Three reasons NOT to invest in Abattis Bioceuticals Corp. stock (ATTBF)

What does Abattis Bioceuticals Corp. (ATTBF) do?

Abattis Bioceuticals Corp. originally sought to be a vertically-integrated company serving the medical marijuana and natural health products industries. They’ve slowly evolved away from that model to reduce overhead. The company’s now focused on generating revenue from its natural tonics, elixirs and blends, many of which contain its proprietary botanical blend ingredient PhytoNOS. The company’s also seeking a Controlled Substance License (CSL) with Health Canada via subsidiary Northern Vine Labs so it can possess and produce cannabis.

Three reasons NOT to invest in Abattis Bioceuticals Corp. stock (ATTBF)

1) Red ink. ATTBF lost $1.5 million (CAD) during the nine months ended June 30, 2016. That’s better than the prior year’s same nine months when the company lost $2.4 million (CAD). Unfortunately, the biggest reason for the smaller loss was cost-cutting (not revenue growth).

The one bright spot? Sales grew from $7,720 (CAD) in 2014 to $91,940 (CAD). That’s a gain of more than 1,000 percent. Yes, it’s fairly easy to grow when you’re only doing $7,000 (CAD) in sales per year, but their numbers are at least moving in the right direction. 2016 could be a defining year for Abattis. “As at June 30, 2016, the Company had a cash balance of $338 (September 30, 2015 – $157,758) and a working capital deficiency of $674,518 (September 30, 2015 – $787,857).” Money is tight, and the need for revenue has never been greater. All told, Abattis has lost $15,105,400 since inception. That’s a lot of cheese.

2) Stock dilution. Between April and June of 2016 (the latest time period available), Abattis issued nearly 13 million shares of ATTBF. That adds up to nearly $600,000 (CAD) worth of stock. If all those shares ended up for sale in short order, ATTBF’s stock could tumble – especially since average daily volume is a tiny fraction (229,000) of the number of shares the company issued.

Look for even more shares to be issued in the coming months. “In order to fund the Company’s ongoing operational needs, the Company will need additional funding through equity or debt financing, joint venture arrangements or a combination thereof,” Abattis writes. “The Company’s operations to date have been financed by the issuance of its common shares and debt instruments. The Company continues to seek capital through various means including the issuance of equity and debt. While the Company has been successful in raising funds in the past, there is no assurance that it will continue to do so in the future or that it will be available on a timely basis or on terms acceptable to the Company.”

3) Not enough focus? Abattis has its hands in a lot of pots (so to speak). Altogether, the company lists ten subsidiaries:

  • Abattis Bioceuticals International Inc.
  • Animo Wellness Corporation
  • BioCell Labs Inc.
  • Biocube Green Grow Systems Corp.
  • iJuana Cannabis Inc.
  • Instant Payment Systems LLC
  • National Access Pharmacy Corp.
  • North American BioExtracts Inc.
  • Northern Vine Canada Inc.
  • Phytalytics LLC

To raise capital, Abattis has started selling off some core technologies from its subsidiaries. “On August 21, 2015, Abattis sold the tangible asset, the flash freeze extractor prototype (FFE) and the intangible asset, the poultry avian flu patent, for $100,000 and 2.1 million free-trading shares of Abattis stock,” the company wrote in a recent MD&A. Those sales booked a loss of $393k (CAD).

Additionally, Abattis suspended operations at Phytalytics, a marijuana testing company in Washington state, in October of 2015. Despite capturing some 9 percent of the state’s testing marketshare, the business proved unprofitable.

One promising subsidiary is Northern Vine Labs. The Canadian company is seeking a Controlled Substance License (CSL) with Health Canada. The process is slow and costly, though. “Northern Vine’s first inspection in support of obtaining this License was completed on January 29, 2016,” the company wrote in a recent MD&A. If Northern Vine Labs acquires a license, it’s unclear how long it might take for it to start generating revenue from the venture. A license in hand might be enough to raise some capital from investors, though.

The bottom line on Abattis Bioceuticals Corp. stock (ATTBF)?

Should the three reasons listed above scare you off Abattis Bioceuticals stock? Probably. The company grew its sales last year by some 1,000 percent, but it still only generated $91,940 (CAD) in sales. It spent more than that in advertising alone (C$129,758). It also burnt through $420,309 (CAD) in legal fees and $1.1 million (CAD) in management and consulting fees.

Abattis does seem serious about cutting costs and generating revenue. Last month, they announced a partnership with China’s Jaingsu to export Abattis’ line of Phtnos Superfruit tonics and VitaGum to mainland China. It’s hard to say whether that’s too little too late. As I mentioned above, a cannabis license is pending for Northern Vine Labs. A positive result might buy the company more time, but they need to show they can generate some cash, and they need to do it soon. I’d stay away from the stock until they can prove that.

Nano-cap stocks are stocks with a market capitalization of $50 million or less. Check out more of my write-ups on nano-cap stocks here and marijuana stocks here. Full disclosure: I do not own a position in ATTBF, and I do not plan to initiate one in the next 72 hours.

Three reasons to invest in Abattis Bioceuticals Corp. stock (ATTBF)

What does Abattis Bioceuticals Corp. (ATTBF) do?

Abattis Bioceuticals Corp. originally sought to be a vertically-integrated company serving the medical marijuana and natural health products industries. They’ve slowly evolved away from that model to reduce overhead. The company’s now focused on generating revenue from its natural tonics, elixirs and blends, many of which contain its proprietary botanical blend ingredient PhytoNOS. The company’s also seeking a Controlled Substance License (CSL) with Health Canada via subsidiary Northern Vine Labs so it can possess and produce cannabis.

Three reasons to invest in Abattis Bioceuticals Corp. stock (ATTBF)

1) Rapid sales growth. ATTBF’s sales grew from $7,720 (CAD) in 2014 to $91,940 (CAD). That’s a gain of more than 1,000 percent. Yes, it’s fairly easy to grow when you’re only doing $7,000 (CAD) in sales per year, but their numbers are at least moving in the right direction. 2016 could be a defining year for the company.

2) China bound. Last month, Abattis announced a partnership with China’s Jaingsu to export Abattis’ line of Phtnos Superfruit tonics and VitaGum to mainland China. From their MD&A:

On August 10, 2016, Abattis announced that it has entered into an exclusive distribution agreement with the Jiangsu Regent Granary Trading Co., Ltd. (“Jaingsu”). Jaingsu is one of a select few that is exporting Canadian beef to China They also export canola, dried fruit and will also include Abattis’ line of Phtnos Superfruit tonics and VitaGum in mainland China. Jaingsu will utilize its network and sales experience to cultivate a market for Abattis offering. Jaingsu has certain sales revenue targets under the agreement; failure to achieve such targets will allow Abattis to terminate the Agreement.

The report continues:

“For the 2016 fiscal year, Abattis will continue with its focus as a bioceutical production and sales company, with projected launches of an extended Saskatoon Berry-based tonic range, an expanded Botanical Blends elixir line, as well as sales of the proprietary botanical blend ingredient PhytoNOS. The Company expects a pipeline of products to be deployed into retail and professional channels as well as the direct sales channel and wholesale distribution markets and to focus on further enhancing its international associations and trade.”

3) Diversification. Abattis has its hands in a lot of pots (so to speak). Altogether, the company lists ten subsidiaries:

  • Abattis Bioceuticals International Inc.
  • Animo Wellness Corporation
  • BioCell Labs Inc.
  • Biocube Green Grow Systems Corp.
  • iJuana Cannabis Inc.
  • Instant Payment Systems LLC
  • National Access Pharmacy Corp.
  • North American BioExtracts Inc.
  • Northern Vine Canada Inc.
  • Phytalytics LLC

There are pros and cons to this approach. Too many subsidiaries can be the sign of a company that doesn’t have one core strength. Most of Abattis’s acquisitions/subsidiaries stay true to the company’s core focuses, though: medical marijuana and natural health products.

Abattis seems to do a good job of cutting off businesses that don’t prove profitable. In 2014, one of their subsidiaries, Phytalytics, sought and received an analytics laboratory testing license in Washington state. Despite capturing some 9 percent of the state’s testing market share, the business proved unprofitable and operations were suspended in October of 2015.

Northern Vine Labs is seeking a Controlled Substance License (CSL) with Health Canada. “Northern Vine’s first inspection in support of obtaining this License was completed on January 29, 2016,” the company wrote in a recent MD&A. It sounds like they’re headed in the right direction.

The bottom line on Abattis Bioceuticals Corp. stock (ATTBF)?

Are the three reasons listed above good enough to invest in Abattis Bioceuticals stock? Sales growth is impressive, but you have to keep in mind ATTBF is still in the red. The company generated $91,940 (CAD) in sales last year, but it spent more than that in advertising alone (C$129,758). It also burnt through $420,309 (CAD) in legal fees and $1.1 million (CAD) in management and consulting fees. All told, the company lost nearly $6 million (CAD) in 2015. Without ongoing and significant cash infusions (or another spike in revenue), ATTBF could face a cash crunch. As of Sept. 20, 2015, the company had just $157,758 (CAD) on hand. I’d hold out until their revenue grows even more.

Nano-cap stocks are stocks with a market capitalization of $50 million or less. Check out more of my write-ups on nano-cap stocks here and marijuana stocks here. Full disclosure: I do not own a position in ATTBF, and I do not plan to initiate one in the next 72 hours.

Should I invest in Agritek Holdings Inc. (AGTK) stock?

Here are three reasons to invest in Agritek Holdings Inc. stock (AGTK) and three reasons to avoid it.

What does Agritek Holdings Inc. (AGTK) do?

Agritek Holdings has its hand in a lot of pots. It markets vapes under the Mont Blunt label. It also operates two subsidiaries: Agritek Venture Holdings, Inc., which holds pot-related land acquisitions and leases and The American Hemp Trading, Inc., which aims to produce “hemp-based beverages and products.” In general, the company’s aiming to become “a leader in compassionate care technology for the medical marijuana industry.” According to investor relations literature, “the company presently owns 80 acres of agricultural land in Colorado as well as acreage in Florida and plans to be the first Company to truly provide managed agricultural facilities, infrastructure, and greenhouse technology to licensed and regulated growers within the sector in both states.”

Three reasons NOT to invest in Agritek Holdings Inc. stock (AGTK)

1) Dead websites. As of this writing, I get an “account suspended” warning when I try to visit Agritek’s website at www.agritekholdings.com. The website for Mont Blunt is dead as well. That means one of two things: 1) the company has suspended operations; 2) the company’s behind on its hosting payment (a fact that doesn’t bode particularly well for the company’s operations).

2) Going concern? As of March 31, 2016, AGTK had total assets of $97,855 against total liabilities of $1.4 million. Cash on hand (and equivalents) was a mere $5,700. Worse yet, the company’s total stockholders’ deficit is just shy of $14 million! Per Agritek’s latest 10Q filing: “The Company had an accumulated deficit at March 31, 2016, a net loss and net cash used in operating activities for the reporting period then ended. These conditions raise substantial doubt about its ability to continue as a going concern. The Company is attempting to produce sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to produce sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect.”

3) Penny stock. Agritek Holdings Inc. is a penny stock. Most penny stocks are thinly traded, and Agritek’s no exception. Some 3 million shares of AGTK trade hands every day. That sounds like a lot until you consider the stock’s price at $0.0025. Even if 3 million shares of AGTK trade hands in a given day, that’s only $7,500 worth of stock!

Three reasons to invest in Agritek Holdings Inc. stock (AGTK)

1) A new direction? Last month, AGTK announced a partnership with WoahStork.com – an online marketplace where patients and recreational users can place online marijuana orders with local disensaries. “The parties have agreed on a 30% revenue share on a $3.75 transaction fee with additional revenues to be shared through advertising models, non-cannabis product sales and doctor’s appointment setting and record management fees.” Depending on volumes at WoahStork, this could be the source of revenue AGTK needs to stay afloat. “It is about time we get back to our original roots as being one of the first public Companies within the cannabis sector focusing on technology, storage of patient records and financial transactions within the industry,” CEO B. Michael Friedman said at the time. “We chose to partner with WoahStork creating a partnership with a high barrier of entry on the technology side as they have created technology far more advanced than a social media forum for cannabis or a delivery service.”

2) A “pure play” on pot. There aren’t a whole lot of stocks that give investors direct exposure to the medical and recreational marijuana industry. AGTK fits the bill, and it does it in a wide array of ways: from land holdings to an online cannabis-ordering platform.

3) Monetary damages on the way? In April (on 4/20/16, of course), Agritek Holdings announced a cease and desist and pending law suit against former CEO Justin Braune (now of Vape Holdings). Agritek alleges “the present vaporizer device and cartridge being sold as Vape Holding’s ‘Revival Vape’s’ product line was designed and developed during Mr. Braune’s tenure as Chief Executive Officer of Agritek Holdings under the Company’s wholly owned subsidiary Prohibition Products Inc. with Mr. Braune as President of Prohibition Products.” Agritek was preparing a law suit against Vape Holdings and Mr. Braune for “intellectual property infringement and violation of Mr. Braune’s employment agreement under non-compete clauses.” It’s unclear whether that lawsuit was filed. If so, there’s a chance (however slim) that Agritek could collect some monetary damages down the road.

Should I buy Agritek Holdings Inc. stock (AGTK)?

Getting in on Agritek’s real estate holdings and its partnership with WoahStork.com is tempting, but the company’s financial position looks too tenuous. Couple that with a pending lawsuit against the company’s former CEO, an offline website and no proven revenue streams, and AGTK looks like the longest of long shots. I’d stay clear until they prove they can generate some revenue.

Nano-cap stocks are stocks with a market capitalization of $50 million or less. Check out more of my write-ups on nano-cap stocks here and marijuana stocks here. Full disclosure: I do not own a position in AGTK, and I do not plan to initiate one in the next 72 hours.