Editor-in-Chief

Debra BorchardtDebra BorchardtNovember 16, 2020
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5min1000

 Neptune Wellness Solutions Inc. (NASDAQ: NEPT) (TSX: NEPT) reported revenue increased 155%  sequentially to $28 million for the second quarter ending September 30, 2020.  Revenues in the first quarter were restated to $11.2 million. It was a big jump over last year’s total revenues of $6 million for the 2019 second quarter. The stock was jumping over 15% in after hours trading to sell near $2.18.

The company delivered a net loss $21 million slightly more than last year’s net loss of $20 million. All figures are canadian dollars unless otherwise stated.

“I am pleased with our strong top line growth and the successful strategic investments we made during the second quarter of fiscal 2021,” said Michael Cammarata, Chief Executive Officer of Neptune. “We are on track for our CPG products to exceed 70% of our revenues in the third quarter of fiscal 2021 and expect this segment of our business to continue to generate very strong growth. The investments and operating efficiencies we implemented in the first and second quarters of fiscal 2021 and will continue to make in the third quarter of 2021, have us well positioned to begin realizing the tremendous revenue from our purchase orders to come.  These orders combined with the growth of our other areas will drive profitable accretive growth with limited incremental capital investment, ultimately driving higher margins and higher returns.”

On a positive note, Neptune said it has received over US$100 million in purchase orders for its Biodroga and Innovations divisions.  The purchase orders come from six different Neptune clients and the booked sales of about $100 million are scheduled to ship in the next 2 quarters. A company spokesman said, “We remain committed to increasing shareholder value as well as confidence and these Purchase Orders are evidence that our B2B and B2C dual go-to-market strategy to serve consumers at both wholesale and retail levels, is yielding consistent, long-term revenue opportunities.” It should be noted, however, that the purchase orders are not guaranteed, and there is no certainty that all of the orders will be completed or that they will be fulfilled in their entirety.

C-Suite Changes

Neptune also announced in a company statement that David Myers, who was previously Chief Operating Officer, recently left the company for personal reasons. Dr. Toni Rinow has been appointed as Global Operating Officer in addition to her current role as Chief Financial Officer, effective immediately.  Dr. Rinow has been instrumental in increasing efficiencies and future profitability across Neptune’s business units, reducing its headcount by 25% to focus on forward-thinking initiatives and to accelerate growth with less focus on long-term, asset heavy investments.

Dr. Toni Rinow , Chief Financial Officer and Global Operating Officer of Neptune, added: “During the second quarter we saw continued growth to our top line while we made additional strategic investments in the future of the Company and in our distribution channels. These investments were an important steppingstone into the next phase of growth. Moving into the back half of fiscal 2021 we are sufficiently capitalized and well positioned to deliver on  growth in purchase orders in the fourth fiscal quarter of 2021 and as we move into the first half of fiscal 2022. We remain focused on innovation that will continue to help customers, from the time they wake up to when they go to sleep.”

Restatement

Neptune  restated its previously filed condensed consolidated interim financial statementsthe first quarter ending June 30, 2020 with respect to recognition of revenue relating to one transaction that was initially recognized at the gross amount and was restated to present the net amount of the transaction. There is no impact on the net loss in the condensed consolidated interim statement of loss and comprehensive loss resulting form this restatement. The restatement of the June 30, 2020 interim statements includes management’s conclusion that Company’s internal control over financial reporting (“ICFR”) was not effective as at June 30, 2020 , due to the existence of a material weakness in its design and the Company’s plans to remediate such weakness.

 

 

 

 


Debra BorchardtDebra BorchardtNovember 16, 2020
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8min1630

Before there was the iPhone, there was the Blackberry. Everyone who was anyone had a Blackberry. It was a status symbol and a very functional piece of technology. It was also groundbreaking until it wasn’t. First-generation technology has its place as a pioneer, but it’s the next generation that is typically a better consumer experience. 

Cannabis tech company Strimo is a textbook example of next-generation software that is better than its predecessors. CEO Helkin Berg learned that many cannabis companies were unhappy with the existing first-generation software options on the market. In the early days of the cannabis industry, Berg says the pioneers were creating frankensoftware to address the industry’s specific compliance requirements. “Seed-to-sale” didn’t exist before legal cannabis came along. So the pioneers were tasked with creating a new product in a short amount of time. This cobbled-together software, while somewhat functional, was in Helkin’s mind, flawed.

First Generation Headaches

“It was often software built on top of older software from other industries and made to look new,” she said. “The underlying technology was not flexible.” She also felt the software was only designed to solve specific problems and wasn’t designed to harness big data or IoT (Internet of things). Operators only had a few options to choose from because, in the early days of legalization, the stigma of working in cannabis remained strong among traditional software companies. In addition to that, many of these options took months to implement and, in the fast-moving pace of the cannabis industry, companies don’t have 9 months to install a software program.

Another challenge for the early pioneers of cannabis software was the ever-changing legislation. Each jurisdiction created its own set of rules and regulations, which changes at the municipal and county levels. As the programs have matured, jurisdictions tweak the rules, which sometimes set off a new round of software updates. In addition to that, some U.S. states select their regulatory software provider and cannabis companies have to ensure that their software provider can exchange data with several different state-run programs. 

And then there is cost. Mainstream big names like Oracle or SAP command price tags anywhere from $150,000 to upwards of $1 million each year. This is a price tag that most in the cannabis industry, especially startups, can’t afford. In addition to the price tag, these companies’ implementation time can often take half a year or more.

Solving The Problems

Helkin’s vision for Strimo was to solve for cost and time. It needed to be affordable and quick to set up. It also needed to be consistent, reliable, and keep the customer’s data secure. Strimo has quickly emerged as a leading player in the cannabis tech world and is winning customers over with its improvements over existing cannabis software options. 

As Helkin talked with cannabis business leaders during the Strimo research and development phase, many expressed their dissatisfaction with the options on the market. There had been data security issues and dependability problems with first-generation solutions. Executives complained of rigid platforms that were outdated and didn’t properly provide inventory management, traceability, or data insights such as costing. Plus, many cannabis companies are in multiple states and expanding into multiple countries. Flexibility was critical.

“Companies were outgrowing those first-generation options and I saw an opportunity to fill that gap,” she said. “We can meet cannabis businesses where they are today and scale with them.” Berg’s talent lies in bringing second and third-generation products to global markets. Her background is in highly regulated industries with former clients like Bank of America, Novartis, and PricewaterhouseCoopers. She chose Bret Cline as Strimo’s lead engineer. He brings over 25 years of experience in building warehouse and inventory management programs in the beverage industry. He has also designed RFID tracking systems for big names like CAT, Raytheon, and even the Department of Defense. 

Strimo’s Solution

Together, they created the Strimo platform that optimizes cannabis business operations. It’s like a multi-tool for cannabis executives and operating teams. Instead of stitching together several tools, top executives can rely on Strimo to capture their key data, from seed-to-sale, and operating teams can support daily processes. Strimo handles compliance and quality control for both cultivation and manufacturing. The Strimo platform manages all cannabis and non-cannabis inventory with full cost accounting support.  

It does all of this in a secure environment. “The Strimo platform is hosted in the Microsoft Azure cloud, so in addition to having peace of mind, you and your team can access data from any device,” said Berg. 

Strimo employs a global attitude to its product. The software is multilingual and can handle multiple currencies. A big bonus for global cannabis companies. Berg said, “Our platform allows for the flexibility to send compliance data to any regulatory authority, including Metrc, BioTrack, Health Canada, Thai authorities, etc.” 

Strimo captures mission-critical data, makes it historically searchable, and helps teams forecast and plan ahead. By tackling resource planning, the platform helps executives make informed decisions instead of relying on gut instinct or “educated guesses”. 

Rising Star

Strimo was recently named the best of ERP (enterprise resource planning) Software company for the cannabis industry by ERP Focus. The reviewer wrote, “Several common ERP components are included in Strimo. Production lets you take control over your entire process, cultivation, extraction, packaging, and track your batch manufacturing.  Accounting meets GAAP, SSAE16, ISAE accounting and audit standards, and helps manage your organization’s finances.” Strimo also made the top ten list of ERP Software Providers when counted by states in a recent Cannabiz Media Software Stack report. 

As the word gets out that Strimo is making cannabis tech problems easier (not harder!) to solve, this company is one to watch. Cannabis tech has been a favorite channel among those with capital for the cannabis industry and investors are undoubtedly putting them on their radar. 

 


Debra BorchardtDebra BorchardtNovember 16, 2020
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3min1560

MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF)  announced its revenues fell to $4.9 million for the third quarter ending September 30, 2020, versus $13.9 million for the second quarter of 2020. This was a massive decline from last year’s revenue of $43 million for the same time period. The company also delivered a net loss before tax of $15.4 million, compared to a net income of $5.3 million for last year’s third quarter. It also increased sequentially from a loss of $3.7 million in the second quarter.

MediPharm said that the decline in revenue was due to lower bulk extract volumes and average selling prices, which were partially offset by growth in formulated finished goods sales, up 30% to provincial distributors throughout Canada, and sales from MediPharm Labs Australia. The company told investors in a statement that based on agreed customer production schedules, it expects revenue from its portfolio of domestic and international sales agreements to grow beginning early in 2021 and will be complemented by new sales of LABS Cannabis products.

“Economic conditions including the oversupply in the Canadian bulk crude resin and distillate markets, along with the impact of COVID 19, continue to challenge the industry,” said Pat McCutcheon, CEO, MediPharm Labs. “We are now focused on doing more to drive profitable revenue and address weaknesses including reducing our cost structure. We have taken immediate steps to improve our costs and organizational alignment against which we have put an action plan in place that will create value and enable us to achieve our potential.”

The company reported its gross profit was ($10.6 million) and gross margin was (214%) compared to a gross profit of $2.2 million and a gross margin of 16% in the second quarter of 2020. This was primarily due to a $6.3 million non-cash write-down of inventory to net realizable value and a $1.5 million write-down of non-current deposits given to vendors for capital expenditures. The gross profit was $$14.7 million for the 2019 third quarter.  The negative Adjusted EBITDA was $7.3 million.

The company said that it had a cash and equivalents balance of $36.5 million on September 30, 2020.

C Suite Changes

Following the end of the quarter, MediPharm announced the departures of Robert Kwon, Chief Financial Officer, and the company’s Chief Marketing Officer. A search process has been initiated for a new CFO while the role of Chief Marketing Officer will not be directly filled and but will be covered by the company’s new VP of Sales.


Debra BorchardtDebra BorchardtNovember 12, 2020
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5min1070

Psychedelic company Compass Pathways plc (Nasdaq: CMPS) reported its financial results for the third quarter of 2020 and gave an update on recent progress across its business. The company reported a net loss of $16.6 million and essentially no income as the company is focused on research at this time. The company has cash of $196.5 million as of 30 September 2020, which is expected to fund operations into 2023.

George Goldsmith, Chairman, CEO and Co-founder, Compass Pathways, said, “This has been a significant quarter, with an IPO that gives us the funds needed to advance our mission and transform mental health care. Recent hires for the company build further important expertise within our strong leadership team, including in data science and digital health, which will be core to the future of mental health care. We remain fully focused on execution of our phase IIb trial investigating our COMP360 psilocybin therapy for treatment-resistant depression and, with scientific partners in our recently established Drug Discovery Center, are also evaluating the potential of early stage compounds to address mental health challenges.”

Expenses

R&D expenses were $6.9 million for the quarter versus $3.1 million during the same period in 2019. The change was primarily related to increased activities associated with the company’s ongoing development of COMP360, increased share-based compensation, and other increases in personnel costs to support the development of COMP360. G&A expenses were $6.6 million for the quarter versus $3.1 million during the same period in 2019. $2.1 million of the increase was related to share-based compensation expenses, and there were also increases in legal and professional fees, personnel and consulting expenses, and facilities costs.

Company Update

Compass said in a statement, “We have continued to make steady progress with our phase IIb clinical trial of COMP360 psilocybin therapy for treatment-resistant depression. We are opening a new trial site in Berlin, Germany, this month, bringing our trial to 21 sites in 10 countries. While the COVID-19 pandemic has impacted our trial, our plan to report data from this trial in late 2021 remains unchanged.”

On 5 August 2020, the company entered into a sponsored research agreement with the University of the Sciences in Philadelphia, PA, to establish a Drug Discovery Center. The Center is exploring and developing optimized psychedelic and other early-stage compounds targeting the 5HT2A receptor, a receptor in the brain that is recognized as a promising target in the treatment of mental health illnesses.

In July 2020, Compass was granted its second UK patent, adding to our US patent and German utility model, and including claims covering crystalline psilocybin, pharmaceutical formulations, medical uses, and a method of manufacturing. The US patent, granted in December 2019, was the subject of a petition for post-grant review, filed on 21 February 2020; the petition was dismissed on the merits on 20 August 2020.

New Team Members

Our team has continued to expand and we have been pleased to welcome several new colleagues to our leadership team during the quarter and post-period. Linda McGoldrick joined our board of directors in September 2020, bringing healthcare and life sciences experience from a range of public and private companies, and non-profit organizations, including Financial Health Associates International, Zillion Inc, Veos plc, and Kaiser Permanente International. In 2018, Linda was appointed by the Governor of Massachusetts to serve on the state’s Health Information Technology Commission. Greg Ryslik PhD joined us on 9 November 2020 as Senior Vice President, Data Science, Machine Learning and Digital Health Research, and Stephen Schultz will join us on 1 December 2020 as Senior Vice President, Investor Relations. Greg is a data scientist and AI (artificial intelligence) executive; he is an instructor at Stanford Continuing Studies and has held senior positions at Mindstrong and at Tesla Inc. Stephen has more than 30 years’ experience in investor relations and joins us from GW Pharmaceuticals; he has previously held senior roles at Amarin Corporation, Acusphere, and Shareholder.com. Earlier in the quarter, Steve Levine MD joined us as Vice President, Patient Access; Steve was formerly Founder and CEO at Actify Neurotherapies. Sarah Bateup was appointed Head of Therapy Research and Training, having previously been Chief Clinical Officer at Ieso Digital Health.


Debra BorchardtDebra BorchardtNovember 12, 2020
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9min2410

Verano Holdings, LLC is buying and merging with Alternative Medical Enterprises, LLC, Plants of Ruskin, LLC,  called AltMed to create the largest privately-owned cannabis company. The value of the transaction was not disclosed.

Verano is a multi-state operator located in 12 states, with 17 active retail locations and approximately 440,000 square feet across its cultivation facilities, The company is known for its portfolio of consumer brands: Encore, Avexia, and Verano. Verano designs, builds and operates inimitable Zen Leaf branded dispensaries.

AltMed is known for its MÜV brand of medical cannabis-infused products launched in Arizona in 2016. MÜV Dispensaries by AltMed Florida was formed a year later through the partnership of AltMed Enterprises and Plants of Ruskin, a multi-generational Florida agricultural leader. The company has 27 locations (one in Arizona muv-az.com, 26 in Florida muvfl.com, and more added each month).

“The combination of Verano and AltMed is a game-changer in the U.S. cannabis industry. It is expected to create one of the largest private cannabis companies with truly no redundancies in geography or operations. AltMed is an ideal partner to accelerate our shared vision to be one of the most innovative and profitable cannabis operators in the country. Our cultures are seamlessly aligned and we have a strong commitment to providing a superior, customer-focused cannabis experience across our existing markets. AltMed not only has a substantial market presence in Florida and Arizona, a state which recently approved recreational use, but also delivers a portfolio of high-quality, pharmaceutical-grade medical cannabis products,” said George Archos, Founder and CEO of Verano Holdings. “Together, we believe we have a very strong management team whose experience spans cannabis, pharma, real estate and hospitality, and we are very excited to welcome and work collectively with AltMed’s Michael Smullen, Bill Petron and John Tipton.”

The combined company will be led by the founder and CEO of Verano, George Archos, a veteran in the logistics and operations spaces who entered the cannabis industry in 2014. AltMed’s key personnel will maintain a strong presence on the management team and Board of Directors, including Michael Smullen, Alternative Medical Enterprises, LLC’s Chairman, CEO & Co-Founder, and John Tipton, a registered CPA with more than 30 years of leadership experience in both the agricultural and land development industries. In addition, Bill Petron of AltMed Arizona will bring his vast experience to the newly formed company.

Mr. Archos continued, “This combination will create significant opportunity to expand our business into limited-license markets and scale both our wholesale and retail operations. We have created a thoughtful model for long-term success and a solid platform to deliver what we expect to be industry-leading EBITDA margin on a pro forma basis. In addition, our combined strong balance sheet should provide us with financial flexibility to expand operations and go deeper in states in which we operate.”

Harvest Went Bust

Earlier this year Verano looked like it was going to be acquired by Harvest Health (OTC:HRVSF) in an all-stock deal valued at approximately $850 million based on a share price of C$8.79 ($6.70). The companies stated at the time of termination that prolonged obstacles in meeting requirements for state and local regulatory authorities needed to transfer ownership and operational licenses, adverse capital market conditions, a challenging environment for asset sales, all contributed significantly to the decision not to move forward with the pending acquisition. Harvest Health shares are now trading at C$2.41 ($1.84).

Profitable and Formidable

Verano says it has been profitable since it was founded.  AltMed was founded in 2014 and said it has been profitable in recent years. AltMed has 220,000 square feet of cultivation facilities in Florida, and 30,000 square feet in Arizona, which is rapidly expanding by an additional 50,000 square feet to meet increased demand.

The combination will accelerate Verano’s expansion into Florida and Arizona, currently among the largest and fastest-growing cannabis markets in the United States. Following the consummation of the transaction, the combined group of companies will operate under the Verano name and will have the ability to operate in 14 states, with eight cultivation facilities and 44 active retail locations. Approximately 32 additional retail locations are planned.

“We share Verano’s enthusiasm for this transformative business combination. We have a mutual commitment to delivering a high-quality product through a superior customer experience to distinguish us in the marketplace,” said Michael Smullen, Chairman, CEO and Co-founder of AltMed’s Alternative Medical Enterprises, LLC. “We are both disciplined stewards of capital, run our businesses efficiently and are focused on delivering profitable growth. It was important for us to find the right strategic partner and Verano was the ideal choice.”

“Through our combination with Verano, we will have economies of scale to further expand our operations, bring adult-use programs online and scale cultivation and manufacturing capacity to meet market demand,” said John Tipton, CEO of AltMed Florida. “Both Verano and AltMed are uncompromisingly dedicated to superb cultivation and manufacturing processes, new product development and retail design and engagement. In combining with a multi-state operator, we have a larger platform to meet the growing needs of our customers and deliver long-term profitable growth for our stakeholders.”

Synergies

The company said in a statement that the combination was expected to result in substantial benefits to AltMed and Verano, including the following reasons for the transaction.

  • Establishes Verano as one of the three largest MSOs in the United States based on 2021 internal projections compared to current FactSet 2021 consensus estimates for revenue and EBITDA.
  • Creates a scale market leader well-positioned for growth and accelerates expansion in the limited license, high-growth markets – specifically Florida and Arizona.
  • Increases Verano’s reputation as a manufacturer of high-quality products on a large scale by adding similar capabilities in new states.
  • Increases the combined company’s financial profile with industry-leading margins and profitability.

Debra BorchardtDebra BorchardtNovember 12, 2020
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4min660

Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) reported financial results for the third quarter ended September 30, 2020, with revenue rising to $25.2 million versus $25.1 million in 2019 and on target for the Yahoo Finance average estimate. The net loss was $6.6 million which was high than last year’s net loss of $1.3 million. The company also reported that the earnings per share were ($0.05) which was in line with the Yahoo Finance average analyst estimate.

The company blamed lower B2B sales which were 29.2% lower year-over-year, accounting for 33.7% of total revenue in the quarter. On a positive note, DTC (direct to consumer) net sales grew by 27.5% year-over-year as online traffic and high conversion rates increased through ongoing marketing and social media programs. Charlotte’s Web said year-over-year new consumer acquisitions increased 52% and conversion rates increased 98%. DTC net revenue accounted for 66.3% of total revenue in the third quarter compared to 52.2% for the same period in the prior year. Sequentially, though, the third quarter was an improvement over the second quarter as revenue increased for both DTC by 8% and B2B by 39%.

“The strength of our leading e-commerce sales continued to offset slower B2B retail sales during the pandemic,” said Deanie Elsner, CEO of Charlotte’s Web. “Within our B2B business, we are seeing signs of improvement with a return to consecutive quarterly revenue growth of +36%, led by the natural channel +20%, and the health care practitioner channel +101% quarter-over-quarter.  In addition, we continued to expand our footprint in terms of distribution in Q3 by adding nearly 1000 new doors to our retail footprint, including natural retailers, nearly 300 independent pet stores and approximately 500 new F/D/M retail doors.”

Expenses Jump

Charlotte’s Web did say that operating expenses jumped 44% to $28.3 million over last year’s $19.6 million. The company attributed the increase to its investments in capacity expansion and transition to a consumer-packaged goods operating company capable of supporting mass retail channel growth. In response, management said it has taken actions to better align operating expenses and initiated an expense optimization program targeting reductions of more than 10% of the consolidated expense run rate by the end of 2020. The company used $21.5 million of cash in operations during the third quarter of 2020 compared to $9.6 million of cash used in operations during the third quarter of 2019, primarily due to the increase in changes in working capital.

The company’s cash and working capital on September 30, 2020, were $65.9 million and $128.6 million, respectively, compared to $68.6 million and $116.9 million on December 31, 2019. 

The stock was lately trading at $3.80, far below its 52-week high of $12.99.


Debra BorchardtDebra BorchardtNovember 11, 2020
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8min920

Harvest Health & Recreation Inc. (OTCQX: HRVSF) reported its financial results for the third quarter of 2020 after the market closed on Tuesday with revenue rising 86% to $61.6 million. This was a sequential increase of 11% compared to $55.7 million in the second quarter of 2020. The company delivered a net loss was $2.1 million for the third quarter, compared to a net loss of $39.1 million in the third quarter of 2019 and $18.3 million for the second quarter of 2020.

During the third quarter of 2020, Harvest opened one new dispensary in Phoenix, Arizona, and one new dispensary in Cranberry Township, Pennsylvania. As of September 30, 2020, Harvest owned, operated, or managed 37 retail locations in seven states, including 15 open dispensaries in Arizona. Harvest owned and operated dispensaries exclude retail locations serviced through Interurban.

Making The Case For Arizona

During the recent 2020 elections, Arizona voters said yes to Prop 207, a ballot initiative to allow and implement recreational cannabis sales in the state. CEO Steve White noted that this initiative was unique because it established some aspects of what the eventual program would look like. “Because the license structure is specifically detailed in the initiative, we have a high level of confidence in our understanding of how licensing will work and the maximum number of potential competitors that can operate unless and until the market structure is changed at the ballot box.,” he said on the company’s earnings call. He went on to add, “As outlined in Prop 207, existing medical operators may apply for a recreational license on January 19, 2021.”  The Arizona Department of Health Services has 60 days to approve or reject the application. If it isn’t rejected it is then approved.

“Theoretically, this timeline may permit recreational cannabis sales at the end of the first quarter of 2021,” said White.  He cautioned that such a transition often doesn’t happen without bumps. ” As we have seen in other instances where existing medical markets were expanded to include recreational use, we expect that there could be some regulatory delays, logistical constraints or supply shortages in connection with the rollout. But given the maturity and stability of the Arizona medical market, we would expect these hiccups to be relatively short-term and readily addressable in nature.”

The Arizona market is estimated to reach $2 billion at maturity. The recreational licenses will be fully vertical like the medical market. White stated that existing operators in good standing in the medical market may apply for a recreational license, which means up to 130 recreational license applications may be submitted. In counties with less than 2 dispensaries, the state may issue additional licenses in order to reach a minimum of 2 licenses per county, adding approximately 10 or so store fronts.

“Unlike other dispensaries, those newly permitted locations must remain within the county. At some point in the future, 26 social equity licenses may also be issued. One way to estimate the expected average performance of the store would be to take the conservative $2 billion total market size and divide it by 166 stores. Based on our view of the market, we have a high degree of confidence that 166 store locations represent a fair approximation of the total retail footprint in the state. Applying those metrics, the average store would realize a little more than $12 million per year in revenue. In practice, of course, some storefronts will underperform or exceed the average revenue generated per store. With the recent acquisition of 3 additional licenses in Arizona, Harvest expects to be operating at least 18 of those stores.”

On November 2, Harvest announced a settlement of ongoing litigation with Devine Holdings which resulted in Harvest getting three vertical medical licenses in Arizona in exchange for the forgiveness of the outstanding $10.45 million receivable owed to Harvest by Devine Holdings. Harvest will also have the right of first refusal on 4 additional vertical medical licenses in Arizona. “We are very pleased with this resolution,” said White.

Huge Debt

Harvest ended the third quarter of 2020 with approximately $63 million in cash and $294 million in debt. The company said it had sufficient capital to service its debt in 2020 and 2021. On October 28, Harvest completed a bought deal financing, raising gross proceeds of approximately $34.5 million. Debt service for the remainder of the year is approximately $15.2 million and the company extended the debt maturity of $6.5 million due in October 2020, by one year to October 2021.

Harvest Health noted that it terminated the agreement to sell two additional California retail assets to Hightimes Holdings for $6 million on October 2. The sale of eight California retail assets to Hightimes was completed in June. On October 30, Harvest completed the purchase and license transfer of THChocolate, including licenses for cannabis and cannabis products manufacturing in Colorado.

Guidance

Harvest Health increased its 2020 full year revenue target to exceed $225 million up from its prior target of $215 million to $220 million. The company said that the magnitude of its full year revenue in excess of $225 million depends on the timing of a number of events and processes, including potential divestitures of noncore assets, which may result in a decrease in revenue. The revenue forecast includes continued growth driven by retail dispensary openings, same-store sales growth, and new and expanded cultivation and manufacturing operations. “Forecast for 2020 assumes no impacts or disruptions that we don’t successfully manage, including those caused by the COVID-19 pandemic,” said CFO Deborah Keeley.


Debra BorchardtDebra BorchardtNovember 10, 2020
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5min1950

Following the market close on Monday, Indus Holdings, Inc.  (OTCQX: INDXF)reported its financial results for the third quarter ended September 30, 2020, with revenue at $14.1 million. This was a 40% year-over-year growth from the third quarter last year and an increase of 43% from the prior quarter. As a percentage of revenues, owned brands grew from 73% in the prior quarter to 84% in the third quarter. Net income for the quarter was $2.4 million, compared to a net loss of ($4.8 million) in the second quarter. It was a huge improvement over last year’s net loss of $19 million for the same time period.

“Despite the headwinds caused by the wildfires, our Q3 results are the direct result of a strategy that prioritizes increased cultivation output and the Indus family of owned products,” says Mark Ainsworth, Chief Executive Officer for Indus Holdings, Inc. “While exceeding our expectations for the quarter, our performance was well short of where we could have been but for the impact of the wildfires and we are taking steps to be better prepared in the future.”

Wildfire Impacts

Indus updated investors on the effects of the fires that devastated the West coast. During the third quarter, the company said it experienced harvest weights that were on average 20% below the second-quarter levels. The company attributed the declines to remediation measures the company adopted to avoid crop-loss during the wildfires. Indus said it did increase in total flower harvest volumes during the quarter due to the increased number of harvests resulting from the expansion efforts in the first half of the year. Indus also said it expects that harvest yields will remain suppressed into the fourth quarter as the company works through the plants in the greenhouse that were impacted by the remediation measures. Indus said it is implementing automated environmental controls to mitigate similar losses in the future.

Indus Brand Updates

Indus owned brands continued to gain market share by strategically expanding in a variety of categories in the third quarter of 2020:

    • Flavor grew 71% from Q2 to Q3.
    • Original Pot Co. successfully launched two additional new baked good SKUs in Q3 and grew 42% from Q2. Allowing the team to penetrate in over 70 net-new dispensaries and garnered the highest month of revenue for the brand to date.
    • Moon, a chocolate edible brand, continues its position in the top three highest selling brands in cannabis-infused chocolates according to BDS Analytics.
      • Moon launched four different SKU’s from its highly anticipated gummy line, the first expansion into gummies for the brand.
    • Cypress brand sales grew by 42% from Q2 to Q3.
      • Due to our cultivation producing higher-quality flower, Indus’ flower continues to fill the void in the market for a higher demand in potency at a competitive price.

New CFO

The company also announced that Brian Shure was appointed as Chief Financial Officer. He is currently a Board member and Chairman of its Audit Committee. Steve Neil will remain with the company in a senior capacity and will focus his efforts on preparing the company for a potential US registration and other important initiatives in addition to supporting the incoming CFO in his transition.

“The turnaround at Indus has been the result of huge efforts by a highly talented team,” said George Allen, Chairman of the Board of Indus Holdings, Inc. “Not only has Indus solidified its market position as a dominant force in the cannabis industry, but the organization has positioned itself for greater success in the coming fiscal year.


Debra BorchardtDebra BorchardtNovember 10, 2020
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4min1140

Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), the parent company of Organigram Inc. announced an underwritten public offering of units of the company led by Canaccord Genuity Corp. who has agreed to purchase 32,500,000 Units from Organigram at a price of C$1.85 per Unit, for total gross proceeds of C$60,125,000. The company said it expects to use the net proceeds from the Offering to repay indebtedness and for working capital and other general corporate purposes. In addition, the company has granted the underwriters a 30-day option to purchase up to an additional 15% of the Units.

The shares were dropping over 15% in early trading to sell at $1.35, far from its year high of $3.64. The company last released earnings in July 2020 for the quarter that ended in May 2020. No date has been announced for the next earnings release.

In the company’s July MD&A it noted that it had a Bank of Montreal senior secured term loan maturing May 31, 2022 with principal repayments starting November 30, 2020
based on a 10 year amortization. s. The proceeds of the Term Loan were being used to fund the Phase 4 and 5 expansions of the Moncton campus and were also used to refinance the company’s long-term debt with Farm Credit Canada. Organigram has amended the loan twice. The MD&A stated, “The Facilities contain customary financial and restrictive covenants. At May 31, 2020, the Company was in compliance with these covenants. Subsequent to the quarter-end, on June 22, 2020, the Company drew the remaining balance of its Term Loan of $30,000 resulting in an aggregate amount outstanding of $115,000.” In April, the company had said it wasn’t in compliance with those covenants.

Falling Revenues

In July, Organigram blamed that quarter’s falling revenues on customers wanted value products.  “Lower flower sales volumes and a lower average net selling price driven by increased competition and as the large format dried flower value segment of the recreational market grew in Q3 2020 while there was a delay launching Organigram’s large-format value product due in part to a reduced workforce from COVID-19 and earlier delays in packaging material and equipment. Fickle customer preferences resulted in returns and price adjustments on the slow-moving aged products to the tune of $3.0 million was recognized during the third quarter. Write-offs of excess and unsaleable inventories of $19.3 million, of which $11.9 million was related to excess trim and concentrate.”

In April, the company blamed falling revenues on the decline to lower recreational flower and oil sales volumes compared to the second quarter in 2019 when there were large pipeline fill orders to Alberta and Ontario. “That occurred when there were supply shortages following the legalization of adult-use recreational cannabis sales. Other reasons for the revenue decline were lower average net selling prices from the increased competition and “evolving consumer preferences, for which a provision for returns and price adjustments was recorded in Q2 2020, mostly related to cannabis oil.” Organigram did note that the decreases were partially offset by the launch of Rec 2.0 products (vape products and cannabis-infused chocolates), and higher medical revenues as well as wholesale and international revenues, which had not occurred in the prior comparative quarter.”

 

 

 


Debra BorchardtDebra BorchardtNovember 9, 2020
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4min1140

Tilray, Inc. (Nasdaq: TLRY) reported that its total revenue for the third quarter was flat at $51.4 million and up 2.0% sequentially. Net losses fell to  $(2.3) million versus last year’s net loss of $(36.4) million and fell sequentially from $(81.7) million in the second quarter. The most significant driver of the change in net loss during the period was the revaluation of the outstanding warrants associated with the equity offering completed in March. Tilray stock was slightly higher in after-hours trading.

“Our third-quarter results demonstrate the significant progress we have made throughout the organization despite the unprecedented challenges presented by the COVID-19 pandemic. We realized solid year-over-year revenue growth in our core businesses and have achieved a significantly more focused, efficient and competitive cost structure, all of which position Tilray for future success. We look forward to building on these accomplishments and remain focused on our goal of achieving break-even or positive Adjusted EBITDA in the fourth quarter,” said Brendan Kennedy, Tilray’s Chief Executive Officer.

The company attributed the disappointing results on the discontinuation of bulk sales and a slight decrease in Canada medical sales which caused cannabis segment revenue to fall by 11% to $31.4 million. Total cannabis kilogram equivalents sold decreased 53% to 5,107 kilograms from 10,848 kilograms in the prior year’s third quarter. Adult-Use and International Medical sales grew 26% and 42%, respectively. Excluding the year-over-year impact related to bulk sales, total cannabis revenue increased by 24%. Hemp segment revenue increased 28% to $20.0 million (C$26.5 million).

Prices Rose, But So Did Costs

The average cannabis net selling price per gram increased to $6.15 (C$8.15) versus $3.25 (C$4.32) in the third quarter of 2019 and $2.64 (C$3.59) in the second quarter of 2020. The increase was due to a continued shift in distribution channels and product mix, including growth in International Medical sales, a shift in sales to higher potency and higher-priced products in the Adult-Use market, and the continued growth of Cannabis 2.0 products in Canada.

The average cannabis net cost per gram increased to $4.23 (C$5.61) compared to $2.28 (C$3.03) in the third quarter of 2019 and $2.06 (C$2.80) in the second quarter of 2020. The year-over-year increase was the result of lower kilograms sold due to the discontinuation of bulk sales and partly due to increased sales of Cannabis 2.0 products which have higher costs than dried flower.

Outlook

Tilray said it was set to deliver positive or break-even Adjusted EBITDA in the fourth quarter of 2020. The company said that it expects to see continued opportunities to leverage its Kindred partnership structure and focused selling strategy to grow market share and revenues for the Canadian adult market. With regard to its international business, the completion of our Portuguese facility will position Tilray for “first mover” advantage as new international markets legalize medical and/or recreational cannabis. Construction on the Portuguese cultivation facility remains largely on track to be completed by the end of the fourth quarter of 2020 with total costs expected to be less than the original budget of approximately $33.0 million.

On the hemp products, Tilray said it will leverage the plant-based food trends in the United States and broaden our product offerings to include CBD once the FDA provides guidance on a nationwide basis. Cash and cash equivalents totaled $155.2 million at the end of the third quarter 2020



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