Market Commentary: Into the Depths of the Cannabis Industry: (CSE:ATT) (OTC:ATTBF)
Volatility and consolidation in the cannabis sector could pave the way for some oversold stocks to out-perform this summer. There is a lot to choose from in this fragmented market, but a strong team of proven performers, and proper news and developments could find a handful of stocks sailing into Canada’s Recreational Legislation Season with the wind at their tails. The country’s move to legalize recreational marijuana is set to unfold this fall with the date now set for October 17, and the tide could rise accordingly.
We recently spoke with Abattis Bioceuticals Corp. (“Abattis” or the “Company”) President & CEO and Director, Rob Abenante, for an update on the Company and what is planned as we move to a legal recreational market. The stock has had a widespread range of $0.94 and $0.10 for the past 52 weeks, and currently sits at $0.20 today. Mr. Abenante had a lot to say about the Company’s strategies and strides in the Cannabis sector, even though as he indicates, the industry is just getting going.
Abattis is a full suite vertically integrated cannabis company. Management has aggressively set the stage this last year to take full advantage of Canada’s momentous recreational legalization. It was a year of leg work for Abattis; the late stage Licensed Producer (ACMPR) applicant acquisition, product distribution deals, product development and licensing, formulations and extracts, partnering with the Alliance of Beverage Licensees (ABLE BC) and acquiring a vape company, to name just a few of the accomplishments. Now, when you read between the lines, you can see their service offering is gearing up for a strong position within the oncoming recreational cannabis market.
New sectors are always volatile and can get frothy. Abattis has managed to stay well-financed as they soldier on through the volatility to become a full spectrum, cannabis powerhouse. “Cannabis is here to stay. This is just the start of a 10-20 year megacycle. Billion-dollar companies have already been created and many more are on the way as approach the first stage of the mega-cycle,” commented Abenante. “In addition, Pharmaceutical and Tobacco companies are positioning themselves to be significant players in the cannabis marketplace,” added Mr. Abenante.
Marijuana contains over 113 different chemical compounds known as cannabinoids. These compounds interact with our bodies via the endocannabinoid system. The two most well-known cannabinoids are THC (tetrahydrocannabinol) and CBD (cannabidiol).
~Via Leaf Science
As more clinical trials and research have been done in the recent months, CBD and THC will be utilized in oils, infused creams, topicals, supplements, teas, edibles, you name it. All kinds of newly developed products will target symptoms for a long list of mental and physical ailments. “We are still at zero on the scale of 1-10 of the Cannabis Revolution. Whenever you are in any mega-cycle, excitement is going to breed a lot of weak companies, but the good ones, the ones with a strong business plan, committed management who can execute and are well capitalized, will thrive. Eventually the market will consolidate, and we hope to be in a good position when it does,” stated Abenante. “I believe we have done a great job in procuring the necessary “ingredients” to achieve our goal of being one of the key players in the cannabis space. We must now clarify and articulate our story for the market so that our true value will be accurately reflected.”
A Busy 6 Months
Abattis currently has a $75 million market cap. Their focus is on being a leading downstream service provider to Licenced Producers (LP’s) who are legal cultivators licensed by Health Canada. The Company’s foundation is based on a far reach of services into the depths of the cannabis industry. Building upon multiple revenue streams, this company will soon begin to see revenue flow in earnest from their downstream services and eventually from the upstream as well through the sales of their own flower and oils and eventually their very own formulated products. Plus with their licenses they will be able to export Cannabis, and products to Europe, South America, and other countries that are coming on board to allow Medical Cannabis use and its related products.
It has been a busy six months. Capital has been raised and deployed, a lot of key transactions and joint ventures have taken place, and this company is now perfectly positioned to enter into a small pool of cannabis service providers with this range of services. Let’s review some of the value added of late:
- Invested in a private, late-stage LP applicant (ACMPR) which will allow them to have the full spectrum from seed to sale;
- Invested in massive lab in Southern Ontario which will include access for R&D, extraction, storage and product development;
- Sold remaining ownership in Northern Vine Laboratory while retaining a Master Services Agreement to provide preferential access for lab services;
- Invested in and launched a new line of vaporizers with an existing distribution into 130 stores throughout North America;
- Invested in a blockchain company devoted to the cannabis industry with an ICO on the way within the next 2-3 months;
- Awarded a Mitacs grant for research and development of nanoemulsified cannabinoid-rich hemp oil in conjunction with the University of British Columbia;
- Partnered with a local craft brewery and ABLE BC to develop a CBD infused beer;
- Signed a number of strategic product distribution deals and developed nutraceuticals, topicals, advanced formulations and other product lines to prepare for the legalization of the recreational markets.
Gabriola Green Farms Inc. Operation
Previously, Abattis’ had to acquire flower from other licensed growers, or only grow the minor amount of bud needed to test and formulate. Now, through the new Gabriola acquisition and soon to be LP, Abattis has vertically integrated to have control over the grow process allowing them to secure supply of biomass internally to supply an extraction program with XLABS, whom they have recently partnered with to launch a 10,000 sq ft. cannabis laboratory in Ontario, BC.
Abattis has acquired 100 per-cent ownership in Gabriola Green Farms Inc. (“Gabriola”). Abattis now looks ahead to Gabriola receiving an LP to sell cannabis products.
Gabriola is a privately held British Columbia company and late stage applicant for an LP under the Access to Cannabis for Medical Purposes Regulations (ACMPR). “After successfully obtaining a licence through Gabriola, we intend to not only cultivate marijuana, but more importantly sell products containing cannabinoids extracted from the cannabis plant, which will complete our full suite of downstream service offerings,” commented Mr. Abenante.
Gabriola currently has plans for an approximately 26,000-square-foot facility to produce medical-grade marijuana located on 18 acres in the agricultural land reserve on Gabriola Island, B.C. The facility will be constructed in two phases: the first achieving 6,000-square-foot; the second, an expansion of approximately 20,000 square feet for this state-of-the-art facility, consistent with ACMPR standards.
Products & Sales
Not only does Abattis know how to cultivate and formulate, they also know how to sell. Green Tree Therapeutics is a Vaporizer company with the product technology and marketing/distribution channels in place across brick and mortar stores in North America. Everyone is talking about the potential that oils and vapes have in this explosive market. Less stigma, convenient, cleaner and healthier and thus a hugely exciting and burgeoning market. Great branding makes a huge difference. Distribution and ability to move product means even more. Since purchasing Green Tree, Abattis has developed and launched a new line of vaporizers designed to be efficient and discrete.
Abattis has also paired up with Faculty Brewing to develop a line of THC-free cannabis and hemp-infused beers. Combine this with the partnership with ABLE BC and you can see that Abattis is very well positioned to provide point of sales access across the province for cannabinoid products when marijuana’s recreational tide comes to shore.
VergenceNaturals.com is another way in which Abattis is distributing innovative products. Brands they feature include:
- Mogiana Coffee
- Planet Hemp
- Beyond Silver
- Real Aloe
- Styrian Gold
- Maui Vera
“We are evaluating new brands to add to our portfolio every week,” said Andrea Bates, chief operating officer of Vergence Naturals. “We are very excited about the development of our own high end Vergence product lines.”
For more information on their products, click here.
Labwork: From Formula to Distribution
Part and parcel with building the war chest, Abattis is helping companies scale up and commercialize great products.
Abattis, through their Master Services Agreement with Northern Vine Labs British Columbia and recent investment in XLABS Therapeutics (ONT) Inc. (“XLABS”) in Ontario, is increasing its ability to not only provide downstream services, but also extraction capabilities.
Abattis has acquired a 10% share of XLABS located in Belleville, Ontario. XLABS is launching a new laboratory that will be ideally located to service the 62 LP’s currently located in the Ontario market. The laboratory will focus on extraction of cannabinoids into oils, storage of flowers and oils, testing and analytical services, manufacturing of cannabis products and research and development. “This is a long-term play by the Company to gain access to a state of the art national lab facility that will be the go to facility for many in the industry in the not too distant future,” stated Mr. Abenante. “By getting in on the ground floor Abattis is poised to benefit as their $2.5M investment quickly appreciates through the build out of XLABS.”
In addition, Abattis has recently divested its remaining share in Northern Vine through a sale to Emerald Therapeutics Inc. while maintaining a Master Services Agreement providing preferred access to the lab. The capital provided from this transaction will allow Abattis to better deploy its resources towards revenue producing activities within it’s wholly owned subsidiaries while maintaining access to a licensed facility.
Blockchain: Investment into CannaNUMUS
In early February of this year, Abattis completed their investment into CannaNUMUS for $5 million dollars. CannaNUMUS is developing a blockchain to link cannabis investors directly with market leading companies, while simultaneously enabling frictionless peer-to-peer transactions.
CannaNUMUS’s technology will marry the accountability and security benefits of blockchain with the real-world backing of enforceable legal contracts. And the coin they plan to ICO (Initial Coin Offering) will present investors with direct exposure to a high performing curation of companies, including licensed producers, labs and service operators. CannaNUMUS is building toward an ICO, expected in the next quarter.
Imagine what this could mean to Abattis investors? The value of CannaNUMUS could appreciate as they get closer to an ICO. They will be busy, signing agreements with licensed producers and late-stage LP applicants to participate in its market. This company is leveraging blockchain technology in a way that brings market participants closer to the companies that they wish to support. They are creating the currency of the cannabis industry, plugging into cost effective systems that eliminate pricey and laborious administration procedures. In other words, stuff that the lawyers would usually do, and charge an arm and a leg for, will eventually take place transparently on this cannabis blockchain.
“With our model, you take well-managed companies, pair them with the investment oversight in CannaNUMUS, and support those relationships with transparent and secure technology,” stated Simran Gill, CEO of CannaNUMUS. “At the end of the day, there’s more left on the table for investors.”
They have dotted their i’s and crossed their t’s, setting up a portfolio company, Active Health, to purchase their soon-to-be cannabis token with their quarterly revenues, and then burn them (creating perhaps a similar effect to a share buy-back). Only time can tell how this coin will perform on the ethereum exchange they plan to list on, but it nicely hedges the other side of the business. The catalyst of announcing this ICO should make for a good trading day.
Abattis has also entered into a strategic partnership with Blockstrain Technology Corp. to integrate its proprietary technology into their product and services offerings. Blockstrain’s platform is designed to store all testing data in a blockchain protected database and significantly reduces the workload and costs associated with product and genetic testing. If desired, producers can now have their strains genetically tested and registered with BLOCKStrain to establish immutable ownership of the strains they have created. BLOCKStrain not only reduces the workload and costs involved with testing, but also provides full visibility of testing results for producers, government regulators and consumers.
Abattis has officially rebranded as a one-stop shop as they provide a host of cannabis solutions for licensed producers (LPs) and manufacturers of cannabinoid-containing products. The company’s focus on the full spectrum of solutions reflects its string of strategic and bold acquisitions as the team successfully integrates the full extend of their service offering. Through its various assets, subs and investments, Abattis can cover off top-of-the-line extracts and formulations, federally licensed research and development and analytical services, regulatory services, biomass production, logistics support for the manufacture, sale, distribution and marketing of cannabinoid-containing finished products and cannabinoid delivery products, and blockchain-based peer-to-peer payment technologies. What a package.
Canadians spent $5.7 billion on marijuana last year, and to put this into context, we spent $22 billion on alcohol and $16 billion on tobacco in comparison. There is room to grow, and eventually, perhaps sooner than you think, this industry will begin to consolidate.
Market volatility and political uncertainty have combined to create an entry point into some really intriguing stocks on the Canadian markets, and Abattis is one of them. Do your own due diligence.
This is not in any way investment advice nor any sort of stock recommendation. Please do your own due diligence and talk to a qualified investment advisor.
The contents of this article are for informational purposes only. Nothing in this article, in any way whatsoever, should be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy, hold or sell any security. Note the inherent risks when investing in microcap stocks. Prior to making any investment decision, we recommend that you seek outside advice from a qualified and registered investment advisor.
Abattis Bioceuticals Corp. is a paid marketing client of Stockpools Inc. and one or more of the owners does own shares in Abattis Bioceuticals Corp.
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