Category: Article

Aurora Cannabis Plots Entry into the US Market

Author: Byron Csizmadia

Image result for hempco food and fiber

Aurora is planning to enter the US market in the very near future. This message was delivered loud and clear by CEO Terry Booth, in the most recent conference call with investors and echoed by CCO Cam Battley in several post-ER video interviews as well as Executive Chairman Michael Singer who said “… we will have a significant footprint in the U.S. in the coming quarters.” What they aren’t saying is how they plan to accomplish this.

While Aurora’s tight lipped tactics may be good from a strategic point of view, it opens the door for investor speculation as to what their plans are. Surprisingly, discussion groups and Twitter are quiet on this subject.

In this article I will look at what we do know about Aurora and take a logical, fact-based approach, examining some of its existing partnerships, resources and alliances and how they fit into what I believe is their overall entry strategy. I will also suggest companies I believe are logical partners to work with Aurora and achieving their entry strategy.  

So, how will they do it?

Let’s take a look at some of the companies and partnerships already in place that might shed some light on the answer to this question.

Australis Capital Corp.

Aurora has stated over and over again that Australis Capital is their beachhead into the US cannabis market so it makes sense to assume they might be the path Aurora plans to use. However, there are still regulations in place that prevent this from happening. So unless the USA moves forward with Federal legalization in 2020 and/or the TMX changes its regulations regarding Canadian companies owning assets in Cannabis related companies in the USA, Aurora will not be able to exercise its back-in right and use Australis Capital as a potential entry into the US market. At least not at this point.

Nelson Peltz

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On March 13, 2019 Aurora announced the appointment of Nelson Peltz as a strategic advisor. Nelson Peltz was brought on “to explore potential partnerships that would be the optimal strategic fit for successful entry into each of Aurora’s contemplated market segments.” While it is not necessary to discuss in detail his extensive resume, there are two companies that should be noted, Proctor & Gamble a global multinational operating in 5 market segments where he is currently a director and Mondelez International, one of the world’s largest snack companies, where he was previously a director.

More on Nelson Peltz and those companies later.

HempCo.

One month after bringing Nelson Peltz on board Aurora announced their intention to acquire the remaining shares of HempCo, making it a wholly owned subsidiary of Aurora. Whether this deal was already in the works or it was advised by Nelson Peltz, HempCo could play a significant part in Aurora’s strategy to enter the US CBD/Hemp market.

HempCo has established brands, PLANET HEMP™ and PRAISE, as well as hemp-based foods and nutritional supplements for people and animals. They have international distribution channels through Amazon, Well.ca and Metro Inc. and are carried in retail outlets across Canada. They are a recognized brand and a turnkey operation capable of supplying various supplement and food products as soon as they are needed.

Radient Techologies Inc.

On November 6, 2017, Aurora entered into a Master Services Agreement (MSA) with Radient Technologies, a company with a proprietary process for extracting CBD and THC from Hemp and Cannabis biomass. At the time, Aurora made an investment of approximately $14.0 million through a combination of convertible debentures, private placements and warrant exercises. As of June 30, 2019, Aurora held a stake in Radient of approximately 13.90% of the issued and outstanding common shares. The MSA has an Investor Rights Agreement which allows Aurora the option to increase ownership in Radient up to 19.99%

Until recently there was no proof that Radient could run its extraction process at a commercial scale but on May 13, 2019, in a joint press release, the two companies announced that Aurora had taken delivery of its first commercial batch of finished cannabis derivatives, proof beyond a doubt that the technology worked at commercial scale. What’s more, not only did it work, but Radient was able to process the commercial scale batches within a 24 hour period, something no other extraction company can do.

After upgrading its existing facility, Edmonton I, to process only Cannabis biomass, the company began construction on Edmonton II which will be dedicated to CBD extraction from Hemp biomass only. The facility, which is on track to be ready by the end of calendar year 2019 will have an annual throughput of approximately 3,200,000 kg of Hemp biomass. Aurora CEO Terry Booth made this statement about their future working with Radient, “Cannabidiol (CBD) derived from hemp requires the level of throughput that Radient’s technology and state-of-the-art second facility will provide to existing and future medical, wellness and consumer markets. We look forward to working with Denis and the Radient team to further our global position in the derivative markets.”

UFC Partnership

Aurora and UFC have partnered to conduct research on UFC athletes and the effectiveness of CBD as a treatment for pain and recovery in these high performance athletes. UFC is a highly visible sport with more than 300 million fans worldwide and while it may not have the same local audience as the NBA, NFL or MLB, one thing cannot be underscored enough, UFC athletes experience extreme pain and require quick recovery times.

Roar Sports CBD infused products will be the official brand used by UFC athletes. Considerable research and testing will be conducted to determine the best dose and delivery method for the UFC athletes to use. The end result will be CBD infused products that are backed by science and endorsed by UFC athletes. This is something the consumer market can have confidence in. Aurora CEO Terry Booth had this to say at a press conference hosted by UFC and Aurora Cannabis, “The brand-building and product development are all part of our move into the U.S., and in collaboration with UFC, and we intend to play a major role in that market.”

Connecting the Dots

In one of his most recent video interviews, Cam Battley emphasizes how Nelson Peltz has been instrumental in providing the guidance they need to take Aurora to the next level. When discussing their entry strategy into the USA he mentions the UFC partnership and states that they are looking at making multiple entries into the US market, “…optimally what we would like to do is enter into partnerships in more than one vertical.” During the same interview he says that they are also looking at future opportunities beyond CBD, but the current opportunity open to them is through hemp derived CBD. Terry Booth, in his letter to shareholders in their 2019 annual report makes this statement referring to Aurora’s relationship with Nelson Peltz: “Together we are approaching our US market entry in a thoughtful and calculated manner and are leveraging Nelson’s expertise and relationships to further advance our agenda.”

So far we have looked at HempCo, an established company with existing Hemp food products. Radient Technologies which will have an extraction system dedicated to extracting CBD from hemp biomass, ready to go into production by the end of 2019. And we have Nelson Peltz, the liaison who brings Aurora together with the two companies mentioned earlier, Procter & Gamble and Mondelez International, both are vertically integrated and both cover different market segments that will undeniably be offering an array of CBD and Hemp infused products from their competitors.

Proctor & Gamble

Image result for Proctor and gamble

Nelson Peltz is currently a director with Proctor & Gamble and the fact that he was interviewed alongside the Procter & Gamble CEO David S. Taylor at Delivering Alpha suggests he carries some influence in the company. P&G operate in 5 major market segments, four of which could offer CBD and hemp oil infused products.

Health Care, which is P&G’s smallest business segment is a perfect fit for the UFC endorsed Roar Sports brand. This would be an opportunity for P&G to grow this market segment. Baby, Feminine and Family Care is their second largest segment followed by Beauty and Grooming. P&G product offerings in each of these segments could be expanded through CBD and hemp oil infused creams, lotions, soaps, shampoos, anti-aging serums, and the list goes on.

Currently, Hemp oil and CBD infused products are gaining popularity in each of these segments. Aurora is well positioned in terms of its capacity and capability to provide P&G with products that can help them take advantage of this trend. Nelson Peltz is well positioned to introduce Aurora to P&G and explore the possibilities.

Mondelez International

As a dedicated snack company, Mondelez International is a perfect fit for Aurora’s line of hemp based food products. Mondelez boasts iconic brands such as Cadbury, Oreo, BelVida, Trident, Tang, Chips Ahoy, Dentyne, Toblerone and Ritz, to name just a few. While not nearly as well known, Planet Hemp products are already available in retail outlets all across Canada and online.

Snack bars, biscuits and CBD infused powders for shakes are some of the products Aurora brings to the table. CBD and Hemp enhanced versions of their existing brands is also a logical step Mondelez could take towards capitalizing on the growing demand for CBD and Hemp infused products.

Conclusion

If you could pick from Nelson Peltz’s bag of goodies, what companies would you pick? Strategic alliances with Proctor & Gamble and Mondelez International would provide Aurora with instant distribution channels and consequently, the significant footprint in the US that Exec. Chairman Michael Singer suggests they will have in 2020.

Is Aurora a company with the size and ability to work with two multinationals like P&G and Mondelez? One has to assume that a business man such as Nelson Peltz would not have agreed to work with Aurora if this wasn’t something he himself could see in the company. Not only would these companies give Aurora an established distribution network in the USA, they could open the world market to them when the time was right.

I personally don’t believe we will see the much anticipated partnership of the sort other leading LP’s have entered into, instead we will see Aurora signing supply agreements with both these vertically integrated multinationals, without giving up any ownership, something the management team at Aurora has stated many times they want to avoid. And why should they? A supply agreement will be a win/win for all companies involved. Aurora will supply the raw materials in the form of Hemp derived CBD, hemp seeds and hemp oil while Proctor and Gamble and Mondelez will do what they are already doing, bringing iconic brands to the market.

Many Canadian LP’s and retailers are looking to Cannabis 2.0 and 2020 to be their breakout year. Although the introduction of edibles and infused products and vape products will definitely change the consumer market, Canada remains a relatively small market and the competition will be high. There is no doubt Aurora plans to be in the Canadian market and continue to compete, but as always, they march to the beat of a different drummer and while the competition is heating up in Canada, they will be looking to the south in hopes of catching a much bigger fish.

How they will do this is still open to speculation. I have presented what I believe to be a logical strategy, however, regardless how they do it, one thing can be certain, with Nelson Peltz in their court they will do it in a very big way.

About the Author

Byron Csizmadia first became interested in the stock market in 1981 when he read an article about an IPO for a company called Ballard in a complementary Financial Post newspaper he found outside his dorm room at UBC. From that point he began to study the stock market and real estate investing. These days, after spending most of his career teaching business management courses and managing in private collages, he is living in the Philippines, working part time as a guest lecturer, teaching business management and English. The rest of his time is spent researching the Cannabis Industry and investing in large and small cap companies he sees as promising. He also has positions in several companies in the Philippines through the Philippine stock exchange. He enjoys writing about the research he does on the companies that interest him and sharing his findings in a number of discussion groups

Full Disclosure: I have long positions on Aurora Cannabis, Radient Technologies and Australis Capital. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship other than shareholder with any company whose stock is mentioned in this article.

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Charlotte’s Web (TSX:CWEB) In Talks With Both NASDAQ And NYSE

Image result for charlotte's web cbd

Charlotte’s Web confirms active discussions with both (NASDAQ and NYSE) exchanges of various related matters.

New CFO at Charlotte’s Web, Russ Hammer’s appointment was in the works for some time and CW wanted to complete this ahead of their US listing efforts as Mr. Hammer will play a big role in the application process and the reporting compliance.  Mr. Hammer has experience leading multi-billion dollar companies on both the NASDAQ and the NYSE.

Despite whatever near term gyrations in the market occur CW spokesperson quoted CW’s long term opportunity is stronger than ever.  The appointments of Deanie and Russ as CEO and CFO, along with several other leadership additions this year are setting the stage to become a dominant global CPG company in the CBD category. 

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Highest Institutional Ownership in Cannabis Sector, Charlotte’s Web (TSX: CWEB)

The $115M IPO was 98% institutionally placed other than the President’s list; 80 funds from Canada, US, Europe, Offshore.

“The offering included a treasury issuance by the Company of Common Shares (the “TreasuryOffering“) and a secondary offering of Common Shares (the “Secondary Base Offering“, and together with the Treasury Offering, the “Offering“), for total gross proceeds of C$115,115,000. Charlotte’s Web sold 13,312,150 Common Shares under the Offering, for total gross proceeds to the Company of C$93,185,050. The Selling Shareholders (defined below) sold an aggregate of 3,132,850 Common Shares pursuant to the Secondary Base Offering and the Over-Allotment Option (defined below) for total gross proceeds to the Selling Shareholders of C$21,929,950. The Company did not receive any proceeds from the Secondary Base Offering or the Over-Allotment Option.” (Press Release)

The recent $161M secondary offering was 100% institutionally placed according to Charlotte’s Web spokesperson.

“Charlotte’s Web Holdings, Inc. (“Charlotte’s Web” or the “Company“), the market share leader in hemp-derived CBD extract products, is pleased to announce today that the Underwriters (as defined below) of its previously-announced underwritten public offering of 7,000,000 common shares of the Company sold by certain current shareholders (the “Selling Shareholders“) at a price of C$20.00 per share (the “OfferingPrice“) have exercised in full their option to purchase an additional 1,050,000 common shares from the Selling Shareholders at the Offering Price. The gross proceeds to the Selling Shareholders under the exercise of this over-allotment will be C$21,000,000, and together with the gross proceeds from the initial closing on May 15, 2019 of C$140,000,000, the aggregate gross proceeds of the offering (the “Offering“) will be $161,000,000.” (Press Release)

List of Publicly registered shareholders:

  • Corriente Advisors LLC (United States)
  • Horizons ETFs Management (Canada), Inc
  • Jennison Associates LLC (United States)
  • Federated Global Investment Management Corp (United States)
  • I.A. Michael Investment Counsel Ltd (Canada)
  • Fideuram Asset Management (Ireland) DAC
  • Purpose Investments, Inc. (Canada)
  • Gilder, Gagnon, Howe & Co. LLC(United States)
  • K2/D&S Management Co. LLC(United States)
  • BlackRock Advisors (UK) Ltd.
  • StoneCastle Investment Management, Inc. (Canada)
  • Baader Bank AG (Investment Management) – (Germany)
  • ATL 12 Capital Gestion SGIIC SA (Spain)
  • IFP Advisors, Inc. (United States)
  • Investment Research Corp. (United States)

After the last $161M secondary offering, Charlotte’s Web now has the highest institutional ownership in cannabis sector.

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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 information and may or may not own shares in the company.

Six National Retailers Carrying Charlotte’s Web (TSX: CWEB) Revealed

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Charlotte’s Web products are being sold across the US, but currently 18 states through the national retailers, of which the largest include:

  • CVS
  • Kroger
  • Safeway/Albertsons (Shaws, Vons and others under the Albertsons banners)
  • Riteaid
  • Vitamin Shoppe
  • Wegmans

Currently Charlotte’s Web is in discussions to be on the shelves of many other national retailers.

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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 information and may or may not own shares in the company.

CV Sciences (OTC:CVSI), The Best Value Play in CBD Sector.

CV Sciences (OTCQB:CVSI)

CV Sciences, Inc. operates two distinct business segments: a drug development division focused on developing and commercializing novel therapeutics utilizing synthetic CBD; and a consumer product division in manufacturing, marketing and selling plant-based CBD products to a range of market sectors.

Key highlights:

  • CV Sciences named one of the FIRST U.S. HEMP Authority Certified Manufacturers and PlusCBD Oil™ softgels named “Top Pick” by ConsumerLab.com
  • Receives Nutritional Outlook’s 2018 Best of the Industry Award
  • Resolved all claims and matters related to the SEC’s enforcement action against the Company. Michael J. Mona, Jr. concurrently settled all claims brought against him personally in this SEC matter
  • PlusCBD Oil™ is Ranked the #1 Selling Hemp CBD Product According to SPINS Scan Data.
  • Significant enhancements to management team in finance, science and regulatory functions:

a) Appoints Deloitte & Touche LLP as auditor

b) Appoints Joerg Grasser as New CFO (Prev role is Chief Accounting Officer)

c) Appoints Dr. Douglas as SVP of Scientific & Regulatory Affairs

d) Engages ICR to enhance Investor Relations & Corporate Communications

e) Retirement of Founder Michael Mona, Jr

CONSUMER PRODUCTS

RETAIL STORE PLACEMENT

Year End 2018 Financial Results

  • Record revenue of $48.2 million for 2018, an increase of 133% over 2017;
  • Record net income of $10.0 million, or $0.09 per fully diluted share;
  • Record adjusted EBITDA of $14.0 million or 29.0% of net revenue for 2018, an increase of $12.4 million from $1.6 million for 2017;
  • Retail distribution increases to 2,238 stores as of December 31, 2018, a 45% increase over the prior year;
  • Generated $12.6 million of cash from operations, with cash balance increasing to $12.7 million at year end;

Key Message from CEO:

“As we enter 2019, our business development activities remain robust. The passage of the 2018 Farm Bill has significantly expanded retailer interests from many new distribution channels. We believe distribution is on the verge of broadening to more traditional food, drug, mass merchandise and convenience store retailers. We are intently focused on leading the expansion of hemp-based CBD products to a broader retail audience nationally.”

Q1 2019 Financial Financial and Operating Highlights

  • Record revenue of $14.9 million for the first quarter of 2019, an increase of 85% over the same quarter in 2018;
  • Strong gross margin of 70.8% compared to gross margin of 68.9% in the first quarter of 2018
  • Retail distribution increased to 3,308 stores as of March 31, 2019, a 48% increase from December 31, 2018;
  • Expanded retail presence into the food, drug and mass channel and are in active discussions for further expansion of the PlusCBD Oil™ brand; and
  • Generated $0.8 million of cash from operations, with cash balance increasing to $13.6 million at quarter end.

2019 progress:

  • Significant enhancements to management team in finance, science and regulatory functions.
  • Distribution expansion into Food, Drug and Mass Channels
  • Generated positive EBITA for the past 4 quarters

Upcoming catalyst:

  1. Nasdaq up listing
  2. Lead drug candidate CVSI-007 progress expected reveal more data in the coming QR, below is the progress:
  • Engaged with the FDA (May 31, 2019)
  • Complete nonclinical toxicology studies in 2019
  • Submit Investigational New Drug (IND) application in 2019
  • Begin clinical trials in 2019

Top 5 Hemp-derived CBD companies Market Shares: CVSI ranked #2

Competitor Analysis: CVSI market cap / rev is the cheapest among top 3 Hemp company. (Excl MJNA as the shares counts is too high & cash / EBITA not available)

Things to watch out:

  1. Delays in Nasdaq uplisting
  2. Potential to raise financing to support the clinical trials

Analysts Target Price :

  • Northland Securities: $8
  • Roth Capital: $9

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Source:

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.

Charlotte’s Web Confirms Four National Retailers Carrying Their Products And In Talks With Several More

Image result for charlotte's web cbd

CIG has now confirmed that Charlotte’s Web products are currently on store shelves in the USA at three national retailers with a fourth now also receiving shipments.  Three of the four brands have made public statements about their entry into the CBD category. 

Only CVS (NYSE :CVS) has given Charlotte’s Web (CSE: CWEB) approval to confirm distribution of CW products out of four national retailers.

  • CVS Pharmacy (NYSE: CVS, 9800 stores in all states except Wyoming)

Other national retailers that have made public statements about entering distribution of CBD products.

  • Walgreens (NASDAQ: WBA, 9560 stores in all 50 states)
  • Rite Aid (NYSE: RAD, 2469 stores in 19 states)
  • Vitamine Shoppe (NYSE: VSI, 700 stores in 14 states+PR+Washington DC)
  • GNC (NYSE: GNC, 6500 stores in 23 states)

The company assured that Charlotte’s Web has significantly more distribution coverage than any other companies in the category and expect to pull away further as we are in discussions with several other mass retailers. (Retail doors have surpassed 6,000 at May 8, 2019)

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Sources

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.

TruNano Technology by Trulieve (CSE: TRUL)

A new technology is entering the cannabis space to help solve common problems faced by patients. Consistency in dosing, how cannabis is absorbed into our bodies, and the effectiveness of various delivery methods are just a few of the improvements Nanoemulsion technology is bringing to cannabis products. 

Nanoemulsions are emulsions with narrow droplet size distributions centered below approximately 100 nm. Nanoemulsion-based formulations in which all droplets are smaller than 30 nm are optically translucent, achieving a progressively higher degree of clarity as the droplet sizes are diminished. These formulations have several attractive properties, including low viscosity, high interfacial surface area, and long-term kinetic stability. Nanoemulsions are made using significantly (about 10 times) lower surfactant amounts than microemulsions or liposomes. They are completely water-soluble and can be easily mixed into any food or beverage. 

In simpler terms, nanoemulsions are smaller, water-soluble particles that breakdown quickly and absorb into the bloodstream faster. This means increased bioavailability using far less product. Nanoemulsion particles are small enough to bypass the tissue layers and more easily enter the blood stream. They can also be absorbed through the skin, opening us up to even more potential delivery methods Bioavailability is increased to nearly 95%. 

Bioavailability is an important concept in the pharmacology of cannabis and how it affects us. Bioavailability is the degree and rate at which a substance is absorbed into our bodies. In order for medicine to work, it has to reach its intended destination. Increasing the bioavailability of cannabis has been a challenge. Cannabis onset times and absorption rates can vary greatly between methods such as inhalation, oral, topical and sublingual. Nanoemulsion technology increases both onset times and absorption rates meaning patients will get faster relief using less product.

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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.

Charlotte’s Web and Plexus No Longer Moving Forward with Collaboration

Image result for charlotte's web cbd

“Over the last few months Charlotte’s Web explored a supply agreement with Plexus, a leader in the direct selling health and wellness category. The two companies mutually agreed not to move forward together and Charlotte’s Web has determined that it will not pursue the direct-sales channel further.  As pioneers in the hemp-derived CBD sector, the company will continue to evaluate new partners and other markets and channels.” (Charlotte’s Web IR)

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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. 
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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.