Indus Holdings Archives - Green Market Report

California-based cannabis company Indus Holdings, Inc. (CSE: INDS)(OTCQX: INDXF) has filed a C$100 million offering in Canada. Indus is based in Salinas, California, and is home to the following brands: Cypress Cannabis, House Weed, The Original Pot Co., MOON, Humble Flower, and Kaizen Medicinals. The offering extends over 25 months and can accommodate a variety of financial instruments. The net proceeds from the  offering will be used for discretionary capital programs, potential future acquisitions, general corporate purposes, and repayment of indebtedness outstanding from time to time

As of October 31, 2020, Indus held a cash balance of approximately $4.8 million and a working capital balance of approximately $20.3 million, compared to approximately $6.5 million and approximately $20 million, respectively, as of September 30, 2020.

Wildfires Affect Harvest

Indus said in its filing that it had realized positive operating cash flows of approximately $4.5 million during the three months ending September 30, 2020. The company attributed it to increased harvest volumes generated as a result of the renovations completed during 2020 to its cultivation facility in Monterey County.

However, for the quarter ending December 31, 2020, Indus said it is “expecting lower harvest yields than the previous quarter due to plant stress experienced from sealing greenhouses to prevent poor air quality from entering due to wildfires in California that occurred in late summer, early fall 2020, at a time when outdoor temperatures were also elevated. In connection with this expectation, on December 3, 2020, the company announced that based on preliminary financial information and subject to year-end closing adjustments, it expects net revenue for the fourth quarter of 2020 to be approximately $9.5 million to $11.5 million, a decline from the previously expected approximately $14 million.”  Prior to this announcement, Indus had said it expected some decline in yields, however, “the deterioration in yields has been more pronounced than anticipated.” Indus did say that new plantings in the current quarter that will harvest in the first quarter of 2021 are expected to return to normal yields.

“The decision to update our previously expected financial results for the fourth quarter 2020 was not taken lightly but we feel that it is the prudent one to make,” added George Allen, Chairman of the Board for Indus Holdings, Inc. “We remain focused on our commitment to building cannabis cultivations at an unprecedented scale in California and on driving long-term value for our shareholders. With the right team in place, we have taken a meticulous approach this year to reevaluate our efficiencies and strategic planning – with flexibility to adapt – and we saw great improvements so far; and we will continue to do so to respond accordingly.”

The wildfires that occurred in late summer, early fall 2020 also negatively impacted the company’s business, financial position, results of operations, and cash flows during the third quarter of 2020 and are expected to continue to have a negative impact for the fourth quarter of 2020 and potentially beyond as it completes its production from cannabis crops that were impacted by such wildfires. In the fourth quarter of 2020, the company said it installed automated environmental control systems within individual grow rooms at its cultivation facility

Personnel Changes

On November 9, 2020, Brian Shure was appointed Chief Financial Officer of the Corporation, adding strategic and financial experience to the company’s management team and replacing Steve Neil.

Co-Founder  Robert Weakley was replaced from his positions as Chairman and former Acreage Holdings’ George Allen was installed as Chairman and a member of the Board. While Mr. Weakley retained his position on the Board and did not resign from the Board at the time but he was later not nominated for re-election to the Board at its annual shareholder meeting held on October 22, 2020, and in his place, Bruce Gates was nominated by the Corporation and elected to the Board at such annual shareholder meeting Mr. Weakley’s involvement with the Corporation is now limited to any remaining ownership that he has of securities of the Corporation and Indus Holding Company.

Indus Holdings Inc. (OTC:INDXF) stock was moving higher by 24% to lately trade at 21 cents following news that former Acreage Holdings (CSE:ACRG.U)President George Allen has invested in the company.

Indus said it received a $2.3 million loan with lenders that included Geronimo Capital, LLC and Merida Capital Partners. In connection with the loan, Indus has entered into a non-binding term sheet with Geronimo Capital and Merida Capital Partners for the financing of up to $14.5 million (inclusive of the $2.3 million loan). The loan matures on March 13, 2021, and has an interest rate of 10% per annum until April 11, 2020, and 20% per annum thereafter

“We are excited to be working with Indus Holdings, Inc. as they have demonstrated early leadership in both cultivation and manufacturing capabilities in California. We see this as an exceptional opportunity to deploy capital behind a team that is focused and determined to lead California Cannabis,” said George Allen of Geronimo Capital. “While we foresee that the broader capital markets will interrupt many operators across the cannabis landscape, we intend to bring enough capital to Indus such that they are poised to fully capitalize on this tremendous opportunity for the benefit of all investors.”

The proceeds will be used to complete greenhouse 1 while the overall follow-on financing will fund the completion of all remaining greenhouse renovations and working capital needs for the company to become profitable and self-sustaining. The company said in a statement that greenhouse 1 and 2 renovations would continue on schedule. Within the past two weeks, the company has finalized and planted four of the additional 12 grow rooms and expects to bring Greenhouse 1 and 2 online by the summer, with one additional grow room every week for the next eight weeks. Indus said it would add one additional grow room every week for the next 11 weeks.

New Team

With the infusion of cash, the new lenders are also bringing in their own new team. Robert Weakley, Indus Holding’s, Inc. co-founder, and CEO said, “We are also looking forward to welcoming Geronimo Capital and Merida Capital Partners. This investment opens up Indus to opportunities that will get us to our goal of profitability.”

Mitch Baruchowitz of Merida Capital said, “Our objective is to finalize our investment into the Company and return the company’s focus to running a lean organization singularly committed to delivering high-quality products to customers.”

Allen formed Geronimo Capital after he parted ways from Acreage Holdings in April 2019. This occurred when Canopy Growth (NYSE: CGC) announced its unusual decision to agree to acquire Acreage once the U.S. federally legalized cannabis. Since that April announcement, Canopy Growth also showed its CEO Bruce Linton the door in July 2019. Linton has gone on to other investment opportunities and two weeks ago announced a $150 million SPAC to acquire cannabis companies.

Refocused On California

It seems one of the plans for the new team is to bring the focus back to California. Indus, like other cannabis companies, saw expansion as the goal for fast growth. However, expansion into numerous states has proven to be more expensive than planned. The company was establishing operations in Nevada and Oregon. The new team also suggested that it was dialing down the number of skus (stock keeping units). This has also been a big issue for many cannabis companies who sought to line up as many skus as possible.

In its last presentation, Indus listed as many as 12 different owned brands. It sells and distributes and mostly manufactures products for well-known brands like Beboe, Dixie Illixirs, Orchid Essentials, and Pantry. In January the company terminated its investment in CBD brand Shredibles as part of its plan to redirect its focus and resources on the company’s core brands.