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North Bud Farms Inc (CNSX:NBUD) CEO on Acquisition of Eureka Vapor LLC

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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.

North Bud Farms Inc (CNSX:NBUD) (OTCMKTS:NOBDF) CEO Ryan Brown shares details of the company’s binding LOI to acquire all shares of Eureka Vapor LLC. Eureka is a manufacturer and retailer of premium cartridge-style disposable vapor pens in California and Colorado. Eureka has significant market penetration in both states and North Bud Farms’ stock soared on news of the acquisition. Brown believes Eureka, a legacy brand in California, helps North Bud Farms build its portfolio of brands as the company looks to build its US footprint. Brown comments on the importance of the US space and highlights that listing in the US has raised the company’s profile. Construction continues on the company’s production facility in Quebec and Brown anticipates the plant will be operational in Q2.

Transcript:

Narrator: North Bud Farms, Inc. is a Canadian-based company that operates and manages cannabis production facilities. Through its wholly owned subsidiary, GrowPros MMP, Inc., North Bud Farms is pursuing a license under the Cannabis Act.

The company is constructing production facilities in Low, Quebec.

North Bud Farms, Inc. plans to focus on pharmaceutical and food-grade cannabinoid production in preparation for the legalization of edibles and ingestible products scheduled for October, 2019.

North Bud Farms, Inc. is listed on the CSE under the ticker symbol NBUD.

James West:   Hey, Ryan, how are you?

Ryan Brown:   Great, James, how are you?

James West:   I’m doing well, thanks. What’s new with North Bud Farms?

Ryan Brown:   Well, we put out a press release last week announcing a binding LOI as we expand our outreach into the US. We’ve signed an agreement to acquire a company known as Eureka Vapor who operate in California and Colorado; they’re a manufacturer of cartridge-style and disposable vapour pens. Significant market penetration in both California and Colorado, and we’re really excited to bring them and their existing business into the North Bud family.

James West:   Fantastic. All right, so, your stock took off on that news, and are you, have you got other acquisitions on the, in plan?

Ryan Brown:   We made the strategic decision a couple of months ago to start looking seriously at some of these small to mid-size US operators, seeing the, you know, the value in the businesses that are being created, and also to prepare us to get ahead of, you know, what’s expected to be some regulatory evolution in the US over the next 12 to 24 months. So that’s yielded significant conversations with a variety of companies operating in a multitude of different states, and we’re certainly entertaining these discussions as we put together what we believe will be a very comprehensive portfolio of brands for both Canada and in the US.

James West:   Right, fantastic. There was, you guys have in your video there some construction going on. Is that plant almost done?

Ryan Brown:   Yeah, so the plant right now, we would categorize it as being 60, 65 percent complete. Starting next week, the interior buildout begins, so we expect another few months of construction to achieve operational readiness. But we’ve been quite pleased with the way the construction crew has worked through the winter. It’s obviously been a very difficult winter, and we’ve experienced very minor delays, and are really excited to get this facility online sometime during Q2.

James West:   Wow, fantastic. How has the response been from your investor base? I mean, it’s been, the space is getting more crowded; is the Eureka transaction a sufficient differentiator that you’re going to be able to generate more interest in the company going forward?

Ryan Brown:   It’s a start. I think when I look at it – when I put on my investor hat and look at it, I see a company with a market cap of approximately 24 million that’s looking to bring on, you know, in excess of 10 million a year in revenue with this one acquisition, not factoring into account increased expansion both in California, Colorado and other states for the Eureka brand, which we really believe is a legacy brand in California, has tremendous following outside of the State of California, and we’re really eager to help them expand their business and obviously bring that revenue into our company, and benefit our shareholders as well as the Eureka shareholders.

So I think for a company our size to be able to execute on a transaction like that should make investors and, you know, future shareholders excited as to the direction of North Bud.

James West:   Sure. Since your listing on the OTC in the United States, have you had a lot of increased interest from US investors?

Ryan Brown:   We have. We’re still waiting on the DTC eligibility; that should take about another week or so, which obviously facilitates the ability for US investors to buy the stock. Definitely brought us onto the radar of some other groups that, you know, maybe we weren’t on their radar before, and I think that, overall, from market perspective, there’s an increased focus on the US and these multi-state operators, be it the large ones like Acreage or, you know, the deal you referenced with Harvest Health and Recreation.

We believe that there’s a lot of undiscovered diamonds out there in the US market, and we’re really excited to help bring these companies into the fold, give them access to public markets as well as, you know, some of the strategic guidance that our team at North Bud can provide.

James West:   Sure. So from all your travels in the United States, I mean, there’s all these giant MSOs around that are trying to pick off assets; there’s, you know, capital pools and promoters walking around trying to take companies public. Are you finding it very competitive when you go to look at solid assets that you might be interested in acquiring, that there are a number of bidders? Or are you sufficiently specialized in what you’re looking for that there’s not really that much competition at this point?

Ryan Brown:   Yeah, I would say the latter. You know, my background, having spent significant time in California, we’re looking for operators. We want, you know, operators that are experts in their crafts, not necessarily investor groups that secured a license and are looking to monetize it before they’ve actually built a business around it. And so from that perspective, there’s no shortage of sophisticated, skilled operators that understand that they need to actually take their business to the next level if they want to be competitive in two to three years from now, competing with these large and behemoth MSOs.

So at, you know, at the rate we’re looking for, and the type of companies that we’re looking at, there’s certainly no shortage in potential acquisitions, partners, licensing agreements. These guys tend to be pretty flexible; they just want their businesses to grow, and they want to make sure that they maintain their market presence. You get California, under the old regulations, transitioning into the new, or operators in existing states that are looking to move into some of these more highly competitive, restricted-license states. So we have no shortage of deal flow on our end, that’s for sure.

James West:   Wow, fantastic. Are you finding some states more attractive than others, at this point? I mean, California, the more I learn about California, the less attractive it seems to me.

Ryan Brown:   I think you have to know what you’re looking for. I think looking at, you know, existing operators that have not tried to comply with the new regulations is obviously not something that we’re interested in; so a lot of, you know, dispensary chains, go to Los Angeles, for example, and go to 10 dispensaries, nine of them are unregulated. And so, companies that are looking to make that transition from the old regulations into the new regulations, have applied for the proper permits, have secured new compliant, properly zoned facilities within each county or city, depending on where they’re operating in – those are the types of guys that we want to work with.

In the case of Eureka, you know, they moved operations to Colorado in 2015 to gain experience operating in a saturated, highly regulated market. So these are the exact type of partners that we’re looking for, and you are correct for, in California, for every 20 that we look at, there’s maybe one that we want to engage. In the case of Eureka, I happen to have an existing relationship with the CEO of Eureka, so there’s a comfort level there, as well as a unique brand that is a highly sought-after brand, and also one that we believe, when brought into the Canadian market through the right joint venture opportunities, they have a product that they believe will endear itself to the Canadian consumer as well, that’s obviously a consumer base that’s in transition also.

James West:   Right. So being focused on vapes, they don’t grow any of their own input?

Ryan Brown:   No. Their model for California and Colorado is strictly as a raw flower purchaser. They extract, distribute and manufacture their own line of products using an advanced technology in regards to their battery and their actual devices, but more importantly, they’ve refined their extraction techniques over 10-plus years of operating in California to create a consumer product that, in my opinion, is second to none, especially when you look at some of the issues with vape pens and trying to convert the, you know, your traditional joint smoker over to a vaporizer user.

We believe that the Eureka product fills a lot of the gaps that these consumers are looking for, and it should be a very trusted and profitable brand in Canada moving forward, as well.

James West:   Yeah, you bet. All right, Ryan, we’re going to leave it there. We’ll come back to you in due course; thanks very much for joining us today.

Ryan Brown:   Thanks a lot, James. Really 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.

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