We will see dollars when the efforts described below by Hagen get market penetration and show up in earnings, possibly by Q2 2019.
"in November, you witnessed the introduction of what has become our highly successful MediPets product line, which opened completely new channels of distribution and outlets for us in the pet industry which represents $69.5 billion in consumer sales in the United State alone. As a result of the new line, today we are approaching multiple new points of distribution, from pet supply stores to veterinary facilities. We firmly believe that our product formulations for pet wellness are unsurpassed in the marketplace and have positioned us for strong continued growth in this new niche market.
We didn’t stop with pets. An announcement in December confirmed that Diamond CBD planned to claim a piece of the $46 billion coffee market with a line of coffee and tea K-Cup capsules, which are compatible with almost any single cup coffee machine. To date, the company has sold out almost all of its initial 20,000 production run and is ordering more to satisfy what appears to be an accelerating demand for a new CBD product category that we are at the forefront of.
Education efforts underline a successful year
On “Black Friday,” Diamond CBD announced plans to sell its products in shopping malls across America via stand-alone retail kiosks, carts, and mall retail stores displaying the Diamond CBD logo and brand. Our efforts here are geared not only to sell product, but to educate consumers about CBD. We have already begun such sales initiatives in the South Florida area to refine product offerings, merchandising and messaging. We anticipate a gradual metro market rollout in 2019 in Florida, with a leap to other major metro markets in other states starting in 2020.
Diamond CBD also launched its own fleet of mobile sales vans to deepen its penetration in brick-and-mortar retail outlets in its hometown of Miami. The fleet provides a level of customer service to retailers that is unprecedented in our industry. The literal “front door delivery service” has redefined retailer expectations of what exceptional customer service and support mean in our industry. To date, the mobile fleet has installed over 500 self-contained Diamond CBD product sales centers solely designed for this initiative. Based on our early success, we have expanded the fleet to a dozen colorful vans readily visible on the roads and highways of Miami, which has become an important tool for building our local consumer awareness. This program is planned to expand to other Florida metro areas in 2019. Inevitably, such a program can further expand in creative ways to solidify reseller loyalty through initiatives such as targeted local co-op advertising and promotions to more firmly seat Diamond CBD as the leading CBD brand in such markets.
The PotNetwork magazine sheds a light on our industry
We have always strived to be an industry leader with high levels of “top of mind” awareness in the CBD and cannabis industries. So, in 2018, we began the process to further strengthen this industry position by exerting renewed effort behind PotNetwork.com, our informational cannabis industry website, while embarking on the publication of a hard cover sister magazine, PotNetwork Magazine.
With more than 300,000 page views and in excess of 150,000 unique visitors per month, PotNetwork.com is the cannabis sector’s leading news and information website. Our recently launched PotNetwork Magazine offers the only 360-degree view of the cannabis industry that exists today, from small retail enterprises to publicly traded companies in the U.S. and Canada. The printed magazine reaches a diverse readership of individual cannabis industry investors and entrepreneurs, as well as high-level cannabis industry executives and CEOs in the U.S. and Canada.
It is a natural offline extension that promises to delve deeper into the untold stories of an industry that is expected to generate $136 billionin retail sales over the next six years in the U.S. alone. We believe the two together, PotNetwork.com and PotNetwork Magazine, will further solidify our industry leadership standing while building brand equity and synergy across all our efforts.
Cutting edge vending machines offer new opportunities
At the Consumer Electronics Show in January, Diamond CBD announced a partnership with CloudPlay for the development of a stand-alone retail vending machine to sell select Diamond CBD products. The machine’s prototype was displayed at CES 2019 and its announcement generated far reaching news coverage across the $292 billion electronic technologies market. Critical to the success of the machine is the completion of a groundbreaking built-in age verification technology. The companies plan to have a commercially marketable version of the machine to be placed into test markets by CES 2020.
We are adapting to new regulations
Clearly for any company, rapid growth in a quickly accelerating, volatile industry brings significant challenges. For the industry, 2018 bought landmark shifts in federal and state laws and regulations impacting CBD businesses. While most changes are beneficial it is essential that we remain agile in our approach to facilitate rapid adaption to an uncertain regulatory and business environment.
As a result of these changes governmental attention and oversight of our industry has increased. A change that we welcome since we believe properly balanced increased oversight will benefit both the consumer and legitimate operators like ourselves in the long run.
You may recall that in October we had announced that Diamond CBD had engaged Washington-based legal counsel to assist us in applying for FDA product registrations for unique product formulations for medicinal use. Scientific and other work has already been initiated in this area and it progresses. As a result, we have every reason to maintain positive feelings about continuing our development of a positive relationship with the FDA.
As managers of your company, and at all times, we exert all efforts and intentions to comply with all governmental requirements, but in addition, as industry leaders, we believe we have an obligation to proactively nurture all such relationships. One way to help accomplish this goal is by increasing our overall transparency for the benefit of our customers, shareholders and the Company alike.
As our company grows transparency is key to our success
We also believe that increased investor transparency is necessary. In 2018 we initiated the process of becoming a fully reporting SEC company, and as part of the process had the Company’s financial results fully audited by PCAOB member audit firms.
Initial efforts at SEC registration proved unsuccessful because of, first, an auditor’s internal problems stemming from an audit in 2015 for an unrelated company, and secondly, a predecessor company’s loss of some accounting backup records from 2016 needing accounting comparatives against our results for 2017. Neither of these had any relevance to the Company currently. Pursuant to strict PCAOB rules, the effect was that we were prevented from obtaining the necessary qualifying audit opinions.
2019 is now a new year, and we have completed a full PCAOB audit of our 2018 financial statements as recently published. In turn, we will now move forward to become a fully reporting SEC company which we intend to be by mid-year.
Lastly, in order to better communicate with investors, customers and consumers alike, we have begun a broad internal initiative to improve our overall communications infrastructure and efforts. As part of this plan, I will be writing letters similar to this one each quarter to provide you with the most recent updates on our progress, growth and challenges. For 2019, we have numerous plans in the works that we believe will further escalate our growth, shareholder value, and our overall market standing as well.
Kevin Hagen, President and CEO
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