Harvest Health Archives - Green Market Report

Debra BorchardtDebra BorchardtNovember 20, 2019
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6min3270

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.”


William SumnerWilliam SumnerAugust 15, 2019
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3min9650

Harvest Health & Recreation, Inc. (CSE: HARV) (OTCQX: HRVSF) has reported its financial results for the second quarter, ending on June 30, 2019. Revenue rose from $19.2 million in the previous quarter to $26.6 million, representing an increase of 39%. If one were to include Harvest Health’s completed and pending acquisitions, quarterly revenue would be $78 million.

The gross profit was $16.9 million, and the gross profit margin was 64%. The company incurred a net loss of $20.6 million, which was attributed to “planned investments in people and infrastructure” meant to support growth initiatives and expansions. Harvest Health currently holds $89.9 million in cash and cash equivalents and has approximately $105.1 million in outstanding debt.

Quarterly Highlights

During the second quarter, Harvest Health opened three new retail locations in the state of Florida, closed its pending acquisition of Cannapharmacy, and was awarded a retail dispensary license in Pasadena, California. Following the close of the quarter, the company gained a cultivation license in Utah and opened six dispensaries in Arizona, California, Florida, and North Dakota.

Additionally, the company signed an agreement with the Asian American Trade Associations Council (AATAC) to distribute Harvest Health branded products to over 10,000 retail locations in the AATAC network.

Harvest Health also had some success in raising funds during the last quarter, having recently closed an initially $100 million tranche (out of $500 million) of convertible debentures, as well as signing a term sheet for a secured term loan for up to $225 million from an investment fund managed by Torian Capital.

“During the second quarter, Harvest continued to execute on its strategy by adhering to our four core initiatives: building a world class team, expanding our retail and wholesale footprint across the U.S., building and acquiring brands and distributing them across our footprint and continuing on a path of profitable growth we believe that we can fulfill our objective of becoming the most valuable cannabis company in the world,” said Harvest Health CEO Steve White.


Debra BorchardtDebra BorchardtApril 9, 2019
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8min10850

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.


Debra BorchardtDebra BorchardtMarch 11, 2019
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8min9640

Harvest Health & Recreation, Inc. (CSE: HARVOTCQX: HRVSF) has entered into an agreement to buy  VeranoHoldings, LLC in an all-stock deal valued at approximately USD $850 million based on a share price of C$8.79. Harvest Health stock jumped over 15% on the news to lately trade at C$9.56. The deal is expected to close in the first half of 2019 and comes with a $20 million termination fee.

If this deal is completed, the combined company will be one of the largest multi-state operators (MSO’s) in the U.S., as measured by licenses held and facilities permitted. Harvest will hold licenses that will allow it to operate up to 200 facilities in 16 states and territories across the country, including 123 retail dispensaries. Harvest Health was founded in 2011 and currently owns licenses for more than 140 facilities in the U.S. It is often ranked as the third largest cultivator.

“The combination with Verano fits perfectly with our vision of creating the world’s most valuable cannabis company,” said Jason Vedadi, Executive Chairman of Harvest.  “We are confident that this is an opportunity to continue to leverage each of our company’s strengths and drive continued shareholder value, while at the same time achieving the scale we know will give us a leadership position in one of the largest cannabis markets in the world.”

The newly combined company plans to continue hubs of operation in both Arizona and Illinois and merge key leadership talent.  Both companies have recently attracted management expertise across consumer-packaged-goods, beverage, spirits, logistics, branding, horticulture, and extraction technologies from some of the largest most influential companies in the world, all supporting the companies’ explosive growth.

“This is a natural match between like-minded entrepreneurs who have built our companies from the initial facilities into two of the largest MSOs in the U.S, with an unwavering focus on operational excellence, superior quality products and service, and delivering value to customers and shareholders,” said George Archos, Verano Co-founder, and CEO. “Our growth and unique positioning in key markets allowed us to evaluate some of the largest players in the space, but we only had one unanimous choice for a major transaction and that was Harvest.”

According to the company statement, Harvest’s planned acquisition of Verano will include:

·      Licenses and operations in 11 states and territories, including seven cultivation licenses, 37 retail licenses and potential to reach 150+ million Americans;

·      Vertically integrated, cash-flow positive operations;

·      Proven executive team with retail, manufacturing, branding, logistics and operational experience and 300 employees.  Hiring for approximately 300 new positions in 2019 with a focus on hiring minorities, women and veterans;

·      Game changing ethanol extraction technology at pharmaceutical grade levels providing new market opportunities for cannabis biotech, food, and beverage verticals;

·      Portfolio of premium proprietary brands with 150 + product SKUs sold in 150 + retail locations;

·      Total cultivation expansion capacity of 900,000 sq. ft in Illinois, Nevada & Maryland;

·      Ownership of an interest in nine Zen Leaf™ dispensaries with average annual revenues 2.5x higher than retail cannabis industry averages;

“Verano has been creating a brighter way for cannabis production, products and health and wellness by assembling a stellar team of experts drawn from the cannabis industry and the top echelons of Fortune 500 corporations,” noted Sam Dorf, Verano Co-founder and Chief Growth Officer.  “We are excited to join forces with Harvest to leverage each of our strengths to share the benefits of cannabis in innovative new ways with an ever-increasing customer base.  Verano and Harvest independently have always focused on business fundamentals to drive year over year growth in both revenue and EBITDA.  Together, we expect to accelerate that momentum and raise the bar even higher for the industry.”



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