Invictus MD (GENE.V) plans to sell its interest in Harvest Future at a loss, demonstrating a trend within the cannabis sector as losses mount and companies scramble to keep their heads above water.
Invictus MD Strategies Corp. has agreed to sell the 82.5-per-cent issued and outstanding shares of Future Harvest Development Ltd. which are held by the company’s wholly owned subsidiary, Prestige Worldwide Holdings Inc., to SL 152 Ventures Ltd., a company owned by Byron Sheppard, a director, president and chief executive officer of Future Harvest, and whose company holds the remaining 17.5 per cent of Future Harvest.
First of all, f*cking lol that Invictus has a subsidiary called Prestige Worldwide. One can only imagine what those board meetings look like.
Invictus plans to sell their interest in Future Harvest for $1,425,000. The company bought their stake in Future for $1,875,000. Let’s use the magic of the internet to roughly estimate how much that would be today in inflation bucks.
That’s roughly a $600K loss, but it’s a necessary step according to the company’s CEO:
Mr. Trevor Dixon, President and CEO of the Company said, “The sale of Future Harvest is the next step in the reorganization of Invictus. Our focus continues to be increasing production and reducing the overhead cost of goods sold by Invictus in the cannabis market to increase shareholder value.”
But why sell Future Harvest? It’s the only thing that sorta actually makes money for Invictus.
The company “sells plant fertilizers, nutrients and other supplies for hydroponics.” In Q1 2019, Invictus registered $114K in net income from fertilizer sales. Cannabis sales resulted in a $1.37M loss for Invictus during the same quarter.
Fertilizer sales earned Invictus $85K in net income for the two quarters ended July 31, 2018. Cannabis sales landed the company a net loss of $2.38M.
Does the company have cash issues? Why yes, it does.
By the end of Q1 2019, the company had burned through $6.4M in cash over the quarter and reserves were down to $3.49M. The lease for Future Harvest is the biggest lease obligation the company has, so it’s possible they’re looking to cut costs.
They definitely were when they announced they were going to sell their shares in Canandia Bioceuticals last month, freeing them from a $3.3M obligation to purchases the property Canandia is located on.
It’s like when you’ve just gotten paid and you think to yourself, ‘man, I’m so cashed up,’ and then you spend your dough like a dumbass on this and that. By the time you’re back to eating Top Ramen, it’s too late to get thrifty.
That’s where Invictus is and I know the company is kicking itself for its habit of spending money on dumb stuff. Invictus acquired Gene-etics Strains and partnered with Gene Simmons, notorious anti-drug crusader, for USD$2.5M and nearly seven million shares priced at $1.97. Hindsight is 20/20 as they say.
Yep, it’s been a tough year for GENE (Invictus, not Simmons). The company cancelled its plans to list on the NASDAQ because its stock bottomed out and now they’re selling off assets which actually generated net income more often than not.
But that’s the way it seems to be going in the cannabis sector. Remember when Aurora (ACB.T) sold their interest in The Green Organic Dutchman (TGOD.T) at a loss a couple of weeks back?
Nobody has money, nobody is making money, barely anyone can hold onto the share price they had around March of this year (see: VFF, LABS).
Word on the street is if the bleeding continues that the big fish will start to pick up on this buying opportunity, though exactly what they’d be picking up is a mystery.