Cannabis One nixes warrant expiry plans, blames bad advice from short seller
Cannabis One Holdings Inc. has rescinded plans to accelerate the expiry of warrants, claiming that the plan was based on bad advice from a financial advisor who was actually trying to tank the company’s stock for the benefit of short sellers.
In a bizarre news release, sent out late Friday evening, the company said that the “regrettable decision to accelerate the expiry date of the applicable warrants” had been taken after the company “received poor capital markets advice from a newly introduced financial advisor that insisted on a reduction in future dilutive securities to better facilitate additional capital raises moving forward.”
“Instead of then assisting the Company with raising capital, Cannabis One later learned that this advisor improperly facilitated a syndicate of structured short selling that clearly impacted the trading price of Cannabis One's listed shares, which naturally resulted in the immediate termination of this relationship,” said Cannabis One, which began trading on the CSE in February and which owns a small portfolio of cannabis assets in the U.S.
The company does not name the “financial advisor” or explain how the individual became involved with Cannabis One. However, the company has been involved with individuals and companies currently under investigation by the B.C. Securities Commission for alleged securities fraud.
Anthony Jackson, a Vancouver man at the centre of the BCSC’s ongoing BridgeMark Group investigation, used to be the CFO of the CSE-listed shell Metropolitan Energy Corp. which merged with Colorado firm Bertram Capital Finance Inc. via an RTO earlier this year, to form the renamed Cannabis One Holdings.
According to the company’s most recent MD&A, Cannabis One continued paying Mr. Jackson “professional fees” after his departure from the company. Cannabis One paid Mr. Jackson $18,900 in 2018 and has paid him a further $22,050 in 2019, which is after he was named in the BCSC investigation.
Likewise, in March, Cannabis One “executed a letter of intent” to buy a majority stake in a California dispensary from Liht Cannabis Corp., a company named in the BCSC investigation.
“It is now the intention of the Company to reinstate all of the Warrants that have already been exercised in accordance with their original terms and to proceed to return any shares issued accordingly to treasury,” the company said in its Friday news release.
The company also announced on Friday that board member Bernard Radochonski has resigned. He’s replaced by Frank Sur, a partner with Gowling WLG. The company’s share price has fallen nearly 80 per cent since April.
BMO analysts bearish on roll-out of value-added products
Following the release of Health Canada’s final regulations for extract-based products on Friday, BMO analysts Tamy Chen and Peter Sklar issued a bearish note on Monday saying they “expect LPs will incur significant opex costs with limited revenue contribution from value-add products in 2019.”
“While Health Canada's timeline contemplates mid-December as the earliest date for value-add product sales, we expect a meaningful rollout will not occur until H1/20,” the analysts wrote.
“We believe the primary bottlenecks will be licensing delays and the ramp of oil extraction, product manufacturing, third-party testing, and packaging capacity. Given that LPs have so far been encumbered with the challenges of scaling dried flower cultivation, most companies underestimated and underinvested in processing capacity.”
Ms. Chen and Mr. Sklar said they expect that companies will have more success early on with vape pens, particularly if they source hardware from third-party manufacturers. That’s the route Aphria, Aurora, Organigram and Supreme appear to be taking, with their announcements last week that they are partnering with U.S. vape maker Pax Labs.
“By contrast, we are cautious on the near-term rollout of cannabis beverages given the complexities in developing a commercial-scale bottling line, retail shelf spacing considerations (beverages are larger SKUs than vape pens), and uncertainty in consumer uptake (i.e., more restrictions on where to consume than alcohol,” Ms. Chen and Mr. Sklar wrote.
Choom announces $49,000 in sales on Niagara store’s opening day
Choom Holding Inc.’s license-partner in Niagara Falls did $49,000 in sales on Saturday, its first day of operations, Choom announced Monday. Choom Niagara, which is in a mall on the outskirts of Niagara Falls, is the company’s first branded store in Ontario.
The store is owned by the lottery winner Lisa Bigioni, as per the Ontario retail lottery rules, but is operated and branded by Vancouver-based Choom.
“Management is of the believe that the private retail market in Ontario provides the greatest opportunity across Canada for cannabis retailers. This channel in Ontario is poised to be larger than all the other private cannabis retail channels in Canada combined,” the company said in its most recent MD&A.
As per Choom’s most recent retail update in March, the company had “completed the buildouts of 17 retail locations across Western Canada and has 8 additional retail locations currently under construction. In all cases, these retail opportunities are subject to all the necessary provincial regulatory approvals.”
Neptune receives license amendments
Quebec extraction firm Neptune Wellness Solutions Inc. says that it has received license amendments from Health Canada that will enable the build-out of ethanol extraction capacity at its Sherbrooke facility.
“Ethanol extraction is faster and more cost effective than the CO2 extraction currently used and will increase Neptune's input capacity from 30,000 kg to 200,000 kg,” the company said on Monday.
“This seven-fold increase in the Company’s capacity will accelerate production and enable fulfilment of commercial commitments. Start-up activities will begin immediately, including the final stages of commissioning the equipment, and Neptune will ramp up commercial operations on a progressive basis during the second fiscal quarter.”