Great article by lesgetrich on mCig: A Complete
Post# of 2155
Posted On: 03/24/2015 2:56:18 PM
Great article by lesgetrich on mCig:
A Completely Transformed mCig May Be The Sleeping Giant Of The Marijuana Sector
By Les Mezei
Mar. 24, 2015 10:32 AM ET | 12 comments | About: mCig, Inc. (MCIG), Includes: CAFS, VTCQ
Disclosure: The author is long MCIG, CAFS, VTCQ, FOFU. (More...)
Summary
-New revenue sources and partnerships could make MCIG the sector's best value play for 2015.
-MCIG is no longer the vape pen company it was in December.
-Investors looking at individual announcements would have missed the big picture. Taken together, they reflect a cohesive and aggressive strategy to become the sector's largest holding company.
-Cafe Serendipity partnership provides professional marketing team, sales force, retail channel and potential entry into casino market.
-New Chill CBD oils create buzz. Market is underestimating potential for it and follow on EM-J products to generate revenue.
I first started investing in mCig (OTC: OTCQB:MCIG) over a year ago when it was just a $10 pen vaporizer company. I was attracted by the fact that it had no toxic debt, or much debt of any kind, and a seemingly shareholder friendly CEO, Paul Rozenberg, who had made a public commitment not to dilute. I was soon rewarded with the promise that I would get an equal number of shares in a spinoff company called VitaCig (OTC:VTCQ) in a deal in which Paul contributed his own personal shares to pay for the dividend. At the time, many people questioned the wisdom of spinning off a subsidiary that promised to be the biggest money generator in their product line. It didn't help that it took 8 months to complete the spinoff during which time the bloggersphere erupted with daily critiques of the deal. What we didn't know at the time, however, was that Paul had bigger things in mind for his company. In the past 3 months, with a flurry of press releases, the company has launched a strategy to transform itself into what could become the marijuana sector's largest and most successful holding company.
It started on December 29, when the company announced plans to form a new subsidiary called CannaProTech, LLC in the state of Oregon, which had just voted to legalize marijuana for recreational use. They stated it was,
For the purpose of processing and distributing cannabis and derivatives, along with future expansion into recreational retail locations. CannaProTech will also assist in the development of the mCig+ line of products, which will provide mobile vaporization in applications for the delivery of cannabis plant derivatives [CBD].
A hint of things to come was also evident in the PR.
mCig, Inc. and CannaProTech, LLC are nearing conclusive agreements with two reputable and long established Medical Marijuana growers in Oregon with large, productive organic cannabis farms. These agreements will allow for CannaProTech to directly obtain medical-grade cannabis for use in extractions, distribution, and retail sales.
This was followed by an announcement on January 5 that caught everyone by surprise. MCIG would enter the market for extraction equipment with the announcement of a new line of home extraction machines and development of a new e-liquid technology using a non-toxic thinning fluid that replaces Propylene Glycol [PG] and Vegetable Glycerin [VG] via a patent pending technique within the extraction process. Both PG and VG have come under increasing criticism as new research is suggesting that they could potentially be harmful to users of e-cigarettes. The new liquids will require pens with a newly developed processing chamber and closed looped extraction system which MCIG has dubbed the "Ultrasonic Vaporizer" and which it plans to offer on an OEM basis.
Almost unnoticed in the announcement was a statement by the CEO that he plans to enter the extraction facilities market in 2015 with "multiple targets in Colorado and elsewhere." This sent me off to Google to look up extraction machines. They can be used to extract oils from plant materials - anything from olives to coconuts as well as marijuana or tobacco. Some of these machines sell for hundreds of thousands of dollars and MCIG claims that their machines run 4 times faster than existing technologies and can process plant materials in as little as 15 minutes. While a home extractor to create your own olive or hash oil looks like it has potential, could MCIG also be looking at selling or licensing the technology for industrial grade applications?
The next announcement on January 8 seemed to come out of left field. They announced a new Technology Division headed by Richard Kreuger, a software exec with an established track record in social media and business intelligence software.
The company's technology will help growers and dispensaries become more informed about their growing operations, inventory management, and legal compliances. It will also provide insight into sales, customer buying habits, and other dispensary operations.
The significance of this announcement didn't become apparent until we absorbed some of the subsequent PRs.
On January 14, the company announced it was rolling out the Electronic Medicated Joint, EM-J, a
New pre-loaded vaporizing pen thru its Colorado-based subsidiary mCig, CBD Technologies. The unique bundled product combines the highest quality THC and CBD concentrated oils pre-loaded into a convenient, discrete vaporizing pen device, which requires no flame, and produces no smoke or odor.
Our new line of EM-J™ vaporizer pens, along with our advanced non-toxic extraction process, extraction machines, and facilities address the most pressing needs of today's medical and recreational marijuana providers. Along with our recent investment in our CannaProTech, LLC subsidiary, operating out of Oregon, we're quickly putting the pieces together to be an industry powerhouse, explained Rosenberg.
Rosenberg also points to the Company's recently launched Colorado-based subsidiary, mCig CBD Technologies, LLC as another key initiative underscoring the company's long-term commitment to extracts. The subsidiary is responsible for designing and manufacturing a new line of products that will leverage its EM-J™ technology for delivery of Cannabis plant derivatives, largely around CBD. CBD, or Cannabidiol, is an active compound in marijuana with a wide range of potential medical benefits and none of the psychoactive effects of THC.
So we now had two subsidiaries, CBD Technologies responsible for designing and manufacturing a new line of EM-J products focused on CBD and CannaPro Tech, focused on processing and distributing cannabis and derivatives. We also had new extraction equipment and facilities and new pens based on a vaporization technology that replaces PG and VG with a new non-toxic thinning fluid. It all sounded really good but none of it had so far addressed the biggest problem the company had faced over the previous 12 months, namely the lack of a distribution channel to produce significant revenue. While the company's products had all met with excellent reviews, there seemed to be little marketing expertise within the company's management. Product sales had come almost exclusively from online sales.
Then on January 20 came an announcement that would make sense of it all. MCIG announced a strategic partnership with Cafe Serendipity (OTC:CAFS), previously (OTC: FOFU), a company that was planning on franchising dispensaries and growing operations into what they expect to be the "Starbucks" of the MJ sector. The announcement resulted in a huge spike for CAFS shares but barely moved the needle on MCIG's pps. After all, CAFS had yet to open its first franchise. What the market didn't see initially was that MCIG had just bought itself a professional sales force with virtually no dilution of its shares. The terms call for an exchange of shares between the companies with MCIG receiving 10 million CAFS shares and CAFS receiving 3 million MCIG shares. The agreement allows CAFS to sell all MCIG and VitaCig products and requires that 60% of the products in their stores be supplied by MCIG with MCIG having a right of first refusal on any other products a franchisee orders. It also requires CAFS to become fully reporting and have 25 franchisees within 18 months.
Since the announcement, Cafe Serendipity has signed up 3 dispensaries which should come online this quarter and the CEO recently announced that they've now hired 20 sales reps and will have 50 by July. He's also forecasting that they should have 60 to 75 franchisees in various stages by the end of the year. Even without new stores, that many reps pushing MCIG products is bound to have an impact.
But MCIG wasn't finished yet.
On February 2, they announce their entry into the hemp oil market. Partnering with a leading hemp producer in Europe, they intend to be able to provide CBD rich hemp oil to key market segments including marketing bulk raw hemp oil to third parties and B2B, launching consumer products such as cosmetics and nutraceuticals, establishing industrial hemp farming and processing operations, and investing in innovative CBD-related retail product manufacturing companies.
Well that partially addressed the question of where the retail products for the Cafe Serendipity deal would come from. But then came another unexpected announcement. MCIG was launching a Construction Division and partnering with an established HVAC company with national experience in developing climate control systems for dispensaries and grow ops. Were they also thinking about installing commercial grade extractors? According to Paul Rosenberg,
Together with ClimaGrow, we have the benefit of industry-leading expertise that is leap years ahead of the competition.
However, they didn't intend to limit themselves to climate control. A few weeks later they hired a general contractor, Ron Sasso, to head the new division and made clear that they were preparing to offer a full range of construction related services to the marijuana industry.
Ron's extensive experience in advanced building techniques, green designs, land acquisitions, land entitlements, company start up, and procedural implementations will significantly help mCig, as well as external consulting clients, to keep up with the increasing demand for marijuana facilities as more and more states legalize marijuana. In addition, Ron's team will be responsible for providing a full-range of security related services, from security operations protocols for facilities to secure transport, and more.
According to mCig, Inc.'s CEO, Paul Rosenberg, "Sassano's approach to projects, along with the industry knowledge he brings will prove to be extremely effective for our strategic business model as we expand into both grow and dispensary centers across multiple states. We are rapidly closing on major deals in Colorado and Oregon to construct grow and extraction facilities as we implement MCIG's vision for growth."
At about this same time, MCIG's new partner, Cafe Serendipity was in the process of forming a Professional Advisory Board to consult with their new franchisees. On February 2 they appointed Petra Stark as its first member. It was an impressive first appointment as Petra's credentials in government gave us more clues to the direction of the two companies.
Ms. Starke served in the Obama Administration in the first and beginning of the second term. She was the General Counsel of the President's Council of Economic Advisers ("CEA"
. In this role, Ms. Starke dealt with virtually all policies and initiatives to revitalize U.S. economy from the financial sector, to the housing market and consumer products. Prior to this role, Ms. Starke served as the Deputy Counsel to the President of the United States of America. Ms. Starke managed the White House legal team responsible for all Presidential appointments, nominations and confirmation. Public private partnerships and enforcement of the standards of conduct at the White House and highest levels of the Executive Branch were also part of Ms. Starke's portfolio. Ms. Starke served on the 2008 Obama Presidential Transition Team. Prior to joining politics, Ms. Starke practiced law at the Washington, D.C. office of O'Melveny & Myers, LLP, where she focused on compliance, business transactions and tax. Ms. Starke has also been involved in representation of Native American tribes mostly in the tobacco industry.
The full implications of this move didn't become apparent until last week when MCIG announced that they had taken a minority interest in the National Cannabis Trade Organization (NCTO - their PR mistakenly refers to it as "Native" not "National", perhaps a Freudian slip). The group was formed about a week after Petra became associated with Cafe Serendipity and CAFS immediately took a minority position in the group. It now lists NCTO as one of its companies on its website.
Most recently, the federal government has acknowledged Native American Tribal sovereignty in marijuana business. Native American Tribes can now lead the way in the United States marijuana industry. NCTO has been working with Tribes to assist in joint venture agreements to build out growing facilities on reservation lands using the most current growing technology along with providing capital funding. Cafe Serendipity Holdings, Inc. is a minority shareholder of National Cannabis Trade Organization, Inc.
Coupled with reports that the Chairman of CAFS will be attending a Native American Economic Development event on March 30, we can see a strategy developing. But to fully understand it, we have to take note of what could be MCIG's biggest announcements to date, a new CDB oil unlike anything on the market which they unveiled at an Academy Awards Celebrity Gift Suite on February 21.
The new product named CHILL! by justCBDoil.com is a revolutionary ultra-pure formula and patent-pending e-liquid that produces a maximum CBD effect unlike anything else currently available. mCig, Inc. has partnered with Just Chill Products, LLC in Melbourne, Florida to manufacture and distribute a new-to-market CBD Hemp Oil formula, initially released in prefilled tanks. Just CBD Oil's CHILL! Prefilled Tank is ready-made for the popular mCig 2.x model vaporizer device and fits any universal 510 threaded battery. Natural flavorings, larger tank sizes, and sleek new vape pens are also scheduled for upcoming release on www.justCBDoil.com.
This was followed by a real blockbuster on March 5, their initial CBD order.
mCig® Inc., a leading provider of technologies and solutions for the legal medical and recreational marijuana industry, is proud to announce a record initial CBD product order worth more than $1.2 million. mCig, Inc. also announces that it is finalizing a nationwide wholesale agreement with two large national distributors to supply these high-demand CBD products to more than 1,000 retail store locations.
mCig is capitalizing on the popularity from the new CHILL! CBD Oil Vape Tanks (www.chillcbdoil.com) to gain entry for all of mCig and VitaCig products to stores across the U.S. In addition to the 1,000 initial stores, which include smoke shops, hookah lounges, and convenience stores, another 6,000 stores through the national distributors are expected to be brought in over the next 12 months. Coupled with Café Serendipity's sales team, all mCig products including EM-J and CHILL!, and all VitaCig products, will also be introduced and distributed to thousands of dispensary locations nationwide.
The Chill product conforms to all existing US laws and because it only contains trace amounts of THC, the psychoactive ingredient in the marijuana plant, and is derived from hemp, it is 100% legal in all 50 states and over 40 countries. After the product announcement, I ordered one and tried it with some friends and family. While we all agreed that it did not produce any of the unpleasant effects of smoking a joint like paranoia or mind bending thoughts, it did produce a very noticeable relaxing and pleasant head rush. It's something like being stoned but not quite. You may feel a bit dizzy, slightly giddy and perhaps a little more talkative but you can still think pretty clearly. Moreover, one can control the dose and effect. Three tokes will typically effect most people for 30 to 60 minutes. I can easily see something like this become the recreational drug of choice for the masses. I used to smoke pot regularly in the 70's when I was younger, but got tired of wasting whole days staring at a wall as the available strains became stronger and stronger. Former tokers will find a product like CHILL CBD that can help you kick back and relax after a long stressful day to be very appealing. Several people have told me that they do not get the same effect from other CBD products so CHILL may have a unique formulation or strength. To anyone who still thinks that CBD has no effect on your brain, however, I have one simple suggestion, "Buy it and try it".
Which brings us back to our original discussion. What better place to introduce the masses to the pleasures of a THC high or a CBD rush than a marijuana cafe in a casino. I'm willing to bet (sic) that a large number of casino customers already partake in their rooms before heading to the slots. Casinos already ply their customers with alcohol to loosen them up and get rid of their inhibitions. What casino operator wouldn't jump at the chance to introduce another product to do the same. Not counting Las Vegas, Native American tribes control most of the casinos in this country. MCIG and Cafe Serendipity have positioned themselves with a definite competitive advantage to pick up a large portion of this business. They can design and construct grow ops, dispensaries and cafe's. They can outsource contracting services to local and tribal businesses and help with security. They can supply extraction and climate control equipment. They can help manage government regulations. They can franchise cafe's. They can supply the necessary software and consulting services to insure that they operate profitably and successfully. And finally, they can supply products (including both CHILL and VitaCig) that are currently legal in all 50 states that will loosen up their customers.
An Indian Casino initiatives could give this strategy a formal stamp of legitimacy and provide an entree into the Las Vegas as well as worldwide casino markets. But even without it, an impressive structure has been built by these companies that promises to produce unprecedented future revenues. Keep in mind that Cafe Serendipity expects to have 50 sales reps by this summer with a target of signing up 60 to 75 franchisees by year end. A look at the CAFS Investor Presentation shows that their business plan calls for each store to average about $2,000,000/year in revenue. Let's assume that MCIG can garner $100,000/year per store in product earnings (this doesn't include extras such as facilities construction, extraction and climate control equipment or software and consulting services). At a PE ratio of 27, that alone should add about $.01/share per store to MCIG's pps.
As I said in the beginning, this is a company with a shareholder friendly CEO with virtually no debt. Paul Rosenberg has been committed to growing the company organically by paying for most expenses out of his own equity. He virtually wiped the slate clean in December when MCIG repaid him in shares and he returned those shares to the treasury. His deal with Cafe Serendipity appears, at this juncture, to have been a brilliant move and it will only cost the company 3 million shares out of a total OS of 270 million. I don't know how much all of these new initiatives will cost, but, if the past is any indication, shareholders have little to worry about. He's set up several new divisions and subsidiaries as profit centers with qualified managers and expects each to produce revenues.
MCIG is not the same company it was in December. In the past three months, it has completely transformed itself from a pure vaporizer play to a highly diversified, horizontally integrated holding company. Several companies, like Abattis Bioceuticals (OTCQX:ATTBF), have gone the vertical integration rout. The problem with that model is it depends too heavily on sales at the top level pushing revenue to the lower levels. MCIG is hitting all aspects of the sector at the same time with all guns firing. Moreover, if their extraction equipment is truly four times faster than current technology, it could give them an edge in supplying enough CBD oils to satisfy market demand ahead of any competition. Franchising Cafe Serendipity to casinos could quickly give both brands and MCIG's products such as Chill Juice and VitaCig national exposure and legitimacy and benefit all three companies.
As I said before, I am long on MCIG, CAFS and VTCQ. All three companies have drifted slowly down over the last several months as has the entire Marijuana Sector. I don't know if this article will result in a pps spike for any of them but I would caution people that these are still penny stocks and as such their share price can be volatile. It may take several quarters of revenues for all of the results of MCIG's recent moves to manifest themselves in solid earnings. As is always the case, people should not invest any more money than they can afford to lose. That said, investors looking at MCIG's announcements over the past three months have been having a hard time seeing the forest from the trees, but when looking at the big picture an aggressive and coherent strategy emerges. If MCIG can successfully execute their business plan, long-term shareholders should be richly rewarded.
Editor's Note: This article covers one or more stocks 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.
Additional disclosure: I have had no communication with MCIG, VitaCig or Cafe Serendipity and the views expressed in this article are simply my own interpretation of recent initiatives by these companies. Cafe Serendipity recently changed it's symbol from FOFU to CAFS.
http://seekingalpha.com/article/3024186-a-com...0&dr=1
A Completely Transformed mCig May Be The Sleeping Giant Of The Marijuana Sector
By Les Mezei
Mar. 24, 2015 10:32 AM ET | 12 comments | About: mCig, Inc. (MCIG), Includes: CAFS, VTCQ
Disclosure: The author is long MCIG, CAFS, VTCQ, FOFU. (More...)
Summary
-New revenue sources and partnerships could make MCIG the sector's best value play for 2015.
-MCIG is no longer the vape pen company it was in December.
-Investors looking at individual announcements would have missed the big picture. Taken together, they reflect a cohesive and aggressive strategy to become the sector's largest holding company.
-Cafe Serendipity partnership provides professional marketing team, sales force, retail channel and potential entry into casino market.
-New Chill CBD oils create buzz. Market is underestimating potential for it and follow on EM-J products to generate revenue.
I first started investing in mCig (OTC: OTCQB:MCIG) over a year ago when it was just a $10 pen vaporizer company. I was attracted by the fact that it had no toxic debt, or much debt of any kind, and a seemingly shareholder friendly CEO, Paul Rozenberg, who had made a public commitment not to dilute. I was soon rewarded with the promise that I would get an equal number of shares in a spinoff company called VitaCig (OTC:VTCQ) in a deal in which Paul contributed his own personal shares to pay for the dividend. At the time, many people questioned the wisdom of spinning off a subsidiary that promised to be the biggest money generator in their product line. It didn't help that it took 8 months to complete the spinoff during which time the bloggersphere erupted with daily critiques of the deal. What we didn't know at the time, however, was that Paul had bigger things in mind for his company. In the past 3 months, with a flurry of press releases, the company has launched a strategy to transform itself into what could become the marijuana sector's largest and most successful holding company.
It started on December 29, when the company announced plans to form a new subsidiary called CannaProTech, LLC in the state of Oregon, which had just voted to legalize marijuana for recreational use. They stated it was,
For the purpose of processing and distributing cannabis and derivatives, along with future expansion into recreational retail locations. CannaProTech will also assist in the development of the mCig+ line of products, which will provide mobile vaporization in applications for the delivery of cannabis plant derivatives [CBD].
A hint of things to come was also evident in the PR.
mCig, Inc. and CannaProTech, LLC are nearing conclusive agreements with two reputable and long established Medical Marijuana growers in Oregon with large, productive organic cannabis farms. These agreements will allow for CannaProTech to directly obtain medical-grade cannabis for use in extractions, distribution, and retail sales.
This was followed by an announcement on January 5 that caught everyone by surprise. MCIG would enter the market for extraction equipment with the announcement of a new line of home extraction machines and development of a new e-liquid technology using a non-toxic thinning fluid that replaces Propylene Glycol [PG] and Vegetable Glycerin [VG] via a patent pending technique within the extraction process. Both PG and VG have come under increasing criticism as new research is suggesting that they could potentially be harmful to users of e-cigarettes. The new liquids will require pens with a newly developed processing chamber and closed looped extraction system which MCIG has dubbed the "Ultrasonic Vaporizer" and which it plans to offer on an OEM basis.
Almost unnoticed in the announcement was a statement by the CEO that he plans to enter the extraction facilities market in 2015 with "multiple targets in Colorado and elsewhere." This sent me off to Google to look up extraction machines. They can be used to extract oils from plant materials - anything from olives to coconuts as well as marijuana or tobacco. Some of these machines sell for hundreds of thousands of dollars and MCIG claims that their machines run 4 times faster than existing technologies and can process plant materials in as little as 15 minutes. While a home extractor to create your own olive or hash oil looks like it has potential, could MCIG also be looking at selling or licensing the technology for industrial grade applications?
The next announcement on January 8 seemed to come out of left field. They announced a new Technology Division headed by Richard Kreuger, a software exec with an established track record in social media and business intelligence software.
The company's technology will help growers and dispensaries become more informed about their growing operations, inventory management, and legal compliances. It will also provide insight into sales, customer buying habits, and other dispensary operations.
The significance of this announcement didn't become apparent until we absorbed some of the subsequent PRs.
On January 14, the company announced it was rolling out the Electronic Medicated Joint, EM-J, a
New pre-loaded vaporizing pen thru its Colorado-based subsidiary mCig, CBD Technologies. The unique bundled product combines the highest quality THC and CBD concentrated oils pre-loaded into a convenient, discrete vaporizing pen device, which requires no flame, and produces no smoke or odor.
Our new line of EM-J™ vaporizer pens, along with our advanced non-toxic extraction process, extraction machines, and facilities address the most pressing needs of today's medical and recreational marijuana providers. Along with our recent investment in our CannaProTech, LLC subsidiary, operating out of Oregon, we're quickly putting the pieces together to be an industry powerhouse, explained Rosenberg.
Rosenberg also points to the Company's recently launched Colorado-based subsidiary, mCig CBD Technologies, LLC as another key initiative underscoring the company's long-term commitment to extracts. The subsidiary is responsible for designing and manufacturing a new line of products that will leverage its EM-J™ technology for delivery of Cannabis plant derivatives, largely around CBD. CBD, or Cannabidiol, is an active compound in marijuana with a wide range of potential medical benefits and none of the psychoactive effects of THC.
So we now had two subsidiaries, CBD Technologies responsible for designing and manufacturing a new line of EM-J products focused on CBD and CannaPro Tech, focused on processing and distributing cannabis and derivatives. We also had new extraction equipment and facilities and new pens based on a vaporization technology that replaces PG and VG with a new non-toxic thinning fluid. It all sounded really good but none of it had so far addressed the biggest problem the company had faced over the previous 12 months, namely the lack of a distribution channel to produce significant revenue. While the company's products had all met with excellent reviews, there seemed to be little marketing expertise within the company's management. Product sales had come almost exclusively from online sales.
Then on January 20 came an announcement that would make sense of it all. MCIG announced a strategic partnership with Cafe Serendipity (OTC:CAFS), previously (OTC: FOFU), a company that was planning on franchising dispensaries and growing operations into what they expect to be the "Starbucks" of the MJ sector. The announcement resulted in a huge spike for CAFS shares but barely moved the needle on MCIG's pps. After all, CAFS had yet to open its first franchise. What the market didn't see initially was that MCIG had just bought itself a professional sales force with virtually no dilution of its shares. The terms call for an exchange of shares between the companies with MCIG receiving 10 million CAFS shares and CAFS receiving 3 million MCIG shares. The agreement allows CAFS to sell all MCIG and VitaCig products and requires that 60% of the products in their stores be supplied by MCIG with MCIG having a right of first refusal on any other products a franchisee orders. It also requires CAFS to become fully reporting and have 25 franchisees within 18 months.
Since the announcement, Cafe Serendipity has signed up 3 dispensaries which should come online this quarter and the CEO recently announced that they've now hired 20 sales reps and will have 50 by July. He's also forecasting that they should have 60 to 75 franchisees in various stages by the end of the year. Even without new stores, that many reps pushing MCIG products is bound to have an impact.
But MCIG wasn't finished yet.
On February 2, they announce their entry into the hemp oil market. Partnering with a leading hemp producer in Europe, they intend to be able to provide CBD rich hemp oil to key market segments including marketing bulk raw hemp oil to third parties and B2B, launching consumer products such as cosmetics and nutraceuticals, establishing industrial hemp farming and processing operations, and investing in innovative CBD-related retail product manufacturing companies.
Well that partially addressed the question of where the retail products for the Cafe Serendipity deal would come from. But then came another unexpected announcement. MCIG was launching a Construction Division and partnering with an established HVAC company with national experience in developing climate control systems for dispensaries and grow ops. Were they also thinking about installing commercial grade extractors? According to Paul Rosenberg,
Together with ClimaGrow, we have the benefit of industry-leading expertise that is leap years ahead of the competition.
However, they didn't intend to limit themselves to climate control. A few weeks later they hired a general contractor, Ron Sasso, to head the new division and made clear that they were preparing to offer a full range of construction related services to the marijuana industry.
Ron's extensive experience in advanced building techniques, green designs, land acquisitions, land entitlements, company start up, and procedural implementations will significantly help mCig, as well as external consulting clients, to keep up with the increasing demand for marijuana facilities as more and more states legalize marijuana. In addition, Ron's team will be responsible for providing a full-range of security related services, from security operations protocols for facilities to secure transport, and more.
According to mCig, Inc.'s CEO, Paul Rosenberg, "Sassano's approach to projects, along with the industry knowledge he brings will prove to be extremely effective for our strategic business model as we expand into both grow and dispensary centers across multiple states. We are rapidly closing on major deals in Colorado and Oregon to construct grow and extraction facilities as we implement MCIG's vision for growth."
At about this same time, MCIG's new partner, Cafe Serendipity was in the process of forming a Professional Advisory Board to consult with their new franchisees. On February 2 they appointed Petra Stark as its first member. It was an impressive first appointment as Petra's credentials in government gave us more clues to the direction of the two companies.
Ms. Starke served in the Obama Administration in the first and beginning of the second term. She was the General Counsel of the President's Council of Economic Advisers ("CEA"
. In this role, Ms. Starke dealt with virtually all policies and initiatives to revitalize U.S. economy from the financial sector, to the housing market and consumer products. Prior to this role, Ms. Starke served as the Deputy Counsel to the President of the United States of America. Ms. Starke managed the White House legal team responsible for all Presidential appointments, nominations and confirmation. Public private partnerships and enforcement of the standards of conduct at the White House and highest levels of the Executive Branch were also part of Ms. Starke's portfolio. Ms. Starke served on the 2008 Obama Presidential Transition Team. Prior to joining politics, Ms. Starke practiced law at the Washington, D.C. office of O'Melveny & Myers, LLP, where she focused on compliance, business transactions and tax. Ms. Starke has also been involved in representation of Native American tribes mostly in the tobacco industry. The full implications of this move didn't become apparent until last week when MCIG announced that they had taken a minority interest in the National Cannabis Trade Organization (NCTO - their PR mistakenly refers to it as "Native" not "National", perhaps a Freudian slip). The group was formed about a week after Petra became associated with Cafe Serendipity and CAFS immediately took a minority position in the group. It now lists NCTO as one of its companies on its website.
Most recently, the federal government has acknowledged Native American Tribal sovereignty in marijuana business. Native American Tribes can now lead the way in the United States marijuana industry. NCTO has been working with Tribes to assist in joint venture agreements to build out growing facilities on reservation lands using the most current growing technology along with providing capital funding. Cafe Serendipity Holdings, Inc. is a minority shareholder of National Cannabis Trade Organization, Inc.
Coupled with reports that the Chairman of CAFS will be attending a Native American Economic Development event on March 30, we can see a strategy developing. But to fully understand it, we have to take note of what could be MCIG's biggest announcements to date, a new CDB oil unlike anything on the market which they unveiled at an Academy Awards Celebrity Gift Suite on February 21.
The new product named CHILL! by justCBDoil.com is a revolutionary ultra-pure formula and patent-pending e-liquid that produces a maximum CBD effect unlike anything else currently available. mCig, Inc. has partnered with Just Chill Products, LLC in Melbourne, Florida to manufacture and distribute a new-to-market CBD Hemp Oil formula, initially released in prefilled tanks. Just CBD Oil's CHILL! Prefilled Tank is ready-made for the popular mCig 2.x model vaporizer device and fits any universal 510 threaded battery. Natural flavorings, larger tank sizes, and sleek new vape pens are also scheduled for upcoming release on www.justCBDoil.com.
This was followed by a real blockbuster on March 5, their initial CBD order.
mCig® Inc., a leading provider of technologies and solutions for the legal medical and recreational marijuana industry, is proud to announce a record initial CBD product order worth more than $1.2 million. mCig, Inc. also announces that it is finalizing a nationwide wholesale agreement with two large national distributors to supply these high-demand CBD products to more than 1,000 retail store locations.
mCig is capitalizing on the popularity from the new CHILL! CBD Oil Vape Tanks (www.chillcbdoil.com) to gain entry for all of mCig and VitaCig products to stores across the U.S. In addition to the 1,000 initial stores, which include smoke shops, hookah lounges, and convenience stores, another 6,000 stores through the national distributors are expected to be brought in over the next 12 months. Coupled with Café Serendipity's sales team, all mCig products including EM-J and CHILL!, and all VitaCig products, will also be introduced and distributed to thousands of dispensary locations nationwide.
The Chill product conforms to all existing US laws and because it only contains trace amounts of THC, the psychoactive ingredient in the marijuana plant, and is derived from hemp, it is 100% legal in all 50 states and over 40 countries. After the product announcement, I ordered one and tried it with some friends and family. While we all agreed that it did not produce any of the unpleasant effects of smoking a joint like paranoia or mind bending thoughts, it did produce a very noticeable relaxing and pleasant head rush. It's something like being stoned but not quite. You may feel a bit dizzy, slightly giddy and perhaps a little more talkative but you can still think pretty clearly. Moreover, one can control the dose and effect. Three tokes will typically effect most people for 30 to 60 minutes. I can easily see something like this become the recreational drug of choice for the masses. I used to smoke pot regularly in the 70's when I was younger, but got tired of wasting whole days staring at a wall as the available strains became stronger and stronger. Former tokers will find a product like CHILL CBD that can help you kick back and relax after a long stressful day to be very appealing. Several people have told me that they do not get the same effect from other CBD products so CHILL may have a unique formulation or strength. To anyone who still thinks that CBD has no effect on your brain, however, I have one simple suggestion, "Buy it and try it".
Which brings us back to our original discussion. What better place to introduce the masses to the pleasures of a THC high or a CBD rush than a marijuana cafe in a casino. I'm willing to bet (sic) that a large number of casino customers already partake in their rooms before heading to the slots. Casinos already ply their customers with alcohol to loosen them up and get rid of their inhibitions. What casino operator wouldn't jump at the chance to introduce another product to do the same. Not counting Las Vegas, Native American tribes control most of the casinos in this country. MCIG and Cafe Serendipity have positioned themselves with a definite competitive advantage to pick up a large portion of this business. They can design and construct grow ops, dispensaries and cafe's. They can outsource contracting services to local and tribal businesses and help with security. They can supply extraction and climate control equipment. They can help manage government regulations. They can franchise cafe's. They can supply the necessary software and consulting services to insure that they operate profitably and successfully. And finally, they can supply products (including both CHILL and VitaCig) that are currently legal in all 50 states that will loosen up their customers.
An Indian Casino initiatives could give this strategy a formal stamp of legitimacy and provide an entree into the Las Vegas as well as worldwide casino markets. But even without it, an impressive structure has been built by these companies that promises to produce unprecedented future revenues. Keep in mind that Cafe Serendipity expects to have 50 sales reps by this summer with a target of signing up 60 to 75 franchisees by year end. A look at the CAFS Investor Presentation shows that their business plan calls for each store to average about $2,000,000/year in revenue. Let's assume that MCIG can garner $100,000/year per store in product earnings (this doesn't include extras such as facilities construction, extraction and climate control equipment or software and consulting services). At a PE ratio of 27, that alone should add about $.01/share per store to MCIG's pps.
As I said in the beginning, this is a company with a shareholder friendly CEO with virtually no debt. Paul Rosenberg has been committed to growing the company organically by paying for most expenses out of his own equity. He virtually wiped the slate clean in December when MCIG repaid him in shares and he returned those shares to the treasury. His deal with Cafe Serendipity appears, at this juncture, to have been a brilliant move and it will only cost the company 3 million shares out of a total OS of 270 million. I don't know how much all of these new initiatives will cost, but, if the past is any indication, shareholders have little to worry about. He's set up several new divisions and subsidiaries as profit centers with qualified managers and expects each to produce revenues.
MCIG is not the same company it was in December. In the past three months, it has completely transformed itself from a pure vaporizer play to a highly diversified, horizontally integrated holding company. Several companies, like Abattis Bioceuticals (OTCQX:ATTBF), have gone the vertical integration rout. The problem with that model is it depends too heavily on sales at the top level pushing revenue to the lower levels. MCIG is hitting all aspects of the sector at the same time with all guns firing. Moreover, if their extraction equipment is truly four times faster than current technology, it could give them an edge in supplying enough CBD oils to satisfy market demand ahead of any competition. Franchising Cafe Serendipity to casinos could quickly give both brands and MCIG's products such as Chill Juice and VitaCig national exposure and legitimacy and benefit all three companies.
As I said before, I am long on MCIG, CAFS and VTCQ. All three companies have drifted slowly down over the last several months as has the entire Marijuana Sector. I don't know if this article will result in a pps spike for any of them but I would caution people that these are still penny stocks and as such their share price can be volatile. It may take several quarters of revenues for all of the results of MCIG's recent moves to manifest themselves in solid earnings. As is always the case, people should not invest any more money than they can afford to lose. That said, investors looking at MCIG's announcements over the past three months have been having a hard time seeing the forest from the trees, but when looking at the big picture an aggressive and coherent strategy emerges. If MCIG can successfully execute their business plan, long-term shareholders should be richly rewarded.
Editor's Note: This article covers one or more stocks 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.
Additional disclosure: I have had no communication with MCIG, VitaCig or Cafe Serendipity and the views expressed in this article are simply my own interpretation of recent initiatives by these companies. Cafe Serendipity recently changed it's symbol from FOFU to CAFS.
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