Invictus MD Strategies Corp. (OTCBB: IVITF), is focused on three main verticals within the burgeoning Canadian cannabis sector: Licensed Producers under the Access to Cannabis for Medical Purposes Regulations (ACMPR) located in both Alberta and Ontario, including Acreage Pharms Ltd. and AB Laboratories Inc.; and Fertilizer and Nutrients through Future Harvest Development Ltd.; and Cannabis Data and Delivery, with its wholly owned subsidiary Poda Technologies Ltd. The company has the largest land package in Canada for building cultivation facilities as demand increases.
On April 20th 2017, Invictus announced that it has engaged Canaccord Genuity Corp. and Eventus Capital Corp., as co-lead underwriters and joint-bookrunners, pursuant to which Underwriters have agreed to purchase, on a bought deal private placement basis, $40 million aggregate principal amount of convertible debentures at a price of $1,000 per Convertible Debenture. Invictus also granted the Underwriters an option to purchase up to an additional $10 million aggregate principal amount of convertible debentures on the same terms as the Convertible Debentures.
On the flip side, it also announced that it has provided Acreage Pharms Ltd, a licensed producer of Cannabis under the Access to Cannabis for Medicinal Purposes Regulations (“ACMPR”), with notification that it intends to exercise its option to acquire 100% of Acreage Pharms’ shares from its current shareholders. The move is drive by company’s continued effort to focus on expansions, which are brownfield and modular in nature.
Prior to this, Invictus also announced that AB Laboratories Inc., a Licensed Producer under ACMPR, will provide their unique products in Canopy Growth Corporation’s (TSX: WEED), curated CraftGrow line on Tweed Main Street’s online store, that brings high quality cannabis grown by a diverse set of producers. Tweed Main Street is an opportunity in the legal market where patients can see what is available through the convenience of an online store.
After the successful development and acquisition of these facilities (i.e. both AB Laboratories Inc. & Acreage Pharms Ltd), Invictus MD anticipates that it will have the capacity to supply more than 50,000 kg of cannabis by 2020. This creates an attractive value proposition in the burgeoning cannabis market.
Canada is on the global stage for cannabis legalization and moves closer to making history by being the first G-7 nation to legalize and regulate access to cannabis. Therefore, the business risk profile of companies like Invictus are expected to derive significant strength due to the expected demand that will come with cannabis legalization for the recreational market.
IVITF operates in a Marijuana industry that has rapidly & recently turned into a multi-billion-dollar massive growth market across US and Canada with many new states legalizing it. According to a recent estimate, the cannabis market crossed $6.7 billion from the U.S. alone in 2016. On a conservative basis, combined recreational cannabis sales could total an estimated $45-$50 billion by 2020, if cannabis is legalized across the United States of America & Canada.
The company’s stock has unsurprisingly found some strength in the recent past. It has been powering due to the favorable impact of the company’s recent announcements and growing popularity & demand of the industry.
Description & about the Company: Invictus MD Strategies Corp is focused on three main verticals within the burgeoning Canadian cannabis sector: Licensed Producers under the ACMPR including an investment in a fully licensed facility, AB Laboratories Inc. as well as the option to now acquire 100% of Acreage Pharms Ltd.; Fertilizer and Nutrients through Future Harvest Development Ltd.; and Cannabis Data and Delivery, with its wholly owned subsidiary Poda Technologies Ltd. Invictus MD targets small and mid-size companies with proven brands, strong customer focus, and significant growth potential. Invictus directs the strategy towards profitability and growth for each of their portfolio companies. They assist the companies with business process integration and by structuring and deploying proper capital to support sustained growth.
It is broadly focused on the following two verticals:
- Cannabis cultivation in Canada
- Cannabis fertilizer and nutrients
About AB labs & AB Ventures: AB Labs, which maintains a 16,000-square foot facility located near Hamilton, Ontario, has successfully conducted test crops and is currently operating at half capacity, with full production capacity scheduled by the end of May 2017. AB Ventures Inc.’s (“AB Ventures”), a company formed to develop a second licensed expansion facility through it’s common ownership with AB Labs, is expected to close a 100-acre acquisition on May 1, 2017, and if licensed under the ACMPR, construction of production facilities totaling 250,000 square feet will begin and be used for future cannabis cultivation. With licensing in place as expected, production at AB Ventures is anticipated to start as early as December 2017. Considering the magnitude of AB Ventures’ land acquisition and future production facilities, and assuming AB Ventures obtains a license to produce the quantity forecasted, Invictus MD anticipates the combined production capacity of both AB Labs and AB Ventures to exceed 25,000 kilograms in 2020.
About Acreage Pharms: Acreage Pharms hold a 6,800-sq. ft. facility already constructed with a 30,000-sq. ft. expansion plan with an option to add an additional 20,000 sq ft second floor located on 150-acre property to accommodate three-phase expansion plan. Cultivation license has already been received on March 29, 2017
Valuation of Acquisitions:
To date the company acquired and sold the following assets:
Industry Outlook: According to Deloitte, Canadian recreational cannabis could reach retail sales of $6.0 billion by 2021. The following graph reflects the estimated Supply, demand and pricing.
Timeline of Recent progress & outlook over the near term:
- March 2017 Closed $16.21 million bought deal through Canaccord & Eventus Capital
- March 2017 AB Labs commences cultivation
- March 2017 Listed on TSX-V
- March 2017 Acreage Pharms received license under ACMPR
- December 2017 Estimated cultivation license for AB Ventures. Production profile for AB Labs & AB Ventures forecasted to reach 25,000 kgs by 2020
- December 2020 Acreage Pharms production profile forecasted to reach 25,000 kgs by 2020
Key Stock Influences & Risk Factors:
Some key influences that might govern future stock price performance include:
- Invictus’s distribution operational & marketing initiatives are still at nascent stage. Though, the company is making rapid progress, and the commercialization is underway. The company’s (including its subsidiaries/associates) ability to revamp its off-take strategies and to align with mainstream markets would hold the key over the near to medium term.
- The Company’s fortunes are significantly dependent on timely approvals and positive regulations in the subject Industry. Therefore, any positive or negative outcome/announcement would act as an immediate & strong trigger for its stock.
- Invictus’s ability to maintain its liquidity and financial flexibility to fund its incremental capital requirements. Since cannabis is still not fully legalized, it is not easy for the company to access capital on agreeable terms. Also, any additional equity raise is exposed to significant dilution risk.
- Company’s ability to timely deliver under its signed contract.
Earnings Review: The Company is in the process of reporting its latest financials. It has published no financial statements in the recent past.
Liquidity and Capital Resources: The Company’s ability to maintain its liquidity & financial flexibility is dependent upon its ability to develop additional sources of capital and ultimately to successfully achieve profitable operations.
Capitalization Structure as per the investor presentation deck, dated April 5th 2017.
Note: The figures are extracted from Company’s latest investor presentation & therefore may not include the most recent developments, as outlined in the report.
Stock Performance:
On Friday, April 21st, 2017, Invictus shares declined by -2.67% to $1.50 on an average volume of 248,454 shares exchanging hands. Market capitalization is $57.75 million. The current RSI is 62.97
In the past 52 weeks, shares of Invictus have traded as low as $0.18 and as high as $1.63.
At $1.450, shares of Invictus are trading above their 50-day moving average (MA) at $1.25 and above their 200-day MA at $0.94.
The present support and resistance levels for the stock are at $1.4476 & $1.5526 respectively.
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