Silo Wellness Tries to Recover from Failed Marley One Deal

Better late than never, Silo Wellness Inc. (CSE: SILO) (OTCQB: SILFF) finally delivered its annual report for the year ending October 2022. Sales revenue for the year was $335,811, showing a significant increase of 179% from the previous year, which reported $120,120. Silo also reported a net loss of $5,812,400 for the year, a slight improvement over last year’s net loss of $6,208,882 in 2021. The net loss per share, basic and diluted, for the year was $0.87, showing an improvement from the previous year’s $2.00.

“The 2022 year-end audit has been an extensive process primarily due to the low materiality threshold because of the small size of our market cap, the complexity of the April 2022 debt financing, and all the recent debt restructuring. I’d like to thank our CFO Winfield Ding and our auditors at Zeifmans for their work to get this over the finish line and the patience of our shareholders and other interested parties,” said Mike Arnold, Silo Wellness founder and CEO.

Going Concern

Silo is still a going concern and said its future is dependent on its continued ability to raise capital through public equity financings or upon the generation of profits from potential revenue streams, the outcome of which cannot be predicted at this time. The company said in a statement that its current liquidity strategy is as follows: encourage management to convert consulting fees to stock over time; continue negotiating debt restructuring with remaining creditors; maintain or increase profit margins in Jamaica; and bridge financing to cover a potential rights offering for existing shareholders. The company is also considering whether it can execute a Regulation A offering to finance an Oregon-based subsidiary covering Oregon operations.

The company wrote in its annual report that it has $25,710 cash (October 31, 2022 – $115) on January 31, 2023, and $44,517 (October 31, 2022 – $64,066) amounts receivable and other current assets. Total assets are $70,227 (2022 – $64,181). The Company has incurred losses since inception and as of January 31, 2023, has a cumulative deficit of $15,243,566 (October 31, 2022 – $15,052,475) and a working capital deficit of $5,434,077 (2022 – $5,304,092).

Costs Down

The cost of goods sold for 2022 was $212,849, indicating a decrease of 45% from the previous year, which reported $388,614. As a result, the Company’s gross margin was $122,962, compared to a loss of $268,494 in 2021, representing a significant improvement in the gross margin of 145%.

The company reported total expenses of $5,544,819, representing an increase of 16% compared to $4,789,543 in 2021, reflecting an increase in advertising and promotion fees, consultant fees, and management fees. The advertising and promotion fees were $3,643,165 in 2022, representing a growth of 140% compared to $1,517,336 in 2021.

Marley One

Last year Silo decided against moving forward with its business model with Marley One or other functional mushroom products as the Bob Marley-branded products did not generate operating profits. Due to the termination of the Marley One royalty agreement in 2022, the company said it accrued a $2,650,000 advertising fee for royalty payments due on the termination of the agreement. However, while these expenses were booked for the company, the company previously released in March that those liabilities were removed from the balance sheet due to divesting the subsidiary that possessed that debt. Consultant fees, directors’ fees, and management fees were $736,658 in 2022, indicating a decrease of 47% compared to $1,394,075 in 2021.

“It was a pointless endeavor for us to advance this asset given the Marley debt that was marooned in this subsidiary,” stated Arnold. “We attempted to negotiate terms with the Bob Marley family as previously disclosed to no avail. Mr. Hartman as the lead inventor of the patent-pending intellectual property is in the best position to attempt to extract value out of this debt-soaked asset. If he manages to do so, we would be entitled to royalties after any secured debt is cleared. We are very excited for this creative resolution and to finally be done with the Marley transaction and its debt.”

Looking Ahead

Last month Silo announced a strategic partnership with Oregon-based Satya, Inc. to develop an ecosystem supporting the well-being of psilocybin patients and Oregonian entrepreneurs. This partnership includes a Raw Materials Supply and Purchase Agreement, which provides Silo with the Right of First Refusal (ROFR) for Satya’s psilocybin biomass that becomes available for sale. This agreement enhances the Company’s revenue-generating potential in the psychedelic space. Arnold stated, “Our mission is to make psychedelic treatments safe, ethical, and accessible to Oregonians while safeguarding local businesses from potentially exploitative out-of-state interests. By partnering with Satya, we establish a sustainable and reliable source of high-quality raw materials, allowing us to fulfill our vision. This agreement is a significant step in mitigating a key industry risk, ensuring we have access to the controlled substances necessary for treatment. With this agreement, we gain access to biomass, providing a dependable source of medicine to support our potential operations and strategic objectives.”

Arnold continued, “With the audit process firmly behind us, our focus continues to be on continuing revenue-generating operations in Jamaica and moving forward our Oregon psilocybin strategy.”

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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