The legitimate Cannabis market in North America is reportedly as high as a $60 billion industry. With numbers like that flying around, it is no wonder that investors have seen a major “Green Rush” of sorts in recent years. But while hype typically precedes fundamentals, now that the smoke has cleared a bit, the industry is better positioned than ever to recognize real companies with real value to offer a major market.
Invictus MD ($IMH:CNX) ($IVITF) is one such company. In fact, its Chairman and & CEO Dan Kriznic welcomes the scrutiny and believes that despite just becoming public in December 2014, Invictus compares favorably to the majority of other companies in the Cannabis space. Invictus operates as an incubator and holding company of sorts in the industry, identifying promising verticals that possess significant growth potential as well as synergistic opportunities with its other companies. It’s a proven model that Kriznic has utilized in the past.
Equities.com had the opportunity to speak with Dan Kriznic, Chairman and CEO of Invictus MD to learn more about its six verticals and the process of creating real value for investors in the Cannabis space.
EQ: Can you start off by telling us about Invictus MD and what you do?
Kriznic: Invictus MD is an aggregator and incubator of companies in the cannabis space. To date, we've added six companies to our portfolio for the purpose of incubating and supporting them to grow in their respective verticals. Two of the six companies are currently revenue producing, one of which has been around for over 20 years. The other four verticals are getting some traction and represent our incubation companies within our portfolio. To date we have taken a 60% position in Future Harvest, 100% position in Cannabis Health, 100% position in Vitaleaf, 35% position in Smokazon, 100% position in Greener Pastures MD and a 40% position in Edison Vape. We did all these acquisitions within 3 months of going public.
EQ: Can you tell us more about your model? How do you identify companies that fit into the overall picture at Invictus?
Kriznic: Identifying acquisition targets is basically done by way of getting out into the market place and working with some of the key individuals and leaders in the industry. We brought in some key players in the industry as well as other industries to show breadth of the team. These team members act as our eyes and ears in the space when seeking new acquisition targets. Invictus continues to look for different targets that are already revenue and EBITDA accretive. The incubation companies that we are currently managing may be quite small at the surface but they have a larger outlook. A good example of that is our Edison Vape Company. We have now secured our manufacturer in China and plan to launch in late fall.
EQ: Can you tell us more about Edison Vape and some of the highlights that you’ve seen with this company?
Kriznic: Edison Vape is a company that we own 40% of right now with an option to get up to a 100%. We will likely be exercising that option very soon. I was in China last week for a period of three days sourcing our manufacturing facility for the Edison Vaporizer. We currently have a provisional patent on that technology, and should be able to scale to commercialization on that product over the coming three months. Our first major launch will occur in the Western United States given the sheer volume and changes to regulations in that part of the US.
EQ: This sounds like an exciting time for Invictus and Edison Vape. How about the other companies in your portfolio?
Kriznic: Well, another company we've acquired is Future Harvest Developments. This company has been around for over 20 years. They manufacture and distribute hydroponic equipment and fertilizers. They have three main product lines including Nutradip, Sunblaster and Plant Life Systems. This includes hydroponic metering products, plastics, lighting and fertilizers.
Future Harvest has generated approximately $4.9 million in revenue for the 12 months ended June 30, 2015. It was really a strategic acquisition for us in a sense that we wanted to buy an asset in the space that can show that we're putting our capital to good use, and we’re looking to grow that vertical by way of other acquisitions that are complementary and synergistic to Future Harvest.
EQ: What about VitaLeaf?
Kriznic: That’s another company that we're in the process of incubation. VitaLeaf is the vital link between the patients, the prescribers, policymakers, producers and the general public. They really act as a community that builds on those different aspects of the cannabis space and how people perceive it. It provides an area where people can join as members and talk within the community about things like ailments and how cannabis has helped them. We'll be launching certain initiatives on the website, such as contests for best recipes or for best strains, and other things like that. VitaLeaf is planning to launch some of those website features in August. In Canada, they are working with the producers to help with some patient management, and are also looking to the US to build on their community.
EQ: Cannabis Health is another company in which you own 100%. Tell us about that one.
Kriznic: Cannabis Health is a journal dedicated to the cannabis industry. The primary focus is on the health aspect of cannabis and the science behind it. We are currently in the process of launching through the fall for the first comeback edition. Prior to our acquisition, Cannabis Health published about 21 journals going back to 2001. When we acquired the company, we were looking at some kind of a strategic direction in terms of marketing for Invictus, and that was a compelling avenue for us to raise the awareness of the brands as well as others that fit within the vision.
The journal allows us to really focus on the health and science part of the industry and the businesses behind this. We expect the full relaunch coming up in September-October timeframe.
EQ: Smokazon is a very interesting name in your portfolio. What does this company do?
Kriznic: We own a 35% stake in Smokazon, which is an online aromatherapy shop that you can buy certain vaporizers, grinders and products like that. We have the option of increasing our stake in the company to 49% for the next couple of years, so we’ll be continuously building on that. The company is currently working with Neil Patel from the US with regards to its overall marketing strategy and search engine optimization. In addition, our Board of Advisors member Dario Meli (co-founder of Hootsuite) has also assisted the company with content creation through with one of his new ventures Quietly. This is just one example where Invictus uses its worldwide network to assist in growing the verticals.
EQ: Lastly, we have Greener Pastures. What can you tell us about this company?
Kriznic: Greener Pastures MD is in its incubation stage. The company is focused on the Marihuana for Medical Purposes Regulations (MMPR) space in Canada. It’s looking at doing certain buildouts of facilities as well as certain growth and yield management methods. That is something that we continue to work down the path and look for opportunities. In the near future the goal would be to have cultivation, whether it is in Canada or the US. At this point, we don’t have a cultivation facility in our portfolio but still seeking those opportunities and the capital to bring along with it.
EQ: Now that we have a better sense of the various industry verticals that you are in. Going forward, will your focus be on growing the six brands that you have or to add to your portfolio by looking at other acquisition targets? Or will it be a combination of both?
Kriznic: Currently, we're looking at really honing in on the verticals that we've acquired over this short period of time since going public back in December 2014. At this stage, there are some pipeline opportunities that we might close on over the next couple of months but given that it’s summer, I would say the focus is on growing the verticals that we do have rather than on raising capital. A big portion of that effort has been shifted towards executing the verticals business plan.
EQ: You mentioned the resources and the competitive advantages that Invictus brings to the table. You have a strong team in place. You have the knowhow. You provide the capital. How do you leverage all of that effectively to achieve the results you’re looking for?
Kriznic: I think the competitive advantage that we have can pretty much be summed up in two words: Human Capital. As you said, we have the strong resources and the people behind it. My background as a Chartered Accountant with Deloitte & Touche gives me the platform to really understand the nuts and bolts behind a business. Each deal is carefully assessed from a diligence perspective. We have gone down the path with a few other companies but decided it wasn’t right for us. In my last position I was an integral part of building Canada’s largest for-profit education company along with a sizeable commercial real estate portfolio. I’m confident in applying the approach I’ve done in other industries to the Cannabis space. I’ve also brought in some key leaders that can help us get there.
I think what differentiates us from some of the other companies in this space is that we can bring a real sense to the market that focuses on cash flow and true value. We’re out there building a real company and we're continuously doing that.
EQ: For people who want to follow Invictus now, how do we measure your success from here? What are some metrics that we should look at to watch your progress?
Kriznic: From a financial perspective, I think definitely the metrics would be the overall balance sheet strength and ongoing revenue from operations. Many companies that are public in this space don’t have this. Our only debt right now is a $300,000 debt that I loaned to the company personally to acquire majority control of Future Harvest. Our second quarter financials since inception is already going to show inventory and receivables. It's a real company. With regards to our financial performance, investors can definitely compare the revenue streams and see that, in a short period of time, the company has actual cash flow coming in. Again, I’m here to build a real business and provide value to our shareholders.
EQ: You’ve put yourself in a great position from a competitive standpoint in this industry. What are the tailwinds or catalysts right now that’s going to really help propel you forward?
Kriznic: One significant catalyst coming into the next two quarters or so that is going to propel us into the next level is going to be the Edison Vape launch. We see a big push into what we're doing there and now that we've structured our manufacturing in China with a very reputable company, we feel that it’s going to be the next type of “shoot for the stars” kind of play. So people can expect to see a lot of traction on Edison Vape and what we're doing there. Secondary to that, there's going to be a lot more hype when we launch the Cannabis Health journal in the fall.
EQ: As you stated earlier, the company is still in the very early stages as a public company. How has the past year been for Invictus?
Kriznic: Well, I look at the market and really, at this point in time, it's soft trading at certain levels. We have not invested significantly into marketing Invictus in the public markets as all the capital has been deployed to buy and grow our verticals. I believe that our intrinsic value at this stage is much higher than what our market cap is.
We are growing our verticals in the Cannabis space that will eventually have some type of exit. Our goal is to pay dividends to our shareholders based on some of these future exits.
EQ: Any final takeaways or anything that you want to share with our readers?
Kriznic: In general, I would just like to reiterate that it's all about bringing together the right people to build successful companies. Companies don’t build companies, and that's what we're doing here. Keep an eye out for us. We are good value in the market at the moment. I can back up that statement given I’ve been buying stock personally.
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