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Zoetic International makes rapid progress with CBD business

Proactive Investors Thursday, 13 February 2020 ()
What the company owns Zoetic International plc (LON:ZOE) performed a major shift in direction in 2019. Formerly known as Highlands Natural Resources, an oil and gas group with wells in Colorado, in March the company got into the CBD business and changed its name in August. It has established CBD sales on both sides of the Atlantic with 67 US stores now stocking its products. Its first retail distribution and sales agreement was with Schrader Oil’s chain of eighteen convenience and gas stores, which also invested £100,000 in the business as part of the deal. These stores are stocking CBD products under the Chill brand, namely chew pouches and pre-rolled ‘smokes’.   How it is doing The six months ended 30 September recorded revenues of £1.15mln, up from £0.52mln the previous year, and ended the period with £1mln in cash. In November it listed on the OTC in New York. CBD In the US, Zoetic has attracted interest from companies such as Mr Checkout, AATAC and New Age Beverages. Chill chew pouches are its best-selling products. In the UK it launched CBD gummies in February following targeted media campaigns, appearing on publications such as the Times, the Sunday Telegraph, Easyjet's in-flight magazine, Absolutely London, Spa Elemental, Styletto and Northern Life. The company is planning to start selling feminised hemp seeds between February and March. In preparation for that, Zoetic has registered as a seed distributor in five US states and is also developing a bespoke website to advertise seed sales. Gas production Zoetic told investors in October that it was in discussions with several parties on the sale of its historic oil & gas assets as it looks to focus solely on CBD. The East Denver project brings in monthly revenue, while there is US$270,000 outstanding in bonds lodged with state authorities. Of these, US$50,000 are expected imminently. DT Ultravert The CBD business was spawned, in a serendipitous way, through Zoetic's ownership of a 75% interest in the economic value of a technology called DT Ultravert, which prevents ‘well bashing’ and enhances well productivity. The process involves the injection of nitrogen gas into an existing well at the same time as a new nearby well is fracked. Zoetic enjoyed some early-stage success in deploying the technology but needed its own nitrogen supply represents one of the largest cost inputs. As a result, it bought a nitrogen producing asset in Kansas in May 2018, which is also a naturally occurring source of hydrogen. Given the volume of nitrogen produced at Kansas, the company realised it might create another revenue stream by becoming a supplier in its own right, as well as using nitrogen to improve its own crops. A pilot project with a Colorado-based organic legal cannabis company surpassed expectations, with the gas mixture increasing plant size, height, root diameter and flower count by up to 30% and inspired the group to enter the CBD business.     What the boss says: Nick Tulloch, chief executive "Our business continues to develop on all fronts and, although competition in the CBD industry shows little sign of abating, our strategy of leading with compelling branding is beginning to show signs of paying off."  “In both the US and Europe, our Chill and Zoetic brands are consistently well received." "The onus is now on us to deliver our products at high volumes and with no compromise on quality."   "We believe our switch to outsourced manufacturing will achieve this and our trials will be completed in the coming weeks following which our distribution contracts will get underway. "   Video   Inflexion points First feminised seeds sales expected in the first quarter Oil and gas assets are being held for sale Hydrogen/nitrogen produced naturally in Kansas, with significant beneficial results in growing cannabis and hemp plants
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