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Heritage Cannabis (CANN.C) is so close profitability, it’s breaking social distancing rules

09/30/2020

Heritage Cannabis (CANN.C) announced a fiscal Q3, 2020 loss of $14,937.

In the wider context of cannabis losses, this a pretender.

Tilray (TLRY.Q) just reported a Q2, 2020 net loss of $81.7 million.

Canopy Growth (WEED.) just reported a Q1, 2021 net loss of $128 million.

Aurora Cannabis (ACB.T) just reported a $3.3 billion loss for fiscal 2020.

$14,937?

That’s the cost of a Steam Punk Coffee Maker.

Come on Heritage.

You’re not even trying.

“Our third quarter revenue continued to show sequential growth,” stated Clint Sharples, CEO of Heritage, “the quarter remained a transitional period for the business as we focused on ramping up our own product sales under the Purefarma and Pura Vida brands.”

Sharples believes that Purefarma, Pura Vida, new contract manufacturing agreements, expansion of Canadian territories, the edibles product launch and the acquisition of Opticann expanding CANN’s U.S. presence will accelerate revenue going forward.

Note: more the Opticann deal later, and its implications for international markets.

CANN Q3, 2020 Financial Highlights:

  • Gross revenue of $2.4-million in Q3 2020 compared with nil in the three-month period ended July 31, 2019.
  • After adjusting for excise taxes, CANN reported net revenue of $2.3-million
  • Gross margin percentage loss on sales net of excise taxes of 42%. The COVID-19 outbreak had a negative impact on the company’s revenue, maintaining efficient production and operating metrics.
  • Net loss of $15,000 or zero cents per common share
  • As at the end of Q3 2020, the company had cash and cash equivalents of $10.2-million

CANN Q3 2020 Growth, Operational, and Corporate Highlights:

  • On May 26, 2020, Heritage announced the intent to launch its own series of formulated extraction products under the brand name Purefarma
  • The Purefarma brand will be sold through recreational channels, including cannabidiol (CBD) focused products such as elixirs and vape pens.
  • Discussions with provincial boards are continuing, particularly with the company’s vape pens that have no carrier oils or added flavours.
  • On June 4, 2020, the company signed an agreement to purchase the Pura Vida brand and trademark for $75,000, satisfied by the issuance of 500,000 common shares of the company at a value of 15 cents each.
  • Pura Vida is an award-winning legacy cannabis brand recognized primarily for its superior tinctures, concentrates and vape cartridge products.
  • On June 16, 2020, and June 18, 2020, the company announced the initial Pura Vida products — full spectrum sativa, indica and hybrid honey oil vape cartridges, as well as daybreak and nightfall full spectrum THC tinctures.
  • On June 24, 2020, the company announced that it will be marketing Purefarma Sun (sativa), Purefarma Moon (indica) and Purefarma Earth (CBD) vape cartridges initially in British Columbia and Manitoba, with plans to expand to the rest of the country thereafter.
  • On June 30, 2020, Heritage signed a term sheet with True North Agri Inc. for contract manufacturing services including biomass sourcing and the production of full spectrum cannabis oil and vape cartridge products.
  • On July 8, 2020, Heritage announced the intended launch of Purefarma Hemplixers and a Pura Vida CBD tincture and four-to-one full spectrum CBD dominant vape product.
  • On July 13, 2020, Heritage signed a term sheet with Weed Me Inc. for contract manufacturing services to produce high-quality cannabis vape cartridge products. Purefarma worked with the production designers at Weed Me to create a product that will offer the consumer a unique flavour profile and will complement and extend Weed Me’s offerings of flower and pre-roll products.

Heritage’s Canadian footprint is growing.

The company has also made some moves that could generate revenues in international markets.

This summer, CANN announced that it has agreed to buy Opticann – a “Colorado-based oral and topical cannabinoid company with the rights to exclusively sell CBD (cannabidiol) and CBG (cannabigerol) products made with the patented VESIsorb drug delivery system for optimized absorption and stability”.

Opticann has a supply and distribution agreement with Geocann LLC, a global cannabis organization with the exclusive worldwide rights to the patented VESIsorb delivery technology for cannabinoids, terpenes and flavonoid formulations.

Opticann has the right to brand and market a select portfolio of VESIsorb formulated oral and topical CBD and CBG products to major U.S. retailers including CVS, Walgreens, Rite-Aid and Walmart, among others.

VESIsorb dramatically improves the stability and absorption (bioavailability) of natural ingredients like cannabinoids, and is backed by a robust body of supporting scientific evidence spanning several decades.

In pharmacology, bioavailability is the fraction (%) of an administered drug that reaches the systemic circulation.

When a medication is administered intravenously (directly into the blood stream) its bioavailability is 100%.  When a medication is administered via other methods, its bioavailability is lower due to intestinal absorption and other metabolic inefficiencies.

The ability to increase bioavailability is a major obsession of the $1.3 trillion global pharmaceutical industry.

According to the peer-reviewed journal, Molecules, the VESIsorb technology delivered higher total absorption (a 440% increase in maximum plasma CBD concentration), and a 285% increase in total CBD exposure over eight hours.

Today’s financials suggest that Heritage Cannabis is close to profitability.

– Lukas Kane

Full Disclosure: Heritage Cannabis is an Equity Guru marketing client

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