Australis Capital Could Make a Splash in the U.S. Cannabis Space

Australis Capital Inc. (CSE:AUSA) expects to leverage its historical relationship with Aurora Cannabis Inc. (TSX:ACB)

SmallCapPower | December 4, 2018: Australis Capital Inc. (CSE:AUSA) is an investment company that intends to acquire ownership interests in several asset classes, primarily in the cannabis and real estate sectors in the United States. The Company leverages its relevant experience and historical relationship with Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB), previously being a subsidiary of the cannabis producer, to build value in the cannabis space in the U.S. Australis Capital’s investments consist of equity, debt or other securities of both public and private companies, financings in exchange for royalties or other distribution steams, and control stake acquisitions. The Company follows strict investment criteria with a focus on near and mid-term, high-quality opportunities resulting in strong return potential.

Australis Capital’s stock started trading on the Canadian Securities Exchange under the ticker ‘AUSA’ on September 19, 2018, following the distribution of units by Aurora Cannabis to shareholders. Currently, the stock trades at a market capitalization of C$112 million.

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Investment thesis

  • Investment in Australis Holdings
  • Acquisition of Rthm Technologies

Investment in Australis Holdings

In April 2015, Australis Capital Inc. formed a joint venture – Australis Holdings LLP (AHL) – with AJR Builders Group LLC, in which both firms hold a 50% stake. Based in Washington, AHL bought two parcels of land, having an area of ~24.5 acres (the Property), for US$2.3 million in Whatcom County, Washington, in 2015 with the intention of construction a cannabis facility. The idea, though, was dropped.

Australis Capital gave a loan of $1.64 million to AHL for funding the purchase of the Property via a secured promissory note bearing interest of 5% p.a. and maturing on October 31, 2018. In case of a default, interest charged will be 12% p.a. The Company further issued an unsecured loan, bearing zero interest, of $1.23 million to AHL on October 31, 2017 for repaying the remaining loan on the Property.

Australis Capital, via its wholly-owned subsidiary Australis Nevada, purchased the 50% interest of its joint venture partner, AJR, for US$0.5 million on July 20, 2018, making AHL a wholly-owned subsidiary of the Company.

Acquisition of Rthm Technologies

Australis Capital signed a non-binding letter of intent (LOI) to acquire 100% of the outstanding shares of Rthm Technologies Inc., in exchange for cash and common shares in the capital of the Company. Rthm is a privately-held, federally-incorporated company, which is making a mobile application for iOS and Android with the objective of aiding users in attaining health and fitness goals through personalized plans based on users’ biological data. The tech company has numerous brand-associated trademarks and several patent applications at different stages of prosecution. Having been ranked the Number #1 health app in 26 countries, and the world’s first mobile genetics and circadian rhythm mapping platform, Rthm has ~2 million downloads and an above industry average retention rate of 45.5%. 

Outlook

Australis Capital is still in its formative stage with a few tangible assets. The Company, however, is in a strong financial position, having raised C$47 million (gross) through private placements and has excess land available for sale. Australis also boasts a lean management team with low overheat.  Australis Capital Inc’s stock started trading on the Canadian Securities Exchange (CSE) on September 19, 2018. Currently, Australis trades at a market capitalization of C$112 million.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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