General Investment

Convertible Preferrred Shares View More

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Investing or trading shares on the open market usually requires certain principles and methodologies, yet the cannabis sector doesn’t always seem to adhere to them, especially when viewing its market activity.

Cannabis stocks have outside pressures that most industries don’t, creating uncertainty about growth, expansion and longevity. The OTC market, where most cannabis stocks trade, only adds doubt. While learning the basic investment rules is important, it helps to concentrate on practices where cannabis is particularly vulnerable.

These companies may have to deal with riskier, or at best, less desirable financing arrangements because of these outside pressures, namely banking and legalization. When most new companies are forming, they pursue financing through various traditional venues, but new disruptive and “semi-legal” ones may find it much more difficult to raise money. One of the financing arrangements they often have to resort to is offering convertible preferred shares.

These convertible preferred shares are fixed-income securities where an accredited investor can choose to earn a fixed dividend rate from the company. They can also convert those shares into multiple shares of the company’s common stock after a predetermined time span or on a specific date, hopefully when the share price has increased. The option to convert these securities into common stock gives the investor the opportunity to gain from a rise in the share price at that time.

This is calculated with a conversion ratio which represents the number of common shares to be received. The original price of the preferred shares is divided by the decided conversion rate. If the preferred convertible shares are offered at $10 per share with a conversion rate of six common shares for each preferred share, the value of each common share would be $1.67.  This number is the minimum share price for the investor to break even, or if it increases, to profit. If the share value increases to $2.50 for example, the investor can convert and earn 50%.

But converting preferred shares into common shares creates an increase in the share count and dilutes the value for common shareholders. If a company is profitable, it may buy back the preferred shares leaving the share count undiluted and preserving the share value; unfortunately, that is usually not the case in the cannabis sector.

Although owners of preferred shares may sometimes remain with the fixed dividend instead of converting, they may decide to convert if the company is not doing well; however, they also have other preferential arrangements that can have repercussions that affect the individual common shareholder buying on the open market. They will receive dividends, if any, first and before regular individual investors will. They will also be able to profit from the company if it declares bankruptcy by receiving percentages of sales of assets, something not guaranteed to the common shareholder.

It isn’t that these practices are so horrible or unethical but it means that they are hard to discover until after they happen because of the OTC status of cannabis stocks. The lack of transparency makes it difficult to discover these financial arrangements; plus, these transactions can affect the share price for companies smaller in size. These conversions appear in the charts so investors might suddenly see dramatic changes in the price, usually down, with share price reflecting the cashing in of old debt and not company performance. Growth in share count is not bad when the company is growing, but using it to pay off old debt only dilutes the value of the shares when a company isn’t growing.

This is not necessarily a bad practice should the company progress and profit, but impatience from investors or decline in value through product flaws could cause these investors to convert and this can put even more financial stress on the company. This can also create a downward spiral of share value while increasing the share count, if investors continue to convert. If the chart shows a severe drop in price within a single day or less, it would be prudent to do some research. If information is not available, it would be wise to wait until you learn more, perhaps from an SEC filing.

Learning the basics may not guarantee you will profit from a company in this sector, but understanding a company’s vulnerability will help you focus on the important details and minimize your losses.

Health Canada View More

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Given the thousands of Health Canada applications filed by companies wanting to legitimize their medical marijuana grow operations in Canada and on the OTC: how did the current six publicly traded Canadian government approved cannabis grow-ops get into the OTC market quicker than others? Does a back door process exist, or a minimum monetary requirement for an initial licensed producer application?

To understand Canadian location discrepancies of regulated versus unregulated OTC pot stocks, look at the global market movement of the herbal product and its financing, not just in Canada, but in surrounding regions. Latteno Foods (OTC: LATF) had its company address listed online as Colorado, but changed it to Canada when Canadian regulations shifted in 2015, perhaps due to a newly dominated liberal government leaning toward recreational legalization.

As a potential investor, you may want to know how LATF got listed in Canada on major online stock trading sites based in America, versus a Canadian-approved company, like Organigram (OTCQB: OGRMF) (TSXV: OGI), the only fully organic licensed Canadian producer and OTC-approved federally banked pot stock allowed to grow and distribute marijuana in Canada.

“There is a plan to run and grow the business, and that might differentiate us from others that are basically stock promoters or benefitting from the retail investment interest in marijuana,” said Denis Arsenault, CEO of Organigram Inc., out of New Brunswick Province, one of Health Canada’s newest MMPR licensed grow-ops.

Arsenault explained,

You have to understand the motivation of governments when they affect public policy. In this case it’s to collect taxes. Let’s not confuse ourselves why the policy is going in the direction that it’s going. So we’re very comfortable that the existing framework will be in place and we would speculate or presume that there will be more licenses given out because currently the licensed producers could not possibly supply the market that’s coming with recreational legalization. We don’t anticipate being able to sell product recreationally for probably another 12 to 18 months. And obviously in the interim, we will continue to add production capacity to our facility in order to have a much higher volume permitted out of the gate. Even though it’s marijuana, and it’s going to be a very large industry, investors need to focus on the management of the company. We could be making lights or telephones, it really doesn’t matter. At the end of the day, we happen to be producing marijuana. But as an investor you need to focus on who’s going to have the ability to take their current facilities, which are all facilities that could maybe produce 10 million dollars, and who’s got the capability management wise to increase this capacity and grow their business to sell for a couple hundred million dollars a year. That takes management.

In contrast to Organigram, Latteno Foods claims to invest in cannabis edibles and erectile dysfunction pills as a focal point of the company’s projected growth. So how does the Canadian address approval process differ for OTC companies like OGRMF in Canada versus companies like LATF with apparent operations in Colorado, Canada and Central America, according to multiple websites and addresses listed for the LATF stock?

No readily available way exists to order edible cannabis in Canada on Latteno’s website or phone. Attempts to contact the company via email and phone proved unsuccessful, and the stock has deluged into ranges of <.001 centavos during the day, and <.000001 pennies/share in after-hours trading for long-term periods. LATF hasn’t issued press in months, which may weary investors feeling limp about buying unregulated erection pills and edibles operating in the shadows of OTC’s cash-only pot-stocks of Canada and Colorado.

As happened with Nixon’s cannabis war, LATF may have permanent limp dick on the OTC. But for all we know LATF penile pill underground transactions are blazing, perhaps providing the best edibles to people round the world, maybe even back and forth between Canada and U.S. But when a company like LATF does not answer its phone or emails to provide said erectile dysfunction pills and brownies, you should speculate as to who deals and produces its product, if any product pusher exists at all.

Such is life in the revolutionary pot-stock world and the black markets that exist in part due to current government regulations and systems of collecting high tax percentages on an address-by-address basis, thereby pushing up the legal cannabis price while untaxed black market cannabis often remains cheaper and just as potent, on or off the OTC. According to VICE, as of Oct. 17, 2015, “black-market growers and grey-market marijuana dispensaries are more prevalent than ever.”

One does not have to look too far into Canada to see that even with legalization promises on the horizon, Canadian activists, like Marc Emery of Cannabis Culture magazine in British Columbia, recently released from years in prison for marijuana-related charges, do not agree with the planned system of controlled cannabis cultivation, distribution, regulation and taxation proposed by federal governments that deny rights of outdoor farmers and individuals from propagating their favorite crop.

According to a recent column on Straight.com by Mark Emery, the “Prince of Pot” in Canada,

Legal marijuana won’t need security. Legal marijuana is subject to PST and GST, any other tax would be punitive and prejudicial and immoral. There is virtually no social cost to legalization unlike that of prohibition—the policy of right now—which is incalculably damaging to civil rights, privacy, the price of consumption, dignity, national and local police budgets, families, assets, livelihoods, and our reputation as individuals who use a substance the government has demonized and punished for 50 years. Yet government officials in Vancouver want to ban cannabis edibles from marijuana shops; wipe out cannabis culture lounges; severely restrict the number of cannabis shops; and apply ridiculous and unmerited restrictions to essentially put 90 percent of the current dispensaries out of business, despite that the marijuana consumer market is made up of intelligent, thinking adults who know what they want and who they want to get it from.

In line with Emery’s argument, a 2013 report from the Liberal Party in Canada stated: “To be successful and prevent organized crime from maintaining a black market, the price of legal marijuana must be lower than it is now. At the same time, the product’s quality must be at least as good—if not better.”

The real question lies in how unregulated OTC cannabis companies listed in the U.S., Canada and other prohibited nations still function in the black market cash system, and how do tax and control systems of marijuana distribution by federal governments tie in to the much larger chaos of recreational marijuana sales potential for Canada’s proposed controlled legalization system?

Further, how do OTC cash-only cannabis companies in and out of Canada transfer money and where in the world does it go? Because when paying taxes, the following are some of the most important details: the operation’s location, mailing address, place of business, PO Box, etc., due to distinctive regulations across multiple nations, states and provinces regarding a marijuana establishment’s official operating address, addressee, and/or addresses. More important: how do governments benefit by black market cash-only cannabis systems that control who grows what, how much, and where it gets sold? Look, we all know large amounts of “illegal” cannabis cross American and Canadian borders, and historically have for decades, e.g., “Kid Cannabis,” creating billions of dollars in untaxed cash income for many nonviolent and violent individuals.

The infinite possibilities of where seeds, weeds and cash from hash can go in a state-by-state or province-by-province mapped out zoning approach to marijuana approval of dispensaries and OTC pot stocks with multiple addresses across multiple trading platforms and wire transfer systems via multiple nations may have made a more powerful system for the cash-only black market to launder its money from quasi-legal weed shops running on multiple types of currency, bitcoin and online stock trading regulations.

Until the U.S. opens up the banking system like Canada has done for federally approved OTC cannabis stocks, almost the entire cash trading of pot stocks on the OTC rise and fall on speculation, and for many like the millionaire Mr. Wonderful on ABC’s “Shark Tank,” investing in marijuana remains beyond risky pending the U.S. Treasury opening up banks for business.

So until the “Man” comes to town, you never know what the Man may throw down.

And yes, if the governments of developed nations continue to require limited indoor grows using lights, air conditioners and high taxes—as developing nations legalize unlimited outdoor propagation of cannabis on cheaper land with cheaper labor via sun and start regulating cannabis like other crops, permitting importing and exporting similar to hops, corn, sugarcane, etc.— then the black market will thrive in places like the U.S. and Canada as cheaper, yet just as potent, cannabis enters the streets at a more affordable price from tropical locales, thereby altering the demand for weed from approved and more expensive regulated dealers, with both sides equal in capacity to produce top quality flowers.

Walls will fall as the Man stands tall. Standing high while governments sow and stall; Mon frère, the royal seed wars call.

CSE View More

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On Jan. 19, 2016, the Canadian Securities Exchange notified all CSE listed companies of its partnership with MJIC Media to offer a discount on tickets and exhibition space for the Marijuana Investor Summit & Business Expo in San Francisco, March 3-5, 2016.

The Marijuana Investor Summit & Business Expo is a meeting hub for industry decision makers, including cannabis business owners and managers, fledgling business owners seeking capital, investors and service providers.

“We’re very excited to be working with the CSE at this critical stage of development for the international cannabis community. The Canadian markets offer unique opportunities for investors that may be understandably wary of the OTC,” said Chris Gromek, COO of MJIC Media.

Canadian public markets are a good place for investors to explore right now, with Justin Trudeau as Prime Minister of Canada, decreased legislative risk, a federal medical marijuana program and rapidly evolving cannabis-related public companies.

With the CSE acting as a resource for investors looking to investigate foreign markets, the exchange’s rules and regulations provide an additional sense of security. More than 25 cannabis-related companies are currently listed on the CSE.

CSE listed companies interested in attending and exhibiting at the Marijuana Investor Summit can reach out to [email protected] or through the event website, www.MarijuanaInvestorSummit.com.

Portland Social Advert 1 View More

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Join us, Feb. 2, 2016, in Portland, Oregon, for a marijuana investor and entrepreneur forum hosted by the Marijuana Investor Summit and Signal Bay Inc., in association with the Cannabis Collaborative Conference.

Many investors and entrepreneurs worry that they have somehow “missed the boat” for cannabis, and that couldn’t be further from the truth. The industry remains ripe for innovative and talented individuals to stake their claim and start building their cannabis empire.

We’ve brought together local and national experts, industry executives, and investment professionals to give you a best-in-class educational experience at an unbeatable price of just $99.

Learn how to structure your business for investment, which licenses to look at, and find out what to watch out for from business owners who have successfully blazed the trail.

Sessions start at 10 a.m. at the Portland Expo Center.

Check out the Agenda here and Register now through the CCC website here!

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On Nov. 13, 2015, Justin Trudeau, the new Prime Minister of Canada, sent a mandate letter to the nation’s Minister of Justice, Jody Wilson Raybould, with the following instructions: “Working with the Ministers of Public Safety and Emergency Preparedness and Health, create a federal-provincial-territorial process that will lead to the legalization and regulation of recreational marijuana.”

Trudeau’s letter represents one of the most historic global stances to begin the first federally legal recreational marijuana operations in North America listed on the OTC stock market.

However, a key question lingers in such a restricted market: will operating costs of OTC Canadian marijuana operations remain at indoor registered light and AC-fueled addresses, or focus on distribution of clones and seeds to farmers, similar to another plant with relations to a prohibitive past in the Cannabaceae family, Humulus lupulus L., better known as hops?

Could you imagine if a website like Weedmaps.com, previously listed on the OTC when owned by General Cannabis Incorporated, which has made millions of dollars by providing an address listing service for marijuana stores starting at $295 per month and a menu review website for marijuana products, was called Hopsmaps.com? Now try and imagine if Hopsmaps.com charged a hops vendor $300.00 a month to list its address for clients to locate places to find and review hops strains. You probably can’t envision this absurd scenario because people know they can find beer made from hops at most stores everywhere in Canada and the U.S., eh.

Now, in the new corporate world of marijuana lobbying and regulation, certain players have an interest in keeping the OTC pot-stocks industry segmented, taxed, regulated and controlled in an indoor environment to benefit the many sectors of the business that have popped up around the plant: computer security, smartphone applications, hydroponics, nursery operations, HVAC, lights, fertilizers, lab testing, edibles, oils, tinctures, capsules, drinks, etc.

In the principal phases of alcohol prohibition in the early 20th century, the U.S. gave medicinal whiskey permits to pharmacies, including Walgreens, to prescribe whiskey as medicine, thereby providing a foot in the door to controlled initial profiteering for specific companies and individuals to sprint ahead of the pack and dominate sections of the liquor market. Perhaps, when and if the time arrives that industrial scale operations of marijuana and hemp start, the companies with initial leads in the industry could become the Budweisers and Marlboros of U.S. and Canadian recreational marijuana followed by an evolution into more conglomerated operations like Unilever.

How do government plans and cash-only OTC pot stocks bought and sold internationally interact to affect the black market while fewer than 10 North American federally approved marijuana grow-ops exist on the OTC markets, nowhere near supplying the real recreational or medical underground demand?

That’s right: six Canadian government approved medically operated pot stocks legally allowed to run their grow-op money thru federal banks exist on the OTC (TWMJF, OGRMF, TBQBF, ACBFF, APHQF, MQTRF) and at any given moment, stand to become the first North or South American federally legal recreational marijuana grow operations listed on the OTC, perhaps creating in the industry a hemispherical shift.

Other Canadian government approved oil and research pot stocks exist on the OTC, also with permits from Health Canada—the medical marijuana production health approval arm of the Canadian government run by Dr. Jane Philpott, Minister of Health. However, more pot stocks than not exist on the OTC with their addresses of operation listed in Canada unapproved by Health Canada’s regulatory system.

To understand who controls the marijuana use regulation in Canada, look no further than Health Canada, in charge of granting Canadians access to marijuana for medical use under a strict set of regulations for patients and producers, detailed in Marihuana for Medical Purposes Regulations. Marijuana remains a controlled substance in Canada, and the possession and/or production of marijuana is illegal outside the purview of the MMPR. According to the MMPR, only Health Canada can legally supply marijuana seeds and dried marijuana to persons authorized to possess and/or licensed to produce marijuana for medical purposes.

Individuals authorized to possess or produce medical marijuana under the Marijuana Medical Access Regulations should note that Health Canada has transitioned from the MMAR to the MMPR. Under the MMPR, all marijuana possessed or produced under the MMAR Authorization to Possess and/or Personal-Use or Designated-Person Production license should have been destroyed by March 31, 2014, and all production of marijuana in homes should have ceased by April 1, 2014. Furthermore, as of April 1, 2014, individuals cannot use an ATP license issued under the MMAR as proof of authority to possess medical marijuana. Under the MMPR, Canadian citizens can only legally access medical marijuana through licensed producers, including the six mentioned earlier. According to Health Canada, the maximum amount of medical marijuana that authorized individuals can possess at any given time is 30 times their daily amount as indicated by their licensed Health Care Practitioner, to a maximum of 150 grams.

“All applications to produce marijuana for medical purposes undergo the same strict and rigorous review. When an application is received it undergoes an initial screening to ensure that it is complete. Complete applications undergo a more in depth screening on key elements of the MMPR,” said Sean Upton, Senior Media Relations Officer for Health Canada. “The application is thoroughly reviewed to ensure compliance with all the requirements of the MMPR. This includes but is not limited to security measures, good production practices, packaging, labelling, shipping, and record keeping. A pre-license inspection occurs once the physical site is ready and the results of the security clearance checks have been received.”

Therefore, Health Canada now controls, and licenses 27 marijuana producers in Canada while prohibiting people from growing marijuana at their homes. Legally, Health Canada has nothing to do with the OTC approval process of pot stocks from Canada. Furthermore, under the Canadian MMPR, individuals who access marijuana for medical purposes cannot let others use their marijuana, grow marijuana, import or export any marijuana or marijuana seeds to or from Canada, or produce derivatives of marijuana such as hashish, hash oil, resin, etc. Given the recent U.S. Congress approval to deny U.S. Drug Enforcement Administration raids in states with legal medical marijuana operations for which growers can attain seeds, make their own products, and attain plants from sources other than the federal government, the Canadian marijuana guidelines under the new Prime Minister may seem more conservative than drug policy in the U.S.