My shareholder meeting report:
- their relationship with seed CX and current competitiveness in industrial hemp production
Michael Mona III said that they've met with Seed CX a few times and they are trying to create an exchange. He said they are still working on the platform and they have gotten some approvals. It sounded like they're still trying to figure out how to make it work, but CV Sciences does want their oil to be sold on that exchange.
- current KY operations, farming, production and supply chain
Michael Mona III said last year they grew four 10-acre plots for R&D purposes, as they wanted to figure out the best growing conditions (soil, stripping, harvesting). He mentioned they have donated to a lot of universities and they're on all the committees and that they hope to bring their production domestically to Kentucky, however, he said until the production side (the actual CO2 extraction side) can keep up with the farming demand, they are not going to be able to do it. But he said hopefully that's only for the next year or two...
- plans to franchise the plus CBD brand & how they intend to scale the consumer products division
Michael Mona III said no to franchising, but he said he has wholesalers and anyone can become one.. They are offering "white labeled" products, but as far as franchising the line-- no.
- Current effectiveness of Advertising and any plans to utilize television commercials
Michael Mona III said television is something they are always looking at but they are very confident in their current store-by-store approach. He said no one is doing television right now because it's too hard to control with the what can happen based on the whole CBD and story surrounding it (meaning too many people still don't understand it and confusing it with THC).
- access to conventional lending, bank loans/ investment banking relations
Joseph Dowling said they are always looking to expand their banking relationships. He said banking is a challenge for all companies whether they are in the CBD or THC side of the business until the federal rules change. He said in terms of expanding the investor base, that's something that they are always looking to do... The reverse split proposal is an effort to put CV Sciences in a position to up-list to a bigger exchange and to jointly consider a registered offering at the same time.
- award of milestones ahead of achievement
Joseph Dowling said the company made a decision to buy out the royalty associated with the drug asset. They did that as a negotiated overall agreement with the selling shareholders. CV Sciences thought it was important because they believe strongly that it is going to be a successful program, and they didn't want to be 2-3 years in the future where they are in talks with big-pharma or a bigger investor and have this royalty hanging over them. As part of the negotiated agreement, there was an acceleration of shares that took previously associated with milestones.
- are there any plans to work with big pharma
Jospeh Download said as a small bio-tech company they are always looking at optimizing whether its the type of investors or the type of partners... So sounded like they're open to it, but nothing lined up right now.
- details about SEC investigation, when we can expect it to be resolved
One of their attorneys said they needed to be limited in the information they give due to legal reasons (he cited an unfair advantage of trading the stock for one, and also being instructed by the SEC to not give public statements regarding the matter). However he said, the company will be filing a responsive document that will detail the company's position. He basically said that the deal for the asset was structured in a way that there was a "collar" on the stock price so that the company would not be over paying for the asset and the seller of the asset would get consideration that they thought was appropriate. He said this was because at the time, the stock was trading with hardly any volume, so it was necessary in order to make this deal work with stock. As far as when it will be resolved, they said they cannot predict-- all they could say is that they feel they have very strong defenses and are very confident, and they realize that the quicker they can get this taken care of the better, but it needs to play out on the time frame... Mona said "We're very aware of the negative over-hang on the company AND MYSELF".
- Timeline regarding phases
Dr. Stephen Schmitz said there is still some work to be done following the FDA meeting. The FDA gave them a lot of useful feedback, and basically a checklist, so they have to do some non-clinical work with the formulation that meets the FDA's requirements. He said the FDA basically said "we're very excited about this-- but you need to do some extra work", and he went on to say that this was not surprising stuff as he's been involved in IND stuff before... He said it's all do-able, and that it shouldn't take a long time, the FDA gave them a roadmap and they just need to follow it. Michael Mona then said that they were surprised that the FDA actually knew a LOT about CBD. They both mentioned the importance of the fact that there were 14 people from the FDA at the meeting because that indicated a great amount of interest. Michael said something to the effect of all the people from the FDA were like the tops of their departments-- the chief of narcotics, the chief of addiction... They were "hotshots" he said, and it was a good sign. He also said that he believes the FDA wants a product to exist on the market that can help cure addiction for chewing tobacco, he again stated that was why there were 14 chief people at that meeting. Joseph Dowling also said several times that they are very excited about the direction of the drug.
- Details about R/S
I asked specifically if there were any particular variables that would influence the ratio for the split, such as, were they just trying to find any multiple that would bring the price close to $4. Jospeh Dowling responded by saying that they currently have no plan to execute on a reverse split right now. He said that they want to do this not just in connection with an up-listing, but also with a registered offering. As part of a registered offering, working with an investment bank, the bank may decide that $4 is just not an interesting number to do a deal with, so they may want to see something at $8 or $10, etc. Therefore, they wanted to make sure that they had enough flexibility with the ratio to be able to accommodate working with investment bankers.
I then asked "so since you said you have no plan to do a reverse split currently, does that mean in a perfect world you'd rather leave the share structure as is?". Joseph replied that unless things change dramatically, like the share price going up substantially between now and next year, they will need to do some kind of a split at some point to get to a price that is meaningful to institutional investors.
I then asked "when you think of CV Sciences, you believe it is definitely a goal to be on NASDAQ?". Joseph said yes and said but not necessarily NASDAQ, it could easily be NYSE.
- Toxicology report
I asked when we can expect to see the published reports about the purity of their CBD oil. Joseph responded saying they are hoping to publish it soon. Michael Mona III chimed in and basically said they are working with various journals, kind of deciding which one to go with, and there's a 90 day period for a toxicology journal to publish it..
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