Editor-in-Chief

Debra BorchardtDebra BorchardtSeptember 8, 2020
aurora2.png

6min3352

Aurora Cannabis Inc.  (NYSE: ACB) gave an update on its business in which the company said it would take a $1.8 billion charge as it released unaudited preliminary fiscal fourth-quarter 2020 results. Revenues also fell sequentially. As an aside, the company also named a new CEO Miguel Martin.

Fourth Quarter Revenue Drops

Aurora reported that its 2020 fourth-quarter net revenue was expected to be in the range of $70 million and $72 million, versus $75.5 million in the third quarter. The company said that cannabis net revenue is expected to be between $66 million and $68 million, a sequential drop from the third quarter net revenue of $69.6 million. The company said in a statement, “We expect adjusted gross margin before fair value adjustments on cannabis net revenue to be within a range of 46%-50%, with lower gross margins expected from non-cannabis business segments.”

Billion Dollar Charge

Aurora also warned investors that there will be a number of balance sheet adjustments to recognize market realities that will range between $1.6 and $1.8 billion. “These adjustments include previously announced fixed asset impairment charges, now expected to be up to $90 million, due to production facility rationalization, and a charge of approximately $140 million in the carrying value of certain inventory, predominantly trim, in order to align inventory on hand with near term expectations for demand.” The comapny said that almost 40% of the inventory is going through a fair value adjustment.

“With the difficult actions we have taken since February to right-size our team and our production footprint now behind us, these amendments to our credit facility provide us with greater flexibility over the next few quarters as we focus intensively on top line opportunities,” stated Glen Ibbott, Aurora’s Chief Financial Officer. “We thank our lending partners for their continued support to reach this agreement. At June 30, 2020, Aurora had approximately $160 million cash on hand. Today, we also have approximately $275 million (US$220 million) available under our existing at-the-market (“ATM”) program which provides us with additional balance sheet support if required as we drive toward achieving Adjusted EBITDA profitability in the near term.”

Right Sizing The Company

As the company adjusts to a new normal, it has embarked on a process of rightsizing its expenses and retooling its debt. The sales, marketing and administrative costs in the second half of fiscal 2020 have been cut from over $100 million in the second quarter down to an expected range of $60 to $65 million in thr fourth quarter. This excludes approximately $3 million of non-recurring costs related to the business reset and $2 million of costs associated with divested businesses.

The company worked with its bankers to get the following adjustments to its debt load.

  • Adjustment of the total funded debt-to-equity covenant to 0.28:1 for Q4 2020 and Q1 2021, and 0.25:1 thereafter, allowing for room to take the balance sheet adjustments noted above
  • Reduction in the Adjusted EBITDA milestones required for the trailing twelve-month period ending June 30, 2021 from $51 million to $20 million, including delaying the requirement to generate positive Adjusted EBITDA to Q2, in line with management’s revised tactical commercial plan
  • Reduction in the size of the revolving facility from $43 million to $15 million to better align with the Company’s average receivables balance and to reduce unnecessary standby fees

New CEO

Separateley, the company announced that Michael Singer, who has served as Interim CEO since February 2020, has stepped down from his temporary role but will remain Executive Chairman. Miguel Martin was named CEO. He is a 25-year consumer packaged goods industry veteran who joined Aurora from Reliva where he served as Chief Executive Officer. He assumed the role of Chief Commercial Officer of Aurora in July 2020. Prior to Reliva, Mr. Martin was the President of Logic Technology, one of the largest manufacturers of electronic cigarettes. He also held the position of Senior Vice President and General Manager of Altria Sales & Distribution.


Debra BorchardtDebra BorchardtSeptember 4, 2020
mushroom.jpg

4min3820

Numinus Wellness Inc. (TSXV: NUMI) has filed a final short form prospectus to offers up to 16,000,000 units at a price of $0.25 per Unit for gross proceeds of up to $4,000,000 in the offering jurisdictions of British ColumbiaAlberta, and Ontario. The offering is expected to close on or about September 10, 2020.

Numinus is a company that is creating an ecosystem of health solutions centered on developing and supporting the safe, evidence-based, accessible use of psychedelic-assisted therapies. The company said it would use the net proceeds of the Offering for MDMA and psilocybin Compassionate Access protocol implementation, to make these drugs accessible to specific patient groups before they are available on the market, as more particularly described in the Prospectus.  Additional funds will be used to secure therapy space and develop psychedelic integrative treatment models, support upgrades to its Lab infrastructure to support its Health Canada licenses, and for general operating expenses.

Deal Details

Each Unit will consist of one common share of the company and one-half of one common share purchase warrant.  Each Warrant will entitle the holder to purchase one additional common share of the company at a price of $0.35 per common share for a period of two years from issuance. The company said it has received conditional approval of the Offering from the TSX Venture Exchange, and for the listing of the common shares comprised within the Units, the common shares issuable on exercise of the Warrants and common shares associated with compensation to the Agent.

The Company

Numinus Bioscience includes a 7,000 square foot research and testing laboratory as well as numerous Health Canada licenses (through its wholly-owned subsidiary Salvation Botanicals), including a cannabis testing license that provides established and growing revenue. It is also a late-stage applicant for cannabis processing. Additionally, the company holds a dealer’s license which allows it to import, export, possess, and test MDMA, psilocybin, psilocin, DMT, and mescaline, and it is the first publicly listed company in Canada to be issued a Health Canada license to produce and extract psilocybin from mushrooms for the purpose of developing proprietary extraction methods.

These licenses will allow Numinus to support the growing number of studies on the potential benefits of psychedelic therapies through research projects, product development, and the supply and distribution of these substances. Numinus R&D leverages established relationships to position the Company for partnerships to host studies, develop medical and therapeutic protocols, and influence regulatory approval. Numinus Health, with one clinic already prototyping systems for efficiency and profitability, is dedicated to delivering therapies that enhance and supplement existing options—centered around psychedelic-assisted therapies when and where regulated—for people wanting lasting physical, mental, and emotional health.


Debra BorchardtDebra BorchardtSeptember 4, 2020
shutterstock_309992177.jpg

8min3158

On Thursday, the Securities and Exchange Commission (SEC) announced charges against Geoffrey Thompson for illegally selling more $19 million in unregistered securities.

The SEC’s complaint alleges that Thompson, a repeated securities laws violator, and his company, Covalent Collective, Inc., directed numerous offerings of unregistered securities from 2014 to 2019, ultimately raising more than $19 million from approximately 500 investors. “As alleged in the complaint, Thompson used numerous mechanisms to solicit investors, including providing investors video and audio recordings in which Thompson encouraged investors to spread the word about the company’s securities to friends and family. The complaint further alleges that despite raising nearly $20 million, Covalent never commenced any revenue-generating operations. According to the complaint, Thompson diverted more than $2.7 million of investor funds for his own benefit.”

Repeat Offender

Green Market Report has followed the saga of Geoff Thompson and his revolving door of cannabis companies. Investors continued to complain to GMR as to why the SEC allowed Thompson to keep setting up cannabis companies and selling shares if he was really just ripping them off.  In September 2017, the SEC sued Thompson for securities fraud and registration violations in connection with another of his companies, Accelera Innovations, Inc. (See SEC v. Accelera Innovations, Inc., et al., 17-cv-7052 (N.D. Ill). In April of this year, Thompson agreed to a final judgment permanently requiring him to quit violating securities laws.

He was also required to pay $350,000, prejudgment interest in the amount of $74,000, and a $100,000 civil penalty. The court also imposed a five-year ban on Thompson from (a) serving as an officer or director of a public company and (b) offering penny stocks. Even while the SEC was investigating him for Accelera, Thompson founded Covalent Collective, Inc., f/k/a Doyen Elements International Inc. f/k/a Advantameds Solutions Inc. and would insist that any shareholder problems with Doyen were because “there were two Doyens and his wasn’t the bad one.”

Covalent

Between July 2014 through at least June 2019, the SEC said that Covalent and affiliated entities offered several different investments, all of which were connected to Covalent common stock. The Covalent securities offerings resulted in the sale of over 800 investments, to approximately 500 different U.S. investors, cumulatively raising over $19 million. Thompson directed Covalent to use offering methods including unregistered broker-dealers, press releases, an investor relations firm, a public website, and a call center operated by Fortress Legacy.

Covalent sold “special warrants” to approximately 177 different investors, raising a total of approximately $8 million. Approximately 79 of the 177 investors did not indicate that they were accredited. Between 2018 and 2019, an additional 440 subscription agreements with 293 different investors, sold more than $8 million in Covalent common stock. Other investors affirmatively disclosed to Covalent that they were not accredited, but were still allowed to invest. Thompson would email audio recordings about the stock offering and promote it through a public website. Covalent never provided the common stock investors with a prospectus or financial statements.

In a related action, the Commission instituted settled administrative proceedings against Covalent. The document read, “Covalent violated Section 5(a) of the Securities Act, which prohibits the sale of securities through interstate commerce or the mails unless
a registration statement is in effect, and Section 5(c) of the Securities Act, which prohibits the offer to sell any security through interstate commerce or the mails, unless a registration statement has been filed as to such security with the Commission.”

As recently as July, Covalent shareholders were being told of a new endeavor called Black Bear Farms and posted a YouTube video updating the shareholders. The new board says they were informal advisors to Covalent and are now the new management team. The video also mentions the company Hempcentrics. Thompson talked about Hempcentric in a 2019 podcast and it is unclear whether he is still a part of the company. Covalent shareholders can receive shares in this company if they choose.

In a recent email, the company said this about Hempcentrics, “Hempcentrics, formerly known as North American Hemp, is a company rightfully owned by CC.  Gene (Berg) is working with the current Hempcentrics team to properly and fairly carve out our equity stake, taking into account what the individuals that have worked to form this company deserve.  Once complete, Bill Gregorak and myself (Sal Milazzo) will need to approve it.”

Where Did $19 Million Go?

According to the SEC case, despite raising $19 million, Covalent never started any revenue-producing moves. Instead, Thompson is accused of giving $2.7 million to himself, his wife, and other companies he owed. Covalent asked Thompson to resign when this was discovered. The SEC is asking for disgorgement of ill-gotten gains and prejudgment interest, and civil money penalties from Thompson.

Cultive

At the end of August, Covalent sent an email to shareholders saying it was rebranding its parent company to the name Cultive. Just two weeks prior to the SEC prohibiting the company from offering securities through the mail, the company said in its email,

We have decided on a structure that will offer all CC shareholders an equity stake in Cultive without having to further invest personal funds.  Thus, you will have interest in Cultive based on having shares in CC.  Furthermore, accredited CC investors will be invited to purchase additional shares, equal to the number of shares they originally bought in CC.  Basically, Covalent Collective will be issued 5% of our parent company.   46% of the company will be made up of CC accredited shareholders that choose to take advantage of our invitation to invest further in the business, along with those people that loaned Cultive funds to develop the farm and acquire the property and capital for the extraction facility and distribution center.  The remaining 49% ownership, as we have reported prior, is owned by the Joint Venture partners.

In Closing

The new management team wants the investors to believe that they are trying to salvage this mess. Lawsuits involving attempted acquisitions (involving Thompson) and continuous requests for more money make that a difficult task. The SEC may move slowly and eventually punishes those that violate securities laws. However, it can’t return the money to investors and it can’t jail the individuals accused of violations. The SEC would have to refer the case to another agency to pursue incarceration.


Debra BorchardtDebra BorchardtSeptember 3, 2020
district.png

3min3320

SLANG Worldwide Inc. (CNSX: SLNG) has been on a quest to consolidate its supply chain Colorado and the latest move is the acquisition of Peoria Partners. Peoria is the state-licensed manufacturer and distributor of SLANG’s District Edibles brand in Colorado. Slang said it plans to keep using Peoria’s Denver facilities to make District Edibles and for the distribution of the full suite of SLANG-branded products within Colorado.

“This is one of the planned acquisitions that allow us to consolidate our supply chain in Colorado,” said SLANG President & CEO Chris Driessen. “Owning a licensed cannabis facility capable of manufacturing and distributing cannabis-infused SLANG products immediately opens up new opportunities for us, including the ability to capture greater top-line revenue and more favorable unit economics.”

Earlier this year, Slang had disclosed in a filing that it entered into an agreement with Peoria and its unitholders in February to buy Peoria for non-material cash consideration. The company said that the purchase of Peoria marked a significant milestone in it’s strategy of consolidating its supply chain in Colorado. Just last month that the Colorado Department of Revenue’s Marijuana Enforcement Division had approved its application for suitability. That approval will allow Slang to own “plant-touching” operations such as manufacturing and distribution facilities.

Slang said that the consolidation will deliver several benefits, including increased revenue and gross profit per unit sold, greater control over production and distribution planning, improved efficiency across the organization, and a strengthening of its leadership position in the state.

Other Consolidation Efforts

In addition to Peoria, Slang has said that it also plans to buy Allied Concessions Group Inc., which is a manufacturing and distribution business in Colorado It has also executed definitive agreements relating to its proposed acquisition of an
edibles manufacturing and distribution business belonging to Oregon-based LBA. That deal is expected to close in the second half of the year. The company said it has been working to obtain the state regulatory approvals required to complete all three transactions.


Debra BorchardtDebra BorchardtSeptember 1, 2020
shutterstock_1517440529-scaled.jpg

5min9480

The UK-based mental health company known for its psychedelic treatments, Compass Pathways has filed to go public this week. The company said it plans to list its American depositary shares on the Nasdaq under the ticker “CMPS”. The company reported total net losses of $13.2 million, $19.6 million and $24.8 million, respectively, for the fiscal years ended December 31, 2018 and December 31, 2019 and the six months ended June 30, 2020.

The company has raised $116 million so far. As of June 30, 2020, it had an accumulated deficit of $62.4 million. Its largest shareholder is Atai Life Sciences, which owns 29% of the stock. Other large shareholders include founders George Goldsmith and Ekaterina Malievskaia each with 16.5% of the company. Entities affiliated with Peter Thiel own 7.5%.

Psilocybin Treatments

The company is known for its pioneering the development of a new model of psilocybin therapy, in which psilocybin is administered in conjunction with psychological support. “Our initial focus is on treatment-resistant depression, or TRD, a subset of major depressive disorder, or MDD, comprising patients who are inadequately served by the current treatment paradigm. The company noted in its filing that early signals from academic studies, using formulations of psilocybin not developed by us, have shown that psilocybin therapy may have the potential to improve outcomes for patients suffering with depression, with rapid reductions in depression symptoms and effects lasting up to six months, after administration of a single high dose.” The company noted that the depression market is seen as a $200 billion market.

“We have developed a proprietary, high-purity polymorphic crystalline formulation of psilocybin, COMP360. In 2019, we completed a Phase I clinical trial administering COMP360, along with psychological support, to 89 healthy volunteers, the largest randomized controlled clinical trial with psilocybin therapy to date. In this trial, we observed that COMP360 was generally well-tolerated. We are currently evaluating COMP360 in conjunction with psychological support in a Phase IIb trial and we plan to report data from this trial in late 2021.”

Use Of Proceeds

The company said it will use the proceeds raised to fund clinical trials, therapist training and other activities to support the development of its investigational COMP360 psilocybin therapy through completion of all ongoing trials through the end of Phase II meetings with the FDA. Compass will also fund research and clinical development activities related to its investigational COMP360 psilocybin therapy to support the progression of COMP360 as a therapy for other neuropsychiatric indications and further our mechanistic understanding of psilocybin. In addition, the money will be used to fund general business development activities, including strategic investments.

Phase 2 trials

Compass is currently conducting a randomized controlled Phase IIb clinical trial in 216 patients suffering with TRD, in 20 sites across North America and Europe. This dose-finding trial is investigating the safety and efficacy of COMP360 combined with psychological support, for the treatment of TRD, and aims to determine the optimal dose of COMP360, with three doses (1mg, 10mg, 25mg) being explored. The primary endpoint of this clinical trial is to evaluate the efficacy of COMP360, as assessed by the change in the Montgomery-Åsberg depression rating scale, or MADRS, a widely accepted scale for depression that has been used as a primary endpoint in pivotal trials of other depression treatments. This trial has been designed to capture a statistically significant reduction in MADRS. Compass plans to report data from this trial in late 2021.
“We are using digital technology in this Phase IIb trial, including an online portal to help patients prepare for their psilocybin experience, and a web-based “shared knowledge” interactive platform to complement therapist training. We are also collecting digital phenotyping information through the measurement of human-smartphone interactions. After the trial, these data will be compared with information collected from validated psychiatric scales, such as MADRS, to develop potential digital applications to help anticipate relapse of depression. In the future, we plan to expand our research into additional digital technologies to complement and augment our therapies.”

Debra BorchardtDebra BorchardtSeptember 1, 2020
4Front.jpg

5min2080

4Front Ventures Corp. (OTCQX:FFNTF) reported revenue of $12.7 million in the second quarter versus $2.5 million for the same time period as last year. However, sales at 4Front were flat quarter-over-quarter. The company said that it achieved positive operating cash flow in the month of August and expects a positive adjusted EBITDA starting in the third-quarter of 2020.

The loss from operations was $4.9 million. On the company earnings call Chief Investment Officer Andrew Thut said , “Our adjusted EBITDA in the second quarter was a loss of $400,000, as compared to a loss of $2.8 million in the first quarter and $5.8 million in the fourth quarter of last year.”

CEO Leo Gontmakher said, “Our strong business momentum leaving the second quarter will be aided by significant tailwinds as we enter the second half of this year.  We welcomed the first adult-use sales in Massachusetts at our Georgetown facility on August 12th and anticipate final approvals for adult use sales at our Worcester facility imminently.  Our cultivation/processing facility expansions in Massachusetts and Illinois as well as our second Illinois retail location are on-track for end of year completion.  We continue to execute on our plans to flip to cash flow positive during the third quarter and have set the stage to exit this year in a position to drive meaningful operating leverage in our business.”

Washington

The company established itself in Washington state and has since been expanding into other states. With regards to Washington, 4Front said it is seeing a phenomenal market turnaround from where the industry was a year and a half ago. “We had record months back to back in July and August, with the July being the first month we’ve had over $4 million in wholesale revenue. Flower prices are still trending up over the last 8 to 10 months, and we’re currently selling packages delivered flower for $900 a pound on average as compared to $650 a pounds just 12 months ago.” The company also noted that it has record sales for vapes and edibles across the board without having to lower prices in any of those categories.

Massachusetts

The company said that its Georgetown, Massachusetts location began serving the adult-use market on August 14. Its first location to be approved in the state. 4Front said it is pleased with the steady progression of the sales ramps since launch, punctuated by a record weekend leaving the month of August. “We expect to be able to make an announcement about our Worcester location entering the adult use markets in the very near future as well, which provides a further tailwind to growth in the space.” The Worcester location for adult use and the third location in Brookline are expected to open in early 2021.

Illinois

The company was offline in Illinois in June and July as the stores were closed for looting during the protests. The company noted that Joe Epperson, who formerly led the flower team in Washington, moved to Illinois and took over leadership of the grow facilities in January, and since that time, they’ve seen the yield in Elk Grove improved from 250 grams per square foot to right around 350 grams per square foot.

4Front said it is on track with the reopening of our South Chicago dispensary. The Calumet City dispensary is also on track to open in the fourth quarter of this year. “This together with our project that’s currently underway to expand our Illinois cultivation facility, tripling our production capacity is expected to strengthen our foothold in the state and pave the way for both top-line and bottom-line growth.”

Looking Ahead

The company said it is in progressive discussions to strengthen its balance sheet through a financing/sale leaseback of its affiliated facilities in Washington state. It also expects to finalize the divestiture activities of non-core assets with the closing of Maryland in early September.

 

 

 


Debra BorchardtDebra BorchardtAugust 31, 2020
Oasis-1280x719.jpg

3min1350

CLS Holdings USA, Inc. (OTCQB:CLSH)(CSE:CLSH) reported that its fiscal year-end 2020 total revenues were $11,917,629 an increase over fiscal year 2019’s total revenue of $8,459,048. The company also reported a net loss $30 million versus last year’s net loss of $27 million. The loss was attributed to a large non-cash impairment charge on goodwill as a result of the decline in the company’s stock price.

“Because our stock price provides a basis for our enterprise value, this decline meant that we were required to write-down the value of this intangible asset by $25,185,003, a one-time write-down that has not occurred in prior fiscal years. This devaluation is not reflective of any tangible loss of assets, and our working capital remains sound.”

CEO Jeff Binder said, “In spite of the competitive landscape in Nevada we were able to grow revenue and increase our gross profit margins. Our “People Power Profits” mantra is paying dividends and I am proud that all our employees have been provided a safe working environment during these challenging times. We are a local company who will continue to provide our community with a robust menu of safe cannabis products at fair price points.”

CLS did point out that excluding the charge, its net loss would have been $5,472,970, an improvement of $22,146,087, or 80.18% compared to the fiscal year 2019 net loss.

The company said that it has seen a growth in sales at the Oasis dispensary despite a brief downturn in sales at the beginning of the COVID-19 pandemic. The company shifted to expanded delivery and curbside sales which contributed to the ability to achieve net revenue growth in an otherwise uncertain environment. The statement read, “Our continued improvements in inventory purchasing and implementation of new processes also led to a 16% expansion in gross margin to 50% in the fiscal year 2020 from 43% in the prior fiscal year. Improvements to our manufacturing division have also been successfully implemented, marked by the completion of an expansive innovation and extraction lab at City Trees in April 2020.”

Expenses dropped from $26 million in 2019 to $8.7 million in 2020. The company said it cut professional fees and trimmed parent company costs. Gross margins expanded 16% to 50% as compared to 43% in fiscal year 2019. The total number of customers served increased 70.48% from 134,009 in fiscal year 2019 to 228,458.

 

 


Debra BorchardtDebra BorchardtAugust 28, 2020
auxly.png

4min4350

Auxly Cannabis Group Inc. (OTCQX: CBWTF) reported total net revenues of $8.6 million for the second quarter ending June 30, 2020. This was a 200% increase over the same period last year and attributed to $6.8 million of cannabis net revenues and research revenues from KGK of $1.8 million.

The net loss at Auxly grew to $27 million from last year’s net loss of $8 million. The increase in net losses was primarily attributable to total other losses recorded during the second quarter, increased depreciation, interest expense, partially offset by gross margins net of selling, general and administrative expenses.

“We are excited to have another successful quarter of cannabis sales behind us, with Q2 bringing in $6.8 million of cannabis net revenues and $8.6 million in total net revenues,” said Hugo Alves, CEO of Auxly. “Despite a decline in sales as compared to Q1 2020, due in part to temporary store closures as a result of COVID-19 and new competitor value brands entering the market, we have taken immediate and deliberate steps to align our Company to reflect current consumer demands and market conditions.  We have already seen improved velocity of sales for our key brands from the pricing adjustments we made earlier this quarter, and are adding new product profiles that appeal to the fast-growing value segment, such as our Foray and Kolab Project’s 1g vape cartridge.  Additionally, we have seen a tremendous consumer response to the recent launch of our Robinsons and Kolab dried flower offerings.  As we move forward in executing our business strategy, we are committed to doing so with the highest degree of fiscal discipline.”

Impairment Loss

Auxly reported that it took an impairment loss on long-term assets of $4.5 million in the second quarter. “The Company’s LATAM cash generating unit Inverell represents its operations dedicated to the cultivation and sale of cannabis products within LATAM. Management determined that a liquidation approach was most appropriate in determination of the recoverable amount of the CGU due to regulatory delays causing uncertainty in the timing of sales and lack of cannabis product sales data in the industry.”

The company reported that over the three and six months ending June 30, 2020, wages and benefits were $7.5 million and $14.0 million, respectively, or an increase of $3.4 million and $5.7 million over the same respective periods in 2019. The increase was driven by workforce increases to support Cannabis 2.0 Product sales, primarily related to the operations and commercial teams.

Looking Ahead

The company had the following outlook for the remainder of the year, With the launch of the Company’s Cannabis 2.0 Products in December 2019, Auxly has established the foundation it plans to build on in 2020 to increase revenues and move towards positive cash flows in 2021. The Company’s objectives for 2020, which may be impacted by the COVID-19 pandemic (see further discussion in the MD&A under “COVID-19 Pandemic”), continue to be concentrated on Canadian operations. Broadly, Auxly’s objectives for the balance of the year are as follows:

Be a leader in the Canadian Cannabis 2.0 Products market. Complete remaining construction and licensing of all Canadian operations to leverage existing assets and increase revenues. Work with the Sunens team to secure the supply of input materials for use in the Company’s product offerings in 2020. Collaborate with strategic partners to move towards commercialization of a small number of products for sale internationally. Continue to take measures to improve cash flows and finance the business.


Debra BorchardtDebra BorchardtAugust 26, 2020
greensolution.jpg

6min4270

Columbia Care Inc. (CSE: CCHW) (QTCQX: CCHWF) has said that it will buy The Green Solution (TGS)  in an all-stock deal that is expected to close on September 1, 2020. The company did not disclose the size of the deal. Columbia Care stock jumped over 7% on the news to lately sell at $3.68.

Colorado-based TGS is said to have unaudited revenue through July 2020 of $52.7 million, which would be a year-over-year increase of 29% compared to 2019. Columbia Care said that the deal would be immediately accretive to Columbia Care’s Adj. EBITDA and, in combination with Columbia Care’s rapidly improving margin and profitability profile, will accelerate the company’s transition to being Adj. EBITDA positive in 3Q 2020.

“Closing the acquisition of The Green Solution represents a major milestone for Columbia Care,” said Nicholas Vita, CEO of Columbia Care. “This transaction aligned well with our national strategy to be the market leader in each of our key markets while adding a portfolio of brands and products to our suite of adult-use offerings across the country.  The acquisition of TGS is immediately accretive to Columbia Care’s Adj. EBITDA and accelerates our transition to generating positive Adj. EBITDA into 3Q. Overnight, we have established a leading position in the world’s second-largest cannabis market.  We added profitable scale to our national portfolio of brands and products and will continue to expand our market share in Colorado as we have done nationally – by offering consumers the highest quality products, best selection, most trusted customer experience, targeted brands, and competitive wholesale offerings. We are grateful to our partners at TGS and applaud their vision and dedication to build one of the most successful companies in the industry.  The entire Columbia Care team looks forward to working with the TGS organization and leadership as we pursue our joint goal of being the leading cannabis operator nationwide.”

TGS is a family-founded and operated business. It was awarded first place for its Supernova Cone and second place for its NectarBee Root Beer in The THC Classics 2020, TGS has remained an industry leader through proprietary technology and innovation, as well was through continually introducing new verticals, including a family of cannabis brands.

The Colorado market had been closed off to investments form publicly traded companies, but that was recently changed. As such, Columbia Care has become one of the first publicly traded companies to acquire a Colorado cannabis business. TGS has 23 dispensaries, many located in the Denver metro area and tourist destinations such as Aspen. The deal will boost Columbia Care’s reach to 95 facilities open or under development, including 73 dispensaries and 22 cultivation and manufacturing locations, covering 18 jurisdictions in the United States and the European Union.

The company supplies its own dispensaries along with its wholesale distribution network from its six operational cultivation facilities and one highly-automated manufacturing facility.  Additionally, a Columbia Care affiliate was recently awarded the opportunity to pursue a marijuana hospitality business license in Adams County, one of the first consumption lounges in the state.

The company statement said that TGS has performed well in 2020 despite headwinds caused by COVID-19.  As a core principle of its national strategy, Columbia Care expects to leverage TGS’s leadership position to serve as a consolidation platform for the fragmented Colorado market. Recently enhanced cultivation and manufacturing infrastructure will enable TGS to continue to expand margins while capturing incremental market share through M&A, the acceleration of its wholesale operations, implementation of additional manufacturing automation infrastructure, SKU optimization (including the launch of Columbia Care’s medical, health and wellness focused products), expanding outdoor cultivation (to solidify its position as the low cost producer of cannabis) and provide a unique customer journey by investing in and expanding dispensary operations.

“We met with most of the largest operators and are thrilled to have found a trusted partner in Columbia Care to see the vision we have always held for The Green Solution,” said Kyle Speidell, who co-founded and operates TGS with his brother, Eric Speidell. “This is a landmark acquisition that allows us to bring Columbia Care’s expansive product portfolio to our customers in Colorado, as well as enables us to quickly expand our brands, products and expertise to every major market in the US. We look forward to our continued success and growth, locally and nationally.”


Debra BorchardtDebra BorchardtAugust 26, 2020
Vireo.jpg

6min1610

Vireo Health International, Inc. (OTCQX: VREOF) reported that it generated revenue including contributions from discontinued operations, of $12.2 million. This was an increase of 70% over $7.2 million in the second quarter of 2019. Vireo reported revenue, excluding discontinued operations, increased 59% to $10.8 million, over $6.7 million in the 2019 second-quarter. The second-quarter net loss grew to $8.9 million, versus a net loss of $1.8 million in the 2019 second-quarter.

“Our second-quarter results were in-line with our expectations both in terms of revenue growth and operating expenses,” said Founder & Chief Executive Officer, Kyle Kingsley, M.D. “Furthermore, with the recent closing of the sale of our Pennsylvania manufacturing and processing subsidiary, we are well-positioned with a strong balance sheet to execute a strategy that should begin to generate positive cash flow next year as we continue increasing scale in our core markets of ArizonaMarylandMinnesotaNew Mexico, and New York.”

Vireo said that retail revenue was approximately $9.2 million in the quarter, an increase of 46% compared to $6.3 million in 2019. The increase in retail revenue was attributed to greater patient enrollment and average revenue per patient in Minnesota and New Mexico, as well as contributions from new retail dispensaries in Pennsylvania. Wholesale revenue of $1.6 million increased by $1.1 million or 256%, as compared to $444,023 in 2019. The increase in wholesale revenue was primarily due to the growth of wholesale operations in MarylandNew York, and Ohio.

Rising Expenses

The company reported that its total operating expenses in the second quarter rose to $15.4 million, versus $5.4 million in the second quarter of 2019, with the increase primarily attributable to increased salaries and wages, as well as an adjustment to share-based compensation related to the vesting of out-of-the-money warrants issued to a former executive upon termination from the company. Excluding depreciation and share-based compensation, operating expenses in the second quarter of 2020 were $6.0 million, or 55 percent of sales, as compared to $5.0 million or 74 percent of sales in the second quarter of 2019, and $6.2 million or 59 percent of sales in the first quarter of 2020.

Total other expenses were $3.4 million during Q2 2020, compared to $1.8 million in Q2 2019. The increase in other expense was primarily attributable to the issuance of warrants in conjunction with the private placement completed in March of 2020, as well as increased interest expense.

On June 22, 2020, the company announced the planned divestiture of its Pennsylvania manufacturing and processing operations to a subsidiary of Jushi Holdings, Inc. for a total consideration of $37 million, including $13.8 million in cash upon closing. The transaction closed on August 11, 2020, and as a result, the company had total cash on hand of approximately $21.1 million.

Dr. Kingsley continued, “We believe there is significant potential for Vireo to improve revenue growth and profitability in our core markets, and we’ll be investing in each of these markets through the balance of fiscal year 2020 to increase production capacity and retail store count. We expect the benefits of these investments to begin materializing late this year, and continue to believe that each of these markets has the potential to enact adult-use legislation over the short- to medium-term future, which would present additional opportunity for revenue growth, margin expansion, and value creation for shareholders.”

Looking Ahead

Dr. Kingsley concluded, “As we enter the second half of fiscal year 2020, we plan to leverage the strength of our balance sheet to make several strategic growth investments in our markets in ArizonaMarylandMinnesota, and New Mexico. We expect to invest approximately $8.0 to $9.0 million in these projects and that they will be completed by the end of the first quarter of fiscal year 2021. Once complete, these investments should help drive stronger revenue growth and profitability, which gives confidence in our ability to begin producing positive cash flow around the mid-point of fiscal year 2021.”



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


READ MORE



Recent Tweets

@GreenMarketRpt – 11 hours

Cannabis Subscription Boxes Grow By 550% ⁦@cratejoy⁩ ⁦@CureCrate⁩ ⁦@hempcrateco⁩ #cannabis…

@GreenMarketRpt – 13 hours

The Green Market Report’s Marijuana Money September 18, 2020 ⁦@WallandBroad⁩

@GreenMarketRpt – 1 day

RT : With 48 days until the election, we are finding ways to let voters in New Jersey know Cannabis is on the ballot and why t…

Back to Top

You have Successfully Subscribed!