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Newly minted Safe Harbor Financial (NASDAQ: SHFS) CEO Terry Mendez outlined a four-point plan to transform the longstanding cannabis financial institution into a much broader resource hub for marijuana companies, during a call with shareholders on Thursday.
The plan, Mendez told Green Market Report prior to the call, is a means to an end. He said that Safe Harbor has been underutilizing its own assets and connections in the cannabis industry, which he argued could easily be monetized with the right approach to clients, boosting the company’s overall performance and bottom line.
Terry Mendez
The strategic “shift,” as Mendez called it, comes in the wake of several important financial milestones for Safe Harbor over the past year. First, the company fell out of compliance with Nasdaq listing requirements that companies be valued at a minimum of $1 per share, Mendez said. Then it had to weather the fallout from a failed acquisition of Abaca that cost Safe Harbor millions. Then there was a recent $6 million debt restructuring, right after CEO Sundie Seefried announced her retirement and the appointment of Mendez.
Despite a January milestone when Safe Harbor surpassed $25 billion in cannabis-related transactions since its founding in 2015, the company posted just $353,817 in net income in its most recent quarter. Mendez believes Safe Harbor can do better.
Regaining Nasdaq compliance is one of Mendez’s top priorities, to which end, he asked shareholders to approve a reverse stock split. Beyond that, he believes there are several very easy ways for Safe Harbor to expand its services and bolster its bottom line.
“I envision a day where somebody can log into our Safe Harbor platform or portal and not only see their banking activity and transfer money and add new users, but see what’s going on with their insurance products, see what’s going on with their HR and payroll products, see what’s going on with their supply chain products,” Mendez said. “I want people to understand when they pay … for one of our accounts, they’re getting a team of people that are looking at their business and trying to help them be successful individually.”
Mendez cited one estimate that found the U.S. cannabis industry to be worth $76 billion, not including all the various ancillary companies selling cultivation equipment, paraphernalia and other tangential non-marijuana goods.
“If I can just participate in 1% of that, and if I can earn platform fees associated with 1% of that, that business alone will be twice the size of our core business today,” Mendez said.
Mendez said his plan is to roll out four new specific suites of services for cannabis companies:
Safe Harbor Protects, to establish financial services for cannabis industry workers, not just businesses, to facilitate paycheck cashing, real estate loans and more.
Safe Harbor Lends, to build a new network of financial providers of all stripes and create a one-stop-shop for marijuana businesses looking for capital.
Safe Harbor Connects, to set up a consortium of businesses in order to leverage large-scale buying power, create a professional services network of providers and provide other resources.
Safe Harbor Enables, a “low-cost center of excellence” where cannabis companies will be able to find quality professionals to help with payroll, human resources, accounting and other standard business services.
Some of the new services will come with added costs, but many will be built into the company’s existing cost structure, Mendez told Green Market Report.
The primary pivot, he emphasized, is away from a financial institution mindset and business model to a more all-encompassing general business services provider for marijuana companies. The new services will be rolled out on an ongoing basis in coming months.
His plans don’t stop where cannabis ends though. Mendez wants to get into any industry that doesn’t have reliable banking services. But, he said, that depends on expanding the number of banks that are part of Safe Harbor’s network.
“I would love to see a day where Safe Harbor is not only in cannabis, but we’re doing psilocybin, that we’re doing gaming, that we’re doing crypto, that we’re doing some other of these de-banked industries, but that requires us to have financial institutions that are willing to play ball with us,” he said. “If you have more financial institutions, you’re able to be more creative because each one of them have a different risk tolerance and what they’re willing to do.”
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