover.
Catalysts 2: FitLife successfully enters foreign GNC franchise market and achieves 50% penetration rate
FitLife has been very successful in "spreading the word" among GNC franchises, allowing it to achieve an 80% penetration rate in the US. Unfortunately, the foreign GNC franchise markets are much more fractured and less competitive, as one needn't usually worry about another GNC store stealing its customers because of superior product selection. I assume only 50% long-term penetration rate (in five years), but the same gross margins as today's. There are 1,900 foreign GNC franchises vs. about a 1,000 in the US. If we assume that they are equally profitable, this would translate to about 120% of additional revenue (perhaps a bit less since FitLife already has some small foreign sales). Everything else being equal, the company could be worth twice as much if it expands internationally.
Catalysts 3: FitLife is acquired by GNC (or someone else)
If FitLife becomes larger, it may become a competitive threat to GNC products as some large GNC competitor may decide to buy the firm (RiteAid, Walgreens, CVS). Since GNC's gross margin of 37% is about the same as FitLife's, I should value FitLife on the EBITDA multiple, plus an acquisition control premium. Current GNC's EV/EBITA is 12.0 vs. 8.3 for FitLife (also worth noting that GNC has significant net debt but FitLife doesn't). If we assume FitLife will be taken out at 12x EBITDA, plus a typical 40% control premium, it should be worth 88% more than its current price. The acquisition will probably not happen within the next couple of years as FitLife has over $20 million unrealized net operating losses, some of which could be lost in the case of an acquisition (see Section 382 of IRS code).
Conclusion
Even without catalysts, FitLife seems 31% undervalued. If the management of the company is successful in carrying out its expansion strategy, the company is a likely "multi-bagger" with each catalyst doubling the equity value.
Additional disclosure: Some of my prior micro-cap articles have caused unusual price volatility after their release. It's not my intention to effect short-term price appreciation as I believe this investment to be an excellent long-term choice. However, I reserve the right to reduce my long position if the price exceeds my short-term target.
This article is part of Seeking Alpha PRO and is available to you on a time-limited basis. Fund managers subscribe to PRO to discover
research & experts on 3,000+ small- & mid-cap stocks in the PRO library.
Just added FTLF at $3.10 now at $3.14 +.15 new 52wk high today...with volume beginning to come in....tuna
Added FTLF now $3.15 +.16 new 52wk high!!! Momo in the making?? Maybe... tuna
Back in FSPM!! $5.10 +.14 from old at 4.68...my favorite weed...tuna
That was one I didn't get in Matt....haha!! Hard to get in all of them but I've been in at least a dozen or more already. Best of luck in all your trades!! tuna
WEEDS: EAPH 34+% FITX 19+% PLPL 16+% SING 11+% ENDO 10+% TRTC 7+% Excellent day for most weeds....keeping my eye on FSPM for re-entry (added more PLPL this morning $1.60's and $1.70's...GL all longs!! tuna
PLPL FITX EAPH SING ENDO up over 10% for each of these weeds here....tuna
WEEDS HOT!!! ENDO....FITX....PLPL....EAPH....SING all UP OVER 10%!!! tuna
TRTC bidding .58 from .545 close!!! Like to see a close over .60 today....weeds all looking very good!! tuna
Good news out on weed SING after hours Friday!!! Big move coming?? Here is the PR:
Singlepoint, Inc. Anticipates Success for Cannabis Mobile Payments in Light of U.S. Government's Issuance of Rules for Banks on Dealing With Legal Marijuana Vendors
Marketwired Singlepoint, Inc.
February 14, 2014 4:03 PM
PHOENIX, AZ--(Marketwired - Feb 14, 2014) - Singlepoint, Inc. (OTC: SING), a state-of-the-art mobile technology company and full-service mobile marketing company that has recently announced entry into the mobile payment systems for the medical marijuana industry, is pleased to announce that the Justice Department and U.S. Treasury have published documents issued to mitigate concerns for banks in doing business with state-legal marijuana companies.
Singlepoint CEO Greg Lambrecht is pleased with the timely news as it directly impacts the likelihood of success for the launch of Singlepoint's Mobile Payment technology, which will include an array of products for marijuana industry players. "This is big news," he states. "Only a month ago, U.S. Attorney General, Eric Holder, stated that the Obama administration would be announcing regulations to make it easier for banks to do business with marijuana vendors, and today we get news that further eases bank concerns in terms of accepting banking business from Marijuana-centric companies."
He continues, "This impacts us directly in terms of overall potential for success in the Cannabis industry as we have launch-ready products positioned to improve overall efficiency for both buyers and sellers of legalized (State) Marijuana, including our mobile payments IP."
In light of the recent USDOJ news, Singlepoint looks to strategically announce other products it has developed and/or planned for development to service the rapid-growing legalized Marijuana industry.
Medical marijuana is now legal in 20 states and the District of Columbia. Of those states, Washington and Colorado have legalized marijuana for recreational use. ArcView Market Research projects the legal marijuana industry has the potential to reach $10.2 billion by 2018 as more states legalize cannabis.
Like Singlepoint on Facebook and follow us on Twitter
Check out Greg Lambrecht on MoneyTV
About Singlepoint, Inc.
Headquartered in Phoenix, AZ, Singlepoint, Inc. is a state-of-the-art mobile technology company and full-service mobile marketing agency. We operate a best-in-class mobile commerce and communication platform specifically designed to serve the needs of the non-profit community as well as the for profit companies. We make any campaign instantly interactive via the mobile phone. This functionality allows our clients to conduct business transactions, accept donations and engage in targeted communication campaigns with their customers/donors through any mobile devices. Send more messages, create more awareness, and raise revenues and donations.
For more information see www.singlepoint.com
Forward-Looking Statements
Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Technical complications, which may arise, could prevent the prompt implementation of any strategically significant plan(s) outlined above. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
Weed play....SING .052 with news after close Friday!!! Watch for upside mono imho:
Singlepoint, Inc. Anticipates Success for Cannabis Mobile Payments in Light of U.S. Government's Issuance of Rules for Banks on Dealing With Legal Marijuana Vendors
Marketwired Singlepoint, Inc.
February 14, 2014 4:03 PM
PHOENIX, AZ--(Marketwired - Feb 14, 2014) - Singlepoint, Inc. (OTC: SING), a state-of-the-art mobile technology company and full-service mobile marketing company that has recently announced entry into the mobile payment systems for the medical marijuana industry, is pleased to announce that the Justice Department and U.S. Treasury have published documents issued to mitigate concerns for banks in doing business with state-legal marijuana companies.
Singlepoint CEO Greg Lambrecht is pleased with the timely news as it directly impacts the likelihood of success for the launch of Singlepoint's Mobile Payment technology, which will include an array of products for marijuana industry players. "This is big news," he states. "Only a month ago, U.S. Attorney General, Eric Holder, stated that the Obama administration would be announcing regulations to make it easier for banks to do business with marijuana vendors, and today we get news that further eases bank concerns in terms of accepting banking business from Marijuana-centric companies."
He continues, "This impacts us directly in terms of overall potential for success in the Cannabis industry as we have launch-ready products positioned to improve overall efficiency for both buyers and sellers of legalized (State) Marijuana, including our mobile payments IP."
In light of the recent USDOJ news, Singlepoint looks to strategically announce other products it has developed and/or planned for development to service the rapid-growing legalized Marijuana industry.
Medical marijuana is now legal in 20 states and the District of Columbia. Of those states, Washington and Colorado have legalized marijuana for recreational use. ArcView Market Research projects the legal marijuana industry has the potential to reach $10.2 billion by 2018 as more states legalize cannabis.
Like Singlepoint on Facebook and follow us on Twitter
Check out Greg Lambrecht on MoneyTV
About Singlepoint, Inc.
Headquartered in Phoenix, AZ, Singlepoint, Inc. is a state-of-the-art mobile technology company and full-service mobile marketing agency. We operate a best-in-class mobile commerce and communication platform specifically designed to serve the needs of the non-profit community as well as the for profit companies. We make any campaign instantly interactive via the mobile phone. This functionality allows our clients to conduct business transactions, accept donations and engage in targeted communication campaigns with their customers/donors through any mobile devices. Send more messages, create more awareness, and raise revenues and donations.
For more information see www.singlepoint.com
Forward-Looking Statements
Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Technical complications, which may arise, could prevent the prompt implementation of any strategically significant plan(s) outlined above. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
I'm also in weeds: ENDO CBIS EAPH and SING.....and like their upside potential also. LOVE the weed sector with so many upcoming positive catalysts coming just like the great news today on approval of US Banks to lend to weed companies!!! This is the hottest sector in all of WALL STREET and my guess is it will remain so for a long time coming....but all imho. tuna
I menioned on IHUB about weed VAPE in the $10's Wed...closed $13.60 today! And FSPM and TRTC are my 2 favorite weeds....PLPL might come back to life soon and I'm in all these...GL all tuna
BIG NEWS IS NEW CATALYST FOR WEEDS:
Pot Businesses Allowed to Open Accounts With U.S. Banks
By Alison Vekshin Feb 15, 2014 3:41 AM GMT+0700 13 Comments Email Print
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Photographer: Matthew Staver/Bloomberg
The guidelines were sought by marijuana businesses and the governors of Colorado and... Read More
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The U.S. government took a step toward legitimizing the marijuana industry today, allowing U.S. banks to offer accounts and other services to businesses in states where medical or recreational pot sales are legal.
The Treasury’s Financial Crimes Enforcement Network issued guidelines for banks intended to reduce the danger sellers face in operating an all-cash business. The rules would give law enforcement more information about marijuana business activity, the agency said in a news release.
“Financial institutions can provide services to marijuana-related businesses in a manner consistent with their obligations to know their customers and to report possible criminal activity,” according to an agency statement.
Marijuana remains an illegal substance under federal law. The guidelines were sought by marijuana businesses and the governors of Colorado and Washington state, whose voters in 2012 approved the sale of marijuana for recreational use. Twenty states also permit medical marijuana.
Related:
Video: Pot's Growing Problem: Where to Keep All the Cash?
Opinion: Confused About Pot? So's the Law
Marijuana businesses rallied on the news, with Medbox Inc. (MDBX), which sells automated dispensing systems, soaring as much as 32 percent to $33 before declining to $30 at 3:24 p.m. in New York.
Companies in states that allow and tax marijuana sales have been operating on a cash-only basis, unable to accept credit cards from customers or using business checking accounts to pay expenses or local and state taxes. This made them susceptible to robbery and forced them to pay their taxes in person and in cash.
Banks’ Choice
Financial institutions will be able to decide on their own whether to take on the business, a senior official in the financial crimes unit, who asked not to be identified without authorization to speak publicly, said in a conference call.
The Justice Department released a memo today indicating it wouldn’t pursue enforcement against banks that do business with the marijuana industry if they comply with eight department priorities. These include diverting marijuana from a state where it’s illegal to one where it’s not, and in cases where a marijuana-related business is being used by a criminal organization to conduct financial transactions for its criminal goals, the agency said in a memo from Deputy Attorney General James Cole.
“The department shares the concerns of public officials and law enforcement about the public safety risks associated with businesses that handle significant amounts of cash,” said Allison Price, a Justice Department spokeswoman.
The guidelines “are intended to increase the availability of financial services for marijuana businesses -- that are licensed and regulated -- while at the same time preserving and enhancing important law enforcement tools,” she said.
To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net
To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net
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Love the news!! tuna
WOW!! Weeds: VAPE $13.60 +2.10 and TRTC .544 +.075 and even PLPL $1.53 starting to wake up!! tuna
Just to let all know....I am a "free" writer so cannot answer private messages...Thanks....I don't buy anything under .05 or so and rarely get stuff under a close to a dime or higher. I"ll take a look and I know most folks here are sub=penny traders but just not my bag...Best of luck!! tuna
GOOD NEWS out on CBIS .18 here:
Cannabis Science (CBIS) Signs Partnership Agreement with Michigan Green Technologies, LLC to Focus on Reform and Proper Implementation of Cannabis and Commercial Hemp Programs for the State of Michigan
PR Newswire Cannabis Science, Inc.
February 13, 2014 9:36 AM
COLORADO SPRINGS, Colo., Feb. 13, 2014 /PRNewswire/ -- Cannabis Science, Inc. (NASD OTC: CBIS), a U.S. Company specializing in cannabis-based pharmaceutical development and related consulting operations, is proud to announce its new partnership with Michigan Green Technologies, LLC that has a broad focus on the reform and proper implementation of state approved cannabis and commercial hemp programs with comprehensive seed to sale process to include cultivation; studies; medical testing; manufacturing; a taxation model; commercial and consumer distribution; education; and clinical research.
Robert Kane, Director and CFO of Cannabis Science, stated, "We feel privileged to participate in the transformation of Michigan's state hemp and cannabis laws that will contribute to creating new agricultural, medical, and research systems. Michigan has always been an important market, and with a population twice the size of Colorado's, we see many opportunities ahead through our new venture with Michigan stakeholders. It is anticipated that these platforms will serve as best practices in state-wide cannabis and hemp reform, providing substantial agricultural opportunity as well as guiding the effective integration of medical cannabis into state healthcare systems. The legislation aims to provide unprecedented economic stimulus to the state of Michigan while also aggressively working to meet medical needs of thousands of patients, pursuing an innovative platform for patient-driven scientific research."
Michigan holds a great American agricultural tradition, signified by President Obama's trip to Michigan last week to sign the landmark farm bill. Obama cited the new law as a victory for the economy and a hopeful sign that the bipartisan legislation could "break the cycle of short-sighted, crisis-driven, partisan decision-making." Importantly, the new law includes the first federal steps towards the legalization of hemp cultivation and research and foretells a growing national movement toward ending medical cannabis prohibition on a national scale. With Michigan's strong tradition in farming and agricultural and medical research, the state is well positioned to lead America into a new era of development in the expanding U.S. hemp market and to move medical cannabis research to a new level.
Michigan Green Technologies is actively participating with farmers, agricultural researchers, medical community, and local businesses in reforming Michigan legislation to address the commercial cultivation and create next generation medical cannabis and commercial hemp usage programs.
About Cannabis Science, Inc.
Cannabis Science, Inc., takes advantage of its unique understanding of metabolic processes to provide novel treatment approaches to a number of illnesses for which current treatments and understanding remain unsatisfactory. Cannabinoids have an extensive history dating back thousands of years, and currently there are a growing number of peer-reviewed scientific publications that document the underlying biochemical pathways that cannabinoids modulate. The Company works with leading experts in drug development, medicinal characterization, and clinical research to develop, produce, and commercialize novel therapeutic approaches for the treatment for illnesses caused by infections as well as for age-related illness. Our initial focus is on skin cancers and neurological disorders.
Forward Looking Statements
This Press Release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. A statement containing words such as "anticipate," "seek," intend," "believe," "estimate," "expect," "project," "plan," or similar phrases may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some or all of the events or results anticipated by these forward-looking statements may not occur. Factors that could cause or contribute to such differences include the future U.S. and global economies, the impact of competition, and the Company's reliance on existing regulations regarding the use and development of cannabis-based drugs. Cannabis Science, Inc., does not undertake any duty nor does it intend to update the results of these forward-looking statements.
Cannabis Science, Inc.
Dr. Dorothy Bray, CEO & Director
www.cannabisscience.com
dorothy.bray@cannabisscience.com
info@cannabisscience.com
Tel: 1.888.777.0658
Investment Inquiries
Robert Kane, CFO & Director
robert.kane@cannabisscience.com
561.420.4824
Weeds!!! FSPM $5.86 +.64 VAP# $12.80 +$1.30 LOOKING VERY STRONG!!! GL all....tuna
Weed....VAPE $11.50 +$1.05 closing at HOD in it's first day of rallying from a hard fall as almost all the weeds suffered through. VAPE is a high flyer in % moves on rallies and dips in the past so I'm guessing this early stage rally will be similar with some multi-dollar day moves up too. This is a very thin trader like ZDPY but can provide 30-100% gains very quickly!!! GL all...tuna
FSPM $5.51 +$1.21 new HOD!!! What a WEED!!! Love this stock...have to leave now....GL on the close everyone!! tuna
Here's a very good article on TRTC .47 +.025 from yesterday....it's long but very informative and very bullish on the company:
I Just Rolled Myself A New Growth Stock: Terra Tech Corp. 13 comments
Feb 12, 2014 11:17 AM
Towards the end of January 2014, I let it be known that I had initiated a position into Growlife, Inc. (Symbol:PHOT), which was my first dabble into the marijuana sector, a sector that includes a wide array of different initiatives and company focus.
Since that time, I have been looking for an additional company, or two, to diversify my sector position and find a company equally capable of significant growth over the next twenty four months. For super speculative investments, I always provide myself a window of twenty four months, and, the most important screen that I must therefore use to make an investment decision, is to achieve a high degree of confidence that the stock I am investing into will make it that far.
Terra Tech, Corp. (SYMBOL: TRTC) has met the standards that I require for micro cap speculative investing:
they are a fully reporting company
they have a specified business plan
they have immediate access to capital
the stock has a consistent volume and liquidity
the company management communicates to shareholders on a regular basis
Now, those standards should be part of any investors screening process, but, often when playing micro cap stocks, investors tend to neglect the disciplines required to be successful for the long term. Day trading these stocks can be quite lucrative for many, but, I am more willing to park some money, set it and forget it, keeping appraised of all company developments and reevaluating my position on a regular basis, as the plan develops, or fails to develop.
I never expect any investment to trade sharply higher without appropriate consolidation. Therefore, although I purchased TRTC at prices slightly above current levels, I am not surprised to see ten percent moves on this stock, in any direction, on a given day. Because I do not try to time the market, I take a position and do not get shaken easily from it, especially from non news related swings in the price.
Before I rolled a big fat position into Terra Tech, I needed to understand what Terra Tech actually is doing now and what strategy they plan to execute in the near future.
Terra Tech is currently earning revenue through their subsidiary, Edible Garden. The revenue is being supported by partnership, wholesale, retail and license agreements with several premier retailers including Shoprite, Fairway, BJ's, Gro Rite Garden Centers and a new seventy store placement with Market Basket.
The fruits of these deals are expected to materialize soon. Terra Tech has been focusing on its hydroponics business since 2008, developing partnership and distribution agreements designed for immediate revenue without significant dilution to shareholders. In May of 2013, for instance, Terra Tech management simplified strategy to focus on partnerships rather than developing additional property locations. By aligning themselves with urban farmers who want to cultivate using the Terra Tech standards, Terra will market and sell through their distribution network and earn a fee associated to the gross revenue sold.
This is a hedge for my investment thesis. I understand the initial stages of business development, and, I know that it will not be easy. But, with anticipated revenues of over ten million dollars expected in 2014-2015 from herbs and hydroponic produce, it provides me comfort while I wait on the development of the hemp and hydroponic equipment and associated opportunities related to marijuana.
The existing infrastructure becomes a catalyst to gain a dominant early position into the marijuana industry, inclusive of hemp, equipment and seed based strategies. With a foundation already in place, which includes land, sales channel agreements and an aggressive Growmass program, I see TRTC as a budding winner as we progress through 2014 and beyond.
In December of 2013, Terra Tech expanded upon my "hedge" when they signed a deal with Heartland Growers, who will develop a line of Edible Garden hydroponic produce that will be sold throughout the Midwest market.
In this deal, Terra will provide the marketing and sales channel support and Heartland will provide the cultivation, packaging and shipping of the product for retail sale. Remember one thing, as many small companies in this sector do pressers about what they will grow and sell, many do not have a single buyer waiting in line for product. That is a huge difference and a reason why I chose TRTC. They can grow it and they can sell it.
Then, again in December of 2013, Terra Tech signed a distribution agreement with Gro Rite Greenhouse and Garden Centers, whereby Terra completed the development of an 8000 square foot hydroponic grow facility to grow herbs and plants for retail distribution. The pair plan to develop an additional 27,000 square feet of hydroponic grow space in the early part of 2014.
In late January of 2014, Terra Tech announced the completion of its new five acre hydroponic greenhouse. As well, Terra provided an open house to the public, an important fact for me, because it proves tangible value to me, not a plan for tangible value. This greenhouse project will allow for the expansion of the hydroponic line throughout the northeast corridor of the U.S. . The projections are that each acre can produce up to two million dollars of produce annually to serve upwards of 12,000 retailers throughout the local market.
But, what about the marijuana, you ask. Well, in January of 2014, Terra Tech management told us that they have secured a team of Nevada lobbyists to assist them as they apply for a Medical Cannabis permit in Nevada. The former ACLU lobbyists should act as a strong intermediary as Terra pushes their move into the cannabis industry forward.
Coming off the back of that filing, was an announcement that Terra has formed a strategic partnership with Inergetics to form a new line of CBD nutritional products, inclusive of hemp and oil based products.
Then, remaining aggressive and focused, management launched what they call the Growmass program, a program designed to offer grow permit winners in the state of Massachusetts the opportunity to purchase high grade cultivation equipment and support with deferred payments for up to one year. This program, similar to one at Growlife, is aimed at securing an early and loyal user base for grow and cultivation equipment from the rapidly developing and competitive permit market. Now, although the $6.5 million dollar project is funded through a convertible debenture instrument, the terms are well in line with my expectations for what an emerging company can expect to negotiate. The dilution is quite manageable, not at all similar to other companies currently in the sector.
Growlife, which I own shares of, will dilute up to two billion shares, if necessary, in their race to secure a dominant seat in this massive and emerging industry. To me, not necessarily unreasonable if managed correctly. Trading shares for value added synergies is perfectly okay with me.
We all need to keep in mind that Terra Tech and Growlife are planting the seed's for growth in the future. Dilution, managed properly, is not an enemy to the investor. Terra Tech, for instance, is well positioned for expedited revenue streams. Even though fundmentally sound, they will still need to tap equity markets for capital as they continue to execute on large scale initiatives. Managed properly and with integrity, I do not fear the dilution.
But, recognizing that seeds for growth need to be planted is an important fact to cope with, as difficult as the short term ramifications might be. Any person that expects a multimillion dollar revenue generating company, based solely on marijuana or hemp based products is not quite grasping the reality of where we are in the cycle of this sector.
Some companies in this industry will survive, but, most will fail. The same principals of startup business will apply, with less than 50% survival rate within three years. Thus, I am looking for the companies that are taking the right steps at the right time, not the ones who pump out enormously speculative press releases that lead a reader to believe that huge rewards are only a quarter away.
True, money can be made by selling on the news on some of the high profile names, but, why not just take a position in a company and watch them development. Timing a stock can undoubtedly backfire, and often does.
Remember, I said I have a twenty four month plan, and now you understand the reason. I need to play a long term time horizon because this industry is barely in its infancy. In fact, I would venture to say that for a good part of the emerging companies, most have not even made it out of the press release stage, yet, they are commanding generous valuations. Be careful, there.
Eventually, though, companies like Terra Tech will move two steps forward as these micro cap press monsters slowly evaporate like smoke from a pipe. It's inevitable that the industry will begin to regulate itself in order to stay credible, and, whether the SEC moves in to take a closer look at some of these small , non reporting companies, or, whether the investment market begins to focus only on the strong, many will be quickly weeded out.
Still, many whom are investing in this sector want a sexier outlook with "got to have it now" tangible results. Well, I look at Terra as a company blazing its own trail at its own pace. Others in the industry, like PHOT, continue to release pressers that tell investors that they will embark on a huge integrated plan and will earn money on everything marijuana related.
That is a good thing, especially for my investment in PHOT. But, in reality, I happen to believe that what Terra Tech is doing, by building a network of distributors, partners and grow facilities, they will emerge a huge winner.
Terra Tech also has interest and management from the Vanda Vrede family. Terra Tech has partnered with one of the largest grow property owners in the region. The potential to develop upon additional acreage in Belvidere, New Jersey and to utilize over 180,000 square feet of greenhouse space is available to expand upon their hemp growing initiative.
And, that is the key difference to me. There is fast money available from fast promoting companies, whom may or may not actually achieve any of their initial goals. In contrast to them, there is Terra Tech, laying the pieces for a strong foundation, accretive partnerships, an acceptable financing package and a growth plan that is extremely feasible.
With indoor growing, they maintain a position to grow the most consistent and high quality product. Remember, while we wait on the marijuana laws to materialize, Terra Tech will be realizing revenue from Edible Garden. To me, getting paid to wait is a beautiful thing
Terra Tech reported 123 million shares outstanding as of October 28, 2013 and they also recognized 14.75 million shares of Series B Preferred stock. These numbers, in comparison to several of the current high flyers is well within reason and certainly does not raise any red flags with me. The Series B Preferred stock dates back to the reverse merger and represents fair value of the transaction. Currently, the stock trades with a healthy average daily volume and the bid/ask liquidity is adequate for efficient trade execution. The expected dilution from the Growmass deal is baked into the share price as well.
To put it all together, Terra Tech Corp remains a top pick for me as a diversification play in the hemp, marijuana, hydroponic equipment and hydroponic grow arena. They have arranged many of the key pieces required to build a durable company and look to be keenly focused on their strategic business plan.
Well diversified and insulated from any sudden legislative impasse, Terra Tech is a solid long term investment that will allow revenue recognition while the longer term hemp and hydroponic plans develop.
As disclosed, I own PHOT as well. I actually consider my investment in Terra Tech to be my long term winner, while PHOT will bring me potential swift gains.
Do your research and set your plan accordingly. This is certainly a sector that deserves investment attention, but, being prudent is essential for long term survival.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TRTC, PHOT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am LONG Terra Tech Corp. (Symbol:TRTC) and Growlife, Inc. (Symbol:PHOT)
Themes: long-ideas
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FSPM $5.10 +.80 here near HOD w/GOOD NEWS OUT:
FusionPharm doubles production capacity
GlobeNewswire FusionPharm, Inc.
1 hour ago
Denver Colorado, Feb. 13, 2014 (GLOBE NEWSWIRE) -- FusionPharm, Inc. (FSPM), manufacturer of the PharmPod(TM) (www.pharmpods.com) professional cultivation system has more than doubled it's Denver Colorado area manufacturing facility, adding 10,000 additional square feet of manufacturing space.
Management felt that its existing manufacturing space was inadequate to handle current and future order flow effectively. The new facility is adjacent to the company's existing facility.
The lease on the new space began on February 1st and retrofit of the space is anticipated to be complete by February 14, 2014.
Additional manufacturing facilities are planned for the east and west coast of the United States in 2014.
About FusionPharm Inc. (FSPM)
FusionPharm, Inc. (FSPM) (www.fusionpharminc.com) was organized to capitalize on opportunities present in the rapidly growing vertical farming and cannabis industries. FusionPharm's primary focus is the development and deployment of the patent pending PharmPods(TM) advanced hydroponic commercial cultivation systems. PharmPods are constructed from standard ISO steel shipping containers that are repurposed for use in indoor controlled environment agriculture. Modular, stackable, cost competitive and financeable, PharmPods have become the industry leader for professional, commercial scale indoor plant cultivation
Cautionary Language Concerning Forward-Looking Statements
This release contains "forward-looking statements" that include information relating to future events and future financial and operating performance. The words "may," "would," "will," "expect," "estimate," "can," "believe," "potential" and similar expressions and variations thereof are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to: fluctuations in demand for FusionPharms products, the introduction of new products, the Company's ability to maintain customer and strategic business relationships, the impact of competitive products and pricing, growth in targeted markets, the adequacy of the Company's liquidity and financial strength to support its growth, and other information that may be detailed from time-to-time in FusionPharms filings with the OTC Markets group. Examples of such forward-looking statements in this release include statements regarding future sales, costs and market acceptance of products as well as regulatory actions at the State or Federal level. For a more detailed description of the risk factors and uncertainties affecting FusionPharm, Inc. please refer to the Company's OTC Markets filings, which are available at www.otcmarkets.com. FusionPharm, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Contact:
FusionPharm, Inc
(720) 458-0686
info@fusionpharminc.com
www.fusionpharminc.com
FSPM $5.14 +.84 new HOD!!! LOVE THIS WEED!!! Hahaha!! tuna
FSPM now $4.70's bidding.....closed $4.30!! A test of $5 coming today with a likely break through imho....previous high in $8's.....tuna