Financial Performance Executive Summary
North American Cannabis Holdings’ (“USMJ”) fiscal year end is June 30th. USMJ just released its third quarter financial report for the period ending March 31, 2017. Management is pleased to report year-to-date sales for the three quarters ending March 31, 2017 of $530,000. The revenue for the first three quarters of 2017 exceeds the total revenue of $515,000 reported for the entire year of 2016. The 2017 year-to-date gross profit of $292,000 also exceeds the total gross profit of $276,000 for the entire year of 2016. The revenue for the first three quarters of 2017 is up 40% over the revenue for the first three quarters of 2016. The 2017 third quarter revenue of $205,000 is up 41% over the 2016 third quarter revenue of $145,000. The 2017 third quarter gross profit of $117,000 is up 53% over the 2016 third quarter gross profit of $41,000. Notably, USMJ posted its first profit since entering the cannabis sector in 2013. The profit of $7,000 is small, but nevertheless a substantial milestone lending credibility to the Company’s long-term viability.
The balance sheet also continues to improve with overall liabilities reduced by $1 million from $3.5 million at the end of the third quarter in 2016 to $2.5 million at the end of the third quarter in 2017.
Get – Paid – To - Learn
Management anticipates rapid organic revenue growth to continue. The Company has practiced a get-paid-to-learn approach to introducing new cannabis sector products and services:
“We identify new enterprise opportunities within the cannabis sector, and we act fast to implement them the best we can rather than loosing early mover market share by spending too much time on a research and planning exercise that probably far exceeds any prudent preparation requirement necessary to launch a pilot sized enterprise,” said USMJ CEO Steven Rash. “If you idle a car in your driveway to warm it up so that it will perform with better efficiency when you drive, you’re getting zero miles to the gallon. You maximize inefficiency in the name of efficiency. Its smarter to take it easy on your car while it warms up, but to go ahead and get some miles down the road. USMJ has jumped into a number of cannabis enterprises and offset the investment required to enter those enterprises by actually selling products and services. Here at USMJ, we’ve seen this get-paid-to-learn approach working. Now, with our revenues growing and posting our first small profit, we have something to point to that shows the market our get-paid-to-learn approach is working.”
American Cannabis Innovations Conglomerated
The Company recently announced the pending roll-up of USMJ into a private holding company called American Cannabis Innovations Conglomerated (“ACI”). While the majority control of USMJ will be held by ACI, USMJ common stock will continue to be listed and trade on the OTC Markets. The transaction between USMJ and ACI does not change USMJ shareholders ability to buy and sell stock. Furthermore, there is no plan to reverse split the stock of USMJ as part of the ACI transaction. On the contrary, management believes the ACI transaction can improve the quality of investment capital and the overall operating efficiency of the Company and in so doing actually enhance the value of USMJ common stock.
The ACI acquisition of the majority interest in USMJ is designed to improve the quality of investment capital available to USMJ to fund growth through product and service expansion.
American Seed & Oil Company
American Seed & Oil Company was the first operating subsidiary under USMJ to enter the cannabis sector. American Seed & Oil Company was a pure cannabis enterprise incubator. Through contracts, joint ventures, acquisitions and even organic start-ups, American Seed & Oil piloted a number of cannabis enterprises. The cannabis extraction business now under Puration, Inc. (USOTC: PURA) started under American Seed & Oil. Once USMJ committed to developing and growing the AmeriCanna Cafe restaurant business, American Seed & Oil did not go away, but it took a back seat.
ACI recognizes the extraordinary upside potential of getting behind promising start-ups and the risk that goes along with start-ups. Accordingly, ACI is taking a portfolio approach to investing in start-ups to balance that upside with the corresponding risk through diversification.
Part of the portfolio approach will inevitably involve periodically exiting some enterprises that don’t establish sustainable traction. The flip side of that means that new enterprises need to be coming into the portfolio in order to replace those that don’t make it. American Seed & Oil Company’s incubator business model will be the platform for feeding in new enterprise opportunities.
American Seed & Oil Company is going to get a 21st century incubator update. The Company will launch a social media platform for cannabis entrepreneurs at large to promote their businesses. Interested investors can browse the site and engage with entrepreneurs. ACI will itself look for promising cannabis enterprises on the site and periodically pursue bringing particularly promising enterprises into its fold.
The AmeriCanna Cafe is the crown jewel of USMJ – for the moment. With the coming ACI transaction, USMJ has even more in the works. In the meantime, the AmeriCanna Cafe is knocking down doors and taking names having been central to USMJ’s overall 40% revenue growth, and 53% gross margin growth, not to mention delivering the Company’s first quarterly profit. USMJ has started selling partnership options to open the first 20 AmeriCanna Cafe restaurants and expects the opening of multiple restaurants to increase the Company’s overall growth rate, in turn, increasing the pace that much closer to the published $2 million annual revenue goal.
Pushing the growth rate even further, USMJ will imminently beggin introducing cannabis infused beverages under the AmeriCanna Cafe brand name. The beverages will be available both from the AmeriCanna Cafes themselves, in addition to be distributed outside the AmeriCanna Cafes. The first beverage to be introduced will be AmeriCann Cafe CBD Infused Water, followed by the introduction of three AmeriCanna Cafe CBD Infused Flavored Waters. Other cannabis infused beverages will follow.
All of us here at USMJ are very happy with the Company’s progress todate. There are not many upstart cannabis sector companies with revenue, let alone with a profit. We think our results speak for themselves. We are more confident than ever before about the future of USMJ.