Lifestyle Delivery Systems (LDS.C) is a vertically integrated weed company with an isogenic pollination nursery and state-of-the-art production facility in California, producing cannabis-infused strips (similar to breath strips).
On July 17, 2018, Lifestyle Delivery Systems announced that its “affiliate”, CSPA Group has received over $200,000 in revenue “during the last week of June 2018”.
“The revenue was associated with sales of extracted distillate in the last week of June 2018 marking the beginning of white label distillate production,” stated the press release, “The Company has redesigned all of its packaging for Rêveur and CannaStrips to meet the latest California regulations which went into effect on July 1, 2018.”
There’s plenty to like about this news.
LDS is barely out of the gate (as a commercial producer) and generating useful cash flow. As one analyst pointed out, “It proves the machines are working”.
Quarterly financials are anticipated in mid August and that will be even more revealing.
On November 14, 2017, we drove two hours east of Los Angles to a tiny desert town (pop. 30,000) called Adelanto –and toured the LDS California facility.
We peppered the CEO, Brad Eckenweiler with questions: What is an Isogenic strain? How do you track inventory? What is your Cannastrip Production Capacity? What is the margin on each strip? What are your projected Q4, 2018 sales? Etc.
Eckenweiler knocked it out of the park.
You can verify that by following our camera through the factory.
On October 18, 2016, LDS made the first public mention of CSPA, stating that the two companies had entered into a “Joint Venture (JV) to establish operations within an existing building that currently has a manufacturing permit to extract and produce medicinal cannabinoid products in Adelanto, California.”
CSPA recently launched Rêveur, “a new luxury brand of cannabis products for the California market.”
The CSPA Group has been test marketing the luxury product line in selected retail stores in California. LDS produced 15,000 grams of Rêveur Live Resin products in February. The launch is happening now, with “deliveries to strategically targeted retailers throughout California.”
“The new packaging for Rêveur arrived on July 10, 2018,” stated the July 17, 2018 press release, “and CSPA estimates that repackaging of the inventory will be completed by July 18, 2018. The new CannaStrips packaging is scheduled to arrive during the last week of July 2018 at which time the production of CannaStrips with their new flavours and advanced formulae will begin.”
After digging around on the world-wide-web, we unearthed a 14-month old CSE filing that shed some light on the financial agreement between LDS and CSPA.
“Revenues over operating expenses”
“Reimbursed for such costs”.
Creating affiliates to execute multiple strands of a single business plan – is normal practice.
But the equity stake, or revenue split with the affiliate is usually pushed to the foreground.
That’s why you so often see the phrase, our “100% owned affiliate” – to make it clear that it’s a structural or bookkeeping strategy to gain a tax/permitting/licence/patent-protection advantage.
It is unclear how from the LDS website how the revenues are going to be divided with the affiliate.
On Thursday, LDS informed Equity Guru that revenue split is LDS (75%) and CSPA (25%).
Full Disclosure: LDS is an Equity Guru marketing client, and we own stock.