HVT is a global consumer packaged goods company that develops and distributes premium health, wellness, and selfcare products to patients and consumers in regulated markets around the world with a specific focus on sleep, anxiety and pain.
MMJ is the largest shareholder in HVT with a 26% stake.
Harvest One has released its financial results and operational commentary for the six months to December 31, 2019.
In delivering the result, management also provided details regarding the group’s current financial position, financial initiatives being taken and an outlook statement for the March quarter.
Harvest One has a number of wholly-owned subsidiaries including licensed producer United Greeneries, Satipharm which is focused on medical and nutraceutical products) and consumer facing groups Dream Water Global and Delivra.
As a backdrop, MMJ is a global cannabis investment company that owns a portfolio of minority investments and aims to invest across the full range of emerging cannabis-related sectors including healthcare, technology, infrastructure, logistics, processing, cultivation, equipment and retail.
MMJ noted that Harvest One continues to evaluate opportunities to realise surplus assets and raise additional debt and equity capital which is required to realise its business plan.
HVT also advised that it is in discussions to divest its 50.1% interest in the Greenbelt Greenhouse facility located in Hamilton, Ontario, which would provide additional capital and allow management to focus on the growth of its core businesses in Cannabis 2.0, product branding and international distribution.
MMJ is holding discussions with HVT on the potential extension of the date of the repayment of the C$2 million secured loan which is currently repayable on March 10, 2020.
HVT’s net revenues from the cultivation division were negatively impacted due to industry wide factors, and most companies in the sector have faced similar headwinds which have been reflected in negative share price movements.
The decrease in net revenue was primarily attributable to product returns, pricing adjustments and reduced provincial orders in comparison to the prior year.
Despite this, the consumer division continued to make steady ground with 11% revenue growth over the previous quarter.
HVT has made significant progress on reducing its overall SG&A expenses with cash expenses decreasing compared to the previous quarter, after adjusting for one-off items.
The decrease is a result of the implementation of cost reduction initiatives midway through the December quarter, a period in which expenses were impacted significantly by $9.9 million in non-cash impairment charges in the cultivation and consumer divisions.
However, the outlook for the six months to June 30, 2020 has improved significantly, most notably at the company’s United Greeneries operations.
Both dried and bulk flower sales have increased significantly and Cannabis 2.0 sales are expected to be reflected in the March quarter results as due to strong demand from both retail and provincial cannabis store partners.
Revenues from the consumer and medical divisions are also expected to show steady quarter on quarter growth
Harvest One’s initial Cannabis 2.0 product offerings include a selection of pain relief topical creams and vape pen cartridges.
Products have undergone the necessary Health Canada notifications and are currently in the process of being listed in Ontario, British Columbia, Alberta, Saskatchewan and Manitoba.
All five provinces have completed registrations and the company is currently working through final arrangements with a production partner to finalize its product launch.
Products are expected to be available later this quarter.
In November 2019, Harvest One received permission from Health Canada to import Satipharm’s 10mg CBD Gelpell® capsules into Canada for research and development purposes.
The company also continues to prepare for a launch of Satipharm’s CBD Gelpell® capsules into Canada and is working through the necessary arrangements with Gelpell®.
The development of this business will be a key element of future growth for Harvest One, but it will require additional financing.