Australis Capital Inc., operating as Audacious (CSE: AUSA) (OTC: AUSAF) recently announced a major development and enhanced its growth profile by signing a binding term sheet to acquire 100% of Gary Maverick Inc., operating under the brand name LOOS, a cannabinoid infused shot beverage company that is based in Santa Cruz, California.
Through the acquisition, Audacious is entering California and has advanced its US growth strategy. The Company expects the cannabis brand to play a key role with how the firm is able to capitalize on burgeoning markets in the US. With LOOS, Audacious is adding a novel brand and product line to its portfolio, which targets a generally cannabis savvy and influential target market. The consumers the brand attracts includes numerous demographics and reaches both new and more experienced consumers.
LOOS’ management team has a proven track record with cannabis brands and brings over a decade of collective experience from working with companies like Plus Products, 710 Labs, Loudpack, and Flow Kana. We are favorable on how these brands have performed and expect the management team’s expertise to play a key role in driving sales for all Audacious brands across its various jurisdictions.
A Cannabis Brand with Substantial Growth Prospects
LOOS’ first product is a 2oz drink that is infused with 100mg of THC. The product line is available in three flavors and each flavor features a unique terpene profile and is infused with added nutraceuticals for increased functionality. The products are based on a unique nano-emulsion technology platform for rapid onset, and we find this aspect of any infused product to be of utmost importance. Going forward, LOOS plans to release a number of other products across several key categories, including cannabidiol (CBD) infused shots.
One of the reasons we are favorable on the acquisition is related to the amount of demand for infused cannabis (CBD and THC) beverages. Zenith Global expects the US CBD-infused beverage market to reach $1.4 billion by 2023, which would make it one of the fastest-growing verticals in the entire cannabis industry. Market research firm Facts & Factors estimates that the global CBD infused beverages market will reach $14.6 billion by 2026.
We are favorable on how these two firms view the cannabis beverage market and, if they are accurate, Audacious could be a major beneficiary of increasing consumer demand. Although no major beverage conglomerate has entered the cannabis industry (outside of alcohol companies), multi-national brands like Coca Cola and Mondelez have conducted significant research on the CBD beverage and edible opportunity.
We believe that it is only a matter of time before one of these major beverage and snack food conglomerates enters the cannabis sector via the CBD vertical. Audacious’ acquisition of Loos accelerates its strategy to enter burgeoning verticals of the cannabis industry and better positions the business to be acquired by a large beverage and snack company.
Expect the Acquisition to be Rapidly Accretive
Another reason for our favorable view on the transaction is related to how LOOS will form the brand foundation for further expansion of Audacious’ product lines into ingestibles and edibles in California as well as other jurisdictions that it operates in (Nevada, Massachusetts, Missouri, Oklahoma, Washington, Australia, and Canada). We expect the product line to make it easier for Audacious to expand into new markets and will monitor how the business advances following the closing of the deal.
LOOS already has an existing sales pipeline with California dispensaries, and we believe this will make the acquisition rapidly accretive for Audacious. From a technology standpoint, LOOS has a platform that enables the launch of a broad range of CBD infused drinks and we are favorable on this aspect of the business.
A Growth Story that is Trading for a Discount
During the last year, Audacious has reported a series of positive developments and has expanded its geographic footprint in the US. We believe the business is well positioned to capitalize on a changing legal cannabis landscape in the US and expect the acquisition to support the growth of the business.
Audacious represents a differentiated play on the US market and we believe the assets that are owned by the company are strategic in nature. Through acquisitions of brands like LOOS, we are of the opinion that the company is enhancing its platform and de-risking the opportunity. Management clearly is executing in its unique and de-risked strategy, and we believe that the moves the Company has made and is expected to make are strongly shareholder value generative.
Going forward, Audacious has significant potential catalysts for growth and we believe the business is significantly undervalued at current levels. As the management team continues to execute, we expect to see more interest in the opportunity, and this is a business that our readers should be aware of.
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