HEXO Archives - Green Market Report

Debra BorchardtJune 21, 2022
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6min110

Once upon a time, owning a cannabis company seemed like a sure bet. Even if you couldn’t make the business work, there was always an option to sell it. So many people have been desperate to get into the cannabis industry that they were willing to pay just about any price. In other words premium prices regardless of whether the business warranted it or not. Now as the bear market in stocks seems to have some staying power and competition in some cannabis markets is heating up, prices for these businesses is dropping.

Body & Mind

The latest price cut is Body and Mind Inc. (CSE: BAMM) (OTCQB: BMMJ) cutting the price it is paying on the Seaside dispensary purchase agreement. The company, through its wholly-owned subsidiary, DEP Nevada, Inc. agreed to buy the Reef dispensary in Seaside California on November 30, 2021, and has been operating the dispensary since December 1st, 2021. DEP has executed the first amendment to drop the cash purchase price of the transaction and to issue shares of common stock having the same value as the cash reduction. The transaction has been changed to reduce the cash purchase price from $2.5 million to $1.25 million. Instead, the company will issue $1.25 million worth of shares. The Body & Mind stock price has fallen from roughly 32 cents at the beginning of 2022 to recently selling at approximately 13 cents per share.

“The combination of our recent debt extension, pausing our Michigan cultivation and reduced cash payment for the Seaside dispensary are designed to strengthen the Body and Mind balance sheet for future development,” stated Michael Mills, CEO of Body and Mind. “We continue to focus on our cultivation, manufacturing, and retail operations as we expand our brand and wholesale business and develop new strains and innovative products.”

HEXO

Last week, HEXO Corp. (TSX: HEXO; NASDAQ: HEXO) announced that it changed its agreement with Tilray Brands, Inc. (Nasdaq | TSX: TLRY) and HT Investments MA LLC. Citing specifically “current stock market conditions”  the three companies agreed to reduce the minimum liquidity interim covenant and closing condition from $100 million (approximately C$129 million) to  $54 million (approximately C$70 million.) The press release also kept mixing currencies throughout the announcement making it confusing for readers and forcing continuous currency conversion calculations to understand what was happening. For example, the press release wrote, “reduce the Amendment Share Price (as defined in the Transaction Agreement) from $0.54 to C$0.40.” Using a currency calculator, the price cut is really dropping from 54 cents to 30 cents, but if you switch in the Canadian dollar amount it doesn’t look as bad.

“The strategic partnership with Tilray Brands significantly improves HEXO’s capital structure and provides the opportunity to accelerate our growth in global markets,” said Charlie Bowman, President & CEO of HEXO. “Challenging stock market conditions have necessitated amendments to the agreement, but this is a critical step in unlocking the shareholder value held within the Company.”

Deals Are Down

According to Viridian Capital Advisors, as of May 4, 2022 only 84 M&A (merger & acquisitions) deals have occurred year-to-date versus 120 in 2021. Overall, the combination of debt and equity capital raise deals for 2022 only adds up to $1.9 billion versus 2021’s total of $5.8 billion for the same time period. 2022 has only seen 99 capital raise deals versus 2021’s 208 deals. Considering the country was still under the cloud of Covid, the numbers for 2021 are pretty impressive.

Putting the blame on stock prices is definitely relevant, but cannabis stock prices also tumbled in 2021. The year started strong in 2021, but stocks plunged after February and never recovered. A hopeful outlook that stock prices would eventually recover may have fueled the optimism of 2021 – only it never happened. The cannabis ETF Advisor Shares Pure U.S. Cannabis  (NYSE: MSOS) is down 54% year-to-date and is down 71% from its 52-week high.

 


Debra BorchardtJune 17, 2022
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3min230

HEXO Corp. (NASDAQ: HEXO) acknowledged today that its wholly-owned subsidiary, Zenabis Global Inc. has filed a petition with the Superior Court of Québec for protection under the Companies’ Creditors Arrangement Act in order to restructure their business and financial affairs. CCAA is basically the Canadian version of bankruptcy.

Hexo said that the CCAA petition is limited to the Zenabis Group and neither HEXO Corp. nor any of its subsidiaries, other than the members of the Zenabis Group, are petitioners or parties to the CCAA Proceedings.

In February 2021, Hexo bought all of Zenabis’ issued and outstanding common shares in an all-share transaction valued at approximately $235 million. The argument for buying Zenabis at the time was that the two could save $20 million in synergies. It would strengthen Hexo’s domestic brands and give them a foot inside the European markets. It would also give Hexo access to Zenabis’ cultivation facilities. Hexo did note in its latest earnings that third-quarter 2022 net revenues doubled when compared to the third quarter of 2021 as the result of the accretive sales contributed by the acquisitions of Zenabis Global Inc. and Redecan (acquired Q4’21 and Q1’22, respectively).

Hexo was already in trouble itself and last October management gave investors a reality check warning about its senior secured convertible notes issued on May 27, 2021.  In a statement, Hexo said, “While there exists a risk that significant cash outflows may be required over the next twelve months under the terms of the Senior Secured Convertible Note, the company has been working with the Holder to renegotiate the terms of the Senior Secured Convertible Note.” Then Tilray (NASDAQ: TLRY) came to its rescue when it said that it would buy Hexo’s remaining $193 million senior secured convertible note. The deal was expected to close by the end of May 2022. The Note will be amended to include conversion rights at a price of C$0.85 per Hexo Share, which would allow Tilray Brands to acquire a significant equity ownership position in Hexo and participate directly in its growth opportunities.

Just this week though Tilray changed the terms of the deal and bought Hexo at a lower price. Perhaps it saw the trouble at Zenabis and decided the price needed to be adjusted? Tilray stock was down slightly on the news of Zenabis.


StaffJune 14, 2022
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3min180

Tilray Brands, Inc.(Nasdaq: TLRY) was able to lower the price it is paying for Hexo. The changes to the original deal include an additional discount on Tilray Brands’ purchase price as well as the reduction of the conversion price under the HEXO Note from C$0.85 to C$0.40 per share. The deal is expected to close on or about July 15, 2022.

Irwin D. Simon, Tilray Brands’ Chairman and CEO, said, “We believe HEXO continues to be the right strategic partner for Tilray Brands in Canada and, therefore, look forward to closing this transaction in July and working with HEXO to deliver on the promise and the potential of this partnership for our shareholders, consumers, and employees.”

Tilray Brands will buy the HEXO Note from HTI, which includes 100% of the current remaining $185 million outstanding principal balance of the HEXO Note, plus any accrued and unpaid interest thereon. Tilray will pay 89.2% of the then outstanding principal balance for the HEXO Note or roughly a 10.8% discount on the outstanding principal amount.

Charlie Bowman, HEXO’s President and CEO, added, “The strategic alliance with Tilray Brands accelerates HEXO’s operational turnaround and unlocks capital to expand our market leadership globally. The partnership is an essential next step in improving our capital structure, and we’re confident that the synergies realized will reset the industry.”

Hexo went on to also state in a separate release that it was also changing an equity purchase agreement with 2692106 Ontario Inc. and KAOS Capital Ltd. The new terms will allow the company to reduce the minimum liquidity interim covenant and closing condition from $100 million to C$70 million. In addition, the Outside Date was extended from July 1, 2022 to August 1, 2022 but not past November 30, 2022. The shareholder approval was extended from June 15, 2022 to July 15, 2022. The Amendment Share Price was cut from from $0.54 to C$0.40. 

Tilray’s will have the right to appoint nominees and an observer to the company’s board of directors so that Tilray will be able to appoint two directors and one observer to the company’s board of directors.

 


Debra BorchardtApril 12, 2022
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4min240

Tilray Brands Inc. (NASDAQ: TLRY) is leaning into its Hexo Corp. (NASDAQ: HEXO) debt buying with the announcement that it would buy Hexo’s remaining $193 million senior secured convertible note. The deal is expected to close by the end of May 2022. The Note will be amended to include conversion rights at a price of C$0.85 per Hexo Share, which would allow Tilray Brands to acquire a significant equity ownership position in Hexo and participate directly in its growth opportunities.

Irwin D. Simon, Tilray Brands’ Chairman and CEO, said, “We know that winning in Canada means a relentless focus on product innovation and operational excellence. The agreement with Hexo delivers on both fronts as it facilitates collaboration, the sharing of best-practices, and yields quantifiable operating efficiencies between two companies with unparalleled global cannabis expertise. In addition, we believe the timing is right given Hexo’s progress executing its operational turnaround plan that could deliver tangible value to Tilray Brands shareholders upon equity conversion of our investment. We look forward to working with Hexo to deliver on the promise and the potential of this partnership for our shareholders, consumers, and employees.”

Immediately Accretive

Tilray said the purchase is expected to be immediately accretive to the company. The agreement provides that Hexo will pay Tilray Brands an annual fee of $18 million for advisory services with respect to cultivation, operations, and production matters. The terms of the Note, as amended, provided that the Note shall bear interest at a rate of 5% per annum, beginning on the date of transaction closing. In addition, Tilray Brands shall have the flexibility to either be paid the principal amount of the Note plus any accrued interest and payment-in-kind upon the maturity of the Note or, prior to maturity, convert such amount into a substantial ownership position in Hexo. Hexo will not receive any proceeds as a result of Tilray Brands’ purchase of the Note from HTI.

Tilray To the Rescue

Tilray had originally announced in March that it was buying $211 million of the troubled company’s debt. The senior secured convertible notes were issued by Hexo and were held by funds affiliated with HT Investments MA LLC. Tilray said that the notes would be amended to permit Tilray Brands to exercise conversion rights at a price of C$0.90 per Hexo share.

In December, Hexo warned that the company was in trouble. Hexo noted in its filing that “existing funds on hand, when combined with operational cash flow, would not be sufficient to fund the potential Senior Secured Convertible Note redemption payments. Additionally, the ability to fund capex budgets, convertible debt, and other commitments may be at risk due to cash payments towards the Senior Secured Convertible Note. Management is exploring several options to secure the necessary financing, which could include the issuance of new public or private equity or debt instruments, supplemented with operating cash inflows from operations. Subsequent to October 31, 2021, management has resumed the previous at-the-market public offering. Nevertheless, there is no assurance that certain sources of additional future funding will be available to the company or will be available on terms which are acceptable to management.”

 

 

 


Debra BorchardtMarch 18, 2022
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4min80

HEXO Corp. (NASDAQ: HEXO) reported its financial results for the second fiscal quarter ended January 31, 2022. Hexo reported total net revenues increased 61% to $52.8 million. The company reported a total net loss of $690 million. The company wrote-down $616 million in impairments.

Still, at the end of its second quarter, Hexo was not in compliance with the positive Adjusted EBITDA covenant set forth in its Senior Convertible Notes resulting in a net fair value loss of $56 million. Subsequent to quarter end, the Noteholder irrevocably waived, on a temporary basis, any rights in relation to the breach of that covenant of the ‎‎company.

“Since joining HEXO in November, my top priority has been to clean up a very challenged balance sheet as a result of the Secured Note that was previously put in place,” said Scott Cooper, President & CEO of Hexo. “We’re now on the path to establishing a strong foundation that we expect will, once finalized, enable us to become a cash flow positive business within the next four quarters, along with continuing to grow our significant market share.”

Cutting Employees

The company said it has identified a way to save $30 million yearly. It will be a combination cutting employees and outside contractors. Half of these positions were related to the previously announced closure of the Stellarton facility. The remaining reductions were related to reducing back-office positions where there is significant overlap as a result of recent acquisitions, simplifying HEXO’s operating model to drive clearer accountability and de-layering management.

The company also said it would transition from co-packaging agreement towards in-house production capabilities, leveraging its scale to deliver on procurement savings and reconfiguring the company’s production network to achieve greater efficiencies; for example, moving vape production and distillate production to the Redecan facility.

“This has been a transformational quarter for the Company and we’re very pleased with the progress we’ve made on a number of fronts,” said Mark Attanasio, Chair of the Board and Executive Chair of HEXO. “We’ve finalized terms of a number of proposed agreements, including the recently announced strategic investment from Tilray, that will, once finalized, restructure the more onerous repayment and liquidity terms of the Secured Note. We expect this much improved structure will allow us to accelerate our growth path and unlock the full potential of the organization.”

Default

HEXO provided notice on March 11, 2022 to HT Investments MA of the occurrence of an event of default under ‎the company’s senior secured convertible note due May 2023 as it was not in compliance with the covenant of the ‎‎company in the Secured Note to have ‎‎positive Adjusted EBITDA for the quarter ending on ‎January 31, 2022.

Following provision of the notice by the Company, the Holder irrevocably waived its rights due to the Event of Default until the earlier of May 17, 2022 or ‎the date the proposed transaction announced on March 3, 2022 among the Company, the Noteholder and Tilray Brands, Inc. (“Tilray”) under which Tilray is expected to purchase the Secured Note from the Holder is terminated (the “End of Forbearance Date”), provided further that the Company, HTI and Tilray have agreed to extend the End of Forbearance Date in the event that they remain engaged in good faith negotiations to consummate the proposed transaction.


Debra BorchardtMarch 3, 2022
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4min110

Tilray Brands, Inc.  (Nasdaq: TLRY) is striking up a partnership with Hexo Corp. (Nasdaq: HEXO) by buying $211 million of its debt. The move will bring together Canada’s top two cannabis market share leaders, strengthening their respective positions and setting the stage for increased production efficiencies amid competitive market dynamics. Tilray’s stock was slipping slightly in early trading on the news.

The senior secured convertible notes were issued by Hexo and are currently held by funds affiliated with HT Investments MA LLC. Tilray said that the notes would be amended to permit Tilray Brands to exercise conversion rights at a price of C$0.90 per HEXO Share and acquire a significant equity ownership position in HEXO.

The acquisition of the Notes by Tilray Brands would be immediately accretive to Tilray Brands said the company in a statement. Hexo will not receive any proceeds as a result of Tilray Brands’ proposed purchase of the Notes from HTI.

“We believe this proposed Transaction would be a win-win for Tilray Brands and HEXO as it would launch a strategic partnership between two leading Canadian cannabis producers with complementary brand portfolios,” said Irwin D. Simon, Tilray Brands’ Chairman and CEO. “For us, it provides a path for meaningful future equity ownership of HEXO, and enables us to participate in HEXO’s share price appreciation as it continues to execute on its growth initiatives. We also expect to realize further commercial and production efficiency savings of up to C$50 million within two years, which would be shared equally and would allow us to continue being the leading, low-cost Canadian producer.”

The proposed alliance between Tilray and Hexo is further expected to deliver up to C$50 million of cost synergies, to be shared equally, within two years of the completion of the deal. Both companies have been working together to evaluate cost saving synergies as well as other production efficiencies, including with respect to cultivation and processing services, certain Cannabis 2.0 products, including pre-rolls, beverages and edibles, as well as shared services and procurement.

Troubled Hexo

In December, Hexo warned that the company was in trouble. Hexo noted in its filing that “existing funds on hand, when combined with operational cash flow, would not be sufficient to fund the potential Senior Secured Convertible Note redemption payments. Additionally, the ability to fund capex budgets, convertible debt, and other commitments may be at risk due to cash payments towards the Senior Secured Convertible Note. Management is exploring several options to secure the necessary financing, which could include the issuance of new public or private equity or debt instruments, supplemented with operating cash inflows from operations. Subsequent to October 31, 2021, management has resumed the previous at-the-market public offering. Nevertheless, there is no assurance that certain sources of additional future funding will be available to the company or will be available on terms which are acceptable to management.”


Debra BorchardtDecember 14, 2021
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9min80

Hexo Corp. (TSX: HEXO; NASDAQ: HEXO)  reported its results for the fiscal first quarter of 2022 ending October 31, 2021, with revenue rising 29% sequentially to $50.2 million. Hexo also reported a total net loss of $116 million or ($0.46) per share. In addition to the numbers, the company also updated shareholders on its new strategic plan with regard to the company debt issues.

“We are taking immediate steps through our new strategic plan, The Path Forward, to strengthen our capital position, improve operations, accelerate organic growth and complete our transformation to be cash flow positive from operations within the next four quarters,” said Scott Cooper, President & CEO, HEXO. “Having visited all our core sites, and in meeting with our employees and customers, I am more confident than ever in HEXO’s future and our ability to accelerate the creation of short and long-term value for shareholders.”

Going Concern

Hexo noted in its filing that “existing funds on hand, when combined with operational cash flow, would not be sufficient to fund the potential Senior Secured Convertible Note redemption payments. Additionally, the ability to fund capex budgets, convertible debt, and other commitments may be at risk due to cash payments towards the Senior Secured Convertible Note. Management is exploring several options to secure the necessary financing, which could include the issuance of new public or private equity or debt instruments, supplemented with operating cash inflows from operations. Subsequent to October 31, 2021, management has resumed the previous at-the-market public offering. Nevertheless, there is no assurance that certain sources of additional future funding will be available to the company or will be available on terms which are acceptable to management.”

As of October 31, 2021, Hexo has $55 million of cash and cash equivalents and $46 million (July 31, 2021 – $37,421) in trade receivables. However, Hexo has current liabilities of $411 million on the statement of financial position. Hexo has remaining contractual commitments of $40.695 million due before July 31, 2022. The company said it has restricted funds to
satisfy debt of $50 million presented in current liabilities. The company said it currently plans to settle a significant portion of this liability in equity. However, if the company is unable to meet the requirements of Equity Condition Waiver, the Holder may demand settlement in cash. During the three months ending October 31, 2021 the company settled all the optional redemption payments in equity and subsequent to the period, the company settled the November and December 2021 optional redemption payments in equity. The company has also received a cash settlement waiver for the May 2023 optional redemption.

CFO Stepping Down

It seems the CFO is taking the fall for the debt issues. Hexo said that CFO Trent MacDonald was stepping down effective March 11, 2022. The company said MacDonald will continue in his role until March 11, 2022, to ensure a smooth transition while it searches for a new CFO. Plus the company has appointed John Bell as the new Chair of the Board, effective immediately. Bell is currently Chairman of Stack Capital, Pure Jamaican Limited, and a board member of Cure Pharmaceutical. Dr. Michael Munzar is stepping down from the board immediately.

 The Path Forward

Hexo announced, “The Path Forward”, a new strategic plan to drive accelerated growth and become cash-flow positive within the next four quarters.

The Path Forward is made up of five priorities according to the company statement:

  1. Reduce manufacturing and production costs;
  2. Streamline and simplify the organizational structure;
  3. Realize cost synergies from acquisitions and recent plant closures;
  4. Focus on revenue management, including more disciplined pricing; and
  5. Accelerate growth through organic market share gains and capture missed revenue opportunities, including improving our ability to align cultivation planning with market demand, reintroduce a focus on medical and strengthen our commercial capabilities and innovation pipeline.

The company said these initiatives are expected to generate incremental cash flow of $37.5 million in fiscal 2022 and an additional $135 million in 2023 for a total of $175 million over the two years, split almost evenly between cost reductions within our control and revenue opportunities.

Keystone Canned

As part of the review of capital-intensive projects, Hexo decided to halt the Keystone Isolation Technologies project indefinitely as of October 31, 2021, resulting in a one-time charge of $11.3 million.

Legal Issues

In addition to the debt problems, Hexo also faces several legal issues. The filing stated: “As of October 31, 2021, the company and its former Chief Executive Officer are defendants in a putative class-action lawsuit pending in the Québec Superior Court brought on behalf of certain purchasers of shares of the Company and filed on November 19, 2019. The lawsuit asserts causes of action for misrepresentations under the Québec Securities Act and the Civil Code of Québec in connection with certain statements contained in HEXO’s prospectus, public documents and public oral statements between April 11, 2018 and November 15, 2019. The allegations relate to: (1) statements made by the Company regarding its agreement with the Province of Québec to supply cannabis; (2) statements made by the Company regarding its acquisition of Newstrike, particularly the licensing of the Newstrike facilities and the forecasted synergies and/savings from the Newstrike acquisition; (3) statements made by the Company about the net revenues in Q4 2019 and fiscal year 2020; and (4) the certifications by Sebastien St-Louis and the  underwriters of the Company.”

Hexo is also named as a defendant in a proposed consumer protection class action filed on June 16, 2020, in the Court of Queens’ Bench in Alberta on behalf of residents of Canada who purchased cannabis products over specified periods of time. The filing stated: “Several other licensed producers are also named as co-defendants in the action. The lawsuit asserts causes of action, including for breach of contract and breach of consumer protection legislation, arising out of allegations that the Tetrahydrocannabinol (THC) or Cannabidiol (CBD) content of medicinal and recreational cannabis products sold by the Company and the other defendants to consumers was different from what was advertised on the products’ labels. Many of the cannabis products sold by the Company and other defendants were allegedly sold to consumers in containers using plastic bottles or caps that may have rapidly absorbed or degraded the THC or CBD content within them. By allegedly over-representing the true amount of THC or CBD in the products, the plaintiff claims that consumers would be required to consume substantially more product than they otherwise would have in order to obtain the desired effects or, in the alternative, would have consumed the product without obtaining the desired effects. The action has not yet been certified as a class action.”


Debra BorchardtOctober 29, 2021
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5min200

HEXO Corp. (NASDAQ: HEXO) reported its financial results for the fourth quarter and fiscal year ending July 31, 2021. While Hexo made great strides in increasing its revenues and cutting its expenses and losses, the company still gave a sobering warning about upcoming convertible debt. Total revenue in the fourth quarter rose to C$53 million over last year’s C$36 million for the same time period. Total net losses for the quarter were trimmed to C$67 million from last year’s C$169 million for the same time period. Total expenses were also trimmed to C$63 million from last year’s C$71 million for the same quarter. All amounts are expressed in Canadian dollars unless otherwise noted.

Full-year Results

Total revenue for the fiscal year 2021 grew to C$173 million over the fiscal year 2020’s total revenue of C$110 million. Net losses for the year also dropped dramatically to C$113 million from 2020’s net losses of C$546 million. Total expenses for 2021 fell to C$134 million from 2020’s C$418 million.

HEXO’s President & CEO Scott Cooper said, “As we review our last fiscal year, I would like to highlight some key achievements. Last fiscal, HEXO achieved its highest net revenue in the Company’s history, leads the Canadian cannabis market in four categories and completed three acquisitions, including the transformative Redecan acquisition, propelling the Company to the number one market share position in Canadian adult-use recreational cannabis sales.”

Convertible Debt Downer

Despite the improvements that Hexo has made, management gave investors a reality check warning about its senior secured convertible notes issued on May 27, 2021.  In a statement, Hexo said, “While there exists a risk that significant cash outflows may be required over the next twelve months under the terms of the Senior Secured Convertible Note, the company has been working with the Holder to renegotiate the terms of the Senior Secured Convertible Note.” Hexo said that it has maintained a positive relationship with the holder and was able to get two amendments that will be favorable to the company.

Unfortunately, Hexo also stated that while it enough money for ongoing working capital requirements, the current funds on hand, combined with operational cash flows,won’t be enough for the cash requirements under the Senior Secured Convertible Note, plus the investments required to continue to develop cultivation and distribution infrastructure, and the future growth plans of the company. Management said it is exploring several options to secure the necessary financing, which could include the issuance of new public or private equity or debt instruments, supplemented with operating cash inflows from operations.

Management Changes

This is the first earnings report under the new CEO Scott Cooper. Hexo announced the departure of its Co-Founder and CEO, Sebastien St-Louis. Scott joins Hexo from Truss Beverage Co., a joint venture between Molson-Coors Canada and Hexo which holds the number one market share in cannabis infused beverages in Canada, where he held the position of President & CEO. For a period of not more than six months, Scott will simultaneously remain in this role.

Hexo also announced the appointment of Valerie Malone as Chief Commercial Officer and Guillaume Jouet as Chief People & Culture Officer. Both executives bring significant consumer-packaged good experience to the organization.

Quarter Highlights

The company listed the following highlights for the quarter in its earnings statement:

  • Net revenue increased 71% quarter-over-quarter and 43% from Q4’20, marking HEXO’s highest quarter of revenue to date.
  • Total Q4’21 net revenue increased to $38.7 million from $22.6 million in Q3’21
  • Total net revenue for FY21 grew to $123.5 million from $80.6 million in FY20.
  • Increased market share in several Canadian provinces, including Ontario, Alberta and British Colombia, and maintained a top two market share in Quebec.
  • Adult-use net revenues, exclusive of beverages, increased 28% quarter-over-quarter.
  • Cannabis beverage net revenues increased 70% quarter-over-quarter and 161% from fiscal 2020.

StaffOctober 18, 2021
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5min230

Two leading cannabis companies have made major changes in the C-suite on Monday morning.

HEXO

The biggest move came from HEXO Corp.  (TSX: HEXO)(NASDAQ: HEXO) which announced that its CEO and Co-Founder Sebastien St-Louis was leaving immediately and that the company was engaging in a structural reorganization. In addition to the CEO, HEXO said that its Chief Operating Officer, Donald Courtney was also out. The Special Committee of the Board for Succession said it was in advanced discussions with a preferred CEO candidate and expected to make an announcement soon. Courtney will remain as COO until a suitable replacement is named.

The shakeup comes not long after Hexo reported that its third-quarter fiscal 2021 that ended in April, showed total revenue sliding by $10.2 million sequentially to $22.6 million. Since then, the company moved its shares to trade on the NASDAQ and closed on a $144 million offering. The company also closed two acquisitions 48North and Redecan.

“Building HEXO from the ground-up to become number one in Canada has been the highlight of my career,” said Sebastien St-Louis. “Without question, HEXO’s future is bright – I am so proud of the team we established, the brands we launched, and the loyalty our customers have shown us. As a significant shareholder, I look forward to the company’s next exciting stage of growth.”

Hexo said in a statement that its next leader would be well-positioned to integrate its recent acquisitions and “leverage the company’s lean production capabilities, solid brands, and robust product offering to lead HEXO through its next phase of strategic evolution.”

“On behalf of the entire organization, I would like to thank Sebastien for his tremendous impact on the Canadian cannabis industry. Through his years of dedication, he has helped build HEXO into a market leader in Canada,” said Dr. Michael Munzar, Chair of the Board. “The Board has established a Special Committee for Succession to identify a new CEO with the experience to defend HEXO’s position as a market leader in Canada and secure our place as a top-three global cannabis company.”

Jushi

Jushi Holdings Inc. (CSE: JUSH) (OTCQX: JUSHF) announced the appointment of Edward (“Ed”) Kremer as its new Chief Financial Officer. Kremer brings over 20 years of financial leadership experience across a wide variety of industries, including technology, fashion, manufacturing, wholesale distribution, licensing, and retail. Jushi also announced that Kimberly Bambach has stepped down from her role as CFO effective immediately, but will remain with the company in a support role through December 1, 2021. Kremer most recently served as Chief Operating and Restructuring Officer of Le Tote and Lord & Taylor, overseeing the organization’s M&A and restructuring efforts.


Debra BorchardtJune 14, 2021
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4min90

HEXO Corp. (NYSE: HEXO)  reported its financial results for the third quarter fiscal 2021 ended April 30, 2021, with total revenue sliding by $10.2 million sequentially to $22.6 million. It was a 2% improvement over last year’s $22 million for the same time period. Hexo shares were sliding over 5% in early trading to lately sell at $6.24.

On a positive note, total net losses were trimmed slightly from the previous quarter from $20.8 million to $20.7 million. However, the losses were slightly higher over the same time period in 2020. All amounts are in Canadian dollars.

“At the advent of legalization, we articulated a plan to become a top-three cannabis player in the Canadian adult-use market. With the acquisition of Zenabis and the announcements of intent to acquire 48North and Redecan, we are on the verge of surpassing that objective to become the no.1 licensed producer by recreational market share,” said HEXO CEO and co-founder Sebastien St-Louis. “While this was a challenging quarter, we maintained our number one position in the beverage category and increased our net sales outside of Quebec by 169% over last year, including 14% sequential quarterly growth in Ontario, while continuing to maintain our number one position as the preferred supplier to Quebec. Moving forward, we are committed to rebuilding our strain strategy and brand mix in the province of Quebec to ensure we meet consumer needs and maintain our dominant position in the province.”

Revenue Declines

Hexo attributed the drop in revenues to a decline in adult-use non-beverage sales of $5.2 million in Quebec related to strain cultivation decisions made by the company and production issues relating to hash. Hexo’s sales in Alberta dropped $2.7 million during the quarter because of a 32% decrease in the provincial UP brand sales because of temporary stock limitations as the company continues to roll out the relaunched brand. Hexo said that despite the impact of the COVID-19 third wave in Ontario during the period, in which most private retailers were limited to curb side pickup only, the company’s sales in Ontario increased 14% or $0.6 million. The increase was led by the strength of the UP brand and its 20%+ THC small format premium dry cannabis which grew 67% quarter over quarter.

In addition to the Canadian issues, Hexo had no international medical cannabis sales due to revised prerequisite testing and an additional certification by the Israeli government which caused a delay in its ability to export. Hexo said that it has since received clearance and is now in compliance to resume these international sales.

Expenses/Balance Sheet

The company was able to cut its selling, general and administrative costs, (SG&A) by 8% sequentially, coming in at $14.4 million, down from $15.6 million. Operating expenses decreased 17% from the second quarter when adjusted for Health Canada recovery fees of $3.6 million.

The company said it elected to repay its outstanding credit facility of $28,875 early, mitigating future interest and administrative costs.

 


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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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