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Could This Be an Interesting Opportunity in Auxly Cannabis Group Inc (OTCMKTS: CBWTF)?

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Fresh off an official makeover including a name change, Auxly Cannabis Group Inc (OTCMKTS: CBWTF) remains one of the most interesting prospects for a pullback bounce on the cannabis scene. The company just announced that Auxly’s streaming partner, CannTx Life Sciences Inc., has been granted a cultivation licence for its production facility in Puslinch, Ontario pursuant to the Access to Cannabis for Medical Purposes Regulations.

Chuck Rifici, Chairman and CEO of Auxly commented, “We want to congratulate the team at CannTx on obtaining their cultivation licence! This represents a major milestone and achievement for CannTx and for the broader Auxly business strategy. CannTx’s approach to cultivation, through a focus on micropropagation and LED enabled vertical farming, makes CannTx a unique project for the Auxly platform and we could not be more pleased to have them as a partner.”

Auxly Cannabis Group Inc (OTCMKTS: CBWTF) trumpets itself as an investment company that seeks to provide investor returns through streams and capital appreciation in the Canadian cannabis industry.

The company operates as a cannabis streaming company. It provides funding for cannabis facility expansions, operations, and initial construction in exchange for minority equity interests and a portion of the cultivation production.

The company was formerly known as Knightswood Financial Corp. and changed its name to Cannabis Wheaton Income Corp. in May 2017. Cannabis Wheaton Income Corp. was incorporated in 1987 and is based in Vancouver, Canada, and became known as Auxly Cannabis Group Inc over recent months.

According to company materials, “Auxly Cannabis Group is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. Our mandate is to facilitate growth for our partners by providing them with financial support and sharing our collective industry experience. Our partners all have different visions, voices and brand values, and all share a common goal—to build a world-class industry based on ethics, diversity, quality and innovation.”

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Most cannabis stocks have been sliced down a bit around the IPO of TLRY on the big boards. As such, the chart shows -8% stripped out for shareholders of the name during the trailing week. In addition, the stock has witnessed a pop in interest during that decline, as transaction volume levels have recently pushed 18% over the long run average.

According to the release, “Pursuant to the definitive agreement entered on December 22, 2017, the Company has provided CannTx with $5,000,000 related to the initial costs for the phase I construction of CannTx’s 30,000 square foot facility. In addition, the Company will provide CannTx with $7,000,000 related to the phase II expansion of the facility, subject to the Company completing satisfactory due diligence and the parties agreeing to a construction budget and timeline for the phase II expansion. The phase II expansion is expected to increase the cultivation area of the facility from approximately 10,000 square feet to effectively 24,000 square feet of pure cultivation space by using innovative vertical grow technology. In consideration for the financing, the Company received a minority equity interest in CannTx and an entitlement to 33% of all cannabis (or cannabis-derived products including any cannabis trim) produced at the facility for a period of 10 years from the date of first sale at a fixed cost.”

At this time, carrying a capital value in the market of $370.5M, CBWTF has a significant war chest ($206.4M) of cash on the books, which is balanced by virtually no total current liabilities. The company is pre-revenue at this point. You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $CBWTF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $CBWTF, either long or short, and we have not been compensated for this article.

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