Exclusive Interview with Body and Mind President and Interim CEO Michael Mills and Body and Mind COO Trip Hoffman
Multi-state operator Body and Mind (CSE: BAMM) (OTCQB: BMMJ) started as a private company serving the Nevada medical market five years ago. Now, it has operations in Nevada, California, Arkansas and Ohio. President and Interim CEO Michael Mills and Chief Operating Officer Trip Hoffman spoke with New Cannabis Ventures about their company’s approach to measured growth and moving toward profitability. The audio of the entire conversation is available at the end of this written summary.
Mills spent more than 30 years of his career in business, ranging from media to technology. He was an early investor in the cannabis space and decided to move into the industry himself. Hoffman comes from a scientific background, with a Ph.D. in physics. He also spent a significant portion of his career in the finance sector. In 2015, he decided he wanted to get into the cannabis space but found it difficult to raise capital with no direct experience. So, he answered a Craigslist ad and spent a few months working as a trimmer. From there, he owned a cultivation operation in Colorado and ran two dispensaries. Through his consulting work, he met the Body and Mind management team and joined them last year.
Body and Mind continues to have support from its founders, including Director Robert Hasman. Mills also points to CFO Dong Shim, who has worked with a number of public companies, as an important member of the leadership team.
From Private Nevada Company to MSO
Body and Mind was one of the original cultivation and production license holders in Nevada, which has allowed the company to build strong relationships with most of the purchasing managers and dispensaries in the state. Nevada is now a recreational market, and the company has products in almost all of its dispensaries. Body and Mind has two facilities in Nevada, recently completing the build-out of a new production facility.
In California, the company has a definitive agreement in place with ShowGrow, which gives it a path to 100 percent ownership of a Long Beach dispensary. The deal is expected to reach completion in the next couple of months, according to Hoffman. Body and Mind also has manufacturing operations in Cathedral City and a license for a dispensary in San Diego that is expected to become operational soon.
The company worked with licensee Comprehensive Care group who won a license in Arkansas at the end of 2018 and developed its operations through 2019. Recently undergoing final inspections, this operation is expected to come online soon as well.
In Ohio, Body and Mind owns 30 percent of a dispensary and production facility with a definitive agreement to own 100 percent. The dispensary has been open for over a year, and the production facility is under development, according to Mills.
Instead of buying built dispensaries or buying a license, Body and Mind has found value in winning licenses. Additionally, the company’s approach to building out its operations has been measured. It has opened a facility and got it running efficiently, rather than opening multiple facilities at once. Wining applications will likely be the company’s approach going forward. States of interest include Michigan, Illinois and New Jersey.
Body and Mind has done strategic acquisitions, and it may do so again. With a number of companies feeling the capital crunch in the market, Mills expects that some licenses that have been sitting and waiting for development may become available. But, it will be circumspect in regard to opportunities. In the past, it has taken heat for not doing deals, but the company saw a number of these opportunities as expensive and not a match for its strategy of measured growth, according to Mills.
The Body and Mind Brand
The Body and Mind brand centers on higher-end products at a lower than average cost. In Nevada, the company spent the time to develop strains, hand trimming and growing in smaller batches. In addition to its flower products, the company has extracts, concentrates, vapes and edibles. Its edibles line includes chocolate-dipped pretzels, as well as gummies and mints.
The company is targeting a general demographic, aiming to appeal to anyone who wants to use cannabis medicinally or for relaxation and recreation.
Australis Capital is one of the company’s strategic investors, which has helped Body and Mind move forward with the ShowGrow deal and its definitive agreement in Ohio.
The company’s other investors, though none own more than 10 percent aside from founders, have been a supportive resource, according to Mills. He has had investors share their ideas and feedback on marketing, new products and more.
Funding and Capital Allocation
Body and Mind has done a relatively small number of financings, the last being in May of 2019. The development of the new Nevada production facility, Arkansas operations and the San Diego dispensary is largely complete. Since last summer, the company has been aiming to move to an EBITDA-positive model.
As it continues to grow, winning licenses will remain a priority, and Mills expects licenses to become less expensive in the near future. While a debt instrument may be an option to help fund expansion efforts, Body and Mind is largely aiming to reach a position where it does not need to raise capital.
Current Operating Challenges
Body and Mind is navigating the challenges of multi-state operations; demand is down in some markets and up in others. In Nevada, dispensaries have shifted to a delivery-only model in response to COVID-19, which has led to a decrease in wholesaling, according to Hoffman. In California, the company had its best month of sales in March and is looking forward to another growth month. While pivoting to meet these challenges, the company is also prioritizing the safety and security of its employees and customers.
Revenue Ramp Up in 2020
Thus far, the only revenue the company reports comes from its Nevada cultivation and production operations. Though running the Long Beach, California dispensary since August, the company has yet to complete the license transfers and take 100 percent ownership. The same is true of its Ohio operations. Once those definitive agreements are closed, that revenue will be consolidated to the top line. Plus, the company is close to bringing its San Diego and Arkansas dispensaries online. All of these initiatives represent a revenue ramp up for 2020.
Body and Mind is in a unique position, with no serviceable debt and just over 100 million shares outstanding, according to Mills. With companies running out of capital and more consolidation on the horizon, Hoffman expects the companies that have the cash to reach profitability over the coming months will be the industry’s survivors.
To learn more, visit the Body and Mind website. Listen to the entire interview: