Key Takeaways; Cannabis Sector

• High Tide revenue rose, but the company still fell short of profitability.
• Aurora Cannabis experienced an increase in revenue; However, the company is facing significant cash expenditure.
• Acreage reduced its board size ahead of canopy deal.

Key Takeaways; Psychedelic Sector

• Awakn announced closing of the second tranche and upsizing of previously announced private placement.
• Numinus announced a partnership with MAPS to support therapist psychedelic experiential training.

In this weekly roundup, we review the key developments amongst major players in the cannabis and psychedelics sectors.

Top Marijuana Companies for Week

#1: High Tide

Canada-based cannabis company High Tide Inc. (NASDAQ: HITI) reported a significant increase in revenue for its second fiscal quarter, ending April 30. The company’s revenue reached an impressive $118.1 million, marking a 46% year-over-year growth from $81 million in the same quarter last year. Despite this positive development, High Tide still fell short of profitability, recording a net loss of $1.6 million.

According to the company, the revenue growth can be attributed to a combination of cost reductions and sales increases. High Tide has been working on improving its operational efficiency, resulting in a reduction in losses compared to the previous year. The company’s losses decreased from $8.2 million in the second quarter of the previous year to $1.6 million in the current quarter.

However, High Tide also faced negative cash flow of minus $1.9 million during the quarter. This indicates that the company is still grappling with financial challenges despite its revenue growth. To address this, High Tide stated that it aims to become cash-flow positive by the end of the calendar year. According to the company, they plan to expand their retail footprint and open more storefronts across Canada, with a target of capturing 15% of the market.

High Tide’s CEO, Raj Grover, expressed optimism about the company’s prospects; “Our bricks-and-mortar margins have increased by approximately 1% every quarter for the last five quarters, and we feel there is further opportunity to increase margins in most markets where we operate,” Raj Grover said in a press release. “We believe there remains a significant opportunity to continue moving towards our goal of capturing 15% of this market.”

While High Tide plans to open more stores in the second half of 2023, the company acknowledges that the overall growth will be relatively muted compared to its historical pace. It expects the challenging market conditions and expiring leases to contribute to the shakeout in the Canadian marijuana industry.

#2: Aurora Cannabis

Aurora Cannabis Inc. (NASDAQ: ACB), a leading cannabis company, recently reported its financial results for the third quarter and fiscal year 2023. While the company saw a rise in revenues, its cash burn remains a concern. Aurora’s total net revenue for the quarter reached $64 million, surpassing the previous quarter’s revenue of $61.7 million and the previous year’s revenue of $50.4 million. The increase was attributed to the contribution of $10.8 million from Bevo, which was acquired in August 2022.

Despite the revenue growth, Aurora continues to experience significant net losses. The company reported a quarterly loss of $87 million, compared to $67.2 million in the second quarter. Aurora attributed the jump in losses to an increase of $60 million in other expenses driven by changes in fair value on derivative investments.

Aurora reassured shareholders about its balance sheet, stating that it has $230 million in cash and cash equivalents and approximately $80 million outstanding in convertible debentures. However, the company’s cash position has decreased significantly, with the cash at the end of June 2022 amounting to $437 million. Over the past nine months, Aurora has burned through more than $200 million, causing its working capital to plunge by 59% since the third quarter of 2022.

Despite the cash burn, Aurora believes its current cash on hand is sufficient to fund operations until it becomes cash flow positive. We are proud to have delivered our second sequential quarter of positive Adjusted EBITDA in Q3 2023, demonstrating our commitment to financial discipline,” CEO Miguel Martin said. “Over the last three years, our ongoing business transformation initiatives have delivered ~$400 million in annualized cost savings that have significantly reduced cash used in operating activities.”

Martin continued, “In fact, cash use continues to improve as evidenced by the reduction from $35.5 million in Q2 2023 to $15.1 million in Q3 2023, excluding working capital. This impressive improvement is the launching point for the initiatives that will support our drive to our new financial target of positive free cash flow by end of calendar year 2024.”

#3: Acreage Holdings

Acreage Holdings, Inc. (OTC: ACRHF), a leading cannabis operator in the United States, announced further changes to its leadership and oversight as it prepares for an anticipated acquisition by Canopy Growth Corporation (NASDAQ: CGC). The company said that it had implemented a streamlined governance structure in order to align with its near-term priorities and ensure a smooth transition.

These changes reflect Acreage’s commitment to positioning itself for success as it integrates with Canopy USA, a subsidiary of Canopy Growth Corporation. The company aims to leverage the combined expertise and resources of both organizations to capitalize on the significant opportunities presented by the U.S. cannabis market, particularly in anticipation of potential federal permissibility.

Dennis Curran, the newly appointed Chief Executive Officer of Acreage, expressed his satisfaction with the company’s progress and its upcoming transition into Canopy USA. He acknowledged the support and strategic guidance provided by the Board, highlighting their instrumental role in Acreage’s journey. Curran also expressed gratitude for their contributions and wished them well in their future endeavors.

Top Psychedelic Companies for Week

#1: Awakn

Awakn Life Sciences Corp. (OTC: AWKNF), a clinical-stage biotechnology company focused on developing therapeutics to treat addiction, announced the closing of the second tranche and an upsizing of its previously announced non-brokered private placement financing.

The initial private placement financing was announced on April 26, 2023, with the aim of raising gross proceeds of up to $3,000,000 through the issuance of up to 6,521,739 units in the capital of the company at a price of CAD$0.46 per unit. The first tranche of the offering closed on a positive note, raising $1,100,715 by issuing 2,392,858 units.

Recently, Awakn successfully closed the second tranche of the offering, issuing 1,884,204 units and generating gross proceeds of $866,733 for this tranche. In total, the company has raised $1,967,448 from the private placement to date. Encouraged by recent developments, Awakn decided to increase the size of the offering from up to $3,000,000 to up to $4,000,000, maintaining the price of $0.46 per unit.

Each unit offered consists of one common share in the company and three quarters (0.75) of one whole common share purchase warrant. The warrants entitle the holders to acquire one common share at a price of $0.63 per share within a period of five years from the date of issuance. The company said that the gross proceeds generated from the offering will be used to fund the company’s general working capital.

#2: Numinus Wellness

Numinus Wellness Inc. (OTC: NUMIF), a mental health care company focused on advancing innovative treatments and evidence-based investigational psychedelic-assisted therapies, recently announced a significant partnership with the Multidisciplinary Association for Psychedelic Studies (MAPS). The collaboration aims to support psychedelic experiential opportunities for practitioners as part of a clinical study. The partnership marks an important step forward in the field of psychedelic-assisted therapy and demonstrates the commitment of both organizations to driving greater understanding and accessibility to these therapies.

As part of the collaboration, Numinus has submitted a Clinical Trial Application (CTA) to Health Canada. If approved, the CTA will enable Numinus to offer MDMA-assisted therapy experiential opportunities exclusively through its programs. The experiential opportunity will be made available to practitioners as part of Numinus’ psychedelic-assisted therapy education and training program. It is noteworthy that this is the first permission granted by MAPS to use its protocol as part of such an experiential opportunity.

The Clinical Trial Application has been submitted by Numinus through its subsidiary, Numinus Wellness Research Inc. Should the application be approved by Health Canada, the clinical trial will provide practitioners interested in MDMA-assisted therapy with the opportunity to experience and observe MDMA sessions. This firsthand experience will further their understanding of psychedelic-assisted therapy, contributing to their professional development.