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Darkpulse Inc (OTCMKTS: DPLS) Major Reversal Brewing as Global Leader in Advanced Laser-Based Monitoring Systems Acquires Nasdaq SPAC GLEE

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Darkpulse Inc (OTCMKTS: DPLS) is heating up after the Company announced it has closed the acquisition of an equity position in Gladstone Acquisition Corp., a Delaware corporation (NASDAQ: GLEE) (the “SPAC”). Pursuant to the Purchase Agreement with Gladstone Sponsor, LLC, and the SPAC, the Company purchased 2,623,120 shares of Class B Common Stock and 4,298,496 Private Placement Warrants, each of which is exercisable to purchase one share of Class A Common Stock from the Original Sponsor, for $1,500,000. GLEE management has resigned and DPLS officer Geoff Mullins, Wayne Bale, and John Bartrum were appointed as members of the board of directors of the Company. Finally, Rick Iler was appointed as Principal Executive Officer, Chief Financial Officer and Secretary of the Company. In addition to the payment of the Purchase Price, the Company also assumed all responsibility for all of SPAC’s public company reporting obligations. For a long time Darkpulse has been planning to spin off Optilan onto a major exchange and the acquisition of GLEE is the perfect choice. They can now do an initial business combination and an intial public offering and raise a significant amount of money to fund expansion by  IPO’ing Optilan into GLEE with the bulk of OS in the new Company owned by DPLS shareholders via the Optilan dividend. 

DPLS continues to see record growth recently reporting record revenues in Q2, 2022 of $4,435,043, an increase of over 120% from the $2,018,333 reported in the previous quarter. Driving the sales increase was continued strong global demand for fiber and infrastructure sales for Optilan, as well as increases in revenue from the Company’s other subsidiaries. Continuing strong demand in the major markets in North America and Europe drove increased sales at Optilan by more than 118% and the Company’s U.S. subsidiaries increased by a combined total of more than 131% from the previous quarter. Management states they expect the latter half of 2022 to continue increasing revenues, with additional contracts wins through Q3 continuing throughout Q4 2022.  The Company just held its 2nd annual shareholders event and you can find it here.

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Darkpulse Inc (OTCMKTS: DPLS) operating out of New York, develops, markets, and distributes a suite of engineering, installation, and security management solutions to industries and governments on an international level. DarkPulse’s ultra-high sensitivity infrastructure monitoring provides enhanced visibility to enterprises, allowing them to detect corrosion and system weaknesses before leaks, spills, and other tragic losses. Our system outperforms all other distributed fiber sensors in the market. The company intends to deliver security and monitoring systems in applications for border security, pipelines, the oil and gas industry, and mine safety. In addition to their leadership in sensing systems, DarkPulse is continuing to expand its offerings into services, and growing their suite of solutions to address global critical resource and infrastructure challenges. 

The Company’s recently acquired subsidiary Optilan is a global provider of turnkey telecommunications and security systems, and integration services intended to offer one-stop-shop services for all aspects of security and communication applications. The company’s services include design, installation, commissioning, support, and maintenance services of satellite, wireless, fiber transmission systems, CCTV security and radio-based systems, enabling the energy, transportation, critical infrastructure and industrial sectors to receive individually tailored, innovative applications and services that deliver value, resilience and flexibility. Optilan is headquartered in the United Kingdom and operates offices in Azerbaijan, India, the Middle East, UAE and Turkey. 

DPLS subsidiary TJM West Electronics is an ISO9001 and AS9100 certified electronics and electro-mechanical assembly operation operating out of a high tech, 20,000 Sq ft facility in Tempe, Arizona. The Company’s subsidiary Wildlife Specialists, LLC was founded in 2007 to provide clients with comprehensive wildlife and environmental assessment, planning, and monitoring services. The Company currently maintain two regional offices located in north central and southeastern Pennsylvania. 

In this videobotda - Twitter Search / Twitter engineers demonstrate the function of the dark-pulse based BOTDA system measuring strain on a PVC pipe. A 4″ PVC pipe specimen with 12′ length has a sensing fibre helically wrapped around it which measures the hoop strain as the pressure in the pipe is raised. Data is first collected at an internal pressure of 10 psig. The engineers then clamp one end of the pipe creating a disturbance in the strain field. This disturbance is readily seen in the second measurement demonstrating dark-pulse BOTDA system’s ability to detect sub-metre strain events. DarkPulse offers multiple configurations with increased processor capacity for faster data display including a cloud-based GUI as part of 24/7 structural health monitoring solutions. Darkpulse is a leader in distributed fiber sensor solutions. DPLS system outperforms all other distributed fiber sensors in the market today. DarkPulse’s growing list of world-class capabilities and the Company’s positioning as the leader in infrastructure sensing and monitoring in all domains, air, land, and sea which represents an enormous market worth billions puts Darkpulse in line for serious government contracts according to many investors who are buying in here. The Company continues to grow fast through acquisition. 

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DPLS

The Company has been very busy; in August Optilan reported it has once again secured three contracts within the same week. The first two are related to the Oil & Gas Industry and located in Iraq and Qatar, respectively. A third contract was won for an offshore wind project located in the United States. The Company anticipates completion of all three contracts in roughly six months. The contract values total approximately USD $3M. Optilan has also successfully continued expansion of its Fibre and Emergency Response Services business unit. 

The Company also entered into agreements to increase its equity ownership to 100% in both Remote Intelligence, Limited Liability Company and Wildlife Specialists, LLC, which, when closed, will make both firms wholly owned subsidiaries of the Company. Together, both companies offer fully integrated, drone-based, geo-rectified, 3D modeled mapping for industrial applications specializing in the energy and environmental survey service. Initially specializing in the Oil & Gas industry, the companies will expand offerings into the home drone delivery markets. 

On October 13 DPLS announced it has closed the acquisition of an equity position in Gladstone Acquisition Corp., a Delaware corporation (NASDAQ: GLEE) (the “SPAC”). Pursuant to the Purchase Agreement with Gladstone Sponsor, LLC, and the SPAC, the Company purchased 2,623,120 shares of Class B Common Stock and 4,298,496 Private Placement Warrants, each of which is exercisable to purchase one share of Class A Common Stock from the Original Sponsor, for $1,500,000. 

David Gladstone, Terry L. Brubaker, Paul W. Adelgren, Michela A. English, John H. Outland, Anthony W. Parker, and Walter H. Wilkinson, Jr. tendered their resignations as officers and directors of the Company, Michael Malesardi, Michael LiCalsi, Bill Frisbie and Bill Reiman resigned as officers of the Company, and Geoff Mullins, Wayne Bale, and John Bartrum were appointed as members of the board of directors of the Company. Finally, Rick Iler was appointed as Principal Executive Officer, Chief Financial Officer and Secretary of the Company. 

In addition to the payment of the Purchase Price, the Company also assumed the following obligations: (i) responsibility for all of SPAC’s public company reporting obligations, (ii) the right to provide an extension payment and extend the deadline of the SPAC to complete an initial business combination from 15 months from August 9, 2021 to 18 months for an additional $1,150,000, and (iii) all other obligations and liabilities of the Original Sponsor related to the SPAC. 

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Currently trading at a $113 million market valuation DPLS OS is 6,145,852,186. The Company has a strong balance sheet with $34 million in assets vs. $17 million in total liabilities including just $2 million in notes payable. DPLS has been working on some major projects in recent months including the Honcut Bridge in Loma Rica California, and recently signed a contract for the installation of its patented BOTDA EREBOS™ high resolution sensor system into Moon Land Resort in Hurghada Egypt. DPLS assisted with the launch of the world’s first intelligent bridge in Marysville, CA by installing its sensor technology with the California Division of Transportation (“CALTRANS”). DPLS is the Platinum sponsor for Smart Cities Connect Washington D.C Smart Cities conference to be held September 26th-29th and its CEO will be the keynote speaker. They also signed a MOU for the purchase of Om Optel Industries Pvt. Ltd., a fiber optic cable manufacturing business located in India. DPLS has completed a number of important acquisitions and expects to continue to see a reduction in costs with increases in revenues as it consolidates and adds key acquisitions in the near future. DPLS has runner in its blood skyrocketing out of the double zeroes last year to highs of $0.202 per share and investors are looking for a move back to these levels. Darkpulse continues to make big moves with the $15 million Company share buyback and the acquisition of Optilan which secured leases for two new facilities located in Warwickshire in the U.K as well as over a dozen new contracts including a contract for $45 million since the Company completed the acquisition. Investors in the Company have been waiting for a catalyst to end the downtrend that has decimated the share price since DPLS hit highs of $0.204 back in July 2021 and this just might be it with DPLS already up over 10% on the news in late trading Thursday. From current levels, DPLS has a lot ton of room for growth. We will be updating on DPLS when more details emerge so make sure you are subscribed to Microcapdaily.

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Disclosure: we hold no position in DPLS either long or short and we have not been compensated for this article.

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.

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