Aurora Cannabis Archives - Page 2 of 9 - Green Market Report

Debra BorchardtDebra BorchardtFebruary 13, 2020
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7min8820

Canadian-based Aurora Cannabis Inc. (NYSE: ACB) saw its shares falling in early trading after the company said that revenues fell in the second quarter of fiscal 2020 ending December 31, 2019. Aurora reported that its total net revenue reported in Canadian dollars fell 26% sequentially to $56 million in the second quarter from $75 million in the first quarter of 2020. It was higher than the 2018’s second quarter, which delivered net revenue of $54 million.

Medical cannabis net revenues decreased 10% sequentially to $27.4 million due to a short-term permit issue in Germany that has since been resolved. The company did state that its medical patient base remained relatively consistent at 90,307.

Wholesale bulk cannabis net revenues fell from $10.3 million in the first quarter to $2.4 million due to overall volume declines and the wholesale of lower potency (priced) product.

Losses Grow

The company also reported that the adjusted EBITDA loss was $80.2 million in the second quarter versus $39.7 million in the first quarter of 2020. The decline was attributed to “an increase in production costs relating to the ramp-up for the legalization of Cannabis 2.0, and the increase in SG&A expenses.” Aurora said it was taking actions to materially reduce SG&A expenses and was focused on achieving positive adjusted EBITDA.

“Despite delivering modest growth in our core medical and consumer business in Q2, we took immediate and deliberate actions to align our Company to current market conditions,” said Michael Singer, Executive Chairman and Interim CEO, Aurora Cannabis. “As announced last week, being a profitable cannabis company for our investors is the singular near-term focus for Aurora and we have begun to implement a business transformation plan where we intend to manage the business with a high degree of fiscal discipline.”

Those expenses increased by 23% to $99.9 million from the prior quarter. So even as revenues were dropping the company increased salaries, benefits, and annual merit increases. Plus there were investments in educational marketing campaigns related to the launch of Cannabis 2.0 products, and marketing initiatives related to the launch of the Aurora Drift brand.  On February 6, 2020, Aurora announced decisive action effective immediately to reduce SG&A expenses from the Q2 2020 levels, and expects to manage the business with an SG&A expense run-rate of between $40 million to $45 million per quarter exiting Q4 2020 (June 30, 2020).

Debt Levels

Aurora’s current credit facility and other debt outstanding include $50 million in a revolving facility, of which $2 million was drawn as of December 31, 2019. $162 million of fully drawn senior secured term loans and US$345 million of senior unsecured convertible debentures due February 2024.  The company also managed to secure credit facility amendments that removed EBITDA ratio covenants. 

“The transformational actions we announced last week have already positively impacted SG&A expense and we are confident that our run-rate will be approximately $40 million – $45 million as we exit the fiscal fourth quarter of 2020.  This is a very important step toward EBITDA profitability,” said Glen Ibbott, CFO. “In addition, our credit facility was amended to provide greater flexibility to Aurora. More specifically, Aurora chose to downsize the facility by $96.5 million with the elimination of undrawn term loan capacity, and further used $45 million of restricted cash to repay a portion of the drawn term loan balance for the purpose of reducing leverage and cash required for debt service.”

Prices Fall

The average net selling price of cannabis decreased to $5.54 per gram over the prior quarter of $5.68. This decrease was attributed to the provision for returns and price adjustments impacting Q2 2020 which did not affect Q1 2020, lower kilograms sold in Q2 versus Q1, and lower wholesale bulk volume and pricing. Gross margin before fair value adjustments on cannabis net revenue, excluding provisions was 48% in Q2 2020, compared to 58% in the prior quarter.

During Q2 2020, Aurora produced 30,691 kilograms of cannabis as compared to 41,436 kilograms in the prior quarter. The 26% decrease in production output was primarily due to previously announced changes to cultivation strategies, including a pivot to high-value, high-potency strains which are lower yielding. “With the continued refinement of our cultivation techniques, we expect to achieve quarterly harvest volumes leading to an average of 150,000 kgs annually or better.”

Looking Ahead

Despite the troubling earnings report, Aurora said it was bullish on the long-term potential for the global cannabis opportunity. “However, due to several short-term factors, there is likely to be a slower than previously expected rate of industry growth in the near-term. The Company has outlined a number of fiscally responsible steps it has already taken to realign its business operations to this expected industry growth rate. Aurora reiterates its outlook for fiscal third quarter that cannabis revenue will be impacted by previously mentioned industry headwinds, and as such will likely show modest to no growth relative to fiscal Q2’s cannabis revenue, excluding provisions, of approximately $65 million.”


Kaitlin DomangueKaitlin DomangueFebruary 12, 2020
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5min16990

Amid layoffs appearing as a constant, The Supreme Cannabis Company is the latest in the industry to let a percentage of its staff go. Last night after the market’s close, the company announced a 15% layoff, releasing a third of corporate positions and 13% of its operational ones. This report comes after the announcements of companies like Tilray and Aurora also slashing jobs. 

All hope is not lost though in the ganja workforce. Leafly found 243,700 full-time-equivalent (FTE) jobs in the United States that are supported by legal cannabis as of January 2020. That is a 15% annual increase. 

This data was reported in Leafly’s fourth annual Cannabis Jobs Report. Even more encouraging, the report shows that the industry created 33,700 new jobs nationwide in 2019, effectively making it the fastest-growing job arena in the United States. 

According to the report, Massachusetts, Oklahoma, and Illinois are leading the fight in terms of employment expansion. Massachusetts recently celebrated the one year anniversary of legalizing cannabis for adult-use in the state and added 10,226 jobs to boot. Oklahoma saw a 221% growth in 2019, supporting 9,412 full-time jobs. Illinois adult-use market rolled out on the first of the year, and early 2020 data shows this is already a $470 million annual market supporting 9,176 jobs.

An interesting tidbit of information, Massachusetts has more cannabis industry workers than hairstylists and cosmetologists, and Illinois has twice the number of cannabis industry workers than they do meat packers. When compared to other industries, it is truly amazing to see the creation of jobs in the United States by the industry, as well as the cannabis industry’s growth in general. 

Though the previously mentioned states take the prize for the fastest job growth, California is still America’s largest cannabis employer. However, Colorado may be the nation’s biggest per-capita cannabis job market. With California offering one job per 980 residents, Colorado supplies one job per 165 residents. 

Colorado is also passing Washington state in terms of jobs. Though both states legalized cannabis for adult-use in 2012, Colorado supplies nearly 10,000 more jobs than Washington state, despite Washington’s population containing nearly 2 million more residents. 

Despite cannabis job expansion’s rapid growth in most of the country, California and Michigan suffered technical job losses. 

Leafly’s experts estimate that their job markets fell due to changes in laws and regulations. In California, an estimated 8,000 jobs moved from legal to non-legal status, but as mentioned before it is still America’s largest cannabis job provider. Michigan’s new regulatory processes pushed hundreds of legally operating dispensaries into illicit status. 

Leafly started their annual job counts four years ago, upon the discovery that federal and state labor economists do not account for state-legal cannabis jobs in their employment reports. The reason? Federal prohibition. The NAICS (North American Industry Classification System) codes classify cannabis retail stores in the same category as art supply stores, hot tub stores, and auction houses. While cannabis cultivators have the same job code as hay farmers and agave growers. 

It is important to note that this report does not include jobs created by CBD since it’s recent change in legal status. Because the regulations for CBD differ from state-legal cannabis, there is no data to build from yet.


Debra BorchardtDebra BorchardtFebruary 7, 2020
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5min8790

Canadian-based cannabis company Aurora Cannabis Inc. (NYSE: ACB) becomes the latest cannabis company to toss its CEO and layoff employees as the company seeks to cut costs and aim for profitability. Aurora blamed slower than expected growth for its moves.

Booth was the founder and leader of the company and is the latest cannabis company founder who has been shown the door when expansion plans became more aggressive than revenue could handle. Michael Singer, Aurora’s Executive Chairman was named interim CEO.

“Over the last seven years, Aurora has built an incredible platform and a leading position in the global Cannabis industry. While there is still much work to be done, the timing is right to announce my retirement with a thoughtful succession plan in place and the immediate expansion of the Board of Directors,” said Booth. “These changes, along with the financial transformation which we are undertaking, should clearly demonstrate to investors that Aurora has the continuity, strategic direction and leadership it needs to transition from its entrepreneurial roots to an established organization well-positioned to capitalize on a global growth opportunity.”

The company has cut 500 full-time positions including 25% of its corporate jobs and is restructuring spending across the board. Aurora said its plan is to get the SG&A to a range between $40 million to $45 million per quarter by the end of the fiscal fourth quarter of 2020, a significant decrease from the preliminary fiscal second quarter 2020 range announced today.

The company said that in order to get there it plans to focus on the following areas: 1) Canadian consumer market; 2) Canadian medical market; 3) established international medical markets; and 4) U.S. market initiatives. Severance and other one-time charges related to SG&A reductions are expected to range from $2 million to $4 million and will be largely incurred in the company’s fiscal second and third quarters ending December 31, 2019, and March 31, 2020, respectively.

Preliminary Fiscal 2020 Second Quarter Financial Results

The company also released its unaudited preliminary second-quarter fiscal 2020 financial results. It said it expects cannabis revenues for the second quarter of fiscal 2020 to be in the range of $62 million to $66 million, net of excise taxes. Aurora expects to record provisions for returns, price reductions and future provisions of approximately $12 million, almost all of which relate to product sold in previous quarters.

“Therefore, net cannabis revenues, after giving effect to these offsets, are expected to be $50 million to $54 million. These revenue expectations reflect consistent quarter-over-quarter medical revenues, a decrease in international revenues due to short-term German supply interruptions, and much lower bulk sales.

The cash cost to produce per gram of dried cannabis sold is expected to remain below $1.00, sales and marketing expenses are expected to be between $28 million to $32 million and general and administrative expenses are expected to be between $70 million to $75 million.”

The company also noted that it will likely “show little to no growth relative to fiscal Q2’s cannabis revenue of $62 million to $66 million, prior to the provisions for returns and price reductions.”

Singer said, “I look forward to serving as Interim CEO and executing on our short-term plans, which include rationalization of our cost structure, reduced capital spending, and a more conservative and targeted approach to capital deployment. These are necessary steps that reflect a fundamental change in how we will operate the business going forward.” Singer continued, “As one of the original cannabis visionaries, Terry is an invaluable resource with deep industry knowledge that we can leverage strategically. I look forward to having him continue on as a Senior Strategic Advisor to our Board of Directors.”

 


Kaitlin DomangueKaitlin DomangueFebruary 6, 2020
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6min9190

It’s time for your Daily Hit of cannabis financial news for February 6th, 2020. 

On the Site

Planet 13 Cafe Is Paying Off As Sales Stay Strong

 

Las Vegas-based cannabis dispensary Planet 13 Holdings Inc. (CSE: PLTH) (OTCQX: PLNHF) reported record-breaking January sales driven by strong traffic and attributed it to the company’s newly opened cafe and event space. The company said that the average ticket size was approximately $100. Planet 13 said that January revenue was ~10% higher than the seasonally slow months of November and December.

CBD Craze Sparks ‘Weed Washing’ Trend

 

Remember the term ‘pinkwashing’? Where companies slapped a pink ribbon on just about anything and claimed to be donating lots of money to breast cancer research? It’s happening again, but this time it’s in the cannabis industry.

“Weed washing” is a disturbing trend that appears to be most dominant in the beauty industry and refers to the act of adding hemp oil that does not contain CBD or only contains a minuscule, non-therapeutic amount to a product in order to capitalize on CBD’s popularity and high price point. 

Psychedelic Clinic Company Field Trip Raises $8.5 Million

 

Psychedelic clinic company Field Trip Psychedelics Inc. closed its oversubscribed Series A financing round. The financing, which was completed through a private placement, raised $8.5 million for the company.

The company said the funds will be used to execute the initial stages of Field Trip’s strategic plan to build out the world’s first network of medical centers focused exclusively on psychedelic-enhanced psychotherapy. In addition to that, the financing will help fund the final construction of its research and cultivation facility at the University of the West Indies in Jamaica. 

South Carolina Kicks Off Hemp Farming Season

 

The South Carolina Department of Agriculture (SCDA) said that it will begin accepting applications for hemp farming, handling and processing permits for the 2020 growing season starting Feb. 1, 2020. Now in its third year, South Carolina’s hemp farming program has grown from 20 farmers in 2018 to 114 permitted farmers and 43 processors at the end of the 2019 season. 

Requirements to receive a hemp farming permit include:

  • Proof of South Carolina residency
  • Criminal background check
  • $100 nonrefundable application fee and $1,000 permit fee
  • GPS coordinates of all locations on which hemp will be grown
  • Attending an SCDA orientation and signing a Hemp Farming Agreement prior to possessing any hemp, including clones and seeds

In Other News

Aurora Cannabis Appoints Two New Independent Directors

 

Lance Friedmann and Michael Detlefsen have been appointed as two new directors for the Canadian cannabis company, Aurora Cannabis. The two have held roles with Kraft Foods and Pomegranate Capital Advisors, respectively. 

Aurora Cannabis Executive Chairman and Interim CEO Michael Singer stated, “We are pleased to welcome Lance Friedmann and Michael Detlefsen as independent members to the board at this critical time in our transformation. We expect to see cannabinoids grow as a category in consumer products and believe their depth of experience and strong track records of successful brand development and operational business transformation will provide helpful insights to our executive team. With the addition of Messrs. Friedmann and Detlefsen, Aurora has expanded its Board, independent directors.”

KushCo Holdings Announces $16 Million Registered Direct Offering

 

KushCo Holdings has announced its entrance to a definitive agreement with investors purchasing stock in the company. The agreement includes 10,000,000 units, with each unit representing one share of common stock. The transaction was set for $0.001 per share, and a warrant to purchase half a share of common stock, at an offering price of $1.60 per unit, pursuant to a registered direct offering.


Kaitlin DomangueKaitlin DomangueFebruary 5, 2020
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3min6280

It’s time for your Daily Hit of cannabis financial news for February 5th, 2020. 

On the Site

Business Strategy For Psychedelic Companies

The Green Market Report hosted its first conference on Psychedelic Investing in New York City on January 24. This panel was titled “Business Strategy For Psychedelic Companies.

Journalist Jeremy Berke of Business Insider moderated this panel.

Atai Life Science CEO, Florian Brand, was on the panel along with Shlomi Raz, the founder of Eleusis. The two were joined by Dr. Terry Kelly, the CEO of Perception Neurosciences.

Tilray Restructures, Cuts Workforce, Stock Rises

Canadian cannabis producer Tilray (NASDAQ: TRLY) said it was restructuring and cutting roughly 10% of its workforce. The stock was moving almost 2% higher on the news in pre-market trading to $18.50.

“By reducing headcount and cost, Tilray will be better positioned to achieve profitability and be one of the clear winners in the cannabis industry, which will drive value for our investor and employee shareholders,” said Chief Executive Brendan Kennedy in a statement.

74% of CBD Buyers Own Pets

A new industry report from Nielsen (NYSE: NLSN) and cannabis data provider Headset has highlighted the impact of hemp-based cannabidiol (CBD) on the U.S. pet care market. According to the 2020 Pet Industry Green Paper by Nielsen and Headset, hemp-based CBD pet products will represent 3-5% of all hemp CBD sales within the U.S. by 2025.

Key takeaways:

  • Pet products have logged over $9.4 million in sales at regulated adult-use cannabis retailers in California, Colorado, Nevada, and Washington combined (Q1 2018 through Q3 2019).
  • To date, 24% of pet owners use hemp-CBD either for themselves, their pet(s), or for both.

In Other News

Aurora Cannabis to Cut Workforce By 10%

Cannabis company Aurora has announced they are cutting their workforce by 10%. Shares are down 1% after hours. This comes right after the announcement of Tilray’s plans to also cut their workforce by 10%.


Debra BorchardtDebra BorchardtDecember 23, 2019
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5min15630

Aurora Cannabis Inc. (NYSE: ACB) provided an update on its operations with the introduction of new product formats, recent industry recognitions, and updates to existing operations. It didn’t seem to have the intended effect as the stock dropped another 7% to lately trade at $2.06.

Aurora disappointed shareholders last month when the company reported that its consumer cannabis revenues fell 33% sequentially from the previous quarter. The decline in cannabis net revenues was attributed ordering that slowed considerably during the summer as distributors worked through inventories and as the industry was impacted by the slow pace of retail store licenses.

“We have focused our collective efforts to be ready for the successful launch of Cannabis 2.0 as Canada takes the next step in the legalization of newly allowed product forms. We are ready and have launched a diversified portfolio of new product formats and are excited for Canadians to have access to high-quality, safe alternative cannabis products such as edibles, vape pens and other derivatives,” said Terry Booth, CEO of Aurora. “We have prudently deployed capital and we believe that we’re ready with the appropriate combination of technology, scale and consumer insights to have the right products on store shelves in a timely fashion. This was not an easy task and I would like to thank the entire Aurora team for their collective efforts in getting 2.0 across the goal line in time for our provincial regulators.”

The company said it trying to reduce expenses, cut near term debt and bolster liquidity in an effort to position itself for long-term success. The previously announced deferral of construction and commissioning activities is expected to conserve approximately $200 million of cash in the near term. Aurora believes that its existing assets are sufficient to meet current demand at a low cost per gram. The company said it expects to have the flexibility to ramp up projects as global demand dictates.

In late November, the company also retired $227 million of the $230 million 5% unsecured convertible  debentures that were due in March 2020 with the issuance of shares and thereby preserving cash. Aurora continues to evaluate multiple sources of capital and currently has access to undrawn capacity under a C$360 million credit facility with a syndicate of banks, in addition to its $400 million at-the-market equity distribution program.

New Products

Aurora said it started shipping initial orders received to ten of Canada’s provincial regulators of Cannabis 2.0 products following December 17, 2019, however, the company cautioned that most Canadian consumers will likely not see these products on retail store shelves until early January 2020 due to varied retail operations across the country. Patients can now immediately access a variety of the new product formats.

Initially, the company said it is providing a variety of CBD and THC vape and edible products, such as gummies, chocolates, baked goods, and mints. These new cannabis products are being produced at Aurora Sky in Edmonton, Alberta, Aurora River in Bradford, Ontario and Aurora Vie in Pointe-Claire, Quebec. These centers have been outfitted to provide centralized production, packaging, logistics and distribution capabilities. The Company has prioritized its resources to prepare for a successful initial launch and has built inventories to support an ongoing replenishment strategy to help ensure consumers across Canada have access to a diverse portfolio of high-quality derivative products.


Debra BorchardtDebra BorchardtNovember 15, 2019
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6min21720

Aurora Cannabis Inc.  (NYSE: ACB) stock was selling off by over 8% in pre-market trading after the Canadian cannabis company reported its earnings following the market close on Thursday. Aurora delivered total revenue for its first fiscal quarter in Canadian dollars of $75.6 million which missed analyst estimates by $17 million. The first quarter GAAP EPS of C$0.01 did beat estimates by C$0.06.

The company said its consumer cannabis revenues were $30 million in the quarter, a 33% sequential drop and contributed 40% to total consolidated net revenue. The decline in cannabis net revenues was attributed ordering that slowed considerably during the summer as distributors worked through inventories and as the industry was impacted by the slow pace of retail store licensing.

“Over the past several years, Aurora has earned its place as a global leader in the cannabis industry. Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense,” said Terry Booth, CEO, Aurora Cannabis. “Aurora has and will continue to focus on everything in our control. Our success in doing this was demonstrated again this quarter by continued strong improvement in our core KPIs. We delivered solid operating results this quarter, exemplified by our industry-leading cash cost to produce which declined another 25% to $0.85 per gram this quarter, as well as by our industry-leading gross margins and market share.”

Scaling Back

Aurora said it decided to stop construction activity at its Aurora Nordic 2 facility in Denmark, which is expected to save approximately $80 million over the next 12 months. Aurora Nordic 1 is fully completed and has received a production license, and the company expects to receive a license to sell shortly. Aurora also decided to defer the majority of the final construction and commissioning activities at its Aurora Sun facility for the foreseeable future which is expected to conserve approximately $110 million of cash. The company said that as global demand develops, or as Aurora’s market share in the global cannabis market increases, it will reactivate these projects.

Medical Is Strong

The company’s medical cannabis net revenue increased 3% quarter-over-quarter to over $30 million. On the company’s earnings call, CFO Glen Ibbott said the increase was “driven by our continued success in growing our patient base, which currently stands at just over 91,000 clients. Our revenue was affected by a slight decrease in the average net selling price of medical cannabis of 6%, but more than offset by patient growth. The decline in selling price was the result of temporary pricing incentives designed to support the move of valuable long-term medical patients to Aurora, and away from LPs that we’re not servicing them well.”

Cost To Produce Drops

Aurora has always had a goal to be a low-cost producer and that mission seems to be fulfilled. Booth said, “I’m also proud to report that our high-tech cultivation facilities delivered on our promise to provide industry-leading indoor cash cost to produce below $1 a gram. And in fact, this quarter we came in well ahead of our expectations at $0.85 a gram.”

Looking Ahead

Aurora said that it knew this quarter would be tough and that it expected a growth plateau. Vapes and edible products will soon be available for sale and the company said that this will bring back sales.

Mr. Booth added, “In order to capitalize on this global market, we recognize the need to be nimble and proactive. To enhance our financial flexibility and position us to take maximum advantage of future growth opportunities, we have also taken decisive steps to immediately strengthen our balance sheet. Specifically, these steps include: (1) the announcement of a formal plan to settle our 5.0% convertible debentures due March 2020, (2) a reduction in our capital investments over the next several quarters by over $190 million to better match near-term capacity expansion with anticipated demand, while maintaining our long-term demand outlook, and (3) raising over US$124 million in gross equity proceeds since the start of fiscal 2020 through our at-the-market (“ATM”) financing program.”

“We view these as short-term headwinds and despite them, Aurora has continued to maintain our position as the leading producer and supplier of high quality medical and consumer cannabis products,” said Booth on the earnings call.


Debra BorchardtDebra BorchardtOctober 3, 2019
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3min7610

Just about every cannabis stock has suffered a drop in valuation in 2019. As a result, companies seem to feel they need to hold the investor’s hands by issuing statements of company health. The latest is Aurora Cannabis Inc.  (NYSE: ACB) who provided a corporate update that didn’t really give any ‘new’ news.

“Aurora takes its leadership position in the global cannabis industry seriously, and is committed to being open and transparent with all of our stakeholders,” said Terry Booth, CEO of Aurora. “The Aurora team is working to advance several major strategic initiatives in Canada, the United States and abroad aimed at further strengthening Aurora’s global position. We are laser-focused on delivering on our business plan and prudently managing our investors’ capital.”

The market though didn’t respond in the manner that was hoped for as the stock sold off another 7% and was lately trading at $4.12, which is lower than the 52-week high of $12.52. The update mostly reviewed the various grow facilities and construction status.

Update on Facilities in Construction:

As Aurora executes on its strategy of leading scalable, purpose-built cultivation, it continues to prudently manage capital allocation decisions driven by global forecasts for demand. Many of the Company’s significant construction projects are nearing completion of major milestones with significant capital investments concluded.

Aurora Sun and Aurora Nordic 2 Construction Update

Aurora continues to progress construction of its 1.6 million square foot facility, Aurora Sun, located in Medicine Hat, Alberta, and its 1 million square foot facility, Nordic Sky, strategically located in Odense, Denmark. The new purpose-built, “Sky Class” facilities Aurora are constructing will have full control over all anticipated environmental and harvest conditions, resulting in the production of consistently high yielding, high-quality cannabis at low-cost.

Mr. Booth added, “Aurora Sun in Medicine Hat and Aurora Nordic in Denmark represent the next evolution of our “Sky Class” cultivation philosophy and construction of these projects is proceeding well. Aurora Sun is nearing completion with the majority of capital investment now behind us, while at Aurora Nordic the primary outdoor construction, including the enclosure of the facility, nears completion. Our design philosophy allows for flexibility in licensing and commissioning in-line with the long-term growth in global demand for medical cannabis.”


William SumnerWilliam SumnerSeptember 11, 2019
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4min6580

It’s time for your Daily Hit of cannabis financial news for September 11, 2019.

Medicine Man Technologies

Medicine Man Technologies, Inc. (OTCQX: MDCL) has entered into a binding term sheet to acquire the cannabis operator Strawberry Fields for $31 million. The acquisition is comprised of $14 million in cash and $17 million in common stock, priced at $2.98 per share. “The integration of Strawberry Fields into our family of Colorado pioneers will be impactful,” said Andy Williams, Co-Founder and CEO of Medicine Man Technologies. “This transaction will provide our Company with low-cost cultivation assets located in Pueblo, a growing manufacturing facility, and branded products. In addition we will be acquiring four retail locations in Western and Southern Colorado, including a high yielding store that is a leader in that part of the state. Adding Strawberry Fields to our portfolio will strengthen our strategy to become the leading integrated cannabis operator of Colorado.”

Tilray

After the market close yesterday, Tilray Inc. (NASDAQ: TLRY) announced in an 8k-filing that it has selected Cowen and Company to sell up to $400 million in stock once an S-3 registration statement is effective, with any sales to be an “at-the-market offering.”

Vapen MJ

Vapen MJ Ventures (OTCQX:VAPNF) announced the appointment of Arizona Attorney Scott A. Hill to the company’s advisory board. Hill is a patent attorney and former stock broker licensed to practice law in the state of Arizona and in the United States District Court for the District of Arizona. “Scott was instrumental in successfully working with the USPTO for Vapen MJ’s utility patent for our Cannabinoid Inhaler without a heating element. Scott crafted the claim in the filing, which makes the recently granted patent as broad as possible,” commented Thai Nguyen, Founder and CEO of Vapen MJ.

Aurora Cannabis

Aurora Cannabis (NYSE: ACB) announced the release of its financial results for the fourth quarter, ending on June 30, 2019. Net revenue for the quarter rose by 61% to $94.6 million. The cost-per gram sold declined t0 $1.14. The gross margin was 58% and adjusted EBITDA was a loss of $11.7 million. “In 2019 Aurora took its place as the global leader in cannabis production, research, innovation, and international market development. We are executing on all our strategic priorities,” said Terry Booth, Aurora CEO. “Our best in class cultivation methods allow us to grow consistent, high-quality cannabis at scale.”


StaffStaffSeptember 4, 2019
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5min17530

Editors note: Guest post by Mark Putrino, CMT Sep 3, 2019, 10:05 am EDT

Are ACB’s sales being affected by the robust black market? I think the answer is yes.

Aurora Cannabis (NYSE:ACB) has a well-defined path to profitability. Its near-term goal is to drive down costs by leveraging its massive scale to improve margins. Its medium-term goal is to leverage R&D to work on higher-margin products and to harvest the Canadian cash flow that is generated from its near-term goals. Long-term, the goal is to use extensive R&D to develop and brand higher-margin products.

Wall Street likes ACB stock. Out of the 17 firms that follow it, 10 of them have it ranked either as a buy or overweight. The average target price is more than two times higher than where it is currently trading.

In addition, unlike many of the other large industrial growers, this company reported an actual profit last year, something that is rarely seen in this industry. In fiscal 2019, the company earned 15 cents a share.

Despite all of these positives, the price of ACB stock continues to decline. Why is this happening? Being a veteran of the markets I know that it is impossible to give an exact and definitive reason.

But I believe that a challenge facing Aurora Cannabis and other cannabis growing companies which isn’t discussed too often is the negative effect that the supply from the black market has on their sales.

The Black-Green Market

If you follow the cannabis markets you are probably aware that two recent stories involve litigation issues other than legalization. Canntrust (NYSE:CTST) is alleged to have operated unlicensed, and therefore untaxed and illegal, grow rooms. These were literally hidden behind fake walls.

In addition, the FBI just announced that it will be investigating the industry. Sources tell me that their main focus will be on the alleged kickbacks that are required in some places in order to obtain a growing license. I believe that their investigation will expose and shed light on the enormous size of the black market of cannabis.

Is the cannabis black market efficient and profitable? You bet it is. As someone who has many connections in law enforcement and the cannabis industry, I can tell you that the black market for recreational cannabis is enormous. And this market is virtually, if not literally, impossible to control.

Consider a cannabis farm of 2,000 acres. You don’t need a vivid imagination to understand how easy it will be for employees and others to walk off with product or to send it out the proverbial back door. In fact, I have talked to recreational marijuana enthusiasts in Canada that enjoy it daily. Yet none have purchased it from a licensed retailer since it became legal almost a year ago.  Why go to the store when someone in the park across the street has the same thing for half the price?

As long as these dynamics exist, industrial growers like Aurora Cannabis will have to accept and face this challenge as part of their growth strategies.

A Look at Aurora Cannabis Stock

ACB stock has been trending lower since it failed at resistance at the $7 level in early August. If it continues to trend lower, there may be support around the $5 level. This is where support was in December and January and it is also important psychologically.

At the time of this writing, Mark Putrino did not hold a position in any of the aforementioned securities.

 



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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


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