Editor-in-Chief

Debra BorchardtDebra BorchardtApril 2, 2020
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6min1290

Israel has been the center of some of the strongest research on cannabis, but for years remained in the research only field. That is beginning to change as more Israeli companies are raising money and more cannabis is being imported to the country.

Panaxia Labs

Pharmaceutical company Panaxia Labs Israel Ltd. (TASE: PNAX) said that it completed a successful fundraising round of 17 million ILS (Israeli shekels)  or approximately $4.6 million by today’s currency exchange. The private placement consists of common stock and warrants to Israeli Institutional Investors: the provident funds, mutual funds, and portfolio management entities of Mor Investment House and Noked Capital Hedge Fund. Total gross proceeds raised, including the exercise of the option by the company, are 23 million ILS.

In connection with the offering, the company issued 6,319,703  shares of the company’s common stock at a purchase price per share of 2.69 ILS, and warrants to purchase an additional 5,055,762 shares of common stock at an exercise price of 4.00 ILS per share.

The company said it intends to use the proceeds from the financing to advance the execution of its strategic plans, especially the export, the marketing, and the sales in Europe. Among the investors: Panaxia Israel’s Chairman, Mr. Jonathan Kolber, CEO Dr. Dadi Segal, General Manager Assi Rotbart, LL.B., CTO Dr. Eran Goldberg, Mr. Ran Nussbaum, and additional Israeli and foreign investors. Exercise of the option is subjected to, among other conditions, the approval of Panaxia Israel shareholders’ meeting.

Supreme Shipment

The Supreme Cannabis Company, Inc.  (TSX: FIRE) (OTCQX: SPRWF)  said that it completed its first international cannabis shipment from Canada into Israel. The Canadian cannabis company said that it partnered with Breath of Life International Ltd., Israel’s largest and a leading producer of medical cannabis and cannabis products, to offer Truverra-branded premium medical cannabis to patients in Israel.

“This transaction represents a new international revenue opportunity for Supreme Cannabis and builds Truverra’s global medical brand in one of the most sophisticated medical cannabis markets in the world,” said Colin Moore, Interim President and CEO of Supreme Cannabis. “With the support of BOL Pharma, we navigated both Canada and Israel’s complex regulatory landscapes to achieve compliance with regulatory authorities in both countries, including Health Canada, the Canadian Food Inspection Agency and Israel’s Ministry of Health and Ministry of Agriculture and Rural Development. We benefitted from BOL Pharma’s skilled team, international experience and solidified the position as a leading medical cannabis company in Israel. As we pursue capital-light international opportunities, we will continue to look to Jeff Adams, Truverra’s CEO, and his exceptional team to build Truverra’s medical brand globally.”

“We are pleased to address the growing demand for premium indoor grown medical cannabis products in Israel through our first cannabis import from Canada. Supreme Cannabis is a partner that shares our high standards for quality and respect for patients and consumers,” said Dr. Tamir Gedo, CEO of BOL Pharma. “On March 30, Truverra products became available across pharmacies in Israel and we are already receiving positive feedback from patients.”

BOL Pharma has been involved in researching and developing cannabis-based products for 13 years. It is the largest medical cannabis company in Israel and the only one to handle all stages of cultivation and production, ensuring compliance with the strictest standards set by the Israeli Ministry of Health and EU-GMP conditions. BOL Pharma is distributing Truverra’s medical cannabis in 10-gram containers to its network of pharmacies across Israel.


Debra BorchardtDebra BorchardtApril 1, 2020
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7min1990

MariMed Inc. (MRMD:OTCQX) quarterly revenues for the quarter ending December 31, 2019, increased 50.9% to  $5.19 million versus $3.44 million for the same period of 2018. The company attributed the increase to the roll-up up of MariMed’s licensed client businesses in Illinois in the fourth quarter of 2019.  Fourth-quarter 2019 revenues were also bolstered from new distribution channels secured for MariMed’s Betty’s Eddies and Kalm Fusion brands. The company did not disclose the net loss for the quarter.

Full Year 2019

For the full year ending in December, total revenues grew to approximately $45.6 million. Core cannabis sales for the fiscal year 2019 were $16.6 million, a 40.0% increase compared with $11.9 million for the fiscal year 2018. The operating loss for 2019, including the GenCanna receivable reserve, was $41.6 million, compared with an operating loss of $5.4 million for the full year 2018.  Net loss for the full year 2019 was $81.2 million or $0.39 per share, compared with a net loss of $13.6 million or $0.07 per share for the full year 2018.

Jon Levine, MariMed’s CFO said in a statement, “Due to GenCanna’s recent challenges, we believed it prudent to make these accounting adjustments now to resolve any uncertainty for our stockholders as no further accounting adjustments are expected as a result of GenCanna’s Chapter 11 proceeding. These financial adjustments did not impact our core cannabis business, which continued to grow revenues substantially during the fourth quarter. “

Running On Fumes

At the end of 2019, MariMed had negative working capital of approximately $31.0 million and has incurred negative cash flow from operations of approximately $24.8 million. In early 2020, the company raised approximately $4.4 million as part of an exchange agreement with two institutional stockholders and $935,000 from the issuance of convertible debentures.

In addition to those measures, the company has extended the maturity dates of approximately $19.4 million of promissory notes and is in the process of finalizing the documentation to extend another $3.0 million of promissory notes. MariMed said that it has obtained a commitment from an accredited investor for a $12.0 million loan, secured by the company’s real estate, at a rate of 10% per annum with a one-year term.

Illinois, Massachusetts To The Rescue

Despite the struggles at MariMed, two states could end up saving the day for the company. MariMed said that the Massachusetts operations are expected to contribute to significant revenue growth in 2020 reflecting the shortage of products across the state and the growing demand by consumers. Plus, the company expects to receive approval from the CCC over the next few months to commence adult-use sales at its Middleborough dispensary, pending a final inspection by the agency. The company was able to introduce branded flower company Nature Heritage and infused products called Betty’s Eddies and Kalm Fusion into the Massachusetts market. The company is planning to roll out other exclusive brands such as Tropizen Hot Sauces, Binske and Tikun Olam in 2020.

In the fourth quarter of 2019, MariMed received Illinois state approval and rolled up the ownership of its two previously managed client licensed medical companies, KPG Anna and KPG Harrisburg. On January 1, 2020, adult-use cannabis sales were legalized in Illinois, which has generated an immediate ramp-up in sales to MariMed in the first quarter of 2020. The company began developing a third dispensary in Mount Vernon, Illinois in March 2020 and has subsequently applied for a medical and adult-use cannabis license for this location. The company also intends to open an additional fourth dispensary in the state later in 2020.

Gen Canna Bankruptcy

Even though it had the largest recorded hemp harvest in Kentucky in excess of 6,000 acres, GenCanna filed for voluntary protection under Chapter 11 in order to reorganize and restructure its debt and business operations. As a result, MariMed’s fourth-quarter 2019 financial results included a one-time charge of $30.2 million as a result of a write-off of its investment in GenCanna. GenCanna management expects that its Chapter 11 restructuring will facilitate it emerging as a stronger company with the ability to complete the processing of in excess of 15 million pounds of biomass on hand.  This will permit GenCanna to commence marketing of one of the largest inventories of CBD oils and isolates in the industry in the foreseeable future.

Levine added, “Despite GenCanna’s Chapter 11 filing, we believe that it will emerge with a restructured capital and operational structure that will allow GenCanna to restore its position as a leader in the hemp industry. If this occurs, we believe there will be an opportunity for the value of the assets to be recaptured at a later date.  We expect to continue our strong relationship with GenCanna and jointly pursue opportunities in the evolving hemp industry.”

Looking Ahead

GenCanna certainly didn’t help MariMed’s earnings, but the company has shored up its finances and is crossing its fingers that Illinois and Massachusetts sales help staunch the bleeding.

Mr. Tim Shaw, MariMed’s COO commented, “Brand recognition of our flower and cannabis-infused products continues to grow as we reach new patients and customers, with Betty’s Eddies being named among the top-selling sublingual and edible products in a national survey conducted by LeafLink, the leading wholesale platform for cannabis products in the United States.  Bringing these products to new patients and customers, as well as launching new SKUs under our best-selling brands, will remain one of our key objectives throughout 2020.”


Debra BorchardtDebra BorchardtApril 1, 2020
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7min2860

MPG Consulting has recently authored a report looking at the potential of Cannabis Municipal Bonds (CMB).  Adam Orens, Founder of MPG and Sal Barnes, Managing Director, MPG have conducted a theoretical analysis using Colorado showing how the state can translate its cannabis revenue into a short-term bond amount of $166 million and long-term bond issued in the amount of $591 million resulting in $123 million and $438 million available for educational initiatives and infrastructure, respectively.

States and municipalities already use revenue bonds as a way to pay for large projects. The investors of such bonds feel that the risk for these investments is lower since there is a captive source of revenue to pay the interest. The report gives Iowa as an example. That state allocates $55 million in gaming taxes every year to pay the debt on revenue bonds that were issued in 2009 and 2010. That money raised selling these bonds was then used for community revitalization, flood mitigation, and bridge improvement efforts.

Test Case: Colorado

MPG used Colorado as an example of how state and municipal governments could tap into this revenue stream as a way to fund large projects. Although the report stresses, that while Colorado makes a good test case because of its well-tracked tax revenue, it isn’t necessarily a good candidate for a CMB. Mostly because the state has already been able to capitalize on the growing tax revenue for various projects – mostly involving education. The authors believe it is a concept worth exploring for newly legalized states.

In Colorado’s case, Denver collected $46.8 million in tax and license revenue in 2018. The estimated amount for 2019 is $63.3 million. MPG suggests this revenue will grow 21.6% on an annual basis. Using these figures and calculating future growth, MPG thinks that Denver could offer three-year CMB’s at a 1.5% interest rate. The city could issue a $166 million three-year bond resulting in potentially giving $123 million to the education allocation. A 10-year bond issue of $591 million would result in $438 million for education and other purposes.

Since Denver’s education needs seem to be met with this new influx of cannabis tax revenue, a CMB would not have as much impact. However, a city that is new to legalization and has more pressing and expensive needs like housing – a CMB might be an attractive solution.

Minneapolis As An Example

MPG Consulting looked at Minneapolis Minnesota as a city that could benefit from CMB. The state has not legalized cannabis, but if it did it could a large city like Minneapolis use the money to address its housing problems. MPG calculated that if the state legalized adult-use cannabis its first-year sales could hit $64 million and eventually reach $182 million in the tenth year. MPG believes that the tax revenue in the first three years would be roughly $63million reaching $343 million in ten years.

The hypothetical case for Minneapolis is that the city could issue $49.4 million in three-year bonds raising $44 million for affordable housing in year one. The current balance for the Affordable Housing Trust Fund is $21 million, so an influx of $49 million would be substantial. A ten-year bond could generate $233 million in the first year. The report also looks at the state in the same hypothetical calculation where the state would reap $385 million from a three-year bond and $2 billion in a 10-year bond.

Banking

Of course, the cannabis industry is challenged with a lack of banking and most of the major debt underwriters want nothing to do with cannabis until it is federally legal. With the current pandemic crisis and an upcoming election, the possibility of any cannabis legislation getting enacted in the near term is remote. The authors though believe that CMB’s could still be issued in the current environment.

“When state and local governments collect cannabis tax revenue, the funds are commingled in the general fund with revenue from other sources. The funds then enter the Federal Reserve System,” said the report. “Capital raised from CMB’s would be no different than any other tax revenue and therefore, in our opinion, would not require any sort of special regulation.” The authors do concede that convincing the banks and underwriters to offer the products could still be difficult.

Potential CMB States

The report notes that demand for such a bond could grow as cities and states grapple with the economic fallout of the COVID19 virus. The report suggests that seven states could see the potential in CMB’s. These states hold the most promise of legalizing adult-use cannabis in the near term. Those states are Arizona, Connecticut, Montana, Missouri, New Jersey, New York, and Vermont. However, the report notes that only the major east coast markets, Missouri and Arizona could support the CMB. Vermont would not have the tax revenue to make it worthwhile.

“States looking to open adult-use cannabis markets should consider utilizing CMB’s to finance crucial infrastructure or strategic public initiatives,” read the report. “Strong and accurate estimation of cannabis demand, tax revenue, growth rates, and other market development factors are imperative to calculating proper bond issue size, yield and maturity dates. Finally, banks who sell CMB’s must develop diligence methods and models to effectively price these securities.”

MPG Consulting said that cannabis revenues are steadier than alcohol and tobacco and more like casino tax revenue. While the idea of Cannabis Municipal Bonds may be novel, it isn’t completely unfeasible. The question isn’t if they will happen, but when. MPG might be correct that COVID could push states and cities to issue CMB’s. Financial institutions may also ease their opposition as they too may need additional underwriting revenue. CMB’s could be the next step in legitimizing cannabis.

 


Debra BorchardtDebra BorchardtMarch 31, 2020
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3min1730

 MJardin Group, Inc. (CSE: MJAR) (OTCQX: MJARF) decided to terminate its previously announced joint venture partnership with Rama First Nation that included prospective plans for a cultivation facility. The company said that the announcement was part of its ongoing review, evaluation and turnaround process and that it has actioned amendments to the Managed Services Agreements (“MSAs”) which were negotiated and put in place by previous management.

“I have nothing but great respect and admiration for our Rama First Nation partners, but I have to make these difficult business decisions in an effort to allocate capital where it makes the most sense while ensuring that we don’t take on more debt until we have successfully turned this business around,” said Pat Witcher, CEO of MJardin Group. “This decision, along with restructuring our pre-existing MSAs to remove the burdensome management costs we were incurring is in the best interest of the Company and all of its stakeholders.”

The decision to dissolve the joint venture partnership with Rama First Nation, and its prospective 94,000 sq. ft. indoor greenhouse cultivation facility was based on fiscal responsibility, preservation of capital and developments in the cannabis cultivation market in Canada.

MSAs

In addition to that the company stated that it has agreed to amend, terminate and extend its MSAs with Potco, LLC & Potco South, LLC, Next1 Labs, LLC, Next1 Labs South, LLC, and Gravitas Henderson, LLC dba F&L Warm Springs, LLC to December 31, 2020. However, it wasn’t clear from the press release which companies were amended or terminated.

MJardin did say that in final stage discussions to extend the MSA with Lightshade Labs, LLC for a period of 14-months. The company said it is also finalizing its renegotiation of its MSA with AtlantiCann Medical Inc. and that MJardin will earn a royalty for the balance of the existing 10-year agreement, but will no longer provide labor support to the operation.

The company stated that the amended MSAs will provide a streamlined royalty fee structure which will allow for the monetization of the company’s intellectual property and proprietary cultivation methodologies. In addition, the amendments will reduce ongoing management obligations, thus reducing costs and placing less cash flow demands on the Company.

 

 

 


Debra BorchardtDebra BorchardtMarch 31, 2020
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4min1430

Alberta-based, retail-focused cannabis company High Tide Inc.  (CSE:HITI) (OTCQB:HITIF) delivered its financial results for the first fiscal quarter of 2020 ending January 31, 2020. Revenue for the quarter increased by 173%, to $13.6 million from $5 million in the previous year. The company said that the increase in revenue was primarily driven by the retail segment of the Company with operations of Canna Cabana and KushBar.

The company managed to trim its operating losses to $1.9 million from last year’s $4.8 million at the same time period. The net losses remained flat at $3.8 million for the 2020 fiscal first quarter.

“High Tide’s first-quarter results for the 2020 fiscal year confirm the company’s positive trajectory towards profitability, with our best quarterly numbers since going public in December 2018. The Company’s significant year-over-year increases in revenue and gross profit, coupled with cost-cutting measures across the organization, have helped narrow our loss from operations for the quarter by 60% over the same period of the previous year,” said Raj Grover, President & Chief Executive Officer. “For the remainder of this year, we will be focused on furthering our expansion in Ontario, Canada’s largest and most underserved market, with an expectation of seven additional stores by September 2020. With more Canna Cabana locations either under development or nearing completion in Alberta, we continue to grow our retail portfolio at a sustainable pace. I am also pleased to report that High Tide has continued to generate additional subscription-based revenue through our proprietary Cabanalytics data analytics service,” added Mr. Grover.

Financial Status

As of January 31, 2020, High Tide had a working capital deficit of $11 million, compared to a surplus of $1.9 million on October 31, 2019. The change is mainly due to convertible debt of $11 million and related derivative liability of $3 million maturing in less than 12 months as at January 31, 2020. During the first quarter of 2020, the company secured a credit facility of up to $10,000 from Windsor Capital. This transaction, among others, is expected to provide the Company sufficient liquidity to execute on its near-term expansion plan and for its working capital needs.

KushBar

In December 2019, the Company acquired the remaining 49.9% of KushBar Inc. This transaction resulted in KushBar becoming a wholly-owned subsidiary of High Tide. Subsequent to the end of the first fiscal quarter of the 2020 fiscal year, High Tide entered into an agreement to sell the assets of KushBar in consideration for a deemed value of $12 million in common shares of Halo Labs.

Canna Cabana

In January 2020, the company acquired 2680495 Ontario Inc., a company that operates a Canna Cabana branded retail cannabis store in Hamilton, Ontario. The company also acquired a 50% interest in a partnership that holds a Canna Cabana-branded retail cannabis store in Sudbury, Ontario.


Debra BorchardtDebra BorchardtMarch 31, 2020
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4min2400

Emerald Health Therapeutics, Inc. (OTCQX:EMHTF) reported some of its results for the fourth quarter and year of 2019 for its British Columbia-based joint venture, Pure Sunfarms (PSF). The company release the net sales for the year and the fourth quarter of 2019 were $82.8 million and $12.1 million, respectively, compared to $4.9 million and $4.7 million.

The company said this consisted entirely of dried cannabis. PSF also recognized revenue of $8.1 million upon the completion of the Settlement Agreement with Emerald in Q4, but it wasn’t clear if this figure was included in the $12 million figure or if it was in addition to that.

The press release noted that it was providing audited results, yet the net losses or income were nowhere to be found. Neither Sedar or the company’s website gave much information beyond the basics. Expenses did increase with selling, general and administrative expenses for the year and fourth-quarter at $10.4 million and $3.0 million versus 2018’s $3.4 million and 2018’s fourth-quarter of $1.3 million.

“In the first full year of legal recreational cannabis sales in Canada, our Pure Sunfarms joint venture achieved stellar outcomes in operations, sales as well as financial performance,” said Riaz Bandali, President and CEO, Emerald Health Therapeutics. “PSF continues to set standards for cultivation efficiency and overall operating costs in the sector and has demonstrated an ability to deliver a compelling product and value proposition to consumers and other Licensed Producers.”

The company said that Pure Sunfarms sold approximately 26,000 kilograms of flower and trim in 2019 at an average price of approximately $2.90 per gram. Roughly 92% of 2019 sales were to the bulk wholesale channel and 8% to the branded retail channel. Fourth-quarter sales were over 1,100 kilograms averaging over C$3.59 per gram. During the fourth quarter, all cannabis sales were branded retail sales to provincial distribution boards and for the most part, represented replenishment orders during the quarter.

“We are proud of PSF’s success and pleased that we continue to be a significant partner in this tremendous company. We are also very pleased with the licensing and scale-up into production of our two wholly-owned cultivation facilities in Richmond, BC, and St. Eustache, Quebec, which now serve as our source of cannabis supply for our product development efforts as well as for our medical and recreational customers. These two facilities, along with our position in PSF, provide Emerald with three distinct operating assets producing differentiated and complementary products to serve the market.”

The company opted not to discuss its recent settlement with Village Farms and Pure Sunfarms. 

Village Farms had been expected to report its earnings on March 30 but had delayed releasing those figures.


Debra BorchardtDebra BorchardtMarch 31, 2020
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5min3180

Under the cover of darkness Zenabis Global Inc. (TSX:ZENA) delivered its earnings in Canadian dollars. It was 1 am when Zenabis issued its press release reported that its 2019 net revenue was $66.5 million, while its net loss for the year was $127 million or $0.53 per share.

The net revenue did increase 850% over 2018’s $7 million, the net loss for 2019 ballooned from 2018’s net loss of $32.5 million or $0.22 per share. The net losses included non-cash impairment losses of $9.3 million or $0.37 per share. The company said that the cannabis segment increased 316% to $29.1 million from $7.0 million in 2018 and the propagation segment increased to $38.6 million

Zenabis said it was able to realize increases in revenue even with downward pressures on pricing in the adult-use recreational market as well as due to lower per gram revenue from wholesale bulk sales due to increasing demand for its products and the expansion of sales of value-added products such as pre-rolls.

Kevin Coft, Interim Chief Executive Officer of Zenabis, stated, “2019 was a transformative year for Zenabis with the substantial completion of the Company’s facility build-out.  In addition, the Company achieved significant growth in revenue throughout the year and in particular, in the fourth quarter with 49% quarter-over-quarter revenue growth. I am pleased and thankful for the team’s efforts and focus on delivering on our construction and sales results. Zenabis is now a significant licensed producer with Zenabis Atholville being one of the largest indoor facilities in Canada. Although the Canadian recreational market had its challenges, we believe that the continued growth in the Canadian cannabis market remains positive.”

Fourth Quarter

The fourth-quarter net revenue was $17.9 million versus $12.0 million in the third quarter. Zenabis said that the cannabis segment increased 50.1% to $10.6 million from $7.1 million in Q3 2019. Propagation segment increased 55.5% to $7.0 million from $4.5 million in the prior quarter

The fourth-quarter net loss was $98.7 million or $0.34 per share versus the net loss of $5.8 million or $0.03 per share in the third quarter.

Looking Ahead

Zenabis said it believes that persistent competition from the low-cost illicit market, as well as new supply from competitor LPs as their facilities reach full production, is likely to result in declines in the wholesale price of cannabis in 2020 and beyond.

The company has initially focused on two product categories for the recently legalized derivative products: vaporizers and beverages. Initial shipments of vaporizer products occurred in Q1 2020 and have continued to supply its cannabis concentrates in the form of vaporizing cartridges designed for use in PAX Labs Inc.’s Era vaporizing devices. Further, Zenabis remains on track to launch cannabis-infused beverages in Q2 2020 with its initial launch of cannabis-infused sparkling water beverages.

Zenabis cut its overhead by reducing the size of the Vancouver head office and its facilities which has resulted in a cost reduction of approximately $2 million per quarter.  Additionally, construction activities at the Company’s various facilities has been largely completed as have ongoing material capital expenditures.


Debra BorchardtDebra BorchardtMarch 30, 2020
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4min1350

Good luck making sense of Cronos Group Inc. (CRON.TO) (CRON.TO) 2019 fourth quarter and full-year business results. The company said it will restate its unaudited interim financial statements for the first, second and third quarters of 2019. The icing on the earnings cake was that it will also reduce revenue for the three months ending March 31, 2019, by C$2.5 million and the three months ended September 30, 2019, by C$5.1 million.

“We are pleased that the Audit Committee has completed its review and that Cronos Group is now current with the filing of our financial reports. As we move forward, we are committed to improving our internal controls and financial reporting practices, maintaining the highest standards of transparency and accountability, and enhancing our capabilities and resources across functions to support our strategy,” said Mike Gorenstein, CEO of Cronos Group.

Fourth Quarter

Despite the restatements, the company reported net revenue of $7.3 million in the fourth quarter that topped last year’s fourth quarter by $3.0 million. The kicker is that the quarterly expenses were $43 million. The company spent $13 million in sales and marketing and another $14 million in general and administrative expenses. This is in one quarter for $7 million in revenue.

The company attributed the increase to a rise in the volume of products sold in the Rest of World segment and the Redwood acquisition, but that this was partially offset by a decrease in the price of products sold in the Rest of World segment.

Cronos also deliver an operating loss of ($63.9) million in the quarter driven by the inventory write-down of one-time charges related to the repurposing of certain facilities at the Peace Naturals Campus, an increase in general and administrative expenses in order to support Cronos Group’s growth strategy, an increase in sales and marketing in order to create, build and develop brands and an increase in R&D costs.

Full Year

For the full year of 2019, the company reported a net revenue of $23.8 million and an operating loss of ($121.5) million primarily driven by inventory write-downs in 2019. Cronos wrote down $29.4 million, made up of a one-time charge of $1.9 million, related to the repurposing of certain facilities at the Peace Naturals Campus, and a $27.5 million write-down on cannabis plants, based on the estimated market value of the specific strains previously in production, and cannabis oil, primarily driven by downward pressure in market prices during the year.

However, due to a $118 million unrealized gain on the revaluation of financial liabilities, primarily resulting from the non-cash change in the fair value of financial derivative liabilities associated with the investment by Altria Group, Inc. Cronos Group recorded a pre-tax unrealized gain of $1.2 billion.

 


Debra BorchardtDebra BorchardtMarch 30, 2020
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4min6120

Medicinal mushroom company Champignon Brands Inc. (CSE: SHRM) has entered into a definitive agreement to acquire Tassili Life Sciences Corp. in an all-stock deal. Tassili will receive 16 million shares, which is roughly C$7.3 million.

The acquisition will expand Champignon’s preclinical trial pipeline, as well as its aggregation of broad intellectual property related to the development of novel psychedelics therapeutics and their delivery systems, targeting multiple pathological psychological diseases.

Tassili working to develop effective psilocybin-based therapeutics for the treatment of mild traumatic brain injuries (mTBI) and/or post-traumatic stress disorder (PTSD). The company is doing this in partnership with a multidisciplinary team of scientists and physicians at the University of Miami.

TRIALS UNDERWAY

Under a collaborative research agreement with the University of Miami’s Miller School of Medicine, Tassili will conduct preclinical studies and eventually human clinical trials with the objective of demonstrating the safety and efficacy of the combination of psilocybin and cannabidiol in treating mTBI with PTSD or standalone PTSD.  The final results are expected in 2021.

Under the terms of the agreement with U of M, Tassili will retain all exclusive rights to inventions, data and IP discovery resulting from the studies which are being led by Dr. Michael Hoffer, professor of otolaryngology and neurological surgery at University of Miami’s Miller School of Medicine.

“Mild traumatic brain injury, especially concussion, is a significant cause of morbidity worldwide,” said Dr. Hoffer. “What many do not realize is that TBI often occurs alongside PTSD. Up to 40% of people impacted by mTBI, a head injury causing a temporary change in mental status or consciousness, or TBI in general, also suffer from PTSD. This combination of mTBI and PTSD is even more common in U.S military members and presents a vast patient population to service and potentially heal with our novel therapeutics under development.”

PSILOCYBIN PATENT PORTFOLIO

George Scorsis, Chairman of Tassili, said in a statement, “Our development program is championed by the University of Miami, a major U.S. research institution with a worldwide reputation in TBI research and treatment. Working with the University of Miami we aim to shift the mainstream perceptions about psychedelics by establishing the scientific underpinnings of the two compounds’ medical benefits and then developing a prescription-based therapeutic medicine for this combined disorder and a number of other disorders on the horizon, such as obsessive-compulsive disorder (OCD).”

In addition to the medical trials, Tassili has filed four provisional patents, one of which relates to its ongoing study with the University of Miami. In collaboration with university research institutes, Tassili said it intends to demonstrate that the clinical and physiological effects in PTSD and obsessive-compulsive disorder (OCD) is enhanced by timely measured dosages of psilocybin and cannabidiol, with superior clinical results as measured by objective outcomes.

The company said its vision is to administer a proven and proprietary combination of psilocybin and CBD in certified drug as well as psychotherapeutic clinics once human clinical trials are completed and the combination is approved by applicable regulatory agencies.

Management also believes that increased specificity to ensure approved, appropriate, standardized and dignified methods of treatment will result from novel delivery systems suiting recovery solutions to specific indications.  Three of the company’s provisional patents relate to this important part of the drug to patient relationship.

 


Debra BorchardtDebra BorchardtMarch 30, 2020
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6min1250

HEXO Corp. (NYSE: HEXO)  reported a staggering net loss of C$289 million for fiscal 2020 second-quarter ending January 31, 2020. The net revenue for Hexo increased 17% to $17 million from $14.5 million in the first quarter. The earnings are reported in Canadian dollars.

The loss from operations for the quarter was $289.4 million, compared with a loss of $60.6M in the prior period. The company said that excluding non-cash write-downs and impairment charges in the quarter, the adjusted net loss was ($23.2M) compared with ($34.0M) in Q1’20. This was basically one of those kitchen sink quarters. The company just tossed everything but the kitchen sink into the loss column and just ripped the bandaid off.

“We have continued our focus on improving our operations and expanding distribution across Canada.  Our strategy with Original Stash has demonstrated that we can directly compete with the black market,” said Sebastien St-Louis, CEO, and co-founder of HEXO Corp. “The industry continues to see challenges ahead, and following a strategic review of the Company’s core and non-core assets we believe we have positioned HEXO to meet these challenges head-on.”

Impairment Charges

The bulk of the net loss was due to impairment charges that the company took with the first being its Niagara facility. Hexo said, “After completing a strategic review of its cultivation capacity, the company made the decision to list the Niagara facility for sale.  As a result of the decision to sell, the company undertook impairment testing of the facility, its property, plant and equipment, and the intangible assets acquired from Newstrike Brands Ltd.  The company determined that an impairment loss of $138.3M was required.

The next big chunk came from a charge on impairment of goodwill. In a statement, Hexo said, “In addition, slower than expected retail store rollouts in Canada and delays in government approval for cannabis derivative products resulted in constrained distribution channels which have adversely affected overall market sales and profitability. As a result of these factors, management performed an indicator-based impairment test of goodwill as of January 31, 2020.  As a result of this assessment, the company recorded an impairment in goodwill of $111.9M.”

Inventory Write-Down

In addition to the impairment charges, Hexo also wrote down inventory to the tune of $16.1 million in the quarter versus $23 million during the first quarter. The write-downs included surplus cannabis trim (trim is primarily used for extraction purposes) and milled products in the amount of $3.1 million due to an excess of stock relative to the company’s short-term demand for cannabis distillate production. There was also a discounting of a concentrated bulk purchase of $11.8 million, in part to an oversupply in the bulk product market, which lowered the value when compared to the contracted price.  Hexo did note that the bulk product was acquired through a supply agreement, which is currently the subject of litigation and is alleged to be void as it was negotiated in bad faith at prices well in excess of the current market.

In addition to those markdowns, another $1.2 million was recognized due to sunk costs related to packaging reconfiguration.

Revenue Increases

While the quarter just seemed completely ugly, there was some slim good news for the company. The gross revenue increased 23% sequentially to $23.8 million.  Adult-use cannabis shipped revenue increased 21% sequentially to $24.4 million.  Net adult-use revenue increased 20% to $16.3 million from $13.6 million in Q1’20. The primary driver of the increase in sales during the quarter was the launch of Original Stash in Ontario, British Columbia, and Alberta during the quarter, and the increased volume sold in Quebec.  Adult-use sales volume in Q2’20 increased by 57% to 6,579 kg from 4,196 kg sold in the prior quarter.

Cannabis consumers have been bargain hunting. Gross adult-use revenue per gram equivalent decreased to $3.49 in Q2’20 from $4.35 as the company’s value brand Original Stash has become more popular. The adult-use net revenue per gram equivalent decreased to $2.47 in Q2’20 from $3.24 in Q1’20.

The company has also managed to cut costs. A 21% decrease in operating expenses for the quarter came as a result of a decrease in marketing expenditures and headcount.

The stock was dropping over 15% in early trading to lately sell at 92 cents, still higher than the year low of 34 cents.



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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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