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Sunday, September 27, 2020

Auxly Cannabis Group Inc (OTCMKTS:CBWTF) Backfires on the Bears

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Shorts are reeling from the failed breakdown evident on the chart of Auxly Cannabis Group Inc (OTCMKTS:CBWTF). The stock broke support late last year, cutting under the $0.50/share level, possibly representing a devastating technical event for shareholders. But now, just a few weeks later, we have a sharp squeeze underway and those in hunting bear gains on the breakdown are scrambling to cover.

Helping to define the context for this action, the company just announced that, further to the Company’s October 30, 2019 press release, it has settled the remaining 6% unsecured convertible debentures that matured on January 16, 2020, for approximately $2.7 million. According to the release, “in addition, warrants issued on January 16, 2018 to purchase 32,200,000 shares of the Company’s common stock at a strike price of $1.80 expired as of January 16, 2020. The warrants, which traded under the TSX venture symbol XLY.WT.A, have been delisted.”

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 that, further to the Company’s October 30, 2019 press release, it has settled the remaining 6% unsecured convertible debentures that matured on January 16, 2020, for approximately $2.7 million.

Recent action has seen 29% piled on for shareholders of the listing during the trailing week. What’s more, the company has registered increased average transaction volume recently, with the past month seeing 73% over what the stock has registered over the longer term.

“The repayment of the remaining debentures, together with the expiration of the 2018 warrants, has simplified our capital structure,” said Hugo Alves, CEO of Auxly. “As we look to continue to lead the derivative cannabis market and increase revenues throughout 2020, our investors can focus on the strengthening fundamentals of our business.”

Now commanding a market cap of $361M, CBWTF has a significant war chest ($186.9M) of cash on the books, which is balanced by about $154.7M in total current liabilities. One should also note that debt has been growing over recent quarters. CBWTF is pulling in trailing 12-month revenues of $5.8M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 215.8%. This may be a very interesting story and we will look forward to updating it again soon. 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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