Avant Brands Inc. (TSX: AVNT) (OTCQX: AVTBF) delivered another quarter of record revenues and positive cash flow for the period ending May 31, marking the fourth consecutive quarter of momentum, the company announced Monday.
The British Columbia-based company reported gross revenue of $9 million in the second quarter, a 101% increase from the same period a year ago. The company also recorded an uptick in its adjusted EBITDA, reporting $1.7 million, versus a net loss in the same period last year.
“Robust domestic and international demand for our products, combined with efficient operations, has allowed us to achieve positive cash flow and adjusted EBITDA,” Norton Singhavon, founder and CEO of Avant, said in a statement.
The strong financial performance has been driven in part by Avant’s recent acquisition of the Flowr Group Okanagan, which, according to Singhavon, substantially enhanced the company’s ability to fulfill rising demand and continue strong revenue growth.
Avant also reported a net loss from operations of $270,000, a meaningful improvement from the previous year. Gross margin dollars were $2.7 million, representing a 187% increase.
Additionally, recreational net revenue was $4.8 million, a 53% increase, and export-B2B net revenue reached $3.2 million, a sizable 311% increase versus the same period last year.
In the first half of the fiscal year, the company produced approximately 4,642 kilograms of cannabis and sold around 4,100 kilograms. The improvements are due, in part, to the integration of Flowr into Avant’s cultivation framework, contributing to strong growth in gross revenue, gross margin dollars, and positive cash flow.
Avant also completed a $3.5 million credit facility on July 17, which will be secured by the real estate of the company’s non-operational and non-licensed real property owned by GreenTec Holdings Ltd.
Contract Breach Claims
Avant found itself in legal hot water during the quarter after Desjardins Securities Inc. filed a lawsuit on May 25 alleging a breach of contract. Desjardins claims damages of approximately $1 million, stating it was not compensated for its role in the initially failed acquisition of The Flowr Corp. by Avant.
According to the complaint, Desjardins was contracted on March 15, 2022, to facilitate the acquisition, a deal designed to be an all-share transaction. But the deal fell through when the parties could not agree on terms, and negotiations ceased on April 23, 2022.
The contract between Avant and Desjardins included a six-month payment period, which should have lasted until October 2022.
Despite the earlier failed transaction, Avant K1, a joint venture in which Avant owns a 50% stake, successfully acquired Flowr in February 2023 after the latter wound up in creditor arrangement proceedings. Then in March 2023, Avant tied up the remaining shares of Avant K1, effectively owning Flowr.
Desjardins argues that it performed significant work related to the initially unsuccessful deal and thus warrants the claimed damages. However, Avant is firm that Desjardins had no part in the ultimate acquisition of Flowr via Avant K1, made in the context of the CCAA proceedings, nor in Avant’s subsequent acquisition of Avant K1.
Avant has denied Desjardins’ claims as baseless and expressed its intentions to fight the allegations. Further developments in this legal dispute remain to be seen.