Tilray Archives - Page 2 of 9 - Green Market Report

Adam JacksonAugust 11, 2022
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12min6111

As talks revolving around the federal legalization of cannabis splinter in Congress, the question of whether the nascent industry can eat beverage alcohol’s margins remains a growing one.

In a report, titled, “Is Cannabis a Threat to Alcohol Sales?” BDSA Consumer Insights contends that while the crop is as popular as ever, any real breakthrough of consumer participation in adult-use and medical markets remains stymied in D.C. – casualties of political animosity and procedural acrobatics aimed at slowing progress.

Consumption Is High

“In just a few short years, attitudes towards cannabis across the country have shifted rapidly, with the share of those who have “bought-in” to cannabis consumption skyrocketing while fewer and fewer report not being open to consuming cannabis,” the report said.

BDS Analytics data showed that this past Spring, 51% of Americans in adult-use states claim to have consumed cannabis in the past six months, up 15% from Spring 2020. At the same time, the share who claim to be rejecters (non-consumers who are not open to consuming in the future) fell from 31% in Spring 2020 to just 23% in Spring 2022.

Overall consumer participation is lower in medical markets, yet BDS Analytics data suggest that consumer participation is growing at a similar rate.

The share of those who report past six-month consumption ballooned from just 26% to 41% between Spring 2020 and Spring 2022 – as the share of rejecters fell from 34% to 28% over that same period.

These realities have left many companies considering what they can learn from the alcohol industry — or how they can partner — as it continues to languish within its own prohibition.

“When we look deeper into the data, we see a cannabis consumer base that is knowledgeable, open to trying new product formats, and willing to experiment with incorporating cannabis consumption into more occasions throughout their lives,” the report said.

Stacking up to Big Alc

While consumer usage rates are starting to near beverage alcohol levels, experts generally agree that significant cannibalization of alcohol by cannabis would likely only occur over the course of at least another generation.

“While the trend toward alcohol’s displacement by cannabis is a durable one, especially among young adults, it is likely going to be a generational one, rather than one manifested in the next few years,” BDS Analytics Andy Seeger said. “Furthermore, it is expected that growing social acceptance will both increase substitutability and strengthen public preferences for cannabis over alcohol, though not completely dissuade cannabis consumers from drinking.”

Together, U.S. legal and illicit sales have been estimated to be $97 billion in 2021 – edging out against $87 million in spirit sales. Demand for cannabis in the U.S. now exceeds what the nation annually spends on spirits – and roughly matching what it spends on beer – according to a report by New Frontier Data.

Two-thirds of cannabis consumers surveyed by New Frontier said that they drink alcohol at least once per month, but 61% say that given a choice, they prefer cannabis.

Additionally, one-third of respondents said that they would like to quit drinking alcohol altogether, “though it is likely that the significant difference in social acceptability between alcohol and cannabis makes it more difficult to stop drinking entirely,” New Frontier wrote.

In another study, Colorado households – compared to all other states that did not legalize recreational cannabis – showed a 13% average monthly decrease in purchases of all alcoholic products combined and a 6% decrease in wine, according to a July 2021 report published in the Journal of Cannabis Research.

However, complicating the idea that cannabis will hurt alcohol sales, researchers’ findings showed that Washington saw an increase in spirits purchased while Oregon showed a significant decrease in monthly spirits purchased when compared to all other states without legalized recreational cannabis.

The conclusion was that the results “suggest that alcohol and cannabis are not clearly substituted nor complements to one another.”

“Future studies should examine additional states as more time passes and more post-legalization data becomes available, use cannabis purchase data and consider additional methods for control selection in quasi-experimental studies,” it said.

Shifting the culture (through regulatory action)

While the nature of cannabis consumption typically resides within the home, finding margins outside of those living spaces has been an ongoing challenge that has frustrated entrepreneurs in the industry.

Those who consume are consuming more often as consumers are pairing cannabis with alcohol and a variety of activities, BDS Analytics said in its report – though the lack of a three-tier system and on-premise regulation prevents cannabis companies from creating social hubs with experiences tied to their product.

“There is very, very little on-premise spending right now, which does add the margin,” Seeger said. “And that’s one of the things that the market, in general, is fighting right now – is a way to find margin. Those kinds of occasions would do that. That’s certainly what we see in beverage alcohol.”

According to BDS Analytics, the share of consumers in adult-use markets who report pairing cannabis with spirits or liquor rose from 12% in Spring 2018 to 22% in Spring 2022, while the share who report cannabis with cocktails doubled to a total of 20% in Spring 2022.

Pairing Up

Additionally, BDS Analytics found that consumers are increasingly pairing cannabis with activities not typically associated with cannabis.

The share of consumers in adult-use markets claiming that they pair cannabis with fine dining rose from 14% in Spring 2020 to 25% in Spring 2022, while the share of those who report using cannabis while exercising rose from 18% in Spring 2020 to 26% in Spring 2022.

“While these increases may not seem shocking to savvy industry insiders, they demonstrate that the use occasions for cannabis are incredibly varied,” the report said. “They also show opportunity for brands that can produce product with form factors and targeted formulations that speak to these varied need states and use occasions.”

Innovations in rapid-onset technology help push cannabis-infused, non-alcoholic beverage products to create a standard beverage serving of Delta-9 THC, such as Keith Villa’s non-alcoholic, cannabis-infused, Belgian-style ale — Ceria Brewing Co. — which sold out in Colorado dispensaries four hours after it’s release; or corona importer Constellation Brands multi-billion dollar investments in Canopy Growth.

Alcohol Meets Cannabis

More recently, distributing partnerships between cannabis companies and the alcohol industry are sprouting.

Fresh Hemp Foods, a part of Tilray’s Wellness (NASDAQ: TLRY) division, signed a distribution agreement on Wednesday with Southern Glazer’s Wine & Spirits — one of the nation’s largest distributors of wine and spirits.

The pact will provide Tilray Wellness with direct access to the alcohol distributor’s network, “reaching consumers everywhere from local bars and restaurants to independent and national grocery chains and convenience stores.”

“This agreement helps Tilray uniquely position itself to enter the multi-billion-dollar adult beverage category with a non-alcoholic, CBD beverage alternative, for consumers who want to relax and unwind,” said Tilray Wellness and Fresh Hemp Foods president Jared Simon.

The agreement allows Tilray to develop a U.S. CBD beverage portfolio within retail channels, “which will transition the category out of the fringe and into the mainstream,” the company said.

“Cannatourism” and the brewery model

Currently, marketing cannabis products toward specific experiential outcomes are limited without a legal framework.

Despite that, the industry has found creative ways to circumvent some of these limitations — even finding parallels with the brewery model.

Operators can establish deeper relationships with customers as people travel to and within states where cannabis is legal to visit the farms where the product is grown, similar to visiting wineries — also known as “cannatourism”.

“It’s a really big opportunity for states that have legalized cannabis to capitalize on that, not just for their own residents but also for tourists that might travel particularly for that,” said Christina Sava, an attorney at Troutman Pepper.

Other services help people find “Bud and Breakfast” spots — onsite consumption lounges in adult-use states such as a 420-friendly bed and breakfast type hotel.

“We kind of take it for granted that you can consume alcohol in entertainment venues and at bars and at restaurants,” Sava said, “but there really aren’t that many sanctioned spaces outside the home to try cannabis and share cannabis with your friends. I think this is an area that is ripe for evolution and will continue to grow.”


Debra BorchardtJuly 28, 2022
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4min1531

Tilray Brands, Inc.  (Nasdaq: TLRY) reported financial results for the fourth quarter and full fiscal year ending May 31, 2022, with net revenue growing 8% to $153.3 million during the fourth quarter from $142.2 million for the same period last year. This dramatically missed the Yahoo Finance average analyst estimate for revenues of $247 million and only barely grew over the third quarter’s revenue of $152 million.

The big news was that Tilray reported a net loss of $457.8 million during the fourth versus last year’s net income of $33.6 million. Tilray attributed the loss to changes in the market that caused a shift in our strategic priorities, and market conditions inclusive of higher rates of borrowing and lower foreign exchange rates. The net loss included a non-cash impairment of $395.0 million primarily impacting inventory, goodwill, and other intangible assets. exchange rates. Tilray Brands now believes it will be free cash flow positive in its business units in the fiscal year 2023.

Full Year Results

For the full year, net revenue increased 22% to $628.4 million for fiscal 2022, a nice improvement over last year’s $513.1 million. The company said the increase was driven by a 17.9% growth in cannabis net revenue to $237.5 million, a 150.0% increase in beverage alcohol net revenue of $71.5 million, and a 928.8% increase in wellness net revenue to $59.6 million. On a constant currency basis, net revenue increased by 29%.

The company’s fiscal year delivered a net loss of $434 million and that was mostly due to the non-cash impairment of $395.0 million in the fourth quarter. despite the large loss, Tilray ended the year with a hefty cushion of cash and cash equivalents totaling $415.9 million.

CEO Irwin D. Simon said, “Over the past year, we have accelerated the optimization of our operations and sharpened execution against our most profitable core business opportunities in medical, adult-use, wellness, and beverage-alcohol across Canada, Europe, and the U.S. At the same time, we accelerated our growth potential through tactical execution and strategic initiatives that enable accelerated revenue growth through improved cultivation, brand building, and distribution. These actions should also contribute to bottom-line performance improvement through production efficiencies and cost reductions. The outcome of this work is that we have driven top line growth across our markets, significantly improved our operating performance, and strengthened our balance sheet.”

Deal Updates

Following the closing of the Tilray-Aphria transaction, Tilray reported it had logged $85 million in cost synergies, exceeding its original target of delivering $80 million of cost savings by the end of the fiscal year 2023. The company attributed the savings to consolidation in key areas of cultivation and production, cannabis and product purchasing, sales and marketing, and corporate expenses. Tilray believes it can squeeze another $20 million of savings, and now expects to deliver a total of $100 million in cost synergies from the transaction by the end of the fiscal year 2023. Tilray said its acquisition of HEXO’s senior secured convertible note closed on July 12, 2022, bringing immediate accretion to the company and laying the groundwork for federal legalization in the U.S.


StaffJuly 19, 2022
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7min1980

The Daily Hit is a recap of the top cannabis business stories for July 19, 2022.

ON THE SITE

Will Cannabis Be Recession Proof?

No one can predict a recession, but it seems likely that some sort of stress is expected on the economy. On a positive note, the big banks have all seemed to dial down the heat on recession fears. During the latest round of earnings here’s what some of them said. Read more here.

High Tide Finds Funds In Bought Deal

High Tide Inc. (NASDAQ: HITI) (TSXV: HITI) has entered into an agreement with a syndicate of underwriters led by Echelon Wealth Partners Inc. have agreed to purchase 4,310,400 units at a price of C$2.32 per Unit for total gross proceeds of approximately C$10 million. Despite raising the money in the bought deal, the company cautioned in its remarks that the overall cannabis landscape was becoming more challenging. Read more here.

CBD’s Future Totally Dependent On FDA

Cannabis research firm Brightfield Group released its CBD: FDA Impact and the Path Forward/ 2022 Mid-Year US CBD Report, which found that growth in the CBD industry is “heavily dependent” on Food and Drug Administration (FDA) regulation, though there has been little progress on federal regulation for cannabidiol (CBD) since provisions removing hemp and hemp derivatives from prohibition were passed in the Farm Act of 2018. Read more here.

Psychedelic Decriminalization Picks Up Steam

It seems like every other week or so, another city or state is working on the decriminalization of psychedelics. In fact, the whole country is virtually awash in legislative action related to reforms about psychedelics. It’s been an active three years, with no slowdown in sight for 2022. Read more here.

IN OTHER NEWS

Canopy Growth Corporation

Canopy Growth Corporation (TSX: WEED) (NASDAQ: CGC) announced yesterdaay that it has closed its previously announced exchange transaction of certain 4.25% unsecured notes due 2023 in order to reduce its debt obligations by approximately $263 million. Constellation Brands, Inc., through its wholly owned subsidiary Greenstar Canada Investment Limited Partnership, participated in the transaction. Read more here.

Tilray Brands, Inc.

Tilray Brands, Inc. (Nasdaq: TLRY; TSX: TLRY), a global cannabis-lifestyle and consumer packaged goods company, today announced that its medical cannabis division, Tilray Medical, launched a new cannabis education platform, WeCare-MedicalCannabis, dedicated to providing resources and educating healthcare practitioners and patients about medical cannabis. Read more here.

Juva Life Inc.

Juva Life Inc. (CSE: JUVA) (OTCQB: JUVAF) (FRANKFURT: 4VV), a life science company with pharmaceutical research and development and consumer-facing operations in cannabis production and distribution, today announced its financial and operating results for Q1 of 2022. $1.16 million of revenue was generated in Q1 2022, almost double the $.58 million of revenue in the same period for the prior year. Read more here.

Kaya Group

Kaya Group (OTC: NUGL), the first medicinal Ganja herb house in the Caribbean and holistic, wellness-focused ecosystem, has now received its first orders for its Jamaican roots herbs brand in the fast-growing California and U.S. market. California has sold $13.5 billion of adult-use cannabis since launching sales in 2018. Read more here.

springbig

springbig (NASDAQ: SBIG, SBIGW), a provider of SaaS-based marketing solutions, consumer mobile app experiences and omni-channel loyalty programs to the cannabis industry, today highlighted data recorded during the weekends of July 4 and July 10. On Independence Day, the company recorded an 18% increase in texts sent and a 22% increase in total campaigns distributed. Additional data obtained by springbig also highlighted an increase in overall sales, reward redemptions and visits. Read more here.

Purissima

Purissima, a biotechnology health and wellness company, announced today an exclusive, multi-year processing and distribution partnership with Open Book Extracts, a total solution provider for high quality cannabinoid ingredients, concept-to-market formulation services, and finished goods manufacturing for the industry’s leading brands. This collaboration also marks Purissima as the first company to achieve commercial scale production of minor cannabinoids using Purissima’s proprietary algae-based fermentation platform. Kicking off production in July 2022, the compounds are proposed to be available to manufacturers and sold to consumer brands before fall 2022. Read more here.

IM Cannabis Corp.

IM Cannabis Corp. (CSE: IMCC) (NASDAQ: IMCC), a medical and adult-use recreational cannabis company with operations in Israel, Canada, and Germany, today announced that the company received written notification from The Nasdaq Stock Market LLC on July 13, 2022, that the company is not in compliance with the minimum bid price requirement set forth in Nasdaq Rules for continued listing on Nasdaq. Read more here.

ZYUS Life Sciences Inc.

ZYUS Life Sciences Inc., a Canadian life sciences company leading scientific research and development in phyto-therapeutics, has completed its first international shipment of ZYUS’ first-generation cannabinoid oil formulations to the Australian medical cannabis market in preparation for the sales and distribution under Australia’s Therapeutic Goods Act special access and authorized prescriber scheme. Read more here.


StaffJuly 5, 2022
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9min1010

The Daily Hit is a recap of the top cannabis business stories for July 5, 2022.

ON THE SITE

Emerald Health Gives Update on Cannabis Exit

On Monday, Canadian-based Emerald Health Therapeutics, Inc. (CSE: EMH) (OTCQB: EMHTF)  reported its financial results for the year ended December 31, 2021, and gave an update on its plans to exit the cannabis industry. Total revenue for Emerald Health in 2021 fell to C$11.8 million from last year’s C$14.2 million. Read more here.

Analyst Sees Value in Beaten Down Cannabis MSOs

Cantor Fitzgerald analyst Pablo Zuanic issued a report this morning in which he sees some value in the beaten-up cannabis group, although he also cautioned that numerous roadblocks remain. He was clear that the group may not have even found a bottom yet as prices continue to slide along with the broader market. Zuanic also noted that even the second quarter might not bring relief on valuations, but he is a selective buyer at these levels. Having said that he said investors may not see any meaningful upside for another two to three years and that it would probably only occur when some sort of federal reform occurs. Read more here.

SPACs Losing Their Mojos as Deals get Pushed Out

SPACs (Special Purpose Acquisition Corp.) were the hottest thing going on in the cannabis industry for the past couple of years, but the buzz may be wearing off. These SPACs would raise millions and then search for a “qualifying transaction.”  In other words, the money was looking for a company to essentially buy and take public. It was an easy way for cannabis companies to get investor money and quickly become publicly-traded stocks. However, these deals frequently turned sour for the secondary buyers dampening the interest. Read more here.

Flower One’s Revenue Drops in Fourth Quarter, Restructures Debt Payments

Flower One Holdings Inc.  (CSE: FONE) (OTCQX: FLOOF) has made some movement with its ongoing restructuring, including the restructuring of its term debt and its master lease. This comes on the heels of the company reporting its annual earnings. For the year ending in December 2021, Flower One reported 2021 revenue of $58.4 million, representing a 70% increase from the prior year. Despite all that revenue, as of December 31, 2021, the company only had cash and cash equivalents of $0.9 million, compared with $1.1 million as of December 31, 2020. Read more here.

Psychedelics Could be a Real Cure for Alcoholism

According to a substance use study, alcohol use disorder accounts for a majority of substance use disorder cases in the U.S., with 14.5 million or 5.3 percent of Americans aged 12 or older meeting diagnostic criteria for an alcohol use disorder in 2017 (AUD). It is a significant medical and social problem in American society, accounting for 88,000 deaths per year and more than $250 billion in annual costs. Alcohol misuse is also implicated in cancer, liver disease, and heart disease. Read more here.

IN OTHER NEWS

Acreage Holdings, Inc., Chalice Brands Ltd.

Acreage Holdings, Inc. (CSE:ACRG.A.U, ACRG.B.U), (OTCQX: ACRHF, ACRDF), a vertically integrated, multi-state operator of cannabis cultivation and retailing facilities in the U.S., today announced that it has executed and closed an amendment to its previously announced asset purchase and services agreement with Chalice Brands Ltd. (CSE:CHAL) (OTCQB:CHALF), completing the sale of the company’s four Oregon retail dispensaries branded as Cannabliss & Co. Read more here.

HEXO Corp, Tilray Brands, Inc.

HEXO Corp (TSX: HEXO; NASDAQ: HEXO) announced that at its reconvened special meeting of shareholders held today, holders of common shares of HEXO approved the previously announced transaction with Tilray Brands, Inc. (Nasdaq | TSX: TLRY) and HT Investments MA LLC. The meeting was originally held on June 14, 2022, and was adjourned prior to shareholders voting on the note transaction in order to provide shareholders with additional time to consider the previously announced amendments to the note transaction. Read more here.

Akerna Corp.

Akerna Corp. (Nasdaq: KERN), an enterprise software company and developer in the global cannabis industry, today announced the closing of its previously announced underwritten public offering of (i) 29,382,861 units of the company consisting of 29,382,861 shares of common stock together with common stock warrants to purchase up to 29,382,861 shares of common stock and (ii) 14,095,400 pre-funded units, consisting of 14,095,400 pre-funded warrants, with each pre-funded warrant exercisable for one share of common stock, together with common warrants to purchase up to 14,095,400 shares of common stock. Read more here.

Entourage Health Corp.

Entourage Health Corp. (TSX-V:ENTG) (OTCQX:ETRGF) (FSE:4WE), a Canadian producer and distributor of cannabis products, announced it has amended its existing senior secured credit facility entered into on March 29, 2019, between the company and Bank of Montreal, and its existing second secured credit facility with an affiliate of the LiUNA Pension Fund of Central and Eastern Canada, entered into on September 30, 2020. The latest amendments to the Senior Credit Facility and Second Credit Facility modify the respective terms under which Entourage secured debt financing. Read more here.

Alcohol and Gaming Commission of Ontario

Today the Royal Canadian Mounted Police (RCMP) announced it has laid multiple criminal charges against five individuals. Their investigation discovered that over $3 Million CAD from the illegal sale of cannabis was laundered, including through casinos in the GTA and Niagara regions. Members of the Ontario Provincial Police’s Investigation and Enforcement Bureau (IEB), attached to the Alcohol and Gaming Commission of Ontario (AGCO) provided assistance to the RCMP throughout their investigation. Read more here.

Stem Holdings, Inc.

Stem Holdings, Inc. (OTCQX: STMH, CSE: STEM), a vertically-integrated cannabis and hemp branded products company, announced that the company has received the approval of the Holders of the Warrants and the Holders of the Convertible Debentures to reprice the convertible securities issued in connection with the company’s special warrant financing, which matured on June 27, 2022, and will mature September 14, 2022. Read more here.

The Flowr Corporation

The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF) herein announces the resignation of Maurice Levesque and Don Duet from the Board of Directors who are departing in order to pursue other opportunities. Flowr would like to thank Mr. Levesque and Mr. Duet for their service to the Company and wish them success in their future endeavors. Read more here.


StaffJune 22, 2022
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5min850

The Daily Hit is a recap of the top cannabis business stories for June 22, 2022.

ON THE SITE

Supreme Court Just Says No

Two Supreme Courts rejected employee requests to have employers reimburse for medical cannabis costs. On Tuesday, the U.S. Supreme Court said it would not hear an appeal that pits the Controlled Substances Act (CSA) against a state workers’ compensation law requiring employers to reimburse workers for medical cannabis. Like many issues within the cannabis industry, there are competing and conflicting government positions. In this situation, the CSA says cannabis is federally illegal, while state law is saying employers need to reimburse employees for medical costs. Read more here.

Analysts Downgrade Scotts, Cuts Targets on Hydrofarm, GroGen

When Scotts Miracle-Gro (NYSE: SMG) first began telling shareholders that its hydroponic subsidiary Hawthorne was slowing in sales, it seemed like a temporary situation. That might not be the case. A new in-depth report by Wells Fargo analyst Chris Carey based on survey data collected by Cannabiz Media is depressing, to say the least. Reality bites. Carey’s response to the study has promoted him to downgrade shares of Scotts to Equal Weight and roping his price target to $85 (from $115). Read more here.

Greenlane Sells Off Assets to Generate Cash

Greenlane Holdings, Inc.  (NASDAQ: GNLN) has said it has a plan to generate more than $30 million in liquidity. Part of the company’s strategy to achieve this goal includes getting a loan to cover its working capital needs, selling the company’s headquarters building in Boca Raton Florida, and getting rid of non-sore and lower-margin inventory. Greenlane has been through a series of struggles since the company’s salad days of selling Juul vapes. Read more here.

IN OTHER NEWS

High Tide Inc.

High Tide Inc. (Nasdaq: HITI) (TSXV: HITI) (FSE: 2LYA), a retail-focused cannabis company with bricks-and-mortar as well as global e-commerce assets, announced that it has closed a short-term debt financing from an arm’s length credit provider for CAD$5 million. The company has chosen to proceed with a small debt facility at this time as the company’s proposed non-dilutive credit facilities with ConnectFirst Credit Union for CAD$30 million (as previously announced on April 18, 2022) has been delayed until July 2022. Read more here.

Tilray Brands, Inc.

Tilray Brands, Inc. (NASDAQ: TLRY; TSX: TLRY), a global cannabis-lifestyle and consumer packaged goods company, welcomed the Luxembourg Ministry of Health Delegation to the Company’s European campus and facility located in Cantanhede, Portugal. Tilray’s EU-GMP-certified medical cannabis cultivation and manufacturing facility in Portugal provides patients in Luxembourg and across Europe, where permitted by law, with safe and reliable access to high-quality medical cannabis. Read more here.

Ultimate Sports, Inc.

Ultimate Sports, Inc. (OTC: USPS), a men’s health services provider, announces negotiations to acquire Sannabis S.A.S., a Colombian cannabis company. Sannabis, and affiliated companies, hold all four cannabis licenses: Seed Use, THC-Cultivation, Non-THC (Hemp)-Cultivation, and Fabrication/Export. Read more here.

Kiva Sales and Service, Jones Soda Co.

Jones Soda Co. (OTCQB: JSDA) (CSE: JSDA), a craft soda known for its unconventional flavors and user photo-submitted labels, today announced an exclusive partnership with Kiva Sales and Service, a cannabis industry sales and distribution platform, to launch its new line of cannabis-infused beverages, Mary Jones, into the California market. Read more here.

The Valens Company Inc., Coldhaus Distribution

The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS)), a manufacturer of branded cannabis products, today announced that it has secured an exclusive cannabis partnership with Coldhaus Distribution to provide integrated logistics solutions for Valens-branded cannabis products across Ontario, Alberta, and British Columbia. Read more here.


Debra BorchardtJune 21, 2022
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6min1680

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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3min2060

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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3min1310

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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4min1240

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 BorchardtApril 6, 2022
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4min1740

Tilray Brands, Inc. (Nasdaq: TLRY) reported financial results for the third fiscal quarter ending February 28, 2022. Tilray‘s ret revenue increased 23% to $152 million during the third quarter from $124 million in the prior-year quarter. However, it fell sequentially from the second quarter’s revenue of $155 million and slightly missed the revenue estimates by roughly $4.7 million. The increase was driven by a 32% growth in cannabis revenue to $55 million, 64% growth in beverage alcohol revenue to $20 million, and wellness revenue of $15 million.

The company also reported a net income of $52 million. and earnings per share of $0.09, which beat estimates by $0.17. However, this net income improvement was almost entirely from a $76M non-cash adjustment to the company’s warrant liability and the future value of convertible debentures(which occurs due to the share price falling). Thus, the $54.7 million of operating losses turned into $5.8M in positive net income.

“Our third quarter results reflect progress and momentum across all of our key business segments and geographies, setting the stage to achieve our target for $4B in revenue by the end of fiscal 2024,” said CEO Irwin D. Simon. “Tilray Medical – which now operates under a cohesive strategy and mission – has a near 20% share in Germany, providing clear benefits in its own right as well as a first-mover advantage that we will leverage as Germany and the EU move towards broader adult-use and medical use legalization. In Canada, we maintained our leading market share position amid intense competition – and believe that our strong capital position, operational excellence and pricing and marketing adjustments will work in concert to help ensure we reclaim share in the coming quarters. This effort will gain further support from the fundamental appeal of our brands and product innovation which, as stores continue re-opening, will resonate powerfully with consumers. In the U.S., our SweetWater Brewing, Breckenridge Distillery, and Manitoba Harvest businesses are profitable, growing and emerging as nationwide, iconic brands with loyal followings that will be home to THC-based products upon U.S. federal legalization.”

Tilray said it maintained its number one leadership position in Canada with a 10.2% cannabis market share driven by its portfolio of adult-use brands, and growth in pre-roll and vape product categories. Cost synergies from Aphria-Tilray combination has achieved on a run-rate basis to date $76 million. The company said it expects to reach the $80 million synergy target by May 31, 2022, five months ahead of schedule, and to generate an additional $20 million in synergies in fiscal 2023.

Mr. Simon continued, “We also continued sourcing and executing strategic and shareholder-friendly transactions that provide value with notable upside. Our most recent example is the proposed agreement to purchase the HEXO senior secured convertible notes, which provides a path for meaningful future equity ownership of HEXO as it executes on its transformation. The proposed HEXO transaction is also expected to facilitate complementary commercial and product innovation and drive production and operating efficiencies. As the global economy re-opens, we are confident that the global cannabis powerhouse at the heart of the Tilray Brands’ value proposition will deliver sustained and tangible shareholder value.”


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