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American Battery Technology Co (OTCMKTS: ABML) Breaking Out After DOE Awards Co $57.7 Million to Build its Commercial-Scale Battery Manufacturing Facility in Nevada

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American Battery Technology Co (OTCMKTS: ABML) is beginning to see some upward momentum and volume has picked up dramatically after the Company was awarded $57.7 million from the Department of Energy (DOE) to build its $115 million Commercial-Scale Battery Manufacturing Facility in Nevada. This award was announced during a Presidential event at the White House, which included a direct conversation about the importance of this project between U.S. President Joe Biden, Secretary of Energy Jennifer Granholm, and ABTC CEO Ryan Melsert.  Right now, 75% of battery manufacturing is done in China,’’ Biden said. “By undercutting U.S. manufacturing with their unfair subsidies and trade practices, China seized a significant portion of the (battery) market. Today we’re stepping up to … take it back — not all of it, but bold goals and actions to make sure we’re back in the (battery production) game in a big way.’’ Ryan Melsert, CEO of American Battery Technology Co. in Reno, Nevada, told Biden that U.S. intervention in the battery market was overdue. “Unfortunately, the U.S. is almost a non-player in the lithium game,’’ Melsert said, noting that less than 1% of lithium products globally are made in the U.S. His company, which makes lithium hydroxide for battery cathodes, is changing that, along with other grant recipients, Melsert said. “Vehicle manufacturers are really hungry to buy these materials from U.S.-based resources,’’ he told Biden. 

Earlier this week ABTC completed its Phase 2 drill program, consisting of six additional sites in addition to the 16-holes sampled in its Phase 1 program, completing the exploration program in its permitted 22-hole plan at its 10,340 acre Tonopah Flats Lithium Project in Big Smoky Valley, Nevada. The Company detected large lithium concentrations above 300 ppmw, with a peak concentration of 1,920 ppmw. After reviewing the highly promising initial results from the company’s exploration operations confirming that the lithium-bearing deposit extends even beyond the previously sampled 500 feet depth, ABTC has engaged RESPEC, a global engineering and design company, to act as an independent firm and as a Qualified Person (QP) to perform an independent analysis of these exploration results and to generate and issue a SK-1300 compliant Inferred Resource report. his independent report will quantify the magnitude of this lithium-bearing resource and the extent to which the resource is economically accessible, and this QP Inferred Resource report will contain specific recommendations on even further progressing this resource forward to a Measured and Indicated status as defined by the United States Geological Services (USGS).  


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American Battery Technology Co (OTCMKTS: ABML) is an industry leading clean technology innovator that has been created to increase the production of primary metals used in batteries that power electric cars, grid storage applications, and consumer electronics.  ABTC has built its capabilities to produce these battery metals through three business divisions: 1) recycling of lithium-ion batteries to recover battery metals, 2) extraction from primary resources, and 3) exploration of new primary resources. Together, the three approaches comprise a unique technologies platform that ensures battery metals are domestically sourced and re-used in an environmentally friendly, closed-loop fashion. ABTC’s multi-pronged approach builds the foundation for a circular economy of battery metals that supports a global shift away from fossil fuel energy sources. ABT subsidiary Lithium Ore has 1,040 placer mining claims on over 20,000 acres in the area known as the Western Nevada Basin, situated in Railroad Valley in Nye County, Nevada. ABT also owns a 120-acre property with water rights, in the town of Duckwater, NV near Railroad Valley.

The company began construction on the ABTC Pilot Plant for lithium-ion battery recycling in the first fiscal quarter of 2022, and to date, construction of the Phase 1 building is largely complete, with additional equipment procurement, component and utility installations, and offsite improvements in process.  ABTC anticipates beginning commissioning of Phase 1 of the plant by year-end 2022, and ramping throughput throughout calendar 2023. 

In October of 2021, ABTC received two government awards: a $4.5 million grant from the US Department of Energy’s Advanced Manufacturing Office Critical Materials Innovation program to advance the company’s first-of-kind processes to extract and manufacture lithium hydroxide from its lithium-bearing sedimentary resources in Tonopah, and a $2 million grant from the US Advanced Battery Consortium to demonstrate the recovery of battery materials from end-of-life lithium-ion batteries, the subsequent refinement of those materials into high energy density active cathode material, and for the fabrication and testing of full size automotive lithium-ion batteries from these recycled-content materials. 

Earlier this week ABML reported it has completed its Phase 2 drill program, consisting of six additional sites in addition to the 16-holes sampled in its Phase 1 program, completing the exploration program in its permitted 22-hole plan at its 10,340 acre Tonopah Flats Lithium Project in Big Smoky Valley, Nevada. The drilling infrastructure employed in the Phase 1 program was able to drill to a depth of approximately 500 feet, and in several of the drill holes there was still significant mineralization of lithium present at these final depths, indicating that the anomalous lithium concentrations could be present at even greater depths. A major goal of the company’s Phase 2 drill program was to employ drilling infrastructure that could sample at even greater depths, and in this program the team was able to successfully drill to deeper depths with the deepest hole ending at 885 feet. 

Characterization results from the assays from holes TF-2218 and TF-2219 have been received from Paragon Geochemical laboratory in Reno, Nevada, and the data confirms that the anomalous lithium-bearing claystone witnessed in previous holes continues well below the previous 500′ known depth of mineralization. Hole TF-2218 is measured to have a very shallow overburden of approximately 40 feet, after which 100% of the sampled material down to a final depth of 710 feet contains claystone with lithium concentrations above 300 ppmw, with a peak concentration of 1,920 ppmw. Hole TF-2219 is also observed to have a very shallow overburden of approximately 45 feet, after which 94% of the sampled material down to a final depth of 685-ft contains claystone with lithium concentrations above 300 ppmw, with a peak concentration of 1,940 ppmw. 

After reviewing these highly promising initial results from the company’s exploration operations confirming that the lithium-bearing deposit extends even beyond the previously sampled 500 feet depth, ABTC has engaged RESPEC, a global engineering and design company, to act as an independent firm and as a Qualified Person (QP) to perform an independent analysis of these exploration results and to generate and issue a SK-1300 compliant Inferred Resource report. This independent report will quantify the magnitude of this lithium-bearing resource and the extent to which the resource is economically accessible, and this QP Inferred Resource report will contain specific recommendations on even further progressing this resource forward to a Measured and Indicated status as defined by the United States Geological Services (USGS). 

These sampling and characterization efforts provide the foundation for the validation and commercialization of ABTC’s internally developed, selective lithium leaching and lithium hydroxide manufacturing technologies that are critical to solving the domestic and global critical battery metals challenges. 

The ABTC Tonopah Flats Lithium Exploration Project encompasses 517 unpatented lode claims covering approximately 10,340 acres. As part of the company’s battery metals resource development exploration efforts, ABTC is performing bench scale characterization and extraction trials to confirm the technical and economic competitiveness of extracting elemental lithium from these domestic sedimentary resources in order to produce battery grade lithium hydroxide for sale to the domestic battery metals market. ABTC, in collaboration with DuPont, was awarded a $4.5M grant from the US Department of Energy to build and operate a multi-ton per day demonstration-scale system to accelerate the commercialization and scale-up of this critical lithium manufacturing technology. 

QA/QC Statement 

Drilling was conducted by Drillrite LLC, Spring Creek, Nevada, using a track mounted reverse circulation drill. Sampling was conducted using a cyclone splitter over 5-foot intervals. Sample custody was maintained by the company’s consultants throughout the sampling and logging process and observed by employees of RESPEC. The company has a rigorous QA/QC program utilizing blanks, duplicates, and a high and a low-grade lithium standard material. Duplicates and standard material are inserted into the sample stream, and blank material was inserted at the start and finish of drill hole sample set. Samples were analyzed by Paragon Geochemical in Sparks, Nevada for analysis utilizing the ICP-MS analysis protocol. 

Also this week the Company announced it has hired former manager of Tesla’s Factory Infrastructure Design team, Mitchell Dreier, as its Director of Engineering, reporting to ABTC CEO Ryan Melsert. Recently Mr. Dreier led a team of multi-disciplinary engineers, designers, and project managers that delivered all infrastructure design for Tesla’s Gigafactory 1 in Nevada advancing key company programs such as Cell Manufacturing, Semi, Megapack, and Powertrain. Of note, Dreier recently managed the design of Tesla’s first advanced water treatment facility, allowing factory processes to consume reclaimed water and recycle process water to achieve a near zero liquid discharge facility.  

https://twitter.com/tha_builder/status/1582417083778097152

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ABML

On October 21 AMBL announced it was selected as a recipient of competitive funding under the Bipartisan Infrastructure Law to expand domestic manufacturing of battery grade lithium hydroxide for lithium-ion batteries for electric vehicles, with a focus on domestic processing of materials and components that are currently imported from foreign countries. 

In collaboration with grant partners DuPont Water Solutions, University of Nevada, Reno, and Argonne National Laboratory, ABTC was awarded $57 million towards this project from the U.S. Department of Energy (DOE) to design, construct, commission, and operate a first-of-kind commercial scale facility to demonstrate its novel process for the manufacturing of battery cathode grade lithium hydroxide from unconventional Nevada-based lithium-bearing sedimentary resources. By demonstrating at commercial scale this new low-cost and low-environmental impact process for manufacturing lithium products from unconventional sedimentary resources, the domestic-U.S. lithium resource base can be expanded and allow for the U.S. battery manufacturing supply chain to operate in a self-sustaining closed-loop fashion.  This award was announced during a Presidential event at the White House, which included a direct conversation about the importance of this project between U.S. President Joe Biden, Secretary of Energy Jennifer Granholm, and ABTC CEO Ryan Melsert. 

The conversation went like this according to the washingtonpost: Ryan Melsert, CEO of American Battery Technology Co. in Reno, Nevada, told Biden that U.S. intervention in the battery market was overdue. “Unfortunately, the U.S. is almost a non-player in the lithium game,’’ Melsert said, noting that less than 1% of lithium products globally are made in the U.S.  
His company, which makes lithium hydroxide for battery cathodes, is changing that, along with other grant recipients, Melsert said. “Vehicle manufacturers are really hungry to buy these materials from U.S.-based resources,’’ he told Biden.” 

This grant accelerates progress on the demonstration and facility commercialization efforts already underway, as ABTC, in collaboration with DuPont and the University of Nevada, Reno, was awarded a $4.5M grant from the US Department of Energy in 2021 to build and operate a multi-ton per day demonstration-scale system to accelerate the commercialization and scale-up of this critical lithium manufacturing technology. 

ABML CEO Ryan Melsert stated: “We are honored and excited to be selected for this investment from the U.S. government to accelerate the construction and commissioning of our first-of-kind commercial scale lithium refinery to manufacture battery grade metals from Nevada-based sedimentary claystone resources. The U.S. has unfortunately been essentially a non-player in the lithium manufacturing industry in recent decades, and while the nation has established large amounts of multi-billion-dollar electrical vehicle and lithium-ion battery factories in recent years, nearly 100% of the lithium materials that feed these facilities are imported from foreign countries.”

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Currently trading at a $375 million market valuation ABML OS is 644,138,631 shares. The Company has an excellent financial position with $56 million in assets $36 million in cash and about $3.5 million in liabilities. AMBL is an exciting story developing in small caps that is looking to uplist to a national exchange. The Company has a unique comprehensive, integrated business model that includes three diversified business units under one roof: Lithium-Ion Battery Recycling, Primary Metals Manufacturing, and Primary Resource Development. Currently the stock is moving northbound since reversing off $0.48 lows on accelerating volume as the Company makes steady progress at its plant in Fernley, Nevada strategically located 20 miles from Tesla’s Gigafactory project investing $10.8 million in construction just over the past year. To date, construction of the Phase 1 building is largely complete, with additional equipment procurement, component and utility installations, and offsite improvements in process.  ABTC anticipates beginning commissioning of Phase 1 of the plant by year-end 2022, and ramping throughput throughout calendar 2023. The stock is beginning to see some upward momentum and volume has picked up dramatically after the Company was awarded $57.7 million from the Department of Energy (DOE) to build its $115 million Commercial-Scale Battery Manufacturing Facility in Nevada. ABML has looks to be moving northbound since reversing off $0.48 lows, the stock has every reason to continue up from here and well into multi dollars from here. We will be updating on ABML when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with ABML. Microcapdaily firest reported on ABML when the stock was $0.03.

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Emerging Markets

Bitfarms (NASDAQ: BITF) in Focus: Exploring the Meteoric 110% Surge and Macro Influences

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Bitfarms Ltd. (NASDAQ: BITF) rides the wave of explosive growth surging by over 110% from its lows of $1.03 per share in November. This BTC miner has witnessed a 41% increase since last Friday, December 1st, 2023. If you’ve been keeping up with our recent articles, you’ll notice that majority of coverage lacks substantial press releases or filings supporting a surge in valuation. Today’s coverage includes precisely that and more. Let’s delve deeper into BITF to assess if this crypto miner is worth considering amidst the ongoing rise in spot BTC.

Background:

Established in 2017, BITF has established itself as a global leader in Bitcoin (BTC) mining. Utilizing its computational power, the company contributes to various mining pools, earning payment in Bitcoin.

BITF sets itself apart by developing, owning, and operating vertically integrated mining farms. These facilities feature in-house management, company-owned electrical engineering services, installation support, and multiple on-site technical repair centers, ensuring a comprehensive operational setup. Bitfarms relies on its proprietary data analytics system, ensuring superior operational performance and uninterrupted service.

Currently managing 11 farms across four countries—Canada, the United States, Paraguay, and Argentina—Bitfarms predominantly uses environmentally friendly hydro-electric power and maintains long-term power contracts. The company remains dedicated to employing sustainable energy sources, often utilizing locally available and under-utilized energy infrastructure.

In its recent upgrade initiative, BITF has improved its fleet’s efficiency and capital practices ahead of the Halving. This strategic move aims to boost its capital-efficient fleet to 12.0 EH/s by Q2 2024. The focus lies in reducing miner and energy costs, enhancing fleet energy efficiency, and fostering greater pricing flexibility for sustained growth and success.

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Market Update:

At the core of BITF’s latest momentum and strength lies its connection to macro-scale factors. To provide deeper insights into BITF’s future prospects, we’ve conducted a comprehensive market analysis.

The latest market surge propelled spot BTC above the USD $44,000 mark at its peak, reaching its highest value in more than 19 months. This remarkable rally emphasizes the enduring positivity shared among retail and institutional traders alike.

Blackrock ETF:

The primary driving force behind Bitcoin’s ascent appears to be rooted in market expectations of an approved spot BTC exchange-traded fund (ETF) in January 2024. This anticipation has spurred substantial cash inflows from institutional investors, contributing significantly to Bitcoin’s current trajectory.

If the approval unfolds as anticipated, it has the potential to bring a substantial wave of fresh capital into Bitcoin. According to certain projections, this approval might introduce up to $50 billion in new liquidity to Bitcoin. The precise impact on Bitcoin’s price remains uncertain; however, a particular model suggests a 4% price surge for every $1 billion that enters Bitcoin. Consequently, if the projected $50 billion materializes, Bitcoin could potentially double or even triple in value.

Rumours from Qatar:

As per bitcoin enthusiast Max Keiser, Qatar’s sovereign wealth fund (QSWF) (mainly tasked with managing the nation’s extensive oil and gas-derived wealth), is contemplating a significant investment spree of up to $500 billion in the flagship cryptocurrency, Bitcoin.

To offer a comparison, this proposed investment dwarfs the disclosed Bitcoin holdings of MicroStrategy, founded by Michael Saylor, by an astonishing 671 times. Presently, MicroStrategy stands as the largest corporate holder of Bitcoin, possessing 174,530 BTC following its acquisition in November.

Keiser is notably optimistic that QSWF’s monumental investment could propel the price of bitcoin to reach soaring highs of $100,000.

Binance Update:

In the aftermath of former Binance CEO Changpeng Zhao’s guilty plea and the subsequent $4.3 billion settlement with the U.S. Department of Justice (DOJ) on Nov. 21, Bitcoin’s price initially showed mixed signals. Contrary to expectations, Binance did not experience a mass exodus of funds similar to what FTX faced during its public liquidity crisis. Notably, prominent figures in the crypto space, such as Galaxy Digital CEO Mike Novogratz, perceive the settlement as a positive development overall.

At first, Binance’s Bitcoin reserves dropped by 17% from their peak. Following the initial outflows, the balance has shown an increase of nearly 1%. As for FTX, their BTC reserves fell a staggering 99.9% from all-time highs in November 2022 ,with no recovery in sight.

This serves as a significant testament to Bitcoin’s resilience at present, even as the largest cryptocurrency exchange by volume faces a monumental lawsuit. Unlike the substantial impact experienced by FTX, this legal challenge did not severely affect BTC reserves.

So What?:

With multiple factors driving spot BTC, smaller-scale BTC miners are becoming increasingly attractive -especially considering the potential financial growth and rising profit margins. Let’s delve into the recent developments concerning BITF for a closer look.

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What Happened:

On December 1st, 2023, BITF released a comprehensive performance and financial update, revealing robust figures for their BTC mining operations. Based on this report alone, it’s evident that BITF boasts a substantial global operational capacity and possesses the financial support needed to remain competitive, particularly as BTC mining grows more challenging post-halving. To enhance clarity, we’ve restructured the release into bullet points for easier comprehension.

BTC Production: November production recorded 392 BTC, a 1.5% decline from October. The network difficulty surged by 19.0% in November, indicating strong miner demand leading into the 2024 Halving.

Network Metrics: For the eleven months ended November 30th, network difficulty increased by 92.2%, while BTC’s price rose approximately 128.4%. This resulted in a 33.9% improvement in production economics measured by USD/TH/day.

Operating Highlights:

  • 6.4 EH/s was online by November 30, 2023, marking a 45% increase from November 30, 2022.
  • 66.4 BTC/average EH/s was recorded, down 1.9% from October 2023.
  • 13.1 BTC earned daily on average in November, equivalent to about $495,200 per day based on a BTC price of $37,800 on November 30, 2023.

Expansion Initiatives:

  • Firm purchase order placed for 35,888 Bitmain T21 miners, with an option for an additional 28,000 T21 miners.
  • Finalizing contracts to expand operating capacity from 30 MW to 50 MW at Paso Pe, adding 20 MW of hydro-miner containers.

Financial Update:

  • Raised $44 million in gross proceeds through a private placement of common stock and warrants.
  • Sold 350 BTC, generating $12.8 million in total proceeds.
  • Added 42 BTC to treasury, holding a total of 802 BTC, valued at approximately $30.3 million based on a BTC price of $37,800 at November 30, 2023.
  • Held Synthetic HODL™ of 35 long-dated BTC call options as of November 30, 2023.
  • Reduced outstanding indebtedness by $1.9 million, leaving a remaining balance of $6.0 million at November 30, 2023.

Technical Analysis:

We’re noticing a trend among retail traders on social platforms like X, discussing technical trading patterns related to crypto miners, specifically highlighting positive momentum linked to an Inverse Head and Shoulders (IHS) pattern. A user, @FreeDoomCapital, suggests that among all miners, BITF seems to exhibit the clearest pattern. Here’s a brief explanation of the pattern to enhance your comprehension.

The Inverse Head and Shoulders (IHS) pattern is a technical analysis formation commonly observed in financial markets, particularly in stocks, currencies, and cryptocurrencies. It’s considered a bullish reversal pattern and typically appears after a downtrend.

Here’s a further breakdown on the pattern:

  • Formation: The pattern consists of three successive troughs. The middle trough (the “head”) is the lowest point, while the two surrounding troughs (the “shoulders”) are higher than the head and relatively symmetrical in height.
  • Shoulders: The left and right shoulders are formed at the end of a downtrend. They show a decline in price followed by a temporary stabilization or slight increase before declining again.
  • Head: The head is formed after the left shoulder, indicating a further decrease in price, often reaching a new low. However, the head is typically higher than the previous trough, indicating a potential shift in the downward momentum.
  • Neckline: The neckline is a trendline connecting the highs of the two shoulders. It acts as a critical level; a breakout above this line is a significant signal for a potential trend reversal.
  • Volume: Volume analysis can complement the pattern. Generally, during the formation of the left shoulder, the volume decreases, increases during the head formation, and decreases again during the right shoulder formation. A breakout with higher volume after the formation is considered a stronger confirmation of the pattern.
  • Confirmation: A confirmed Inverse Head and Shoulders pattern occurs when the price breaks above the neckline. Traders often look for a sustained move above the neckline to confirm the reversal.

The Inverse Head and Shoulders pattern is considered complete when the price breaks above the neckline, indicating a shift from a downtrend to a potential uptrend. Traders and analysts use this pattern as a signal to anticipate higher prices, and they often set price targets based on the distance between the neckline and the head.

Similar to all technical trading patterns, it’s important to recognize that it’s not foolproof and may not be accurate in every instance. However, it’s noteworthy that several sources are paying attention, particularly due to the apparent clarity of BITF’s formation of an IHS pattern in their lineup.

Conclusion:

An essential consideration with BTC miners is the increasing difficulty of mining the digital asset after halving, which is scheduled for around April 2024. BITF’s recent fleet upgrade aims to strengthen its capacity pre-halving, positioning itself as a frontrunner. With spot BTC around USD $44,000, the 392 BTC mined in November alone would translate to approximately USD $17 million in top line revenue. If potential BTC catalysts sky rocket the price to USD $150,000 as some suggest, November’s mining performance would represent nearly $60 million – and that’s just in one month. As one of the leading BTC miners globally, we highly recommend keeping BITF on your radar.

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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.

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Emerging Markets

Music Licensing Inc. (OTC: SONG): Unraveling the 1250% Surge and Current Valuation

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Music Licensing, Inc. (OTC: SONG) shares skyrocket a whopping 100% gain at the time of writing, marking an incredible 1250% surge since their October low of $0.0004. Many appear to be wondering the cause behind the sudden rise and after today’s spike we decided to do more research. Let’s dig into the company and its recent updates to figure out how they’ve pulled off such an impressive climb and what might be coming next.

Background:

Starting with their name – Music Licensing, Inc., it is more commonly recognized as Pro Music Rights. If you’re diving into your own research, you’ll likely want to search by, “Pro Music Rights” to find the investor information you’re looking for, you won’t find much under the stock name alone.

In a nutshell, SONG is a performance rights organization (PRO) and was the 5th to be established in the United States. If that mean’s absolutely nothing to you, skip to the next title for a better understanding.

Nethertheless, they’ve got some big players under their license umbrella, including TikTok, iHeart Media, Triller, Napster, 7Digital, and Vevo. In total, SONG holds an estimated market share of 7.4% in the United States, representing a whopping 2,500,000 works.

Look out for familiar artists like A$AP Rocky, Wiz Khalifa, and Young Jeezy in their impressive lineup. For more details on other notable artists, their press releases have a comprehensive list for you to explore.

Again if the whole idea of a Performance Rights Organization (PRO) feels confusing, you’re not alone. We did some digging to break it down for you.

What’s a Performance Rights Organization:

To keep it simple, think of a Performance Rights Organization (PRO) as the backstage manager for musicians. It’s like the middle person making sure that when your favorite songs are played in public—on the radio, at concerts, or even on your go-to streaming app—the artists get their fair share of the spotlight. These organizations, such as ASCAP, BMI, and SESAC, keep tabs on where and how music is being enjoyed and make sure the right people get paid for their tunes. It’s a behind-the-scenes gig that ensures artists get a nod and a paycheck every time their music takes center stage.

Latest Press Release:

This morning on November 10th, 2023, the company announced it will be cancelling 59.9% of  their outstanding shares to enhancing Shareholder Value.

“Following the cancellation of an astounding 1,566,945,290 common stock shares, which reduced the total outstanding shares to 2,000,000,000, Mr. Noch is now embarking on yet another groundbreaking endeavor. He has pledged to cancel an additional 1,197,364,785 common stock shares, equating to a remarkable 59.9% of the current outstanding shares”.

Taking the cancellation of all these shares would also mean their market cap would be effected pretty drastically as well. If we do the math (at time of writing), 2B shares outstanding multiplied by the current stock price of $0.004 would mean ~8M market cap.

Okay Jake, so you’ve done the share reduction dance, claiming it’s a boost for shareholders. But really, what else does cutting down on shares mean for investors. Allow us to further break it down.

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Why Does it Matter?

Cutting down on the number of shares a company has floating around might seem like financial gymnastics, but it actually makes sense for a few reasons:

  • More Bang for Your Buck (EPS): Picture this – you and your buddies own a pizza joint. If you slice up the pizza into more pieces, each one gets smaller. The same goes for shares. Less shares mean each piece of the company’s earnings pie goes to fewer shareholders, so everyone’s slice gets bigger. That’s what we call Earnings Per Share (EPS), and a bigger slice is usually good news.
  • Share Price Perk: When a company trims down its shares, it can potentially give its stock price a boost because the float is now tighter. With a tighter float, it doesn’t take as much buying to move the stock price in either direction.
  • Steady Ship: Fewer shares mean fewer folks holding the reins. It’s like steering a ship – with fewer hands on deck, it’s easier to keep things steady. Reducing the number of shares available for purchase also makes it harder and more costly for others to buy a big chunk of ownership, fortifying the company against hostile takeovers.
  • Improved Financial Ratios: Reducing shares outstanding can even positively impact financial ratios, such as earnings per share, return on equity, and book value per share. These improvements of course make their financial profile more attractive to investors by and large.

Financial Highlights:

Despite having a market cap of around $15 million on YahooFinance, or $8 million if we consider the share consolidation, SONG has posted impressive numbers for its financials. They’ve managed to rake in a substantial $758 million in revenues, pushing a solid net income of $39 million. Their quarter ending in June, 2023 showed 93M in revenue, which was also net profitable too. Digging into their balance sheet, you’ll find $45 million in assets and a modest $61,000 in liabilities. Given those figures, this valuation’s definitely a head-scratcher and seems completely off.

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Behind SONG’s Low Valuation:

According to one user, @StockPicksNYC, on Twitter there’s a story behind why their valuation is so low given their fundamental financial backing.

Apparently the stock’s low valuation can be attributed to a previous incident where a storm-induced power outage at the CEO’s residence led the company to a downgrade on OTC markets, pushing SONG into ‘Expert Market‘ status with a ‘Shell Risk’ label.

Despite successfully addressing challenges to regain ‘Pink Current’ status and remove the ‘Shell Risk’ designation, SONG is still unable to update its information on the OTCM platform.

This is a well-documented problem with OTCM and there’s ongoing litigation with OTC Link, (an OTC Markets subsidiary), revolving around transparency and responsiveness issues during efforts to resolve downgrade-related issues.

This has now pushed SONG to take further measures to safeguard itself and its shareholders. They currently have a lawsuit filed against OTC Markets, where they’re pursuing $386.6 Million in Damages.

The good news is despite the lack of information on OTCM, SONG filed a Form 1-SA with the SEC to provide detailed information about their business.

OTC Expert Market:

If we look at the OTC Market tiers, there’s OTCQX, OTCQB, OTCPNK, OTC Expert Market, and OTC Grey. Back on September 28, 2021 the SEC put an amendment in place that stops brokers from quoting stocks without current information. That’s where OTC’s Expert Market steps in.

In a nut shell, any company that does not have current information publicly available trades on OTC Expert Market. Only broker-dealers, professionals or sophisticated investors are allowed to view quotations in Expert Market securities. It of course comes with massive risk given you’d be completely unaware of the company’s financial health.

Conclusion:

Among many factors, SONG’s impressive revenue and profits alone make the company appear considerably undervalued. Even without more developments, we can imagine a company of this caliber will inevitably draw increasing interest from investors. Considering the legal issues with OTC, a move to a bigger exchange like  the NYSE or NASDAQ seems likely. They’d atleast be a great candidate considering the fundamentals. Keep in mind, this dynamic story could change at a moments notice, so be sure to keep them on your radar.

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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.

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Emerging Markets

Lucy Scientific Discovery’s (NASDAQ: LSDI) Game-Changing Move: A Closer Look at the High Times Acquisition

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On August 8th, 2023, Lucy Scientific Discovery Inc. (NASDAQ: LSDI), a leading developer in the psychedelic drug industry, witnessed an impressive surge in its stock value, gaining approximately 25% in combined trading, including after-hours (AH) trading. The British Columbia-based company made headlines by announcing its strategic move to acquire intellectual property (IP) from the renowned cannabis publication, High Times Holding Corp. (HHC).

Additional Background:

Under this agreement, Lucy will exchange 20% of its shares and a series of payments for access to HHC’s valuable IP portfolio, which includes the rights to generate licensing and royalty income from renowned brands like High Times, 420.com, and Cannabis Cup, along with their associated domain names.

Lucy’s commitment involves making semi-annual payments to HHC over a five-year period, structured around earnings before income, taxes, depreciation, and amortization (EBITDA) generated through the acquired IP. The flexibility exists for Lucy to fulfill these payments either in cash or through stock issuance and the announcement is generating considerable interest.

Furthermore, post-acquisition, Lucy will grant High Times the opportunity to operate retail outlets and distribute THC products bearing these prestigious brands within the United States. This privilege comes in exchange for an annual license fee of $1 million, set to double to $2 million annually once federal legalization of cannabis occurs in the country.

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Leveraging the brand rights secured from HHC, Lucy aims to bolster its revenue streams by expanding and enhancing its existing 18 licensing agreements, both domestically and internationally. These arrangements encompass a wide array of consumer products and merchandise, promising to further establish Lucy’s presence in the global market. The acquisition is expected to be finalized within the coming two weeks, marking a significant strategic move for Lucy Scientific Discovery Inc.

As a result of the acquisition, High Times is now a publicly-traded entity. Lucy anticipates that this agreement will contribute over $10 million in revenue to its financial results in the upcoming year, along with $5 million in EBITDA.

Adam Levin, the Executive Chairman of HHC, expressed optimism about the deal, noting, “This transaction will create exciting new growth opportunities for the High Times brand, under the leadership of Richard Nanula, a seasoned executive with extensive experience in major consumer brands and global corporations.”

Levin also emphasized High Times’ enthusiasm in becoming a significant shareholder of Lucy Scientific Discovery. Notably, Lucy completed its initial public offering and Nasdaq listing in February, offering 1,875,000 shares at $4.00 each.

Richard Nanula, CEO of the British Columbia-based company, shared his outlook on the acquisition, stating, “Lucy expects this acquisition to rapidly generate high-margin revenue within the global cannabis sector.”

In recent developments, Lucy introduced the sleep aid product “Twilight,” which includes amanita muscaria and reishi mushrooms. Additionally, the company joined forces with Wesana Health Holdings Inc. (OTCQB: WSNAF) in March to collaborate on the development of the CBD and psilocybin-based drug SANA-013, targeting conditions such as migraines, cluster headaches, and major depressive disorder.

High Times, founded in 1974, has a rich history, featuring works by renowned writers like Truman Capote and Hunter S. Thompson. Since 1988, its Cannabis Cup has stood as the most prestigious cannabis competition globally, with notable judges including Snoop Dogg, Joe Rogan, Tommy Chong, and other prominent figures in the cannabis industry.

While Lucy’s shares showed a nearly 16% increase to reach $0.68 on the Nasdaq exchange on Friday, it is worth noting that they have experienced a decline of over 77% over the past year.

Macro Trend:

In recent times, our articles have prominently featured cannabis-related topics, reflecting the growing popularity of stocks in this sector. LSDI’s acquisition aligns perfectly with the current climate, as the cannabis industry experiences a significant surge, coinciding with the Health and Human Services (HHS) exploring the possibility of reclassifying cannabis from Schedule I to Schedule III of the Controlled Substances Act.

While many countries around the world have already moved towards decriminalization and legalization, the United States has been relatively cautious in its approach. However, the consideration of such a reclassification represents a potential historic turning point. If such a change were to materialize, it would mark a substantial shift in the regulatory landscape, potentially revitalizing cannabis as an attractive investment opportunity. The industry is already showing signs of reestablishing its market presence and could once again become a noteworthy investment option.

We will update you on LSDI when more details emerge, subscribe to Microcapdaily to follow along!

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Disclosure: We have not been compensated for this article/video. MicroCap Daily is not an investment advisor; this article/video does not provide investment advice. Always do your research, make your own investment decisions, or consult with your nearest financial advisor. This article/video is not a solicitation or recommendation to buy, sell, or hold securities. This article/video is our opinion, is meant for informational and educational purposes only, and does not provide investment advice. Past performance is not indicative of future performance.

Picture by herbalhemp from Pixabay

 

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