Newstrike Brands Latest Announcement Looks Appetizing

In this market news, Newstrike Brands Ltd. (TSXV:HIP), one of the Canadian marijuana stocks, said it has signed a joint venture agreement to develop, market and sell cannabis edibles

SmallCapPower | November 30, 2018: Newstrike Brands Ltd. (TSXV:HIP), one of the Canadian cannabis stocks, Wednesday announced that it has signed an agreement with privately-held snacks company Neal Brothers Inc. for the creation of a co-branded specialty food products joint venture. To be owned 60% by Newstrike Brands and a 40% by Neal Brothers, the joint venture will develop, market and sell cannabis edibles. For the development of products, an in-house R&D facility is being constructed at Newstrike’s licensed facility in Niagara.

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In addition to the joint venture agreement, Newstrike Brands also entered into an agreement to acquire a minority interest in Neal Brothers. As part this deal, Peter and Chris Neal, the founders of Neal Brothers, will also provide advisory services to Newstrike.

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The creation of a JV for cannabis edibles is in line with Newstrike’s sole focus on recreational cannabis. However, cannabis edibles are not yet legalized in Canada although recreational cannabis comprising fresh, dried bud, oil, plants and seeds were legalized for recreational use on October 17. Hence, products being developed by the JV cannot be sold until likely in 2019.

Operating through its licensed subsidiary Up Cannabis, Newstrike Brands is focused primarily on the recreational cannabis market and continues to develop adult-use brands through partnership with the Canadian rock band Tragically Hip. For the third quarter ending September 2018, Newstrike Brands generated $3.4 million in revenue, which includes $0.6 million from first shipments of dried cannabis for adult use to Alberta, Ontario and Nova Scotia, with the rest coming from wholesale sales of cannabis for extraction purposes. The Company currently has a production capacity of 15,000 kg/annum, which will increase to 37,000 kg/annum post completion of its Niagara facility in 2019.

Newstrike Brands stock currently trades at a market cap of $248 million.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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