Total revenue for the three and nine months ended September 30, 2018
increased 62% and 92%, respectively from prior year.
Total revenue for Q3 2018 increased 6% compared to Q2 2018.
The Company continues to operate profitably; Adjusted EBITDA for the
nine months ended September 30, 2018 was $7.6 million (all dollars are
in U.S. dollars, except where noted).
In 2018, successfully raised almost $290 million of funds, as follows:
approximately $50 million in convertible debentures, approximately $20
million in senior debt, and approximately $218 million in a brokered
PHOENIX--(BUSINESS WIRE)--The Q3 2018 financial and operation results are for the reverse takeover
(“RTO”) acquirer of Harvest Health & Recreation, Inc., which is referred
to as the Harvest Enterprises Group of Companies (the “Company” or
“Harvest”). Harvest is one of the largest multi-state vertically
integrated operators in the cannabis industry. The Harvest team brings
broad operational expertise in real estate, legislation, permitting,
zoning and retail sales. The Company has been successful in winning
licensure in non-competitive and competitive application processes
throughout the country, winning many licenses across the states in which
it operates or is expanding into. Harvest’s ability to navigate complex
regulatory pathways that are different in each state, as well as
extensive research into each market the Company enters, are key tenets
to its success. Harvest has won licenses in every state in which it has
applied, underscoring a high success rate.
Financial Highlights for the Third Quarter Ended September 30, 2018
Total revenue was $11.2 million, an increase of 62%, compared to $6.9
million in Q3 2017.
Total revenue increased 6% compared to $10.5 million in Q2 2018.
Gross profit, excluding impact of biological assets, was $5.6 million,
an increase of 61%, up from $3.5 million in Q3 2017.
Gross profit margin, excluding the impact of biological assets, was
50% for Q3 2018 and Q3 2017.
Adjusted EBITDA1 gain was $3.2 million, compared to a loss
of $0.04 million in Q3 2017.
Net loss was $0.5 million, including a $3.7 million of RTO and
expansion related expenses.
Financial Highlights for the Nine Months Ended September 30, 2018
Total revenue for the nine months ended September 30, 2018 was $30.0
million, an increase of 92%, compared to $15.6 million for the same
period in 2017.
Gross profit, excluding the impact of biological assets, was $17.4
million, an increase of 96% compared to $8.8 million for the nine
months ended September 30, 2018.
Gross profit margin, excluding the impact of biological assets, was
58% for the nine months ended September 30, 2018, compared to 57% in
the same period the prior year.
Adjusted EBITDA1 gain totaled $7.6 million for the nine
months ended September 30, 2018, compared to $3.8 million for the same
period in 2017.
Net gain was $3.6 million for the nine months ended September 30,
2018, including $4.8 million of RTO and expansion related expenses.
Capital Markets, Financing Activities and Growth Strategy
On November 13, 2018, Harvest raised $218,149,676 in a brokered
private placement. The company has raised nearly $290 million this
year: approximately $50 million of convertible debentures, which
converted into common stock when Harvest completed its RTO,
approximately $20 million of senior debt, and approximately $218
million of equity issuances. The Company plans to use this cash to:
Continue to expand its commercial footprint focusing on building
additional retail, cultivation, and production locations for
medical and adult use cannabis.
Apply for new licenses and successfully receive them in an
extremely competitive market, further establishing management’s
credibility through a consistent track record of complying with
the industry’s stringent regulations.
Make selective acquisitions of facilities and brands.
On November 14, 2018, the Company completed the RTO and listed on the
Canadian Securities Exchange. Harvest now trades under the ticker
In November, acquired San Felasco Nurseries, Inc. (“San Felasco”), a
holder of a medical marijuana license and authorized to operate as a
Medical Marijuana Treatment Center in the state of Florida. Each
Medical Marijuana Treatment Center is allowed to operate up to 25
dispensaries, as well as a cultivation and production facility in the
State of Florida.
In November, acquired CBx Enterprises LLC, a Colorado intellectual
property company (“CBx”). CBx has entered into a licensing agreement
with two Colorado cannabis licensed businesses, THChocolate, LLC and
Evolutionary Holdings, LLC (collectively, “EvoLab”). EvoLab owns and
operates a Colorado medical and adult-use cannabis operation with a
medical and retail processing facility located in Denver, Colorado.
Retail Footprint Expansion
As of September 30, 2018, the Company operated nine retail locations
in two states. Significant expansion of cultivation, manufacturing and
retails locations will occur in the 4th quarter and
Balance Sheet and Liquidity
As of September 30, 2018, the Company had $28 million of cash and cash
The company has raised nearly $290 million this year: approximately $50
million of convertible debentures, which converted into common stock
when Harvest completed the RTO, approximately $20 million of senior
debt, and over $218 million of equity issuances.
In the third quarter of this year, the Company issued approximately $50
million of convertible debentures. These debentures converted into
common stock upon close of the RTO on November 14, 2018.
On November 14, 2018, the Company received gross proceeds of over $218
million from the completion of its brokered private placement.
In conjunction with the RTO, Harvest has entered into a Letter Credit
Agreement to borrow $20 million for a period of three years at an
interest rate that is equal to Bank of Nova Scotia Prime plus 10.3% per
(1) See "Non-IFRS Financial and Performance Measures" below for more
information regarding Harvest's use of Non-IFRS financial measures.
About Harvest Health & Recreation, Inc.
Harvest Health & Recreation, Inc. is one of the first consistently
profitable, vertically integrated cannabis companies with one of the
largest footprints in the U.S. Harvest’s complete vertical solution
includes industry-leading cultivation, manufacturing, and retail
facilities, construction, real estate, technology and operational
expertise — leveraging in-house legal, HR and marketing teams, along
with proven experts in writing and winning state-based applications. The
company has 425 employees with proven experience, expertise and
knowledge of in-house best practices that are drawn upon whenever
Harvest enters new markets. Harvest’s executive team is comprised of
leaders in finance, compliance, real estate and operations. Since its
founding in 2011, Harvest has grown its footprint every year and now has
licenses in 11 states, with planned expansion into additional states by
2020. Harvest shares timely updates and releases as part of its regular
course of business with the media and the interested public. For more
information, visit: https://www.harvestinc.com/.
Non-IFRS Financial and Performance Measures
In this press release, Harvest refers to certain non-IFRS financial
measures such as Adjusted EBITDA, being Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) less certain non-cash equity
compensation expense, including one-time transaction fees and all other
non-cash items. These measures do not have any standardized meaning
prescribed by IFRS and may not be comparable to similar measures
presented by other issuers.
Adjusted EBITDA gain for the three-month period of $3.2 million is
calculated as the Company's income from operations of $1.8 million, plus
depreciation and amortization of $0.3 million, and RTO of $1.1 million.
For the nine-month period, adjusted EBITDA gain of $7.6 million is
calculated as the Company's income from operations of $5.1 million, plus
depreciation and amortization of $1.1 million, and RTO of $1.4 million.
Forward Looking Information
Certain statements in this press release are forward-looking statements
and are prospective in nature. Forward-looking statements are not based
on historical facts, but rather on current expectations and projections
about future events, many of which, by their nature, are inherently
uncertain and outside of the Company's control and are therefore subject
to risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the
forward-looking statements. These statements generally can be identified
by the use of forward-looking words such as "may", "should", "will",
"could", "intend", "estimate", "plan", "anticipate", "expect", "believe"
or "continue", or the negative thereof or similar variations.
Forward-looking statements in this news release include, but are not
limited to, information concerning the ability of the Company to
successfully achieve business objectives, and expectations for other
economic, business, and/or competitive factors. Those assumptions and
factors are based on information currently available to the Company.
Although management of the Company has attempted to identify important
factors that could cause actual results to differ materially from those
contained in forward-looking statements or forward-looking information,
there may be other factors that cause results not to be as anticipated,
estimated or intended. Among the key factors that could cause actual
results to differ materially from those projected in the forward-looking
information and statements are the following: the ability of the Company
to develop the Company's brand and meet its growth objectives, the
ability of the Company to complete acquisitions that are accretive to
the Company's revenue, the ability of the Company to obtain and/or
maintain licenses to operate in the jurisdictions in which it operates
or in which it expects or plans to operate. Should one or more of these
risks, uncertainties or other factors materialize, or should assumptions
underlying the forward-looking information or statements prove
incorrect, actual results may vary materially from those described
herein as intended, planned, anticipated, believed, estimated or
expected. There can be no assurance that such statements will prove to
be accurate, as actual results and future events could differ materially
from those anticipated in such statements. Readers should not place
undue reliance on forward-looking statements and forward-looking
information. The forward-looking information contained in this release
is made as of the date hereof and the Company assumes no obligation to
update or revise any forward-looking statements or forward-looking
information that are incorporated by reference herein, whether as a
result of new information, future events or otherwise, except as
required by applicable securities laws. The foregoing statements
expressly qualify any forward-looking information contained herein. All
subsequent written and oral forward-looking information and statements
attributable to the Company or persons acting on its behalf is expressly
qualified in its entirety by this notice.
Unaudited Interim Condensed Combined Statements of Financial Position
(Expressed in United States Dollars)
Cost of Goods Sold
Gross Profit Before Biological Asset Adjustments
Unrealized Gain on Changes in Fair Value of Biological Asset
Cost of Goods Sold on Biological Asset Transformation
General and Administrative
Sales and Marketing
Depreciation and Amortization
Gain on Sale of Asset
Reconciliation to Adjusted EBITDA
Operating Income (Loss)
Depreciation and Amortization
Powerplant Global Strategies
Alex Howe, Managing Director