What's the difference between marijuana and cannabis?
Cannabis is the real name of the plant, the scientific name. Marijuana however is a nickname of Mexican origin.
What is the difference between CBD and THC?
In short, cannabidiol (CBD) and tetrahydrocannabinol (THC) are the two most prominent cannabinoids found in Cannabis, the plant genus that includes both hemp and marijuana. While there are over 100 different cannabinoids so far identified in cannabis by scientists, CBD and THC are by far the most extensively studied and best understood. THC is pychoactive and CBD is not. Both have healing properties.
How are the investment vehicles arranged in cannabis?
Most investments have an "offering" and a formal writing that describes yield expectations, risk considerations and time-lines for the investment...the best investments make sense and tell a story and have a narrative that supports the various claims.
What’s the biggest risk in investing in cannabis?
Fraud, inaccurate data and misrepresentation represent the biggest risks in all types of investing in marijuana. Further, poor leadership and lack of vision and execution represent other causes for increased risk.
Which are the safest marijuana investments?
Investments that make sense and that have strong leadership and vision. Integrity is also a principal tenant in selecting quality investments. Real Estate driven investments always are good with expert advice.
Is it too early to invest?
Too early? The industry will never be smaller than it is today - at least that is our belief at Goldstalk. Though good opportunities to invest in the cannabis industry will exist for decades to come, the opportunities of today are ripe for investors looking to make alternative investments in high growth industries. Most of the investment opportunities are in companies that would be considered small to medium businesses.
Are investments in cannabis legal?
Opinions from legislators, academics and the legal community universally accept the lawfulness of investing in cannabis, though not completely, in that there are many variations of where to invest that have varying degree of risk and legal foundation. Investing in stocks and public companies are typically safe and compliant while investing in poorly constructed investment vehicles present legal issues un-associated with the plant itself. As a schedule I drug, the Federal government can enforce its will on the investment community in a variety of ways, including enforcement of current laws by the department of justice, IRS, FTC, etc.
What is an investment deck and an executive summary?
Cannabis founders looking for capital need to have a deck and executive summary. Something well written and professional deserves attention. Pay attention to the nuances of what is received. Dates of exhibits, officer compensations, bad debt, location, etc. The decks for investments under $2mm generally are limited in scope and quality so more due diligence is advised.
What documents are needed to make an investment decision?
The best investments have plenty of papers that answers both big and small questions about the opportunity. The documents an investor needs are:
Offering memorandum
Current and Proposed Financials
Evidence of compliant license status
Inspection of facility
Business and marketing plan
The list continues….
How do investors get paid since there are no banks that can process my checks?
Only participate in investments that pay in traditional ways or consult your CPA about best practices.
What is an accredited investor?
In the United States, to be considered an accredited investor, one must have a net worth of at least $1 million dollars, excluding the value of one’s primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year. The term “accredited investor” is defined in Rule 501 of Regulation D of the U.S. Securities and Exchange Commission (SEC). Please check with your financial advisor to see if you qualify.
Is being an accredited investor required to invest in cannabis?
It depends on the type of investment you are considering….the investment itself will dictate investor status. Look for statements that describe investor suitability requirements.
What are Goldstalk’s Investment Criteria?
Visible and viable exit strategy and path to monetization
Synergies with sister companies, our investors, founders and our industry network
We must learn if the investment serves our internal investment criteria. Tightly forged relationships insure our success.
Experienced, seasoned, and mature management team
We are looking for diversity in gender, ethnicity, age and religion. Wharton grads are welcome.
Clear visibility to profitable cash flows
We are looking for tempered claims of revenue.
Reasonable and justifiable valuations
This is where most opportunities fall short and where the real money is earned. Valuations are rarely reasonable, at best.
Strategic and capital strong co-investors
Why are most of the pot stocks on the OTC:
Easy access. Provides new industry access to investment capital in the public market.
What are the three tiers of the OTC Exchange?
OTCQX is the highest tier of the OTC. Companies that trade on the OTCQX meet certain financial metrics, can prove that they are in compliance with U.S Securities laws, provide disclosures, and are sponsored by a professional, independent third party.
OTCQB has less stringent requirements than the OTCQX tier. Companies that trade on the OTCQB are developmental companies. On May 1, 2014, the OTCQB implemented a one-penny bid price requirement ($0.01) to improve the quality of the tier. To qualify for the OTCQB tier, the CEO or CFO must certify that the reported information is current and accurate and are required to go through an annual verification and certification process. Companies that fall under this tier tend to vary in strength because there are no minimum financial standards.
OTCPK (OTC Pink) is the lowest tier on the OTC exchange. These companies typically provide limited or no financial reporting information to the SEC. Technical420 does not recommend investing in companies that trade on the OTCPK due to the lack of information provided. Companies that trade on the OTCPK are considered to be beyond speculative. When an OTCPK listed company becomes current with the SEC, they may qualify for the OTCQB if they also satisfy the one-penny bid requirement. There are only a few companies that trade on the OTCPK and are current with their SEC disclosures.
How do cannabis companies go public on the NYSE if its federally legal?
Many of the cannabis companies are ancillary businesses levered to the growth of the industry. These companies do not actually touch the plant. Cannabis companies do not go public through typical methods. The companies go public through reverse mergers. A reverse merger allows a private company to become public without having to raise capital, which simplifies the process. While conventional IPOs can take months to materialize, reverse mergers can take only a few weeks to complete (in some cases, in as little as 30 days). In a reverse merger, investors of the private company acquire a majority in the shares of the public shell company, which is then merged with the purchasing entity.
What’s the difference between equity and debt?
Cannabis investments opportunities utilize the same mechanisms that are used in most investments, though are more apt to be negotiable. The shortage of investment capital in the industry gives added influence that investors have and can levy…
Equity financing often means issuing ownership interest to an investor. That equity can be an ownership percentage through shares or equity as part of a partnership.
Debt financing means borrowing money and not giving up ownership. Debt financing often comes with strict conditions or covenants in addition to having to pay interest and principal at specified dates.
What is IRS Code 280E?
IRS Code 280E is the bane of the existence of many dispensary owners and other businesses that “touch the plant”. Section 280E says that cannabis growers, processors and dispensaries can NOT deduct expenses from their income, except for Cost of Goods Sold (COGS). In essence, this means that businesses that “touch the plant” need to get creative with their accounting or pay their federal tax bill based on their Gross Profit and not their Net Profit. Ouch!
Do taxes have to be paid on the cash or checks received?
Yes. Income must be treated the same as any legal investment. The issuer of the cash and any compensation will send evidence of this, likely K1 partnership, at the end of the fiscal year. Claim it all.
Is investing in the stock market the best and safest way to earn a nice ROI?
No.
How much money do I need to have to invest with Goldstalk? What is the minimum and maximum?
The range of investments vary greatly. We are a local firm with most of our transaction flow emanating from current founder operators of grow operations, dispensaries and the like. Minimum investments are $50k with exceptions based on the total investment amount. Where the required capital is large ($1mm - $5mm) minimum investments increase to $250,000.00
Do you invest primarily in private or public cannabis companies? What’s the ratio?
Since 2015 we have grown the number of investments we review and underwrite, now receiving between 40-60 investment opportunities each month. Like a VC firm, Goldstalk rejects 99% of all inquiries due to poor construction and premise, inadequate papers, poor presentation or follow up. 60% of our targets are with privately held entities and/or real estate type of transactions. Goldstalk is also interested in the public space and investigates these opportunities with the advice and help of our attorneys and high level advisors.
Can I invest in cannabis if I live in a state in which it is illegal?
It mostly depends on the investment vehicle in which the investment capital resides.
Who manages the syndications and investments?
Goldstalk typically is the managing member of each investment opportunity and the company’s partners and staff act according to the operating agreement, conducting the day to day affairs such as structuring each deal, collecting payments, monitoring progress, and managing the entity’s legal and financial affairs.