CannaPharmacy Archives - Green Market Report

Debra BorchardtDebra BorchardtNovember 20, 2019
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6min5760

Harvest Health & Recreation Inc. (CSE: HARV)(OTCQX: HRVSF) reported total revenue for the third quarter of 2019 of $33.2 million, an increase of 197% from $11.2 million in the third quarter of 2018. This was an increase of 25% sequentially. The net loss was $39.1 million for the quarter, which the company attributed to the cost of investments to support its growth initiatives, disclosed acquisitions and planned expansion.

“During the third quarter, Harvest continued to execute on its strategy by investing in assets and infrastructure needed to return to profitable growth.  As a Company, we have the assets and team required to achieve operational excellence and succeed in the cannabis industry,” said Chief Executive Officer Steve White.

Subsequent to quarter-end, Harvest Health said it raised $6.5 million in real estate financing and CAD$62.5 million in short term secured debt financing.

The company stated that as of September 30, 2019, it operated 26 retail locations, compared to 16 retail locations at the end of June 30, 2019.  During the quarter, the company opened new retail locations in Chandler, AZVenice, CAGainesville, FLWilliston, NDBismarck, ND, and Reading, PA.  Harvest acquired retail locations in Casa Grande, AZPhoenix, AZGrover Beach, CA, and LuthervilleTimonium, MD during the third quarter.  Harvest was one of eight companies selected to move forward to finalize a cultivation license in Utah.  Subsequent to quarter-end, the company opened new retail locations in Palm Springs, CAScranton, PAJohnstown, PA, and Harrisburg, PA and was awarded a cannabis dispensary permit with delivery service by the City of Hanford, CA.

CannaPharmacy Deal Revised

It was also announced that Harvest and CannaPharmacy, Inc. agreed to revise their pending transaction. “Under a new binding agreement, Harvest and CannaPharmacy have agreed to terminate their current agreement whereby Harvest would have acquired CannaPharmacy’s right to own or operate cannabis licenses in PennsylvaniaDelawareNew Jersey, and Maryland.”

According to the company statement, now Harvest will only acquire Franklin Labs, LLC, a subsidiary of CannaPharmacy, for $26 million payable with $15 million in cash and an $11 million promissory note. The revision went on to note that the parties may elect consideration consisting of certain other cannabis assets and a reduced cash payment of $8 million. The aggregate purchase price in either scenario is well below the purchase price in the previous agreement which consisted of $88 million in cash, plus Harvest stock.

The revised agreement is due, in part, to accommodate Harvest’s plans to more strategically align with Harvest’s operational needs, which have evolved since the previously announced acquisition of CannaPharmacy. The acquisition of Franklin Labs is expected to allow Harvest to more efficiently scale operations in Pennsylvania and provide dispensaries and patients in that state with access to Harvest’s intellectual property, high-quality products, and trusted retail experiences. The acquisition is subject to, among other things, the execution of definitive agreements, the receipt of regulatory approvals and the satisfaction or waiver of closing conditions customary for a transaction of this nature.

“These transactions come at a key strategic time for Harvest, as we’re working to scale our operations in key markets and to enhance our ability to pivot and fulfill product demands for our patients and consumers,” said Harvest Executive Chairman Jason Vedadi. “A critical aspect of our long-term strategy is a sharp focus on operational excellence as we build out new facilities and enhance existing ones in 2020. This revised agreement and attractive funding sources will help us toward achieving our revenue and profitability goals, delivering on our promise to increase shareholder value and ultimately fuel Harvest’s continued growth and success.”


Debra BorchardtDebra BorchardtApril 9, 2019
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8min12960

Harvest Health & Recreation, Inc. (CSE: HARVOTCQX: HRVSF) is acquiring CannaPharmacy, Inc. in a deal with undisclosed value. CannaPharmacy owns or operates cannabis licenses in Pennsylvania, Delaware, New Jersey, and Maryland.

Harvest recently announced the private placement of $500 million in convertible debentures to continue to finance acquisitions and corporate growth. Harvest said that it expects that the transaction will be accretive to Harvest’s 2020 revenue and EBITDA.

“We’re seeing significant M&A activity across our industry, but the most important factors are the price one pays for an acquisition, strength of the assets relative to the market size and synergies between the companies,” said Steve White, CEO of Harvest. “Harvest was already fully funded to build out our entire footprint, inclusive of the significant assets that come with the Verano acquisition. Our recent $500 million financing, secured in $100 million tranches for new accretive acquisitions like CannaPharmacy, continues to solidify Harvest’s position as the leading company in the cannabis industry in reach, brands, infrastructure, assets, and footprint.”

Expanding Its Footprint

The CannaPharmacy acquisition will bring operations in four major northeastern states. The licenses and assets of CannaPharmacy will add to Harvest’s extensive national footprint across 17 states and Puerto Rico. Upon closing of this transaction and the closing of the previously announced acquisition of Verano Holdings,  Harvest will hold licenses that allow it to operate up to 213 facilities, including 130 retail dispensaries.

“All of our efforts back up our three core objectives; to expand and deepen our retail and wholesale footprint, build national brands and continue our path to profitable growth, and this CannaPharmacy deal is no different,” said Jason Vedadi, Executive Chairman of Harvest. “Harvest has led the cannabis market in the Western United States for years, and this acquisition will similarly widen and extend our U.S. foothold to the East Coast. When you add that to our existing dominant position in the Pennsylvania and Maryland markets, acquisition of CBx and its suite of brands, as well as our pending acquisitions of Falcon and Verano, with its holdings throughout the eastern seaboard and brands and infrastructure to leverage, we are looking at Harvest becoming a household name throughout the region in a matter of months.”

The company statement outlined the acquisition as follows:

New Jersey

  • One of six operational (and 12 awarded) fully vertical licenses, permitting cultivation, retail sales and manufacturing.
  • Woodbridge, NJ flagship store open and operational on a major highway since 2013, one of six in the state, 20 miles from NYC. According to the most recent NJ Dept. of Health annual report in April 2018, this dispensary has served more patients and completed more cannabis transactions since inception than any other dispensary.
  • A satellite store is approved and under construction in Union, NJ, 17 miles from NYC, on one of the most heavily trafficked highway corridors in the state at the intersection of the Garden State Parkway, NJ Turnpike, Route 22, and Route 78.
  • Approval pending for a third dispensary in densely populated Monmouth County, NJ (the “Jersey Shore”), which presently does not have a single dispensary.
  • 43.4% year-over-year revenue growth from 2017 to 2018.
  • New Jersey has 42,000 medical patients and growing 60 percent annually.

Pennsylvania

  • One 46,800 square foot cultivation and processing facility in the fifth most populous state in the country, with a statutory cap of 25 grower-processors;
  • Facility is a former Pepsi bottling plant employing local Pennsylvanians.
  • Harvest currently has seven state licenses allowing up to 21 retail stores throughout the state.
  • Pennsylvania currently has 116,000 medical patients as of February 2019 and growing at 10 percent month over month.

Maryland

  •  Rights to one dispensary in Prince George’s County.

Delaware

  • One of three fully vertical licenses, permitting cultivation, manufacturing, and three retail dispensaries.
  • Newark, DE flagship open and operational on a major highway leading into the heart of downtown, one of four stores statewide, in the county that hosts 60 percent of the state’s population.
  • Two additional dispensaries expected to open in 2019-2020.
  • Delaware currently has 7,104 medical patients, a 53 percent increase from 2017, and is experiencing rapid growth in a state with one of the most liberal lists of qualifying conditions in the country.

Harvest recently won every license it applied for in Pennsylvania, giving the company the ability to open up to 21, the largest retail network in the state. Harvest received the highest scores on all but one of its regional applications (where it placed 2nd overall) based on its responses to the criteria developed by the Pennsylvania Department of Health.



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