Weekly Roundup on the Cannabis Sector & Psychedelic Sector

Key Takeaways; Cannabis Sector

• Schwazze completed $75 million acquisition.

• Israeli medical cannabis company InterCure reported its preliminary Q4 financial results.

• Cannabis REIT Chicago Atlantic lent $34 million to FarmaceuticalRX.

• Red White & Bloom closed the acquisition of Michigan marijuana operator PharmaCo.

• Weak cannabis sales drove Canopy Growth Q3 revenue 8% lower to C$115 million.

• Aurora cannabis Q2 revenue decreased by 10%; However, they beats estimates.

• Harborside closed $77.3 million debt.

Key Takeaways; Psychedelic Sector

• Awakn to host fireside chat with Dr. Ben Sessa.

• Cybin announced grant of U.S. patent.

It was a busy week in the cannabis sector. The week was full of action as more companies in the sector reported their earnings while others closed some acquisitions deals. Below is a weekly roundup on the cannabis and psychedelics sectors. Make sure you follow through to the end to get the latest updates in these sectors.

Top Marijuana Companies for Week

#1: Harborside

Harborside Inc. (OTC: HBORF), a vertically integrated marijuana company situated in Oakland, California, has completed the first tranche of a $77.3 million loan financing agreement.

The move came as part of the company’s previously announced merger with Urbn Leaf, a San Diego-based retailer, and Loudpack, a Los Angeles-based cultivator, processor, and distributor.

Harborside said in a news release that the first tranche of financing from Pelorus Equity Group is worth $45.4 million, with around $15.5 million coming to Harborside, $16.4 million to Loudpack, and $13.5 million to Urbn Leaf.

When the business combination is finalized, the California Corporation expects to change its name to StateHouse Holdings. The deal is expected to finalize in March, pending shareholder and regulatory clearances, among other things, according to Harborside.

The company used some of the financing to pay off $12 million outstanding under a senior secured revolving credit facility.

“Proceeds from the first tranche of the roll up financing will be used to retire certain existing loans, to fund closing costs and interest reserves, and to provide additional working capital to the three companies,” according to the Harborside release. “Proceeds from the second tranche will be used primarily for working capital purposes and for growth capital of StateHouse.”

The second tranche of financing from Pelorus will be worth $31.9 million.

Harborside also announced it was terminating a $10 million private placement of equity units that it announced along with the business combination in November. In addition, Pelorus said in a release that its financing to Harborside carries a nominal interest rate of 10.25%.

#2: Canopy Growth

Canopy Growth Corporation (NASDAQ: CGC) lost 115 million Canadian dollars ($90 million) in the quarter ending December 31, 2021, due to reduced cannabis sales in its key Canadian market.

The company’s third-quarter net revenue was CA$141 million, which was somewhat above than analysts’ projections. However, compared to the same period previous year, this constituted an 8% drop.

Once again Canopy continued to have difficulty selling cannabis in Canada. Recreational cannabis sales dropped to CA$47.8 million, the lowest level in over a calendar year, and a 25% drop from the same period a year earlier. Medical cannabis sales in Canada declined 7% year over year in the third quarter, to CA$12.9 million.

In Canada, gross sales of dry bud plunged almost 30% to CA$47 million in Q3, but sales of oils and softgels inched higher, to CA$8.8 million.

One of the biggest areas of concern for Canopy is the so-called 2.0 category, consisting of beverages, edibles, topicals and vapes. The company once had ambitions to rule the category, but gross sales of 2.0 products declined to CA$5.8 million, 40% lower year-on-year.

In a conference call to discuss the quarter, analyst Owen Bennett asked the company what went wrong. Canopy CEO David Klein said that “the key unlock is if we get movement on equivalency in Canada, because we just can’t sell the volumes across the market that would be necessary to get the kind of returns that we want.” He’s hopeful that comes in the not-too-distant future.

In addition, the company’s global cannabis net revenue fell 20% year-over-year to only CA$83 million in the October-December quarter. Storz & Bickel, Canopy’s vaporizer device brand, provided a bright spot, with sales rising in the quarter to CA$25.2 million.

The company’s sports nutrition brand, BioSteel, provided another area of strength. BioSteel sales soared 130%, year-over-year, to CA$17 million in the third quarter. Canopy also booked asset impairment and restructuring costs worth CA$36.4 million. The company had CA$1.4 billion in cash as of Dec. 31, 2021.

Canopy shares trade as WEED on the Toronto Stock Exchange and CGC on the Nasdaq.

#3: Medicine Man Technologies “Schwazze”

Since late December, Medicine Man Technologies, Inc. (OTC: SHWZ), a Denver-based vertically integrated cannabis company, has closed on three big acquisitions totaling $75 million, including purchasing one of the region’s most distinguished stores and expanding across of state.

The announced purchases come at a time when Colorado’s cannabis industry is undergoing strong consolidation, and they buck a trend that has seen out-of-state companies buy their way into the Mile High market through acquisitions.

On Thursday, February 10, Schwazze announced that it had completed the purchase of Emerald Fields (officially registered as MCG LLC), a two-store chain with outlets in Manitou Springs and Glendale. The total compensation for the two stores is $29 million, paid 60 percent in cash and 40 percent in Schwazze common stock, according to the business.

In addition, Schwazze reported on Tuesday that it had closed on a $42 million deal in New Mexico, acquiring “virtually all the operating assets” of Reynold Greenleaf & Associates LLC, as well as the stock of Elemental Kitchen & Laboratories LLC. Schwazze now has a significant presence in the state, with ten dispensaries, four cultivation facilities, and a manufacturing facility.

These acquisitions officially make Schwazze one of only a few Colorado-based cannabis multistate operators, referred to within the industry as MSOs.

“With our regional expansion into New Mexico now complete, we have firmly graduated to the MSO category but with a differentiated regional focus which we and our stakeholders believe will be successful as we continue to position the company for rapid expansion as the market opens for adult use consumption,” Schwazze CEO and Chairman Justin Dye said in the statement announcing the deal.

#4: Red White & Bloom

Red White & Bloom Brands Inc. (OTC: RWBYF), a multistate cannabis corporation located in Canada, completed the acquisition of PharmaCo, a Michigan marijuana company. RWB, based in Toronto, declared its intention to purchase PharmaCo in July 2020, exercising its right to do so as part of a financing contract.

Red White & Bloom will issue 37 million units as part of the all-stock deal, each unit having one common share and one convertible preferred share in RWB. In addition, to satisfy obligations, RWB is issuing new units to some of PharmaCo’s debtors.

The acquisition includes: Eight cannabis stores in operation, plus two more that are ready to open; two indoor cultivation facilities; one outdoor cultivation site; and other owned properties that could be used as cultivation or retail sites. RWB already operates a manufacturing facility in Michigan.

In a news release, RWB Chair and CEO Brad Rogers said the company’s Michigan plans “include extending our branded product lines, updating our dispensaries to heighten the customer experience, creating supply chain efficiencies and growing revenue and profitability.”

Red White & Bloom shares trade on the Canadian Securities Exchange as RWB and on U.S. over-the-counter markets (OTC) as RWBYF.

#5: InterCure

InterCure Ltd. (NASDAQ: INCR), an Israeli company, released preliminary financial results for the fourth quarter of 2021 on February 8. Revenue is expected to be more than $31 million, which is three times higher than the fourth quarter of 2020 and represents a sequential increase of more than 24%. The company did not say whether it had made a profit or lost money.

The company also announced that full-year revenue is expected to reach $87 million, representing a nearly 250 percent increase year over year (YOY). The company’s revenue growth is predicted to continue beyond 2022.

On Tuesday, March 15, 2022, InterCure aims to file its full financial statements for the fourth quarter and full year of 2021.

“InterCure continues to execute, achieving record growth in the quarter ended December 31, 2021, with preliminary revenue anticipated to be $31 million, up by over three times from the fourth quarter of 2020,” said InterCure’s Chief Executive Officer, Alexander Rabinovitch. “We have now achieved eight consecutive quarters of double-digit revenue growth and increased profitability, while also crossing the one-ton mark in GMP medical cannabis products dispensed monthly during the fourth quarter, which is a world record in the GMP-certified cannabis markets. Going forward, we remain focused on maintaining our market-leading position in Israel’s cannabis market while continuing with our international expansion plans. By executing on our profitable growth strategy, InterCure is well positioned to build shareholder value as one of the leaders of the international cannabis industry.”

InterCure Ltd and its subsidiaries are involved in medicinal cannabis research, cultivation, manufacture, marketing, and distribution in Israel and overseas. It also invests in the biomedical field. The company was founded in 1994 and is based in the Israeli city of Herzliya.

#6: Aurora

Aurora Cannabis Inc. (NASDAQ: ACB) released results for the second quarter fiscal 2022, which ended December 31, 2021, after the market closed on Thursday.

Aurora reported $60.6 million in total cannabis net sales in the second quarter, up 1% year over year but down from $67 million last year. According to Yahoo Finance, this exceeded analysts’ revenue projections of $46 million. As a result, the stock is currently trading at $4.70, up over 2% from its previous close.

The company also reported a net loss of $75 million for the quarter, down from a net loss of $300 million the previous year. The average net selling price per gram of dried cannabis fell 10% to $4.20 in the first quarter of 2022, excluding the effect of bulk wholesale of excess mid-potency cannabis flower throughout the quarter, reflecting sustained downward pricing pressures due to competition.

“During the second quarter, we improved our Adjusted EBITDA by $2.5 million over Q1, moving us closer to our profitability goal. Our focus remains on further cost reductions, and we are pleased to announce today that we expect to reach the high end of the $60 to $80 million range. Our balance sheet remains among the strongest in the industry, with approximately $445 million in cash as of yesterday. This gives us significant working capital to support organic growth and positions us to pursue strategic M&A opportunities,” stated Miguel Martin, Chief Executive Officer of Aurora.

Aurora Cannabis Inc. is a Canadian company that manufactures, distributes, and sells cannabis and cannabis-derived products both domestically and abroad. It also participates in cannabis breeding, research, production, derivatives, product development, wholesale, and retail distribution.

Top Psychedelic Companies for Week

#1: Awakn

On Wednesday, March 2nd at 11:00 a.m. EST, Awakn Life Sciences Corp. (NEO: AWKN) (OTCQB: AWKNF), a biotechnology business that is studying, developing, and delivering psychedelic therapies to treat addiction, will conduct a fireside chat with Dr. Ben Sessa, Chief Medical Officer.

Dr. Sessa, author of ‘The Psychedelic Renaissance,’ among other works, is widely regarded as one of the most prominent personalities in the psychedelic industry, having spent the last 15 years at the fore. He also oversaw the first MDMA-assisted therapy clinical trial for the treatment of Alcohol Use Disorder in the world.

Dr. Sessa will address the psychedelic industrial environment and Awakn’s unique and differentiated approach to developing psychedelic therapies to treat addiction during the video webinar. He’ll also go through some of the company’s expected milestones for 2022, as well as the company’s strategy for realizing its mission of researching, producing, and providing psychedelic therapies as more than a therapy choice.

The webinar is free and open to the general audience. During the Q&A phase of the webinar, participants will have the opportunity to ask questions. If you are interested participating in this informative and educative webinar, please go here to register for the event.

#2: Cybin

On February 09, Cybin Inc. (NYSE: CYBN), a biopharmaceutical company focused on advancing “Psychedelics to Therapeutics,” announced that the United States Patent and Trademark Office granted U.S. patent 11,242,318 to the Company’s investigational deuterated dimethyltryptamine (“DMT”) compound CYB004. The company said that, a variety of deuterated variants of DMT, as well as 5-MeO-DMT, are authorized.

The patent, which covers composition of matter and protects the CYB004 drug substance as a putative new chemical entity, is set to expire in 2041 before any term extensions are considered.

Cybin’s lead experimental proprietary DMT molecule is CYB004. CYB004 has shown potential efficacy at lower doses while also enhancing the duration of pharmacological action in preclinical trials, resulting in a therapeutic profile that may mitigate the unpleasant effects commonly associated with traditional DMT.

In the second quarter of calendar year 2022, Cybin plans to file a clinical trial application for a pilot study of CYB004, with the pilot study expected to begin in the third quarter of calendar year 2022.

The Company is continuing to pursue several avenues to establish and support its patent position for research and development testing deuterated tryptamines for potential psychedelic-based mental disorder treatments.

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