Shares of Auxly Cannabis Group Inc (OTCMKTS:CBWTF) are holding up awfully well following the company’s announcement earlier this month of the termination of the definitive agreement dated March 3, 2018, between the Company and FV Pharma Inc., a wholly-owned subsidiary of FSD Pharma Inc. governing the joint venture between the parties. Apparently, CBWTF states that it entered into a JV for the development of a major cannabis cultivation facility, from which it was to derive nearly 50% as a cut of sales, and for which it invested $7.5M in construction funds.
According to the release, “That amount was invested into the project pursuant to a private placement dated September 20, 2018, pursuant to which the Company received 7.5 million Class B Subordinate Voting Shares of FSD Pharma. In the course of the Company’s efforts to advance the JV Facility Development, it identified contractual breaches relating to FSD Pharma’s management and staffing obligations of the JV Facility, as well as significant concerns regarding certain aspects of the buildings’ infrastructure. On January 17, 2019, the Company provided notice to FSD Pharma of such breaches in the hopes that FSD Pharma would work with the Company toward a resolution. To the Company’s disappointment, FSD Pharma failed to remedy its breaches and instead purported to terminate the Agreement effective February 6, 2019. The Company subsequently terminated the Agreement effective February 7, 2019. The Company reserves all of its rights under the Agreement.”
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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As noted above, CBWTF just announced the termination of the definitive agreement dated March 3, 2018 between the Company and FV Pharma Inc., a wholly-owned subsidiary of FSD Pharma Inc. governing the joint venture between the parties.
Traders will note 2% during the past week in terms of shareholder gains in the stock. Furthermore, the company has seen interest climb, with an increase in recent trading volume of 12% beyond what we have been seeing over the larger time frame.
Chuck Rifici, Chairman and Chief Executive Officer of Auxly, commented: “We are disappointed by FSD Pharma’s response to our significant concerns. We remain committed to working with all of our partners and are surprised by FSD Pharma’s chosen course of action. We will explore strategic alternatives for the approximately $50 million in capital that was earmarked for FSD Pharma that is now available for deployment. We take our responsibility as stewards of shareholder capital very seriously and remain committed to delivering on our strategy.”
Earning a current market cap value of $338.18M, CBWTF has a significant war chest ($236.9M) of cash on the books, which compares with virtually no total current liabilities. CBWTF is pulling in trailing 12-month revenues of $512K. However, the company is seeing recent declines on the top-line on a sequential quarterly basis, with revenues falling at 0% as of its latest reporting period. 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.