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C21 Investments Inc (CNSX:CXXI) CEO on Nevada Success and California Expansion Plans

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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.

C21 Investments Inc (CNSX:CXXI) CEO Robert Cheney has nothing but praise for the company’s recent market performance. He credits the company’s tight share structure for C21 Investments’ recent success. Cheney highlights the company’s profitable Nevada platform, where C21 Investments is one of the leading cultivators, processors, and retailers. Its Sparks dispensary is number one in the state, and the dispensary has generated $32 million in revenue. C21 Investments reaches 100,000 customers each month in Oregon and is opening a second production facility in Bend. While the company is looking at acquisitions in medical states like New York, New Jersey, and Arizona, expanding into the California market remains its priority.

Transcript:

James West:   Rob Cheney joins me now via Skype. He’s the CEO of C21 Investments, and he’s in Portland, Oregon today. The company trades on the CSE under the symbol CXXI. Rob, welcome back.

Rob Cheney:   Thanks for having me back. I really enjoyed the first session with Ben and Ed, and it’s very kind of you to have me back.

James West:   Yeah, well, we’re always happy to have a company back that performed so well since our last conversation! Rob, you put out a press release suggesting that the stock that the stock for no effort on your part, but the company has a very tight share structure and is really making some solid moves and putting out a good flow of news. And you seem to be focused as a US-based multi-state operator that is vertically integrated, but you’ve also got some international moves.

So, start with an overview of what is the company’s sort of philosophy and ambition in this space?

Rob Cheney:   Well, we are focused very much on our US operations. We are a consumer packaged goods company in the cannabis sector; we’re vertically integrated. We have an exceptionally strong management team in each vertical, so 200-plus years of cannabis cultivation experience, an amazing extraction team in Oregon and in Nevada. We have great brands led by a branding team with Sky Pinnick out of Microsoft, Randy Torcom, who led brand innovation at Burton Snowboards for 12 years, and John Dempsey, who is an internationally recognized digital brand expert.

And then on our Board, we have Bruce McDonald from the Royal Bank of Canada, who is a capital markets expert. So we have professional expertise, we’re building a company as a business, and as you mentioned, we certainly have the tightest cap table of any company in the space. We have 62 million shares out; over half of those shares, over 30 million of those shares, are held by myself and our long-term investor business partners. I think since February 19th, and I’m sure your show was part of this, we’ve traded over 12 million shares at prices over $1.55, so we’re certainly creating a new level of investor interest.

And everything we do is focused on creating value for our shareholders, for our investors, on a long-term basis. So we don’t try to titillate the Twitter universe or the social media universe with news releases that we can’t deliver on. Everything C21 enters into, every transaction we enter into, needs to be accretive to shareholders, create value, create scale, and be something that we can execute on.

James West:   Right. That’s quite a lineup of human capital you’ve got there. I mean, I recognize all of those names. So then, you’re basically growing through a process of acquisition?

Rob Cheney:   That’s right. So we are continuing to look at opportunities to expand our very, very profitable platform in Nevada. Investors who follow us will know that our Sparks dispensary has been the Number One dispensary in the state since cannabis was legalized in the State of Nevada. Our 12-month trailing revenue on that single dispensary is $32.5 million CDN; 21 cash registers.

Investors who follow the stock will also know that we’ve now opened a second dispensary in Fernley; same management team, same discipline, the same look and feel, the same amazing customer selection and amazing prices. So certainly, our revenues are going to ramp significantly in 2019.

In Oregon, we have assembled a great team of professionals, brands and companies. We’re also looking at acquisitions in medical space like New Jersey and New York, on the east coast; Arizona…but our Number One focus in the near term is California, and we also continue to maintain a strong focus on expanding our platform in Nevada.

James West:   I have to think that competing to acquire strong producing assets in the cannabis space in those states has got to be very competitive at this point. Do you find that that is the case, that you’re competing for the same assets with other large, well-capitalized multi-state operators? And if so, how do you get around that?

Rob Cheney:   Every business I’ve ever been in is competitive, and if you want to do well, you have to have a strategy and a management team that can execute. The key to our success is really building a relationship with the companies that we want to acquire. The companies that we acquire are people who want to build a business together with us. They’re not actually typically selling their business; they’re actually joining into a partnership with us where they get equity in a much larger company that has larger scale and the ability to compete at a higher level.

So all of our business partners, if you look at Swell and Phantom, those individuals took shares at $3.00 a share, which is a significant premium to where the stock is today. They’re long term partners. Sonny Newman, my partner in Nevada, is a long term builder of this company.

So we’re not fast-buck artists, we’re not stock promoters; as I’ve mentioned many times before, I don’t have a single $0.01 share, I don’t have a single $0.02 share. I paid $1.00 for my shares. All of my business partners and co-investors paid $1.00 for their shares. So we’re building a business. That narrative resonates with some companies; not with everyone, and we don’t try to make every acquisition. We try to make strategic acquisitions that are accretive in value, and with people who are like-minded and who want to build a business.

James West:   Sure. Well, that’s a solid message, and I mean, the people you have on your Board of Directors certainly sort of lend credence to the idea that you’re really building a premium operation. Where are your biggest challenges that threaten the progress of this growth?

Rob Cheney:   Well, anyone who wants to be in cannabis, you know, you need to be nimble, you need to be adept. As you saw with the Aphria short report, you’re never going to wake up and know what tomorrow is like, because the world can change very quickly. And so it’s not an industry for the meek or the mild. I’m a pretty mature guy, I’ve built businesses in many sectors, so I think I have a lot of common sense that I’ve developed over the years. I’ve surrounded myself with a team of professionals who likewise have a lot of great business expertise, and together, we’re very confident we can meet the challenges of this dynamic sector. But it is – it’s not a business for, you know, for somebody who isn’t up for some challenges.

James West:   Sure. I’m curious as to your total marketplace. What sort of is the size of the footprint of your customer base?

Rob Cheney:   So in Nevada currently, we are in the process of launching wholesale products and brands, which we’ll launch in May, and that will extend our reach. Currently in Nevada, we touch about 50,000 customers a month on a consistent basis, and we are certainly one of the leading cultivators, processors and retailers in the state.

In Oregon, our products are in a wide variety of dispensaries, and we touch over 100,000 customers a month, and that’s expanding rapidly.

We are in the process of taking shelf space and customers away from our leading competitors, and we believe that we’re well positioned with crude oil, Swell, Dab Society, Quill and Phantom to become, if not the dominant player, one of the two dominant players in the State of Oregon, which is a very, very vibrant cannabis market.

We’re just opening our second processing facility in Bend; since your brother lives in Portland, you’ll know Bend. That gives us capacity this month for a further 100,000 cartridges, it’s a CO2 facility.

So we’re scaling up rapidly in Oregon, and as I’ve said, our next target is California. We want to be in eight states, you know, as quickly as possible.

James West:   Sure. And in terms of California, how far down the road are you? Do you have an active discussion underway with anybody, or are you still sort of evaluating the landscape and looking for targets?

Rob Cheney:   We’ve been – well, I’ve been at this hard for two years. My neighbours think I’ve moved out of my apartment, because I haven’t been home. So we have been in a review of California for some time; a lot – you know, we have experienced professionals in this company, and many of them have been in the industry in California. They have connections in California, so we’re not starting from zero. We are in active discussions with several parties; I have hired an M&A expert trained at Morgan Stanley for seven years, Dave Goode, who is working with my CFO. We don’t rush into things.

As I’ve said, we don’t do deals to create drone footage to, you know, excite the social media space. We look carefully, we kick the tires, we learn about the people who’ve run these businesses. We make sure that they’ve been doing everything legally and compliant, and we make sure that how we price the transaction is going to be accretive to my existing shareholders, because I’m old enough to know that I’m not going to blow my brains out. We may make a few mistakes, we may make a few missteps, because this is an industry that’s very dynamic and moving fast; but we’re not going to be stupid.

But we’re working hard, and certainly I think news is coming on the Nevada front in terms of expansion, and I believe news is coming in terms of California. So, everyone can stay –

James West:   Okay, great, Rob. Well, we’re going to stick close to this story. That’s a great update. We’ll come back to you as soon as we see the next press release. Keep on keeping on, we love it, and good luck with everything. Thanks for joining me.

Rob Cheney:   Well, I appreciate you having me on, and I’ve love for your viewers to take a serious look at C21. We’re serious people, building a great business with great brands.

James West:   Perfect. Thanks a lot, Rob.

Rob Cheney:   Cheers.

 

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.

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