California-based dispensary company Harborside Inc. (CSE: HBOR) reported that its third-quarter revenue increased 22.4% year-over-year to $14.1 million for the quarter ending September 30, 2019. The company said that the increase in revenue was attributed to a 13.5% growth in retail revenue and 57.1% growth in wholesale revenue.
Net losses for the third quarter were trimmed to $1.2 million versus last year’s net loss of $5.2 million for the same time period. This was attributed to decreases in fair value of biological assets, increases in operating expenses and a one-time write-down of investment which was offset by a non-cash gain on derivative liabilities of $9 million due to translation on exercise prices of options and warrants, and conversion prices of debentures, denominated in other foreign currencies.
“We are pleased with the continued strong results from our retail and wholesale operations, which have contributed to a robust third quarter. Our revenue growth remains solid and Q3 represents the 15th quarter in a row in which our revenue has tracked over $10 million,” said Harborside Interim CEO Peter Bilodeau.
“While we are pleased with our third-quarter results, there is still much work to be done. We are focused on executing on our goals, continuing to drive growth through our retail and wholesale divisions, and remaining laser-focused on our California-centric growth plan. In addition, we have worked with our executives, members of the Board of Directors and insiders to extend the terms of the company’s lockup agreements until June 1, 2020, and expect analyst coverage of our company to commence shortly.”
Harborside reported that its total operating expenses for the quarter were $8.7 million, which rose over last year’s $6.7 million for the same time period. Total operating expenses in the third quarter of 2019 included general & administrative expenses of $5.4 million, $2.1 million in expenses related to share-based incentive compensation, $2.3 million of share-based payments, an allowance for expected credit loss of $0.3 million, and $0.284 million of depreciation and amortization.
“In addition, in order to be a profitable business, we must address costs. To reach our goal of reducing our operating expenses, we have begun implementing the cost-cutting initiatives the Alvarez & Marsal team identified to recognize the efficiencies in our business and have focused on streamlining our operating costs at our Salinas facility.” Total assets totaled $53.0 million and included $16.6 million of cash on hand.
“We are updating our full-year 2019 revenue guidance from $55–57M to $50–52M to reflect the delayed timing of the openings of the Desert Hot Springs and San Leandro locations and the delayed closing of the LUX acquisition. Both stores are in the process of opening, and we now expect LUX to close by the end of December, such that they will be reflected in our run rate for 2020. The delay in the closing of the LUX acquisition is expected to result in an approximately $1.5 million decrease to 2019 annual revenue, and an additional $2 million decrease in revenue resulting from the delay in the opening of the two new locations. Additionally, a production issue at the Company’s farm disrupted three harvests which the Company expected to monetize in the fourth quarter of 2019 worth approximately $1.5 million of revenue.”
The company noted that 2019 guidance does not include the results of any pipeline acquisitions other than LUX.