Key Takeaways; Cannabis Sector

• Hydrofarm sales are still declining, despite improved revenue projections.
• Agrify announced a modification to their credit agreement with Bridge Bank.
• Trulieve announced fourth-quarter results and record full-year revenue exceeding $1.2 billion for 2022.
• Village Farms sales slightly decreased in the fourth quarter.

Key Takeaways; Psychedelic Sector

• Awakn broadened the geographic reach and scope of its licensing partnership business with the signing of its first licensing partnership deal in Europe.
• Seelos Therapeutics announced a registered direct offering of shares of common stock and warrants to purchase shares of common stock.

It was a terrifying week after the biggest bank failure since 2008 was announced on Friday, and the upcoming week is anticipated to witness further drama around the fall of SVB Financial Group (NASDAQ: SIVB) and its ramifications for the banking industry and venture capital ecosystem. It was a challenging week for cannabis operators as well, with a number of companies highlighting the sector’s existing problems through their dismal financial performance.

Below is a review of the companies that dominated the news in the cannabis and psychedelic sectors throughout the course of the previous week.

Top Marijuana Companies for Week

#1: Hydrofarm

Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM) released its financial results for the fourth quarter and full year ended December 31, 2022, after the market closed on Thursday; these figures showed a sharp decline in sales. In comparison to the same period last year, net sales for the fourth quarter fell to $61.5 million from $110.4 million.

According to Hydrofarm, the decline was caused by a decrease in sales volume primarily due to the industry recession, a 0.9% decline in price and product mix mostly due to the sell-through of discounted lighting products, and a 0.5% decline as a result of unfavorable currency exchange rates.

In comparison to the fourth quarter of previous year, when there was a net loss of $11.0 million, this quarter’s net loss was $35.3 million. As a result, the company experienced a net loss of 57.4% of net sales, or $0.78 per diluted share. Despite the deficit, the company’s revenue during the previous four quarters twice exceeded consensus analyst estimates.

Bill Toler, Chairman and CEO of Hydrofarm, said; “While the current operating environment remains challenging, I am encouraged that we finished 2022 with our net sales coming in at the upper end of our previously provided outlook and that we generated positive Free Cash Flow for the third quarter in a row. We have experienced sales stabilization over the last several months and are seeing some positive indicators that the industry is moving closer to a rebound. I am pleased with the many actions behind the restructuring initiative and related actions that our team has launched to right-size our business and become a leaner, more profitable company. We remain confident in the long-term strength of our business, as our disciplined approach to working capital and restructuring actions initiated in 2022 have put us in a healthy position heading into 2023 and beyond.”

#2: Agrify

Agrify Corporation (NASDAQ: AGFY), a leading developer of indoor agriculture technology and solutions, announced an agreement to modify its credit facility with Bridge Bank, a division of Western Alliance Bank.

The credit facility was originally established in February 2021 and had a total commitment of $18 million. The modification allows Agrify to increase the size of the facility to $30 million and provides for a more flexible repayment schedule. The agreement also allows for Agrify to draw down on the facility in multiple tranches as it requires funding for its growth initiatives.

According to Agrify, the modified credit facility provides the company with the ability to expand its operations and invest in research and development to create innovative indoor agriculture solutions. With the increased capital, Agrify will be able to enhance its product offerings and services to meet the growing demand for indoor agriculture solutions in various markets, including cannabis, leafy greens, and specialty crops.

#3: Trulieve

Trulieve Cannabis Corp. (OTC: TCNNF), one of the leading medical cannabis companies in the United States, recently reported its fourth-quarter earnings and full-year results for the year 2022. The results showed that the company achieved a record-breaking revenue of $1.24 billion, which is an increase of 32% from the previous year.

Trulieve reported $302 million in revenue for the fourth quarter, with 2% growth in retail revenue and 96% of revenue coming from retail sales. A further $85 million in adjusted EBITDA, or 28% of revenue, was generated by the company during the quarter. Also, the company generated $21 million in free cash flow and $55 million in operating cash flow during the quarter.

The company’s growth can be attributed to various factors, including Trulieve’s expansion into new markets, the opening of new dispensaries, and the company’s strong branding strategy. The Florida-based company operates in various states across the US, including West Virginia, Massachusetts, California, and Connecticut, among others.

“Trulieve has grown to surpass $1.2 billion in revenue in less than seven years, a notable milestone and a testament to the agility of our team,” said Kim Rivers, Trulieve CEO. “Our success is the culmination of thoughtful intention, superb execution, and best in class capabilities for rapid growth.”

#4: Village Farms

Village Farms International, Inc. (NASDAQ: VFF) announced its financial results for the fourth quarter and full year ending December 31, 2022. According to the released data, Village Farms’ revenue decreased from $72.8 million in 2021 to $69.5 million in 2022, slightly missing the average analyst estimate of $70 million on Yahoo Finance. The company attributed the decline to a stronger U.S. dollar relative to the Canadian dollar, which resulted in a $2.4 million decline in reported U.S. sales for their Canadian Cannabis operations.

Moreover, the company recorded a net loss of $49.3 million, or $0.54 per share, compared to a net profit of $2.1 million, or $0.03 per share, which also missed the Yahoo estimate for earnings of $0.09.

“The fourth quarter of 2022 once again demonstrated the momentum in our Canadian Cannabis business as investments in new brands and product innovations contributed to 25% year-over-year growth in retail branded sales and our 17th consecutive quarter of positive adjusted EBITDA,” said Michael DeGiglio, Chief Executive Officer, Village Farms.

Top Psychedelic Companies for Week

#1: Awakn

Awakn Life Sciences Corp. (OTC: AWKNF), a biotechnology company focused on developing and delivering innovative treatments for addiction and other mental health conditions, recently signed a licensing partnership agreement in Europe with a Portugal-based healthcare consortium currently operating in stealth mode. This agreement marks a significant step for Awakn as it expands its reach and solidifies its position as a leader in the field of psychedelic medicine.

The licensing partnership agreement between Awakn and the Portugal-based healthcare consortium will allow the two organizations to collaborate on the development and commercialization of Awakn’s proprietary psychedelic-assisted therapies for the treatment of addiction and other mental health conditions. The agreement grants the healthcare consortium exclusive rights to use and distribute Awakn’s intellectual property and technologies within Portugal, and non-exclusive rights to distribute these therapies throughout the rest of Europe.

According to Anthony Tennyson, the CEO of Awakn, the company is delighted to broaden “by geography” and “by scope” its license partnership business for the treatment of mental health disorders. “We are also delighted to work with our new partners in Portugal who are deeply experienced in, and knowledgeable of, the Portuguese mental health treatment and wellness sectors,” Tennyson added.

#2: Seelos Therapeutics

Seelos Therapeutics, Inc. (NASDAQ: SEEL), a clinical-stage biopharmaceutical company, recently announced a registered direct offering of its common stock and warrants to purchase its common stock. The offering is expected to raise up to $11.24 million in gross proceeds, which will be used to fund the development of the company’s pipeline of novel therapeutics.

Seelos Therapeutics intends to sell up to 12,059,298 shares of its common stock, as well as pre-funded warrants worth a combined 9,340,702 shares of common stock and common warrants worth a combined 26,750,000 shares of common stock. The pre-funded warrants and accompanying common warrants are being sold at a combined offering price of $0.524 per pre-funded warrant, while the shares of common stock and accompanying common warrants are being sold for a combined offering price of $0.525 per share.

According to the company, the proceeds from the registered direct offering will be used to advance the development of Seelos Therapeutics’ pipeline of novel therapeutics, including the continued clinical development of its product candidates. The company also plans to use the funds for general corporate purposes. This offering is expected to close on or about March 14, 2023, subject to the satisfaction of customary closing conditions.