SOL Global Investments Corp. (CSE: SOL) (OTCPK: SOLCF) released its financial results for the year ending March 31, 2019 with net income of $94.9 million or $2.30 per diluted share.
Most of the income was based on a September 2018 sale of its LATAM investment to Aphria. The fair market value of the transaction was $297 million and the cost related to the investment was $93 million leaving a gain on the sale of $204 million. The company disclosed that it was aware of two legal actions relating to the disposal of the LATAM assets but noted that no amounts have been accrued in the financial statements. SOL Global almost doubled its payroll costs going from $6.7 million in 2018 to $13.3 million in 2019.
SOL Global’s Chief Investments Officer Andy DeFrancesco believes that the fiscal-year results validate the strategic creation and direction of the company, “Brady Cobb, SOL Global’s CEO, has been by my side since building the foundation of the US Cannabis Market since 2015. Specifically, Brady worked with the state of Florida to shape the legal and regulatory structure of one of the most coveted markets in the cannabis sector, while I built a structure and strategy around partnerships and financing.”
DeFrancesco added, “After early success in Canada, and followed by early success in the state of Florida, it was clear that the US cannabis market was poised for a strong run and incredible growth. We took control of a faltering and nearly insolvent single-focused biotech venture and created what SOL Global has become, by assembling one of the best THC and CBD portfolios in the sector.”
DeFrancesco concluded “We moved quickly with our second Florida acquisition, 3 Boys Farm, as well as key investments in leading THC and CBD brands and operators throughout the US and California. We implemented a vision for growth in multiple verticals within the Cannabis sector and used our deep roots into the quickly evolving US Cannabis legislative reform efforts (where Brady is a huge contributor) to stay two steps ahead of our competition. We also looked to what we saw as related businesses, outside the box and towards the future. It’s now time for SOL Global to focus on the growth of its THC operations via our new MSO and to foster the expansion of our vertically integrated Hemp & CBD Operations throughout the U.S., as well as Italy, the United Kingdom and Brazil under the most amazing teams we have assembled.”
Post Fiscal 2019
On April 8, 2019, SOL Global acquired CannCure, an entity that indirectly holds a 100% interest in 3 Boys Farms, LLC for C$55,128,200 or $41,207,519) which was partially satisfied by the issuance of 7,317,500 of the company’s common shares at a negotiated price of CAD $4.00 per share totaling $29,270,000 (USD$21,878,878).
There is a unique footnote with regards to 3 Boys Farms. If SOL Global agrees to sell 3 Boys within two years of the closing date, it will pay an earn-out structured as follows according to the company: (i) the company and the sellers will each receive funds from the sale proceeds as reimbursement of the amounts each had invested into 3 Boys; and (ii) any remaining amount from such sale proceeds would be split, with 42% of any additional proceeds being earned by the Company and 58% of any additional proceeds being earned by the sellers. If SOL Global doesn’t sell 3 Boys within two years of the closing date, it will be required to pay the sellers $107,025,000 (USD$80,000,000).
Following the end of the fiscal year, SOL Global completed a $50,000,000 private placement financing on July 8, 2019 by way of the issue and sale of a senior secured non-convertible debenture. In addition to the deal, the company announced that its President Jonathan Gilbert was resigning as the President of the wholly-owned subsidiary, Impact Biosciences Inc. (formerly Scythian Biosciences Inc.).
On July 29, 2019, the company announced a further investment into Heavenly Rx, bringing its total investment to $23,909,00.
Cobb went on to add, “By the end of 2019, the companies we’ve founded and have built from the ground up — our CBD-focused HeavenlyRx and our soon to launch multi state operator, 3 Emeralds — are expected to be operating independently, bringing months of hard work to fruition.”
HeavenlyRx Ltd is planning to list publicly as an independent operating CBD, Hemp and Wellness company in the U.S. which could happen in August 2019. HeavenlyRx, is under the leadership of former Kellogg’s North America President Paul Norman, who is performing a strategic review of the board and management and the team will be announced once this has been completed. Additionally, as the company previously released, HeavenlyRx has closed on several of its key portfolio company investments including Blühen Botanicals (cultivation, processing and oil/isolate processing and production), Jones Soda (a leading premium soda-maker based in Seattle, Washington), TRU Brands (emerging health and wellness-focused food company), and Airganics (a company that develops high-performance wellness products). These portfolio companies consist of established brands that are generating revenue and soon to launch, innovative products, all of which have a unique application for the use of CBD.