Key Takeaways; Cannabis Sector
- Agrify secured $135 million debt facility.
- TerrAscend reported full year 2021 net sales of $210.4 million; an increase of 42% YOY.
- Ayr Wellness reported solid Q4 and full year 2021 results.
- Canadian cannabis firm High Tide reported $72 million in revenue for first quarter.
- Glass House Brands reported a 44% increase in Q4; the company expects positive cash flow this year.
Key Takeaways; Psychedelic Sector
- Awakn received regulatory approval for flagship clinic in London to begin delivering treatments; the company also appointed Kevin Lorenz as U.S. head of commercial development.
Since the World Health Organization declared the COVID-19 outbreak a global pandemic in March 2020, it’s been a roller coaster ride for many cannabis companies. Despite the setbacks, majority of the companies in the sector have shown strong resilience and they continue to thrive as major states continue to legalize adult-use and sale of cannabis. Below is a weekly roundup of the top business stories from the cannabis and psychedelics sectors. It was another busy week in the sector as more companies reported their quarter earnings results.
Top Marijuana Companies for Week
#1: Agrify
Agrify Corporation (NASDAQ: AGFY), a cannabis ancillary company, signed a definitive agreement to fund up to $135 million in debt financing to bolster its balance sheet and support sustained expansion. According to a news release that was issued on Monday, March 14, 2022, the Massachusetts-based developer of indoor agriculture technologies, said that under the senior secured debt facility, $65 million will be available at closure. And depending on certain conditions, the remaining $70 million can be accessed in $35 million increments.
The note, which has a favorable annual interest rate of 6.75 percent, will mature in March 2026. Additionally, it also includes stock warrants that will be issued to the lender. The warrants can be exercised at $6.75 each, which is equivalent to 110% of Agrify’s stock closing price on the day before the definitive agreement. In addition, the warrants, which have a term of 5.5 years, are potentially exercisable for a number of shares equal to 65% of the funding amount, divided by the closing stock price on the trading day before the definitive agreement.
The agreement also requires that Agrify should pay the interest on the loan in cash and on a quarterly basis for the first year. Moreover, under the agreement terms, Agrify should make payments equal to 4% of the original principal on a monthly basis starting in February 2023. It was also reported that Alliance Global Partners will be the placement agent for the financing.
Agrify produces hardware and software for use in cannabis cultivation and other crops. The company went public in January 2021 and has raised additional capital and made acquisitions since. Agrify shares trade as AGFY on the NASDAQ exchange.
#2: TerrAscend
On March 16, 2022, TerrAscend Corp. (OTC: TRSSF) (CSE: TER) released its financial results for the fourth quarter and full year ended December 31, 2021. In the fourth quarter, net sales were $49.2 million, up from $49.1 million in the third quarter and $49.6 million in the same period the previous year.
The net loss was $5.9 million, compared to $94 million the previous year. TerrAscend attributed the loss to a $3.3 million one-time loss in lease termination fees, $6.9 million in finance and other expenses, $6.9 million in accumulated income taxes, and $2.0 million in transaction costs, all of which were predominantly linked to the Gage Growth Corp. acquisition. These costs were partially offset by a non-cash gain of $14.4 million on the fair value of warrant liabilities.
Net sales for the entire year 2021 were $210.4 million, up 42 percent from the previous year. As a result, the company made a $6.1 million profit. The 42 percent increase in net sales was attributed to the company’s first full year in the New Jersey medical cannabis market and retail expansion in Pennsylvania. In addition, the net sales also reflected the profits from the acquisition of KCR in May 2021, as well as a full year of operations at the three existing Apothecarium shops. Total revenue was further boosted by the late 2020 expansion of State Flower production in California and the acquisition of HMS Health in Maryland in May of 2021.
Cash and cash equivalents totaled $79.6 million as of December 31, 2021, compared to $102.6 million as of September 30, 2021 and $59.2 million as of December 31, 2020, indicating that the company has enough cash and cash equivalents to fund planned organic and inorganic expansion plans.
During the quarter, the Company completed the partial acquisition of its New Jersey partnership for $25 million, increasing its ownership to 87.5 percent from 75 percent.
TerrAscend is a prominent North American cannabis company with vertically integrated operations in Pennsylvania, New Jersey, Michigan, and California, as well as licensed cultivation, processing, and production in Maryland and Canada. The company’s key markets are retail dispensaries The Apothecarium and Gage, as well as scaled cultivation, processing, and manufacturing facilities.
#3: Ayr Wellness
On Thursday, March 17, Ayr Wellness Inc. (OTC: AYRWF) reported a 133 percent increase in fourth-quarter revenue to $111.8 million from $47.8 million the previous year. It was a 16 percent rise from the $96.2 million in revenue in the third quarter. The company also said that it earned $23 million in net income for the quarter and $0.35 in earnings per share. This was also an improvement from the $3.3 million net deficit in the third quarter.
In addition, the revenue for the fiscal year 2021 was $357.6 million, up from $155.1 million the previous year. The year’s net deficit was reduced to $17 million, down from $24.6 million in 2020. Irrespective of these solid Q4 results, the company predicts that the first half of the year will be flat, but that the second half will pick up.
Given previous construction delays and uncertain regulatory timelines for key revenue-generating initiatives, such as regulatory approval for adult-use sales and cultivation expansions in both Massachusetts and New Jersey, Ayr Wellness expects financial results to remain relatively flat in the first half of 2022, in line with industry trends, followed by a step-function in growth beginning in Q3 2022 and continuing through Q4 2022.
Ayr Wellness reported that if everything goes according to plan and the company receives approvals in the third quarter, the fourth quarter of 2022 may see an annualized run-rate of $250 million in Adjusted EBITDA, $100 million in operating income, and $800 million in revenue. On an annually basis, the company expects $250 million in Adjusted EBITDA, $800 million in Revenue, and $100 million in US GAAP Operating Income, based on the run rate forecast in the fourth quarter of 2022.
#4: High Tide
After the stock market closed on Thursday, March 17, 2022, High Tide Inc. (NASDAQ: HITI) (TSXV: HITI), a Canadian cannabis company, released its financial results for the first fiscal quarter of 2022, which ended January 31, 2022. In the first quarter of 2022, revenue grew to $72.2 million, up from $38.3 million the previous year. In comparison to the fourth quarter of 2021, revenue increased by 34% sequentially. A net loss of $7.3 million was also reported by the company. All figures are in Canadian dollars.
Geographically, $52.4 million in revenue was earned in Canada in the first quarter of 2022, $17.4 million in the United States, and $2.3 million internationally. Revenue increased by 53% in Canada, 346% in the United States, and 1,016% globally compared to the first quarter of 2021. In comparison to the fourth quarter of 2021, income earned grew by 22 percent in Canada, 65 percent in the United States, and 455 percent globally.
“This past quarter’s results, showcasing 34% sequential revenue growth and 80% sequential increase in Adjusted EBITDA, re-affirm our exponential, yet sustained growth trajectory. We continue to execute on our business plan quarter after quarter by strategically expanding our business in Canada and internationally through organic growth and accretive M&A across our diversified ecosystem. Our forward-thinking approach makes us a leader amongst our peer group in Canada, as we keep introducing innovative retail concepts such as our discount club model, while remaining agile and pivoting quickly when needed due to the constantly evolving dynamics in the global cannabis landscape,” said Raj Grover, President and Chief Executive Officer of High Tide.
High Tide reported that it aims to expand revenue through organic growth and accretive M&A throughout the second fiscal quarter of 2022, as well as the rest of the year. The company plans to expand its Canadian retail store portfolio to at least 150 locations by the end of the calendar year 2022, with a major concentration on the province of Ontario. The company also stated that it intends to enter the British Columbia market in the near future and that it will continue to grow strategically in the provinces where it now operates. Despite the fact that hurdles exist as a result of the ongoing COVID-19 epidemic, the Company is optimistic in its ability to maintain a strong growth trajectory.
#5: Glass House Brands
Glass House Brands Inc. (OTC: GLASF) announced on March 17, 2022 that revenue for the fourth quarter ended in December increased by 7% sequentially to $18.4 million. This was a 44 percent increase compared to the same period the previous year.
Wholesale biomass sales, which climbed 31% over Q3 2021, were credited with driving the sequential revenue improvement, according to Glass House. In addition, the adjusted EBITDA loss was $9.1 million, up from $5.4 million in the previous quarter. Lower wholesale price and inventory reserves in the quarter severely impacted gross margin, resulting in a $3.8 million decline sequentially.
As for the full year results, Glass House said that in 2021, the company had a 44 percent rise in revenue to $69.4 million, an increase of $21.2 million. The growth was due to an increase in the company’s CPG and retail activities. Because of the high rise in Glass House Farms branded sales, Glass House’s CPG business surged by 93%.
Glass House also said that the full-year impact of the company’s Berkeley store, which opened in January 2021, generated $6.8 million in revenue during the year. Subsequently, this boosted retail sales by 50%. In addition, during 2021, adjusted EBITDA was a loss of $11.8 million, up from a loss of $0.3 million in 2020. The rise was due to a combination of decreased gross profit and greater non-excludable operational expenses.
Finally, Glass House said that Looking ahead, they expects to be able to fully utilize the Phase 1 capacity of the SoCal Facility this year and next, assuming wholesale and CPG pricing stay steady. The company also said that production will be in line with existing production metrics. And according to Glass House, this will put the company on track to generate positive cash flow from operations by early 2023.
Top Psychedelic Companies for Week
#1: Awakn
On March 17, 2022, Awakn Life Sciences Corp. (NEO: AWKN) (OTC: AWKNF), a biotechnology company that is researching, developing, and delivering psychedelic therapeutics to treat addiction, announced that Awakn Clinics London has received formal approval from the Care Quality Commission (CQC) to begin addiction and mental health treatments.
The flagship London clinic is Awakn’s third, joining the company’s two other clinics in Bristol, UK, and Oslo, Norway (Norway). The facilities provide ketamine-assisted therapy for addiction and a variety of mental illnesses. Awakn’s breakthrough treatment protocol, established in their newly published Phase II a/b clinical trial, will be given to clients seeking therapy for Alcohol Use Disorder.
Anthony Tennyson, Awakn’s CEO, commented, “This is a very exciting moment for Awakn and for ketamine-assisted therapy overall as it starts to become a more accessible option for patients. Most importantly, it provides an effective treatment option for so many when other current therapies or treatments fall short. The CQC giving us this recognition again signals a positive direction for the UK and Europe toward embracing ketamine-assisted therapy as a mainstream treatment.”
Following the CQC approval, Awakn will apply to the Home Office for a schedule 2 license, allowing ketamine to be administered in the London clinic.
In addition to these great developments, the company announced on Tuesday, March 15, 2022 that it had appointed Kevin Lorenz as its U.S. Head of Commercial Development, with immediate effect. Mr. Lorenz will be in charge of Awakn’s therapeutics commercialization activities in the United States, beginning with the launch of its Licensing Partnership business in the second half of 2022, which is projected to generate revenue.
Mr. Lorenz joins Awakn with extensive commercial biotech experience, having worked in the pharmaceutical sales industry for over two decades, specializing in the addiction treatment market in the United States. He formerly worked at Alkermes as a Senior Regional Sales Director, where he oversaw a team of executives and representatives responsible for Vivitrol, an FDA-approved medicine for the treatment of Alcohol Use Disorder and Opiate Use Disorder, across 32 states. Mr. Lorenz was in charge of half of Alkermes’ Vivitrol sales in the United States, which totaled $170 million each year. In addition, Mr. Lorenz formerly worked at Cephalon Inc. and Janssen Pharmaceuticals, among other companies. He holds a degree from Lambuth University.