Crop Infrastructure (CROP.C) has had a rather nasty run in with the rabid flora and fauna of rural Nevada, seeing the majority of their hemp and THC bearing crops laid low by the savage antelope.
According to Michael Yorke, CEO of Crop, his company has “been humbled by the realities of commercial scale farming with hard lessons learned,” adding that Crop is “determined to forge ahead” with and we are readying our teams to complete the harvesting of the remaining hemp in Nevada, and THC in California, Washington and Oklahoma.”
“Major losses.” Those are the words used to describe the events which took place earlier in September. Pity.
I am a great fan of real-estate investment trusts (REITs), a business model similar to they which Crop employs.
It has to do with the hierarchy of expenses. Rent is paid before EBITDA is even calculated, meaning things have to go rather pear shaped before property owners lose out on revenue.
And CROP isn’t in the farming business like other licensed producers, it’s in the rent collecting business. Unfortunately, landlords have trouble collecting rent when their tenants’ crops are destroyed by bloodthirsty varmints.
This is why the company announced the following in early October:
“Crop Infrastructure Corp. will undertake major management actions to remedy recent operational failures from its investments and implement improved reporting protocols throughout its structure, including its investments.”
The company has investments in six United States-based limited liability corporations in California, Nevada, Washington and Oklahoma, but disappointing performances have led the company to re-imagine its southern strategy.
“We believe Crop and our shareholders deserve better representation after these very disappointing performances to protect and enhance our U.S. business interests, and we are committed to making appropriate changes to facilitate the growth of these investments,” Yorke said.
To that end, the company is selling its deposit on its extraction equipment for hemp operations, capital it will need to free up since a collateral agent acting on behalf of debenture holders sent management a notice that the debenture interest has yet to be paid.
Worse yet, Crop’s 49%-owned Nevada interest, Elite Ventures Group, has revived notice that it is currently in default on the mortgage for its Nevada THC property.
The company currently has promissory notes against the assets of each of the U.S. LLCs and has demanded their repayment and is calling all of the notes on its assets to secure the company’s U.S. LLC investments.
Crop Infrastructure is in dire straits, and with only $86 thousand in cash as of May 31, 2019. With a $4 million debenture which converts at $0.30–the company’s stock closed at $0.03 yesterday–they are going to need to sell more than their processor deposit to cover their seemingly insurmountable debt.
I won’t bother shorting this company, as it would be unsportsmanlike. My father taught me to let a man up before knocking him down again, and the same principle applies in the capital markets.
More money to be made that way.