Organigram Archives - Green Market Report

Debra BorchardtJuly 13, 2021
Organigram-Holdings.jpg?fit=960%2C540&ssl=1

4min7100

Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) released its results for the third quarter ending May 31, 2021, with revenue growing 31% over last year to $29.1 million. This was an increase of 51% from the second quarter. The net loss fell 96% to just $4 million from last year’s $89 million. The stock was trading higher by 6%  in early trading and was lately selling at $2.83.

Organigram attributed the increase in revenue to higher adult-use recreational net revenue and higher wholesale revenue (from other licensed producers) in the quarter. Last year’s third quarter adult-use recreational net revenue was reduced by a provision for product returns and pricing adjustments of $3.0 million (net of excise) of which the majority was largely due to slow-moving oil and certain flower products.

“We are pleased with the growth in revenue in Q3 as we were better staffed to fulfill the demand for our revitalized product portfolio, which continues to resonate well with consumers,” said Paolo De Luca, Chief Strategy Officer. “The ongoing investment in our genetics and cultivation program has yielded some exciting new dried flower products with more genetics and derivative product launches planned for the near term. Sales are trending higher to date in Q4 supported by a strong outlook for the industry as the number of cannabis retail stores continues to grow and existing stores are permitted to re-open their doors to customers.”

The cost of sales decreased from last year and this was primarily due to almost $30.0 million in inventory write-offs and provisions as well as charges related to a reduced workforce due to COVID-19 which were all incurred in the third quarter of 2020. SG&A increased over last year and Organigram said this was largely due to increased staffing and office costs related to the establishment of the CoE as well as the EIC acquisition, higher cultivation related research and development costs as well as higher audit fees (in connection with the company’s regulatory requirement to obtain an integrated audit opinion for the first time for its Fiscal 2021 annual financial statements).

Outlook

Organigram said it currently expects fourth-quarter 2021 revenue to be higher than the third quarter largely due to stronger forecasted market growth as COVID-19 restrictions lift (permitting cannabis retail stores to reopen to foot traffic) and the number of retail stores continuing to grow.  The company said it is better able to fulfill the demand for its revitalized product portfolio with increased staffing. In a statement, the company said,  “Revenues to date and purchase orders received from customers support the company’s expectation of revenue growth from Q3 2021 to Q4 2021; however actual results could vary from estimates from the date hereof until year-end. In addition, the company expects to generate a new and incremental revenue stream from the first sales of soft chews expected in Q4 2021.”

Solid Financials

On April 1, 2021, Organigram repaid all outstanding balances (approximately $58.5 million) under its credit agreement with BMO and a syndicate of lenders, which will result in annual interest savings of $2.7 million. Currently, the company has $222 million in cash and short-term investments (including restricted funds). Organigram believes it has sufficient cash and short-term investments to support its current plans, including the budget of $38 million for the completion of Phase 4C and the Moncton Campus design improvements, and to also support the corresponding growth to its working capital assets and still maintain sufficient liquidity and financial flexibility.


Debra BorchardtJune 25, 2021
Organigram2.jpg?fit=960%2C504&ssl=1

3min13350

Organigram Holdings Inc. (TSX: OGI) (NASDAQ: OGI) announced after the market close on Thursday that it has filed a preliminary short form base shelf prospectus with the securities commissions in each of the provinces and territories of Canada. The Base Shelf Prospectus will allow Organigram to qualify the distribution of up to C$500 million of common shares, preferred shares, debt securities, subscription receipts, warrants, and units during the 25-month period that the Base Shelf Prospectus remains effective. Shares were falling slightly in early trading.

In May, Organigram announced that Greg Engel was stepping away from his role as CEO and director. Peter Amirault, current Board chairman, was appointed by the Board to serve as executive chair on an interim basis until a new permanent CEO was appointed.

In April, Organigram said it had repaid all outstanding balances (approximately $58.5 million) under its credit agreement with BMO and a syndicate of lenders which would result in annual interest savings of $2.7 million. At that time it had $232 million in cash and short-term investments.

The specific terms of any future offering of securities will ‎be established in a prospectus supplement filed with the applicable Canadian and US regulatory authorities. The Base Shelf Prospectus when final and effective will provide flexibility for financing options to pursue the company’s objectives. A corresponding shelf registration statement on Form F-10 has been filed with the United States Securities and Exchange Commission but is not yet effective.

In April, Organigram reported revenue for the second quarter ending February 28, 2021, fell 29% to $19.2 million from last year’s $27.3 million for the same time period.  The company attributed it to significantly lower wholesale revenue and lower average selling prices. The company said that last year’s better revenue was due to higher wholesale revenues that were opportunistic in nature and primarily to a single licensed producer.

The company went on to say that the net revenue was also lower due to missed sales opportunities, as certain employees tested positive for COVID-19 which resulted in a significant number of facility staff having to isolate. Organigram said it was unable to fulfill certain demands for its products totaling approximately $7 million in the quarter due to production and processing constraints. The revenue was also negatively impacted by certain provincial boards aiming to manage lower levels of inventory such as Alberta.

The net losses grew by 872% to $66 million from last year’s net loss of $6.8 million. The company said this was largely due to the negative change in the fair value of the derivative warrant liabilities and the negative gross margin in the second quarter.


Debra BorchardtApril 13, 2021
Organigram2.jpg?fit=960%2C504&ssl=1

5min12200

Organigram Holdings Inc. (NASDAQ: OGI) shares were falling over 9% in early trading after the company reported that its revenue fell in the second fiscal quarter of 2021 and then et losses ballooned. Organigram reported revenue for the second quarter ending February 28, 2021, fell 29% to $19.2 million from last year’s $27.3 million for the same time period.  The company attributed it to significantly lower wholesale revenue and lower average selling prices. The company said that last year’s better revenue was due to higher wholesale revenues that were opportunistic in nature and primarily to a single licensed producer.

The company went on to say that the net revenue was also lower due to missed sales opportunities, as certain employees tested positive for COVID-19 which resulted in a significant number of facility staff having to isolate. Organigram said it was unable to fulfill certain demands for its products totaling approximately $7 million in the quarter due to production and processing constraints. The revenue was also negatively impacted by certain provincial boards aiming to manage lower levels of inventory such as Alberta.

The net losses grew by 872% to $66 million from last year’s net loss of $6.8 million. The company said this was largely due to the negative change in the fair value of the derivative warrant liabilities and the negative gross margin in the second quarter.

“Although Q2 2021 results were challenged by industry dynamics, COVID-19 and staffing limitations at our facility, we believe there are excellent prospects ahead for the industry, Organigram and our shareholders,” said Greg Engel, Chief Executive Officer of Organigram. “Nearer term, we are currently tracking to generate higher revenue in Q3 2021 as our new product portfolio continues to gain traction and we become better staffed to fulfill demand. Our recent acquisition of The Edibles and Infusions Corporation positions us to generate revenue from the largest single category of edibles, soft chews or gummies. We also see the potential for meaningful gross margin improvement over time as we revitalize our dried flower portfolio with new Edison and Indi strains and execute on a number of opportunities including the refinement of our cultivation, post-harvesting and packaging processes. Longer-term, we are extremely excited about developing innovative and appealing products to consumers in collaboration with BAT. All of this is made possible and supported by strong liquidity and a balance sheet that is largely debt-free.”

Balance Sheet Solid

Even though it was a fairly disappointing quarter, Organigram still make moves to stabilize its finances. It repaid all outstanding balances (approximately $58.5 million) under its credit agreement with BMO and a syndicate of lenders which will result in annual interest savings of $2.7 million. Currently, it has $232 million in cash and short-term investments.

Looking Ahead

Despite the less than stellar second quarter, Organigram said it expects third-quarter revenue to be higher as the company is improving demand fulfillment with increased staffing. The company’s Moncton facility was shut down during the quarter for deep cleaning due to COVID which caused the company to lose production time in order to fulfill demand.  While COVID could still rear its ugly head, the company is hoping to catch back up from the lost time. It also gave itself some wiggle room by warning that pandemic restrictions for cannabis retail stores, particularly in the most populous province of Ontario, could suppress demand and negatively impact net revenue in the third quarter.

The company expects to generate more revenue growth from the production of soft chews and other confectionery products with the specialized equipment in the Winnipeg EIC facility. Organigram said it is targeting first sales of soft chews in the fourth quarter of 2021 subject to certain achievements, including, but not limited to, the timing of receipt and commissioning of certain ancillary equipment, completion of quality assurance documentation, the hiring of requisite staff and obtaining product listings from the provincial boards.


Debra BorchardtApril 6, 2021
candy.jpg?fit=801%2C1000&ssl=1

5min12360

Organigram Holdings Inc. (NASDAQ: OGI) has acquired The Edibles & Infusions Corporation in a deal valued at $35 million consisting of $22.0 million, plus up to an additional $13.0 million in shares (payable upon the EIC business achieving certain earnout milestones. Organigram said that the EIC Acquisition will expand its product offerings and provide an operational footprint in Western Canada.

The edibles category currently represents approximately 4.4% of the Canadian recreational cannabis market of which soft chews (and related formats) collectively are approximately 75%. This is a rapidly growing segment of the overall Canadian market and Organigram said it expects the Canadian market to gradually grow towards the 12%-15% and 85% edible and soft chew (and related formats) category share seen in the U.S. as new product offerings are introduced, and as regulatory changes unfold.

“EIC is an important acquisition to ensure Organigram is consistently at the forefront of cannabis product development. The integration of EIC will continue to provide our consumers access to innovative cannabis products while leveraging Organigram’s national sales and distribution network,” said Greg Engel, Chief Executive Officer of Organigram. “Edible products remain an important product category to Organigram and EIC represents an ideal partner with which to expand our market presence in this category as well as other derivative cannabis categories. EIC’s commitment to research and development, continuous innovation, and its confectionery market leadership strategically aligns with Organigram’s domestic and international strategy. We value James Fletcher’s tremendous knowledge of confectionary manufacturing and proven track record of fulfilling the product needs of some of the world’s largest retailers at Cavalier Candies.”

EIC

EIC was co-founded by AgraFlora Organics International Inc. (CSE: AGRA) and James Fletcher, who is the Chief Executive Officer of Cavalier Candies – one of Canada’s oldest confectionery companies. EIC constructed a purpose-built, highly-automated, 51,000-square-foot manufacturing facility located in Winnipeg, Manitoba. The facility employs state-of-the-art equipment designed to produce highly customizable, precise, and scalable cannabis-infused products, including edibles. EIC currently holds a Research License and a Standard Processing License issued under the Cannabis Act and regulations; it is in the process of completing its application to add the activity of the sale of Cannabis 2.0 products to its Standard Processing License. Until EIC receives its Sales License, it is capable of manufacturing products in bulk for further processing, review, and sale by Organigram or third-party licensed producers, for which it may provide white-label services.

The company said it currently expects first sales of EIC manufactured soft chews in Q4 Fiscal 2021 subject to the timing of receipt and commissioning of certain ancillary equipment, completion of quality assurance documentation, and hiring of requisite staff.

“This acquisition, on the heels of the recently completed BAT transaction, provides strong strategic synergies for Organigram’s vision of developing innovative and novel products to serve the Canadian market and beyond,” said Paolo De Luca, Organigram’s Chief Strategic Officer. “Diversifying our manufacturing and R&D base gives us increased ability to fast-track our near-term commercial plans as well as expand our R&D efforts in addition to those already destined for the Centre of Excellence in connection with BAT.”

“Organigram and EIC have enjoyed a collaborative partnership in working towards the closing of this transaction. Working with Organigram, we believe EIC can realize its full potential. Combining our complementary management expertise and business strengths will result in an integrated entity that is poised for further growth in Canada as well as globally in an expanding market for cannabinoid-infused products,” commented James Fletcher, President of EIC. “Our facility at EIC was designed to handle both smaller-batch artisanal manufacturing but, more importantly, large-scale nutraceutical-grade high-efficiency manufacturing with a view to gaining EU GMP certification as well. Indeed, the facility design and all of the equipment specifications were completed with that in mind.”


Debra BorchardtMarch 11, 2021
cigarette.jpg?fit=960%2C640&ssl=1

8min17730

The cannabis industry’s fear of big tobacco trying to elbow into the industry has finally come true with today’s announcement of a $175 million investment into Organigram Holdings Inc. (NASDAQ: OGI) from a wholly-owned subsidiary of British American Tobacco or BAT (NYSE: BTI). The BAT subsidiary has subscribed for approximately 58.3 million common shares of OGI, which represents a 19.9% equity interest on a post-transaction basis for total proceeds of approximately C$221 million (“Investment Proceeds”) at a price per share of C$3.792.

Big Tobacco has had to keep its distance from cannabis due to the restrictions and regulations for that industry. Cannabis remains a federally illegal product. However, the cannabis industry has always feared that as soon as legality occurred, big tobacco would try to take over. While BAT isn’t stepping into the THC portion of the business, it is dipping its toes in the legal CBD side.

“This is a tremendous milestone in the evolution of Organigram. It is instrumental in advancing our commitment to offering consumers innovative cannabis products and to furthering our long-term international strategy,” said Greg Engel, Chief Executive Officer of Organigram. “We have been extremely selective about aligning with a strategic partner and, in BAT, we’ve found a leading consumer goods business with sophisticated management, innovative product platforms, an impressive dedication to research and development, deep consumer insights, regulatory expertise and a commitment to responsible stewardship and consumer safety among many other enviable attributes. This collaboration is the culmination of extensive discussions and workshops and in-depth due diligence.”

A Balance Sheet Decision

BAT’s investment is expected to strengthen Organigram’s balance sheet, accelerate its R&D program and product development activities and bolster its ability to enter the U.S. and other international markets. In January, Organigram  released its results for the first-quarter ending in November causing the stock to tumble. A shift to value products hurt the company, which also warned that the second-quarter revenue could be impacted as well. The company delivered net revenue of $19.3 million for the first fiscal quarter of 2021 versus last year’s $25.2 million, which the company blamed on significantly lower wholesale revenue from licensed producers and a lower average selling price in the quarter.

Organigram also told investors that a negative non-cash adjustment to cost of sales for unabsorbed fixed overhead costs in Q2 Fiscal 2021 was anticipated to persist as a result of the company’s plans to cultivate less than its cultivation capacity. “Some production inefficiencies are anticipated to persist in the near to medium term and impact gross margins while Organigram continues to launch new products and optimizes production and staffing.”

“In our view, the cannabis industry is still in the nascent stages of product development. We believe that product innovation backed by core fundamental R&D is necessary to establish a long-term competitive advantage in the cannabis industry,” stated Paolo De Luca, the Company’s Chief Strategic Officer.

The company acknowledged that with the significant capital injection, Organigram is better positioned to expand into the U.S. and further international markets at the appropriate time and subject to applicable law. Upon closing, Organigram will have pro-forma cash and short-term investments of approximately C$296 million (of which approximately C$30 million will be reserved in order to satisfy certain of Organigram’s obligations under the PDC Agreement and the balance of which can be used, among other things, for growth opportunities and other strategic investments including advancing Organigram’s international strategy).

Tobacco Use Declining

According to the World Health Organization, “During nearly the past two decades, overall global tobacco use has fallen, from 1.397 billion in 2000 to 1.337 billion in 2018, or by approximately 60 million people, according to the WHO global report on trends in the prevalence of tobacco use 2000-2025 third edition.”

The WHO also said that a new report shows that the number of male tobacco users has stopped growing and is projected to decline by more than 1 million fewer male users come  2020 (or 1.091 billion) compared to 2018 levels, and 5 million less by 2025 (1.087 billion). “By 2020, WHO projects there will be 10 million fewer tobacco users, male and female, compared to 2018, and another 27 million less by 2025, amounting to 1.299 billion. Some 60% of countries have been experiencing a decline in tobacco use since 2010.”

So, it was inevitable that big tobacco would look to replace its declining sales and cannabis was the logical choice.

Center Of Excellence

Licensed cannabis producer Organigram Inc. said it entered into a Product Development Collaboration Agreement with BAT to create a “Center of Excellence” to focus on developing the next generation of cannabis products with an initial focus on CBD. The company said the Center of Excellence will be located at Organigram’s indoor facility in Moncton, New Brunswick, which holds the Health Canada licenses required to conduct research and development activities with cannabis products.

According to the statement, both companies will contribute scientists, researchers, and product developers to the Center of Excellence which will be governed and supervised by a steering committee consisting of an equal number of senior members from both companies. Under the terms of the PDC Agreement, both Organigram and BAT have access to certain of each other’s intellectual property and, subject to certain limitations, have the right to independently, globally commercialize the products, technologies and IP created by the Center of Excellence pursuant to the PDC Agreement.

Dr. David O’Reilly, Director, Scientific Research at BAT, commented: “Today’s announcement underscores BAT’s commitment to accelerating our transformation and building A Better Tomorrow. Our multi-category, consumer-centric approach, which is key to our transformation, aims to provide choice and meet the evolving needs of adult consumers. Choice that provides reduced-risk alternatives to combustible cigarettes, as well as going beyond tobacco and nicotine into new and exciting areas of product innovation.”

 


Debra BorchardtJanuary 12, 2021
Organigram2.jpg?fit=960%2C504&ssl=1

5min10690

Organigram Holdings Inc. (NASDAQ: OGI)  released its results for the first quarter ended November 30, 2020, causing the stock to tumble in early trading. A shift to value products has hurt the company, which also warned that the second-quarter revenue could be impacted as well. The stock was falling over 7% to lately sell at $1.64.

The company delivered net revenue of $19.3 million for the first fiscal quarter of 2021 versus last year’s $25.2 million, which the company blamed on significantly lower wholesale revenue from licensed producers and a lower average selling price in the quarter.

Organigram said in a statement that the higher wholesale revenues during the first quarter of 2021 were opportunistic in nature, primarily sales to a single licensed producer; and not necessarily expected to recur each quarter at those levels, or if at all. First-quarter net revenue from the Canadian adult-use recreational market grew 30% to $16.8 million from $12.9 million in the prior-year quarter largely because Rec 2.0 products were not yet legalized.

The company also delivered a first-quarter net loss of $34.3 million, or ($0.17) per share on a diluted basis, compared to the 2020 first quarter net loss of $0.9 million, or ($0.01) per share, largely due to greater negative gross margin.

“We are pleased with our double-digit sales growth in the Canadian adult-use recreational market this past quarter as it reflects the success of many of our new product launches, particularly in the dried flower value segment,” said Greg Engel, CEO. “Now we look forward to our new higher-margin Edison dried flower offerings contributing substantially to overall revenue with even more new products to come in the next few quarters. We believe our product portfolio revitalization combined with additional resources to ramp up production and achieve greater economies of scale as well as our relentless focus on increased automation and cost efficiency opportunities position us well to generate further top-line growth and significantly improve gross margins.”

Gross revenue fell 11% to $25.3 million versus $28.4 million in Q1 2020 largely due to similar factors impacting net revenue and reflected the increase in excise taxes as a percentage of gross revenue in Q1 2021. In mid-calendar 2020, Organigram began a product portfolio revitalization to address what it believed to be some of the biggest consumer trends and preferences, including demand for value in large format, higher THC potency in dried flower as well as new genetic strains and novel products.

Less Than Stellar Outlook

Organigram said that stronger than expected demand for many of its new products resulted in competing priorities for the company’s existing staffing and production levels. “This contributed to delays in product launches and hindered consistent order fulfillment, which resulted in some meaningful missed revenue opportunities in Q1 Fiscal 2021 and is expected to continue to impact Q2 Fiscal 2021. As such, management has decided to ramp up staffing. By early Q3 Fiscal 2021, the Company plans to have hired 100 more positions, mostly in cultivation, and up to an additional 30 more positions in packaging.”

The company also warned that its revenues in the second fiscal quarter could also be impacted due to COVID closures. However, the stores are still offering online and delivery services.

Organigram also told investors that a negative non-cash adjustment to cost of sales for unabsorbed fixed overhead costs in Q2 Fiscal 2021 was anticipated to persist as a result of the company’s plans to cultivate less than its cultivation capacity. “Some production inefficiencies are anticipated to persist in the near to medium term and impact gross margins while Organigram continues to launch new products and optimizes production and staffing.”

Organigram launched a number of value segment products to respond to increased demand in this area and it said the new products have been well-received by the market, particularly SHRED (currently the Company’s deepest value offering). SHRED sales drove the Company’s revenue growth in Q1 Fiscal 2021 in the Canadian adult-use recreational market over Q4 Fiscal 2020. “As such, Organigram is focused on further revitalizing its Edison mainstream brand, which attracts higher product gross margins, by launching new dried flower offerings with unique strains and higher potency THC.”


Debra BorchardtNovember 10, 2020
Organigram2.jpg?fit=960%2C504&ssl=1

4min11260

Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), the parent company of Organigram Inc. announced an underwritten public offering of units of the company led by Canaccord Genuity Corp. who has agreed to purchase 32,500,000 Units from Organigram at a price of C$1.85 per Unit, for total gross proceeds of C$60,125,000. The company said it expects to use the net proceeds from the Offering to repay indebtedness and for working capital and other general corporate purposes. In addition, the company has granted the underwriters a 30-day option to purchase up to an additional 15% of the Units.

The shares were dropping over 15% in early trading to sell at $1.35, far from its year high of $3.64. The company last released earnings in July 2020 for the quarter that ended in May 2020. No date has been announced for the next earnings release.

In the company’s July MD&A it noted that it had a Bank of Montreal senior secured term loan maturing May 31, 2022 with principal repayments starting November 30, 2020
based on a 10 year amortization. s. The proceeds of the Term Loan were being used to fund the Phase 4 and 5 expansions of the Moncton campus and were also used to refinance the company’s long-term debt with Farm Credit Canada. Organigram has amended the loan twice. The MD&A stated, “The Facilities contain customary financial and restrictive covenants. At May 31, 2020, the Company was in compliance with these covenants. Subsequent to the quarter-end, on June 22, 2020, the Company drew the remaining balance of its Term Loan of $30,000 resulting in an aggregate amount outstanding of $115,000.” In April, the company had said it wasn’t in compliance with those covenants.

Falling Revenues

In July, Organigram blamed that quarter’s falling revenues on customers wanted value products.  “Lower flower sales volumes and a lower average net selling price driven by increased competition and as the large format dried flower value segment of the recreational market grew in Q3 2020 while there was a delay launching Organigram’s large-format value product due in part to a reduced workforce from COVID-19 and earlier delays in packaging material and equipment. Fickle customer preferences resulted in returns and price adjustments on the slow-moving aged products to the tune of $3.0 million was recognized during the third quarter. Write-offs of excess and unsaleable inventories of $19.3 million, of which $11.9 million was related to excess trim and concentrate.”

In April, the company blamed falling revenues on the decline to lower recreational flower and oil sales volumes compared to the second quarter in 2019 when there were large pipeline fill orders to Alberta and Ontario. “That occurred when there were supply shortages following the legalization of adult-use recreational cannabis sales. Other reasons for the revenue decline were lower average net selling prices from the increased competition and “evolving consumer preferences, for which a provision for returns and price adjustments was recorded in Q2 2020, mostly related to cannabis oil.” Organigram did note that the decreases were partially offset by the launch of Rec 2.0 products (vape products and cannabis-infused chocolates), and higher medical revenues as well as wholesale and international revenues, which had not occurred in the prior comparative quarter.”

 

 

 


Debra BorchardtJuly 21, 2020
Organigram2.jpg?fit=960%2C504&ssl=1

5min10520

Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) reported its third-quarter net revenue fell to $18.0 million from last year’s $24.8 million for the same time period ending in May. The net loss increased 783% to $89.8 million from last year’s net loss of $10 million.

“Since the onset of the global pandemic, the priority for us has been protecting the health and safety of our employees,” said Greg Engel, Organigram CEO. “This prioritization led to a significantly reduced workforce which contributed to a number of product launch delays, including our initial large format value offering, which affected opportunities to potentially capture significant market share and sales in dried flower, the largest product segment of the recreational market. Since then, we have launched a number of new products and line extensions with more to come. Furthermore, we believe we have right-sized our workforce and even before doing so, we were able to generate positive cash flow from operations in Q3 2020 as we continue to remain focused on building a business that delivers an attractive return on investment for shareholders.”

What Went Wrong

The company noted that several things went wrong which led to the drop in revenue. Organigram said in its statement, “Lower flower sales volumes and a lower average net selling price driven by increased competition and as the large format dried flower value segment of the recreational market grew in Q3 2020 while there was a delay launching Organigram’s large-format value product due in part to a reduced workforce from COVID-19 and earlier delays in packaging material and equipment.

Fickle customer preferences resulted in returns and price adjustments on the slow-moving aged products to the tune of $3.0 million was recognized during the third quarter. Write-offs of excess and unsaleable inventories of $19.3 million, of which $11.9 million was related to excess trim and concentrate. The company also took a $2.7 million in inventory write-down to net realizable value to reflect the declining price.

The third quarter resulted in a negative gross margin before fair value changes to biological assets and inventories of $26.4 million compared to positive $12.3 million in Q3 2019.

Organigram cut its workforce by ~25% or ~220 employees in June. However, it took $7.9 million in charges related to a reduced workforce due to COVID-19 comprised of $5.0 million in plant culling, $2.0 million in unabsorbed fixed overhead as a result of lower production volumes, and $0.9 million mostly related to lump-sum payments paid to temporarily laid-off workers.

New Value Products

Organigram had already planned to launch new value products and it seems those items are now on the shelves. The value segment strategy includes dried flower offerings launched in larger format sizes of 7g and 15g under the Trailblazer brand in mid-July 2020. The Trailblazer value brand offers higher THC levels versus what was offered when originally launched near the start of adult-use cannabis legalization, at a competitive price point such that the company believes it has the ability to compete in the growing large format value segment of the market.

The company said it expects to start shipping new core strains with higher potency THC during Q4 Fiscal 2020 and began rolling out further line extensions, including new size formats and three-pack pre-rolls of its most popular strains, such as Limelight and Blue Velvet, in June 2020.


StaffJune 23, 2020
daily_hit004.png?fit=1200%2C500&ssl=1

9min8520

It’s time for your Daily Hit of cannabis financial news for June 23, 2020. 

On The Site 

Aurora  

Aurora Cannabis Inc.  (NYSE: ACB) is the latest cannabis company to destroy the job argument as a reason for legalization. The Canadian cannabis company laid off 25% of Aurora’s SG&A staff, most of those to take place immediately and a roughly 30% reduction in production staff over the next two quarters. The cuts went to the highest levels including a restructuring of the executive leadership team and the recently announced retirement of President Steve Dobler. 

Aurora said it has initiated a plan to close operations at five facilities over the next two quarters in order to focus production and manufacturing at the Company’s larger scale and highly efficient sites. The company will take a charge of $60 during the fourth quarter in order to make these changes. 

Harvest Health 

Harvest Health & Recreation Inc. (OTCQX: HRVSF) said that it has completed the initial closing of certain retail properties in California to Hightimes Holding Corp. as previously announced on April 28, 2020, and June 12, 2020. The deal was recently amended from the original 13 operational and pending properties to ten. Those terms have now been reduced to a deal now valued at $67.5 million. The terms are now $1.5 million in cash and a $4.5 million one-year promissory note with 10% interest and $61.5 million in Series A Preferred stock issued by Hightimes Holding Corp. 

Organigram 

Organigram Holdings Inc.  (NASDAQ: OGI) issued a very brief announcement stating that the company was facing a lawsuit and that it was changing its newly launched Trailer Park Buds brand. Organigram said it wouldn’t comment on the case, which was started in the Court of Queen’s Bench in Alberta. It is a class action case that seeks damages from many cannabis companies including Organigram. 

In Other News 

TILT

TILT Holdings Inc. (OTCQB: TLLTF) reported Quarterly revenue of $42.4 million, up 27% Quarter over Quarter and 23% over Q1 2019. The company reported a positive net income of $50,925.  

“We are pleased to report our Q1 financials, which were driven by strong performances from our well-balanced portfolio of businesses,” said Mark Scatterday.  “Our first quarter revenue was up 27% Quarter over Quarter, and gross margins grew to 27.7%, demonstrating the durability of our business model as we support our customers in their quest to build winning cannabis brands.” 

“With our portfolio of market-leading businesses, TILT is activating multiple revenue streams leading to increased cash flow generation and shareholder value creation.  We are proud of our team’s agility and fortitude in the face of this ever-evolving and challenging environment, and look forward to continuing to build on the solid foundations we’ve established.  We believe that we will continue to move in a positive trajectory as the economy shifts into a more normalized environment.” 

Trading Ceased

The following companies are suspended pursuant to CSE Policy 3. The suspensions are considered Regulatory Halts as defined in National Instrument 23-101 Trading Rules. A Cease Trade Orders have been issued by one or more securities commissions. 

Alternate Health Corp.  AHG  Ontario Securities Commission 
Champignon Brands Inc.  SHRM  British Columbia Securities Commission 
CIM International Group Inc.  CIM  Ontario Securities Commission 
iAnthus Capital Holdings Inc.  IAN  Ontario Securities Commission 
Ionic Brands Corp.  IONC  Ontario Securities Commission 
Sunniva Inc.  SNN  Ontario Securities Commission and British Columbia Securities Commission 

Debra BorchardtJune 23, 2020
shutterstock_309992177.jpg?fit=960%2C640&ssl=1

5min22430

Organigram Holdings Inc.  (NASDAQ: OGI) issued a very brief announcement stating that the company was facing a lawsuit and that it was changing its newly launched Trailer Park Buds brand. Organigram said it wouldn’t comment on the case, which was started in the Court of Queen’s Bench in Alberta. It is a class action case that seeks damages from many cannabis companies including Organigram.

Pesticides In Cannabis

It wasn’t clear from the statement if this is a new case, but Organigram has already been battling one long-running case that stemmed from 2016. That complaint was filed against Organigram in 2017 after two recalls were issued over the cannabis products in 2016. Myclobutanil was the unapproved substance found in Organigram’s medical cannabis, and in 2017 the company acknowledged that some medical cannabis patients reported adverse effects from their product. The lead plaintiff, Dawn Rae Downton, said that unauthorized use of pesticides made her and other consumers sick.

Organigram lost its organic certification, but then subsequently got it back. Organigram has fought the case. Recently, Justice Peter Bryson on behalf of the appeals court wrote,  “There is no evidence that there is a workable methodology to determine that the proposed adverse health effects claims have a common cause.” The Nova Scotia Court of Appeals also dropped Downton’s claims for unjust enrichment. The order read, “Proposed common issues for those claims should not be certified.  The claim for unjust enrichment is improperly pleaded and should be struck.” The case looks like it is headed to trial.

Organigram has stated in its filings that there is no litigation that would have an adverse effect on the company.

Trailer Park Buds Rebrand

Organigram had planned to have a key brand in its portfolio called Trailer Park Buds, named after a Showcase Tv series called Trailer Park Boys. The group of friends is always trying to run get rich quick schemes that mostly revolve around selling cannabis. It seemed like a no-brainer, except that Canadian laws forbid celebrity endorsements.

Subsection 17(1) of the Act specifically states that cannabis products can’t be promoted “by means of the depiction of a person, character or animal, whether real or fictional,” nor “by presenting it or any of its brand elements in a manner that associates it or the brand element with, or evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring.”

The product finally arrived on the shelves in April 2020 and it looked like the problems with the regulators had been solved. Now, Organigram says, “After reviewing perception around our Trailer Park Buds brand with Health Canada, the Corporation is making some changes to its newly launched brand and logo. In the immediate term, Organigram will move to a modified version of the logo. Longer-term, the Corporation is exploring options for a permanent logo and brand name combination for its large-format value brand. The Corporation will continue to have this large format value offering in the market throughout.”

At-the-Market Program Completion

On a positive note, Organigram did remind investors that earlier this month it completed its at-the-market equity program previously announced on April 22, 2020, issuing an aggregate of 21,080,229 common shares for gross proceeds of approximately CAD$49 million.


Don't Miss This Week's Groundbreaking News

Join the thousands of subscribers who stay informed with GMR's exclusive news briefs delivered directly to your inbox every Friday afternoon.

We respect your privacy. See our privacy policy.


About Us

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


READ MORE



Recent Tweets

@GreenMarketRpt – 6 hours

Running a little late today but here’s your

@GreenMarketRpt – 19 hours

Nevada schools have received $159 million from cannabis taxes in FY21. @ShopPlanet13…

@GreenMarketRpt – 19 hours

Pretty scary results on Delta-8 products by The latest from

Back to Top

Don't Miss This Week's Groundbreaking News

Join the thousands of subscribers who stay informed with GMR's exclusive news briefs delivered directly to your inbox every Friday afternoon.

We respect your privacy. See our privacy policy.