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Is Ignite CBD Broke?
It appears Ignite CBD is running out of money.
What happened? What does the future look like for Ignite International & its founder, Dan Bilzerian?
Dan Bilzerian, the trust-fund kid turned playboy, has been dubbed the “king of Instagram.” He spends his time sharing glimpses of his lavish lifestyle hanging out on yachts with a harem of models.
In 2017 Dan formed a CBD brand called Ignite CBD. The idea was that he would use his fame and social media reach (currently sitting at 32.5 million followers) to create a global CBD brand.
But things don’t appear to be going according to plan — and there’s a lot of speculation around the future of Ignite International Brands LLC.
After filing the second-quarter financial reports nearly two and a half months late (which were found buried into a subpage on the Ignite website), the results paint a grim outlook for the company.
Youtuber Tom Nash managed to dig up the reports and has been breaking them down over a series of videos.
The reports suggest the company is on a steady losing streak. Ignite burned through $11 million in 6 months — which works out to nearly $1.8 million per month. In Q2 of 2020 alone, the company had a net loss of $7.4 million. In total, they’re in the hole well over $70 million.
With reports the company was set to go broke in a matter of weeks, Dan Bilzerian was forced to inject $25 million (Canadian) of his own capital into the company to keep it alive.
This was a large sum of money, but it didn’t go very far. Most of this cash went to paying off a lender, only $4 million was left over to keep the company going.
While the $25 million was commendable, it’s not going to keep the company afloat for long unless there are some fundamental changes in the company’s operations.
So what went wrong?
How could a company once valued at over $140 million in 2019 be so close to collapse?
Ignite is hemorrhaging money. The monthly burn rate is out of control — largely because Dan Bilzerian has been using it as his personal spending account for nearly two years. Ignite investors have been funding his insanely lavish lifestyle — buying trips, paying for models, and even covering the rental cost of the Bel Air mansion he’s been living out of.
One of the now-defunct presidents of Ignite, Curtis Heffernen, recently started exposing some of the company’s obnoxious spending habits.
As head of the company, Heffernen was faced with a difficult decision. Many of the expenses written off as “operational” or “marketing” expenses could be deemed unethical at best — fraudulent at worst.
After Dan tried to include an $18,000 liquor tab from a Valentine’s day party under the company’s expenses, Heffernen wasn’t having it anymore. He pushed back and was promptly fired.
Heffernan has been out of work ever since — his career likely forever tainted by his participation in the failing CBD company. He’s now suing Ignite brands and scheduled for a jury trial in December 2021.
After being let go from the company, Hefferenen started exposing some of the insane expenditures slipped under the company expense account.
Here are some of the large ticket items Dan’s been buying with Ignite money:
- $40,000 for a rock climbing wall
- $15,000 for a ping pong table
- $130,340 for a Bahamas photo shoot
- $18,000 in liquor charges from a Valentines day party
- $75,000 for a paintball field
- $60,000 on a Star Wars gun set
- $50,000 on a custom room-sized bed
- $31,000 on pool renovations
- $2,400,000 per year renting a mansion in Bel Air
Other unspecified spending went to yacht rentals, parties, models, groceries, household items, flights, and more.
It would be difficult to reasonably argue any of these charges as a “business expense.”
Ignite Has Never Been Profitable
Bilzerian shared a Youtube video recently to address concerns about the financial state of his company. He suggested the company is set to “have a profitable fourth quarter” — before shamelessly plugging his new book.
But there’s a problem with this claim. Ignite CBD has never been profitable, not even close. And with the recent injection of cash and massive stockpiles of unsold products, most experts find it unrealistic to suggest that the company will be profitable in Q4.
As a publicly-traded company, Ignite’s financials are all public. Here’s what the company reported for the last several quarters:
- Q2 2020 — Net loss of $7.4 million
- Q1 2020 — Net loss of $8.9 million
- Q4 2019 — Net loss of $34.2 million
- Q3 2019 — Net loss of $13.1 million
- Q2 2019 — Net loss of $11.0 million
- Q1 2019 — Net loss of $11.3 million
- Q4 2018 — Net loss of $8.3 million
- Q3 2018 — Net loss $6.9 million
Total inventory as of Q2 was reported in their financial statements to be $8.1 million, which is $2 million more than the closing quarter in 2019.
The company claims COVID-19 was the main reason their stock isn’t moving. However, Ignite has been having problems moving their stock long before COVID-19 ever appeared.
In 2018, the total revenue generated by the company was $707K. This came with an operating cost of $17.1 million.
Somehow, it was even worse in 2019 — with $2.1 million in gross profit and $45.8 million in operating expenses.
The claims of COVID affecting business also runs contrary to the general sentiment we’ve seen in the cannabis industry since the pandemic started. Early on, cannabis companies were deemed “essential services,” and most dispensaries and CBD manufacturers saw a sizable increase in sales throughout the summer.
What Went Wrong With Ignite CBD?
Ignite is a prime example of how systemic problems can lead to corporate failure. It will be amazing if Ignite can find a way to pull itself out of its current situation.
Here are the highlights of the issues currently going on with Ignite CBD:
Shaky Leadership
Ignite has already gone through 4 presidents — one of which is currently suing the company.
The first CEO was Jim McCormick, followed by Curtis Hefferenen (fired in June 2020), then Lester Vee (fired but kept as a board member), and the current president, Jon Schaefer.
There’s also a lot of speculation about who the true leader of the company may be. Many suggest the man behind the curtains pulling the strings is Dan’s father — Paul Bilzerian. Paul is a convicted felon and corporate takeover specialist. He was convicted for failed takeovers of Cluett, Peabody and Company, and Hammermill Paper Company during the 1980s.
Shortly after, the SEC ordered Paul to pay $62 million for securities fraud. Ultimately they were only able to collect $3.7 million. Paul packed up, renounced his citizenship, hid his money in trusts around the world, and moved to the remote islands of St. Kitts and Nevis, where he lives today.
Many people speculate Paul Bilzerian is the true mastermind behind Ignite CBD.
Outrageous “Marketing Expenses”
Operating expenses went from $10.8 million in Q2 2019 to $7.8 million in Q2 2020. The company associated these savings with changing the marketing approach of Ignite to social media channels. This is odd when you consider the fact that the entire point of this company was to leverage Dan’s social media following. What were they spending so much extra money on?
Bad Debts
Among the many brow-raising entries on the company balance sheet are some curious debts the brand has written off. For example, the company terminated a partnership with Ignite Social LLC and waived a debt of $200K.
This is a large sum of money for a company in financial turmoil to simply “write-off.”
Who owns Ignite Social LLC? Why was this debt wiped from the record?
Ignite is also the source of a few bad debts of its own. For example, the company took a $1.2 million PPP loan from the government in 2020. PPP stands for Paycheck Protection Program — it’s a government loan offered to companies having a hard time paying employees because of the pandemic. It’s designed to make it easier for companies to keep their staff on the payroll during difficult times rather than having to lay them off.
Ignite claims to be applying for “loan forgiveness” before the end of 2020 — which essentially means they don’t plan on paying it back.
Poor Profit Margins
The initial profit of revenues for Ignite products was 39%.
This was reduced to 27% in 2020 after several poor decisions were made on behalf of the company. The largest was the decision to focus on wholesale rather than the more profitable retail side of the business.
The company signed with Namaste to grant them exclusive rights to sell Ignite in Canada. This deal has since been severed by Namaste. The cause remains unknown, but it’s most likely Namaste either wasn’t getting paid, or the products weren’t selling.
Pending Lawsuits
A large percentage of Ignites budget is going to be sucked up by their legal problems in the near future. Ignite is already in the middle of a lawsuit with Curtis Hefferenen — the former CEO-turned whistle-blower.
The company initially tried to dodge the lawsuit, filing their own motions and dismissals, but the judge ultimately granted a trial which is scheduled for the end of 2021.
There’s also speculation of an upcoming class-action lawsuit against Ignite CBD on behalf of investors feeling defrauded by the frivolous spending of investors funds.
A third, lawsuit filed against the brand claims the company breached the Telephone Consumer Protection Act after unlawfully soliciting Ignite products through text messages.
Is Bilzerian Planning on Leaving the United States?
2021 is going to be a difficult year for Dan Bilzerian and his company — filled with SEC investigations, DOJ investigations, and class action lawsuits. Many of the questions he’s going to be asked about company spending will be difficult to answer.
Some speculate Dan aims to follow the path his father took and renounce his citizenship, hiding his money in trusts and filing for bankruptcy in the United States. These are purely speculations at the moment, but there are a few things that support this idea.
A few years ago, Dan received Armenian citizenship. Whether he planned his current predicament or not, it seems he may need it soon.
Then, earlier in October, Dan’s family gave $250K to Armenia.
Dan has also been posting a lot of pro-Armenian nationalist Tweets lately.
Is Dan planning an exit? We’re not sure. That $25 million of his own funds he injected into the company says otherwise, but unless Dan and John McCormick can curb spending and start moving product — ASAP — leaving the country could be his best option.
