NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ALL FIGURES IN CANADIAN DOLLARS UNLESS OTHERWISE SPECIFIED.
LOS ANGELES, CA / ACCESSWIRE / July 31, 2019 / Ventura Cannabis and Wellness Corp. (CSE:VCAN) (“Ventura Cannabis” or the “Company”) is pleased to post its first fiscal quarter financial statements as a cannabis company for the quarter ending May 31, 2019. In April 2019 shareholders overwhelmingly approved a change of business from addiction rehabilitation services to cannabis products.
Additionally, management released a synopsis to clearly explain the path to the annual revenue goal of $10 million in cannabis sales with the current balance sheet and purchase agreements in place.
- Generated $93,000 in cannabis revenue for the quarter. This revenue is from the Amberlight acquisition and represents less than one month of the quarter.
- Since closing Amberlight and implementing several operational improvements, management has increased total estimated cannabis revenue guidance for the quarter ending August 31, 2019 from $225,000 to over $300,000 (or $1,200,000 annualized) from the Amberlight cannabis business.
- As expected, revenues associated with addiction services decreased, due in part to the disposition of certain assets in the business unit in exchange for cash.
Balance Sheet and Cash Flow Statement:
- Cash as of July 31, 2019 is $4,444,088 as compared to $5,036,000 at the year-end (February 28, 2019).
- Projected Cash Flow Summary of the for the first two quarters, the period March 1, 2019, to August 31, 2019 (Rounded)
Cash at year-end (February 28, 2019)
ADD: Cash generated from a combination of operational cash flow and cash
from the sale of addiction services assets during the first two quarters (the period March 1, 2019 to August 31, 2019)
LESS: Cash spent or set aside for transactions (See below)
Estimated cash balance end of Q2 2019
Cash is expected to be $4,250,000 at the end of the second quarter (period ending August 31, 2019) after closing the Amberlight and Kush Rush acquisitions (representing 100% of the cash consideration for both acquisitions).
VCAN expects to continue to generate at least $500,000 in quarterly cash flow from a combination of operational cash flow and cash from the sale of addiction services assets into the third and fourth fiscal quarters of the year.
Cash spent for transactions:
- The entire cash consideration component for the Amberlight acquisition, (closing announced May 6th, 2019) as well as legal, due diligence and transaction fees associated with the acquisition totaled $683,289. At the time of closing, the acquisition was expected to generate $225,000 per quarter of revenue. That estimate has since been increased to over $300,000 for the quarter ending August 31, 2019 ($1,200,000 annualized).
- The entire cash consideration component for the Kush Rush acquisition (announced July 2nd, 2019) which is expected to close in the current quarter, as well as legal, due diligence and transaction fees associated with the acquisition totaled $373,439. The acquisition is estimated to generate $125,000 per quarter of revenue ($500,000 annualized).
- All transactional, legal and due diligence costs totaling $393,889 for the following acquisitions and projects representing an additional $5,300,000 in annualized revenue when closed (all cannabis businesses are anticipated to have 20% EBITDA margins post- integration):
- Oakland (pending close)
- CannaSun and UHCC (pending close)
- Remedy (pending close)
- Creation of a pipeline project stream to reduce future and current transactional costs.
“I am pleased with our first quarter as a cannabis company,” said Chris Heath, President of Ventura Cannabis. “We held a shareholder vote to transform ourselves into a cannabis company, closed our first cannabis deal, executed purchase agreements to add seven million dollars in annual revenue and built a significant pipeline of acquisition targets. We also improved many marketing and operational aspects of our first acquisition, Amberlight, giving us the confidence to increase our quarterly cannabis revenue projections for the second fiscal quarter.”
“We continue to manage cash wisely,” said Andrew Cross, Chief Financial Officer of Ventura. “We are focused on generating cash this year to invest in cannabis assets. We are actively looking to divest the remaining addiction treatment services assets, including the real estate we hold, which should generate cash in the coming quarters. We are also actively working on methods to increase value from our current and future cannabis assets.”
Ventura Cannabis Revenue Growth Plan Highlights - The Path to $10 Million in Annual Revenues
VCAN has a target of $10 million in annual cannabis revenues for its first full year of cannabis operations.
Full year of operations begins after the closing of:
Five dispensaries currently under contract (One is closed, awaiting regulatory approval for remaining four).
- Vertically integrated product business currently under contract.
The First $7 Million in Annual Revenue: Closing Acquisitions
- VCAN has executed binding Purchase Agreements to acquire five dispensaries, including Amberlight, with expected total annualized sales of $7 million.
- VCAN has executed a binding Purchase Agreement to acquire a vertically integrated cannabis product company.
- VCAN has the balance sheet and cash flow to close these deals and generate a minimum of $7 million in projected annual revenues.
The Next $3 Million in Annual Revenue: Adding Post-Acquisition Revenues
Once acquisitions are completed, VCAN has a plan to increase sales in each of the five dispensaries of just $600,000 per year or $50,000 per month to meet the revenue target.
Three ways to increase revenue post-closing:
- Increasing the customer base using targeted VCAN products for seniors and professionals.
- Increase customer spending with higher quality and higher-priced VCAN products.
- A growing overall market - increasing the estimated annual revenue for the dispensaries under contract for revenue growth after closing based upon operational improvements and cost-effective marketing initiatives.
Amberlight is the first “proof of concept”
- At closing, Amberlight revenues were estimated and reported to be $225,000 per quarter - the quarter ending August 31st will be the first full quarter of revenue to measure actual revenue.
- Since closing and implementation of marketing and operational initiatives, Amberlight revenue has increased to $300,000 in quarterly revenue.
Kush Rush is expected to close this quarter and be the second “proof of concept”
- At closing, Kush Rush revenues are estimated and reported to be $125,000 per quarter - the quarter ending November 30th will be the first full quarter of revenue to measure actual revenue.
Once the other California dispensaries are closed, and VCAN products are prominently featured, Management expects additional organic revenue growth from product sales to the network of partner-operated dispensaries.
Certain statements contained in this presentation constitute "forward-looking information" as such term is defined in applicable Canadian securities legislation. The words "may", "would", "could", "should", "potential", "will", "seek", "intend", "plan", "anticipate", "believe", "estimate", "expect", “confident” and similar expressions as they relate to the Company. Such statements reflect the Company's current views and intentions with respect to future events, and current information available to the Company, and are subject to certain risks, uncertainties, and assumptions. The forward-looking information included are made as of July 31, 2019, and the Company undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law. VCAN holds or is acquiring marijuana assets in the United States. Previously disclosed acquisitions are still subject to closing.
Marijuana is legal in each state VCAN is looking to operate, however marijuana remains illegal under US federal law, and the approach to enforcement of US federal law against marijuana is subject to change. Shareholders and investors need to be aware that adverse enforcement actions could affect their investments and that VCAN's ability to access private and public capital could be affected and or could not be available to support continuing operations.
SOURCE: Ventura Cannabis and Wellness Corp.