Under the Radar Extraction Company, Halo Labs (NEO:HALO)

Introduction:

In recent weeks, extraction companies, such as MediPharm Labs (LABS) and Valens Grow Works (VGW), seem to be the hottest topic in the cannabis sector. In fact, the area of extraction may be the fastest growing in all of the industry. The current article will explore one of the, if not the, most under the radar company in extraction, Halo Labs (HALO).

Halo Labs is a consumer-focused cannabis extraction company that develops and manufactures high quality cannabis oils and concentrates. Founded in Oregon in 2016, Halo is backed by a strong management team with multiple years of experience, both in the cannabis sector and across other blue-chip industries. The company has produced over 3 million grams of oils and concentrates since their inception and is working towards expanding its operations, with new facilities in Nevada and California.

Halo Labs Management Team
Halo Labs Board of Independent Directors

Oregon Operations:

Halo labs has been operating for over 3 years in the Oregon market. To date, they have over 20% market share of wholesale concentrates. They have posted revenues of over 25 million, which includes over 2 million grams sold as of September 2018. Recently, Halo announced and LOI to acquire a hemp processing facility in southern Oregon. This will allow the company to enter the cbd isolate and distillates markets. Production at this facility is expected to start in Q3 2019 and at full capacity, will be able to produce 10 000 Kg of hemp per month. The company suggests this will bring in a monthly revenue of over $3.5 million USD.

California Operations:

Halo labs owns and operates a 15000 square foot licensed manufacturing facility in Cathedral City, California. As of March 5, 2019, Halo was one of only 52 annual licensees in the state of California. Currently, they have two manufacturing contracts signed worth $2.0 and $2.1 million USD respectively.

Nevada operations:

In Nevada, Halo has access to an 8000 sqft licensed processing facility conveniently located by the Las Vegas Airport. At present time, they are only operating out of 2000 sqft. Further, Halo has two licenses under contract for purchase in Nevada. One of these is for manufacturing and the other for cultivation, with distribution deals pending. As of March 18, Halo products were available in 21 of the 64 operating Nevada dispensaries (NR).

Science and Product Development:

Halo strives to be a leader in the utilization of modern science-based extraction techniques. With proprietary techniques and pending patents, Halo has developed many innovative products and brands. The development of credible brands is another pillar of Halo and they have done so with two different approaches. Halo develops both their own In-house brands but also a line of white label products. These products are manufactured by Halo but are sold with the logos and branding of the purchasing retailer or company. Of halo’s current revenues, 35% is accounted from the sale of white label products.

Extraction:

Most extractors specialize on one or two methods of extraction. However, similar to Valens, Halo has expertise in all major extraction methods. For more information on competing extraction companies and their methods, visit https://cannabis-investment-group.com/extraction-companies-comparison/

Capital Structure:

Halo currently has an outstanding share balance of approximately 166 million shares. Fully diluted, the company is sitting on roughly 310 million shares. While this is on the high range, it would give Halo a market cap of around $230 million CDN, given a $0.74 share price. Recently, Halo warrants have also begun trading. These warrants have an exercise price of $0.90 CDN and expire in April of 2020. At a current trading price of $0.22 CDN, the warrants will need Halo to be trading above $1.12 to be in the money. There is also an acceleration clause of these warrants if the price of Halo stock trades above $1.35 CDN for 10 consecutive days.

One of the biggest drawbacks of Halo is that it is trading on the NEO, a much less popular exchange than the CSE. Companies on the NEO typically see much lower volume than the CSE. Recently however, HALO has begun to see increased trading volume. This could perhaps be a result of the company showing increased revenue in each of the last three months. For March 2019, HALO reported revenues of approximately $3.7 million CDN. In a recent interview, Halo Labs CEO Kiran Sidhu stated that the company is expecting to achieve approximately $6.7 million CDN in revenue. As a point of reference, Valens recently reported revenue of $2.2 milllion CDN for the entire quarter

Image result for halo labs

Value Play (Warrants)

  • Exercise price: $0.90
  • Expiry date: April, 2021
  • Other clause: Common shares trading equal to or above $1.35 for ten consecutive trading days.
  • Today’s premium about 50%

Given the time frame and the growth of this company, the warrants seem to be better value play than the common shares.

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References

  • https://halocanna.com/halo-investors/
  • https://halocanna.com/wp-content/uploads/2019/03/Halo_March_Corp_Prez_V1.0.pdf
  • https://www.businesswire.com/news/home/20190414005074/en/Halo-Enter-Hemp-CBD-Extraction-Market
  • https://www.businesswire.com/news/home/20190305005878/en/Halo-Labs-Awarded-Annual-Cannabis-Manufacturing-License
  • https://www.businesswire.com/news/home/20190318005776/en/Halo-Labs-Continues-Expand-Nevada-Business
  • https://www.businesswire.com/news/home/20190402005397/en/Halo-Labs-Reports-Record-Monthly-Revenue-March
  • https://smallcappower.com/videos/editors-pick-video/halo-labs-cannabis-oil-stock/

Author: Bryan Halabi

Disclaimer: All posts made on this website are provided for information purposes only. None of the information here is intended as investment advice, as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any security, Company, or fund. Before making an investment decision, you should seek the advice of a qualified and registered securities professional. The Author is not paid to share this content and may or may not own shares in the company.

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