Elevating the Cannabis Industry with Financing and Seed-to-Sale Services.
With the legal cannabis market in the US estimated to at $1.7 billion per year, and growing quickly, there are an ever-increasing number of investors looking to the industry for potential investment opportunities. With so many investors wanting in on the burgeoning cannabis industry, FINRA was compelled to release a statement warning investors that these investments are notoriously risky. Since cannabis remains a schedule I controlled substance in the USA, investors have been limited to companies that operate ancillary businesses that surround the industry such as Vape Holdings Inc.’s (OTC: VAPE) vaporizers or GreenGro Technologies Inc.’s (OTC: GRNH) indoor growing technologies.
Chuma Holdings Inc. (OTC: CHUM) offers a risk minimized option providing investors with greater exposure to the mainstream legal cannabis industry. Through a combination of financing products and seed-to-sale turnkey business services for the industry, Chuma has direct exposure to the business and financial aspects of dispensaries and growers while being insulated from significant regulatory risk. Management has identified a clever niche in the market , and is poised for rapid growth within the industry.
A Clever Niche
Chuma Holdings (OTC:CHUM) is a company poised to capitalize on a unique dynamic within Los Angeles’ medical cannabis industry. After California legalized medical marijuana in 1996, the LA market exploded to include more than 1,700 dispensaries and non-profit collectives – more dispensaries than Starbucks! This dynamic was driven by high demand in one of America’s largest and most liberal-leaning cities.
Public complaints that cannabis collectives outnumbered Starbucks eventually led to the implementation of the City’s Interim Control Ordinances (“ICO”) to reduce and regulate the types of collectives that could open. At the time, just over 180 pre-ICO collectives were grandfathered in and permitted to legally operate in the burgeoning downtown Los Angeles marketplace. Today approx. 137 pre-ICO collectives are still in operation.
Chuma Holdings’ management estimates that California is already doing about $980 million of the industry’s $1.7 billion in gross revenue. California is seen as a “mature” market and most new entrants to the cannabis industry are focused on the legalized recreational markets in Colorado and Washington. Chuma’s strategy is to focus on California and target the pre-ICO businesses as its niche market.
A Prudent Start
Chuma’s management team began developing the infrastructure needed to convert a traditional private enterprise business into a public company during the first quarter of 2014. The company stayed under the radar while the first surge of initial investors flooded the market. During the second quarter, the team raised $1.2 million from family and friends in order to prove up its model by investing money in three elements of the business: one dispensary contract, one indoor contract, and five outdoor contracts – all in California.
Chuma’s outdoor contracts follow a standard borrower/lender model with the normal course legal and financial documentation such transactions entail.
Chuma provided these operations with a number of turnkey services, including financing solutions, compliance consulting, retail solutions, commercial equipment, supply chain solutions, marketing and sales guidance, R&D services, and consumer product solutions. In aggregate, these services also serve to diversify the company’s revenue streams away from any single service sector.
In each case, Chuma’s investment led to the creation of an asset on its books, producing both a predictable revenue stream and an attractive 10% per annum interest rate on the outstanding principal amount.
These contracts proved the viability of Chuma’s business model and provided an indication of the profitability of these operations. Pleased with the results to date, management is currently raising an additional $9 million from Accredited Investors to deploy using the same model.
A solid management team makes all the difference in micro, and small-cap stocks given the unproven nature of their operations. Chuma’s management team has over 35 years of combined experience in the legal cannabis industry in California. It is already generating revenue from the initial financing and service solutions. The team has already demonstrated it can execute.
Chief Financial Officer Paul Shively has worked with over 500 dispensaries. He is recognized in California as an Expert Witness specializing in the interpretation of the U.S. Attorney General’s compliance letter. Chief Executive Officer Jordan Shapiro has been involved with numerous public companies and played a part in three $100+ million buyouts in the mining sector in the past. Newly appointed President, Kevin Wright, brings decades of marketing experience with Fortune 500 companied to the company.
Management’s past experience and current success with the first phase of its business plan bodes well for its future. As the Chuma team deploys the 9 million second tranche of investment, investors may want to take a closer look at Chuma’s stock, financial statements and business plan, particularly given its clever niche within the burgeoning cannabis industry.
Disclaimer: Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC dba TDM Financial, which owns CannabisFN, may be compensated for its services in the form of cash-based compensation or equity securities in the companies it writes about, or a combination of the two. For full disclosure please visit: http://www.cannabisfn.com/legal-disclaimer/.