Stock Insight: Cannabis Sativa, Inc.

Cannabis Sativa, Inc. (OTCQB: CBDS) has unveiled a line of cannabis-infused lozenges in Washington. This product is an opportunity for investors to borrow some inspiration from Tootsie and pose a new question to the cannabis confectionary world. How many lozenges will Cannabis Sativa, Inc., need to sell to merit its market cap of $117MM?

Cannabis Sativa’s stock has seen triple digit percentage gains (+969%) over the first three quarters of 2014, and the company nabbed a spot on Forbes’s “8 Hottest Publicly Traded Marijuana Companies.” Most of this trading volume can be credited to its frequency in the press for recruiting Gary Johnson, a celebrity CEO, Libertarian party leader and former governor of New Mexico.

The company is collaborating with Washington-based edibles producer, Baked Botanicals, to produce and distribute these lozenges. But due to Washington regulations regarding the packaging/marketing of edibles, Cannabis Sativa may not even be able to rely on its corporate branding campaign—centered around the slogan “products of higher consciousness”—to compete with the myriad of infused candies already being sold in the state. According to Stesha Ries, owner of Baked Botanicals, the two companies are working together to tweak the product’s branding to accommodate Washington’s legal regulations.

Cannabis Sativa’s name makes it seem as if the company has always been geared towards the green rush, but up until now, the company has actually been selling herbal skin care products—lotions and lip balms—under its subsidiary, Wild Earth Naturals. So perhaps it is not surprising its financial statements don’t exactly resemble a public company with a $117MM market cap. Here are the numbers the company released in its latest 10Q:

  •      Cash and cash equivalents: $40,885
  •      Last 3 Month Revenue: $1,114
  •      Total Current Assets: $60,971
  •      Total Current Liabilities: $1,502,638
  •      Quarterly Net Loss: ($216,040)

Given that Cannabis Sativa has immaterial revenue from its other operations, the company is going to need to sell several million lozenges to even come close to meriting its inflated market cap.

Is this doable? Infused products are not exactly revolutionary—they already make up 21 percent of total sales in Colorado, according to ArcView Market Research estimates. The commercial for the Hi lozenge—a 50 second video of two girls dancing in a field—reveals little information regarding how this lozenge differs from the hundreds of candies and edibles already being sold in Colorado and Washington. The company looks like it is going to face further obstacles, now that it may not be able to rely on its overarching corporate branding in certain states.

CEO Gary Johnson has been quoted saying his company might be the “Microsoft of Cannabis,” but Cannabis Sativa’s revenue and product line do not really back up that claim. Tread with caution when investing in cannabis stock. The public cannabis companies with the sexiest tickers are usually the best ones to avoid.

Emily Fata is a financial analyst, writer and consultant focused on the cannabis industry. She builds financial models and writes business plans for cannabis cultivation/manufacturing companies, dispensaries and ancillary businesses. Emily has assisted a number of companies in Colorado, Washington, Nevada and Illinois raise capital and successfully apply for state cultivation and dispensary licenses. She began her career as an analyst at a private equity firm in New York City. Emily graduated magna cum laude from New York University with a concentration in International Relations and Economics. She lives in Denver. You can follow her on Twitter @EmPatriceFata.

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