Debra Borchardt, Author at Green Market Report

Debra BorchardtDebra BorchardtFebruary 21, 2019
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3min1520

Following the market close on Wednesday, Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) filed an amended report for its three and nine months financials ending December 31, 2018, and in doing so the company’s losses doubled. The report wasn’t issued until 11 pm yesterday evening.

In a company statement, Canopy said that the correction of the Adjusted EBITDA loss for the nine months jumped from C$69,006,000 to C$155,154,000. “The correction was made due to a formula error in the spreadsheet supporting the year to date Adjusted EBITDA loss calculation. The Adjusted EBITDA loss for the three months ended as December 31, 2018, was correct as reported, as were all prior quarters as released.”

An C$86 million error was blamed on a formula problem in a spreadsheet.

The net revenue for the nine months was C$132 million, but the net losses for that time period were C$349 million. The loss from operations for these nine months was C$402 million.

As of December 31, 2018, the company has cash and cash equivalents of C$4.1 million. “The increase from the end of fiscal 2018 was mainly due to the investment of an approximately $5,000,000 by Constellation Brands on November 1, 2018, issuance of convertible senior notes with an aggregate principal amount of $600,000 offset by cash used to fund operations of $294,949, cash used for the acquisition of subsidiaries and investments in facility enhancements totaling $568,236.”

Canopy did not go into any additional detail as to how such an enormous mistake could have been made. The company did say that no changes were required to Canopy’s unaudited condensed interim consolidated financial statements for the three and nine months ended December 31, 2018 (filed on February 14, 2019). The statement went on to say, “Other than as expressly set forth in the Amended MD&A, the Amended MD&A does not purport to update or restate the information in the Original MD&A or reflect any events that occurred after the date of the filing of the Original MD&A other than changes to the sections entitled Results of Operations, Third Quarter Review, and Adjusted EBITDA (Non-GAAP Measure).”

 


Debra BorchardtDebra BorchardtFebruary 20, 2019
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3min2120

A letter to the (Food & Drug Administration) FDA Commissioner Scott Gottlieb was penned by a group of politicians requesting guidance with regards to CBD (cannabidiol). The letter referred to New York City’s ban on food products containing CBD and enforcement actions happening in the states of Maine and Ohio.

Representative Chellie Pingree posted the letter on her Twitter feed. It acknowledged that the FDA had posted a response with regards to CBD following the passage of the 2018 Farm Bill. The letter also noted that there is a “tremendous amount of confusion among product manufacturers, hemp farmers and consumers.”

The letter said, “We are calling on the FDA to swiftly provide guidance on lawful pathways for food products with CBD.” The group asked that answers to the following questions be provided by Friday, February 22.

When will FDA provide guidance on lawful pathways for food products containing hemp-derived CBDin interstate commerce? For example, the GRAS Notification program seems as though it is one such pathway.

When will FDA hold a public meeting on the regulation of food products containing hemp-derived CBD in interstate commerce?

New York City’s Health Department has confused food producers and restaurants as well. The group initially banned all CBD food products, but then reversed course last week and delayed the ban until July 1. The information was sent out in an email to restaurant owners.

The NYC Hospitality Alliance said it has requested the DOH to provide guidance but has received no answers to its requests. “This aggressive enforcement is another example of New York City’s regulatory approach: issue fines first, and educate last. Issuing a violation for using CBD in food and drink is especially ironic to happen when New York is seriously considering legalizing marijuana.  Enough is enough.  The city must stop finding ways to fine our city’s small businesses.”

One manufacturer of CBD edible products said he was operating “business as usual” apparently unconcerned about the confusion created by the FDA.


Debra BorchardtDebra BorchardtFebruary 19, 2019
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4min910

The saga of Namaste Technologies Inc. (NXTTF) and its co-founder Sean Dollingers seems to have finally come to an end. The company announced that it has reached a settlement with Dollinger in which he will step down from all of his formal roles with the company, including that as a board member. Instead, Dollinger will enter into an advisory relationship with the company.

Earlier this month Namaste fired Dollinger and said it could be reviewing selling the company. Namaste came under a short seller attack by Citron Research in October 2018 which caused the board to form a Special Committee to investigate the allegations. The only one that was substantiated and required action according to the company was related to the sale of Namaste’s US subsidiary, Dollinger Enterprises US Inc., in 2017, and subsequent transactions involving its assets and companies in which Sean Dollinger and Namaste’s head of marketing David Hughes have a beneficial interest, as well as breaches of fiduciary duty by Sean Dollinger and evidence of self-dealing.

The company said it was also taking legal action against Dollinger for damages and disgorgement. In return, Dollinger filed a countersuit. As part of the settlement, Dollinger has agreed to drop his lawsuit.

“The events of the past few weeks have been difficult for everyone involved, but we are pleased to have reached a mutually agreed upon settlement that puts the interests of Namaste and our shareholders first,” said Interim CEO Meni Morim. “With this issue behind us, Namaste can focus on what matters most – growing our business and creating shareholder value. We have an excellent management team, a strong cash position, and a strategic plan that will drive innovation and growth. The future for Namaste is bright.”

The company also noted that as part of the Agreement Dollinger has agreed to a market standard standstill, under which, among other things, he will vote his Namaste shares in favour of the election of management’s nominees to the Board of Directors for three years. The company and Dollinger have also entered into standard non-solicitation and non-competition agreements.

Corporate Governance Update

Namaste also made the following announcements about the Board of Directors and its committees:

  • Branden Spikes has been appointed the Chair of the Board.
  • The Board has reconstituted the audit committee to be comprised of Branden Spikes, Sefi Dollinger and Laurens Feenstra. The Chairman of the committee is Laurens Feenstra.
  • A nominating and governance committee has been established, comprised of Branden Spikes, Laurens Feenstra, and Kiranjit Sidhu. The Chairman of the committee is Kiranjit Sidhu.

Debra BorchardtDebra BorchardtFebruary 19, 2019
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4min3250

Fresh off its successful IPO, SLANG Worldwide (CNSX: SLNG) has formed a strategic partnership with Florida-based Trulieve Cannabis (OTC: TCNNF) to offer cannabis patients in Florida access to leading cannabis brands in Trulieve’s dispensaries across the state. As part of the agreement, Trulieve will have an exclusive license to SLANG’s extensive portfolio through its U.S. subsidiary, National Concessions Group, Inc. better known as Organa Brands.

Florida is quickly establishing itself as a significant cannabis market in the U.S.  The state has registered over 180,000 medical cannabis patients, a number that has tripled since 2017. According to the Florida Department of Health, Trulieve is responsible for consistently producing and distributing between 60% and 80% of cannabis in the state. The company has 24 dispensaries and home delivery available throughout the state.

“Great partnerships and collaboration are foundational to SLANG’s culture, scalability, and growth strategy,” said SLANG’s CEO Peter Miller. “Not only does Trulieve operate one of the most impressive cannabis cultivation and distribution businesses in Florida, they also share SLANG’s commitment to bringing leading cannabis products to consumers. Every year, SLANG products deliver millions of high-quality cannabis experiences to consumers around the world and, in partnership with Trulieve, we look forward to providing those same exceptional cannabis products to Florida’s patients.”

As a result of the partnership, SLANG will introduce the O.penVAPE, Bakked, District Edibles, and Magic Buzz product lines to Florida medical patients. The company said that the availability of edible products will be subject to regulatory approval by the Florida Department of Health. As part of the agreement signed by the two groups, SLANG will collaborate with Trulieve with regard to the production and distribution of the SLANG portfolio of products, offering in-house training to staff in preparation for production and distribution exclusively through Trulieve.

“SLANG operates with the same goals as Trulieve, working to expand patient access and create products that are high-quality, consistent, and reliable,” said Trulieve CEO Kim Rivers. “SLANG’s expansive portfolio ranges from vaporizer cartridges to edibles to concentrates, all products that will provide Florida’s patients with the effective, natural relief they’re seeking in ways that are innovative and fresh.”

According to an Arcview report titled the State of Legal Marijuana Markets, Florida is estimated to have 550,000 legal potential consumers by 2022. It is projected to reach $1.7 billion in legal spending by the year 2022. The report also stated that medical cannabis sales are expected to reach $456 million in 2018, up from $192 million in 2017.

 

 


Debra BorchardtDebra BorchardtFebruary 18, 2019
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3min700

It’s time for your Daily Hit of cannabis financial news for February 18, 2019.

Happy President’s Day. The markets were closed today and so there wasn’t any trading in stocks.

On The Site

New Jersey

Multiple news outlets have reported that Gov. Phil Murphy and state legislative leaders had reached an agreement with regards to legalizing adult use cannabis in the state of New Jersey. The state leaders had been negotiating about taxation for months after the newly elected Governor said he wanted to legalize adult use cannabis.

Legislative sources told the media that the rumored deal involved taxing cannabis by the ounce versus a sales tax, which seemed to be the point of contention.  State Sen. Nicholas Scutari, D-Union, the prime sponsor of the legalization bill, said: “We don’t have a final deal.” Scutari told NJ Advance Media on Friday night. “There still are more details to be worked out, but the two sticking points (taxes and a commission regulating the industry), we are there. But we are not finalized.”

UK

A landmark moment for the UK’s cannabis industry occurred this week when the first bulk shipments of marijuana were imported into Britain since legislation changed in November. Aurora Cannabis Inc. (ACB) announced Monday that it had completed its first commercial export of medical cannabis oil to the United Kingdom from a certified pharmacy.

The Canadian company, which is currently building out its UK operations, said the product was successfully dispensed from Canada under the UK’s new legal framework.

In Other News

Love Shack

Closed since March 2018, the legendary San Francisco cannabis dispensary Love Shack re-opens its doors this week in its original Mission Dolores location with a new name reflecting a new partnership: Love Shack by SPARC. Known for their dedication to customer service, legendary customer appreciation events, and loyal following, the Love Shack by SPARC was originally established by founder Chris Montana in 2002. It was one of the only onsite consumption dispensaries in San Francisco before adult use laws came online in 2018. The Love Shack by SPARC is one of California’s oldest operating cannabis clubs.


Debra BorchardtDebra BorchardtFebruary 15, 2019
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4min1360

Canopy Growth Corporation (WEED.TO) (CGC) released its financial results for the third quarter fiscal 2019 ending December 31, 2018. Net income for the quarter was $74.9 million compared to a net income of $11.0 million for the same time period during last year. Net revenue increased 282% to $83 million over last year’s $21.7 million for the same time period. Total gross revenue increased 350% to $97.7 million.

The company reported that the adjusted EBITDA in the third quarter fiscal 2019 amounted to a loss of $75.1 million compared to a loss of $5.7 million in the same period last year. The net loss per diluted share was $0.38. Cannabis shipments totaled 10,102 kilograms and kilogram equivalents.

“Our successful first full quarter with recreational sales in Canada reinforces our long-held strategy of making meaningful investments early in order to secure market share,” said Bruce Linton, Chairman & Co-CEO, Canopy Growth. “With a strong cash position, we added strategic assets and IP through acquisitions to accelerate the sophistication of our inputs with ebbu, and our consumer-facing outputs with Storz and Bickel.”

Oils, including the company’s softgel capsules, accounted for 33% of product revenue during the quarter, up from 23% of product revenue in the same period last year.  During the third quarter of fiscal 2019, approximately 30% and 42% of recreational and medical sales, respectively, were comprised of oils, including softgel capsules.

The company said that during the transition from a “medical marijuana” business to a business producing clinically proven cannabinoid therapies, Canopy experienced a decline in its Canadian medical market demand in the quarter. The decline may be attributed to the initial adjustment to the available legal recreational market which patients can also access.

Adult Use Sales

Linton added, “The Canadian recreational cannabis market will be dominated in the long term by businesses delivering excellent products and consumer experiences. Sales from the first wave of products and retail environments launched in the third quarter demonstrate that we are capturing consumers’ attention.”

Canopy said that it placed a significant focus on shipping core products, backed by deep inventory levels, into physical retail store networks across the country. At the end of the quarter, Canopy said that it began shipping its softgel capsules and pre-rolled joint products in recreational channels across the country. Canopy Growth finalized its acquisition of HIKU during the second quarter, adding the Tokyo Smoke retail channel to complement its Tweed banner stores.

 

 


Debra BorchardtDebra BorchardtFebruary 13, 2019
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3min1280

Emerald Health Therapeutics, Inc. (OTCQX: EMHTF) announced that its 50%-owned joint venture for large-scale, low-cost, high-quality cannabis production, Pure Sunfarms Corp. has entered into a credit agreement with Bank of Montreal as agent and lead lender and Farm Credit Canada as a lender for C$20 million secured non-revolving term loan. The credit is secured by the greenhouse facility.

Pure Sunfarms intends to use the funds available under the Credit Facility to finance the final costs of converting its 1.1 million square foot greenhouse for cannabis production, the vast majority of which was completed in January of this year.

“Pure Sunfarms is proud to enter into this Credit Facility with these two highly respected institutional lenders,” said Mandesh Dosanjh, President, and Chief Executive Officer, Pure Sunfarms. “As Pure Sunfarms approaches operational positive cash flow, completion of non-dilutive financing with these financial institutions is an excellent accomplishment,” said Dr. Avtar Dhillon, President and Executive Chairman of Emerald. “We look forward to Pure Sunfarms’ rapid quarterly growth through this year as it comes fully onstream.”

Wurk

Cannabis HR firm Wurk announced the raise of $11 million in a funding round led by returning investors Poseidon Asset Management and Arcadian Fund. Existing investors Altitude, Salveo Capital, Phyto Partners, and The Arcview Group also participated in the round.

Wurk plans to use the money to enhance the client experience while expanding its cannabis HCM platform, including the launch of managed services. This will provide its growing customer base with dedicated human resource, payroll, and tax experts. The company will also implement a robust analytics engine to provide highly sought-after data for the cannabis industry, allowing employers to increase operating efficiencies by benchmarking themselves against industry best practices.

“After participating in Wurk’s previous two funding rounds, we are thrilled to have the opportunity to invest in the company yet again,” said Emily Paxhia, Managing Partner at Poseidon Asset Management. “As investors focused on the cannabis space, we regularly see the HR, accounting, and tax challenges that startups in the industry face on a frequent basis. Wurk’s solution helps ease that massive compliance burden and creates a huge investment opportunity in doing so.”


Debra BorchardtDebra BorchardtFebruary 12, 2019
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5min1510

Cannabis tech company Cannaregs, Inc. has completed a $2 million capital raise that the company will use to expand services and features across the country under the company’s umbrella of Regs Technology. Cannaregs is the leading web-based data technology platform providing up-to-date access to comprehensive cannabis-related legal data including rules and regulations from municipal, county, state and federal sources.

In other words, the company has solved for something that many have tried to do and been unsuccessful, which is drilling down to the local level on regulations. It’s a subscription-based service that many cannabis operators, law firms, investors, real estate professionals, consultants, and governments have used to track cannabis regulation and policy, in real-time, providing users with critical information they need to make strategic business decisions.  For more information visit www.cannaregs.com.

“We’ve built a terrific set of advanced data services for our CannaRegs subscribers and are proud to be working with the best companies in the cannabis industry,” explained Founder and CEO Amanda Ostrowitz. “With this infusion of capital, we’re confident that we will take RegsTech to the next level.”

Ostrowitz has identified other industries that would be affected by local level regulations and laws similar to cannabis. Self-driving cars, drones, robotic deliveries, ride-share businesses, dockless bikes, and scooters. Even electric vehicles and charging stations could be subjected to various municipality requirements. The next portal on the horizon for RegTech is TransitRegs

Lead investors include Phyto Partners and Panther Opportunity Fund along with other high profile tech and cannabis VC investment. “By simplifying local legal search, Cannaregs helps all industry participants understand and comply with the laws saving time money and potential regulatory scrutiny,” said Larry Schnurmacher managing partner of Phyto.  “As the cannabis economy continues to expand to more states, the need for this type of legal resource grows and we think cannaregs will capture that market.” 

Jordan Tritt, Principal at Panther Opportunity Fund added, “We are excited to be investing in RegsTechafter following Amanda Ostrowitz over the last two years and seeing her grow her team and company to be the leading provider of local compliance and regulatory tracking software. Amanda and her team are very well respected among cannabis operators, consultants and government entities, and this capital raise will allow RegsTech to expand its reach within the cannabis industry as well as other highly regulated and localized industries.”

CannaRegs currently provides comprehensive cannabis laws for the states of California, Colorado, Florida, New Jersey, Nevada, Massachusetts, Michigan, Illinois, Ohio, New York, Missouri, and Pennsylvania to be followed by all other states that permit medical and/or recreational marijuana.

 


Debra BorchardtDebra BorchardtFebruary 11, 2019
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5min2340

Aurora Cannabis Inc. (ACB) reported that its gross revenue jumped 430% to $62 million over last year’s $11.7 million for the same time period. The net revenue rose 363% to $54.2 million over last year’s $11.7 million.

Losses jumped a whopping 3,179% to $237 million versus last year’s gain of $7.7 million for the same time period. The company said in a statement that “Non-cash expenses including the December 31, 2018 mark-to-market adjustments of approximately $190 million primarily on the company’s derivative investments contributed significantly to a net loss of $240 million.”

“Aurora continues to execute strongly across all of its market segments, as demonstrated by the 83% revenue growth over last quarter and the significant increase in confirmed production results,” said Terry Booth, CEO of Aurora.

The company said average selling prices were impacted by the introduction of excise taxes across all Canadian sales channels on October 17, 2018, as well as lower wholesale pricing realized in the Canadian consumer market. Aurora said that it intends to continue prioritizing medical patients in Canada and globally where margins continue to exceed those achieved on the wholesale consumer market. The cash cost to produce per gram of dried cannabis sold temporarily increased from $1.45in the previous quarter to $1.92 in Q2 2019.

Q2 2019 kilograms produced and kilograms sold of 7,822 and 6,999 were up 57% and 162%, respectively, driven by continued and significant scale-up of Aurora’s cultivation operations and strong demand across all the Company’s markets.

Gross margins on cannabis sales dropped dramatically to 54% from 70% in the prior quarter.  The decrease was primarily due to a lower average selling price per gram of dried cannabis, the impact of excise taxes on medical cannabis net revenues, and a temporarily lower proportion of cannabis oil sales in the company’s sales mix ratio.

Aurora also blamed increased packaging requirements under the Cannabis Act and one-time ramp up and optimization costs for the Sky facility. The company said it expects that the launch of new product lines like edibles and vapes will contribute to improving margins.

Glen Ibbott, CFO of Aurora added, “We are also very pleased with our recent placement of US$345 million in convertible notes.  These convertible notes were subscribed by high-quality US, Canadian, and international institutions and offer Aurora the flexibility and optionality to settle the entire principal amount of the notes in the future for cash, shares, or any combination thereof. This funding sufficiently supports the global opportunity for us to continue our commitment to growth in the legal, regulated medical and consumer cannabis systems across the globe.”

Outlook

Aurora said that it anticipates that with Aurora Sky operating at full capacity, as well as a continued reduction in operating costs, the cash cost to produce per gram will trend significantly lower. Management reiterates its expectation that the sustainable long-term operating cost at its Sky Class facilities will be well below $1 per gram. Aurora said it expects to achieve sustained positive EBITDA beginning in fiscal Q4 2019 (calendar Q2 2019).

Aurora is now operating at an annualized production rate of approximately 120,000 kgs, based on Health Canada approved planted rooms, and expects to reach in excess of 150,000 kgs by March 31, 2019.  Management reiterated its previous guidance that based on the company’s current confirmed production results, Aurora will have approximately 25,000 kgs available for sale in Q4 (April to June 2019).


Debra BorchardtDebra BorchardtFebruary 11, 2019
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4min3961

Editors Note: You can follow all current legislation for free under the Green Market Report Legislation tab.

On Wednesday this week, Congress will hold a hearing on banking services for the cannabis industry. This is the first hearing to be held by the new Congress that will begin tackling the issue of banking for cannabis companies.

Businesses that work in states where cannabis has been legalized continue to struggle with financial institutions. The major credit card companies of Mastercard and Visa refuse to work with cannabis companies since it is still a federally illegal product. The major banks in this country also decline to bank these companies even though some are publicly traded entities with market capitalizations in the billions. Cannabis companies have turned to local banks and credit unions for their banking needs. Payment options are a pieced together with various solutions, but they aren’t ideal.

Attorney Brady Cobb met with House lawmakers last week and is actively engaged with the legislative process. “With the opposition out of the way, we can finally make some progress,” said Cobb. He was referring to the ouster of Pete Sessions, who continually refused to bring cannabis legislation to the floor for a vote. Cobb said that the committee’s existing members were supportive and expect new members to be positive as well. The hearing will be available on CSPAN.

This comes on the heels of the creation of a new lobbying group called the National Cannabis Roundtable that is being chaired by former Speaker of the House John Boehner. The Speaker sits on the board of Acreage Holdings Inc. (ACRG.U). That group is also working towards getting laws changed to favor more traditional banking.

Marijuana Moment reported that the people scheduled to testify include Corey Barnette, owner of the District Growers Cultivation Center and Metropolitan Wellness Center, which produce and sell medical cannabis in D.C., California State Treasurer Fiona Ma, Rachel Pross, the chief risk officer at the Oregon-based Maps Credit Union and Greg Deckard of State Bank Northwest in Washington State representing The Independent Community Bankers of America. In addition to that, Major Neill Franklin, a retired Maryland police officer who serves as the executive director of Law Enforcement Action Partnership (LEAP) looks to be on board.

While it would be great news for cannabis companies and dispensary owners to finalize use a major bank or take a debit card for a transaction, it could spell trouble for others. A whole cottage industry has sprung up in order to solve the banking problems for cannabis companies. It’s possible that by opening up the system, these companies stand a chance of getting acquired by bigger banks who want to get a quick foot in the door.



About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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