Sundial Growers Archives - Green Market Report

StaffFebruary 2, 2021
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5min6920

Sundial Growers

Sundial Growers Inc. (NASDAQ: SNDL) has closed a best efforts underwritten registered offering of 100,000,000 Series A Units with gross proceeds from the offering coming at approximately $100 million, before deducting underwriting discounts and estimated offering expenses. In addition to that announcement, Sundial also said that it has priced a best efforts underwritten registered offering of 60,500,000 Series A Units raising $74.5 million. The exercise price of the Series A Warrants will be $1.10 per common share.

“Sundial’s current balance sheet and liquidity enable management to focus on delighting consumers while providing significant optionality to participate in North American consolidation,” said Sundial’s CEO, Zach George. “We are grateful for continued investor support as we pursue attractive capital allocation opportunities within the emerging cannabis industry.”

Following the closing of the offering and the expected closing of the additional units offering of US$74.5 million announced today, Sundial will have unrestricted cash of approximately $615 million, in addition to marketable securities and loans receivable of approximately $57 million, and approximately 1.52 billion common shares outstanding.

Aleafia Health

Aleafia Health Inc. (OTC: ALEAF) announced the full repayment in cash of its 8% unsecured convertible debt, which matured on February 2, 2021. Emblem Corp., which issued the Convertible Debt on February 2, 2018, was acquired by the Company on March 14, 2019.

“Our team is excited to see continued cannabis sales growth in 2021, driven by new products launched late last year,” said Aleafia Health CEO Geoffrey Benic. “The adult-use, medical and international cannabis markets are the pillars of our 2021 growth strategy, and we look forward to capitalizing on this global opportunity through the continued expansion of our cannabis product portfolio.”

In a statement, Aleafia gave the following update on the company’s businesses:

  • Medical Cannabis: Q4 2020 represents Aleafia Health’s best medical cannabis sales quarter to date. The company expects to continue this growth trajectory in 2021 with a more diverse product mix, expanded same-day delivery service which is critical during Covid-19, and through its strategic partnership with Unifor, Canada’s largest private sector union. In January, traditionally a month with slower demand, the company observed its fourth consecutive monthly record for medical cannabis revenue.
  • Adult-use Cannabis: The company’s adult-use market strategy, coupling an expanded product portfolio and dedicated sales team with deep cannabis experience, is now delivering promising results. In the first month of 2021, adult-use purchase orders have nearly surpassed the total order value in Q4 2020, driven in part by sales of an innovative product, Kin Slips® sublingual strips. Shipments to additional provincial markets are also expected to commence in the near term.
  • International Cannabis: Following the completion of its largest international cannabis shipment in Q4 2020, the Company has entered into supply agreements with new strategic partners in the European Union and Israel, significantly expanding international cannabis sales. Purchase orders for both markets, and a new order from Australia, are being processed, with the timing of delivery depends on the receipt of necessary import and export permits.
  • Product & Brand Development: The launch of new product formats and strengthening of core lines has substantially driven sales growth in early 2021. Further product development is also underway, with the near term launch of soft chews and new dried flower cultivars. Later this month, the company plan to provide further details on a much broader expansion of its adult-use brand and product portfolio. This will be led by new brands tailored to specific consumer segments, each featuring novel and high-demand formats, aligned with the needs of Canadian consumers.

Debra BorchardtJanuary 6, 2021
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6min19700

The battle is heating up between Sundial Growers Inc. (Nasdaq: SNDL) and Zenabis Investments Ltd. (OTC: ZBSIF) as it appears that Sundial is looking to capture Zenabis by becoming its creditor. Sundial’s subsidiary special purpose vehicle owns $51.9 million of the aggregate principal amount of senior secured debt of Zenabis Investments, which is a subsidiary of Zenabis Global Inc. Zenabis made a principal payment of $7.0 million on December 31, 2020 in accordance with the terms of the Senior Loan.  Despite that payment, a notice of default was delivered to Zenabis, and is arguing that it isn’t in default.

Sundial Attempts Forced Acquisition

The maneuvering began on December 30, 2020, when Sundial said it had made a strategic investment in Zenabis’ senior lender, which Zenabis said was an attempt to coerce Zenabis into being acquired by Sundial. In a statement, Zenabis said, “Prior to Sundial’s acquisition of the Senior Lender, the company had been in late-stage discussions with the Senior Lender relating to the extension of its obligation to repay $7 million of the principal amount of debt on December 31, 2020. Contrary to the discussions with the Senior Lender prior to the point at which it was acquired by Sundial, the Senior Lender substituted the soon to be consummated extension with a demand that the $7 million principal repayment be made on December 31, 2020 accompanied by a forbearance agreement.” Zenabis also said that the forbearance agreement required it to enter into exclusivity arrangements with the Senior Lender in relation to any sale of the company and also required Zenabis to accept significant potential financial penalties in excess of the outstanding balance of the debt owed to the Senior Lender.

On December 31, 2020, Zenabis entered into a letter agreement to sell $7 million of dried cannabis to another major Canadian licensed producer of cannabis and used that money to make the $7 million loan payment. Zenabis said that after making the payment it was alleged that there were a variety of defaults under the terms of the amended and restated debenture dated June 28, 2020.

The company said that none of the alleged defaults are for failure to make payments of principal or interest. In Zenabis’ statement, “The company believes the Senior Lender’s allegations to be spurious and without merit and intends to vigorously defend against what it considers to be an ill-disguised attempt to circumvent a fair and competitive process to acquire the company by improperly foreclosing the equity of the company or compelling Zenabis to enter into a transaction with Sundial.”

Zenabis Has Another Buyer

While Zenabis is fighting desperately to keep Sundial from taking over the company, it says it has started talks with another significant licensed cannabis producer. “There can be no assurance that these discussions will result in a binding agreement or the completion of a transaction. No further details regarding such discussions, including the identity of the counterparty, will be disclosed at this time,” said the company in a statement.

In June, Zenabis Global reported that it had entered into an agency agreement with a syndicate of agents co-led by AltaCorp Capital Inc. and Eight Capital and including Canaccord Genuity Corp., Haywood Securities Inc. and PI Financial Corp. for the sale of up to 157,643,875 Units at a price of $0.13 per Unit for gross proceeds of up to $20,493,704. Zenabis said it planned to use the net proceeds of the offering for general working capital and corporate purposes, the partial repayment of subordinated secured notes, the partial repayment of the Company’s unsecured convertible debentures, the partial or full repayment of it’s $7,000,000 third tranche of senior secured debt and the payment of an extension fee on the remaining balance of Tranche 3, if applicable.

Losses Piled Up
Zenabis has been unable to get ahead of its losses. In March 2020, it was 1 am when Zenabis issued its press release reported that its 2019 net revenue was $66.5 million, while its net loss for the year was $127 million or $0.53 per share. The net revenue did increase 850% over 2018’s $7 million, but the net loss for 2019 ballooned from 2018’s net loss of $32.5 million or $0.22 per share. The company has blamed declines in wholesale pricing as the reason for pressure on its revenue. Zenabis has not reported any earnings since the first quarter results for the period ending March 2020. At that time Zenabis said that its net losses dropped dramatically to $1.5 million in the first quarter from the fourth quarter’s net loss of $98 million.

 


Debra BorchardtAugust 14, 2020
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7min17550

Sundial Growers Inc. (NASDAQ: SNDL) reported that its revenues were rising and then quickly followed up with an offering. the stock fell from $0.70 to $0.51 on the news for a drop of over 25%.

First, the Canadian-based Sundial said its net cannabis revenue increased 44% sequentially in the second quarter of 2020 to $20.2 million. The company also delivered a net loss of $31.6 million, which was trimmed slightly from the first quarter’s net loss of $38.4 million. The company said the decreased loss of $6.8 million was primarily due to improvement on loss from operations, partially offset by provisions against the company’s inventory and biological assets to reflect current and rapidly evolving market conditions.

Zach George, Chief Executive Officer of Sundial said, “While we are pleased to be one of a small group of Canadian LP’s able to post quarterly revenues greater than $20 million, we remain focused on the intense competitive landscape and the need to gain greater scale to reach sustainable profitability.  We have made good progress in streamlining our business over the past six months, having eliminated non-core initiatives, reduced costs, and improved operating efficiencies. We still have significant work to do as we look to deliver on innovation, improve capacity utilization, and reduce our cost of goods sold. These initiatives, along with continued strong consumer demand and increased sales levels to date in 2020, should position us well for the balance of the year.”

Strategic Initiatives

In its press release, the company said that its board of directors had authorized management and its external advisors to consider a broader range of strategic alternatives, including a potential sale of the company, merger or other business combination, investments in other Canadian cannabis companies, including dispensaries and other retail outlets, dispositions of discrete brands and related assets, optimizing its assets, including the potential sale of its Rocky View and Merritt facilities. It is also looking at selling limited quantities of inventory at or below cost and entering into long-term supply agreements with other licensed producers, licensing or other strategic transactions involving the company, or any combination of the foregoing. Sundial has engaged a financial advisor to assist with these efforts.

Sundial also said that it secured an amendment to its $79.3 million syndicated credit agreement deferring all material financial covenants other than maintaining a minimum cash balance of $2.5 million and securing additional equity financing of US$10 million on or prior to December 1, 2020. The company also said that with regards to the Bridge Farm Group, $45 million of its term debt facility was extinguished with the remaining $73.2 million converted into non-interest-bearing convertible notes.

Offering Priced

Sundial followed the earnings announcement with a registered offering of 25,820,000 Series A Units sold at a price of US$0.50 per Series A Unit and each Series B Unit will be sold at a price of US$0.50 per Series B Unit, minus US$0.0001, and the remaining exercise price of each Series B Warrant will equal US$0.0001 per common share. Sundial’s gross proceeds from this offering are expected to be approximately US$20 million. The offering is expected to close on August 18, 2020. 

Subsequent to the quarter-end, Sundial filed a registration statement for a mixed shelf prospectus allowing it to issue common shares in an amount up to US$100 million at its discretion and intends to establish an At-the-Market (“ATM”) equity program covering issuances of up to US$50 million.

Revenue Details

Sundial reported that the average gross selling price per gram equivalent of branded products was $5.67 per gram in the second quarter of 2020, including net provisions, compared to $5.11 per gram in the prior quarter.  The change in average gross selling price was primarily due to an increase in vape sales. Average gross selling prices for unbranded flower in the second quarter were $2.82 per gram up from $2.74 per gram in the previous quarter despite competitive pressures in the wholesale market as a result of industry-wide increased inventory levels.

The gross revenue from vape cartridge sales was $6.3 million in the second quarter of 2020 representing a 44% increase from the previous quarter. The company sold 5,997 kilogram equivalents of cannabis in the second quarter of 2020, a 35% increase over the previous quarter sales of 4,437 kilogram equivalents.

Branded net cannabis sales in the second quarter of 2020 were $14.0 million compared to $7.6 million in the first quarter of 2020, an increase of 84%, supporting Sundial’s strategy to focus on increased sales to Provincial Boards.

The cost of goods sold per gram of bulk dried cannabis was $1.34 in the second quarter, an increase of 11% over $1.21 per gram in the prior quarter. The company said that the increase was due to a decrease in production capacity utilization and consequent allocation of manufacturing overhead over fewer grams.


William SumnerAugust 14, 2019
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6min12410

It’s time for your Daily Hit of cannabis financial news for August 14, 2019.

On the Site

Zenabis Global

Zenabis Global Inc. (TSX: ZENA) (OTC: ZBISF) reported that its second-quarter net revenue rose 78% to $25 million from last year’s $4.1 million for the period ending June 30, 2019. The company said that the results were achieved “despite being negatively impacted by temporary price reductions on inventory sold to provincial counterparties designed to help Zenabis to capture a larger share of the recreational cannabis market.”

Charlotte’s Web

Charlotte’s Web Holdings, Inc. (TSX: CWEB)(OTCQX: CWBHF), a producer of whole-plant CBD hemp extract products, reported its financial results for the second quarter ending June 30, 2019. The company’s revenue grew 45% to $25 million over last year’s $17.2 million for the same time period. The net income fell to $2.2 million from last year’s $3.7 million.

Who’s Really Buying CBD? And Why?

If you’re asking yourself who’s buying CBD products, just take a stroll to your local grocery store and mosey over to the vitamins and supplements section. Prepare to be overwhelmed by the thousands of nutraceutical “wellness” products filling the shelves – everything from melatonin chocolates for sleep-aid to echinacea for immune support – and yes, very recently products containing the compound that’s outshined Beyonce in popularity, CBD.

In Other News

Jushi Holdings

Today, Jushi Holdings Inc. released its financial results for the second quarter. Year-over-year, revenue for the quarter increased to approximately $200,000, and the gross profit was roughly $200,000. The net loss increased to $11.8 million, up considerably from $100,000 in the same period of the previous year. Despite low earnings and high losses, the company has a net working capital of $95.4 million, of which $86.7 million is in cash.

Sundial Growers

Sundial Growers Inc. (NADAQ: SNDL) has released their financial results for the second quarter. Gross revenue was $20.3 million. The net loss declined from $16.6 million in the first quarter to $12.4 million. Adjusted EBITDA was a loss of $500,000, up from a loss of $5.5 million. “Sundial accomplished great things this past quarter and our team’s solid execution across key areas of our business resulted in significant revenue growth,” said Torsten Kuenzlen, CEO of Sundial. “We are very confident in our go-to-market strategy, our strengthened balance sheet and our ability to execute upon organic growth opportunities.”

The Green Organic Dutchman

After the close of the market yesterday, The Green Organic Dutchman Holdings Ltd. (TSE: TGOD) reported their financial results for the second quarter. Revenue rose 20% over the previous quarter to $2.9 million. The net loss rose from $8.5 million in the previous year to $16.6 million.  “Q2 was pivotal for the Company as we began commercial production in the second phase of our Hamilton site and expanded our product line for the Grower’s Circle,” commented Brian Athaide, CEO of The Green Organic Dutchman.

Helix TCS

Today, Helix TCS, Inc. (OTCQB: HLIX), announced the release of its financial results for the second quarter. Quarterly revenue was $3.9 million. The gross profit was $1.9 million, with a gross margin of 49%. “We feel that we are still deeply undervalued due to our focus on execution as opposed to publicity, and are working to tell the simple truth of our constantly improving business and strong results,” said Helix TCS CEO and Executive Chairman, Zachary L. Venegas.

HempFusion

HempFusion, Inc. closed a brokered and non-brokered private placements of a total of 28,800,000 units of the Company at a price of US$1.25 per Unit for gross proceeds of US$36 million. The brokered portion of the Offering consisted of the sale of 26,227,650 Units for aggregate gross proceeds of US$32,784,563 and was completed by a syndicate of agents led by Canaccord Genuity Corp. and including Haywood Securities Inc. and PI Financial Corp. Due to demand, the Offering was upsized from US$20 million to US$36 million.


William SumnerJuly 23, 2019
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4min31550

It’s time for your Daily Hit of cannabis financial news for July 23, 2019.

On the Site

Consumer Preference Is Shaping Cannabis Consumption

As the restrictions on cannabis start loosening, new consumer demands are shaping the industry. The following infographic is contributed content from Ionic Brands.

Executive Spotlight: Marion Mariathasan of Simplifya

If there is someone who exemplifies a smart investor in the cannabis industry, it’s Marion Mariathasan, currently the co-founder and CEO of Simplifya, the industry’s leading regulatory compliance tool for licensees and those who audit them. Green Market Report caught up with Mariathasan to hear about his path to where he is now in the cannabis space.

Amplify Investments

Amplify Investments is getting into the cannabis industry. Today, Amplify ETF’s announced the launch of Amplify Seymour Cannabis ETF (NYSE Arca: CNBS), an actively managed ETF covering the cannabis industry. Tim Seymour, CIO of Seymour Asset Management and CNBC Fast Money co-host, will act as the fund’s portfolio manager.

In Other News

Curaleaf

Today, Curaleaf Holdings (OTCMKTS: CURLF) received a warning letter from the United States Food and Drug Administration regarding what the agency says are unsubstantiated health claims on its products; including the company’s  CBD Lotion, Pain-Relief Patch, Tincture, Disposable Vape Pen, and its Bido CBD for Pets. “You should take prompt action to correct the violations cited…” reads the letter. “Failure to promptly correct these violations may result in legal action without further notice, including, without limitation, seizure and injunction.” Curaleaf has 15 days to respond to the FDA’s letter and take corrective actions.

Sundial Growers

Sundial Growers, an early-stage Canadian cannabis producer, announced today the terms of its initial public offering (IPO). Hoping to raise $130 million, the company is offering 10 million shares ranging in price between $12 and $14. Founded in 2006, the company recorded an annual revenue of $1 million. Sundial hopes to lists its shares on the NASDAQ market under the symbol SNDL.  Cowen, BMO Capital Markets, RBC Capital Markets, Barclays, and CIBC Capital Markets are leading the IPO as joint bookrunners.


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