Integrated Company Building Brands, Winning Customers and Growing Revenue with Alternative Hemp and Plant Based Products
Geyser Brand Inc. (TSX.V:GYSR) is taking a slightly different approach to the “noisy competition” in the rapidly growing international cannabis and cannabinoid (CBD) market. As a licensed producer (LP) Geyser is using the Canadian regulatory framework to grow, develop, manufacture and sell a spectrum of healthcare products including cannabis-derived product such as CBD. Geyser is building upon a portfolio of well-known hemp-and plant-derived product brands – and is readying them for its proprietary Nano Fusion as the regulatory landscape clears and more global jurisdictions are de-risked.
To that end Geyer’s wholly owned Licensed Producer, doing business as Apothecary Botanicals (AB), just received its processing license from Health Canada. This license allows AB to manufacture products including tinctures and supplements.
AB expects the physical modifications to its facility to accommodate this development to be completed at the end of June 2019. The modifications and processes are designed to deliver GMP-compliant capacity. With the installation of manufacturing equipment, and the completion of distribution agreements, AB will be able to service the production needs of Geyser’s existing and third-party brands.
Geyer’s “Apothecary” brand is already known in every dispensary in Canada, while international requests are coming almost daily, according to management. The company is lining up more conditions-based brands and products to acquire customers, expand current markets and penetrate new markets as they come available. Geyser’s focus is to become a “global cannabis-led consumer and healthcare company” with a portfolio of products in pain relief, skin health, sleep disorder and anxiety relief, pet health and other wellness categories.
Geyser’s recent acquisition target, Solace Management Group Inc., owns a number of brands with leading market positions in Canada. Theses brands include Apawthecary Pets, WildTails pet products, Apothecary Naturals and Apothecary Ink — all of which use hemp oil in their formulations. These products are distributed into leading retailers including Bosley’s and Shoppers Drug Mart. With the new license and capability within its Licensed Producer, Geyser is able to extend the brands into the highly regulated cannabis market in Canada with production starting within the next 90 days.
Early in the game, Geyser had the foresight to become a LP in the province of BC to sell through dispensaries and government stores and produce products for international export. The company acquired its 7,000 square foot facility in Port Coquitlam, B.C., ultimately to manufacture and distribute its hemp-based CBD products and to establish it as an R&D centre. The processing licences announced this week is a huge milestone for Geyser, says CEO Andreas Thatcher. “The license allows us to add value to existing consumer healthcare brands by providing them the platform to add CBD. It also reflects our business model to focus our Licensed Producer on delivering scale through manufacturing and distribution. ”
Geyser also anticipates adding manufacturing capacity for edibles, extracts, and topicals, which will allow AB to extend the wider range of products from the Apothecary group of brands into cannabis. The modifications for the Licensed Producer also includes a laboratory setup that anticipates the LP receiving its R&D license shortly. It is also anticipating its sales license soon after that.
Meanwhile, the facility continues to earn revenue by growing cannabis for Licenced Distributors (LD) in Canada. However, growing and selling marijuana is clearly not the endgame.
In February, Geyser announced the acquisition of Solace Management Group, known for its brands, intellectual property, and proprietary formulations in the hemp and cannabis markets. Its brands have established themselves through the sales of already legal hemp-based products, without the use of CBD. The aggregate purchase price Geyser paid for Solace was $3.9 million, composed of 5.8 million shares at $0.60 and $400,000 cash. Solace’s 12-month trailing revenues are approximately $2 million, a 120% increase from the prior year, with an EBITDA of about 33%. A current cash position of $2.3 million gives Geyser Brands the base to fund their CBD product development, and to ramp up their global sales and marketing including these brands.
As for share structure, of the company’s 21 million shares outstanding management holds about 5.5 million. Other escrowed equates to 4.6 million, while 3.3 million warrants are now exercisable at $0.80 to May 2020. On April 18, the company also announced a $400,000 private placement, comprised of 615,385 units at $0.65 and a full 2-year warrant at $0.85. With $2.3 million cash and estimated net assets of $24 million, the company is valued in the market at about $13 million and trading in the $0.60 range after trading down from a 52-week high of $0.85 at the end of April. The Solace agreement will add another 5.8 million shares, but on whole a nice tight structure, and now looks to be a good entry point.
The new Geyser prides itself on its all-natural NanoFusion technology developed for its conditions-based hemp seed oil products and its now emerging line of CBD products. This process will be developed and tested in their BC licenced facility. “Our NanoFusion technique is one of the few all-natural processes out there,” says Thatcher “It’s an all-plant-based process that, unlike most similar technologies, does not use a solvent for emulsification. The advantages of our proprietary process are that products are shelf-stable, not bitter, permeate skin and cell membranes for deeper and site-specific targeting and provides improved dosage control.”
The recent licensing and facilities developments catapults Geyer to becoming a serious player in the global roll-out of CBD, which is still in its infancy. Technavio’s market analysts estimate that the global CBD oil market will grow to almost $2.7 billion by 2022 with an estimated CAGR of more than 31 % (2018-2022).
Meanwhile, virtually all of the global health and wellness segments Geyser is going after are in the billions, even trillions of dollars, so lets just acknowledge the space and market opportunities are infinite. “We are building and marketing the world’s best-loved cannabis-led consumer healthcare products,” says Thatcher. “We aim to have brands that consumers will trust and use. It’s conditions-based, so if you’re tired, you can’t sleep, you’re stressed, or you’re in pain, we intend to have the brands that you will think of first. CBD, and our ability to develop products with it, will certainly become a significant element in that goal.”
As an early stage investment, Geyser is it at the bottom rung of valuation against its Canadian-listed CBD focused peers who are in the $50-$150 million market cap range. The strategy makes sense: be the first to market using your existing brand equity and build upon your base, continue to win more loyal health and wellness conscious customers that trust in your brand, grow your revenue in the process, accelerate your product and market research, then guide your customers into a cannabis-driven marketplace when it is eventually all approved and de-risked.
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