KISS – Keep It Simple, Stupid

It’s no surprise that given the current landscape of cannabis stocks – some are starting to die. Are we pulling a Forbes and categorically stating that the entire industry is done forever? No. Of course not.

But, there are definitely some losers that are going down fast, not only their stock price – but also revenue, reputation, and odds of success. Invictus MD ($GENE) is one of those companies. They are burning cash at an alarming rate, with no real raises recently. Whether it’s been a bull market or bear market, this company knows how to bleed value.

According to the company, “Invictus MD is one of Canada’s leading diversified cannabis companies committed to providing medical cannabis.” While the company touts itself as a leader in the industry, their stock has been getting absolutely shredded for over a year now as they speed towards bankruptcy.

Their operations have been a flop as well, for Q1 of this year the company had a net loss of $14.2M CAD ,while doing just $1.2M CAD in revenue.

Aside from bringing ex celebrity Gene Simmons on for a pile of paper, and changing their ticker from IMH to GENE, the company really has no differentiators from a marketing aspect. They are just like every other weed company, but with a lot less money.

Now there’s a chart you could ski down.

For those unfamiliar with Invictus, here is a Small Cap Power informercial where former Invictus CEO George Kveton gives the canned ‘we have big dreams’ speech to an interviewer who has never heard of the company – it’s gripping to say the least.

At this rate Invictus will be broke by…last month

Invictus has an insane burn rate, even for a weed company. They are quickly drowning and dumping assets to merely pay their directors and keep the lights on.

From January 2018 to January 2019 the company went from a cash position of $37.5M, down to $9.8M – that’s an average spend of $2.3M per month.

On July 2019 that position dipped even further down to $1.6M – meaning an average spend of $1.3M per month. At this rate Invictus will be broke by…last month.

Things look bleak, but investors fear not! In July, Invictus did a raise at $0.40, granting 1,250,000 shares for proceeds of $500,000 – which at this rate gives them about 2 extra weeks of runway. But, Strangely enough, Invictus CEO Trevor Dixon picked up all of those 1,250,000 shares the same day the release came out. It looks like the CEO has confidence, but as the only subscriber, it looks like he’s alone on this one.

Earlier this month, Dixon bailed and a new interim CEO was declared.

Invictus subsidiary Acreage Farms received a non-binding loan of up to $6M, at a 10% interest rate, but this doesn’t appear to be how the company is currently floating. According to the release, the money is for the completion of the 90,000 square foot Phase III cultivation facility near Edson, Alberta, including the purchase of automated processing equipment and the development of the EU-GMP facility.

What is Invictus up to these days? They are selling off assets rapidly as they need to pay their directors.

On August 30th, 2019 Invictus sold its subsidiary 0989561 BC Ltd.

On September 20th, 2019 Invictus sold its subsidiary Future Harvest.

From the company’s most recent MD&A:

The financial mess above is beyond troubling, however, earlier this week Invictus announced a terminated deal with Authentic Brands that sees Invictus dishing out $3M by 2020 – which looks highly unlikely at this point.

According to the release, Invictus has agreed to pay Authentic Brands $407,000 CAD in cash on October 22, 2019 which had been owing under the terms of their once agreement. The rest of the $3M Invictus owes them can be paid by cash or stock (above $0.12) by January 2020. If Invictus can stay above $0.12, they can pay the rest of the amount owing in shares, but that’s a big if, a rollback may be in order come 2020 if we see Invictus continue to get shredded.

Still the most bizarre move in the history of weed

There were many cannabis marketing flops, but, Invictus said ‘hold my beer’ and grabbed someone who hasn’t been relevant in about 30 years, gave them $2.5M in cash, 6.4M shares, changed their ticker to $GENE, created a subsidiary weed co for him, and set him loose onto the media landscape to be their head evangelist.

What did they get in return for that deal? We still don’t know.

And, why Gene? Out of all the influencers a cannabis company could have afforded in 2017, why choose one who is culturally irrelevant, and staunchly anti drug? Simmons knows less about cannabis than most of the ex cobalt mining CEO’s who run the LP’s.

The only plausible reason is they wanted to tap into investor’s nostalgia, not realizing that most cannabis investors are too young to really care about Gene Simmons, it was a really bad fit. For our readers under 45, Gene Simmons was a part of KISS, a rock band from the 70’s and 80’s who made music for truck stops and strip clubs. It’s not really something you would really want to smoke weed to, unless you pumped gas, or were Dirk Diggler’s fluffer.

KISS ended, and after decades of irrelevance, Gene Simmons decided to become a media personality, starring in multiple reality television shows that contrasted his past life of rampant groupie sex with a now generic, everyday American family. This ticked all the boxes for modern cable television, but the shows were wildly unpopular as audiences began to realize that once the makeup came off, there really wasn’t much there.

Gene-Etics

Some people see Simmons as a marketing God, and while KISS was a good marketing bit with the comic books and makeup, since then Simmons hasn’t really been that disruptive in any industry. But, Invictus saw the opportunity to give him some of their dwindling resources, including launching a weed brand built around Simmons himself, this was also perplexing as Simmons has stated on multiple occasions that he has never been high before.

Again, great fit.

According to the company’s annual report, Invictus incurred $7 million of one-time costs expensed to Sales and Marketing ($6.7 million of which was non-cash) related to the acquisition of Simmon’s company ‘Gene-Etics Strains Co’. and related intangible assets – a Google search shows no information related to this brand.

Gene Simmons has since quit Invictus,and as far as we know he is no longer active in the cannabis world.

Final thoughts

On paper this company should be bankrupt by now. The current climate of cannabis stocks is pretty bleak, and raising money isn’t easy like it was 2017. This company has been burning cash rapidly for years now, thinking the glory days of early money raising would last forever.

They are now selling off their assets to keep the lights on and pay directors. With just over $1M in revenue a quarter combined with a $14M loss, this company is not doing anything special. They also need to pay out over $3M to Authentic Brands in 2020 with just $1.6M on the books currently, and their last private placement had 1 subscriber. They have resorted to getting loan money which will also need to be paid back.

The stock continues to dive down further, and if it hits below $0.12 the company could be in major trouble as one of the deals they owe on requires the settlement to be paid in cash, or, stock worth more than $0.12.

The clock is ticking quickly on this company, and this looks to be the final hours.