Cannabis Sativa Inc (OTCBB:CBDS) Draws Attention to Itself

At the end of the third quarter of 2013, Cannabis Sativa Inc (OTCBB:CBDS, CBDS message board) sold its tanning salon business and focused solely on producing natural health and nutritional products (some of which are based on hemp oils). Two months later, they changed the company name and CBDS officially became a pot stock. This means that it’s been on a wild ride since the beginning of 2014.

The ticker stormed out of the sub-dollar levels in January and hit a 52-week high of nearly $16 per share on March 6. It then dropped back down and spent quite a lot of time fluctuating between $4 and $6. All in all, a typical pot stock performance. Unlike most of the cannabis-related tickers, however, CBDS failed to register any sort of consistently high volumes. This, it seems, is about to change.

Quite a lot of shares were traded over the last couple of weeks and judging by the buzz on discussion boards and social media, a lot of people are now jumping in. As a result, the price is going up. The run is not exactly consistent, but CBDS did manage to gain more than 140% in a matter of just ten days. The stock currently stands at $9.75 per share which commands a market cap of a around $146 million.

The reason for all the commotion is the acquisition of Kush and the subsequent changes to the management team. CBDS issued around 3.3 million shares of common stock and in exchange, they received a development stage company that owns a licensing agreement for a medical cannabis trauma cream.

Fortunately, we now have access to Kush’s Q1 financial statement. Unfortunately, it doesn’t look all that impressive. Here’s what the new daughter company had on March 31:

• cash: $456


• current assets: $1 million


• current liabilities: $759 thousand


• no revenue


• quarterly net loss: $377 thousand

Upon the closing of the acquisition, David Tobias (CBDS‘ ex-CEO) stepped down from his position and a former governor called Gary Johnson took the helm. In addition to this, a certain Steven Kubby became Chairman of the Board.

CBDS try to convince us that with Mr. Johnson’s help, the company will receive a lot of exposure and they seem to be right. He already gave some interviews which have served as an additional catalyst for the surge in investors’ interest.

CBDS also tell us that Mr. Kubby is an established name in the pot industry and that he’ll help get the business off the ground. Indeed, if you do a quick search, you’ll see that he has been involved in numerous cannabis-related projects which should mean that he has plenty of experience. At one point, however, he had some problems with the law and in 2006, he spent some time in jail.

Mr. Kubby’s past won’t necessarily hamper CBDS‘ stock performance, but we can see of one thing that could definitely put a spoke in the wheel.

A couple of years ago, CBDS (then called Ultra Sun Corp) issued some promissory notes and in April 2013, for reasons that are not very well explained, they decided that adding a conversion feature is a good call. During the first quarter of 2014, the note holders decided to take advantage of the said feature and they turned $78,112 worth of debt into 3,889,071 shares of common stock. In other words, the conversion rate came in at around $0.02 per share – 99.8% below the current market price.

If the note holders decide to unleash the discounted stock on the open market, the effects on CBDS‘s price could be quite devastating. That’s why doing a lot of due diligence and considering all the risks is absolutely essential.

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Cannabis Sativa Inc (OTCBB:CBDS) Draws Attention to Itself