HALO COLLECTIVE INC. /NOT FOR DISTRIBUTION TO
All figures in USD unless stated otherwise
This news release constitutes a "designated news release" for the purposes of the Company's prospectus supplement dated
In response to the Company's record results, CEO and Co-Founder Kiran Sidhu commented, "Now, in 2021, we will begin to reap the rewards that we initiated with the change in our product range in 2020. We exceeded our own sales forecast by almost
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Q1 2021 FINANCIAL RESULTS
Revenue
Revenues in Q1 2021 were
The Company's subsidiaries
ANM
In Q1 2021, ANM, the owner of the Company's facility in
MDT
In Q1
Halo Winberry
In Q1 2021, Halo Winberry, a fully owned subsidiary of the Company, received conditional approval to execute the asset purchase agreement to acquire the assets of
Gross Profit
The Company reported a gross profit of
The month of March was specifically strong with an aggregate gross margin across operating units of 27.9%. Broken down by subsidiaries, ANM was 23.6%; MDT was 29.7%; Coastal Harvest was 31.8%; and Halo Winberry was 33.6%.
Summary consolidated statement of income - expressed in US dollars | ||||
For the 3 months ended: | ||||
Revenue | $ | 9,939,103 | $ | 4,449,098 |
Reported gross profit | 1,955,776 | (172,180) | ||
Gross margin | 19.7% | -3.9% | ||
Unrealized fair value (gain) loss on growth of biological assets | (167,111) | - | ||
Realized fair value (gain) loss included in the cost of inventory sold | 411,905 | 289,553 | ||
Impairments | - | 951,813 | ||
Gross profit excluding biological assets and impairments | 2,200,570 | 1,069,186 | ||
Gross margin | 22.1% | 24.0% | ||
Net loss | (9,067,681) | (8,609,704) | ||
Comprehensive loss | (8,570,121) | (8,703,482) | ||
Net loss per share (basic and diluted) | $ | (0.01) | $ | (0.03) |
Weighted average number of outstanding common shares, basic and diluted | 1,610,099,430 | 277,418,561 | ||
Total assets | $ | 133,903,098 | $ | 47,508,892 |
Long-term financial liabilities | 20,147,988 | 8,661,381 | ||
Working capital | 22,499,128 | 13,278,652 | ||
Operating Expenses & EBITDA
The loss before interest, tax, depreciation & amortization and adjusted for non-cash items ("adjusted EBITDA") was
The first-time contribution of Halo Winberry added
Salary expense increased with the onboarding of new employees associated with the various acquisitions over the past year. Professional expenses decreased 15.8%. Sales and marketing expenses doubled to
Overall operating expenses increased year over year by 29.5% and on a like for like basis, excluding acquisitions, increased by 17.4%. This is compared to revenues which increased 253% overall, and 62.4% on an organic basis.
Cash
As of March 31, 2021, the Company had unrestricted cash available in the amount of $10.3 million and working capital in the amount of $22.5 million. Cash used in operations in Q1 2021 was $9.4 million, cash used for investing was income of
On
Corporate M&A Activity
In Q1 2021, the Company progressed on five mergers or acquisitions. For details, please refer to Note 14 in the Consolidated Financial Statements, which are available on SEDAR. These transactions include one cultivation company, being the assets of Winberry, and two dispensaries (
With Halo Winberry, the Company purchased secured debt owed to
On
On
Moving Forward in 2021
The Company is actively reducing operating expenses to improve EBITDA margin going forward in 2021. These cost reductions are occurring across most of the Company's entities including corporate, ANM, Halo Winberry, MDT and Coastal Harvest. At the corporate center, the Company plans to reduce legal cost by hiring an in-house General Counsel and believes costs will decrease naturally with reduced Merger & Acquisition activity. In addition, at ANM and Halo Winberry, costs are expected to improve through restructuring and consolidation of the two companies. The Company also experienced farm improvements in Q1 2021 that are not yet capitalized and will decrease naturally now that the farm is ready for 2021 planting. At MDT, overheads will continue to decrease now that the entire salesforce has been outsourced to a third-party distributor. Below the Company has outlined a detailed strategic plan to grow revenue and improve margins across all markets.
Halo anticipates undertaking the following activities in an effort to grow and improve the Company's business in
- Bring in house manufacturing of all key SKUs to lower the wholesale price and increase profit margins;
- Launch new flavor SKUs of
Winberry Farms distillate cartridges and infused pre-rolls; - Launch Hush 5-piece vegan gummies as well as re-formulate and update current gummy offerings, specifically the one-piece gummy;
- Bring all distribution in house rather than using third-party distributors to increase efficiency in distribution and lower cost;
- Increase purchasing of third-party flower to increase availability and sales of flower products;
- Expand the offering of third-party brands to the Company's existing dispensary customer base, helping to increase distribution revenue;
- Acquire indoor cultivation and more outdoor and greenhouse cultivation to increase the Company's access to quality raw materials and increase consistency of the supply chain; and,
- Establish a central cannabis processing unit in
Southern Oregon to reduce processing costs from over$100 per pound to an anticipated target of$60 per pound.
Halo anticipates undertaking the following activities in an effort to grow and improve the Company's business in
- Complete move to full-service distribution partner,
Greenstone , increasing immediate store sales; - Launch Hush live resin pucks and carts into the
California market to fill void of our current third party distribution partner; - Launch FlowerShop* Bouquet Packs and
Bud Vase flower products to expand higher price offerings; Re-launch Winberry Farms distillate vape products into theCalifornia market;- Launch the Company's retail footprint by opening three retail dispensaries in the
City of Los Angeles ; - Identify opportunities to expand or build retail dispensary store clusters in
Southern California and in theBay Area ; - Build large, scalable indoor cultivation footprint by commencing buildout the UVI indoor facility; and
- Commence operations of
Triangle Canna Corporation ("Triangle") with at least one outdoor grow cycle in partnership with Green Matter. Halo owns 44% of Triangle and has a favorable off take agreement which is expected to contribute revenue and gross profit byNovember 2021 which has not been included in the Company's forecast.
International
Halo anticipates undertaking the following activities in an effort to grow and improve the Company's business internationally:
- Finalize Good Agricultural and Collection Practices ("GACP") certification at the cultivation site operated by
Bophelo Bioscience & Wellness (Pty) Ltd. ("Bophelo"), which includes the installation of security perimeter fencing and camera systems, completion of ablutions and a cafeteria, completion of post-harvest processing facilities, and the review, approval and implementation of 245 Standard Operating Procedures. Bophelo is currently in the final stage of obtaining approval with less than 10% of the certification requirements remaining to complete; - Continue to aggressively scale growing capacity at Bophelo via site development and build-out of 40,000 square feet of Cravo Green Houses by the end of October and the build-out of an additional 60,000 square feet of Cravo Green Houses by the end of the year;
- Complete the build out of a small extraction facility at Bophelo to conduct training of local personnel in the handling of explosive gases (butane/propane) and handling of flammable liquids (alcohol);
- Develop and implement a business plan to secure sales to patients at
Canmart Ltd. ("Canmart") in theUnited Kingdom , while also starting the planning and build out of a 5,000 square foot European Union Good Manufacturing Practices certified facility at Canmart for processing of cannabis; - Evaluate the further development of the Canmart facility to also encompass cultivation and/or manufacturing oils and concentrates subject to local regulations; and
- Close the acquisition of Kushbar retail dispensaries in
Alberta and continue to add profitable dispensaries. This transaction is expected to be completed inJuly 2021 .
Non-IFRS Financial Measures
Organic Revenue, Adjusted Gross Profit, EBITDA 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 Organic Revenue as Revenue excluding revenue from Halo Winberry. Management defines Adjusted Gross Profit as Gross Profit excluding fair value gains in biological assets, impairment of inventory and non-reoccurring costs. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management defines Adjusted EBITDA as EBITDA adjusted for share-based compensation and payment, foreign exchange loss, share based payments for goods and services, accretion expense, fair value on intangible, values on biological assets and marketable securities. 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 their 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. For a reconciliation of Adjusted Gross Profit, EBITDA and Adjusted EBITDA please refer to "Non-IFRS Measures" in the Q1 2021 MD&A.
About
Halo is a leading, vertically integrated cannabis company that cultivates, extracts, manufactures, and distributes quality cannabis flower, oils, and concentrates and has sold approximately nine million grams of oils and concentrates since inception. Halo continues to evolve its business and scale efficiently, partnering with trustworthy leaders in the industry, who value the Company's operational expertise in bringing top-tier products to market. Current growth includes expansion in key
Halo is led by a strong, diverse, and innovative management team with deep industry knowledge and blue-chip experience. The Company is currently operating in
As part of continued expansion and vertical integration in the
Internationally, the Company's subsidiary Bophelo is currently cultivating cannabis in
The Company also has acquired a range of software development assets, including technology platforms CannPOS, Cannalift, and, more recently, CannaFeels. Halo also owns the discrete sublingual dosing technology, Accudab. The Company intends to spin-off these assets along with its intellectual property and patent applications into its subsidiary
For further information regarding Halo, see Halo's disclosure documents on SEDAR at www.sedar.com
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Cautionary Note Regarding Forward-Looking Information and Statements
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". The forward-looking information and forward-looking statements contained herein may include, but are not limited to, statements about the Company's prospects and operations in
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: unexpected costs or delays in the completion of the Company's proposed dispensaries, facilities and other operations; negative results experienced by the Company as a result of general economic conditions or the ongoing Covid-19 pandemic; delays in the ability of the Company to obtain certain regulatory approvals; unforeseen delays or costs in the completion of the Company's construction projects; adverse changes to demand for cannabis products; ongoing projects by competitors that may impact the relative size of the Company's growing operation; delays or unforeseen difficulties in connection with the cultivation and harvest of raw material; adverse changes in applicable laws; adverse changes in the application or enforcement of current laws, including those related to taxation; increasing costs of compliance with extensive government regulation; changes in general economic, business and political conditions, including changes in the financial markets; risks related to licensing, including the ability to obtain the requisite licenses or renew existing licenses for the Company's proposed operations; dependence upon third party service providers, skilled labor and other key inputs; and the other risks disclosed in the Company's annual information form dated
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.
Financial Outlook
This press release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of the Company to provide an outlook for the Company's forecasted revenue and EBITDA for the twelve and three-month period ending
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i Organic growth excludes the Winberry acquisition. |
SOURCE
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