- Positions CDB Small Cap with Unrivaled Share Structure and Cash to Accelerate Global Agreements and Brand Development
In an explosive market sector such as medicinal cannabis, new entrants to the capital markets hit the ground running in a bid to capture the imagination of investors. Few companies have sprinted from the starting gun harder and faster than Vancouver-based Phivida (C.VIDA), offering cannabidiol (“CBD") infused functional foods, beverages and clinical products. As recent as December 18, 2018, Phivida completed a $5.7 million IPO with 14,375,000 units priced at $0.40 with half warrant priced at $0.75. Since then the company has traded an average daily volume of over 2,000,000 shares and has recently settled in the $1.50 range on the Canadian Securities Exchange. On February 24, after the company’s share price well-exceeded 20 trading days over $1.00, Phivida announced the conversion of 3,858,627 million warrants exercisable at $0.75 per share. Combined with already-exercised warrants (and assuming all remaining warrants are exercised) this brings in additional gross proceeds of $5.4 million to the treasury without breaking a sweat.
The good news for shareholders, is that through the warrant conversion they have an opportunity to maintain their pro-rata position at a lower risk level, by converting and holding.
The effect of this conversion is a company with about $11 million in cash—effectively doubling Phivida position in only 24 trading days—and an enviable share structure that now consists of only 47 million shares (post warrant exercise) and a market cap that has already surpassed $70 million. Phivida’s $11 million cash position, on its own, equates to about $0.23 cash per share.
By comparison, on the same day as Phivida’s warrant conversion, Isodiol International (C.ISOL) a “leader in the manufacturing and development of phytoceutical consumer products,” closed at $1.24 on January 24, and has 299 million shares outstanding for a market cap of $370 million. Isodiol reported approximately $3.7 million in cash and receivables in its quarter ending September 30 last year and closed $30.1 million on December 27. Assuming all-in and no burn, you have $33.8 or $0.11 cash per share.
Lexaria Bioscience (C.LXX), which “promotes healthier ingestion methods,” closed January 24 at $1.98 with 70.9 million shares out and US $2.2 million in cash at quarter-end November 30, 2017 (with no subsequent financing). Along with the exercise of about U$450,000 in warrants since November, factoring all-in equates to about CAD $3.25 million or CAD $0.045 per share.
ICC Labs Inc. (V.ICC) an “integrated company dedicated to the production of CBD extract in South America,” has 137.6 million shares outstanding and closed at $1.45. ICC Labs reported $2.1 million in cash and equivalents, along with $1.7 million in other receivables at the end of the same period. In November ICC Labs closed a $23-million bought deal, so all told about $26.7 million (assuming no spend since November), or $0.194 cash per share.
So why the frenzied market interest in C.VIDA? Perhaps because it mirrors Phivida’s core strategy, which, first and foremost, is to rapidly lock in its product manufacturing and distribution agreements upfront, initially focused in the US, while building an unforgettable brand. The market potential is staggering by any measure. The overall Natural Health Product market has grown by over 66% in the past decade, and is expected to scale from a $675B market, to over $1T – that’s “trillion” – USD by 2017. If we narrow it down more specifically, a recent CBD sector report estimated the US market for hemp-derived CBD is growing at a pace of 55% per year and is on pace to reach $1 billion by 2020. It is in this space where Phivida plays especially hard, and is acutely focused here it it’s infancy.
“When it comes to cannabidiol infused functional foods, beverages and clinical formulas we are insistent on establishing THE recognized brand,” says Phivida President and CEO John-David Belfontaine. “It’s really the same strategy that other wildly successful brands undertook at their incubation; names like Netflix, Red Bull, BitCoin and closer to home, TWEED is achieving this on the recreational marijuana (THC) space, or HIVE in the Canadian blockchain sector. That takes an upfront investment and commitment to prolific marketing. That is why we’re so encouraged by the how the capital markets are responding to our core business plan. At the end of the day investors want to see an increase in underlying value, but that value is too often undermined by excessive dilution. We feel we’ve established a foundation for a growth model that is beneficial to the shareholder, not just the company.”
Phivia is rapidly developing CBD infused products under three banners: 1. Organics: professional grade, wholesale whole plant hemp oil extracts; 2. Nutrition: iced tea, vitamin juice and shakes; and 3. Enhanced: tinctures and vitamin shots. In the US, Phivida has already secured a distribution agreement in California and a brand licensing agreement in Oregon with an eye on more agreement to come from Washington and Colorado. Internationally, Phivida recently named Namaste as its preferred global online retailer, initially focused on the German and Australian territories. The company also secured a product distribution agreement with Asayake Inc. to sell its cannabidiol products across Japan. At this pace, and with plenty of fuel in the tank, investors can look forward to more agreements from Phivida in the weeks, months, and years to come.
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