California Suspends Hundreds of Cannabis Business Licenses, Massachusetts Issues Quarantine on Vapes: Week in Review

California Suspends Hundreds of Cannabis Business Licenses, Massachusetts Issues Quarantine on Vapes: Week in Review

BOULDER, CO, Nov. 14, 2019 /CNW/ – PRESS RELEASE – Charlotte’s Web Holdings, Inc. a hemp CBD extract products company, has announced the appointment of Jacques Tortoroli to its Board of Directors.

Tortoroli, who most recently served as Chief Administration Officer of Bacardi Limited in Bermuda, brings extensive global experience in finance and operations at both private and public companies. As CAO of Bacardi, the largest privately held spirits company in the world, he was a member of the Global Leadership Team and responsible for global finance, operations, information technology and real estate.

Before joining Bacardi in 2014, Tortoroli had spent more than a decade at Viacom, Inc. He held a number of senior finance roles at the multinational entertainment company, most recently serving as both Executive Vice President of Finance for Viacom and as EVP and Chief Financial Officer for Viacom Media Networks, formerly MTV Networks. Prior to that, he held various executive leadership roles at Young & Rubicam, Inc., PepsiCo, Inc., and KPMG.

Tortoroli also recently accepted a position as Executive in Residence and Lecturer at St. Thomas Aquinas College in New York. He has been a member of the college’s Board of Trustees since 2001, serving on the Audit Committee and the Investment & Finance Committee. Tortoroli previously served as a Board Member of the International Baccalaureate, as head of the Audit and Finance Committee and member of the Compensation Committee, Geneva and Cardiff.

“Jacques’ appointment is timely, with the company exploring plans to expand globally as the market leader in CBD products,” said Charlotte’s Web Chairman of the Board and Co-Founder Joel Stanley. “His deep financial knowledge and breadth of international experience in public and private companies will make an important contribution during our next phase of growth.”

Tortoroli stated, “I am honored to serve on the Charlotte’s Web Board of Directors. It’s an exciting time in the growing CBD industry, and Charlotte’s Web has earned its dominant market position through a combination of innovative products and world class executive talent.”

Tortoroli, who will serve on the Compensation and Audit Committees, brings the number of Directors to seven. In addition to Joel Stanley, he joins Jared Stanley, the Company’s Co-Founder and Vice President of Cultivation Operations; Charlotte’s Web CEO Deanie Elsner; John Held, Executive Vice President, General Counsel, and Secretary of Omega Protein Corporation; William West, Co-Founder and President of Tesseract Medical Research; and Shane Hoyne, Managing Director & Chief Marketing Officer of Quintessential Brands Group.

Published at Sat, 16 Nov 2019 11:00:00 +0000

Isracann Biosciences Announces OTC Trading Symbol Change to “ISCNF”, Effective November 15, 2019

Isracann Biosciences Announces OTC Trading Symbol Change to “ISCNF”, Effective November 15, 2019

Isracann Biosciences Inc.  (CSE: IPOT) (FRA: A2PT0E) (OTC: ISCNF) an Israel-based company focused on becoming a premier low cost, high quality cannabis producer for both Israeli and European export sales, is pleased to announce that the Financial Industry Regulatory Authority, Inc. has approved the Company’s request to change its OTC ticker symbol to ISCNF, effective as of the opening of market trading on November 15, 2019.

The previous trading symbol was ATLED and has been changed to more accurately represent our corporate brand and primary operations in the cannabis sector. The Company is also pleased to announce that it has secured DTC eligibility by The Depository Trust Company (“DTC”) for electronic settlement and transfer of its common shares in the United States.

“Trading under the new OTC ticker symbol ISCNF and achieving DTC eligibility is a major step forward in making it materially easier for US-based investors who are intrigued by the idea of buying shares in an Israeli cannabis venture operated by sector experienced entrepreneurs and capital markets professionals. Our strategic aim is straightforward and leverages the national brand excellence of the Israeli agricultural industry combined with planned industrial scale production of low cost premium quality cannabis targeting export into the massive European marketplace. It’s a uniquely scalable venture that combines numerous positive attributes including a team that knows how to execute,” stated Darryl Jones, Company CEO. “This is an important step in propelling our story to wider audiences and to materially grow our investor base.”

No action is required to be taken by current shareholders with relation to the trading symbol change, and no changes have been made to the Company’s share capital, management, or control. Isracann’s shares will continue to trade on the Canadian Securities Exchange (CSE) under the symbol CSE: IPOT, as well as the Frankfurt Stock Exchange under the symbol FRA: A2PT0E.

Updates relating to the additional corporate changes mentioned above will be announced as initiatives continue to progress.

ON BEHALF OF THE BOARD OF DIRECTORS

“Darryl Jones”

Darryl Jones
Chief Executive Officer and President

About OTC Markets Group Inc.
OTC Markets Group Inc. operates the OTCQX Best Market, the OTCQB Venture Market, and the Pink Open Market for 10,000 U.S. and global securities. Through OTC Link ATS and OTC Link ECN, the OTC Markets Group connects a diverse network of broker-dealers that provide liquidity and execution services. OTC Markets Group enables investors to easily trade through the broker of their choice and empowers companies to improve the quality of information available for investors.

About the Depository Trust Company
The Depository Trust Company (“DTC”), a subsidiary of the Depository Trust & Clearing Corporation (“DTCC”) and manages the electronic clearing and settlement of publicly traded companies. Securities that are eligible to be electronically cleared and settled through the DTC are considered “DTC eligible.” This reduces costs and accelerates the settlement process for investors and brokers, allowing the stock to be traded over a much wider selection of brokerage firms by coming into compliance with their requirements.

About Isracann Biosciences Inc. (CSE: IPOT) (FRA: A2PT0E) (OTC: ISCNF)
Isracann is an Israeli-based cannabis company focused on becoming a premier cannabis producer offering low-cost production targeting undersupplied, major European marketplaces. Based in Israel’s agricultural sector, Isracann will leverage its development within the most experienced country in the world with respect to cannabis research. The Company has secured agreements within Israel for medicinal marijuana cultivation. For more information visit: www.isracann.com.

The CSE does not accept responsibility for the adequacy or accuracy of this release.
All statements, other than statements of historical fact, included herein are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ, materially from the Company’s expectations are disclosed in the Company’s documents filed from time to time with the Canadian Securities Exchange, the British Columbia Securities Commission, the Ontario Securities Commission, and the Alberta Securities Commission.

Contact
Investor Relations
Toll Free: +1 855.205.0226
Email: inquiries@isracann.com
Web:  www.isracann.com

Primary Logo

Source: GlobeNewswire (November 15, 2019 – 9:00 AM EST)

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Published at Fri, 15 Nov 2019 14:13:27 +0000

Charlotte’s Web Appoints Former Bacardi Chief Administration Officer Jacques Tortoroli to Board of Directors

Charlotte’s Web Appoints Former Bacardi Chief Administration Officer Jacques Tortoroli to Board of Directors

BOULDER, CO, Nov. 14, 2019 /CNW/ – PRESS RELEASE – Charlotte’s Web Holdings, Inc. a hemp CBD extract products company, has announced the appointment of Jacques Tortoroli to its Board of Directors.

Tortoroli, who most recently served as Chief Administration Officer of Bacardi Limited in Bermuda, brings extensive global experience in finance and operations at both private and public companies. As CAO of Bacardi, the largest privately held spirits company in the world, he was a member of the Global Leadership Team and responsible for global finance, operations, information technology and real estate.

Before joining Bacardi in 2014, Tortoroli had spent more than a decade at Viacom, Inc. He held a number of senior finance roles at the multinational entertainment company, most recently serving as both Executive Vice President of Finance for Viacom and as EVP and Chief Financial Officer for Viacom Media Networks, formerly MTV Networks. Prior to that, he held various executive leadership roles at Young & Rubicam, Inc., PepsiCo, Inc., and KPMG.

Tortoroli also recently accepted a position as Executive in Residence and Lecturer at St. Thomas Aquinas College in New York. He has been a member of the college’s Board of Trustees since 2001, serving on the Audit Committee and the Investment & Finance Committee. Tortoroli previously served as a Board Member of the International Baccalaureate, as head of the Audit and Finance Committee and member of the Compensation Committee, Geneva and Cardiff.

“Jacques’ appointment is timely, with the company exploring plans to expand globally as the market leader in CBD products,” said Charlotte’s Web Chairman of the Board and Co-Founder Joel Stanley. “His deep financial knowledge and breadth of international experience in public and private companies will make an important contribution during our next phase of growth.”

Tortoroli stated, “I am honored to serve on the Charlotte’s Web Board of Directors. It’s an exciting time in the growing CBD industry, and Charlotte’s Web has earned its dominant market position through a combination of innovative products and world class executive talent.”

Tortoroli, who will serve on the Compensation and Audit Committees, brings the number of Directors to seven. In addition to Joel Stanley, he joins Jared Stanley, the Company’s Co-Founder and Vice President of Cultivation Operations; Charlotte’s Web CEO Deanie Elsner; John Held, Executive Vice President, General Counsel, and Secretary of Omega Protein Corporation; William West, Co-Founder and President of Tesseract Medical Research; and Shane Hoyne, Managing Director & Chief Marketing Officer of Quintessential Brands Group.

Published at Thu, 14 Nov 2019 22:48:00 +0000

BevCanna Announces LOI to Acquire Cold-Pressed Juice Co. Little West

BevCanna Announces LOI to Acquire Cold-Pressed Juice Co. Little West

Emerging leader in infused cannabis beverages, BevCanna Enterprises Inc. (CSE:BEV, Q:BVNNF, FSE:7BC) (“BevCanna” or the “Company”) announced today that it has signed a non-binding Letter of Intent (the “LOI”) to acquire West Coast cold-pressed juice company, Little West Holdings LLC (“LW”).

BevCanna (CNW Group/BevCanna Enterprises Inc.)

California-based Little West currently offers a wide range of well-curated, delicious and locally sourced juices, including a line of hemp-derived CBD cold-pressed juices.  The CBD infused juices are crafted using high-quality Nano-emulsified CBD that has 0% THC. These new blends combine locally-sourced fresh produce with naturally-derived CBD, making Little West’s products one of the only all-natural CBD beverages on the market.

“Little West’s line of cold-pressed juices will be a fantastic addition to our portfolio of cannabis-infused beverages,” said Emma Andrews, Chief Commercialization Officer at BevCanna. “Their products are created with a focus on health and wellness, using the highest-quality, freshest ingredients, and the taste is incredible. There are a number of synergies with BevCanna’s range of infused beverages, and we’re excited to soon be able to offer Little West juices to our customers.”

“Little West has developed a compelling range of products, including their range of CBD infused drinks, with an authentic emphasis on health and wellness all without compromising on taste”, said Emma Andrews, Chief Commercialization Officer at BevCanna. “The premise and intention behind their brand aligns very well with BevCanna’s vision to promote wellbeing and quality of life through everything we produce.”

“BevCanna will also be able to leverage Little West’s unique points of distribution amongst ‘tastemaker’ accounts in the food service and hospitality channels, as we look to bring additional CBD infused brands and products to market” continued Ms. Andrews. Little West’s distribution includes a number of high-end hotels, retailers, restaurants and grocery chains, including Ace Hotels, Viceroy Hotels, WeWork, Apple Headquarters, La Colombe, Alfred Coffee, Bristol Farms, and Gelsons Market.

“We’ve been looking for a partner that can help us grow Little West, while maintaining our vision of providing the very best in all-natural, nutritious, healthy juices, said Cassandra Troy, Founder and CEO, Little West. “BevCanna fit the bill perfectly. The bottling, branding, development and natural resources that they bring to the table are unmatched, and their view of the future of infused beverages meshes seamlessly with ours.”

Letter of Intent

The non-binding LOI contemplates that BevCanna US Operating Company Ltd. (“BEV US”), a wholly owned indirect subsidiary of the Company, would acquire all of the issued and outstanding shares of LW and the business of LW (the “Acquisition”) from the securityholders of LW (the “LW Shareholders”) pursuant to a share purchase agreement (the “SPA”) which will include the terms and conditions set forth below, and additional warranties, representations, covenants and terms and conditions that are customary and consistent with industry standards for this type of transaction. Entry into the SPA and the closing thereof is subject to certain conditions including completion by BevCanna of a satisfactory due diligence review of LW and receipt of all necessary corporate and regulatory approvals, including those of the Canadian Securities Exchange (the “CSE”).

Consideration for Acquisition

  • In consideration for the Acquisition, the LOI contemplates that the LW Shareholders would be paid by BevCanna an aggregate of US $1.0 million in cash and US $3.0 million in common shares (each, a “Share”) in the capital of BevCanna. The deemed issuance price of the Shares would be equal to CAD$0.56, subject to compliance with CSE policies and applicable securities laws.
  • The Company would also issue additional Shares to LW Shareholders on achievement of certain milestones by LW (the “Additional Consideration”). The terms of the Additional Consideration will be included in the SPA. The deemed issuance price of the Shares issued as Additional Consideration would be equal to the closing price of a Share on the applicable date, being the trading date prior to the date that a particular Milestone occurs, subject to compliance with CSE policies and applicable securities laws.

No Shop and Exclusivity

  • LW and the LW Shareholders have agreed to a no shop clause and exclusivity of negotiation for 45 days from the date of the LOI.

Distribution of BevCanna Products

  • Following the Acquisition, the Company expects to introduce its own water-based hemp-derived CBD infused product lines for sale through LW’s distribution network in 2020 and onwards, with a mutually agreed-upon sales strategy to be put in place.

Target Closing Date

  • The parties have agreed to act in an expeditious manner to close the Acquisition within 45 days from the signing of the LOI.

About BevCanna Enterprises Inc.
BevCanna Enterprises Inc. (CSE:BEV, Q:BVNNF, FSE:7BC) develops and manufactures cannabinoid-infused beverages and consumer products for in-house brands and white label clients. With decades of experience creating, branding and distributing iconic brands that have resonated with consumers on a global scale, the team demonstrates an expertise unmatched in the emerging cannabis beverage category. Based in British Columbia, Canada, BevCanna has a 130-acre outdoor cultivation site in the fertile Okanagan Valley and the exclusive rights to a pristine spring water aquifer, as well as a world-class 40,000-square-foot, HACCP certified manufacturing facility, with a current bottling capacity of up to 72M bottles per shift/per annum.

None of the securities issued in connection with the Acquisition will be registered under the United States Securities Act of 1933, as amended (the “1933 Act”), and none of them may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the 1933 Act. This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of the securities in any state where such offer, solicitation, or sale would be unlawful.

Disclaimer for Forward-Looking Information

This news release contains forward-looking statements under applicable securities laws, including the statements: that BevCanna will add high-quality juices to its portfolio, and will also leverage Little West’s US distribution network for BevCanna brands; that Little West’s line of cold-pressed juices will be a fantastic addition to BevCanna’s portfolio of cannabis-infused beverages; that BevCanna will soon be able to offer Little West juices to its customers; that BevCanna will also be able to leverage Little West’s unique points of distribution amongst ‘tastemaker’ accounts in the food service and hospitality channels, as BevCanna looks to bring additional CBD infused brands and products to market; with respect to the terms of the Acquisition, including the timing of the entry into the SPA and the closing thereof, the consideration to be paid by the Company in connection with the Acquisition; and that following the Acquisition, the Company expects to introduce its own water-based hemp-derived CBD infused product lines for sale through LW’s distribution network in 2020 and onwards, with a mutually agreed-upon sales strategy to be put in place. These statements are based on certain assumptions regarding the Acquisition and the future business plans of the Company. Readers are cautioned not to place undue reliance on forward-looking statements. The assumptions of the Company, although considered reasonable by it at the time of preparation, may prove to be incorrect. In addition, forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with future legislative and regulatory developments in Canada and the United States; that the CSE may not approve the Acquisition as proposed or at all; that the parties may not enter into a definitive agreement in connection with the Acquisition; that the parties may not be able to satisfy the conditions to closing of the Acquisition; adverse market conditions; and other factors beyond the control of the parties. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

SOURCE BevCanna Enterprises Inc.

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/November2019/13/c7223.html

For media enquiries or interviews, please contact: Wynn Theriault, Thirty Dash Communications Inc., 416-710-3370, wynn@thirtydash.ca; For investor enquiries, please contact: Luca Leone, BevCanna Enterprises Inc., 604-880-6618, luca@bevcanna.comCopyright CNW Group 2019

Published at Wed, 13 Nov 2019 13:45:27 +0000

Surna Reports Record $5.5 Million in Quarterly Revenue in Q3 2019 and Its Second Consecutive Profitable Quarter

Surna Reports Record $5.5 Million in Quarterly Revenue in Q3 2019 and Its Second Consecutive Profitable Quarter

Surna Inc. (OTCQB: SRNA) announced today operating and financial results for the three and nine months ended September 30, 2019.

We will be hosting an investor conference call to discuss our Q3 2019 financial results and to provide updates on our recent business developments and our strategic growth plan. The call will be held on Wednesday, November 20, 2019 at 4:00 p.m. Eastern Time.

To access the investor call via telephone:
Dial-In Number: 1-973-528-0008
Access Code: 485475

To access the investor call via the Internet:
Webcast URL: https://www.webcaster4.com/Webcast/Page/2020/31743

Interested parties, with contact information supplied, may submit questions to the Company prior to the call to investor@surna.com. These questions, along with all live questions, will be answered in the time available.

For those unable to participate in the investor conference call at that time, a replay will be available on the investor relations section of our website at https://surna.com/investor-relations/ beginning on November 21, 2019 at 4:00 p.m. Eastern Time (and will remain available until February 1, 2020).

Financial Highlights

Surna had another record-setting quarter in Q3 2019:

Our Q3 2019 revenue was $5.5 million—a record. Our Q3 2019 revenue represents an increase of 66% compared to Q3 2018 and 31% compared to Q2 2019 revenue of $4.2 million—which was our then previous record high. Third quarter revenue reflects $3.9 million recognized from two expansion project contracts we signed with a single multi-facility operator in Q2 2019.
Our third quarter gross margin was 28.6%, a decrease from 34.4% in Q2 2019, as we took advantage of larger project opportunities that included a high proportion of non-proprietary products. Our gross margin for the first nine months of 2019 was 30.6%, an increase of 3.5 percentage points over the gross margin of 27.1% for the first nine months of 2018.
For the first time, we achieved back-to-back quarters of both positive operating and net income. For Q3 2019, operating income was $277,000 and net income was $222,000, each a quarterly record for us. Moreover, our adjusted operating income was $421,000, a key management metric and point of focus.
As of September 30, 2019, our cash was $2,000,000. We generated $1,750,000 in cash flow from our operating activities in the first nine months of 2019. We also reduced our working capital deficit to $771,000 as of September 30, 2019, a decrease over the last six months of $857,000, from $1,628,000 as of March 31, 2019.

Tony McDonald, the Company’s CEO, stated: “We are extremely pleased with our second straight quarter of record revenue and profits. We continue to focus on our two key financial metrics: revenue growth and profitability. We also improved our cash position significantly—with a quarter-end cash balance of $2.0 million—and strong operating cash flows year-to-date. We believe the numbers speak for themselves.”

Other Highlights

ther highlights during Q3 2019 include:

During Q3 2019, we entered into contracts for our SentryIQTM sensors, controls and automation platform with two multi-facility operators which totaled $218,000 as well as two controls contracts with larger independent cultivators for $295,000. We believe our expanding controls business positions us for a more significant role in the technology and automation advancement of indoor grow facilities. Through September 30, 2019, we signed seven controls contracts for a total aggregate contract value of $687,000.
In June 2019, we delivered our first custom-designed ducted air handling system, which is now offered as an alternative to our new and improved ductless fan coil units. Our ability to offer larger capacity air handling systems should provide greater opportunities for us to work with multi-facility operators. Through September 30, 2019, we entered into sales contracts of $2,860,000 for our ducted air handling systems, of which we recognized revenue of $2,270,000.

Bookings and Backlog

During Q3 2019, we executed new sales contracts with a total contract value of $2,441,000. During this same period, we cancelled two outstanding sales contracts with a total remaining contract value of $47,000 and had positive change orders of $250,000. After adjustments for these cancellations and change orders, our net bookings in Q3 2019 were $2,644,000, representing a decrease of $3,046,000 (or 54%) from net bookings of $5,690,000 in Q2 2019.

During Q3 2019, we believe certain Canadian prospects delayed new or expansion projects as access to capital has recently tightened due to current market conditions in that country. However, we continue to pursue several initiatives to drive our bookings and revenue growth. Among other activities, we sharpened and expanded our marketing outreach in an effort to increase the quantity of qualified sales leads. During the third quarter, we also added three sales representatives. Finally, we believe our introduction of several new products to the market, including custom air-handlers, 4-pipe fan coil units, and our SentryIQTM controls system, will also contribute to our future growth.

Strategic Plan

To date, we have identified several business verticals, or silos, that we believe could be logical and natural complements to our climate control business, including: lighting, fertigation (automated process of delivering nutrients and water to plants), benches (customized systems to optimize use of the growing space), cultivation management technology (software), consumables (growing, packaging, facility and lab supplies), and operational improvement analytics (modeling, data aggregation and artificial intelligence). Initially, we will seek to form strategic alliances, such as distribution, reseller, co-marketing or product development agreements, with select companies which are consistent with our strategic direction. Through at least the first half of 2020, our strategic focus will be to establish these types of strategic alliances.

Link to Strategic Plan can be found at the end of the press release.

Over time, it is possible that some of these strategic alliances may evolve into acquisition targets. Under the right circumstances and at the appropriate time, we believe acquisitions and related capital infusions of growth equity, combined with the proper execution of our growth plan, can accelerate our progress towards consistent cash operating profitability. Our goal for 2021 is to obtain a Nasdaq listing and implement an aftermarket support program that will result in a widely held, actively traded, and fully valued public company.

About Surna Inc.

Surna Inc. (www.surna.com) is a Boulder, Colorado-based company that designs, engineers and manufactures environmental control and air sanitation systems for commercial, state- and provincial-regulated indoor cannabis cultivation facilities in the U.S. and Canada. Our engineering and technical team provides energy and water efficient solutions that allow growers to meet the unique demands of a cannabis cultivation environment through precise temperature, humidity, and process controls and to satisfy the evolving code and regulatory requirements being imposed at the state, provincial and local levels. We have been involved in consulting, equipment sales and/or full-scale design for over 800 grow facilities since 2006 making us a trusted resource for indoor environmental design and control management for the cannabis industry.

Forward Looking Statements

This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect our current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release, including the factors set forth in “Risk Factors” set forth in our Form 10-K and Form 10-Q filed with the Securities and Exchange Commission (“SEC”), and subsequent filings with the SEC. Please refer to our SEC filings for a more detailed discussion of the risks and uncertainties associated with our business, including but not limited to the risks and uncertainties associated with our business prospects and the prospects of our existing and prospective customers; the inherent uncertainty of product development; regulatory, legislative and judicial developments, especially those related to changes in, and the enforcement of, cannabis laws; increasing competitive pressures in our industry; and relationships with our customers and suppliers. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. The reference to Surna’s website has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release.

Non-GAAP Financial Measures

To supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures including net bookings, backlog, as well as adjusted net income (loss) which reflects adjustments for certain non-cash expenses such as stock-based compensation, certain debt-related items and depreciation expense. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. For purposes of this press release, (i) “adjusted net income (loss)” and “adjusted operating income (loss)” mean GAAP net income (loss) and operating income (loss), respectively, after adjustment for non-cash equity compensation expense, debt-related items and depreciation expense, and (ii) “net bookings” means new sales contracts executed during the quarter for which we received an initial deposit, net of any adjustments including cancelations and change orders during the quarter.

Our backlog and net bookings may not be indicative of future operating results, and our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including delays in or inability to obtain project financing or licensing or abandonment of the project entirely. Accordingly, there can be no assurance that contracts included in the backlog will actually generate revenues or when the actual revenues will be generated.

Statement about Cannabis Markets

The use, possession, cultivation, and distribution of marijuana is prohibited by U.S. federal law for medical and recreational purposes. Although certain states have legalized medical and recreational cannabis, companies and individuals involved in the sector are still at risk of being prosecuted by federal authorities. Further, the landscape in the cannabis industry changes rapidly. This means that at any time the city, county, or state where cannabis is permitted can change the current laws and/or the federal government can supersede those laws and take prosecutorial action. Given the uncertain legal nature of the cannabis industry, it is imperative that investors understand that investments in the cannabis industry should be considered very high risk. A change in the current laws or enforcement policy can negatively affect the status and operation of our business, require additional fees, stricter operational guidelines and unanticipated shut-downs. Although our customers do, we neither produce nor sell cannabis.

Surna Contact
Jamie English
Director of Marketing
jamie.english@surna.com
(303) 993-5271

Surna Inc.
Condensed Consolidated Balance Sheets (unaudited)

  September 30, 2019     December 31, 2018  
ASSETS
Current Assets
Cash and cash equivalents $ 2,000,465 $ 253,387
Accounts receivable (net of allowance for doubtful accounts of $162,152 and $119,022, respectively) 106,621 210,187
Inventory, net 936,171 935,886
Prepaid expenses 692,889 127,694
Other assets 3,490 654
Total Current Assets 3,739,636 1,527,808
Noncurrent Assets
Property and equipment, net 289,235 520,321
Goodwill 631,064 631,064
Intangible assets, net 12,075 23,028
Deposits 51,000 51,000
Operating lease right-of-use asset 580,144
Total Noncurrent Assets 1,563,518 1,225,413
TOTAL ASSETS $ 5,303,154 $ 2,753,221
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 2,022,173 $ 1,917,087
Deferred revenue 2,274,993 641,798
Current portion of operating lease liability 213,345
Total Current Liabilities 4,510,511 2,558,885
NONCURRENT LIABILITIES
Operating lease liability 460,901
Total Noncurrent Liabilities 460,901
TOTAL LIABILITIES 4,971,412 2,558,885
Commitments and Contingencies (Note 6)
SHAREHOLDERS’ EQUITY
Preferred stock, $0.00001 par value; 150,000,000 shares authorized; 42,030,331 shares issued and outstanding 420 420
Common stock, $0.00001 par value; 350,000,000 shares authorized; 228,216,638 and 224,989,794 shares issued and outstanding, respectively 2,283 2,250
Additional paid in capital 25,213,957 24,538,027
Accumulated deficit (24,884,918 ) (24,346,361 )
Total Shareholders’ Equity 331,742 194,336
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 5,303,154 $ 2,753,221

 
Surna Inc.
Condensed Consolidated Statements of Operations (unaudited)

  For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
  2019     2018     2019     2018  
Revenue, net $  5,524,105 $ 3,324,621 $ 11,505,728 $ 7,387,094
Cost of revenue 3,943,758 2,228,069 7,987,516 5,385,103
Gross profit 1,580,347 1,096,552 3,518,212 2,001,991
Operating expenses:
Advertising and marketing expenses 123,566 223,474 415,479 658,393
Product development costs 98,145 75,448 326,659 207,537
Selling, general and administrative expenses 1,081,294 1,460,273 3,284,485 5,121,051
Total operating expenses 1,303,005 1,759,195 4,026,623 5,986,981
Operating income (loss) 277,342 (662,643 ) (508,411 ) (3,984,990 )
Other income (expense):
Interest and other income (expense), net (55,319 ) 19,081 (30,146 ) 35,571
Interest expense (35 )
Gain on change in fair value of derivative liabilities 21,403
Total other income (expense) (55,319 ) 19,081 (30,146 ) 56,939
Income (loss) before provision for income taxes 222,023 (643,562 ) (538,557 ) (3,928,051 )
Income taxes                        
Net income (loss) $ 222,023 $ (643,562 ) $ (538,557 ) $ (3,928,051 )
Income (loss) per common share – basic and dilutive $ 0.001 $ (0.003 ) $ (0.002 ) $ (0.018 )
Weighted average number of common shares outstanding, basic 227,918,377 222,782,404 227,475,335 216,836,968
Weighted average number of common shares outstanding, dilutive 237,028,377 222,782,404 227,475,335 216,836,968

Surna Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)

  For the Nine Months Ended September 30,  
  2019     2018  
Cash Flows From Operating Activities:
Net loss $ (538,557 ) $ (3,928,051 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and intangible asset amortization expense 129,723 118,999
Gain on change in derivative liabilities (21,403 )
Compensation paid in equity 675,963 2,067,191
Provision for doubtful accounts 43,130 3,682
Provision for excess and obsolete inventory (213,556 ) 4,926
Loss on disposal of assets 115,359 19,278
Changes in operating assets and liabilities:
Accounts receivable 60,436 94,152
Inventory 213,271 16,498
Prepaid expenses and other (568,031 ) (55,960 )
Operating lease right-of-use asset 134,272
Accounts payable and accrued liabilities 213,044 368,328
Deferred revenue 1,633,195 (399,542 )
Deferred rent (5,014 )
Lease liability (148,128 )
Net cash provided by (used in) operating activities 1,750,121 (1,716,916 )
Cash Flows From Investing Activities
Capitalization of intangible assets (2,503 )
Purchases of property and equipment (3,043 ) (232,109 )
Proceeds from payment of tenant improvement allowance 100,000
Cash disbursed for equipment held for lease (16,237 )
Net cash used in investing activities (3,043 ) (150,849 )
Cash Flows From Financing Activities
Cash proceeds from sale of common stock and warrants 1,210,000
Proceeds from exercises of stock options 3,375
Proceeds from exercise of investor warrants 15,000
Repurchase of common shares from related party (400,000 )
Purchase of option to repurchase preferred stock from related party (5,000 )
Payments on loans from shareholders (6,927 )
Net cash provided by financing activities 816,448
Net increase (decrease) in cash 1,747,078 (1,051,317 )
Cash, beginning of period 253,387 2,468,199
Cash, end of period $ 2,000,465 $ 1,416,882
Supplemental cash flow information:
Interest paid $ $ 35
Non-cash investing and financing activities:
Equity issued in settlement $ $ 226,400
Extinguishment of derivative liability on cashless exercise of warrants $ $ 389,477
Unpaid purchases of equipment and other assets $ $ 2,525

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Published at Tue, 12 Nov 2019 22:05:34 +0000

Hope for Veterans Fighting PTSD: A New Study on Cannabis from Canada

Hope for Veterans Fighting PTSD: A New Study on Cannabis from Canada

According to statistics from the National Center for PTSD, in the U.S., seven to 8 percent of the population will develop post-traumatic stress disorder (PTSD) at some point in their lives. While PTSD is more common after certain types of trauma, like combat and sexual assault, it can happen to anyone.

What is PTSD?

PTSD is a common psychiatric disorder resulting from a traumatic event that can manifest through a broad range of symptoms that can cause incapacitating alterations in personal and social functioning. Those suffering from this condition have reported symptoms involving cognition (i.e. repeated recall of an event through intrusive thoughts, flashbacks, and nightmares), mood (i.e. depression and anxiety), and emotion (i.e. psychological instability, impulsivity, and hyperarousal). The pathophysiology of the disorder involves several neurotransmitters, including the endocannabinoid system (ECS) and other systems that the ECS helps to regulate, like serotonin and opioid pathways.

A recent systematic review of the use of cannabis in treating PTSD demonstrated that cannabis and synthetic cannabinoids, both acting on the endogenous cannabinoid system, may have potential therapeutic use for improving PTSD symptoms by helping to reduce anxiety, modulate memory-related processes, and improve sleep. A new report out of Canada has found similar evidence.

Hope is On the Way

Researchers from the British Columbia Centre on Substance Abuse (BCCSU) and the University of British Columbia (UBC) recently reported that Canadian PTSD sufferers who do not consume cannabis to treat symptoms are seven times more likely to have experienced a recent major depressive episode and nearly five times more likely to have thoughts of suicide compared to cannabis consumers not diagnosed with the disease.

The study was published last week in the Journal of Psychopharmacology and analyzed health survey data collected by Statistics Canada from more than 24,000 Canadians. Among the eligible respondents, 420 reported a current clinical diagnosis of PTSD, with 28.2 percent, or 106 people, reporting past-year cannabis use. This number is almost three-fold the 11.2 percent of Canadian consumers not diagnosed with PTSD, the study reported.

“We know that with limited treatment options for PTSD, many patients have taken to medicating with cannabis to alleviate their symptoms,” Stephanie Lake, a research assistant at the BCCSU and PhD candidate at UBC’s school of population and public health, commented in the UBC website announcement. “However, this is the first time that results from a nationally representative survey have shown the potential benefits of treating the disorder with cannabis.”

Published at Mon, 11 Nov 2019 19:41:00 +0000

Canopy Growth Corp’s Medical Division Partners with Emerald Clinics on Real World Evidence Research

Canopy Growth Corp’s Medical Division Partners with Emerald Clinics on Real World Evidence Research

Spectrum Therapeutics (“Spectrum”), the medical division of Canopy Growth Corporation (Canopy Growth), is pleased to announce an Australian first for the company. Spectrum has partnered with Emerald Clinics Australia (Emerald Clinics) to collect real world data on the safety and effectiveness of Spectrum Therapeutics’ medical cannabis products.

Spectrum Therapeutics
Spectrum Therapeutics

Under the terms of the agreement, following ethics approval, Emerald Clinics will collect clinical outcome data for up to 500 patients[1] prescribed Spectrum Therapeutics products in Australia throughout the course of their treatment. The study, which will take place over the next 12 months, will enable Spectrum Therapeutics to better understand the safety and effectiveness of its products when used in a supervised and regulated clinical setting.

“Spectrum Therapeutics is committed to investing in ongoing local research, while making sure that quality and regulated supply of medical cannabis is accessible to patients in Australia, and this project will allow us to do both,” says Dr Christina Xinos, Medical Director at Spectrum Therapeutics. “This partnership allows us to work with Emerald Clinic’s innovative care model which ensures that patients receive extensive follow up and support throughout their treatment while collecting real world data which will complement the robust clinical trials required to get our products registered with the Therapeutic Goods Administration.”

Australia’s regulatory system enables the collection of high quality data due to the stringent product quality controls in place, and along with the requirement for detailed monitoring plans, this allows us to work towards a more evidence based approach to prescribing cannabinoid medicines,” says Dr Alistair Vickery, Principal Investigator and Medical Director at Emerald Clinics.

Spectrum Therapeutics’ research program is committed to furthering the science of cannabis through clinical trials and real world evidence approaches, with a focus on conditions with high unmet medical needs, particularly around the areas of chronic pain, anxiety disorders and insomnia. Today’s announcement is the first in a series of research initiatives that Spectrum Therapeutics is delivering locally, aligned with its commitment to invest in ongoing global research, including:

  • 24 therapeutic trials planned and ongoing;
  • 26 third party preclinical and clinical studies planned and ongoing;
  • 1000+ patients participating in human health clinical trials; and
  • A unique global pharmacovigilance programme

Here’s to Future Growth (informed by real world outcomes).

About Emerald Clinics

Emerald Clinics is a healthcare technology and services company incorporated in March 2018 whose mission is to improve lives, by learning from the experience of every patient that is treated with a cannabinoid medicine. Our team includes specialist physicians, experienced General Practitioners and clinical trials experts to deliver best-practice care for patients who have exhausted conventional therapies in Australia through our clinics in SydneyMelbournePerth and Northern NSW.

About Canopy Growth Corporation

Canopy Growth (TSX: WEED, NYSE: CGC) is a world-leading diversified cannabis, hemp and cannabis device company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms, as well as medical devices through the Company’s subsidiary, Storz & Bickel GMbH & Co. KG. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time. The Company has operations in over a dozen countries across five continents. The Company’s medical division, Spectrum Therapeutics, is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public’s understanding of cannabis, and has devoted millions of dollars toward cutting edge, commercialisable research and IP development. Spectrum Therapeutics sells a range of full-spectrum products using its colour-coded classification Spectrum system as well as single cannabinoid Dronabinol under the brand Bionorica Ethics. The Company operates retail stores across Canada under its award-winning Tweed and Tokyo Smoke banners. Tweed is a globally recognised cannabis brand which has built a large and loyal following by focusing on quality products and meaningful customer relationships. From our historic public listing on the Toronto Stock Exchange and New York Stock Exchange to our continued international expansion, pride in advancing shareholder value through leadership is engrained in all we do at Canopy Growth. Canopy Growth has established partnerships with leading sector names including cannabis icons Snoop Dogg and Seth Rogen, breeding legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol leader Constellation Brands, to name but a few. Canopy Growth operates eleven licensed cannabis production sites with over 4.7 million square feet of production capacity, including over one million square feet of GMP certified production space. For more information visit www.canopygrowth.com

About Spectrum Therapeutics

Spectrum Therapeutics, the medical division of Canopy Growth Corporation (TSX: WEED, NYSE: CGC), is dedicated to educating healthcare practitioners, furthering the public’s understanding of medical cannabis and its various applications, and cutting edge, commercialisable research and IP development. Founded in Canada, Spectrum Therapeutics operates in AustraliaSouth AmericaAfrica and across Europe. Its products are available in a wide range of potencies and formats designed to simplify the dialogue around strength and dosage by applying a colour-coded spectrum to categorise medical cannabis according to THC and CBD levels.

Spectrum Therapeutics’ offerings include whole flower cannabis, oils and new innovations such as Softgels in addition to single cannabinoid medicine Dronabinol under the brand Bionorica Ethics. Through product simplification, robust clinical research and ongoing education of healthcare professionals, Spectrum Therapeutics is committed to addressing the unmet medical needs of patients around the globe.

Notice Regarding Forward Looking Statements

This news release contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities legislation. Often, but not always, forward-looking statements and information can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Canopy Growth or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. Examples of such statements include respect to project completion dates.. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including study results and such risks contained in the Company’s annual information form dated June 24, 2019 and filed with Canadian securities regulators available on the Company’s issuer profile on SEDAR at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information or forward-looking statements in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information and forward-looking statements included in this news release are made as of the date of this news release and the Company does not undertake an obligation to publicly update such forward-looking information or forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities laws.

[1] Only patients who have given full consent will be included in this study

For further information: Contact:, Spectrum Therapeutics Australia, Ben Quirin, Regional Managing Director, APAC, ben.quirin@canopygrowth.com, +61 466 231 441; Emerald Clinics, Adam James, Media Relations, adam.james@emeraldclinics.com.au, +61 400 105 462

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Published at Mon, 11 Nov 2019 13:00:52 +0000

Why Canada Is (Still) #1 For Cannabis Investment Opportunities

Why Canada Is (Still) #1 For Cannabis Investment Opportunities

Sometimes the numbers don’t tell the whole story.

The population of the United States is just under 330 million people. The population of Canada is 37.5 million people.

Canada has fully legalized cannabis nationally. In the U.S., cannabis is now fully legal in 11 states, with medicinal cannabis legalized in 33 states.

This means roughly two-thirds of the U.S. population (over 200 million people) have at least partial access to legal cannabis. The state of California, by itself, has a fully legal market with a larger population than Canada (39.75 million).

On paper, at least, the United States should already represent a better cannabis investment opportunity because it represents a much larger overall market.

BDS Analytics has estimated legal cannabis spending in the U.S. will reach US$12.2 billion in 2019. In Canada, even at the current rate of sales (CAD$127.3 million in August, according to StatsCan), Canada has a CAD$1.5 billion industry.

Despite this, Canada offers both cannabis companies and cannabis investors the best opportunities today. Why?

Even with overly restrictive regulation in some areas, Canada provides the legal cannabis industry with a clear playing field (in comparison to the U.S.).
 

  1. Regulatory certainty allows Canadian companies to plan ahead and scale-up operations with greater confidence
  2. This clean regulatory environment also provides greater access to public markets, greater access to capital markets, and generates greater outside investment

While Canada’s provincial markets present some operational differences, it’s a generally homogenous regulatory landscape. This allows greater certainty in planning for everything from cultivation operations and R&D to product development and retailing.

It’s perhaps even more important from the perspective of corporate finance. U.S.-based companies have struggled to raise capital (within the U.S.). Canadian companies, until recently, were awash in investor capital.

Most of the U.S.-based companies that have a public listing have had to come to Canada for their primary listing. U.S. trading for most of these companies is only available on the OTC.

This cleaner regulatory picture is also more attractive to large corporations seeking to enter the cannabis space. The biggest publicity has come with the investments of multinational beverage giants.

Constellation Brands (US:STZ) has invested twice in Canopy Growth (US:CGC / CAN:WEED), with the second investment totaling $4 billion.  Molson Coors (US:TAP) has entered into a joint venture with Quebec-based HEXO Corp (US:HEXO / CAN:HEXO).

However, other prominent multinationals have also entered the cannabis sector – via major investments in Canadian cannabis companies. Tobacco giant Altria (US:MO) invested $1.8 billion in Cronos Group (US:CRON / CAN:CRON). More recently, groceries and convenience store multinational, Alimentation Couche-Tard (CAN:ATD.A / US:ANCTF) invested in Canadian cannabis retailer, Fire & Flower Holdings (CAN:FAF / US:FFLWF).

Couche-Tard’s initial strategic investment was only CAD$26 million. But the Company announced in the release that over the longer term it was prepared to commit up to CAD$380 million in “growth capital”.

Conversely, the largest outside investment in a U.S.-based cannabis company, was the $3.4 billion invested in Acreage Holdings. This was by a Canadian cannabis company – Canopy Growth.

Canopy may not remain a “Canadian” company due to Constellation’s dominant position. Technically, however, the largest investment in the U.S. cannabis industry was by the Canadian cannabis industry.

Holding back Canada’s cannabis industry to date has been reluctance and incompetence from some Canadian provinces in licensing cannabis stores. However, after a slow start, there are now more than 700 licensed cannabis stores across Canada, according to data from a new Echelon Wealth Partners report (Stores Wanted: The Need For Cannabis Retail In Canada).

Canada’s largest provincial markets (Ontario and Quebec) are still woefully under-serviced with legal cannabis retail stores. But the Canadian market as a whole has now reached a critical mass, led by Alberta – with 306 retail outlets.

This is translating into robust growth in cannabis sales, despite provincial failures. Canada’s legal cannabis industry tripled in size over Year 1 of full legalization. Monthly cannabis sales are now consistently growing at a double-digit pace.

Now Phase 2 of legalization is here. “Cannabis 2.0” brings a wide array of cannabis derivative products: concentrates, edibles, and infused beverages. It is expected to add 3 million new consumers (roughly a 50% increase) as well as many more female cannabis consumers.

The current fundamentals are now extremely positive for the Canadian cannabis industry. Already, some companies are making the transition to profitability.

However, what really emphasizes Canada’s position as the premier jurisdiction for cannabis investment is future potential. Echelon Wealth Partners has more data to offer here.

It starts with higher cannabis consumption rates. Though several U.S. states moved to full legalization well ahead of Canada, Canadians have a higher rate of cannabis consumption than even the most pro-cannabis states.

This means into extra revenue dollars being on the table in Canada today, per capita. It means even greater future potential in the Canadian marketplace.

Here Alberta’s cannabis market is illustrative. As noted, this province has greatly outpaced any other province in licensing and opening cannabis stores. At one point, Alberta had as many retail outlets as the rest of Canada combined.

This greater access to legal cannabis is already generating a dramatic increase in the rate of cannabis use in that province. In just one year, Alberta’s individual consumption rate has jumped from 16% to 20% of the population. That’s a 25% increase in the consumption rate over 12 months.

In other words, the more exposure that Canadians get to legal cannabis, the more they like it. This duplicates what is being seen in Colorado, the U.S.’s most mature (and successful) cannabis market.

Colorado is in its 6th year of full legalization. But it has set new monthly records for cannabis revenues in four of the last five months.

That’s the demand side of the equation. The untapped potential is much more dramatic when we look at supply. With the cannabis black market still controlling 85% of sales, the legal market is just the tip of the iceberg today.

Even with more than 700 cannabis retail stores in Canada, the retail footprint for cannabis is dwarfed by retail alcohol. There are roughly ten times as many retail outlets selling alcohol compared to cannabis, according to Echelon Wealth Partners.

As The Seed Investor has previously noted, cannabis has nearly unlimited commercial potential as an alcohol substitute. It is much safer than alcohol, produces none of the undesirable side effects, and consumers are already migrating aggressively from booze to pot.

This, among other reasons, is why unit sales of alcohol are now in decline. The projected CAGR for the alcohol industry falls short of even official inflation numbers.


Legal cannabis has over ten times the projected growth rate.

Combine this with the additional cannabis distribution for medicinal purposes. Over the long term, there is no reason that the Canadian cannabis industry could not have an equal or larger retail footprint than retail alcohol.

That spells (long term) a ten-fold increase in cannabis retail stores. In turn, it is this increased retail footprint that is necessary to claim that 85% market share from the cannabis black market.

Even in the small fragment of this market that currently exists, Canada’s leading retailer, National Access Cannabis (CAN:META / US:NACNF) is moving to profitability. As Canada’s cannabis retail sector scales up, other retailers will follow.

There are more overall dollars on the table today in the U.S. cannabis industry than in Canada. Undoubtedly this will hold true going forward.

However, regulatory uncertainty and a generally unfriendly corporate environment has made it very challenging for publicly listed companies to capture these revenue streams efficiently.

Positive regulatory movement can dramatically change these dynamics. But as we’ve seen in Canada, even after the laws are passed, it takes longer than expected (due to regulatory inertia) to capitalize on commercial opportunities.

There is no way the U.S. cannabis industry can (or will) pass the Canadian cannabis industry overnight. Indeed, even with the hemp industry, which is fully legal in the U.S., farmers are having enormous difficulty selling their crops. This is because the glacier-slow U.S. government has yet to create a commercial framework for this new industry.

Canada’s stronger domestic market (and national legalization) also makes it much easier for Canadian-based companies to capitalize on growing international opportunities in cannabis. Europe and Central/South America are already starting to yield commercial opportunities.

The picture for Canadian cannabis stocks today looks grim, with valuations having retreated to greater than two-year lows. The picture for the Canadian cannabis industry is extremely bright.

Investors take note.
 

Published at Fri, 08 Nov 2019 11:00:01 +0000

Westleaf to Combine with We Grow BC, Ultra Premium Cannabis Producer of Qwest Branded Products

Westleaf to Combine with We Grow BC, Ultra Premium Cannabis Producer of Qwest Branded Products

Westleaf Inc. (TSX-V: WL) (OTCQB: WSLFF) is pleased to announce that it has entered into a definitive arrangement agreement (“Arrangement Agreement“) to combine with We Grow BC Ltd. (“We Grow“), a leading indoor cannabis producer located in Creston, British Columbia (the “Transaction“). We Grow brings an ultra-premium cannabis brand, Qwest (“Qwest“), which achieves some of the highest realized pricing in the Canadian adult-use markets(1). The combination of We Grow’s Qwest brand with Westleaf’s high quality production and retail assets, creates a combined company which is expected to be one of Canada’s preeminent craft-at-scale cultivators, manufacturers, and retailers of ultra-premium cannabis products.

“This transaction brings together a known brand with revenue and EBITDA to complement some of Canada’s most premier indoor cultivation and extraction facilities. Together, we will be able to aggressively expand a trusted brand, increase market share, drive revenue and EBITDA growth and become an extremely competitive company in Canada and beyond” said Scott Hurd, President and Chief Executive Officer of Westleaf.

“Westleaf has built world class cultivation, extraction and retail assets that will allow us to scale quickly and address the existing demand for our Qwest branded products. Together, we create the preeminent ultra-premium cannabis brand in Canada” said Benjamin Sze, Chief Executive Officer of We Grow.

Highlights of the Transaction

The Arrangement is expected to accelerate We Grow’s strategy to expand cultivation capabilities for its popular Qwest and Qwest Reserve ultra-premium cannabis flower brands. The Arrangement is expected to elevate the combined entity’s forecasted 2020 cannabis production capacity to 9,100 kgs(2) of dried cannabis flower while enabling the Company to fully leverage the Qwest ultra-premium brand through Westleaf’s extraction facility and Westleaf’s chain of award-winning Prairie Records retail stores. Specific additional highlights include the following:

  • Established Industry Leading Cannabis Brands: Qwest has established itself as a leading cannabis brand, recognized for ultra-premium quality products and rare flower varieties, evidenced by its leading realized selling prices in the Canadian recreational market and strong demand across various distribution channels(1). The Transaction positions the combined company to accelerate Qwest’s brand growth through Westleaf’s assets by expanding into cannabis derivative products, adding craft-style cultivation capacity, and owning the relationship with the consumer through the award winning wholly owned retail stores, Prairie Records.
  • Creates One of Canada’s Largest Craft Producers: The Transaction combines We Grow’s current production and Westleaf’s nearly completed Thunderchild cultivation facility, creating one of the largest craft producers in Canada with a core focus on producing the highest quality cannabis and cannabis derivative products for the recreational market. We Grow’s access to an extensive genetic library is anticipated to be commercialized on an accelerated basis to bring novel, differentiated cannabis products to market.
  • Positioned for Cannabis 2.0 Products: Westleaf brings scalable extraction and product manufacturing assets which is expected to enable Qwest to expand its ultra-premium product lines into high margin derivative cannabis products in time to meet the expected demand for cannabis 2.0 products.
  • Proven Execution Capabilities: We Grow intends to take its best-in-class production practices and cannabis cultivation expertise and apply it to Westleaf’s high quality assets to maintain its high standard of quality for products under the Qwest banner, including Westleaf’s Thunderchild Cultivation facility and The Plant extraction facility.
  • Highly Experienced Management Teams: We Grow’s management and cultivation teams have a proven ability to scale ultra-premium indoor cannabis production at industry leading yields and obtain best in class wholesale pricing. Westleaf brings a complementary and experienced processing and extraction team, industry leading retail operators and capital markets expertise.
  • Additional Non-Dilutive Financing from ATB Financial: As part of the transaction ATB Financial has committed, subject to customary conditions precedent to be satisfied prior to or concurrent with closing of the Transaction, to provide $8.9 million of additional credit and liquidity through the issuance of a new term loan ($4.7 million) and removal of the restricted cash requirement (~$4.2 million) under the Company’s current subsidiary level credit facilities (which are expected to be consolidated at the Company level as part of the Transaction). Following the close of the Transaction, the combined company’s remaining infrastructure projects are anticipated to be fully funded.
  • Strong Economics and Demonstrated Cash Flow: We Grow has demonstrated a disciplined approach to sustainable profitability, achieving positive Adjusted EBITDA and net income in Q3 2019 enabling the Transaction to be immediately accretive to Westleaf. The combined entity is anticipated to be reflective of We Grow’s commitment to lean and efficient operations and the pro forma management team is expected to be focused on delivering strong financial performance going forward.

Transaction Summary

The Arrangement

Under the Arrangement Agreement, Westleaf will purchase all of the issued and outstanding shares of We Grow (the “We Grow Shares“), other than its Class “H” non-voting common participating shares (“Class H Shares“), in exchange for common shares in the capital of Westleaf (“Westleaf Shares“), by way of plan of arrangement under Division 5 of Part 9 of the Business Corporations Act (British Columbia)(the “Arrangement“). Each We Grow Share will be exchanged for 4.264 Westleaf Shares and each outstanding option to purchase one We Grow Share (the “We Grow Options“) will be exchanged for one Westleaf option (“Westleaf Options“) to purchase 4.264 Westleaf Shares pursuant to the Westleaf stock option plan currently in place.

All Westleaf Shares issued to the former holders of We Grow Shares (excluding any Westleaf Shares issued in exchange for We Grow Shares issued pursuant to the We Grow Financing or any We Grow Shares issued on the exercise of We Grow Warrants (as defined below)) or to the holders of We Grow Options on the valid exercise of their Westleaf Options, will be subject to a hold period from the closing of the Arrangement (the “Hold Period“), whereby 10% of such Westleaf Shares will be released on the date of closing of the Arrangement (the “Closing Date“), 30% of such Westleaf Shares will be released from the Hold Period on the date that is six months from the Closing Date, 30% of such Westleaf Shares will be released from the Hold Period on the date that is nine months from the Closing Date and the remaining 30% of such Westleaf Shares will be released from the Hold Period on the date that is 12 months from the Closing Date. All such foregoing Westleaf Shares will be legended with the applicable details of the Hold Period.

After giving effect to the Arrangement, the pre-Arrangement holders of We Grow Shares excluding the holders of We Grow Shares issued pursuant to the We Grow Financing (as defined herein), will hold approximately 55% of Westleaf’s issued and outstanding shares on a pro forma basis and the existing shareholders of Westleaf will hold approximately 45% of Westleaf’s issued and outstanding shares on a pro forma basis.

Upon closing of the Arrangement, it is anticipated that Westleaf’s board of directors (the “Westleaf Board“) will be reconstituted and will include three appointees of We Grow being Benjamin SzeMichael KellyPaul Wilson, and two appointees of Westleaf, being Cody Church and a Thunderchild nominee.  Westleaf’s officers will be reconstituted and will include Benjamin Sze, current Chief Executive Officer of We Grow, as Chief Executive Officer, Scott Hurd as President, Taylor Ethans as Chief Financial Officer, Gary Leong as Chief Compliance Officer, and Adam Coates as Executive Vice-President, Commercial. The foregoing changes will constitute a “Change of Management” as defined in the policies of the TSX Venture Exchange (“TSXV“)(the “Change of Management“).

The Arrangement is anticipated to close in mid-December 2019. Closing of the Arrangement is subject to the approval of not less than 662/3% of the votes cast by holders of We Grow Shares and We Grow Options, each voting as a separate class, on a resolution approving the Arrangement (the “We Grow Resolution“) at the upcoming We Grow Meeting (as defined below) and, as a result of the Change of Management and in accordance with the polices of the TSXV, approval of not less than 50% of the votes cast by holders of Westleaf Shares on a resolution approving such Change of Management (the “Westleaf Resolution“) at the upcoming Westleaf Meeting (as defined below).

It is anticipated that a meeting (the “We Grow Meeting“) of the holders of We Grow Shares and We Grow Options and a meeting (the “Westleaf Meeting“) of the holders of Westleaf Shares will each be held on or around December 11, 2019 following the mailing to such securityholders of a joint management information circular regarding the Arrangement in November 2019 (the “Joint Information Circular“).

Westleaf previously completed a financing of convertible debentures (“Debentures“), and the Arrangement constitutes a “Change of Control” as defined in the debenture indenture dated May 10, 2019 for the Debentures between the Company and Computershare Trust Company of Canada, as trustee for the Debentures (the “Debenture Indenture“). Holders of 50% of the principal amount of the outstanding Debentures have agreed in writing to consent to the Arrangement, provide a waiver and modification of the Debenture Indenture so that the Arrangement will not require the Company to repurchase the Debentures and to an amendment of the conversion price of the Debentures from $1.30 to $0.45 per Westleaf Share.

Additional Transaction Terms

The Arrangement is subject to We Grow completing a non-brokered management and key stakeholder led private placement financing of subscription receipts of We Grow (“Subscription Receipts“) for gross proceeds of not less than $3,000,000, at a price of $0.30 per Subscription Receipt, to be completed prior to or concurrently with closing of the Arrangement (the “We Grow Financing“). Each Subscription Receipt shall entitle the holder thereof to acquire a unit of We Grow, which unit will ultimately be exchanged under the Arrangement for one (1) Westleaf Share and one-half of a warrant of Westleaf (each a full warrant, “Westleaf Warrant“).  Each Westleaf Warrant shall be exercisable at a price of $0.38 per share for a period of 2 years following the closing of the Arrangement.

The Arrangement is also subject to, among other conditions, the approval of the Supreme Court of British Columbia, the receipt of all necessary regulatory approvals, including approval of Health Canada, applicable provincial retail cannabis regulators and the TSXV, and satisfaction of certain other closing conditions that are customary for a transaction of this nature.

The Agreement contains representations, warranties and covenants, including a termination fee in the amount of 3% of the transaction value payable by Westleaf or We Grow to the other party, as applicable, in the event that the Arrangement Agreement is terminated in certain circumstances. The Arrangement Agreement also includes certain non-solicitation covenants subject to the rights of each of Westleaf and We Grow to accept a superior proposal in certain circumstances, with the other party having a five business day right to match any such superior proposal received. Additional details of the Arrangement will be provided in the Joint Information Circular.

Westleaf Board Approval and Recommendation

Westleaf appointed a special independent committee (the “Special Committee“) of the Westleaf Board consisting of Cody ChurchKareen StangherlinDelbert Wapass and John Radostits, with the mandate to review and evaluate strategic transaction alternatives for the Company including the Arrangement. Based on the recommendation of the Special Committee, the Westleaf Board has unanimously approved the Arrangement Agreement, determined that the Arrangement is in the best interests of Westleaf and the Westleaf Board has unanimously resolved to recommend that the holders of Westleaf Shares vote in favour of the Westleaf Resolution at the Westleaf Meeting. The Special Committee also received a verbal fairness opinion provided by Eight Capital Inc. (the “Eight Capital Fairness Opinion“) which was considered in connection with its recommendation to the Board, that provided, subject to the assumptions, qualifications and limitations contained in the Eight Capital Fairness Opinion, that the consideration to be paid by Westleaf for the acquisition of We Grow pursuant to the Arrangement, is fair, from a financial point of view, to Westleaf.

All of the directors and officers of Westleaf, who beneficially own, or exercise control or direction over, approximately 19% of the outstanding Westleaf Shares, have entered into support agreements pursuant to which each has agreed to vote their Westleaf Shares in favour of the Westleaf Resolution and all other matters in favour of the Arrangement as applicable.

We Grow Board Approval and Recommendation

We Grow’s board of directors (the “We Grow Board“) has unanimously approved the Arrangement Agreement, determined that the Arrangement is fair and in the best interests of We Grow and, based on the verbal fairness opinion provided by AltaCorp Capital Inc. (the “AltaCorp Fairness Opinion“), determined that and subject to the assumptions, qualifications and limitations contained in the AltaCorp Fairness Opinion, that the consideration to be paid by Westleaf to the holders of We Grow Shares with respect to the Arrangement is fair , from a financial point of view, and the We Grow Board has unanimously resolved to recommend that the holders of We Grow Shares and the holders of We Grow Options vote in favour of the We Grow Resolution at the We Grow Meeting.

All of the directors and officers of We Grow who beneficially own, or exercise control or direction over, approximately 36% of the outstanding We Grow Shares, have entered into support agreements pursuant to which each has agreed to vote their We Grow Shares and We Grow Options in favour of the We Grow Resolution and all other matters in favour of the Arrangement as applicable.

Complete details of the terms of the Arrangement are set out in the Arrangement Agreement, which will be filed by Westleaf and will be available for viewing under Westleaf’s profile at www.sedar.com.

Combined Westleaf-We Grow Pro-Forma Facility and Assets

  • Creston Valley Cultivation (We Grow) – We Grow has a purpose-built indoor cultivation facility currently consisting of 26,000 square feet which has been retrofitted for phase 1 cultivation including over 14,000 square feet of growing rooms, and up to 100-acre cultivation abilities for future production. We Grow is currently constructing a genetics and tissue culture lab in the existing facility.
  • Thunderchild Cultivation (Westleaf): Construction of Westleaf’s purpose-built, GMP compliant, indoor cultivation facility near Battleford, Saskatchewan has progressed significantly in the third quarter and is nearing completion. Phase I of the indoor grow operation will be a total of 80,000 square feet with 20 grow rooms and approximately 21,000 square feet of flower bench. Phase II will add an additional 50,000 square feet of production space. The name of the facility reflects the company’s first and largest investor, the Thunderchild First Nation, an independent Cree nation based in Turtleford, Saskatchewan.
  • The Plant by Westleaf Labs (Westleaf): A scalable extraction, processing, and product manufacturing facility located in Calgary, Alberta is a strategic asset for the Company. With the legalization of derivative products, Westleaf anticipates strong industry wide demand for efficient extraction, processing and formulation capacity and recently announced receipt of its first white label order. The Plant is currently a 16,000 square foot licensed production facility with scalable capacity of up to 65,000 kgs(3) of dried flower per annum. The Plant has an additional 45,000 square feet of expansion space.
  • Prairie Records (Westleaf): The Company’s experiential retail concept Prairie Records, which combines music and cannabis into a unique retail environment, launched with three stores in the Saskatoon region and one in Calgary. Westleaf maintains a portfolio of over 20 premium retail locations with development permits.

Advisors and Counsel

Eight Capital is acting as the exclusive financial advisor to Westleaf and the Special Committee. Borden Ladner Gervais LLP is acting as legal counsel to Westleaf.

AltaCorp Capital is acting as the financial advisor to We Grow. McCarthy Tetrault LLP is acting as legal counsel to We Grow.

About Westleaf Inc.

Westleaf is a Canadian cannabis company focused on cannabis brands, extraction and production of derivatives, wholly owned retail, as well as cannabis cultivation. The Company’s Health Canada licensed extraction and processing facility, The Plant, is expected to produce high quality and consistent cannabis derivatives and consumables, both for Westleaf’s in-house brands as well as white label products. Westleaf’s retail concept, Prairie Records, leverages the instinctual tie between recreational cannabis and music with stores operating or in development across Western Canada. The Company’s Thunderchild cultivation facility is scheduled for completion at the end of this year.

About We Grow BC Ltd.

We Grow is an authorized licensed cultivator, processor and seller under the Cannabis Act (Canada). We Grow is located in Creston, British Columbia in the heart of the Kootenay’s, where British Columbia-grown marijuana originated, and holds a Cultivation License pursuant to the Access to Cannabis for Medical Purposes Regulations under Health Canada. We Grow has scalable production facilities currently consisting of 26,000 square feet which has been retrofitted for phase 1 cultivation including over 14,000 square feet of growing rooms, and up to 100-acre cultivation abilities for future production. We Grow’s cannabis production includes its brand Qwest, which is considered a preeminent ultra-premium cannabis brand achieving one of the highest realized flower prices in Canada.

Non-GAAP Measures

To supplement the financial measures prepared in accordance with Canadian generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures, including Adjusted EBITDA (non-GAAP). The Company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, provide useful information about the Company’s operating results and liquidity and enhance the overall ability to assess the Company’s financial performance.  The Company uses these measures, together with other measures of performance under GAAP, to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business.

However, these measures are not prepared in accordance with GAAP nor do they have any standardized meaning under GAAP. In addition, other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to such similarly titled non-GAAP measures. We caution investors not to place undue reliance on such non-GAAP measures, but instead to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation. They should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

As indicated above, for guidance purposes, the Company does not provide reconciliations of projected Adjusted EBITDA (non-GAAP) to projected GAAP net income (loss), due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations.

Forward-Looking Statements

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “anticipate”, “may”, “will”, “should”, “believe”, “intends” and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this press release contains forward-looking statements and information concerning: mailing of the information circular, timing of the WGBC Meeting, the timing of the Westleaf Meeting, the timing and proceeds from the We Grow Financing, details with respect to the Hold Period, anticipated synergies, anticipated pricing, future capital requirements, construction of the Creston Valley Qwest Cannabis Estate, Thunderchild and The Plant facilities and the timing and production related thereto, the ability to satisfy all requirements in order to close the Transaction and the anticipated closing of the Arrangement. Risks and uncertainties inherent in the nature of the Arrangement include the failure of the parties to satisfy the conditions to the Arrangement, in a timely manner, or at all. The failure of the parties to satisfy the conditions to the Arrangement may result in the Arrangement not being completed on the proposed terms, or at all. In addition, the failure of WGBC or Westleaf to comply with certain terms of the Arrangement Agreement may result in WGBC or Westleaf being required to pay a non-completion fee to the other party, the result of which could have a material adverse effect on Westleaf’s financial position and results of operations and its ability to fund growth prospects and current operations.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of Westleaf are included in reports on file with applicable securities regulatory authorities, including but not limited to Westleaf’s Annual Information Form for the year ended December 31, 2018 which may be accessed on Westleaf’s SEDAR profile at www.sedar.com

The forward-looking statements and information contained in this press release are made as of the date hereof and Westleaf undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities issued pursuant to the Arrangement described herein have not been and will not be registered under the United States Securities Act of 1933 and may not be offered or sold in the United States except in transactions exempt from such registration.

The TSX Venture Exchange has in no way passed upon the merits of the Arrangement and has neither approved nor disapproved of the contents of this press release.

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

  1. Based on average management suggested retail price of SKUs available from Alberta Gaming, Liquor and Cannabis in September 2019.
  2. Thunderchild production capacity estimates are based on Phase I and Phase II total flower bench of 42,000 square feet total (21,000 square feet per phase), 60 grams of flower per yield per square foot per harvest, and 5.8 harvests per annum. Phase I consists of facility floor plate of approximately 80,000 total square feet (total square footage of Phase I & II of ~130,000 sq. ft.). Creston production capacity estimates are based on Phase1 and Phase 1B total flower bench of 22,900 square feet total (7,700 square feet phase 1), 43 grams of flower per yield per square foot per harvest, and 5.5 harvests per annum.
  3. Extraction capacity estimates based on a phased approach anticipated to reach 65,000 kg capacity in Q1 2020 as additional equipment is installed in existing built out space. Based on 350 workdays per year.

SOURCE Westleaf Inc.

Related Links

http://www.westleaf.com

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Published at Fri, 08 Nov 2019 13:54:32 +0000