General Cannabis (CANN) reported a 19% decrease in losses for the year ending December 2017 with revenue of $8.2 million versus last year’s revenue of $10.1 million. The loss per share was $0.40 versus last year’s loss per share of $0.66. The company said that as of December 31, 2017, it had an accumulated deficit of $34.8 million. Revenues for 2017 increased 18% to $3.5 million from $2.9 million. It had net cash of $5 million at the end of December 2017 versus $800,000 at the end of 2016.
“Fiscal 2017 was a transformative year for General Cannabis. Our balance sheet has never been stronger. Along with generating record revenues in 2017, we successfully paid down substantial amounts of debt, raised new equity, and significantly increased our book value,” said Robert Frichtel, Chief Executive Officer of General Cannabis. “Our liquidity continued to improve in 2018, as we paid off all of our debt and generated an additional $4.2 million through the exercise of warrants and stock options.”
Revenues for the apparel line Chiefton recovered in the fourth quarter. The company said in its filing that in 2017 it experienced a drop in apparel sales and an increase in consulting revenue, as it dedicated resources to launching the design agency. “Expenses for the design business during the first six months of 2017 were high, as we tried different approaches to establishing its operations, which negatively impacted costs and expenses. We believe we now have an efficient model for Chiefton Design, with manageable, moderate recurring expenses. In the third quarter of 2017, we hired a new managing director to drive Chiefton Supply’s apparel business, which contributed to increased sales in the fourth quarter of 2017.”
Revenues decreased 16% to $1.8 million in 2017 from last year’s $2.2 million due to the loss of a significant customer as a result of the drop in wholesale cannabis prices in Colorado. General Cannabis said that it was partially offset in the third quarter of 2017 by organic growth and our acquisition of Mile High. The filing stated, “Costs and expenses typically vary with changes in revenue, however, the increase in costs and expenses in 2017 compared to 2016, relates primarily to overtime and training time for guards as our customer base recovered from the decline experienced during the first six months of 2017. We also incurred additional expenses in 2017 for our expansion into California and overhead from the Mile High acquisition.”
Revenues in 2017 increased 193% to $1.2 million over last year’s $432,000 primarily due to General Cannabis’ assisting companies submitting applications to acquire licenses in states that recently legalized cannabis like California and adding a significant two-year contract in July 2017 to manage the cannabis grow facility for a customer. Costs and expenses increased in 2017 primarily due to the company hiring new consultants to meet current and expected future demand for services, as well as the cost of the products sold.
Additional Management Comments
“Along with growth through acquisitions, we are also focused on organic growth and driving each segment to profitability,” said Joe Hodas, Chief Operating Officer of General Cannabis. “I have spent extensive time with each of our segment leaders, diving into staffing models, revenue projections and challenges. With initial analyses in hand and the existing General Cannabis infrastructure, I believe we can capitalize on new lines of business, cross-sale opportunities between segments, and operating efficiencies. I am eager to work with the great team in place here at General Cannabis to drive strong top line and bottom line results.”
Michael Feinsod, Executive Chairman of General Cannabis, stated: “Our business expanded during the year, which positions us for continued national expansion. We will continue to hire talented executives to support our growth. General Cannabis has never been in a better position to take advantage of our strong infrastructure and continue to focus on growth through acquisitions. Our strong platform and corporate team can quickly help entrepreneurial cannabis companies achieve success.”