Pandemic Pauses Planet 13 Growth in Q1 – New Cannabis Ventures

June 01, 2020
 

Planet 13 Announces First Quarter 2020 Financial Results
  • Q1 2020 Revenue of $16.8 million; EBITDA of $2.5 million
  • SuperStore accounted for 10.1% of all Nevada cannabis dispensary revenue in Q1 2020¹

All figures are reported in United States dollars ($) unless otherwise indicated

LAS VEGAS, June 1, 2020 /PRNewswire/ – Planet 13 Holdings Inc. (CSE: PLTH) (OTCQB: PLNHF) (“Planet 13” or the “Company”), a leading vertically-integrated Nevada cannabis company, today announced its financial results for the three-month period ended March 31, 2020. Planet 13’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”).

Larry Scheffler, Co-CEO of Planet 13 commented, “I am very proud of the solid Q1 Revenue and EBITDA delivered by our team, despite a sharp COVID-19 related drop-off in traffic in the latter half of March. We continued to grow our market share in Nevada during the quarter, with the SuperStore accounting for 10.1% of all retail cannabis sales in the state in quarter – our best yet.”

While Q2 has been a challenging period for all Nevada businesses, Planet 13 pivoted quickly to a delivery-based model, which has significantly lessened the impact of lower tourist traffic, while broadening the SuperStore’s long-term customer base and opportunity set.

Larry Scheffler, Co-CEO of Planet 13

As Nevada has started reopening, allowing both curbside pickup and limited in-store sales, we have seen a corresponding pickup in sales. As expected, we have also seen continued traction within our delivery program, with over 40% of our customers continuing to choose Planet 13 delivery as their preferred method of shopping.

Bob Groesbeck, Co-CEO added, “Our objectives during this time have been to maintain a solid balance sheet, strengthen and grow our local customer base, expand alternative sales channels and set the Company up for growth on the other side of this pandemic. Prior to the impact of COVID-19 we were heading for another record month in March at the SuperStore and expect the momentum to resume as activity in the state continues to increase. Having renegotiated and closed the acquisition of the Santa Ana dispensary license and lease we’ve added meaningfully to our out-of-state growth profile. We look forward to bringing the Planet 13 experience to Californians. While COVID-19 continues to impact all businesses in Nevada, we see positive signs every day of a progressive return to normal activities. I want to thank our entire team for their efforts, as well as our customers for including us as a part of their daily lives.”

_______________________

1 https://tax.nv.gov/uploadedFiles/taxnvgov/Content/TaxLibrary/NV-Marijuana-Revenue-FY20(4).pdf

Financial Highlights – Q1 – 2020

Operating Results

All comparisons below are to the quarter ended March 31, 2019, unless otherwise noted

  • Revenues were $16.8 million as compared to $13.8 million, an increase of 21.4%
  • Gross profit before biological adjustments was $9.0 million or 53.9% as compared to $7.4 million or 53.8%, an increase of 21.5%
  • Operating expenses, excluding non-cash compensation expense, were $7.0 million as compared to $5.9 million, an increase of 17.3%
  • Net income before taxes of $0.3 million as compared to a net income of $0.1 million
  • Net loss of $1.4 million as compared to a net loss of $1.4 million
  • Adjusted EBITDA of $2.5 million as compared to Adjusted EBITDA of $1.7 million

Balance Sheet

All comparisons below are to December 31, 2019, unless otherwise noted

  • Cash of $13.9 million as compared to $12.8 million
  • Total assets of $66.5 million as compared to $62.9 million
  • Total liabilities of $24.7 million as compared to $21.6 million

Q1 Highlights and Recent Developments

For a more comprehensive overview of these highlights and recent developments, please refer to Planet 13’s Management’s Discussion and Analysis of the Financial Condition and Results of Operations for the Three Months Ended March 31, 2020 (the “MD&A”).

  • On January 20, 2020, Planet 13 announced the opening of dosist™ shop-in-shop wellness experience.
  • On March 19, 2020, Planet 13 announced offering expanded online ordering and delivery services.
  • On March 23, 2020, Planet 13 announced 24-hour delivery service.
  • On April 13, 2020, Planet 13 announced termination of the Santa Ana acquisition.
  • On April 17, 2020, Planet 13 announced the renegotiation of the Santa Ana acquisition.
  • On May 21, 2020, Planet 13 announced the acquisition of a dispensary license and the close of the Santa Ana acquisition.

Results of Operations (Summary)

The following tables set forth consolidated statements of financial information for the three-month periods ending March 31, 2020 and March 31, 2019. For further information regarding the Company’s financial results for these periods, please refer to the Company’s interim financial statements for the period ended March 31, 2020 together with the MD&A, available on Planet 13’s issuer profile on SEDAR at www.sedar.com and the Company’s website https://www.planet13holdings.com.

Outstanding Shares

As at the date of this report, the Company had 86,998,532 common shares and 59,173,872 class A convertible, restricted voting shares issued and outstanding for a total of 146,139,404 shares outstanding. There were 558,507 options issued and outstanding of which 250,834 have fully vested. There were 11,666,653 warrants outstanding and 3,388,589 RSU’s outstanding of which nil RSUs had fully vested as at the date of this report.

Conference Call

Planet 13 will host a conference call on Monday, June 1, 2020 at 5:00 p.m. EST to discuss its first quarter financial results and provide investors with key business highlights. The call will be chaired by Bob Groesbeck, Co-CEO, Larry Scheffler, Co-CEO, and Dennis Logan, CFO.

CONFERENCE CALL DETAILS

Date: June 1, 2020 | Time: 5:00 p.m. EST
Participant Dial-in: 416-764-8688 or 1-888-390-0546
Replay Dial-in: 416-764-8677 or 1-888-390-0541
(Available for 2 weeks)
Reference Number: 134387
Listen to webcast: https://bit.ly/2LYV5xD

Financial Measures

There are measures included in this news release that do not have a standardized meaning under generally accepted accounting principles (GAAP) and therefore may not be comparable to similarly titled measures and metrics presented by other publicly traded companies. The Company includes these measures because it believes certain investors use these measures and metrics as a means of assessing financial performance. EBITDA (earnings before interest, taxes, depreciation and amortization) is calculated as net earnings before finance costs (net of finance income), income tax expense, and depreciation and amortization of intangibles and is a non-GAAP financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.

About Planet 13

Planet 13 (www.planet13holdings.com) is a vertically integrated cannabis company based in Nevada, with award-winning cultivation, production and dispensary operations in Las Vegas – the entertainment capital of the world. Planet 13’s mission is to build a recognizable global brand known for world-class dispensary operations and a creator of innovative cannabis products. Planet 13’s shares trade on the Canadian Stock Exchange (CSE) under the symbol PLTH and OTCQX under the symbol PLNHF.

Original press release

Canadian Cannabis Stocks Extend Spring Surge in May – New Cannabis Ventures

May 31, 2020
 

Canadian licensed producers, after twelve consecutive monthly declines through March, posted their second straight gain during May, with the Canadian Cannabis LP Index rising 20.2% to 319.23, far surpassing the performance of the S&P/TSX Composite, which rose 2.8%:

Over the past year, the index has declined 67.3%:

The index remains substantially below the all-time closing high of 1314.33 in September 2018, just ahead of Canadian legalization. In March, it posted a new 52-week closing low of 196.10, a level not seen since late 2016, and it closed 62.8% above that level at the end of May. The index has declined 18.9% from its close of 393.78 at the end of 2019:

The index, which included 35 publicly-traded licensed producers that traded in Canada at the end of March, with equal weighting, is rebalanced monthly. Each of the members is also included in a sub-index, with 9 in the Canadian Cannabis LP Tier 1 Index, 8 in the Canadian Cannabis LP Tier 2 Index and 18 in the Canadian Cannabis LP Tier 3 Index during the month. Please note that at the end of 2019 we began excluding companies with a price below C$0.20 unless they generate quarterly industry revenue in excess of C$1 million. There are currently almost two dozen publicly traded LPs that fail to qualify.

Tier 1

Tier 1, which included the LPs that are generating cannabis-related sales of at least C$10 million per quarter (in 2018, we used C$4 million as the hurdle), which fell in April, was boosted by a rebound in one stock this month, rising 26.7% to 471.32%. In 2019, it declined 38.5%, when it ended the year at 642.23, and Tier 1 has declined 26.6% so far this year, substantially worse than the other tiers. This group included Aphria (TSX: APHA) (NYSE: APHA), Aurora Cannabis (TSX: ACB) (NYSE: ACB), Canopy Growth (TSX: WEED) (NYSE: CGC), HEXO Corp (TSX: HEXO) (NYSE American: HEXO), MediPharm Labs (TSX: LABS) (OTC: MEDIF), Organigram (TSXV: OGI) (NASDAQ: OGI), Radient Technologies (TSXV: RTI) (OTC: RDDTF), Valens Company (TSXV: VGW) (CSE: VGWCF) and Zenabis Global (TSX: ZENA) (OTC: ZBISF). Zenabis, which more than doubled during the month, remains down almost 22% year-to-date. HEXO, the only other member of Tier 1 to outperform the sector during May, remains down 59% in 2020. MediPharm Labs was the only Tier 1 stock to decline during the month, though Canopy Growth and Radient both rose less than 10%.

Tier 2

Tier 2, which included the LPs that generate cannabis-related quarterly sales between C$2.5 million and C$10 million, rose 19.9% to 492.47. In 2019, it lost 44.3% after closing at 569.54 and is down 13.5% in 2020. This group included Aleafia Health (TSX: AH) (OTC: ALEAF), Cronos Group (TSX: CRON) (NASDAQ: CRON) , Delta 9 (TSXV: DN) (OTC: VNRDF), Emerald Health (TSXV: EMH) (OTC: EMHTF), Heritage Cannabis (CSE: CANN) (OTC: HERTF), Supreme Cannabis (TSX: FIRE) (OTC: SPRWF), VIVO Cannabis (TSX: VIVO) (OTC: VVCIF) and WeedMD (TSXV: WMD) (OTC: WDDMF). Emerald Health led the way with a 65% gain that leaves it down about 14% in 2020. Aleafia, Health, Cronos Group, Heritage Cannabis and VIVO Cannabis all rose less than 10%.

Tier 3

Tier 3, which included the 18 qualifying LPs that generate cannabis-related quarterly sales less than C$2.5 million, led in April but lagged in May, rising 17.0% as it closed at 81.97. It ended at 96.76 in 2019, declining 45.0%, and is down 15.3% in 2020. Four names in this group declined, while five gained more than 35%.

The returns for the overall sector varied greatly, with 18 names posting double-digit (or triple-digit) gains, while 5 declined, with the entire group posting a median return of 11.0%, well below the 20.2% average return:

For June, the overall index will have 38 constituents, as CanadaBis (TSXV: CANB) returns and Lotus Ventures (TSXV: J) (CSE: LTTSF) and NextLeaf Solutions (CSE: OILS) (OTC: OILFF) join for the first time. Each of these will also be in Tier 3. Additionally, Aleafia Health has moved from from Tier 2 to Tier 1.

In the next monthly review, we will summarize the performance for June and discuss any additions or deletions. Be sure to bookmark the pages to stay current on LP stock price movements within the day or from day-to-day.

TerrAscend Q1 Revenue Increases 34% Sequentially to C$34.8 Million – New Cannabis Ventures

May 28, 2020
 

Visit the TerrAscend Investor Dashboard and stay up to date with data-driven, fact based due diligence for active traders and investors.

TerrAscend Reports First Quarter Net Sales of $34.8 Million and Adjusted EBITDA of $4.9 Million
  • Net sales increased 34% quarter-over-quarter and 139% year-over-year
  • Adjusted EBITDA of $4.9 million
  • U.S. operations generated 25% adjusted EBITDA margin
  • Anticipates Q2 2020 net sales of approximately $45 million, representing 30% quarter-over-quarter growth, with continued gross margin and adjusted EBITDA margin expansion

NEW YORK and TORONTO, May 28, 2020 /CNW/ – TerrAscend Corp. (“TerrAscend” or the “Company”) (CSE: TER, OTCQX: TRSSF), a leading North American cannabis operator, today reported financial results for its first quarter ending March 31, 2020.

First Quarter 2020 Financial Highlights
(Unless otherwise stated, comparisons are made between Fiscal Q1 2020 and Q1 2019 results and are in Canadian dollars)

  • Net sales: Net sales increased 139% to $34.8 million from $14.6 million.
  • Gross margin: Gross margin increased to 45%, compared to 10% (before gain on fair value of biological assets).
  • Adjusted EBITDA¹: Adjusted EBITDA¹ was $4.9 million, compared with $(5.5) million.
    U.S. Operations: The Company’s U.S. operations generated 57% Gross Margin and 25% Adjusted EBITDA margin.
  • Balance Sheet: Cash & equivalents (including restricted cash) of $31.4 million, compared to $8.6 million.
  • Capital Markets & Financing: The Company closed the final tranches of its previously announced private placement in January resulting in proceeds of $12.7 million and completed a loan financing agreement with Canopy Growth in March, providing $80.5 million in capital that was partially used to fully retire an existing credit facility held with JW Asset Management.

Management Commentary

Getting to adjusted EBITDA profitability is a transformational milestone for our Company, and I’d like to thank the team for their tireless efforts towards that goal. These results were driven by the strong performance of our U.S. operations, which continue to perform ahead of plan.

Jason Ackerman, Executive Chairman and CEO of TerrAscend

With our Pennsylvania expansion complete and construction of our New Jersey facilities well underway, we’re confident in the ongoing growth targets that we have set. We remain focused on prudently investing our capital in the markets where we see the greatest and most profitable opportunities.

Jason Wild, Chairman added, “We’ve assembled a high-caliber team that is executing on the opportunities ahead. I’m extremely proud of the results reported today and pleased to see the commitment to driving strong revenue growth coupled with profitability.”

First Quarter 2020 Operational Highlights

  • Tripled Ilera Healthcare’s cultivation output and completed the phase II expansion, with total footprint of 150,000 square feet
  • Announced the opening of two Apothecarium retail dispensary locations in Pennsylvania to serve medical marijuana patients.
  • Issued a permit to cultivate medical marijuana by the New Jersey Department of Health.
  • TerrAscend Canada Inc., a wholly owned subsidiary, entered into a loan financing agreement with Canopy Growth in the amount of $80.5 million pursuant to a secured debenture. A portion of the proceeds received from Canopy Growth was used to retire the outstanding principal and interest amounts under the credit facility with JW Asset Management

Subsequent Events

  • Appointed Jason Ackerman as permanent Chief Executive Officer.
  • Named Keith Stauffer as Chief Financial Officer.
  • Announced a US$30 million non-brokered private placement
  • Closed the initial tranche of the non-brokered private placement, resulting in gross proceeds of US$27.3 million

Outlook and Preliminary Q2 2020 Revenue Guidance

Based on the success of the Company’s operations to-date, TerrAscend anticipates Q2 2020 net sales of approximately $45 million, representing 30% quarter-over-quarter growth. The Company also anticipates ongoing expansion of gross margin and adjusted EBITDA margin beyond Q1 2020 levels.

TerrAscend remains focused on the execution of its U.S. expansion strategy. To date, the Company has grown its U.S. presence, both organically and through targeted strategic acquisitions, which include Arise Bioscience, The Apothecarium, Ilera Healthcare, and State Flower. This has enabled TerrAscend to enter new markets and establish a strong foothold. The Company’s U.S expansion strategy is rooted in a commitment to achieving scale and profitability in the select markets where it operates. To that end, TerrAscend is focused on fully leveraging the expansion completed at the Company’s cultivation and manufacturing facility in Pennsylvania, completing the construction of its cultivation facility in New Jersey, and continuing to add depth to the Company’s portfolio of retail locations in California, Pennsylvania, and New Jersey. The Company continues to evaluate additional markets for potential entry through organic license applications and strategic acquisitions.

Ensuring the health, safety and well-being of its employees, patients, customers, and the communities in which it operates remains TerrAscend’s highest priority. In response to the ongoing COVID-19 pandemic, TerrAscend continues to adhere to stringent, company-wide measures which include taking employee temperatures at the beginning of each shift; thoroughly cleaning equipment and high-traffic areas; using hand-sanitizer between transactions; requiring non-essential employees to work from home; and practicing social distancing from fellow employees, customers and patients. In addition, TerrAscend has implemented convenient drive through services and curb side pick up options at its retail dispensaries, where permitted. TerrAscend’s management team continues to monitor this situation and will proactively implement new measures as required.

Q1 2020 Financial Summary

Net sales increased 139% to $34.8 million in the first quarter of 2020 (“Q1 2020”), as compared to $14.6 million in the first quarter of 2019 (“Q1 2019”). Net sales in the U.S were $30.9 million in Q1 2020, contributing 89% of total consolidated net sales, reflecting TerrAscend’s continued focus on this important market. This increase was driven by the operational scale-up of TerrAscend’s U.S footprint, which the Company has strategically expanded through investments in production capacity as well as wholesale and retail sales presence.

Gross margin, before gain on fair value of biological assets, was 45% in Q1 2020, compared to 10% in Q1 2019. The increase in gross margin is the result of the Company’s shift to higher margin opportunities in the U.S., as well as ongoing initiatives to rationalize its Canadian operations to the current market opportunity.

Q1 2020 G&A expense was $14.6 million, an increase of 66% compared to Q1 2019. The change was primarily driven by the Company’s strategic focus on entering the U.S. market which drove 139% total net sales growth compared to the prior period. TerrAscend expects to continue to strategically invest in acquiring the talent and developing the appropriate infrastructure to ensure continued expansion in the high-growth U.S market while driving operating leverage as the Company’s operations continue to scale.

Adjusted EBITDA was $4.9 million in Q1 2020, compared to $(5.5) million in Q1 2019. On a geographic basis, adjusted EBITDA from the Company’s U.S. and Canadian operations in Q1 2020 was $8.2 million and $(3.3) million, respectively. Adjusted EBITDA margin generated from the Company’s U.S operations was 25%.

Cash and cash equivalents, including restricted cash, were $31.4 million as of March 31, 2020, compared to $8.6 million as of March 31, 2019, resulting from the net proceeds from the $80.5 million Canopy Growth financing arrangement. $64.8 million of those proceeds were used to retire an existing credit facility with JW Asset Management.

Conference Call

TerrAscend will host a conference call tomorrow, May 29, 2020, to discuss these results. Jason Ackerman, Executive Chairman and Chief Executive Officer, Keith Stauffer, Chief Financial Officer, and Jason Wild, Chairman, will host the call starting at 8:30 a.m. Eastern time. A question and answer session will follow management’s presentation.

DATE: Friday, May 29th, 2020

TIME: 8:30 a.m. Eastern Time

WEBCAST: Click to Access

DIAL-IN NUMBER: 1 (888) 664-6392

CONFERENCE ID: 62330066

REPLAY: (416) 764-8677 or (888) 390-0541 – Available until 12:00 midnight Eastern Time Friday, June 12th, 2020

Financial results and analyses are available on the Company’s website (www.terrascend.com) and SEDAR (www.sedar.com).

The Canadian Securities Exchange (“CSE”) has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.

About TerrAscend

TerrAscend provides quality products, brands, and services to the global cannabinoid market. As the first North American Operator (NAO), with scale operations in both Canada and the US, TerrAscend participates in the medical and legal adult use markets across these jurisdictions. TerrAscend operates a number of synergistic businesses, including Ilera Healthcare, Pennsylvania’s premier medical marijuana cultivator, processor and dispenser; The Apothecarium, an award-winning cannabis dispensary with several retail locations in California; Valhalla Confections, a manufacturer of premium cannabis-infused edibles; and Arise Bioscience Inc., a manufacturer and distributor of hemp-derived products. TerrAscend holds a cultivation permit in the State of New Jersey and is pending approval for a vertically integrated medical cannabis operation with the ability to operate up to 3 Alternative Treatment Centers. Additionally, TerrAscend holds a Medical Cannabis Processor License in the State of Utah. For more information, visit www.terrascend.com.

Non-IFRS Measures, Reconciliation and Discussion

Certain financial measures in this news release are non-IFRS measures, including Pro forma revenue, EBITDA and Adjusted EBITDA. These terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These metrics have no direct comparable IFRS financial measure. Such information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

For more information, please see “Non-IFRS Financial Measures” in the Company’s Interim MD&A available on www.sedar.com.

Pro forma revenue is a non-IFRS measure which management uses to capture total revenue plus revenue from pending and closed acquisitions as if such acquisitions had occurred at the beginning of the performance period. The Company considers this measure to be an appropriate indicator of the growth and scope of the business.

EBITDA is a non-IFRS measure which management uses to evaluate the performance of the Company’s business as it reflects its ongoing profitability. EBITDA is calculated as earnings before interest, tax, depreciation and amortization.

Adjusted EBITDA is a non-IFRS measure which management uses to evaluate the performance of the Company’s business as it reflects its ongoing profitability. The Company believes that certain investors and analysts use Adjusted EBITDA to measure a company’s ability to service debt and to meet other payment obligations or as a common measurement to value companies in the biopharmaceutical industry. The Company measures Adjusted EBITDA as EBITDA less unrealized gain on changes in fair value of biological assets and other income plus fair value changes in biological assets included in inventory sold, purchase accounting adjustments, transaction costs, share based compensation and unrealized loss on investments. The Company believes that this definition is suited to measure the Company’s ability to service debt and to meet other payment obligations.

Certain comparative figures have been reclassified to conform to the current period’s presentation.

Caution Regarding Cannabis Operations in the United States

Investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the US Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable US federal money laundering legislation.

While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve TerrAscend of liability under US federal law, nor will it provide a defense to any federal proceeding which may be brought against TerrAscend. The enforcement of federal laws in the United States is a significant risk to the business of TerrAscend and any proceedings brought against TerrAscend thereunder may adversely affect TerrAscend’s operations and financial performance.

Financial Outlook

This press release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of TerrAscend to provide an outlook for the first quarter of 2020 and may not be appropriate for any other purpose. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed under the heading “Forward Looking Information” above and assumptions with respect to production, pricing, and demand, The actual results of TerrAscend’s operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. TerrAscend and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading “Forward Looking Information” above, it should not be relied on as necessarily indicative of future results. Except as required by applicable Canadian securities laws, TerrAscend undertakes no obligation to update the financial outlook.

TerrAscend undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of TerrAscend, its securities, or financial or operating results (as applicable).

Original press release

Cramer's lightning round: Canopy is 'most legit' of the cannabis stocks

May 26, 2020
 
"Mad Money" host Jim Cramer rings the lightning round bell, which means he's giving his answers to callers' stock questions at rapid speed.

How The Third Wave in Cannabis Stocks Begins – New Cannabis Ventures

May 24, 2020
 

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Subscribe to receive our free weekly newsletter in your inbox each Sunday morning.

Friends,

This past week, the New Cannabis Ventures Global Cannabis Stock Index soared 26%, its best week since late March, when the index bounced off of its weekly all-time closing low and rallied 32%. We ended the week at 32.17, gaining 38% over seven trading sessions and leaving the index almost 90% above its March 18th low:


Even with the big rally over the past nine weeks, the index remains down 24% this year so far and still below levels seen in February. While stocks in general have been in decline since February, when the S&P 500 put in an all-time high, cannabis stocks have been in a bear market for more than a year.

Why Cannabis Stocks Are Going Up

Trying to explain the rationale for a move is always speculation, as no one knows for sure what drives explosive rallies. One explanation may be simply short-covering. It could also be just that traders returned to a sector they had abandoned. The reality is likely a combination of both of these. Quite simply, with prices still way down but a bottom likely in and stocks in general stabilizing, cannabis stocks were ripe for the picking.

The rally began with a small lift Thursday a week ago ahead of the Aurora Cannabis fiscal Q3 financial report. In fact, that day, the stock reversed off on all-time low set early in the session at C$7.50 to close at C$9.20, up 11% on the day. It had begun the week having closed on the 8th at C$10.92. The company exceeded revenue expectations, reduced its operating loss, announced divestitures and guided for positive EBITDA in the September quarter, all of which sent the stock 69% higher last Friday, with U.S. trading exceeding $1 billion and sparking interest across the sector. Written off for dead, with shorts piling on after its reverse split earlier that week, Aurora Cannabis was the initial catalyst that lured traders back to the sector it seems. Also helping to get the market rallying, in our view, was the GTI Q1 report showing revenue in excess of $100 million, well ahead of expectations and driving a big profit.

This past week, Aurora Cannabis again appears to have played a big role, as its American CBD acquisition announcement sent the stock soaring. The New York Post’s picking up a recently published story out of Canada about CBD potentially showing “promise blocking coronavirus infection” was gasoline on the fire. Across the board, volume picked up in the sector during the week.

The Rally May Be Sustainable

A quote by legendary investor Howard Marks of Oaktree in the New York Times in early March caught our attention: “There will come a day when we reach a bottom. We have no idea when or where that bottom will be. But all great investments begin with discomfort. You make the big money buying things no one else will buy.” Of course, he wasn’t speaking directly about cannabis stocks. His comments, which were just two weeks ahead of the S&P 500 low (at least for now!), certainly apply as well to cannabis stocks. We ran a survey in this newsletter, and the respondents were overwhelmingly negative right at the bottom.

It’s always a challenge to call a bottom in real-time, and calling one in the cannabis sector has been an exercise in futility. We shared our view that the bottom for cannabis stocks was likely in with subscribers at 420 Investor the evening Aurora Cannabis reported, though we had certainly expressed our belief that the bottom was possibly in much earlier. For the past two months, we have been discussing our views regularly that while many cannabis operators are likely to be crippled or bankrupted by the escalation of the capital crunch, those that are able to survive will actually thrive, and investors seem to have picked up on this. Three of the top four MSOs and Canopy Growth are outperforming the S&P 500 in 2020. Several ancillary companies in the U.S. are up year-to-date, including GrowGeneration (62%), Innovative Industrial Properties (9%) and Akerna (6%).

The Third Wave for Cannabis Stocks

From our perspective, interest in the sector has just started to return. We expect that a lot of stocks that are rallying could be dead-cat bounces and short-squeezes, but, at the same time, those companies with strong access to capital, good cash flow and defensible valuations could offer investors outsized returns ahead. We note that the four largest MSOs lagged the overall market move since May 13th, with returns ranging from 12.5% to 29.2%, all less than the 37.8% market move. Finally, we think valuations for public stocks are better than they have ever been, and expectations are certainly tempered regarding growth prospects.

We believe the market is transitioning to what we are calling the third wave for cannabis stocks. The first wave began in late 2012 or early 2013, when there were few publicly-traded cannabis stocks and few that were even real companies. The legalization in Colorado sparked a massive rally that petered out until early 2016, when the second wave began. This next phase saw Canada move forward with legalization for adult-use and many states legalize as well, including California. The second wave peaked as California implemented its legalization and was followed by the 2019 vaping crisis and then the pandemic.

The third wave is likely to see regulatory reforms in the U.S. at the state level and possibly the federal level, more states embracing adult-use cannabis such as Arizona, Florida, New Jersey, New York and perhaps Pennsylvania, improvements in key markets like Canada, California and Massachusetts, that have been slow to roll out, well funded private MSOs debut on the public markets and the first cannabis public companies to exceed $1 billion in revenue annually. This next rising tide will not lift all boats, but we are optimistic that investors who follow fundamentally sound companies could enjoy better returns ahead after two straight years with market declines of 34% in 2019 and 55% in 2018.


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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:


To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Get ahead of the crowd! If you are a cannabis investor and find value in our Sunday newsletters, subscribe to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013. Gain immediate access to real-time and in-depth information and market intelligence about the publicly traded cannabis sector, including daily videos, weekly chats, model portfolios, a community forum and much more.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks that generate industry sales of more than US$7.5M per quarter.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan & Joel

Green Organic Dutchman Raises $15 Million Selling Units at $0.40 – New Cannabis Ventures

May 20, 2020
 

The Green Organic Dutchman Announces $15 Million Bought Deal Public Offering Plus Over-Allotment Option

TORONTO, May 20, 2020 /CNW/ – The Green Organic Dutchman Holdings Ltd. (the “Company” or “TGOD”) (TSX:TGOD) (US:TGODF), a leading producer of premium certified organic cannabis, is pleased to announce that it has entered into an agreement with Canaccord Genuity Corp. (the “Underwriter”). The Underwriter has agreed to purchase, on a bought deal basis pursuant to the filing of a short form prospectus, an aggregate of 37,500,000 units (the “Units”) at a price of $0.40 per Unit (the “Offering Price”) for aggregate gross proceeds to the Company of approximately C$15 million (the “Offering”).

Each Unit shall consist of one common share (each a “Common Share”) and one common share purchase warrant of the Company (each a “Warrant”). Each Warrant shall be exercisable to acquire one common share of the Company for a period of 48 months from closing of the transaction at an exercise price of C$0.50 per Warrant.

The Company has granted the Underwriter an option (the “Over-Allotment Option”) to purchase up to an additional 5,625,000 Units at a price of C$0.40 per Unit, exercisable at any time, for a period of 30 days after and including the Closing Date, which would result in additional proceeds of approximately $2.25 million. The Over-Allotment Option is exercisable to acquire Units, Common Shares and/or Warrants (or any combination thereof) at the discretion of the Underwriter.

The Units will be offered by way of a short form prospectus to be filed in all provinces of Canada except Quebec. The Offering is expected to close on June 9, 2020 and is subject to certain conditions including, but not limited to, the receipt of all necessary regulatory and stock exchange approvals, including the approval of the TSX and the applicable securities regulatory authorities.

The Company will use best efforts to obtain the necessary approvals to list the Common Shares, Warrants, and the Common Shares issuable upon exercise of the Warrants on the Toronto Stock Exchange (“TSX”).

TGOD intends to use the proceeds of the Offering for general corporate purposes.

About The Green Organic Dutchman Holdings Ltd.

The Green Organic Dutchman Holdings Ltd. (TSX: TGOD) (US‐OTC: TGODF) is a premium certified organic cannabis company focused on the health and wellness market. Its certified‐organic cannabis is grown in living soil, as nature intended. The Company is committed to cultivating a better tomorrow by producing its products responsibly, with less waste and impact on the environment. Its two Canadian facilities have been built to LEED certification standards and its products are sold in recyclable packaging. In Canada, TGOD sells dried flower and oil, and recently launched a series of next‐generation cannabis products such as organic teas, infusers and vapes. Through its European subsidiary, HemPoland, the Company also distributes premium hemp CBD oil and CBD-infused topicals in Europe. By leveraging science and technology, TGOD harnesses the power of nature from seed to sale.

TGOD’s Common Shares and warrants issued under the indentures dated November 1, 2017 and December 19, 2019 trade on the TSX under the symbol “TGOD”, “TGOD.WT” and “TGOD.WS”, respectively, and TGODF trades in the US on the OTCQX. For more information on The Green Organic Dutchman Holdings Ltd., please visit www.tgod.ca.

Original press release

This Cannabis Software Company Secured a $2.2 Million Paycheck Protection Program Loan – New Cannabis Ventures

May 17, 2020
 

Cannabis software company Akerna (NASDAQ: KERN), the parent of MJ Freeway, disclosed in its 10-Q for the quarter ending March 31 that it received a $2.2 million Paycheck Protection Program loan in April. The company received the loan, which is guaranteed by the Small Business Administration, prior to guidance that was issued on April 23rd, and it is “evaluating the impact this guidance has on Akerna and the PPP Loan”, though it’s not clear what exactly the company is evaluating.

MassRoots also received a PPP loan that was disclosed in its SEC filings, which created an uproar, as companies that derive revenue from the cannabis industry may be prohibited from accessing SBA loans. Cannabis-focused law firm Vicente, Sederberg stated, “While SBA has not formally addressed the eligibility of marijuana businesses for the broader Paycheck Protection Program, it appears prior SBA regulation and policy guidance may prohibit access to this program by marijuana businesses and certain other types of businesses.”

Akerna can prepay up to 20% of the loan at any time, but, prepayment in excess of 20% will require the company to pay all accrued interest if the loan has been sold on the secondary market. The two-year loan carries an interest rate of 1%, with interest deferred for the first six months. The company didn’t disclose the lender.

Schwazze Reports $3.2 Million Revenue in Q1 – New Cannabis Ventures

May 11, 2020
 

Schwazze, Formerly Operating as Medicine Man Technologies, Inc., Provides Company Update and Announces First Quarter 2020 Financial Results
  • Company to Host Conference Call and Webcast Today at 4:30 p.m. ET
  • Company Completes First Acquisition Amid COVID-19; Remains on Schedule to Roll-up Colorado Cannabis Operators
  • Total Revenues Increase 59.9%; Gross Profit Increases 160.5%; Net Loss Narrowed Significantly

DENVER, May 11, 2020–(BUSINESS WIRE)–Schwazze, formerly operating as Medicine Man Technologies Inc. (OTCQX: SHWZ) (“Schwazze ” or “the Company”), today provided a company update and announced financial results for its first quarter ended March 31, 2020.

Schwazze is uniquely positioned to be a winner as the cannabis industry experiences consolidation, and step by step we are making progress on our stated goal of becoming one of the largest vertically integrated seed-to-sale operators based on revenues.

Justin Dye, Chief Executive Officer of Schwazze

We recently completed our first acquisition, Mesa Organics, and we remain confident that we will make great strides in our outlined acquisition strategy this quarter. These transactions represent just the beginning of what we look forward to accomplishing this year.

“With respect to our financial performance, we had a very strong first quarter characterized by robust top-line growth due primarily to higher product sales and more than doubled our gross profit compared to last year. We also significantly narrowed our net loss despite meaningful investments in our business as we prepare for the future and work tirelessly to execute our strategy. 2020 is poised to be a historic year for our Company, employees, shareholders, communities, and above all, customers,” concluded Dye.

Company Update

  • During the COVID-19 pandemic, the Company’s top priority has been the health of its employees and communities and has therefore enacted measures to do its part to slow down the spread of the virus. It has also collaborated with state and local governments to develop and implement rules and regulations for the cannabis industry throughout Colorado with the underlying goal to protect patients, recreational consumers, employees, and the public. The Company is sincerely grateful to the healthcare providers, government officials, and essential businesses for their tireless work and is keeping those affected by the pandemic in its thoughts and prayers those affected by the pandemic.
  • On March 27, 2020, the Company launched a collective online platform that can now be found at www.schwazze.com/marketplace. Throughout the COVID-19 pandemic, emergency rules and regulations for Colorado cannabis operations have changed. To help Colorado consumers find information and updates on the dispensary operations of our strategic partners, we launched a collective online platform to bring together their ordering capabilities under one marketplace. This has enabled consumers to fulfill their cannabis needs in a manner that was not possible before and we thank our strategic partners for their commitment to supporting cannabis consumers.
  • On April 20, 2020, the Company announced that it would now be doing business as Schwazze (pronounced SHHwahZZ). The new branding reflects the Company’s goal to create a dynamic, innovative culture and brand identity while supporting the current and future house of brands as Schwazze continues to grow. It also further amplifies the Company’s purpose-driven mission to recognize the full potential of cannabis and continue promoting its ability to improve the human condition.
  • On April 20, 2020 the Company completed its acquisition of Mesa Organics and its Purplebee’s business. Mesa Organics operates four dispensaries throughout southern Colorado in Pueblo, Ordway, Rocky Ford, and Las Animas. Purplebee’s is a leading pure CO2 and ethanol extractor and manufacturer, as well as a producer of cannabis products for some of the leading edible companies across the state.
  • At this time, the Company is pleased with how it is trending during the second quarter and remains confident that great strides will be made in the outlined acquisition strategy during Q2. Additionally, the Company believes being deemed an essential business during COVID-19 has enabled not only the cannabis industry to thrive but the Company to continue to make significant progress.

First Quarter 2020 Financial Results

Revenues were $3,203,134 during the three months ended March 31, 2020, representing an increase of 59.9% as compared to $2,003,476 during the three months ended March 31, 2019. Product sales and consulting and licensing fees increased 63.8% and 46.8%, respectively. The increase in product sales can largely be attributed to consumer stockpiling due to the COVID-19 pandemic.

Cost of goods and services were $2,148,535 during the three months ended March 31, 2020, representing an increase of 34.4% as compared to $1,598,712 during the same period in 2019. This increase was due to increased sales of our products, and increased salaries and related employment costs.

Gross profit was $1,054,599 during the three months ended March 31, 2020 as compared to $404,764 during the same period in 2019. Gross profit increased to 32.9% of revenues from 20.2% of revenues during the same period in 2019. This improvement was mostly driven by improved product profitability.

Total operating expenses were $5,165,674 during the three months ended March 31, 2020 as compared to $2,632,791 during the same period in 2019. The increase was primarily attributable to higher salaries and selling, general and administrative expenses related to building an infrastructure to ensure a seamless integration of the numerous pending acquisitions and to help build the proper platform for sustainable growth, along with non-cash, stock-based compensation.

Net other income was $2,731,765 during the three months ended March 31, 2020 as compared to net other expenses of $683,791 during the same period in 2019. This represented an improvement of $3,415,556. The increase in other income (expense), net was primarily due to the forfeiture of contingent consideration in relation to the resignation of an officer and director, and an unrealized gain recognized on the change in fair value of certain derivative liabilities.

Net loss was $1,379,310 for the three months ended March 31, 2020, or a loss of approximately $0.03 per share on a basic weighted average, as compared to net loss of $2,911,818, or a loss of approximately $0.10 per share on a basic weighted average, for the three months ended March 31, 2019.

Conference Call and Webcast Today

Schwazze will host a conference call and webcast today at 4:30 p.m. ET. Investors interested in participating in the conference call can dial 412-317-6026 or listen to the webcast from the Company’s “Investors” website at https://ir.schwazze.com. The webcast will later be archived as well.

Following their prepared remarks, Chief Executive Officer Justin Dye and Chief Financial Officer Nancy Huber will also answer investor questions. Investors may submit questions in advance or during the conference call itself through the weblink: http://public.viavid.com/index.php?id=139701. This weblink has also been posted to the Company’s “Investors” website.

Virtual Investor Conferences Participation

On May 12, 2020, Schwazze is pleased to be participating in the Canaccord Genuity’s Cannabis Conference. The Company will be hosting meetings and presenting a company update at 2:00 p.m. ET via http://wsw.com/webcast/canaccord39/sch/ as part of this virtual conference.

The Company will announce additional virtual conference participation in the coming weeks, please check back on the Company’s website, ir.schwazze.com for information.

About Schwazze

Medicine Man Technologies, Inc. is now operating under its new trade name, Schwazze. Schwazze is executing its vision to become one of the nation’s largest vertically integrated cannabis holding companies by revenue. Upon the completion of its announced acquisitions, its portfolio will consist of top-tier licensed brands spanning cultivation, extraction, infused-product manufacturing, dispensary operations, consulting, and a nutrient line. Schwazze leadership includes Colorado cannabis leaders with proven expertise in product and business development as well as top-tier executives from Fortune 500 companies. As a leading platform for vertical integration, Schwazze is strengthening the operational efficiency of the cannabis industry in Colorado and beyond, promoting sustainable growth and increased access to capital, while delivering best-quality service and products to the end consumer. The corporate entity continues to be named Medicine Man Technologies, Inc.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Original press release

Here’s a Model for Solving a Huge Cannabis Industry Problem – New Cannabis Ventures

May 10, 2020
 

You’re reading a copy of this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Subscribe to receive our free weekly newsletter in your inbox each Sunday morning.

Friends,

Since September, we have been detailing the challenges the sector faces with respect to raising capital, a situation set in motion by the vaping crisis and then exponentially magnified by the pandemic. Many operators, both public and private, are burdened with debt and facing an existential threat. Investors in public companies have shied away from both Canadian and U.S. operators with near-term debt maturities that are challenging to address, leaving the equity price under selling pressure.

Companies facing debt maturities have several options:

  • Sell stock to repay existing debt holders
  • Convince the debt holders to take equity
  • Raise additional debt capital
  • Sell assets
  • File for creditor protection

While Aphria wasn’t facing any near-term liquidity issue, the company was extremely proactive addressing a weakness in its balance sheet. Recall that the company issued debt last April, selling US$350 million 5.25% convertible debt in a private placement, with a maturity of 2024. The bonds were convertible at US$9.38, then a 20% premium to the price but, more recently, more than 2X where the stock was trading.

On Friday, the company announced what we think is an extremely smart deal to repurchase 26% of the debt at a big discount. Specifically, it paid US$2.1 million to cover accrued and unpaid interest and issued 18.7 million shares to retire $90.8 million of the bonds, effectively US$4.84 per share, a 31% premium to its recent closing price. To be clear, the debt holders received stock valued at about $69 million, a discount of 24%.

In hindsight, the company would have been better off a year ago selling stock rather than issuing convertible debt, but this transaction reduces debt, improves net cash and lowers interest expense. Shareholders didn’t appreciate these benefits initially, as the stock sold off and ended the day down almost 7%. The best explanations of why the stock declined are that the increased share count is seen as dilution (the 18.7 million shares boosted shares outstanding by 7%) and, perhaps more importantly, that most likely a portion of the stock issued hit the market.

We were a bit surprised that the debt holders agreed to do the deal, so we reached out to the company to gain a better understanding.

The bonds had apparently been trading at about sixty-one cents on the dollar, so this transaction enabled the shareholders to exit the bonds at a higher price, effectively. As the bonds are privately traded, pricing data isn’t readily available to the public. For the debt holders to lose, the stock would have to decline to US$2.96.

So, why is this such a big deal?

We see a path to debt reduction through similar negotiated transactions across the sector. There are several Canadian LPs and U.S. operators with out-of-the-money convertible debt that need to address the maturity over the next 12 to 24 months, depending upon the issuer. Debt holders for some publicly traded convertible notes and presumably private placement convertible notes as well are willing to sell for very low prices, and companies, rather than trying to figure out how to repay them in full, should access capital to buy back the discounted debt or negotiate equity settlement, as Aphria did. Just chipping away over time could help the equity improve as the debt appears to become more manageable, decreasing the risk of a default at maturity, as relying upon other solutions becomes more tractable.

We are encouraged to see Aphria and some of its debt holders create a win-win scenario through the transaction announced Friday, and we are hopeful that holders of debt in other companies will take back reduced principal, effectively, a move that may save many companies that are otherwise executing operationally.


With the recent change in its laws, Colorado is now open to publicly-traded company ownership. A first-mover is Medicine Man Technologies, now doing business as Schwazze, which has closed its first acquisition and is in the process of closing several others to create a very large roll-up in the state. Led by management that played a big role in the turnaround of Albertsons, it is focused on being the nation’s largest vertically integrated cannabis holding companies.

Get up to speed by visiting the Schwazze Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.


New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:


To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Get ahead of the crowd! If you are a cannabis investor and find value in our Sunday newsletters, subscribe to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013. Gain immediate access to real-time and in-depth information and market intelligence about the publicly traded cannabis sector, including daily videos, weekly chats, model portfolios, a community forum and much more.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks that generate industry sales of more than US$7.5M per quarter.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan & Joel

Aurora Cannabis 12:1 Reverse Split Effective May 11th – New Cannabis Ventures

May 08, 2020
 

Aurora Cannabis Confirms Share Consolidation Effective Date
  • Common shares of the Company will begin trading on the New York Stock Exchange and the Toronto Stock Exchange on a post-consolidated basis at the opening of trading on May 11, 2020

EDMONTON, May 8, 2020 /PRNewswire/ – Aurora Cannabis Inc. (the “Company” or “Aurora”) (NYSE | TSX: ACB), the Canadian company defining the future of cannabis worldwide, confirms today that it has received all necessary approvals for its previously announced consolidation of the common shares (the “Common Shares”) of the Company on a 12 to 1 basis (the “Consolidation”) and confirms that the Consolidation will be effective on May 11, 2020 (the “Effective Date”).

Aurora’s Common Shares will begin trading on the New York Stock Exchange (the “NYSE”) and the Toronto Stock Exchange (the “TSX”) at the opening of trading on the Effective Date under the symbol “ACB” on a post-Consolidation basis.

About Aurora

Aurora is a global leader in the cannabis industry serving both the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in global cannabis dedicated to helping people improve their lives. The Company’s brand portfolio includes Aurora, Aurora Drift, San Rafael ’71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler, and ROAR Sports. Providing customers with innovative, high-quality cannabis and hemp products, Aurora’s brands continue to break through as industry leaders in the medical, performance, wellness and recreational markets wherever they are launched. For more information, please visit our website at www.auroramj.com.

Aurora’s Common Shares trade on the TSX and NYSE under the symbol “ACB”, and is a constituent of the S&P/TSX Composite Index.

Original press release

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