NetworkNewsWire
Editorial Coverage: For the North American cannabis industry,
U.S. Attorney General Jeff Sessions’ decision (http://nnw.fm/7hbPL) to remove the protections to
cannabis operations provided by the Cole Memo has created an
environment of frustrating challenges, albeit one coupled with
immense opportunity for neighbors in the north. While the AG’s
broadside has increased uncertainty in the U.S. cannabis sector,
federal authorities in Canada have taken a completely different
tack. With legalized medicinal cannabis use already in the books,
Canada’s impending Cannabis Act will allow adults to possess and
access regulated, quality-controlled, legal cannabis, effective
July 1, 2018. These shifting tides continue to increase interest in
Canadian cannabis companies like DOJA Cannabis Company Ltd.
(CSE: DOJA) (OTC: DJACF) (DOJA
Profile), Aurora Cannabis, Inc. (OTC: ACBFF)
(TSE: ACB), Hydropothecary Corp. (OTC: HYYDF) (TSVX: THCX),
OrganiGram Holding, Inc. (OTCQB: OGRMF) (TSXV: OGI) and
WeedMD Rx, Inc. (OTC: WDDMF) (TSXV: WMD).
The decision by Sessions will remove the safe harbor provided to
the industry since 2013 by the Cole Memo, which promised to avoid
federal interference with state laws if compliance with certain
conditions were in place. Among other stipulations, these included
safeguarding public health, particularly from the risk of impaired
driving, and preventing the distribution of marijuana to minors and
to states where it remains illegal.
Now under his indictment that the Cole Memo “undermines the rule
of law,” the AG has left a controversial wake that frustrates the
laws of the 30 U.S. jurisdictions that currently permit the use of
cannabis for either medical or recreational purposes.
Despite the disheartening developments in the U.S., the cannabis
industry in Canada appears headed for comprehensive liberalization
and regulation of cannabis. The Canadian government has committed
to bringing the proposed Cannabis Act into force this summer,
allowing adults to legally possess, grow and purchase cannabis with
restrictions (http://nnw.fm/FSz7L). The Act would also allow
individuals 18 years of age or older to have up to 30 grams of
dried cannabis or its equivalent in their possession when in
public. Unlike in the U.S., federal and local legislation are
framed to work in harmony, with provincial governments being able
to set an additional layer of regulation over federal law if they
so desire.
In Canada’s rapidly growing cannabis industry, DOJA
Cannabis Company Ltd. (CSE:
DOJA) (OTC: DJACF) is poised to become the preeminent
craft cannabis brand house in the Canadian adult-use cannabis
market.
On December 21, 2017, DOJA disclosed it had signed a binding
Letter of Intent to acquire Tokyo Smoke (http://nnw.fm/UoY1c), an award-winning Canadian café
company dubbed ‘the Starbucks of Cannabis’ (http://nnw.fm/0UOla). Under the terms of the
agreement, DOJA will acquire all of the issued and outstanding
shares of Tokyo Smoke, creating an emerging company with the
proposed name, Hiku Brands Company Ltd.
Tokyo Smoke, recently named Brand of the Year at the Canadian
Cannabis Awards, is a lifestyle label that blends elements of
cannabis culture with Japanese influences. The company has six
brick-and-mortar cafes in Toronto and Calgary, which offer coffee,
tea, juice and snacks along with a variety of cannabis
accessories.
The DOJA merger with Tokyo Smoke is bolstered by funding from
Aphria, Inc. (OTCQB: APHQF), (TSX: APH), which will inject C$10
million in equity into the combined company and Aphria will also
enter into a supply agreement for cannabis concentrates with Hiku.
Aphria, recognized as one of Canada's lowest cost producers, is
the first medical cannabis producer licensed under Access to
Cannabis for Medical Purposes Regulations (ACMPR) to report
positive cash flow and positive earnings from operations in
consecutive quarters. Aphria recently announced (http://nnw.fm/j3OJn) receipt of a Dealer’s License
pursuant to the Controlled Drugs and Substances Act under Health
Canada, which authorizes it to possess, sell and transport medical
cannabis oil and resin to international markets. The news has
pushed Aphria’s stock up over C$22 per share with a market cap of
nearly C$3.5 billion.
Aphria’s investment in Hiku gives them a stake in British
Columbia's premium cannabis market, though Aphria’s financial
interest will go beyond being a passive investment. In what is
expected to be a supply-constrained market at the onset of
legalization, Hiku’s agreement with Aphria will increase Hiku’s
accessibility to product (http://nnw.fm/7ZUDo).
The DOJA-Tokyo Smoke deal has the potential create a highly
differentiated Canadian craft cannabis label that has significant
national retail presence and a growing portfolio of premium
cannabis lifestyle brands including DOJA, Tokyo Smoke, and Van der
Pop. The combined entity, Hiku, will have seven operational, legal
cannabis accessory stores in Alberta, British Columbia, and
Ontario, representing an unrivalled platform to build brand
awareness and reach consumers and will prioritize retail expansion
in provinces allowing private cannabis retail. Post-merger, Hiku
is expected to have a cash balance of approximately C$31 million,
which the company plans to invest in scaling up production
capacity, expanding its retail and global footprints, and further
build-out of its portfolio of cannabis brands.
DOJA also operates a cannabis production facility in British
Columbia's Okanagan Valley. The company is now building a new
production facility, FUTURE LAB, to be located in Kelowna,
British Columbia, which will support production capacity in excess
of 5,000 kg per year. DOJA also operates the Culture Café,
located on Kelowna's busiest street, which serves as a cannabis
information center that generates brand awareness. Late last
year, DOJA announced that its wholly owned subsidiary, Northern
Lights Marijuana Company, a licensed cannabis producer under the
Access to Cannabis for Medical Purposes Regulations (ACMPR), had
successfully completed its initial cannabis harvests and had
requested a Pre-Sales License Inspection from Health Canada
(http://nnw.fm/6KF4o). The Pre-Sales License
Inspection is the last step prior to the issuance of a Sales
License under the ACMPR.
DOJA (the name is slang for cannabis) has emerged as a producer
of high-quality product, supported by grow rooms equipped with
equipment from Surna Inc., cultivation experts and agricultural
engineers, and fitted with ductless air handlers, commercial-grade
dehumidifiers, in addition to bio-security products using
photo-catalytic reaction that sanitizes the air and minimizes
breakouts of pests, pathogens and mold.
Trading at C$3.50 on the Canadian Securities Exchange with a
market cap of C$214 million, DOJA is pacing its potential alongside
some of the industry’s leading players.
Aurora Cannabis (OTC: ACBFF) (TSE: ACB), the
only licensed producer (LP) located in Alberta, is also taking
steps to capture its share of Canada’s increasingly ripe cannabis
industry. Aurora kicked-off 2018 with news it plans to buy a 17.6
percent stake in privately held marijuana grower Green Organic
Dutchman Holdings for C$55 million (USD 44 million) (http://nnw.fm/4Wc1N). The deal gives Aurora the rights
to buy up to 20 percent, or more than 20,000 kilograms of
Ontario-based Green Organic Dutchman’s annual production of
cannabis at full capacity. And it allows Aurora to purchase up to
33 percent if Aurora increases its ownership to 31 percent. Aurora
has also announced a deal with Danish tomato and pepper producer
Alfred Pedersen & Son to produce and sell cannabis in Europe
(http://nnw.fm/G2Fm6).
Eastward in Quebec, Hydropothecary (OTC: HYYDF) (TSVX:
THCX) is planning to expand production 30-fold from 3,600
kg to 108,000 kg per annum, according to the company’s website
(http://nnw.fm/5tPbM). Economies of scale and
Quebec’s low utility rates have made Hydropothecary possibly one of
the lowest cost producers in Canada.
In New Brunswick, OrganiGram Holding (OTCQB: OGRMF)
(TSXV: OGI) announced the closing of its C$57.5 Bought
Deal financing during December 2017 (http://nnw.fm/TaMh8). Around the same time, the
company provided an update on how the construction of its
facilities is proceeding (http://nnw.fm/3HEsN). About 80 percent of the net
proceeds of the financing will fund the construction of an
additional 255,000 square feet of production space at the Moncton
campus. The company has also signed an MOU with New Brunswick
provincial authorities to provide a minimum of 5 million grams
yearly to the adult recreational market, a deal valued at between
C$40 million and C$60 million.
Ontario-based WeedMD Rx (OTC: WDDMF) (TSXV:
WMD) is also raising funds. In December 2017, the company
entered into a letter of engagement for bought deal equity
financing of $15 million. WeedMD intends to use the net proceeds of
the funding for working capital, general corporate purposes and to
position itself to expand production capacity within its recently
announced existing 14-acre greenhouse. WeedMD is the publicly
traded parent company of WeedMD Rx Inc., a federally licensed
producer and distributor of medical cannabis. The company operates
a 26,000-square-foot indoor facility in Aylmer, Ontario, and is
awaiting its second-site cultivation license for a greenhouse in
Strathroy, Ontario, representing 610,000 square feet, or 14 acres
under glass.
While cannabis companies in the U.S. mull through Sessions’
recent decision regarding the Cole Memo and what it means for their
operations, Canadian cannabis companies are stretching their legs
to prepare for a significant boost in product demand and subsequent
opportunity in market share.
For more information on DOJA Cannabis Company, visit DOJA Cannabis
Company Ltd. (CSE: DOJA) (OTC: DJACF)
For a more in-depth look into DOJA Cannabis (CSE: DOJA)
(OTC: DJACF), view the full report on Microsmallcap.com.
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