The Canadian cannabis industry should see even stronger growth in the back half of 2017 after Health Canada announced a major change to its rules that will streamline the application process and increase overall cannabis production.
Under the new regulations, licensed medical cannabis producers can better manage production to meet demand as they are now able to increase production within their facility to the maximum they are authorized to store, based on the capacity and security level of their vault(s) or safe(s).
This is a significant change to the Health Canada’s rules and licensed producers will benefit from this development. Several Canadian cannabis companies have announced important developments since this change was made and we want to highlight some of these announcements.
CW Improves Portfolio of Streaming Partners
Yesterday, Cannabis Wheaton (CBW.V: TSX Venture) (KWFLF) and ABcann Global Corporation (ABCN.V: TSX Venture) announced a binding interim agreement to fund the construction of a 50,000 square foot cultivation facility at ABcann’s proposed facility in Napanee, Ontario known as the Kimmett facility.
Under the agreement, Cannabis Wheaton has agreed to invest $30 million in ABcann as follows:
- On the date that is the earlier of 10 days of the final closing of Cannabis Wheaton’s previously announced financing or by June 30th. The company will buy $15 million of common stock at $2.25 a share
- On the date that is the earlier of 10 days of CW raising an aggregate of $150 million or March 31, 2018. Cannabis Wheaton will subscribe for an additional $15 million at a price equal to the greater of two times the 10 day volume average trading price of ABcann at the relevant time or $2.25.
Upon completion of the $30 million investment, and upon accepting ABcann’s construction budget and timeline for the new production facility, Cannabis Wheaton will provide funding to complete the construction of it. In return, Cannabis Wheaton will receive 50% of the proceeds (net of certain costs) of future wholesale or retail sales completed by ABcann with respect to cannabis produced in the new production facility. Cannabis Wheaton’s entitlement to the allocation will not start until after the completion of the $30 million investment.
Aurora Expands International Presence into Germany
On Friday, Aurora Cannabis (ACB.V: TSX Venture) (ACBFF: OTCQX) announced that it was acquiring Pedanios GmbH, a leading wholesale importer, exporter, and distributor of medical cannabis in the European Union (EU).
The market responded mixed to this development and Aurora Cannabis came off its highs ended the day up less than 2%. This was a significant development for the company as it now is leverage to three legal cannabis markets (Canada, Australia, and Germany).
Since December 2015, Pedanios has been importing, exporting, and distributing medical cannabis into and within the EU. The company holds all relevant licenses and permits and is a federally licensed medical and narcotic wholesale and GMP inspected narcotic import business.
In March 2017, when Germany’s new law came into effect Pedanios’ monthly sales immediately doubled and growth continues to accelerate as Germany’s new regulations have made it much easier for its 80 million citizens to access medical cannabis.
Mobile Payment App Enters Cannabis Industry
Glance Technologies Inc. (GET.CN: OTC) (GLNNF) entered the legal cannabis industry after agreeing to license its mobile payment technology to Cannapay Financial for $1,000,000. Cannapay is developing a mobile payment app that will allow users to order products from their phones, tablets or computer and have them delivered to their physical location in compliance with local rules and regulations.
Pursuant to the agreement, Cannapay was issued a non-exclusive global license to white label Glance’s mobile payment processing platform and its anti-fraud technology for the legal cannabis industry. The license has an initial term of 10 years and is renewable for two additional 10 year periods. Glance will receive a 50% royalty on the revenue from all sub-licenses and additional fees for any development work required for customization/operation of the Cannapay platform.
Glance Technologies owns and operates Glance Pay, a streamlined payment system that revolutionizes how smartphone users choose where to dine, order food, settle bills, access digital receipts, earn great rewards, and interact with merchants. The Glance Pay mobile payment system consists of proprietary technology, which includes user apps available for free downloads in IOS (Apple) and Android formats.
This is an interesting development within the Canadian cannabis industry and will monitor how the market responds to these announcements from the sidelines. While we view this area as a major global opportunity, we are cautious and want to monitor how the company continues to execute.
Biotech Firm Enters Canadian Cannabis Industry
One of the Canadian cannabis firms under pressure has been Revive Therapeutics Ltd. (RVV.V: TSX Venture) (RVVTF). Despite the shares being up more than 70% so far this year, the shares are down more than 33% in the last quarter and will monitor how the market responds to its sponsored research agreement with the University of Wisconsin-Madison.
Under the agreement, Revive will work with the university to evaluate a novel drug delivery technology with a focus on cannabinoids for the potential to treat various diseases.
The research program will be led by Jess D. Reed, Ph.D., Professor of Animal Sciences at the University of Wisconsin-Madison. His team will evaluate the role and potential use of a chitosan-tannins based formula for the delivery of cannabinoids.
Although we are favorable on this development, we are cautious with Revive and continue to prefer Canadian companies like Emblem Corp (EMC.V) (EMMBF), which also has a biotech strategy to complement its legal cannabis sales strategy.
Disclaimer: Pursuant to an agreement between MAPH and Cannabis Wheaton (KWFLF) we were hired for 30 Days to publicly disseminate information about (KWFLF) including on the Website and other media including Facebook and Twitter. We are being paid $150,000 (CASH) for and were paid “0” shares of restricted common shares of Cannabis Wheaton. We may buy or sell additional shares of (KWFLF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable
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