Chemesis (CSI.C) Q1, 2020 cannabis revenue up 279% – official “survivor” status?

December 3, 2019

On January 10, 2018 (almost two years ago), the Canadian Marijuana Index peaked just north of a 1,000.

At that time, the valuation of almost every cannabis company looked rich.

Today, the Canadian Marijuana Index is at 212 (down 80%).

These days, the pom-poms are locked firmly in a drawer, but it is worth pointing out that weed is a thing.

By that we mean – it’s not BananaCoin.

Or Car Lashes.

Or Toilet Golf.

It’s easy for investors to get swept up by euphoria, or crushed by gloom.

“The value of the global cannabis market is set to soar to new heights, as more countries and American states legalize the drug,” stated Bloomberg.

Global legal spending on cannabis is forecast to be USD $40.6 billion in 2024, nearly 300% higher than the USD $14.9 billion estimated to be spent this year, according to Arcview Market Research.

“While much of that growth is expected to be led by North America, which accounts for nearly 90% of all spending, other markets such as Europe and Asia are expected to end cannabis prohibition with a focus on liberalizing medical markets,” continued Bloomberg.

“Countries are realizing that people are using cannabis anyways. They can either tax it and regulate it or they can do nothing,” stated one analyst, “That realization is set to spread globally and won’t take that long to see cannabis prohibition unravel.”

Some of these beaten down weed companies are starting to look cheap.

Chemesis International (CSI.C) is a case in point.

CSI has 4 main branches of operation:

  • Cultivation:  Hemp cultivation in Michigan, grow facility in Puerto Rico with 30,000+ lb overall grow capacity. Grow opportunities currently under review in California. Also, a 1,000-acre Colombian grow facility in development.
  • Manufacturing: extractions, formulations and products, specializing in BHO, alcohol and CO2 extraction with the current capacity of over 2,000 lbs of raw material a day.
  • Distribution: With new regulations impacting the California market, Desert Zen has emerged as a fully compliant first mover. In the Puerto Rico market, CSI serves the entire island from seed to sale.
    Retail: Chemesis distributes and transports and third-party brands to over 600 dispensaries in California and Puerto Rico.

Equity Guru has developed a reliable (not infallible) Spidey-sense about the ability of a CEO to lead a team, to build a company.

You can make your own judgement, but in this May, 2019 podcast Edgar Montero, the CEO of Chemesis, spoke with Equity.Guru’s Guy Bennett about how CSI cross-pollinates innovation between its international operations.

Last week, CSI released financials, and they were not embarrassing.

Damning with faint praise?

Not really.

Q1, 2020 Financial & Operational Highlights:

  • Revenue of $4.7 million – up 279% from a year earlier
  • Gross profits excluding the fair value increase in biological assets was $1.8 million
  • Excluding the unrealized loss on our investment in GSRX, EBITDA is positive at $107,568.
  • Purchased a majority  interest in GSRX Industries; assets include dispensaries in Puerto Rico, and a fully licensed cannabis manufacturing facility in Northern California.
  • Agreement to purchase three dispensaries in Puerto Rico, currently awaiting regulatory approval.
  • Began to develop, process, package, and distribute tobacco-free smokeless cannabis chew.
  • Chemesis announced a partnership with Happy Tea, along with a $4 million USD minimum purchase order to manufacture & distribute Happy Tea
  • A $6 million USD annual minimum purchase order with PR ONE for dry flower & cannabis infused goods.
  • Chemesis to manufacture, distribute, and retail Hemp Cigarettes across the United States & International markets.
  • Chemesis secures Hemp Biomass supply agreement that will be processed, extracted and manufactured for use within Chemesis’ finished goods portfolio.

“CSI is integrating assets acquired during fiscal Q1, 2020,” stated Montero. “Chemesis will continue to leverage the addition of dispensaries, partnerships, brands, and a team with extensive retail experience to further expand and create more efficient operations.”

On December 3, 2019 CSI’s 100% owned subsidiary, La Finca announced that it is on track to complete its agronomic evaluation, which is a milestone on the path to registering CSI’s genetics as intellectual property.

Leveraging genetics, La Finca believes it can build a stable revenue stream as a global seed supplier.

La Finca is working with local indigenous farming communities in Colombia to provide education, technical advice and a crop purchasing program.

In addition, La Finca is building its seed stock through cultivation.  The company anticipates the harvest of over 5,000 kilograms of biomass within the next 90 days.

“La Finca has made incredible progress in a very short amount of time,” stated Montero. “We believe La Finca will be a leader in cannabis cultivation, manufacturing and retail in Colombia.”

Chemesis remains in a stable financial position with access to $32 million in drawdown equity facilities.

Within the carnage of the cannabis investment sector, CSI is looking like a survivor.

CSI is up 8% today to .20 on 506,000 shares traded.

– Lukas Kane

Full Disclosure: Chemesis is an Equity Guru marketing client.

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