Israeli medical cannabis producer Breath of Life International Ltd. (BOL) cut its valuation for a pending Toronto Stock Exchange initial public offering by about 17%. According to a Canadian regulatory filing on June 14, the company is seeking to list 14% of its shares at a fully allotted valuation of CAD 1.02 billion (USD 827 million), compared to a previous valuation estimate of about $1.19 billion, following its May 23, 2019 prospectus.
Breath of Life produces medical cannabis and cannabis products — including 99%-pure cannabinoids — distributed primarily through pharmacies. The company currently supplies 48 pharmacies from its single facility in the southern Israel kibbutz of Revadim. It is targeting export markets in the E.U., Canada and Australia.
According to the prospectus, BOL showed revenue of $3.5 million in 2018, up from $3 million in 2017, and posted a net loss of $29.3 million, compared with a $6.4 million loss a year earlier. The IPO proceeds will be used to expand operations to Portugal resulting in an annual manufacturing capacity of more than 870,000 kilograms of dried cannabis in Israel and Portugal combined by the end of 2020, the prospectus said.
BOL set a price range of CAD 27-32 per share (USD 20-USD 23.80). Underwriters are BMO Nesbitt Burns Inc., Cowen and Company LLC, and Scotia Capital Inc.
BOL expects to take advantage of recent changes in Israel’s medical cannabis regulatory framework, which went into effect in late April. Under the changes to the country’s long-established medical cannabis program, there is no longer a fixed limit on the number of patients who can be prescribed medical cannabis; the number of physicians allowed to prescribe medical cannabis has been expanded; and, all pharmacies can be certified to distribute medical cannabis.
As a result of the framework changes, BOL forecasts that the number of approved medical cannabis patients in Israel will quadruple to 120,000 by 2022, from 30,000 last year. Earlier in the year, the government approved the export of processed and finished medical cannabis product.
The Israeli government sees a significant economic opportunity in medical cannabis. Various published forecasts peg the sector to be worth from $260 million to as much as $1.1 billion by 2022. In the last year the government committed the equivalent of more than USD $3 million to more than a dozen studies on boosting medical cannabis growing and cultivation.
SOL Global Investments Corp. (CSE: SOL) (OTCQB: SOLCF), the owner of 3 Boys Farms, which holds one of Florida’s original 14 operating and vertically integrated medical marijuana treatment center licenses, has entered into a binding letter of intent with cannabis-focused private equity firm Merida Capital Partners to acquire Merida’s Michigan subsidiary, MCP Wellness, Inc. in a deal valued at $150 million.
The company said that MCP Wellness was a special-purpose vehicle (SPV) created to invest in Michigan cannabis operations and currently holds the rights to acquire two Michigan cultivation licenses, a processing license, and 3 fully licensed cannabis provisioning centers in Michigan with a fourth provisioning center scheduled to open in Ann Arbor in May. MCP Wellness also has plans to open an additional nine municipally-approved provisioning centers by August 2019. Assuming MCP Wellness’ expansion plans are completed as scheduled, SOL Global and Merida expect Michigan gross revenue from the acquired business to generate in excess of $61 million in the calendar year 2019 and more than $121 million in 2020.
“MCP Wellness’s acquisition of the Michigan licenses, once completed, will be the perfect complement to 3 Boys’ operations in Florida, as both states offer tremendous growth potential and this partnership will combine talent, industry-leading genetics and processing, plus cultivation and retail expertise across two of the most coveted and revenue generating markets in the U.S.” said Brady Cobb, CEO of SOL Global. “This acquisition will help ensure that SOL Global, through the MSO, will be able to execute on its visionary vertically integrated cultivation and retail strategies in the United States’ most promising cannabis markets.”
According to the company statement, the deal will consist of $35 million in cash and $115 million in equity consideration in CannCure, resulting in Merida owning approximately 42% of CannCure. With regards to the cash, $9 million will be sourced from cash on hand and $24 million will come from a private placement financing of CannCure equity and/or debt.
“Over the past several years, Michigan has become one of the country’s largest medical cannabis markets, projected at nearly $900 million for 2019, according to New Frontier Data,” said Mitch Baruchowitz, managing partner of Merida Capital Partners. “With adult use coming in 2020, Merida is excited by the opportunity to combine one of Michigan’sleading retail operations with a Florida operator while aggressively pursuing additional acquisition targets across several states that will help create a more diversified company.”
The statement also noted that SOL Global and Merida Capital are in active negotiations on acquisitions for the MSO in additional states. Specifically, SOL Global is finalizing negotiations to acquire an industry leading California cultivator and processor with superior genetics and a chain of prime retail dispensaries in California, and at the conclusion of that transaction, SOL Global intends to pursue a “going public transaction” of the MSO.
New Frontier Lawsuit Against SOL Global
Andy Defrancesco, the Chief Investment Officer of SOL Global, has been sued for defamation, conspiracy to defame and tortious interference in a business relationship by New Frontier Data’s Giadha Aquirre De Carcer. Merida Capital is also an investor in New Frontier Data. Defrancesco has said he is an investor in Prohibition Partners, a research company that had a falling out with New Frontier over a report the two companies agree to create jointly.
When the relationship was terminated, both companies released a report with similar sounding titles within a week of each other. Both companies have accused the other of borrowing intellectual property and threatened lawsuits.
Merida has defended New Frontier and the spat doesn’t seem to be having any effect on the relationship with SOL Global.
Chicago-based Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) released its unaudited financial results for the fourth quarter and full year ending December 31, 2018. The fourth quarter revenue was $17.0 million, an increase of 411% over last year for the same time period and up 33% sequentially.
The company trimmed its net losses to $2.6 million versus the net loss of $3.0 million for 2017 fourth quarter. The quarter’s pro forma revenue was $22.5 million.
Full Year Results
Cresco Labs delivered full-year revenue of $43.3 million, which increased 294% from 2017 and the full year pro forma revenue was $75.6 million. The company was profitable for the full year as it delivered a net income of $3.9 million, compared to a net loss of $4.0 million in the prior year. Cresco Labs is now operational in seven U.S. states, with binding transactions pending in New York, Massachusetts, and Florida. On March 25, 2019, it received approval to enter into the State of Michigan
“We completed 2018 with another quarter of positive pre-tax income that reflected continued strong execution across all areas of our operations,” said Charles Bachtell, Co-founder, and CEO of Cresco Labs. “Building on our momentum from 2018, we have already made incredible progress this year in building Cresco Labs’ leadership position in the cannabis industry. The definitive agreement signed with Origin House earlier this month is a transformational deal for Cresco that creates a cannabis industry powerhouse with the premier distribution platform in the United States serving the greatest number of dispensaries in the country. Combined with our recent entrance into the Florida market, Cresco has built the largest and most strategic footprint of any cannabis company in the United States.”
Success In The Capital Markets
Cresco Labs is a relatively young company that has accomplished a great deal very quickly. It only began trading its common shares on the Canadian Securities Exchange on December 3, 2018 under the symbol “CL” following the successful completion of the Company’s reverse takeover of Randsburg International Gold Corp. On March 6, 2019, the company was approved to list on the OTCQX market and its common shares are currently trading under the symbol “CRLBF.” Cresco successfully raised $205 million in growth capital through three capital raises in 2018.
As of December 31, 2018, Cresco had total assets of $318.4 million, including cash and cash equivalents of $131.3 million. In addition to that, it had a working capital position of $172.7 million with zero debt on the balance sheet.
The company gave the following operational updates in its statement:
Construction is underway to expand the Company’s cultivation facility in Lincoln, IL to 170,000 square feet with expected completion during the second quarter of 2019.
Launched an Illinois Opioid Alternative Pilot Program in the Company’s FloraMedex dispensary, which opens up access to medical cannabis across the state and removes certain registration barriers previously imposed on medical marijuana patients.
The Company opened its third dispensary (New Kensington) under its first license in the state.
The Company became the first dispensary in the Pittsburgh market to offer online ordering.
The Company is currently in the process of expanding its Brookville cultivation facility by approximately 85,000 square feet.
On January 16, 2019, the Company made the first legal sale of medical marijuana in Ohio, the second consecutive state in which Cresco Labs was first to market (following similar success in Pennsylvania).
Hope Heal Health, one of the companies with which Cresco entered into a definitive merger agreement, opened a medical cannabis dispensary in Fall River, Bristol County, Massachusetts. This acquisition is pending regulatory approval.
The Company will be launching a wholesale distribution of more than 50 products under the Cresco brand during the second quarter of 2019.
The Company’s new processing facility in Mendota, CA is scheduled to open during the second quarter of 2019. This will enable the Company to distribute its full suite of brands across the state.
Mindy’s Edibles are now carried in 62 out of 67 dispensaries in Nevada and have three of the top 10 selling edibles in the state, including the top-selling edible, according to Headset Inc., a cannabis data intelligence company.
The company still delivered a net loss of $71.1 million for the quarter which included a non-recurring, non-cash fair value charge of $50.7 million associated with convertible debt that was converted to equity during the year. The gross profit, excluding the impact of biological assets, was $7.2 million, an increase of 342%, up from $1.6 million in Q4 2017.
“2018 continued to set records for Harvest’s growth and momentum across the United States,” said Chief Executive Officer Steve White. “Three key initiatives dictated our decisions throughout the year and will continue to be our focus in 2019: aggressively expanding our retail and wholesale footprint across the U.S., building, acquiring and expanding our suite of brands across our footprint and continuing to operate in a financially disciplined way, while also fueling the revenue growth of the company.”
HHR made a splash recently when it announced it was acquiring Verano Holdings in a deal valued at $850 million. Verano is one of the largest privately held multi-state, vertically integrated licensed operators of cannabis facilities. Upon completion of the acquisition, it is expected to add licenses throughout the Midwest and East Coast. As of December 31, 2018, HHR operated ten retail locations in four states. The company said that significant expansion of cultivation, manufacturing and retail locations will occur throughout 2019.
For the full year for 2018, HHR reported total revenue of $47.0 million, an increase of 106%, compared to $22.8 million for 2017. The net loss was $67.5 million which included a non-recurring, non-cash fair value charge of $50.7 million associated with convertible debt that was converted to equity during the year.
The gross profit, excluding the impact of biological assets, was $24.6 million, an increase of 135% compared to $10.5 million for 2017. The gross profit margin, excluding the impact of biological assets, was 52% for 2018, compared to 46% in the same period the prior year. The adjusted EBITDA totaled $10.3 million for the 12 months ended December 31, 2018, compared to $6.0 million for the same period in 2017.
Cash On Hand
As of December 31, 2018, HHR had $191.9 million of cash and cash equivalents and $30.9 million of debt outstanding. The company has raised nearly $300 million in 2018: approximately $50 million of convertible equity notes, which converted into common stock when Harvest completed the RTO, approximately $20 million of senior debt, and over $218 million of equity issuances.
In February 2019 the company announced the pending acquisition of Falcon International Corp, a California vertically-integrated operator currently serving more than 80% of the legal dispensaries in California. It is expected to serve as a beachhead in California, providing cultivation, manufacturing, and distribution, wholesale opportunities, is expected to add well-regarded brands like Cru and High Garden to its portfolio and is expected to add key personnel to our team.
Editors Note: This is republished with approval from A Biz In A Box author Jordan Zoot.
Choosing Cannabis Tax Advisors – is one of the most important decisions that the owners of a legal commercial cannabis business must make. We are consistently disappointed by the lack of consideration owners invest in making their selections and abhor the misformation and in some instances criminal conduct by a small number of “tax advisors”. This piece is NOT about our practice, it’s about the selection process. We readily acknowledge that we are not the only skilled and qualified tax advisors out there, they do exist and our goal is to assist everyone in finding one. We have been very careful to divide the piece into distinct parts, the first part is comprised solely of factual information where the source of information will be hyperlinked, or a citation provided. The second part is going to reflect our opinions on the topic, and we certainly accept that “opinions are like a**holes”, everybody has one. The California Board of Accountancy [“CBA”] maintains a Cannabis Industry Information page on its website which highlights its unique status.
Critical Criteria – FACTUAL INFORMATION
The U.S. Treasury – Internal Revenue Service [“IRS”]
The Internal Revenue Service maintains an extensive structure for the oversight, regulation, supervision, and, and if the required discipline of individuals and firms that are involved with Federal taxes. The oversight is divided into several broad groupings and you need to understand the differences between them. They are:
Office of Professional Responsibility [“OPR”] – OPR’s vision, mission, strategic goals, and objectives support effective tax administration by ensuring all tax practitioners, tax preparers, and other third parties in the tax system adhere to professional standards and follow the law. OPR’s goals include the following: (1) Increase awareness and understanding of Circular 230 and OPR through outreach activities, (2) Apply the principles of due process to the investigation, analysis, enforcement, and litigation of Circular 230 cases and (3) Build, train and motivate a cohesive OPR team.
Return Preparer Office [“RPO”] – is a community of professional tax practitioners working with the IRS to improve tax administration with the strategic goals to register and promote a qualified tax rofessional community,improve the compliance and accuracy of tax returns prepared by tax preparers and engage stakeholders to create an environment that fosters compliance and program improvement
Treasury Inspector General for Tax Administration [“TIGTA”] – audits, investigations, and inspections and evaluations protect and promote the fair administration of the Federal tax system and work to ensure that the Internal Revenue Service (IRS) is properly doing its job. TIGTA reports directly to the Secretary of the Treasury and has oversight and review responsibility that extends to the IRS Office of Chief Counsel, the IRS Oversight Board, and the Taxpayer Advocate Service maintains a highly skilled, proactive, and diverse Inspector General organization dedicated to working in a collaborative environment with key stakeholders to foster and promote fair tax administration. TIGTA reports directly to the Secretary of the Treasury and has oversight and review responsibility that extends to the IRS Office of Chief Counsel, the IRS Oversight Board, and the Taxpayer Advocate Service. A maintains a highly skilled, proactive, and diverse Inspector General organization dedicated to working in a collaborative environment with key stakeholders to foster and promote fair tax administration.
OPR is responsible for the top tier of tax “professionals” – attorneys, certified public accountants and enrolled agents who are subject to the provisions of Circular 230 [“Circ. 230”] – Regulations Governing Practice before the Internal Revenue Service.
Certified Public Accountant [“CPA”] Verification – The tools available to perform that task include cpaverify.org a CPA lookup tool populated by official state regulatory data sent from Boards of Accountancy to a central database. The website represents the first ever single-source national database of licensed ‘ and CPA firms. Determine a CPA or CPA firm’s credentials without having to search each of the 55 Boards of Accountancy website individually. The California Board of Accountancy [“CBA”] licensee search is located here.
Enrolled Agent [“EA”] Verification – An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years. Enrolled agents, like attorneys and certified public accountants (CPAs), have unlimited practice rights. This means they are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before. An Enrolled Agent’s credentials can be verified here.
Return Preparer Verification [make sure you understand how they differ from Circular 230 Practitioners]
Registered Tax Return Preparer [“RTRP”] – Program suspended due to IRS loss in litigation read here.
California Tax Education Council [California Registration Only] – Verify a Tax Return Preparer here [Circ. 230 Practitioner are Exempt]
Annual Filing Season Program [“AFSP”] aims to recognize the efforts of non-credentialed return preparers who aspire to a higher level of professionalism. Those who choose to participate can meet the requirements by obtaining 18 hours of continuing education, including a six-hour federal tax law refresher course with a test. The return preparer must also renew their preparer tax identification number (PTIN) for the upcoming year and consent to adhere to the obligations in Circular 230, Subpart B and section 10.51.
Preparer Tax Identification Number [“PTIN”] – anyone who prepares or assists in preparing federal tax returns for compensation must have a valid 2019 PTIN before preparing returns. All enrolled agents must also have a valid PTIN. The PTIN Directory is located here.
Authorized eFile Provider –the “Authorized IRS e-file Provider” database is a nationwide listing of all businesses which have been accepted to participate in the electronic filing (IRS e-file) program.
Circ. 230 Practitioners are the ONLY group of tax advisors that are permitted to sign extensions of time to file, and represent a taxpayer before the IRS and state tax agencies for the Examination, Appeals and Collection functions Does it make sense to select a tax advisor that isn’t permitted to defend the positions claimed in your tax return, particularly if they prepare the return?
Certified Public Accountants [“CPAs”] are the only tax advisors that may* be permitted to certify financial statements, review or compile financial statements. Enrolled Agents [“EA’s”] are not permitted to provide certification, review or compilations of financial statements. The IRS is prohibited from hiring EA’s as Revenue Agents [the entry-level position for “auditing” tax return unless that possess a CPA Certificate or have completed thirty hours of accounting courses at the college level. The IRS is limited to hiring EA’s that don’t meet the criteria as mail or file clerks.
Enrolled Agents [“EAs”] often state that “EAs are the only federally licensed tax professionals who also have unlimited rights to represent taxpayers before the IRS”. The statement is factually untrue as CPA”s and attorneys have the same rights and obligations when representing taxpayers before the IRS. There are some additional distinctions which need to be made at the state level.
California is one of seven states that requires registration of tax return preparers [Circ. 230 Tax Practitioners are EXEMPT from the requirement. The registration is accomplished through the California Tax Education Council [“CTEC”] and requires continuing tax education and a $5,000 surety bond.
CPA’s may either complete a process known as “reciprocity” and obtain a license in a state other than their state of primary licensure, or they may utilize the procedures developed under the National Association of State Boards of Accountancy [“NASBA”] CPA Mobility Project to obtain a “limited practice privilege“. Once a CPA have completed either of the two steps above they have rights to represent a taxpayer in any location which is the same as an EA.
* – the California Board of Accountancy issues two types of licenses, A and G.
Type A – “Authorized” means the CBA has determined that the CPA completed a minimum of 500 hours of the experience required for licensure in attest work. The 500-hour minimum standard ensures entry-level exposure to attest engagements.
Type G – “Qualified” means that regardless of whether a CPA has met the minimum steps to be authorized to sign reports on attest engagements, they comply with applicable professional standards, which requires the CPA to undertake only those professional services that can be reasonably completed with professional competence, including achieving a level of competence that will assure that the quality of service meets the high level of professionalism required. It is the responsibility of the CPA to evaluate whether their specific education, experience, and judgment are adequate to perform the services being requested. As a result, it important to ask the CPA about their number of years and level of experience, continuing education, and recent peer review, if any.
California CPA’s and CPA Firms that provide attest services are required to undergo a quality control process known as “peer review“.
CPA’s that certify financial statements or provide SSARS-21 attest services for a client are strictly prohibited by “independence rules which can be found under both state accountancy statutes and professional standards from providing bookkeeping or technology services, such as accounting software or POS systems for the same client.
Choosing Cannabis Tax Advisors
Our Recommendations – Opinion
We believe that the optimal combination of tax advisors for a cannabis business would be to have BOTH a CPA with a graduate degree [a Masters in Taxation or “MST”] and a tax attorney with a graduate law degree [an “LLM – Taxation”]. Our rationale for the collaboration of both is detailed in “Legal Cannabis Support – Clarion Call“. You can learn more about the importance of having access to both sets of skills in “CPA Becomes A Cannibal” and “Kovel Accountants Cannabis Industry“
Where your tax advisor went to school is important, and we believe continues to be relevant without regard to the number of years since they graduated. I personally have an undergraduate degree in accountancy from the University of Illinois – Urbana, and an MST from the University of Texas – Austin. Both programs have been ranked no lower than #3 in the United States for the past FORTY years.
Listings of top undergraduate and graduate accountancy and tax programs can found here for undergraduate and here for graduate and LLM – Tax are here.
Experience with a Big 4 Accounting Firm is important. The level of experience is probably of greater importance – the usual progression is Staff Accountant [“Analyst”], Senior Accountant [“Associate”], Manager [“Director”], Senior Manager [“Director”], and Partner [“Managing Director”]. Big 4 experience at the Partner level is the “gold standard” with fewer than one in thirty Big 4 firm hires becoming partners.
Additional Recommendations – Opinion
Professional Memberships are important, with increased value ascribed to participation in the organization’s Technical Committees increasing their value
State Society Membership – provides development of local relationships and is a stepping stone to AICPA Committee appointed membership. CalCPAcan be found here, and the other state societies here.
AICPA Private Companies Practice Section [“PCPS”] for firms – The AICPA’s
Private Companies Practice Section (PCPS) supports CPA firms in the everyday intricacies of running a practice. PCPS partners with firms of all sizes, creating targeted and customizable practice management resources, networking opportunities and is a strong, collective voice within the CPA profession. PCPS provides content designed to sharpen technical proficiency to best practices in firm practice management.
Locate the Firm’s website and explore it, and investigate the firm’s presence on social media. You are welcome to explore our firm’s digital presence here.
We hope this piece provides insight into the process of selecting a professional tax advisor and welcome your comments, you can email us at email@example.com.
CannaRoyalty Corp. also known as Origin House (CSE: OH) (OTCQX: ORHOF) has signed a binding term sheet to acquire certain business assets of California-based cannabis cultivator, Cub City LLC for total consideration of $7,025,000. The deal is expected to close in March 2019.
Origin House will be purchasing a state-of-the-art craft cultivation facility with an annual production capacity of up to 1,400 kg of an ultra-premium flower. At that price, it would imply a purchase price of $5 per gram of funded capacity.
“This Acquisition was a logical next step for Origin House, led by the needs of our brand partners as we execute on our brand support and acceleration strategy,” said Afzal Hasan, President and General Counsel of Origin House. “Access to bespoke third-party cultivation is critical for new flower brands that want an authentic brand promise from seed to consumption. The existing alternative for brands is to use undifferentiated and mass-produced biomass available on the market. ”
Cub City was co-founded by a team that included Drew and Karen Duval of FloraCal. The facility and team have produced flower for some of the top packaged flower brands in California, as well as a prominent pre-roll brand.
In addition to the premium product that Origin House sought, the facility is located in close proximity to FloraCal’s 62,000 sq. ft. facility. Origin House said that the additional 24,600 sq. ft. cultivation capacity will be focused on third-party cultivation.
The company also said that both current and potential brand partners have highlighted the desire for bespoke exotic cannabis cultivation. This acquisition further expands Origin House’s brand support and acceleration platform and will allow the company to close pipeline opportunities with promising brands in California
Hasan added, “We are excited to continue growing our infrastructure and team to unlock further opportunities for growth that we have been cultivating with brand partners in California.”
Terms Of The Deal
The company statement outlined the following terms of the deal:
Under current Cub City management, the facility is undergoing construction with an estimated completion date of March 31, 2019. Upon the completion of construction, the facility will be composed of a two-story building with 11,000 sq. ft of cultivation space, and 7,400 sq. ft of distribution, processing and packaging space in addition to 6,200 sq. ft of office space, storage, and common area
Within 30 days, Origin House will provide a construction loan facility (the “Loan”) to Cub City in an amount of up to USD$1,700,000. Funds advanced under the Loan will bear simple interest at 12% per annum and mature two years from the date of the first advance. The Loan proceeds will be used for construction and equipment for the Facility
The Loan will be secured by a first ranking security interest on all present and future assets of Cub City and guaranteed by each of the members of Cub City on certain conditions
Some of the key assets, among others, to be purchased in the Acquisition include:
Cub City’s 20-year lease of the 24,600 sq. ft Facility; and
A 5-year local permit to cultivate, process, package and distribute cannabis. On Closing, Origin House will also have access to two state licenses: (a) a cannabis Type 11 Distribution License; and (b) a Small Indoor Cultivation license that may be used for future operations.
Included In Purchase Price
Forgiveness of the principal and interest accrued under the Loan (the “Loan Balance”);
$3,525,000 less the Loan Balance, in immediately available funds on Closing Date;
$3,500,000 on the one-year anniversary of the Closing Date (“Holdback Disbursement Date”). Cub City will have the option to receive the second payment in cash, shares of Origin House, or a combination of both but not less than 50% in shares.
MPX Bioceutical Corporation (CSE: MPX) reported its financial results for the second quarter ended on September 30, 2018. MPX recorded revenue of CAD$14.7 million, up from CAD$4.4 million in the same quarter during the previous year. The increase in revenue was attributed to wholesale operations and the company’s management of four cannabis dispensaries in Arizona. Gross profits for the quarter rose by 30.1% to $4.4 million.
The company’s net loss for the quarter rose precipitously to CAD$19.2 million, up CAD$3.9 million in the same period during the previous year. The company attributes its losses to general operations, accretion expense of CAD$1.4 million and costs related to the change in fair value for the Hi-Med Facility and convertible loan for CAD$9.2 million.
“For the second quarter, we again experienced strong growth, with revenue increasing $10.3 million year over year, topping $14.7 million, driven by the strong performance of our Arizona operations and much-improved production from our facility in Nevada,” said W. Scott Boyes, Chairman, President, and CEO of MPX. “We continue to execute upon our aggressive expansion strategy, as demonstrated by the successful openings of the Health for Life dispensaries in Maryland managed by one of MPX’s subsidiaries.”
Plus Products Inc.
The California-based edibles manufacturer, Plus Products Inc. (CSE: PLUS) announced its financial results for the quarter ended on September 30, 2018. Revenue rose to $2.56 million, up 60% over the previous quarter. The company’s loss and comprehensive loss rose to $1.79 million, up from $1.21 million during the same period during the last year.
PLUS ended the quarter with a gross margin of $0.38 million (15%) and $11.1 million in cash on hand. Shortly after the end of the quarter, the company went public and closed a CAD$20 million IPO
“We are pleased that as measured by retail sales in Q3, the PLUS brand is now the leading edibles brand in the largest and most competitive cannabis market in the world, and we look forward to extending the brand beyond California in 2019,” said Jake Heimark, CEO of PLUS.
Emerald Health Therapeutics Inc.
Emerald Health Therapeutics Inc. (TSXV: EMH) reported its financial results for the third quarter ending on September 30, 2018. Revenue for the company rose to $321,070, representing an increase of 51% when compared to the same period in the previous year. Likewise, Emerald Health’s net loss also increased; increasing from $1.9 million in Q3 of 2017 to $6.26 million.
Shortly before the end of the quarter, Emerald Health was chosen as an authorized cannabis supplier by the Newfoundland Labrador Liquor Corporation (NLC), and by the last week of November had completed its first adult-use cannabis shipments to Newfoundland; as well as British Columbia and Labrador.
“As we move forward at this pivotal point of commercial production, we expect our Pure Sunfarms joint venture, Quebec facility, and hemp sourcing agreements to result in significant scaling of production and sales from the fourth quarter onward,” commented Avtar Dhillon, MD, President of Emerald Health.
Today, Acreage Holdings Inc. (CSE: ACRG.U) announced its unaudited financial results for the third quarter, which ended on September 30, 2018.
Acreage reported quarterly revenue of $5.5 million, representing a 160% increase when compared to the same period in the previous year. The company’s year-to-date revenue increased by 92% to $10.6 million. The company’s net loss increased from $0.7 million in the third quarter of 2017 to $4 million. The year-to-date net loss was $2.1 million.
Gross profits for the quarter, excluding fair value items, was $1.9 million; up 118% when compared to the same period in the previous year. Year-to-date gross profits were $3.8 million, representing an increase of 76% over the previous year.
During the last quarter, Acreage launched its flagship brand, “The Botanist;” opening a cannabis dispensary in Baltimore, Maryland and increasing the number of dispensaries owned by the company to 16. By January 2019, the company expects to have as many as 23 retail dispensaries opened. Acreage was also awarded the right to receive one of eight total dispensary licenses in the state of North Dakota.
“We are in the midst of a transformative moment for the U.S. cannabis industry and we have been laying the groundwork to fully leverage our unique strategic advantages – scale, operational depth, and financial strength,” commented Kevin Murphy, Founder, and CEO of Acreage. “Our November public listing and private placement equity raise of approximately $314 million gives us the ability to continue to expand our industry-leading footprint beyond the 18 states that we are in. These efforts have laid the foundation for us to roll out the nation’s first truly national brands in the industry. With our operational foundation now in place and the tailwinds of transformational pending legislation that we anticipate will open new cannabis markets in the U.S., we believe we are in a strong position for the future.”
Acreage on the Move
Over the last month, Acreage has made a number of property purchases and acquisitions to strengthen its portfolio. Most recently the company close the acquisition of Michigan-based Blue Tire Holdings LLC, entered into an agreement to acquire the intellectual property rights of one of the world’s largest and diverse libraries of cannabis genetics, and has agreed to purchase a third Connecticut cannabis dispensary. The latest purchase in Connecticut will give Acreage three of nine dispensary licenses in the state.
The New York Stock Exchange (NYSE: ICE) is delisting self-described cannabis company India Globalization Corp. (NYSE: IGC). In a short statement, the NYSE said that trading of the common stock would be suspended immediately.
The statement said that IGC has “Engaged in operations which, in the opinion of the Exchange, are contrary to the public interest. Section 1009(a) (ii) of the Company Guide states that it is necessary and appropriate for the protection of investors to immediately suspend trading in the Company’s common stock.”
The NYSE also said that “The issuer has substantially discontinued the business that it conducted at the time it was listed or admitted to trading and has become engaged in ventures or promotions which have not developed to a commercial stage or the success of which is problematical.
The Green Market Report recently highlighted the ways India Globalization Corp. claimed to be a cannabis company, but in reality, was earning money from legacy trading operations. Other outlets like MarketWatch have also dived into the company’s filings to uncover bad behavior. Mostly that IGC pretends to pivot its company to whatever new trend is moving the market, while not actually doing so.
On a positive note, Aphria Inc. (TSX: APH) said that its common shares have been approved for listing on the New York Stock Exchange and will begin trading at the open of markets on November 2, 2018. The new symbol will be APHA and the company said that it was changing its Toronto symbol from “APH” to “APHA.”
The shares that are currently trading on the OTCQB will move over to the NYSE. Shareholders will not need to do anything other than making sure their brokerages reflect the change in exchanges.
“Listing on the NYSE provides Aphria with access to the largest equity market in the world, with increased exposure to a vast array of US institutional and retail investors. This strategic move aligns directly with our growth ambitions as we enter an elite peer group of respected, high-profile corporate brands listed on the NYSE,” said Vic Neufeld , Aphria CEO.
Mr. Neufeld added: “We are excited to usher in a new era with the recent legalization of adult-use cannabis in Canada and as we aim to further expand our footing in exciting markets such as Latin America , the Caribbean and Europe . Aphria is well-positioned to capitalize on this fast-growing industry.”
What is the economic impact of adult use cannabis? In many U.S. states, that is a difficult question to answer. Hoping to divine the answer, the Nevada Dispensary Association (NDA), which represents approximately 80% of cannabis dispensaries in the state of Nevada, commissioned a report by RCG Economics to find out; and the results were surprising.
To fully ascertain the scope of the cannabis industry’s economic effect on Nevada’s economy, RCG implemented several strategies. To start, RCG electronically sent out a survey to NDA members; requesting information such as tax collections, gross sales, wages, benefits, and employment.
Next, RCG ran an economic benefits analysis (EBA) and compared the data to existing figures. An EBA typically involves analyzing direct benefits, indirect benefits, and induced benefits. Finally, RCG prepared a fiscal benefits analysis, which examined statistics such as state-level excises taxes, retail sales taxes, and the payroll tax.
After collating the data, RCG found that legalized cannabis will have a tremendous effect on the Nevadan economy.
Currently, adult use cannabis sales account for 63% of all cannabis sales in the states, while medical makes up the remaining 37%. Between 2018 and 2024, the state’s adult use cannabis industry is expected to generate an estimated $8 billion of economic activity.
Additionally, the industry is expected to support approximately 67,000 jobs in the same period. Cannabis regulations are also forecasted generate roughly $3.6 billion in direct, indirect, and induced labor income.
Direct spending in the cannabis industry is also projected during this period to have a multiplier effect of 1.63; which means that for every $1 spent on retail cannabis, another $0.63 will be generated throughout the state economy.
The retail cannabis industry is expected to produce approximately $989.7 million of total output activity in 2018 alone; representing roughly $60.7 million in sales. By 2024, that total is expected to rise to approximately $1.2 billion. Similarly, the industry is projected to support around 8,300 jobs in 2018, but by 2024 that number is expected to grow to 10,200.
Between 2018 and 2024, Nevada’s cannabis industry could potentially create roughly $1 billion in fiscal benefits for the state. The largest chunk of that figure is from sales and use tax accounts, which is projected to generate $349.4 million. The second largest contributor is the retail excise tax ($336.2 million) and the wholesale excise tax ($212.3 million).
For 2018, the industry is expected to generate approximately $113.1 million in fiscal benefits. By 2024, that number is expected to swell to $158.7 million annually.
RCG is quick to point out that these figures are only estimations based upon the available data and may change depending on outside economic factors. However, external economic factors or not, one thing is clear for the report, and that is that the legal cannabis industry will have a tremendous impact on the state of Nevada’s economy in the coming years.
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