All figures in USD unless stated otherwise
"Marked to market the Company's estimated unrealized gain before taxes at
Akanda Corp. ("Akanda"), Halo's first incubated company, completed its initial public offering and the listing of its common shares (the "Akanda Shares") on NASDAQ inMarch 2022 .- Halo's consolidated Q1 2022 revenue of
$7.6 million declined$2.4 million , or 23.9%, compared to revenue of$9.9 million in Q1 2021. Revenue was impacted by a significant downturn in both theCalifornia andOregon markets. The flower category, which is a leading indicator, sharply declined, with sales falling by 23% inCalifornia and 26% inOregon year over year.3 Adjusted gross profit4 was$1.4 million , or 18.7% gross margin, compared to$2.2 million , or 22.1% gross margin, in Q1 2021. - Halo's California Wholesale business segment posted positive EBITDA in Q1 2022.
- As of
March 31, 2022 , the Company had a book value of$80.7 million ($1.65 book value per share).
"In 2022, we intend to develop, grow, and ultimately monetize assets by incubating promising cannabis related businesses while remaining laser focused on optimizing
"Halo's
"The Company's
Akanda successfully listed the Akanda Shares on the Nasdaq Capital Market onMarch 15, 2022 , under the ticker symbol "AKAN ."As ofMarch 31, 2022 , the Company held a total of 12,674,957 common shares ofAkanda , and based onAkanda's listed stock price per NASDAQ of$7.94 per share onMarch 31, 2022 5, the Company had an estimated unrealized gain from Halo'sAkanda investment of$74.6 million .Halo Tek Inc. ("Halo Tek"), a wholly owned subsidiary of Halo, filed a preliminary long form prospectus with the securities regulatory authorities in each of the provinces and territories ofCanada , other thanQuébec , for the purpose of qualifying the distribution by Halo to holders of Halo's common shares ("Halo Shares") of all of the issued and outstanding common shares in the capital of Halo Tek (the "HaloTek Shares ") as a return of capital (the "Distribution"). Prior to the Distribution, Halo intends to reorganize its technology assets so that Halo Tek is the owner of all the outstanding shares ofHalo DispensaryTrack Software Inc. ,Halo AccuDab Holdings Inc. ,Halo Cannalift Delivery Inc. ,Nasalbinoid Natural Devices Corp. , 1265292B.C. Ltd. (d/b/a Cannafeels), and 1275111B.C. Ltd. - Halo signed a letter of intent and entered into exclusive negotiations to acquire Phytocann, one of
Europe's leading wellness CBD companies. Upon closing the acquisition of PhytoCann, PhytoCann is expected to add substantial net revenue and EBITDA and an impressive CBD-based product lineup to Halo. - The Company also expects its holding in
Elegance Brands, Inc. , now known asSway Energy Corporation ("Sway"), to be listed on a major North American exchange in 2022. Halo holds 9,333,333 shares in Sway, and the listing would allow Halo to monetize the position. The Company further holds 5,000,000 Sway warrants exercisable at a price of$0.75 per Sway share.
The initial phase of Halo's retail rollout is almost complete. As of
In Q1 2022, the
- Expansion of
California's product line to 77 SKUs, including product categories gaining market share. - Increased distribution from 142 dispensaries on
December 31 st, 2021, to 163 onMarch 31 st, 2022. Bad debts have been reduced, and accounts receivable days have decreased. - Overhauled social media platforms and added brand ambassadors to increase retail sell through and demand at the consumer level.
- Increased white label business reducing fixed overhead costs and contributing to positive net income
- As of
April 2022 , discontinued operations at Coastal Harvest and consolidated toOuter Galactic Chocolates/Mendocino Distribution and Transportation LLC , which will reduce overheads and increase profitability in Q2 2022.
The Company anticipates
Consolidated
- Increased
Oregon's product lineup to 422 SKUs targeting growing market categories byMarch 31 st, 2022. - Decreased distribution of our products to
Oregon dispensaries from 478 onDecember 31, 2021 , to 464 onMarch 31 st, 2022; bad debts have been reduced, and accounts receivable days have decreased. - Further reductions planned of production overheads and "right sizing" of the business for current revenue and future projections.
- Reduction in outdoor cultivation operations both in scope and cost for the 2022 growing season to decrease working capital expenditure and improve cash flow.
In
- Brand: Management intends to rebrand the stores from Kushbar to Budega. While the stores are aesthetically pleasing, the Company believes that the Budega brand promise -- superior quality product, community-centricity, and sunset vibes – will resonate well with Canadian consumers. To achieve this, each store will be refreshed by the end of 2022 with mini makeovers that will reflect that of Budega's
U.S. operating retail outlets. - Performance: To drive sales performance, the Company plans to methodically assess and rationalize the product assortment to ensure the store stocks the highest velocity items. SKUs held in inventory past 30 days must be sold through and replaced with products that our consumer base desires most.
- Experience: The Company intends to implement proprietary operational systems to shift the focus of frontline employees from "clerking" to ensuring customers leave with every need filled and expectations exceeded. In both
U.S. and Canadian operations, we will continue to be laser focused on ensuring each guest interaction is thoughtful and complete. Upon exit, the consumer should not have to stop at any other dispensary for cannabis products. - Loyalty: Halo believes the current Kushbar loyalty program can be improved by applying the successful Budega approach. By implementing the Budega loyalty program, the Company anticipates Kushbar stores will experience improved sell through, overall guest experience leading to more frequent purchases, larger basket size, and higher average ticket size.
Halo corporate overheads were
- Professional and legal fees are expected to decline as Halo Tek spins out, the pace of smaller acquisitions declines, and more professional and legal services have been brought in house.
- Executive salaries are expected to be paid in cash by Q3 2022, reducing aggregate costs by 50%.
- General and administrative costs are expected to decline as travel costs abate.
Halo will host a live webinar at
Please email all questions in advance to info@haloco.com.
Complete results are reported in the Company's condensed interim consolidated financial statements for the three months ended
Halo is a multi-national incubation company with assets and operations centered in both THC and non-THC sectors. For the THC sector, Halo is focused on the
In the non-THC sector, Halo is expanding into health and wellness categories including CBD and functional supplements such as nootropic nutraceuticals and non-psychotropic mushrooms. Halo, through a series of acquisitions, has product offerings in the form of beverages (H2C Beverages), dissolvable strips (Dissolve Medical), capsules (Hushrooms™), and topical supplements (Hatshe) with proposed national distribution via a strategic agreement with
As an incubator, Halo has successfully acquired and integrated a variety of companies which were subsequently reorganized to create
For further information regarding Halo, see Halo's disclosure documents on SEDAR at www.sedar.com.
Connect with
Adjusted Gross Profit and Adjusted EBITDA are non-IFRS financial measures that the Company uses to assess its operating performance and does not have any standardized meaning prescribed by IFRS. Management defines Adjusted Gross Profit as Gross Profit adjusted for fair value gains or losses on biological assets, and impairments included in cost of goods sold. Management defines Adjusted EBITDA as earnings (loss) before interest, tax, depreciation, and amortization, as adjusted for non-cash items. These non-IFRS measures are provided to assist management and investors in determining the Company's operating performance. The Company also believes that securities analysts, investors, and other interested parties frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities. For a reconciliation of Adjusted Gross Profit and Adjusted EBITDA, please refer to "Non-IFRS Measures" in the Q1 2022 MD&A, which is available on the Company's SEDAR profile at www.sedar.com.
This press release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only Halo's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Halo's control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "will continue", "will occur" or "will be achieved". Forward-looking information may relate to anticipated events or results including, but not limited to the expected results of operations and changes to operating expenses currently expected by management, the number of stores to be added by the end of the year, management's plans regarding its portfolio of cannabis businesses, the proposed acquisition of PhytoCann, revenue outlook, the expected contribution from the Company's
By identifying such information and statements in this manner, Halo is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such information and statements. In addition, in connection with the forward-looking information and forward-looking statements contained in this press release, Halo has made certain assumptions. Although Halo believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Among others, the key factors that could cause actual results to differ materially from those projected in the forward-looking information and statements are the following: inability of management to successfully integrate the operations of acquired businesses, changes in the consumer market for cannabis products, changes in the expected outcomes of the proposed changes to Halo's operations, delays in obtaining required licenses or approvals necessary for the build-out of
The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and Halo does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to Halo or persons acting on its behalf is expressly qualified in its entirety by this notice.
This press release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared to provide an outlook for annual net revenues and operating profit for the Company's three Budega dispensaries, following a ramp-up period of six-months per location and may not be appropriate for any other purpose. The financial outlook has been prepared based on several assumptions including the assumptions discussed under the heading "Cautionary Note Regarding Forward-Looking Information and Statements" above and assumptions with respect to market conditions, pricing, and demand. The actual results for any period will likely vary from the amounts set forth in these projections and such variations may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading "Cautionary Note Regarding Forward-Looking Information and Statements" above, it should not be relied on as necessarily indicative of future results.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
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1 The closing NASDAQ market price on |
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