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Vapen MJ (VAPN.C): What if you built a weed company that actually made money?

05/31/2019

I know what you’re going through. Yet another cannabis company going public. Holy smokes, does it never end? What are we at now, 300+?

That was certainly my feeling when I walked into the offices of the folks bringing Vapen MJ (VAPN.C) public.

‘Vapes?’ I wonderd. ‘Who’s doing vapes these days?’

“We are, and we’re making a profit,” came the quick reply.

How much of a profit was laid out in financial statements today.

VAPEN MJ VENTURES REPORTS 47.8% REVENUE INCREASE, 55.8% INCREASE IN NET INCOME, FOR FIRST QUARTER OF 2019

Vapen MJ Ventures Corp. has provided its financial results for the first quarter of 2019, the period ended March 31, 2019. [..]

Vapen MJ’s gross revenues increased from US$4.4 million for the quarter ended March 31, 2018 to US$6.5 million for the quarter ended March 31, 2019, an increase quarter over quarter of US$2.1 million or 47.8%.

Now, I’m not going to toss Skittles around the room in celebration at a company increasing revenues over the course of a year. Hell, in the cannabis business, if you can’t get your revs up 50% in a year, your pulse ought to be checked.

But I can dig this:

Net Income increased for the quarter ended March 31, 2019 to US$1.7 million compared to US$1.1 million for the comparative quarter ended March 31, 2018 an increase quarter over quarter of US$0.6 million or 55.8%.

Small numbers, but important ones. Generally we don’t see the words ‘net income’ in cannabis news releases, unless they’re followed by a minus sign and red font.

The products they sell are legit. I’ve often griped that the cannabis market is so obsessed with enthusiasts that they ignore the much larger ‘regular guy’ or even seniors demographic, but check this out:

Grandma friendly.

  • Pharmaceutical-grade dosing with every puff
  • Engineered to deliver the strength and taste you want every time
  • Discreet and compact – ready for any occasion
  • 1,000 mg per cannister
  • 100 total puffs
  • 10 mg per puff

As for reach, their products are sold under license in California, Nevada, Oklahoma, and Massachusetts, as well as Jamaica, Canada, and Latin American nations.

Naysayers will point to the small nature of the numbers and suggest there’s no future in a long slow crawl upward, even if its a profitable crawl. We’re in a land rush, after all, and companies are borrowing money to buy things to stay competitive.

But Vapen’s go-public investor deck pointed to CAD$20 million in 2017 revenues, $24 million in 2018, and EBITDA in 2018 of $8.4 million, so it’s not bleeding out in ways companies like Medmen (MMEN.C) are.

Vapen doesn’t need to borrow money to buy things.

Working capital as at March 31, 2019 was reported at US$16.5 million

And then?

On May 22, 2019, Vapen MJ closed an oversubscribed private placement, raising a total of CAD$6.1 million, resulting in the issuance of 6,148,665 common shares. The funds will be utilized for equipment, business development, and general working capital purposes.

Christ on a bike, that’s a lot of walking around money, especially when it doesn’t need to be used to cover quarterly losses.

As a base, Vapen calls Arizona home, and that’s where they’re cultivating,m extracting, infusing edibles, wholesaling to the majority of AZ dispensaries to the point where they’re considered the largest in the state, and operating a retail dispensary in Herbal Wellness Center.

“ERMAGHERD! IT’S LIKE AN APPLE STORE!”

Arizona came a little later than Canada to the cannabis party, but it’s come strong in the time since. Unlike the situation in Canada, marketing in the Grand Canyon State is not forbidden, and in fact it appears to be welcomed if this is anything to go by.

Health Canada would be having heaving convulsions behind the couch if this sort of thing happened in Montreal.

To be sure, the story is barely out just yet on Vapen, so don’t go buying stock expecting that it’s in full swing promo phase. It’s not. In fact, though the stock is lifting nicely, the volume on it has been threadbare. That’s a good sign for the future, should it catch a wave of popular opinion.

I bought some of this at its last raise, so I’m obviously conflicted, but I bought in because I heard the words ‘profitable’ and ‘cash’ and had to go look up what they meant because nobody in the cannabis industry speaks of them.

Watchlist.

— Chris Parry 

FULL DISCLOSURE: The author owns stock in Vapen. The company is not an Equity.Guru marketing client.

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