Please read thoroughly and do your own due diligence before making any decisions. Highly recommend reading Part 7: Summary section for my thoughts and the risks involved.
Table of Contents
Part 1: Company Overview
Part 2: Financials
Part 3: Catalyst
Part 4: Technical Analysis
Part 5: Insider Trade & Ownership
Part 6: Short Data
Part 7: Summary (TLDR)
The AgriFORCE team is dedicated to transforming agriculture in multiple sectors - from growing to the production processes that result in delicious, nutritious, and sustainable food. We believe that vegetables, fruits, and other plant-based food products, as well as crops for medicine and supplements, should be Clean. Green. Better. - from seed to sale.
AgriFORCE has developed IP which creates the next generation of agriculture facility design to allow plants to achieve their full genetic yield optimization and allows for significant yield compared to traditional indoor growing environments.
· Each facility for Medical Plants provides: Annual Revenue of $30-40M and EBITDA of $15-20M
· 4 potential facility contracts in the pipeline (3 California, 1 Barbados)
“We have pioneered dynamic new technologies in our IP that leverage unique facility/lighting design, automation and artificial intelligence, fertigation and nutrients, and micropropagation. Perhaps most compelling is our highly advanced facility design that merges an optimized indoor microclimate with natural sunlight, supported by almost ideal supplemental growth lighting to maximize yields.”
Figure1. AgriFORCE contracted to build a Growhouse facility in Barbados by early 2023 to grow medicinal plants.
December 2nd (2021): AgriFORCE signs a definitive contract to deploy its proprietary GrowHouse facility and IP in Barbados for the production of High-Value Medical and Agricultural Crops. (AKA weed)
Upon production, Humboldt has committed to remit an IP licensing, management services, and equipment leasing fee to AgriFORCE for up to 14,300 pounds (6,500 kgs) of high-value medical and agricultural crops per year.
Table 2. The five-year contract with two five-year automatic renewals. The company anticipates the total contracted EBITDA to be approximately $190M.
The division of AgriFORCE focuses on the development and commercialization of plant-based ingredients and products that deliver healthier and more nutritious solutions.
September 15th (2021): AgriFORCE acquires patent-pending technologies to naturally process and convert grain, pulses, and root vegetables, resulting in low-starch, low-sugar, high protein, fiber-rich baking flour products.
This exciting IP is the foundation piece of the AgriFORCE Brands side of our business, which will showcase products through a new consumer brand that is set to be unveiled early in 2022. This IP, with an initial focus on the wheat process, has the potential to transform the soft-baked goods sector.
Figure 3. AgriFORCE focus is to target the wheat market
Table 4. AgriFORCE Balance Sheet for 2020 and 2021.
On July 7th, 2021, AgriFORCE announced the pricing of 2.7M units (One share and warrant) at a pricing of $5/unit approximating $13.6M. There were an additional 238k warrants exercised at the same price. After all the IPO expenses, the company received a net $13.4M of proceeds from their public offering.
The company now has 9.8M cash on hand and total assets valued at 13.9M. With only 47k in debt and 1.8M in short-term liabilities, AgriFORCE is financially stable. At a 17.9M market cap, the company is trading near asset value.
Figure 5. Charts of $AGRI upon news of an acquisition
AgriFORCE Growing Systems (NASDAQ: AGRI) entered a Binding LOI to acquire European agriculture/horticulture and AgTech consulting firm. With global operations and over 200 employees, this AgTech Consultancy achieved 2020 annual revenues of $26M and EBITDA of $3M and expects to end the year of 2021 with revenues of $28M.
The consultancy has generated strong historical financial performance and consistent growth across Europe and internationally. AgriFORCE plans to build on this growth through expansion of these consulting operations and the establishment of a research and development center in North America, higher penetration of its Asian markets, as well as expanding AgriFORCE's operations in Europe.
AgriFORCE is currently working through the due diligence process with this acquisition and expects to close, as scheduled, in the first quarter of 2022.
Jan 11th: CEO says, “As a result of the completion of due diligence, we expect to finalize the definitive agreement by the end of January 2022 and hope to close as soon as it is practicable to do so.”
Once the acquisition is finalized and the public target is revealed likely by early February, this stock will pump upon news alone.
Figure 6. The stock price from IPO date (July 8th, 2021) to now
On IPO day, the stock price was set to open trading at $5. During the few days since it launched, it was pumped to highs of $13.98 with approximately 5M volume. Since then, the price has been beaten down to ATL today with only one large jump upon acquisition news.
Figure 7. Charts of the last 10 trading days.
Over the last two weeks, the market has been extremely volatile. Spy dropped to the highs of -5% and came out green at the end of the day. This hasn't been favorable to $AGRI. There were two large gap downs during the peak of volatility on extremely little volume. Dropping nearly 30% in two weeks. At these prices, there is no resistance, and we will gap back up with ease.
After hitting ATL of $1.12 for a moment, the stock price is now in the consolidation zone and already reached back up to the first gap with little effort.
Indicators: MACD turning, RSI bouncing from oversold. 10D daily average volume has exceeded four out of the five latest trading days. Volume is ramping up.
From a technical perspective, the first gap up is filled, and the second gap of $1.63 will fill with no resistance**. The next gap after is the $2 range**. These prices will bounce from purely technical and if news comes out, the real pump will commence.
Table 8. SEC filing shows CEO bought shares.
On November 11th, 2021, Ingo Willhelm Mueller (CEO) purchases 12,739 shares at $2.35 in the open market. There have been no records of any insiders selling their shares and only one record of the CEO purchasing shares.
Figure 9. Current ownership of AgriForce
Figure 10. Cost of Distribution of positions from Webull
Ownership is divided by 88.7% retail, 10.64% insiders, and .66% institutional. The average cost of shares is $4.16 which is nearly 3.5x the current price. With large retail ownership, there is no risk of dumping since it is sitting at ATL.
Figure 11. Short interest % of free float since first trading day.
During the first pump upon news of the acquisition, the stock price soared 3x, and so did the short interest %. After being shorted massively, the shorts started to cover in the $2-3 range. Today, the short interest is at ATL and sitting at .28% SI % of FF. This shows that shorts are not willing to short or even hold near the $1 range, and we are tremendously oversold.
As of this moment, CTB is at 25% and only 40k shares are available to short.
I play this as a low-risk, high-reward swing trade. From purely technical, this stock is already filling the $1.3 gap and is going to fill the second gap at $1.63 with no resistance. I am confident the second gap will fill and the next gap to fill is in the $2 range. These gaps dropped the price by extremely low volume and will effortlessly come back with no resistance. All the indicators point to a bounce from oversold territory. Consolidating at these levels will help for a breakout.
The main catalyst is a wild card. Upon acquisition rumors, there were 265M volumes, and the price shot up more than 3x. Now, AgriFORCE updated shareholders that they will complete the deal end of January to early February. News of the acquisition's closing and target reveal could bring in surplus volume and have similar price action to rumored news.
Know Your Risk
Putting money in any penny stock is risky. They currently have no current revenue aside from the 5M annually potential contract. They burn cash each year doing research and development, constructing their facilities, and acquiring intellectual property and brands.
What they do have is 9.8M cash on hand. The average cost of distribution of shares is $4.16 while the price is sitting at $1.30 at the time of this writing. In addition to this, the ownership of shares is majority retail (88.7%). No institution to dump, no insiders to sell their shares… Only retail with shares more than 3x the price on average. This makes $AGRI an insanely low-risk swing trade at these prices.