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Nutritional High Reports Strong Revenue Growth

Ryan Allway

July 6th, 2017

News, Top News

The cannabis industry is projected to surpass $50 billion over the coming years, according to Cowen & Co., thanks to the ongoing legalization of medical and recreational marijuana. Investors have many different options for exposure to the growing industry, but they should be aware of the risks associated with each investment. Real estate companies offer some of the best opportunities given the steady rental income, strong asset base, and consistent exposure.

In this article, we will look at Nutritional High International Inc. (CSE: EAT) (OTCQB: SPLIF) and the growth that it reported during the latest fiscal quarter from its cannabis operations.

Strong Revenue Growth

Nutritional High reported revenue that rose 15.9% to $195,763 from a combination of rental and interest income, but the real growth story can be seen in the company’s accounts receivables that have risen to nearly $2 million last quarter.

The rental income receivable comes from its Pueblo project in Colorado that’s being leased to Palo Verde (see Figure 1). Palo Verde is expected to begin making payments after achieving gross sales of $125,000 per month for three consecutive months. At that time, Palo Verde will pay rent and all deferred rent in equal monthly installments over 12 months or as agreed upon. In the meantime, Nutritional High is accruing interest at 12% per year on the amount owed.

Figure 1 – Palo Verde Receivables – Source: Regulatory Filings

There are signs that Palo Verde’s sales are accelerating. In late-June, the company announced that Palo Verde’s “FLI” brand was rapidly penetrating the Colorado market with several new orders and three subsequent re-orders from an existing customer, Nature’s Herb. That company alone has three popular dispensaries in the Greater Denver area that have seen strong interest in the “FLI” brand products.

Nutritional High has also reported over $600k in sales at its Effingham, Illinois dispensary, in which it owns 50% interest. The company reports its financials under International Financial Reporting Standards®, which do not to permit to consolidate the revenues from the dispensary with the main financial statements. Instead, the company uses the equity method of accounting to record financial performance. Note that it’s the third quarter during which the dispensary has been operational, and Note 20 in the filing presents more information in this regard. By extrapolating the data reported over the last three quarters the sales and income trends are as follows:

Figure 2 – The Clinic Effingham Income Summary – Source: Nutritional High International Inc.

This is one of the examples of how Nutritional High is creating value for its shareholders, and investments like this could present attractive spin off opportunities. At the time when the company signed the joint-venture with GTI and Ataraxia for its Effingham dispensary, it also entered into agreement with a cultivation and extraction company to negotiate an agreement to license its products in the State of Illinois. This agreement represents another strategic expansion piece to Nutritional High’s plan of establishing a nationwide platform.

Solid Balance Sheet

Nutritional High is well-capitalized with approximately $1.6 million in cash, $1 million in short-term investments, and $2 million in deposits. In addition to its $4.8 million in current assets, the company reported about $3 million in investments and $1.3 million due from Palo Verde.

The strong cash position provides management with a cash runway and the flexibility to execute future plans to acquire properties or investments. In addition, the company’s nearly $10 million in total assets and $1.5 million in total liabilities yields about $8.3 million in shareholders’ equity. The company’s market capitalization of about $22 million, according to OTC Markets, implies that the company’s growth opportunities are valued at approximately $14 million.

The de-leveraged balance sheet and strong cash position provide significant flexibility for making future acquisitions or reinvesting in growth. At the same time, these dynamics – which are exceedingly rare among over-the-counter companies – provide shareholders with a strong margin of safety from an asset valuation perspective.

Looking Ahead

Nutritional High International Inc. (CSE: EAT) (OTCQB: SPLIF) represents a compelling opportunity within the cannabis industry. Investors may want to take a closer look at the stock given these dynamics and its future growth potential.

For more information, visit the company’s website or CannabisFN’s company profile.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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CFN Enterprises Inc. (OTCQB: CNFN) owns and operates CFN Media Group, the premier agency and financial media network reaching executives, entrepreneurs and consumers worldwide. Through its proprietary content creation, video library, and distribution via www.CannabisFN.com, CFN has built an extensive database of cannabis interest, assisting many of the world’s largest cannabis firms and CBD brands to build awareness and thrive. For more information, please visit www.cfnenterprisesinc.com.

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