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Established Industries Look to the Cannabis Market for New Revenue Streams

Vlad Poptamas

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Photo source: reuters.com
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As investments continue to fuel the cannabis market expansion, the social stigma revolving around the plant is beginning to subside. Similar to most emerging industries, institutions invest because they see potential value for future growth. And with the growing popularity of the cannabis marketplace, companies across various industries have become interested. Notably, healthcare companies are interested in ramping up cannabis research because the plant could become a viable treatment option for patients living with a variety of ailments. On the other hand, alcohol, tobacco, and healthcare companies have stepped into the cannabis industry because of declining sales in their primary units. For instance, large corporations such as Altria, owner of Marlboro, and Constellation Brands, producer of Corona and Modelo, have invested billions of dollars into the cannabis industry. Specifically, the two have invested in various cannabis companies to stimulate their overall business portfolios, as tobacco and alcohol consumption rates are declining. Now, the Arizona Beverage Company has even entered into the industry with its own venture to manufacture vape pens and infused gummies and drinks. Arizona Beverage is well known for its USD 1 drinks found throughout thousands of convenience stores and supermarkets internationally. And Arizona Tea’s entry marks yet another large corporation diving into the cannabis marketplace. The investments are not only propelling the cannabis industry but are also allowing it to become a mainstream market among consumers. Now, as more large companies take their place within the cannabis market, the industry is positioned to become a disruptive global entity. And according to data compiled by Verified Market Research, the global marijuana market was valued at USD 42.20 Billion in 2016. Furthermore, by 2025, the market is expected to reach USD 466.81 Billion while registering a CAGR of 35.3% from 2018 to 2025. Pasha Brands Ltd. (OTC: CRFTF) (CSE: CRFT), Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON), Aurora Cannabis Inc. (NYSE: ACB) (TSX: ACB), Aphria Inc. (NYSE: APHA) (TSX: APHA), HEXO Corp. (NYSE: HEXO) (TSX: HEXO).

The cannabis industry is split into two segments: recreational and medical. Predominantly, the medical industry is much larger because of its global accessibility and availability. However, countries such as the U.S. and Canada are expected to accelerate the recreational segment’s growth, causing it to eventually surpass the medical segment. While the two markets target wholly different audiences, they handle widely similar products. For instance, extracts and concentrates continue to be so highly popular in both market segments that they have ultimately led to a decline in dried cannabis flower sales throughout the past recent years. Nonetheless, “craft cultivators” have taken initiative to revive the dried cannabis flower market. Craft cultivators engage in cultivating premium cannabis and high-quality strains. Unlike typical large licensed producers, craft cultivators generally operate on a smaller scale in order to ensure their products are consistent. And while large scale producers usually have automated grow houses, craft cultivators take extra, meticulous steps and carefully inspect each individual plant to assure that it is growing healthy and maintaining its cannabinoid content. Consequently, craft cultivators create an exceptional strain that stands out against producers that grow tons of cannabis in volume. “We are seeing more and more mainstream retail and branding strategies come into the space as the industry continues to evolve and mature. With the shift toward mainstream cannabis, a number of high-end marketing and brand firms are starting to enter the space to cater to the new consumer. Naturally, this has led, and will continue to lead, to the prevalence of more high-end products throughout the market,” said Erik Knutson, Chief Executive Officer or CanCore Concepts.

Pasha Brands Ltd. (OTC: CRFTF) (CSE: CRFT) is also listed on the Canadian Securities Exchange under the ticker (CSE: CRFT). Earlier this week, the Company announced breaking news that, “the Company has secured eligibility by the Depository Trust Company (DTC) for its shares on the OTC Markets.

The DTC is a subsidiary of the Depository Trust & Clearing Corporation (DTCC), which manages the electronic clearing and settlement of publicly traded companies in the United States. Securities that are eligible to be electronically cleared and settled through the DTC are considered DTC-eligible. Pasha’s common shares are now fully DTC-eligible, and trade under the symbol “CRFTF” on the OTC Markets. This electronic method of clearing securities speeds up the receipt of stock and cash, and thus accelerates the settlement process for investors.

‘We are very pleased to have obtained DTC eligibility,’ said Patrick Brauckmann, Executive Chairman of Pasha Brands. ‘This status will make the process of trading our stock in the United States much easier. We expect that this will make our shares available to a larger percentage of the investment market, which should improve the liquidity of our shares and therefore benefit Pasha and our shareholders.’

Established in 1973 under the incorporation laws of New York for trust companies, the DTC has grown to one of the largest securities depositories in the world holding securities valued at upwards of $54 trillion (2017).

 

SOURCE FinancialBuzz.com

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Cannabis

Flower One’s Second Quarter Highlighted by Industry Leading Cultivation Performance

Vlad Poptamas

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Flower One Holdings Inc. (the “Company”) (CSE: FONE) (OTCQX: FLOOF), a leading cannabis cultivator, producer and innovator in Nevada, today reported its financial and operating results for the second quarter ended June 30, 2019. All amounts are expressed in U.S. dollars unless indicated otherwise.  Now operating in a state of ongoing weekly harvests following the completed conversion of its Nevada greenhouse and its inaugural harvest announced on June 11, 2019, the Company confirmed today that its second quarter financial and operational performance has resulted in a cultivation yield performance of 38.3 grams per square foot, per harvest cycle, at an average cost per gram of $0.45.

In addition, the Company announced that it has completed an initial harvest in all eight of its flower zones and has commenced harvesting of its second cycle of planted cannabis.   The success of its cultivation performance through the second quarter has resulted in a year-to-date tenfold increase of the Company’s biological assets and inventory to $56.1M further strengthening its balance sheet. At the quarter end, the Company held more than 14,000 pounds of dry cannabis inventory. Flower One’s dry cannabis will now transition to the Company’s 55,000 square-foot production facility to generate a wide variety of the most in demand cannabis products and brands from across the United States.

“Achieving a cultivation yield performance of 38.3 grams per square foot and doing so at a cost of $0.45 per gram, firmly establishes us as one of the leading large-scale cannabis cultivators in North America and the world,” said President and CEO, Ken Villazor.

“We are extremely proud of these results and what they signal not only for the future of Flower One, but also for our ever-expanding brand and retail partner portfolio, and valued shareholders. This clearly demonstrates our ability to fulfill our promise of providing the industry’s first seed-to-shelf solution for cannabis brands and retailers,” added Kellen O’Keefe, Chief Strategy Officer.

Other Q2 highlights:

  • Entered eighth brand partnership – plus three more subsequent to the quarter;
  • Obtained debt financing of up to $30 million to accelerate market roll-out;
  • U.S. trading upgraded to OTCQX Best Market from OTCQB in May.

Second quarter financial results

The Company’s operational activities during the quarter largely focused on advancing the conversion of its 455,000 square foot greenhouse and production facility for cultivating high-quality cannabis at scale which was completed during the quarter.

The Company recorded cannabis inventory of $25.4 million and biological assets of $30.6 million as a result of the cultivation activities during the six months ended June 30, 2019.  Additionally, the Company invested $41.0 million in property, plant and equipment primarily for the Nevada greenhouse facility.

Revenue for the quarter was $636 thousand. The Company began recording revenue on November 9, 2018 subsequent to the acquisition of the assets of NLVO. As such, there was no revenue for the comparable period of 2018. All revenue for the quarter was from the NLVO operations. The Company expects to begin earning revenue from the sale of products from its the flagship greenhouse facility starting in the third quarter.

Net income was $19.1 million mainly driven by a fair value gain of $37.3 million on the growth of biological assets, partially offset by cost of goods sold of $844 thousand and $1.8 million in losses related to fair value adjustments on derivative liabilities, $461 thousand in share-based compensation, $3.1 million in finance expenses, $796 thousand in foreign exchange loss related to the convertible debenture, derivative liabilities and the Company’s cash balances held in Canadian dollars, $3.7 million in general and administrative expenses, and tax expense of $7.9 million mainly related to the fair value gain on the growth of biological assets.

As at June 30, 2019, Flower One had working capital of $41.9 million compared to a working capital deficit of $32.9 million at December 31, 2018.

Flower One’s 2019 second quarter financial statements and management’s discussion and analysis will be issued and filed on SEDAR at www.sedar.com on August 13, 2019 and will be available on the same day on Flower One’s website at www.flowerone.com/investors/financial-reports.

Notice of conference call

Management of Flower One will host a conference call at 8:30 a.m. ET on Wednesday, August 14, 2019 to review recent and upcoming milestones. You can join the call by dialing 647-427-7450 or 1-888-231-8191. Please dial 647-427-7450 or 1-888-231-8191 approximately 15 minutes prior to the call to secure a line. You will be put on hold until the conference call begins. A replay of the conference call will also be available until Wednesday, August 28, 2019. To access the archived conference call, please dial 1-855-859-2056 and enter the conference code 2435459.

A live audio webcast of the call will be available at http://bit.ly/FONE2019Q2. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 90 days.

 

SOURCE Flower One Holdings Inc.

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Cannabis

Sunniva Provides Update On California Operations

Vlad Poptamas

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Sunniva Inc. (“Sunniva”, the “Company”, “we”, “our” or “us”) (CSE: SNN) (OTCQB: SNNVF), a North American provider of cannabis products and services, today provided an operational update and outlook for its U.S. operations.

Sunniva California Campus

The Company has recently been advised by our general contractor that connection of certain utilities to the glasshouse in Cathedral City, California have been delayed for several months. In addition, the longer than expected time to closing of the sale of Sunniva Medical Inc. to CannaPharmaRx, Inc. has limited the amount of cash available for the ongoing funding of the glasshouse which has created additional delays in the current schedule.  The expected date for onboarding of genetic material and plants for phase one of the 325,000 square foot Sunniva California Campus is now anticipated to be early 2020. The developer and Sunniva have been disappointed with the overall progress of the glasshouse. As a result, the parties have reorganized the project management team and have engaged an internationally recognized construction consulting firm to manage the project through the final stages of construction and commissioning of the facility. Both parties believe that these changes will greatly influence the ability to achieve the revised estimated time to completion.

“Today’s announcement of the deferral of our previously planned operational date is disappointing, however, we do not feel that this setback will have an impact on the long term value that may be created from the glasshouse and we remain confident that the cannabis grown in this facility will be of the highest quality in the industry.” said Dr. Anthony Holler, CEO of Sunniva.

Branded Cannabis Product Sales

The Company has been prioritizing available capital towards the completion of the glasshouse and as a result has reduced the amount of cash allocated to the purchase of biomass for use in the Company’s Extraction Facility and to the purchase of third party flower to be used in branded cannabis sales. As a result of this decision, the Company will not achieve its previously announced 2019 revenue estimate of USD$55$60 million from sales of Sunniva branded products.

Preliminary Q2 2019 Revenue

The Company is announcing preliminary revenue of $5.3 million for the three-month period ended June 30, 2019. This represents an 18% increase over the $4.5 million in revenue generated in the comparative three-month period from 2018. At the end of June 30, 2019, the Company had generated approximately $19.5 million in revenue in 2019.  Gross profit margin for the second quarter of 2019 is expected to be a loss of approximately $1 million primarily due to the lower sales of cannabis products in California, while continuing to bear the fixed operational costs of the respective facilities.

“We are pleased with the performance of our operations in the first half of the year. The $19.5 million in revenue is greater than the total revenue generated in all of 2018.” Said Kevin Wilkerson, President of Sunniva, Inc. “We have demonstrated our ability to produce large volumes of cannabis products and combined with our distribution and packaging capabilities, we have been able to successfully deliver that product into the California market.”

Further information regarding the revised timeline for expected completion of the Sunniva California Campus and an updated financial outlook for the remainder of fiscal 2019 will be provided in the Q2 2019 Earnings Release.

Q2 2019 Earnings Release Date

The Company plans to release financial results for the second quarter 2019 and provide a corporate update on its Canadian and U.S. operations, after market close on Thursday August 29, 2019.

The Company’s executive management will discuss the results during a conference call on Thursday, August 29, 2019 at 5:00 pm Eastern Time / 2:00 pm Pacific Time.  To participate in the call please dial 1-800-319-4610, or (604) 638-5340.  An audio replay will be available shortly after the call by dialing 1-855-669-9658 or (604) 674-8052 and entering code 3557.  The replay will be available for two weeks following the call.

For more information please visit: www.sunniva.com.

To be added to the Sunniva email distribution list please register at www.sunniva.com/email-alerts.

Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

SOURCE Sunniva Inc.

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Cannabis

Namaste Technologies Announces Changes to Board of Directors

Vlad Poptamas

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Namaste Technologies Inc. (“Namaste” or the “Company”) (TSXV: N) (FRANKFURT: M5BQ) (OTCMKTS: NXTTF) today announced that Kenneth Ngo, the Company’s Chief Financial Officer, has stepped down from the Board of Directors effective immediately.

“I wish to thank Kenneth for stepping onto the Board of Directors in December 2018 as we reshaped the Company.  With the addition of Ken Jones and Andy Wilczynski, who can provide financial expertise to the board, Kenneth has decided to step down as a board member” said Meni Morim, Interim CEO of Namaste Technologies.

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