The Truth About Invictus: IMH.C

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A million dollar dividend.  

…What do you mean that a 2-yr old, sleepy little pot stock is about to announce a $0.10 per share dividend?  That just doesn’t happen in this space!

Dividend is a word you never hear in the micro-cap space… ever.   A 10% yield?!?  GTFO of here…

“More pro, less bro” as my good friend John Fowler famously said.  It makes guys laugh every time they hear it because you know exactly what it means.  That’s IMH.  If there’s one word to summarize Dan Kriznic, the CEO and founder of IMH and how he’s running the ship; it’s Professional.  

I’ve always given the advice “act the part, dress the part, be the part – get the part”.  When you come out of the gate with huge ambitions and you stick to it…  when you come out of the gate and ignore all the noise, the naysayers and the temptations… When you tough it out yourself, and refuse to cluck with the chickens, but instead choose to soar with the eagles…  I’ve found that all to be true in watching this little, 2 year old company mature and blossom into a cash generating machine, that will make any 20-year-old company embarrassed at just how much can actually be accomplished in only 20 months.  Less than 2 years and IMH has bought and sold 3+ companies, incubated a top-secret, disruptive handheld medical device, produced top-tier material and educational videos on the medical side of the space and simultaneously acquired 82% of an absolute gem of a business at an absolutely perfect time (FHD).  And on paper, so far, the FHD acquisition very much looks like a pennies-on-the-dollar score for Invictus.  

Kriznic came out of the woodwork in late 2014 with a project that would go all but un-noticed to the red-eyed ‘potstock’ crowd at the time when the only thing everyone was talking about was licenses… licenses on applications done by companies that now trade publicly, with promoters in charge, inside of what where dormant mining shells only months earlier… nothing of substance.  So many disgraces.  So much embarrassment.  RTO’s that literally gave the term RTO a bad name.

Due to his pedigree and experience in the real world, Dan had full intentions of creating a company – not just buying some shell to promote.  And create he did.  He was awarded the prestigious Top-40 Under 40 award in Vancouver in the years prior and came into the business as a decorated long-time member of the Deloitte family as a senior accountant and deal-maker based here in Vancouver.  He was new to all the nuances (fantasy) and glitches that plague the micro-cap space today, and prided himself on “always billing by the hour and never making a commission cheque in his life”.  I met Dan with Brian Paes-Braga in early 2015 when I was the Executive VP of the best commercial cultivator in Canada; Supreme Pharmaceuticals (SL.C).  I liked what I heard from Brian and Dan so much, that I (reluctantly) resigned from my post at Supreme  (I had to as well due to some personal health issues).  I later went on to pursue the idea with these rogue dealmakers and was immensely impressed with the laser-focused plan on rolling up the fragmented Cannabis Sector with a sort of VC/private equity model, but publicly traded, as ticker symbol IMH.C.  And to do it with a big middle finger to the old ways of Vancouver smash-and-grab type deals; to create, to build and THEN to talk about it.  Not the other way around.  We joked about how companies doing well at the time had very much survived on LOI’s alone.  The history books wrote the rest.  But Invictus took the more corporate, big, private-company approach to everything, and I mean everything.  One might say the ‘conservative’ approach, something that I admired very much having been an entrepreneur my whole life and knowing what it takes.  And as much as shareholders will always bitch and ask the company for fluffy news releases, and updates so they can play armchair quarterback in the bullboards – you just can’t play that game long term.  It’s not the way it’s supposed to be and I truly hope it’s a trend that stops in micro-caps.  That fine line between being promotional as you have to be, but also keeping your cards close to your chest.  It’s an art in venture capital as much as a science.

Now, IMH is easily able to raise money and use equity as a currency for the right opportunities; it was a hugely successful RTO with one of the more respected deal-builders and financiers in town, David Eaton, Principal at Baron Group.

David, Brian and Dan took IMH public just days before Christmas on the 23rd of December in 2014, raising only $440,000 under the radar.  They were quiet for a reason – they were working.  And what they’ve got today – a mere 2 years later is nothing short of astounding.  The hard asset value that’s been created in IMH is unmatched in recent Canadian venture capital history, in my opinion (please prove me wrong of anything comparable).  A true testament to the conviction and steadfastness of its leadership.  Invictus has now paved a 4-lane highway for the likes of absolute money-making-monsters like iAnthus (IAN.C) and the very anticipated CannaRoyalty Corp. led by Mr. Marc Lustig (soon to be trading as CRC.C).  Much more on that one very soon as I have been fortunate enough to work alongside Marc as he builds out the most impressive portfolio of businesses that I have ever seen.

I was shouting from the hills when the first 20% stake in Future Harvest Developments that Dan negotiated for only $500k with a ROFR (for up to 75% of the entire company) had closed.  Our market cap was tiny at the time, under $5mm, and FHD was not a start-up either, with some shiny deck and sexy pro-formas.  Not even close – FHD is a 20+ year pioneer in the space, led by Byron Sheppard, who knows who you need to know on the nutrients and lighting side of the cannabis space – picks and shovels as they say.  By this time the forward-looking minds knew that the margins will be in the peripherals and the brands and IP, not in the cultivation (and eventually not even in the retail of the flower as we’re seeing now).  Do you want to be a farmer or do you want to invest in technology and valuable data?  FHD had found their niche and strong following early on.  Based in Kelowna, BC , they enjoyed a massive two decade run on small scale gardens.  But FHD had much bigger plans for the future (no pun intended).  When one runs the numbers on mom & pop small-scale cannabis grows vs. the multi-billion dollar lawn and garden business; it becomes very clear where to focus your efforts, so they’ve been doing just that.

Mike Blady, possibly the most interesting man in venture capital was the connector of FHD to IMH in late 2014/early 2015 and since then has personally championed their HUGE move into the US lawn & garden space.  Literally driving the business to the next level – in very short order.  And the numbers speak volumes; earlier this month, Invictus MD announced that Future Harvest had just achieved 50% year over year growth. Better yet, IMH now owns 82.5% of FHD after accelerating and exceeding their original plans of up to 75% ownership .  Put that in your pipe and smoke it.  Mike Blady was made aware of Future Harvest originally by the Executive Chairman of Doventi Capital, Mr. Norton S. himself (small world, I know).  I have many good friends in many great places… but if I were to make a bet on who makes the first billion in this exciting new space, it’s Norton – hands down.  Businessman-extraordinaire and one of the largest IMH shareholders.

If that’s not enough to prove where this story is headed, Kriznic was able to secure a buyer for Future Harvest’s SunBlaster Lighting line (the best in the business), which roughly made about a third of FHD’s revenues, for a staggering $4.85 million in cash.  And right now that money is being driven directly into the development and expansion of their plant food and other more profitable lines, which are more easily scaled and bring better EBITDA (and thus net profits for IMH, up to and including this massive dividend of roughly $0.10 per share).  I think the most recent financials speak more than anyone’s words ever could;

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There was a $1 million dollar dividend announced in mid-October of this year and of course news of a spinout of a vape device company that is so exciting, that I am just going to leave it at that.  Exciting.  Led by the “Two Ryans” who will take the device side of the business by storm with what they’ve got behind the curtain – believe that.  

But back to the dividend..  Who does that?  Real businesses, that’s who.  They reward their shareholders with real numbers and real cash rather than squander it on stimulating a share price and flying around the world to wine and dine newsletter writers.  Invictus has literally only raised a couple million dollars, has spent zilch on promotion, has trimmed all the fat, has the leanest corporate burn rate in the business and has $5.2mm in shareholders equity as of their last financials in June.  That’s beyond impressive.  That’s what you get with an accountant in charge who understands M&A and shareholder value: 

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The one-for-ten rollback in March came as a surprise to most, even me.  But in looking back, it was not only a good idea, and I’m sure it was a tough one, but it set the foundation for some serious future growth now that the company has only 10 million shares out and has virtually shed any legacy holders, promoters, skeletons et al.  I was a very aggressive market supporter in the high teens prior to the roll back, and since that happened my stock is 1/10th the amount of units and it has a cost basis (literally) from $1.20 all the way up to $1.90.  And guess what – that doesn’t bother me.  In fact, and for the sake of full disclosure, I have not sold a single IMH share yet and have bought over 100k more shares in the market from .66 to .78 in the last 4 weeks alone as I’ve watched the volume come alive.  So this is one instance where I feel a high level of conviction and faith in “averaging down” as the saying goes.  But this is not a trade for me – so don’t jump in here expecting it to shoot over a buck.  This is an investment in FHD and a way to secure your piece of Podavape (name changed from Edison) after the proposed spinout.

To summarize; I don’t think the CEO started this company because he wanted to make $5mm bucks in a year or two.  I think he started this company to see it through to a billion-dollar enterprise.  That is – if a suitor does not step in on FHD before then.  (Don’t be surprised to see offers after the recent activities with GH and Scotts).  If Dan’s name sounds familiar it’s probably because Chris Parry has covered IMH since inception, and even did a great update on the business just a few days ago which you can read here.  Chris’ articles are not only real in the truest sense (he is honest to a fault) but there is a brilliant sort of undertone that only some are perceptive enough to pick up what he’s putting down.  He’s been mislead by many-a-PotCo-CEO but I have immense respect for how he will never mislead a reader – for anyone, or anything, ever.  

Back to a CEO like Dan, who by the way serves as CFO on the well-known lithium behemoth, Lithium X (LIX.V) with Frank Giustra, Paul Matysk and Brian Paes-Braga.  As well as Riwi Corp (RIW.C) with Robert Pirooz.  So are we in good hands and among winners as IMH shareholders?  I certainly think that roster speaks for itself and I look forward to what the future has in store for this mysterious WeedBank.

So is it a good buy here at .80?  Well, how expensive is it?  What’s the market cap?  Book value, and what does it generate in sales and in profits?  Make sure you can answer all of these before anything.  I for one think that this company is a steal under $1 – but that’s just my opinion.  That opinion comes from having a front-row-seat since inception.  But I also know enough to never chase a stock, and my patience has been rewarded on this one by bidding down in the high 60’s and mid 70’s.  Don’t be afraid to contact the company directly with any questions and get clarity yourself, along with your advisor(s) before making ANY moves up down or sideways.  Like all micro-caps this stock is still considered very high risk and they have their last PP coming free-trading this week.  It’s so tightly held now that it may not even make a bubble, but be aware of it in case there’s a chance to buy it cheaper a week or so after the restriction is gone.  (That would be Nov 8th-ish)

*UPDATE* as I was writing this today, this piece of news came out.  I know a bit about the lab and can confirm that this is yet another fantastic move, getting exposure of a real lab in Central-BC with this calibre of equipment and staff that will soon have a Section 56 license.  Brilliant, brilliant move IMHO.

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-Brayden Sutton

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DISCLOSURE:  The author has no commercial affiliation in any way with this company.  This posting was not incentivized in any way, shape or form.  The author is a shareholder and has been buying common stock in the open market since the IPO.  No intention to sell any shares in the next 90 days.

 

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