What Happened To Cannabis Leaf Inc (OTCMKTS:PCFP)?

Today, we need to talk about a Cannabis Leaf Inc (OTCMKTS:PCFP), a wholesale distributor of cannabis products.The company recently released its latest quarterly report, which seemed to be appreciated by market participants in September and October. The share price went from $1.0 to close to $1.5 in less than a month, delivering approximately a 50% return to those who were rapid enough to assess the news. Then, on October 23, 2017 the share price collapsed. From $1.4 the share price declined to approximately $0.8. Have a look at it before we explain what's going on: 2 months chart for PCFPBusiness HistoryThe company was founded on October 6, 2014. The company's business objective was the mining exploration of geological formations to identify copper, lead, zinc, and tungsten deposits. To date, it owns mining claims, which are said to be currently in good standing with Elko County and Bureau of Land Management. They are located in the Ruby Valley, approximately 83 km southeast of Elko Nevada. According to the company, still there is a lot of work to do in order to determine the economic and legal feasibility of the project. Company LogoBut, the most interesting events came in 2017. On June 2, 2017, the company merged with Cannabis Leaf Incorporated., a Nevada Corporation. The Merger was approved by the Board of Directors of the company and the subsidiary on the same day. As a result, the name was changed to Cannabis Leaf Inc.What's the new business model?This is what we could read on the OTC Markets website:

"Cannabis Leaf, Inc. is a wholesale distributor of quality, end use edible cannabis products. We offer brands from local sellers with variety for recreational and medicinal use in legalized states." Source

We believe that the corporate move is quite smart. After the legalization of some forms of medical marijuana in the US and Canada, the demand for marijuana products has increased resulting into the growth of the marijuana industry. Cannabis stocks are reporting interesting growth and stock returns as a result. Cannabis Leaf, Inc. seems to be doing the same thing. We appretiate it.Recent DevelopmentsThe following are the most significant developments that have pushed up the share price in 2017.On June 2, 2017, the merger was released to market participants. Additionally, the Board of Directors accepted to increase its authorized shares from 100,000,000 shares to 600,000,000 shares, affecting a 6 for 1 forward stock split. The market did not really react to this announcement, as the information about the new business model was limited.On June 21, 2017, the company released a quarterly report, wherein the financial statements before executing the merger were noted. We believe that our readers will appreciate checking the most significant accounts (for the period ended april 30, 2017):

• Cash: $6,200
• Total Assets: $35,173
• Total Liabilities: $72,225

On September 19, 2017, the company released new financial statements for the period ended July 31, 2017. Please note how the amount of assets and liabiltities increased.

• Total Assets: $68,722
• Total Liabilities: $125,573

We believe that two things were appreciated by the market; the increase in the size of the balance sheet and entering into the marijuana business. As a result, the share price increased.Additionally, we believe that the low float may explain very well why the price volatility is high:Authorized Shares600,000,000a/o Aug 07, 2017Outstanding Shares50,340,000a/o Aug 07, 2017-Restricted36,000,000a/o Aug 07, 2017-Unrestricted14,340,000a/o Aug 07, 2017Held at DTCNot AvailableFloat14,340,000a/o Aug 07, 2017Par Value0.001SourceShort sellersOn October 23, 2017, the share price collapsed. It is difficult to explain reasons behind this decline, because the company did not release any news.We believe that short sellers have been operating in the market and are responsible for the value lost. Have a look at how the short interest increased in August and September:DateShort Interest% ChangeAvg. Daily Share VolumeDays to CoverSplitNew IssueSept 29, 20175,05273.9760,2661.00NoNoSept 15, 20172,90460.4469,8711.00NoNoAug 31, 20171,810135.376,1731.00NoNoAug 15, 2017769100.0012,2261.00NoNoSourceConclusionCurrently trading with a market cap of $71 million, PCFP is an interesting story among small caps. The company is still in the pre-revenue stage and it has to provide some financial figures to check that the new value proposition really works. Additionally, short sellers have been operating in the market.But, we believe that the change in the business model, the low float and the balance sheet improvement are all positive. However, considering the volatility in the stock price, caution is warranted.We will be updating our subscribers as soon as we know more. For the latest updates on PCFP, sign up below!Image courtesy of Tim Pitot via FlickrDisclosure: We have no position in PCFP and have not been compensated for this article.