Broken Coast Archives - Green Market Report

StaffApril 23, 2018

This is your Daily Hit of cannabis news for April 23, 2018:

On The Site:

Maricann & Broken Coast Add More Capacity

Aphria Inc. (APHQF) announced that its subsidiary, Broken Coast Cannabis received a license amendment from Health Canada that provides Broken Coast with an additional 18,000 square feet of production space as part of its Phase III expansion, bringing total production space to 44,000 square feet.

In addition to Broken Coast, Maricann Group Inc. (MRRCF) announced that it received all of the necessary approvals from Health Canada to commence cultivation in Phase One of the company’s new facility in Langton, Ontario, Canada. This is Maricann’s third license issued by Health Canada. Maricann is currently undertaking an expansion of its cultivation and support facilities in Canada in a 942,000 sq. ft. build out, with a designed expected capacity of producing 95,000 kg (based on conservative estimates) of dry cannabis flower per year to support existing and future patient growth.

Is YouTube Blocking Spanish Cannabis Channels?

For many Spanish-speaking cannabis users, Marihuana Television is their go-to source for all things cannabis. Featuring how-to guides and up-to-date news, Marihuana Television looks like any other mainstream YouTube channel but with cannabis; which is why many were shocked to find that the channel had been deleted with no explanation.

In Other News:

Nutritional High International Inc.

Nutritional High International Inc. (SPLIF) announced that it signed an agreement to purchase California-based Pasa Verde, LLC. a leading cannabis extraction and toll processing facility in Sacramento, California. Pasa Verde operates a 17,600 sq ft extraction facility in Sacramento’s “Green Zone” and was the first operator in Sacramento to receive its Conditional Use Permit. Pasa Verde’s large-scale facility is located in a fully-serviced industrial area and has excellent space and infrastructure to house a significant extraction and marijuana-infused products operation – capable of production volumes suitable for the California market which is expected to reach US$6.5 billion in annual sales by 2020.

Emblem Corp.

Emblem Corp. (EMMBF) announced that it purchased C$2.5 million of units of Fire & Flower Inc. at a price of C$0.80 per unit as part of a larger unit offering conducted by Fire & Flower. According to the company statement, each unit consists of one common share in the capital of Fire & Flower and one common share purchase warrant entitling the holder thereof to acquire one (1) additional Fire & Flower Share at a price of C$1.05 per share for a period of two (2) years, subject to adjustments in certain events.

General Cannabis Corp.

General Cannabis Corp. (CANN) announced that it completed the closing of a private placement transaction with various private parties, including existing and new investors in General Cannabis. The company issued $5.54 million of senior secured promissory notes and an aggregate of 4,432,000 warrants to purchase common stock at the closing. The notes bear interest at 8.5% per annum and are secured by all of the Company’s assets. The warrants have an exercise price of $2.35 per share. The proceeds of this debt raise will be used primarily to fund the company’s expansion and for working capital.

ABCD Cannabis Data

ABCD, a data-driven media campaign outlet, has released new data which reveals the number of marijuana head and grow shops in 120 cities around the world. This research, which builds on the 2018 Cannabis Price Index released earlier this year, reveals which locations around the world are ready to embrace cannabis legalization.

With a total of 156, Los Angeles, USA has the most headshops.
Madrid, Spain has the largest amount of grow shops, with a total of 68.
Tokyo, Japan has the most expensive cannabis, at 32.66 USD per gram, while Quito, Ecuador has the least expensive marijuana, at 1.34 USD per gram.
Based on the average US marijuana tax rates currently implemented, New York City could generate the highest potential tax revenue by legalizing weed, with 156.40 million USD per year. New York City also has the highest consumption rate of cannabis, at 77.44 metric tons per year.

Debra BorchardtApril 23, 2018

Aphria Inc. (APHQF) announced that its subsidiary, Broken Coast Cannabis received a license amendment from Health Canada that provides Broken Coast with an additional 18,000 square feet of production space as part of its Phase III expansion, bringing total production space to 44,000 square feet. As a result of the amendment, Broken Coast’s production capacity will nearly double to 4,500 kg annually.

“We’re pleased to receive Health Canada approval on our Phase III expansion, which will enable us to quickly ramp up production of our small-batch, premium, high-quality B.C. bud,” said John Moeller, Co-founder and President of Broken Coast. “We expect the first crop cultivated and produced at the expansion to be available for sale by the end of July.” Vic Neufeld, CEO of Aphria added, “This is an important milestone for Broken Coast and for Aphria as we continue to bring online more capacity to meet the anticipated demand in the Canadian market.”

In addition to Broken Coast, Maricann Group Inc. (MRRCF) announced that it received all of the necessary approvals from Health Canada to commence cultivation in Phase One of the company’s new facility in Langton, Ontario, Canada. This is Maricann’s third license issued by Health Canada. Maricann is currently undertaking an expansion of its cultivation and support facilities in Canada in a 942,000 sq. ft. build out, with a designed expected capacity of producing 95,000 kg (based on conservative estimates) of dry cannabis flower per year to support existing and future patient growth.

Kris Krane of 4Front Ventures worries that it is too much cannabis being grown for the market. “There’s a ton of capacity being built, but the Canadian market will only be so big and the international market they are banking on is an unknown,” Krane noted that Canada is a terrible place for large-scale cultivation. “There is not a lot of sun and labor costs are high,” he added.

The big argument for these massive expansions is that Canada will be legalizing adult-use marijuana and sales are expected to begin later in 2018. Krane points out that Canada’s entire population is roughly 36 million, which is smaller than the state of California. The California marijuana market is estimated to be $5 billion by 2019 according to BDS Analytics, but Canada is pricing these companies and their expansions as if the market will be larger.

This is why many of these companies crowing about enormous cultivation facilities are courting foreign countries for their product. Krane though believes that relationship won’t last. “The European markets will eventually buy their cannabis from countries like the Balkans, Turkey or even North Africa,” said Krane. He thinks these companies may make money in the short term, but in the long term, he doesn’t think its sustainable.

Krane even believes that ultimately cannabis will end up being grown in Latin American countries where other commodities are grown due to the abundance of sun and cheap labor. That’s assuming countries allow imported cannabis. “I still believe Columbia or Mexico will embrace growing cannabis and take market share,” Krane said.

This dynamic is already being played out in Oregon where the Willamette Weekly reported that the state grew more cannabis than there was demand causing prices to plunge. Marijuana farmers grew 3x more than the residents could consume. It is expected that the summer months will bring even more marijuana into the market regardless of the demand. There are rumors that some of the Oregon cannabis is making it way down to California dispensaries, even though that diversion is illegal.

Some small cultivators can’t make it with prices getting cut in half and are selling at low-ball offers to out-of-state players according to the story. The story also claims that many farmers are left with pounds of product that they can’t sell. Of course, every new market goes through a period of boom and bust. Krane believes he is seeing the boom of Canada’s cannabis expansion and expects the bust isn’t too far away.

Debra BorchardtJanuary 15, 2018

It’s merger Monday in the cannabis industry as Aphria steps up to make a big deal with Broken Coast Cannabis.

Aphria Inc. (APHQF) announced that it entered into a binding letter agreement to acquire 100% of Broken Coast Cannabis Inc., a premium cannabis producer located in British Columbia. The deal is expected to add incremental annual production of 10,500 kgs, some of that cannabis is market ready today, quickly boosting Aphria’s forecast annual production to 230,000 kgs. The transaction also gives Aphria more geographic diversification, a cross-Canada distribution platform, and access to over 40,000 medical patients.

The total value of the deal is approximately C$230 million, to be paid with up to C$10 million in cash and the remainder in Aphria shares. Shares issued to Broken Coast shareholders will be issued at a price of C$15.09 and the deal is expected to close January 31. Each of the three co-founders of Broken Coast, who cumulatively hold over 80% of the outstanding capital, will remain with the pro-forma company.

This is Aphria’s second major investment into consumer- and brand-focused assets, in advance of the legalization of adult-use cannabis expected in 2018. In a company statement, Aphria said that Broken Coast has had positive Adjusted EBITDA since 2015 and that its lean operations are highly complementary to Aphria. In combination with Aphria’s track record, the combined entity is expected to be amongst the most profitable and sustainable producers in the country.

“Adding one of Canada’s most sought-after premium brands represents a major triumph for Aphria and our shareholders and firmly establishes our position as a Canadian leader in premium indoor cannabis production,” said Vic Neufeld, Chief Executive Officer of Aphria. “Broken Coast has proven that you can grow premium quality cannabis, charge a reasonable price and earn a profit all at the same time. Our two companies are closely aligned, particularly as it relates to our relentless focus on production costs and profitability.”

Strategic Investment in Althea

Aphria Inc. also announced that it signed a supply agreement with Australian-based Althea Company Pty Ltd. and invested C$2.5 million in Althea in exchange for 25% shareholdings in the Company. The investment increases Aphria’s presence in the emerging Australian cannabis market. This is the second supply agreement Aphria has signed in Australia.

According to the company statement, Aphria will provide Althea with packaged co-branded cannabis oil and dried flower products for the Australian medical cannabis market. Althea has already received import permits from the Australian Government’s Office of Drug Control (ODC) and Aphria is expected to export the first shipment this month, subject to regulatory approvals by Health Canada.

Aphria stock was lately trading at $14.45 on the OTC Marketplace, down from its 52-week high of $19.86, but way above its 52-week low of $3.39.