Body and Mind Inc (CNSX:BAMM) (OTCMKTS:BMMJ) CEO Leonard Clough talks about the company’s progression from one of the original Nevada LPs to a key player in the challenging Ohio market. Body and Mind has increased production in Nevada by 40 percent and has seen profits soar to $5 million this year. Clough’s group raised $7 million in financing last year and has used that to fund Body and Mind expansion plays with applications for new licenses and retail applications pending. The company has been granted production and dispensary licenses in Ohio and plans to grow its operations in that state following the blueprint established in Nevada. Clough believes derivative products are the future of the industry and are currently 50 percent of Body and Mind’s business.
James West: Welcome back to Midas Letter Live. My guest this segment is Leonard Clough; he’s the CEO of Body and Mind, trading on the CSE under the symbol BAMM, BAMM. Len, welcome to the show.
Leonard Clough: Thanks for having me, James.
James West: We are, in fact, having an inaugural conversation with you in the context of BAMM, at least.
Leonard Clough: Indeed, indeed. Thanks for having us.
James West: Sure. Why don’t you start with an overview of what does BAMM do, where does it do its thing?
Leonard Clough: Well, BAMM is primarily a Nevada-based company. It’s one of the original cultivators, got one of the initial licenses when the new program came in for medical use and company’s been at it for about four years. Founded by a guy by the name of Robert Hasman, with an investor group. Built that business up and spent a lot of time on the brand itself, and then we got more involved when the company went public about a year ago, James. So we’re about a year at it now, and now we’re in Ohio, as well. So we’ve got kind of a dual footprint, if you woll, in both those states.
James West: Right. This is one of the first projects that I ever visited in the US round, and so I remember that you had such a wide range of products that I was then able to see in other dispensaries around, because that was just after it went legal n Nevada on July 1, 201y, correct?
Leonard Clough: Correct, yeah.
James West: So, have you – even at the time, I recall you were expanding and you were going to, you know, try to keep up with the demand that had set in after July 201y.
Leonard Clough: Yeah, you’re talking about a lot of the – I think you’re talking about a lot of the production products and the edibles and whatnot, so yea, we’ve got a very active kitchen. But you’re right, a lot of this is supply constrained, and everything we produce, we sell. You know, the price has been strong; we’ve been able to, you know, to grow this business through that.
But what I’ve said before is, we spent about the first half of this year fine-tuning everything in that operation, and then we took on a Phase II expansion. And actually you’ll see that4 – actually, the plants have been populated in the rooms now, and you’ll see the first harvest in December. And we anticipate that’ll be about a 40 percent increase in production in Nevada.
James West: Wow. So what kind of revenue numbers are you looking at?
Leonard Clough: Well, this year it’s, really, you know, our first true year in the public markets; it’ll be about $5 million USD. The operating business is profitable. And what I’d like to bring to your attention, James, is you know, we look at when we did this deal about a year ago; it was about a $7 million raise that we did, and there was a payment to the original vendors and whatnot. So really, we were left with about 3 to 4 million. And throughout the past year, we’ve been able to apply for new licenses out of state, we’ve added CO2, new drip systems, and a whole bunch of different initiatives.
We’ve got four applications pending now for retail in Nevada, so you know, what I think we’ve done is, we’ve shown that we’ve been great stewards of capital, built that business up, now it’s making money, and we look at taking those same principles into Ohio.
James West: Yeah, we’re looking at your chart, here, and you’ve really started to take off in the northerly direction. So, is this a reflection of the fact that you’ve got this expansion underway and it’s all starting to happen?
Leonard Clough: I think it was a few different things, but I would say for surely the expansion was one driver, but it was our success in processing applications in Ohio which I think really kind of separated ourselves from, you know, some of the other players. You know, we’re applying for these licenses; we’re not paying market prices for them. So we’re putting our sweat equity into, you know, into getting these licenses, and we’ve been awarded two of them. We’ve been awarded a dispensary license in, it’s called Elyria; it’s Lorain County in Ohio. We’ve also got a production license.
So I think what you’re seeing is a few things kind of come together. I think the US trade’s on in a big way, so I think we’re getting a little uptick everywhere, and I think we’ve been dealing with a number of different parties and I think that the general report card when they see the operations is that these guys have really dialled it in. You know, this business is still a very young business, and I think we have made all the mistakes you could possibly make, but now we’re dialing it in. we have less staff turnover we’ve got, you know, new product introductions. Our yields, we’ve got CO2 coming in in December of this year and you’re going to see probably another jump of 15 to 20 percent in efficiencies, there.
So I think it’s probably, you know, a culmination of a number of different factors.
James West: Right. So what is the highest margin product in the BAMM sort of inventory?
Leonard Clough: It would be the edibles, I would say.
James West: And what percentage of the sales are edibles as of 100 percent of the whole? I’ curious.
Leonard Clough: That’s a loaded question. It’s probably only about 10 percent, however, it’s a split of about 50 percent to 50 percent in terms of flower versus that production department. So n that production department, obviously our oils are very well regarded.
James West: Your gummies are very well regarded too.
Leonard Clough: Gummies, and the beef jerky…
James West: I had one of those gummies in Vegas when I was there and it just about blew my head off. I had t be escorted 4back to my hotel room.
Leonard Clough: Well, you’ve got to be worried about the dosages on those so we’re doing this micro-dosing.
James West: That was not micro-dosed. That was mega-dosed! But I enjoyed it. So are the high-potency products really popular?
Leonard Clough: Well, I think it’s transitioning. I think, you know, the average guy it the medical system knew exactly what he was buying, right? He’d go in, he’s getting 100 mg or 300 mg in some of these granola bars we have; he knows exactly how to eat it, and there’s no problem.
Well, as we transition into this very new market with the adult use, you know, people don’t really know that, well, why is 300 a big deal as opposed to 10 or 20? So I think what you’ll see with a lot of the players and we’re already be seeing it now is, that, you know, they’ll be bringing down the dosages and actually margins are going up, because there’s more THC to spread around.
James West: Oh, is that right? So people really do prefer the lower-dosage stuff as a percentage of the population.
Leonard Clough: Yeah, I mean, we’re trying to keep them safe. We don’t want to have them have a bad experience, and then we’ve got this very it’s a premium product, you now, we’re trying to maintain that name and that’s why we’re talking about introducing another line, another band that would kind of sit underneath that so we don’t touch that but we want everyone to have a good medical experience, if you need medication.
James West: So what is the size of the Nevada market in its entirety?
Leonard Clough: Well, the first six months wag out 450 million – or sorry, that was the fist year, 50 million. So it kind of blew all the initial expectations of 250 million out o the water; you know, the state collected 7 0 million in taxes. So id’s say, for all intents and purposes, it’s been an absolutely home run for the state.
James West: Right. What percentage of that market do you think that BAMM will be able to capture in the next few years?
Leonard Clough: We want to be that 20,000 to 25,000 square foot facility. Were we want to spend more time on now, we want to get into more of the, you now the kitchen products, the production products more the oils, and introduce deferent offerings as they come and go so I guess we need to, we’ll bring on the next phase II expansion. Well have more flower and stuff to dedicate to that department, but ultimately, I think you’re going to see the growth side of things get more and more commoditized. We want to position ourselves where we have the bigger production department, and I think maybe you’ll remember, but we have a very, very talented production department – the guy scores really well with industry experts, so we’re really proud of that.
And we just brought in a confectionary chef to run the kitchen products, and she’s done unbelievable. She’s got new ideas, and so we’re really excited about that. So if you ask me where we’re going to focus our business, our business is going to be accessing more of the, more trim in the third party market. Also, maybe looking at doing an offtake with some of the bigger grows, and get more into the production of products. We’re not wanting to go down that model of the massive cultivation facilities who want to kind of leverage our brand, and to copy what we’ve done in Nevada in Ohio and then do some tuck-on kind of acquisitions here and there, and really make it juicy.
James West: How long is it going to take till Ohio is onstream, in terms of the financials of the company?
Leonard Clough: It’s going to take a while. It’s a medical rollout; you know, there’s not going to be a lot of flower on the market when it starts.
James West: So you’re still planning to buy flower and trim, or you’re going to grow flower?
Leonard Clough: Yeah, so right now, we have a retail license as well as a production license in Ohio, so we plan on opening the retail before the end of the year; in fact, Robert Hasman’s in Ohio this week doing some interviewing, some staffing, and whatnot. So I think we’ll be one of the first in the state to open, and then it’ll probably take at least another six months to gt the production department going there. But at the same time, we are looking at maybe tying in one of these, there’s a Tier 1 and a Tier 2 grow license in Ohio; we’d like to tag one of those on into, you know, the whole picture, to be vertically integrated there.
James West: What is the difference between Tier 1 and 3?
Leonard Clough: It’s just the size. You know, it’s a very limited licensing regime; that’s why I think a lot of the Ohio players have done very well in the market, because they know that that’s a tough market to get into. You know, many of the big guys got shot down for licenses there, and I think you know a few of them.
James West: The state started with a total of 11 licenses. Did they expand that, eventually?
Leonard Clough: Well, that was just on the Tier I cultivation licenses, and then there’s more dispensaries, upwards of, you know, 30. It’s a state of 12 million people. Just within our, you know, if you were to draw a circle around our dispensary we have in Lorain County, there’s probably a million an a half people within a 20 minute drive. So that’s really exciting, and here’s only two players there are going to be open in that area.
So we think it’s a very special asset, and then we’ll probably see cultivation, if we end up getting a deal done – there’s been no deal done yet – but when and if that happens, I think you’ll probably see that kind of mid-next year.
James West: Okay, very good. Len, we’re going to leave it there for now; thanks for joining me today.
Leonard Clough: James, thanks for having me. Appreciate it.
Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.
Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.
Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.