M7 Reports Earnings, Remains In Debt Default

ManifestSeven Holdings Corporation (M7) (OTCMKTS: MNFSF) announced financial results for its fiscal third-quarter ending August 31, 2021, on October 29, 2021, as revenues rose 11% sequentially to $4.2 million from the second quarter’s revenues of $3.8 million. The net loss for the quarter was $1.6 million. Despite this M7 said it is still in default of certain debt obligations. M7 said it is looking at solutions and is working closely with its major creditors, vendors, and landlords as it continues to pursue a range of strategic and financing alternatives.

Revenue Decline

M7 reported revenue of $11,704,450 for the nine months ending August 31, 2021, which represents a decrease of $1,979,802 (15%) from $13,684,252 for the nine months ended August 31, 2020. The company attributed the decrease to a decline in revenue generated from ancillary product sales due to a disruption in one of the company’s third-party e-commerce distribution channels that caused extended delays in the delivery time of products to customers and were partially corrected following the conclusion of the first fiscal quarter.

Can’t Pay The Bills

As of August 31, 2021, M7 only had $170,704 in cash. The company had a net working capital deficit of $28,251,574, however, the financial statements at August 31, 2021, reflect certain notes payable and convertible debentures as current liabilities that are not expected to be repaid within the next twelve months. In addition, the derivative liability is a non-cash balance, the resolution of which is entirely tied to the resolution of the convertible debentures. When excluding these balances, the working capital deficit was approximately $15.9 million.

As a result of the debt woes, M7 said it continues to explore, review and evaluate a broad range of potential strategic alternatives focused on maximizing shareholder value. The company managed to cut some operating expenses as that number fell by 33% to $2.3 million during the fiscal third quarter versus $3.5 million during the second fiscal quarter.

Revenue Streams

During the third fiscal quarter, M7 said it continued to place a greater emphasis on generating revenue from its regulated operations, with regulated product sales increasing by 25% quarter-over-quarter and expected to yield more significant long-term revenue growth. the company also said in July that it entered into a Master Services Agreement with a licensed third-party cannabis distribution company, focused primarily on the rapidly growing beverage product category, to carry out finished goods distribution operations on behalf of Highlanders. “The contract consolidates a client portfolio that includes some of California’s highest-selling beverage products, a database of nearly 400 active licensed retailers throughout California, and a robust fleet of 16 distribution vehicles, allowing for efficient statewide long-haul transportation and last-mile fulfillment of regulated products. The agreement is expected to result in significant operational synergies and maximize the company’s ability to monetize its regulated distribution infrastructure by generating incremental and accretive revenue and optimizing operating margins.”

One of the company’s products, The Marijuana Index has been offline for some months saying it is being reengineered. Though it seems the company is more focused on supply chain businesses.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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