Auxly Cannabis Archives - Green Market Report

Debra BorchardtAugust 15, 2022
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5min170

Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF)  released its financial results for the three months ending June 30, 2022. Total net revenues from the sale of adult-use cannabis in Canada were $27.3 million for the quarter, a 31% increase from the same period last year. The net losses for Auxly in the quarter almost doubled from last year’s $8.6 million to this year’s $14.2 million.

Revenue in the second quarter of 2022 was approximately 40% in sales of dried flower and pre-roll Cannabis Products, with the remainder from oils and Cannabis 2.0 Product sales. Net revenues improved from the company’s expansion of its Cannabis 1.0 Products and continued leadership in Cannabis 2.0 Products. Auxly reminded investors that it does not participate in the Quebec market, approximately 85% of cannabis sales during the second quarter of 2022 originated from sales to British ColumbiaAlberta, and Ontario.

“We continued to make meaningful progress towards our strategic objectives during Q2,” said CEO Hugo Alves. “With an increasingly competitive market, we have been able to maintain our position as the #1 LP in cannabis 2.0 sales, driven by our leadership position in the vapor category where we ended the first half of the year as the #1 LP in the category with over 17% share of market. We successfully increased revenues and gross profits during the quarter while maintaining our SG&A spending largely flat. We have also strengthened our balance through the sale of non-core assets for total proceeds of $10.1 million to date, which will support our continued growth. We remained focused on our consumers and their evolving needs and preferences by launching 27 new SKUs during the first half of the year and will continue to prioritize investments in innovations in key growth categories. Finally, as we enter the second half of 2022, we will continue to focus on cost control and margin enhancement through continuous process improvements and investments in automation to further support our key objective of Adjusted EBITDA profitability in 2022.”

In July, Green Market Report reported that the Cantor Fitzgerald analyst lowered his 12-month price target on Auxly to C$0.08 from C$0.20 on reduced estimates and a lower multiple used. The stock was last trading at $0.06 or C$0.075. Zuanic wrote, “The heavy debt load and likely equity-holder further dilution, combined with worsening scanner trends prompt us to downgrade our rating to Neutral. We do see much improvement on cash burn. Based on our math, Auxly has the highest debt-to-sales ratio among LPs. This includes convertible debt held by Imperial Brands (IMB.LN/NC) due Sep 2024; but with a conversion price of $0.81, we think terms will be renegotiated.”

The company noted that interest expenses were $5.3 million and $10.4 million for the three and six months ending June 30, 2022, an increase of $0.5 million and $1.0 million over the same periods in 2021 primarily as a result of the inclusion of Auxly Leamington. Interest expense included accretion on the convertible debentures and interest paid in kind on the $123 million Imperial Brands Debenture. Interest payable in cash was approximately $1.6 million for the current quarter.

Looking Ahead

Auxly said it remains committed to building on its success as a Canadian market leader in 2022. The Company’s high-level objectives for 2022 are to improve revenue and gross profit margin to achieve a positive Adjusted EBITDA. The company said that during the second quarter it made positive progress toward its strategic objectives. “Despite operating in a challenging macroeconomic environment, the Company increased revenues and gross profits during the quarter. Coupled with largely flat SG&A spending, Auxly improved its Adjusted EBITDA by approximately 34% since the fourth quarter of 2021, bringing it closer to its objective of Adjusted EBITDA profitability in 2022.”

 


Debra BorchardtJuly 25, 2022
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5min270

Cantor Fitzgerald analyst Pablo Zuanic downgraded Fire & Flower (OTC: FFLWF) and Auxly Cannabis Group to Neutral from Overweight and cut his price targets for both. Challenges within the Canadian cannabis market were cited as the overarching reason.

Canadian Problems

Zuanic noted that the market seems to have hit a saturation point. He wrote in his report, “There are now over 3,300 stores in Canada (~1,600 in ON; 765 in AB, 435 in BC, 89 in QB). Store density in Canada (85 stores per 1mn people, with ON at 108) is above that in most states in the US, ex CO (129), OR (171), and OK (590).”  He went on to write, “Price deflation in Canada (flower prices down 36% in the last two years), has not all been caused by competition among licensed producers (LPs), but also by some retailers cutting prices and pursuing a discount strategy. Thus, overall, we think this is a tough market climate for retailing.” At this point, Cantor only gives three cannabis companies an Overweight rating and those are Aurora (ACB), Organigram (OGI), and Village Farms (VFF).

Fire & Flower

Zuanic dropped his rating on Fire & Flower to Neutral from Overweight and lowered his 12-month price target to C$2.60 from C$9.50 (last published 4/26/22) on reduced estimates and increased operational risks. It was last trading at $1.65 or C$2.11. He wrote, “Our recent surveys show that Fire & Flower stores (factoring-in its Spark membership offers) are now pricing in line with High Tide’s stores (NASDAQ: HITI), below Nova Cannabis, and well-below the OCS online store. While we believe this makes sense, we think competitive dynamics have forced Fire & Flower to take more draconian measures on the pricing front than management may have initially envisaged. The transition (likely increased sales but lower margins) generates uncertainty and makes us wonder about the company’s ability to make meaningful improvements to cash burn; we think this is also reflected by the company’s decision to delay its NASDAQ listing.”

Following the April quarter, the cantor analyst noted that sales fell 4% seq to $41 million, with retail store revenues dropping 7% sequentially and that same-store sales fell 26% year-over-year to $30 million. In addition to that, the store count fell to 101 stores at the end of April from 105 at the end of January. He also pointed out that tech revenues were down 28% to $3 million, and wholesale and delivery was up (but on lower margins).

That said, we appreciate Fire & Flower’s asset-light strategy, prudent brick & mortar growth plans, its inroads in tech services and delivery, and the strategic benefits of the partnership with Circle-K (ATD.TO/NC). However, given heightened competitive challenges and further potential shareholder dilution down the road, we now prefer to rate the stock Neutral.

Auxly Cannabis

The analyst lowered his 12-month price target on Auxly to C$0.08 from C$0.20 on reduced estimates and a lower multiple used. The stock was last trading at $0.06 or C$0.075. Zuanic wrote, “The heavy debt load and likely equity-holder further dilution, combined with worsening scanner trends prompt us to downgrade our rating to Neutral. We do see much improvement on cash burn. Based on our math, Auxly has the highest debt-to-sales ratio among LPs. This includes convertible debt held by Imperial Brands (IMB.LN/NC) due Sep 2024; but with a conversion price of $0.81, we think terms will be renegotiated.”

The analyst also lowered his sales estimates based on the latest Hifyre data, which showed Auxly losing further market share in the vape and flower segments (vape is >40% of sales, and the company’s vape share is now 16% vs. 24% a year ago), and sales dropping at a faster pace at retail. He also pointed out that Auxly has been lowering prices, which is not a good sign for profitability. Having said that he believes Auxly could still be an attractive target (given 2.0 share, pre-rolls gains, and supposedly more-efficient flower cultivation), but the convertible debt held by Imperial Brands may deter interested parties.


StaffJune 23, 2022
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7min200

The Daily Hit is a recap of the top cannabis business stories for June 23, 2022.

ON THE SITE

IGC Makes Progress on THC for Alzheimer’s

India Globalization Capital, Inc. (IGC) (NYSE: IGC) announces its financial results for the fiscal year ending March 31, 2022. IGC reported that its revenue was approximately $397 thousand and $898 thousand for Fiscal 2022 and Fiscal 2021, respectively. The net loss for Fiscal 2022 for IGC was approximately $15 million or $0.30 per share, compared to approximately $8.8 million or $0.21 per share for Fiscal 2021. Adjusting for approximately $5.3 million in one-time and non-cash expenses, the net loss is approximately $9.7 million in Fiscal 2022. Read more here.

Selling the Psuedo-Psychedelic Sizzle

Say you want a quick microdose of an uplifting substance this morning and decide to turn to one of a handful of companies promising a “magic” experience with their mushroom concoctions—such as Mudwtr. A little psilocybin buzz should do the trick, right? Oops… better look closer. Read more here.

Executive Spotlight: Dave Choulpek

Juva Life (OTC: JUVAF) is a life sciences research company with an immense background in cannabis, allowing the company to cultivate and to derive small molecule compounds that target inflammation in the human body. Currently Juva Life is working with Juva-019 and Juva-041, which are non-cannabinoid molecules found to be naturally occurring in the cannabis plant. Juva Life’s assets include one micro business, one cannabis cultivation facility and two cannabis delivery companies in California. Read more here.

IN OTHER NEWS

Khiron Life Sciences Corp.

Khiron Life Sciences Corp. (TSXV: KHRN) (OTCQX: KHRNF) (Frankfurt: A2JMZC), a global medical cannabis company throughout Latin America and Europe, announced the results of its 2022 Annual General and Special Meeting of shareholders held on June 23, 2022. Read more here.

Auxly Cannabis Group Inc.

Auxly Cannabis Group Inc. (TSX: XLY), a consumer packaged goods company in the cannabis products market, announced that it has amended and restated the unsecured convertible debentures in the capital of the company issued under its standby facility with an institutional investor, which was previously announced on April 28, 2020. Read more here.

Nabis Cannabis, Teamsters Local 630

Drivers and fleet maintenance workers at Nabis Cannabis have voted overwhelmingly to ratify their first contract with Teamsters Local 630. It is the first collective bargaining agreement at the rapidly-growing cannabis distribution company. “I’m incredibly proud of the tenacity and courage that was demonstrated by this group of workers,” said Lou Villalvazo, Local 630 Secretary-Treasurer. “What they have done at this company can serve as a model for successful organizing and bargaining throughout the California cannabis industry moving forward.” Read more here.

Item 9 Labs Corp.

Item 9 Labs Corp. (OTCQX: INLB) — a vertically integrated cannabis dispensary franchisor and operator announced today that its new 20,000 square-foot, state-of-the-art cultivation and lab facility in Pahrump, N.V. is nearing completion and expected to be fully operational by end of 2022. Read more here.

CannTrust Holdings Inc.

CannTrust Holdings Inc. (unlisted), minority investor in Phoena Holdings Inc. (formerly CannTrust Equity Inc.) today announced that it is seeking an order from the Ontario Superior Court of Justice extending the time for the company to call the next annual meeting of its shareholders. The company also provided an update concerning its board of directors’ review of strategic alternatives. Read more here.

CryoMass Technologies Inc.

CryoMass Technologies Inc. (OTCQX: CRYM) announced that CryoMass begins trading today on OTCQX under the symbol “CRYM.” Christian Noël, CryoMass CEO, stated, “We are pleased to reach this important milestone, as OTCQX is the highest tier of the OTC markets. Of more than 12,000 securities traded on the OTC Markets, only 644 (as of May 31, 2022) have met the requirements for trading on the OTCQX® Best Market. The upgrade to the OTCQX will increase CryoMass’s accessibility to U.S. investors and will allow our shareholders to trade more effectively. This also reflects our continued commitment to responsible corporate governance.” Read more here.

Akanda Corp.

Concerned shareholders of Akanda Corp. have today replaced a majority of the board of directors of the Corporation, with highly-qualified and motivated directors. The concerned shareholders of the corporation collectively own or control 16,556,779 common shares of the corporation (representing approximately 54.1% of the issued and outstanding common shares of Akanda), and yesterday passed a written resolution of the shareholders of the corporation pursuant to the provisions of the Business Corporations Act (Ontario) removing each of Louisa Mojela, Philip van den Berg, Charles Kié, Gila Jones, Gugu Dingaan and Bridget Baker as directors of the Corporation effective immediately. Read more here.


Debra BorchardtMay 16, 2022
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4min100

Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF) released its financial results for the three months ended March 31, 2022. Auxly reported net revenues rose 147% to $22.6 million versus $9.2 million during the same period in 2021. Revenues fell sequentially from the fourth quarter’s revenue of $29 million. Auxly admitted it had lower winter yields at Auxly Leamington and hardware and packaging shortages due to supply chain disruptions. The company said believes that those challenges are largely behind it, and is very encouraged by yield and overall product quality improvements that it has seen at Auxly Leamington, which it believes will better equip Auxly to meet the demand for its flower and pre-roll products.

Net losses rose to $39 million for the quarter versus last year’s net loss of $10 million for the same time period. The earnings per share were ($0.05) versus last year’s ($0.01).

Revenue in the first quarter of 2022 was approximately 61% in Cannabis 2.0 Product sales, with the remainder from Cannabis 1.0 Product sales. Auxly said that revenues improved as a result of its expansion into Cannabis 1.0 Products and continued leadership in Cannabis 2.0 Products. Consistent with prior periods, as the Company does not participate in the Quebec market, approximately 85% of cannabis sales during the first quarter of 2022originated from sales to British ColumbiaAlberta and Ontario.

Hugo Alves, CEO of Auxly, said, “Amid intense and growing competition and seasonal buying trends in the Canadian cannabis market, Auxly continued to see strength in sales, increasing revenues 147% year-over-year. Though this quarter presented some ongoing supply chain and operational challenges preventing us from meeting consumer demands for our branded cannabis products, we believe we have taken the necessary steps to correct these issues for the coming quarters, allowing us to increase fill rates and continue with our exciting new product launches throughout the year. We continue to lead the market in cannabis 2.0 products and remain focused on building to leadership in dried flower and pre-rolls and improving our business to achieve our goal of reaching adjusted EBITDA profitability.”

Losses Increase

The company addressed the increase in losses saying that there was an impairment of long-term assets of $12.9 million and intangible assets and goodwill of $10.8 million respectively in the first quarter of 2022 related to the closure of the Auxly Annapolis and Auxly Annapolis OG facilities where the carrying value exceeds the fair value less cost to sell. Gains and losses on settlement of assets and liabilities and other expenses in the prior-year quarter were primarily associated with a gain on the settlement of a $5.8 million liability associated with a non-monetary product exchange with another licensed producer. The share of loss on investment in joint venture of $0.5 million represents the company’s proportionate share of Auxly Leamington’s earnings prior to its acquisition in November 2021, which results are presently consolidated into the Company’s financial statements.

Outlook

Auxly said it is confident in its second-quarter sales outlook and in its ability to achieve Adjusted EBITDA profitability in 2022. The company, however, provided no numbers for its sales expectations.


Debra BorchardtJanuary 21, 2021
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3min161

Auxly Cannabis Group Inc. (OTCQX: CBWTF) has raised $15 million with a deal in which ATB Capital Markets Inc. and Cantor Fitzgerald Canada Corporation, as co-lead underwriters and joint book-runners, together with a syndicate of underwriters will buy 40,550,000 Units of the Company at a price per unit of $0.37. The stock was lately selling at $0.33. The offering is expected to occur on or about February 10, 2021.

Auxly said each Unit shall be made up of one common share of the company and one-half of one Common Share purchase warrant of the Company. Each Warrant shall entitle the holder thereof to purchase one Common Share at an exercise price of $0.46 at any time up to 36 months from the closing of the Offering. The company said it has granted the Underwriters an option to increase the size of the Offering by up to an aggregate number of Units, and/or the components thereof, equal to 15% of the total number of Units issued under the Offering, such Underwriters’ Option being exercisable at any time and from time to time up to 30 days following the closing of the Offering.

The net proceeds will be used for working capital and general corporate purposes.

A Need For Cash

In November, Auxly reported $13.57 million in cash and cash equivalents for the three month period leading up to September 30th. This is 69% less than what was reported as of December 31st, 2019. Last year’s cash equivalents totaled $44.13 million. Auxly’s claimed at the time it had $381,598 in total assets and $112,358 in debt. Auxly reported a decrease in selling, general, and administrative expenses – dropping down to approximately $11.36 million from roughly $16.59 million during the same time last year. So there seemed to be a cash crunch happening.

Also in November, Auxly reported total net revenue of $13.4 million for the three months that ended on September 30th. Before excise taxes and research contacts, this figure is $15.2 million. Their reported net revenue represents an 85% increase from the previous quarter and a 732% increase from the same period last year. Last year’s total revenue clocked out at roughly $1.6 million, representing an approximately $11 million dollar difference.

 


StaffSeptember 9, 2020
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3min50

Auxly Cannabis Group Inc. (OTCQX: CBWTF) closed on an additional $2 million worth of unsecured convertible debentures under its $25 million unsecured convertible debenture standby facility with an institutional investor as previously announced on April 28, 2020.

The convertible debentures that Auxly issued to the investor have a conversion price of $0.18 per common share of the company, while the stock currently trades at $0.12. The investor received warrants to purchase 6,111,111 common shares until September 8, 2022 at an exercise price of $0.216 per Common Share.

In connection with the completion of the Tranche, Auxly said it has agreed to indemnify certain of its directors and officers for any and all losses not otherwise recoverable from the collateral provided by the investor for the common shares. The Indemnity may constitute a related party transaction under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101“) but is otherwise exempt from the formal valuation and minority approval requirements of MI 61-101. The Indemnity has been approved by the independent directors of the Company.

The company said in a statement that each convertible debenture will mature on September 8, 2022 and will bear guaranteed interest from the date of issue at 7.5% per annum, payable semi-annually on June 30 and December 31 of each year and has the same terms and conditions as described in the Original Offering and the transaction documents filed on the Company’s SEDAR profile

Kolab Project

Last week, Auxly’s Kolab Project and Lotus Cannabis Co. launched Kolab Project cannabis flower in select licensed retailers across Canada. Kolab Project Kalifornia is a heavy-hitting Indica-dominant strain, which is the result of a collaboration between Kolab Project and Lotus Cannabis Co., the consumer brand of Lotus Ventures Inc. (OTC:LTTSF).

“Kolab Project and Lotus Flower are a dream team,” said Hugo Alves, CEO, Auxly. “We’re excited to leverage Kolab Project’s marketing and distribution expertise to bring this premium product to Canadians at a competitive price point. Congratulations to the talented and dedicated Lotus team, renowned in the region for their passion for growing and commitment to their craft. We are proud to work with Lotus to transparently introduce Canadian consumers to their story and their high-quality products.”


William SumnerJuly 25, 2019
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5min30

It’s time for your Daily Hit of cannabis financial news for July 25, 2019.

On the Site

Leafwire

Leafwire, the largest cannabis business network worldwide, announced today the closing of a Seed Round for $1 Million. Since its launch, Leafwire has grown rapidly, often with over 1,000 members visiting the platform daily. Leafwire currently boasts more than 16,000 members currently and is projected to surpass 25,000 members by the end of the year.

Executive Spotlight: Jessica Velazquez, Managing Partner of Indiva Advisors LLP

Jessica Velazquez is a Certified Public Accountant (CPA) licensed in Illinois & Nevada and Partner of Indiva Advisors LLP, a full-service accounting firm for cannabis and hemp businesses.

Heavenly Rx

The hemp-CBD company Heavenly Rx Ltd. announced today that it has closed its acquisition of Tru Brands Inc. Tru Brands is a health and wellness company focused on developing a suite of all-natural food products. Under the agreement, Heavenly Rx will acquire a 51% stake in Tru Brands for $3.5 million in cash and $2.57 million in company stock. Through a series of working capital injections, the company will eventually increase its stake in Tru Brands to 62%.

Auxly Cannabis

The tobacco industry is betting big on cannabis. Today, Auxly Cannabis Group Inc. (TSX.V: XLY) (OTCQX: CBWTF) announced that the international tobacco company Imperial Brands PLC will make a $123 investment in the company through a convertible debenture.

In Other News
Namaste Technologies

Namaste Technologies Inc. (TSXV: N) (FRANKFURT: M5BQ) (OTCMKTS: NXTTF) announced that it has settled a series of class action lawsuits filed against the company in both the United States and Canada. The suits were filed in response to a report published by Citron Research alleging securities violations.  Without admitting guilt or liability, Namaste will pay $2.15 million to settle claims in Canada and $2.75 million to settle claims in $2.75. Much of the payout will be funded through the company’s insurance, Namaste itself will only contribute $500,000. In a statement, interim CEO Meni Morim said that the settlement was a “win-win for Namaste Shareholders and business partners alike.”

Cannara Biotech

Cannara Biotech Inc. (CSE: LOVE) (FRA: 8CB) (OTCQB: LOVFF) announced the release of its financial results for the third quarter, ending on May 31, 2019. Lease revenue was $506,785 and lease operating costs were $221,157. The company’s operating expenses for the quarter was $150,429, amortization expenses were $150,429, and the net loss was $2.8 million. As of May 31, 2019, Cannara had a net working capital amount of $28.43 million, which should be sufficient to fund its planned construction and operating expenses for at least the next year. “Given the size of our facility and the self-evident need for greater supply in the marketplace, we are as committed and confident as ever in our mission to be an integral cannabis producer in the Canadian landscape, combining scale with premium quality,” said said Zohar Krivorot, President and CEO of Cannara.

SOL Global Investments Corp.

SOL Global Investments Corp. (CSE:SOL (OTCPK:SOLCF) ) (Frankfurt:9SB) announced a $2 million capital infusion its portfolio company CannCure Investments Inc. The capital infusion is aimed at accelerating expansion initiatives of companies owned, or soon to be owned, by CannaCure; including Northern Emerald and One Plant Dispensaries.


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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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