Origin House Announces Record Quarterly Revenue of $11.2 Million for the First Quarter of 2019; Sequential Growth of 41% from Q4 2018
Pro-Forma Q1 2019 Revenue including 180 Smoke for a full quarter would have been $13.1 million
OTTAWA, May 29, 2019 /CNW/ – CannaRoyalty Corp. d/b/a Origin House (CSE: OH) (OTCQX: ORHOF) (“Origin House” or the “Company”), a North American cannabis products and brands company, today announced its financial results for the three months ended March 31, 2019. All figures are reported in Canadian dollars ($), unless otherwise indicated. Origin House’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”).
As previously announced, the Company will hold a Special Meeting of shareholders on June 11, 2019 in connection with its previously announced statutory plan of arrangement pursuant to which Cresco Labs Inc. (“Cresco Labs”) will acquire all of the issued and outstanding shares of Origin House (the “Arrangement”).
This was a milestone quarter for Origin House, as the team drove solid organic growth within our Californian distribution and brands platform and completed meaningful strategic merger and acquisition-based initiatives including the addition of 180 Smoke in Canada.
Marc Lustig, CEO and Chairman of Origin House
Moving forward through the balance of the year, we are confident that, once completed, the combination of Cresco Labs’ scale and Origin House’s California-wide distribution footprint will further accelerate growth and build significant value for the shareholders of both companies.
Financial Highlights for the first quarter ended March 31, 2019
The following are financial highlights of Origin House’s operating results for the three months ended March 31, 2019, compared to the three months ended March 31, 2018:
- Revenue was $11.2 million as compared to $0.6 million;
- Gross margin was $1.7 million as compared to $nil;
- Operating expenses were $18.2 million as compared to $4.5 million;
- Adjusted EBITDA loss of $12.7 million as compared to adjusted EBIDTA loss of $0.9 million.
The following is a summary of key balance sheet items as at March 31, 2019, compared to December 31, 2018:
- Cash was $39.3 million as compared to $69.2 million;
- Total assets of $269.4 million as compared to $230.7 million;
- Current assets of $68.7 million as compared to $86.0 million;
- Current liabilities of $34.2 million as compared to $26.2 million; and
- Long-term debt financing of $nil as compared to $16.0 million.
If the 180 Smoke acquisition had occurred on January 1, 2019, management estimates that for the three months ended March 31, 2019:
- Pro-forma consolidated revenue would have been $13.1 million; and
- Pro-forma consolidated net loss would have been $17.7 million.
Corporate Highlights subsequent to the quarter ended March 31, 2019
For a more comprehensive overview of these recent developments, please refer to Origin House’s Management Discussion and Analysis of the Financial Condition and Results of Operations for the Three Months ended March 31, 2019.
- On May 28, 2019, Origin House subsidiary Trichome Financial (“Trichome”) announced that 22 Capital Corp. and Trichome received conditional approval from the TSX Venture Exchange for their previously announced amalgamation under the provisions of the Business Corporations Act (Ontario) that will result in a reverse take-over of 22 Capital by the shareholders of Trichome (the “Transaction”). The closing of the Transaction is expected to take place on or around July 5, 2019 or such other date as 22 Capital and Trichome may agree, subject to a number of conditions.
- On May 15, 2019, Trichome entered into a $4.5 million trade finance facility and a $1.5 million mortgage loan with Blissco Holdings Ltd., a wholly owned subsidiary of Blissco Cannabis Corp. (CSE: BLIS), a licensed producer under the Cannabis Act and a Canadian Wellness cannabis brand based in British Columbia.
- On May 14, 2019, Origin House filed its management information circular, letter of transmittal and related proxy materials, pursuant to its statutory plan of arrangement with Cresco Labs.
- On May 3, 2019, the Company obtained an interim order from the Ontario Superior Court of Justice (Commercial List) in connection with its previously announced statutory plan of arrangement pursuant to which Cresco Labs will acquire all of the issued and outstanding shares of Origin House.
- On May 2, 2019, the Company closed the acquisition of Cub City LLC (“Cub City”), a licensed premium craft cannabis producer based in Sonoma County California.
- On April 10, 2019, FloraCal and Cub City received permit approvals from Sonoma County, California, to commence facility expansions.
- On April 1, 2019, the Company entered into a definitive agreement to be acquired by Cresco Labs for approximately $1.1 billion, creating a North American cannabis powerhouse.
Results of Operations (Summary)
The following tables set forth consolidated statements of financial information for the three months ended March 31, 2019 and March 31, 2018. For further information regarding the Company’s financial results for these periods, please refer to the Company’s Management’s Discussion and Analysis for the periods ended March 31, 2019 and March 31, 2018 and the Company’s Financial Statements for the periods ended March 31, 2019 and March 31, 2018, published on Origin House’s issuer profile on SEDAR at www.sedar.com and the Company’s website at www.OriginHouse.com.
Non-IFRS Financial Measures
The Company has provided unaudited pro forma financial information, which assumes that closed mergers and acquisitions in 2019 are included in the Company’s financial results as of the beginning of fiscal 2019. EBITDA and Adjusted EBITDA are non-IFRS measures and do not have standardized definitions under IFRS. The Company has provided the non-IFRS financial measures, which are not calculated or presented in accordance with IFRS, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. These supplemental non-IFRS financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-IFRS financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein.
The Company’s authorized share capital is an unlimited number of common shares of which 66,841,636 were issued and outstanding as at March 31, 2019 (December 31, 2018 – 60,263,768 common shares). Also issued were 3,045,791 RSUs that have not been exercised as at March 31, 2019 including 2,556,001 that have vested (December 31, 2018 – 3,431,210 including 2,551,839 that had vested). As of March 31, 2019, there are share purchase warrants and broker warrants outstanding that can potentially be converted to 12,938 shares (December 31, 2018 – 12,938). The Company has issued 929,000 share options that have not been exercised as at March 31, 2019 including 425,750 that have vested (December 31, 2018 – 929,000 including 420,125 that had vested). A total of 1,483,680 common shares and an additional $15 million cash equivalent in common shares may be issued as contingent consideration for the acquisition of 180 Smoke over the next three years subject to the achievement of agreed milestones (December 31, 2018 – nil and $nil). The Company has outstanding 34,268 Class A Compressed Shares and 21,001 RPE shares which can each be converted into 100 common shares, or a total of 5,526,900 common shares (December 31, 2018 – 35,088 Class A and 21,001 RPE compressed shares convertible to 5,608,900 common shares). There are an additional 35,088 Class A Compressed Shares that can be issued upon meeting certain milestones and 49,000 RPE shares that may be issued over the next 24 months.
Approval of Origin House Restricted Stock Unit (“RSU”) Issuances
Prior to approving the definitive agreement in connection with the Arrangement (the “Arrangement Agreement”), the Board of Directors of Origin House approved a pool of 2,292,000 Origin House RSUs (the “RSU Pool”) to be issued following execution of the Arrangement Agreement to employees, officers, directors and consultants of the Company at the direction of management of Origin House. The Company now announces that the RSU Pool has been conditionally allocated, including 1,332,000 Origin House RSUs allocated to the directors and executive officers of Origin House. The RSUs are expected to be issued at such times as management of the Company considers advisable and, subject to their terms, are expected to vest in three equal tranches, on the dates that are 6 months, one year, and two years from the grant date.
About Origin House
Origin House is a growing cannabis brands and distribution company operating across key markets in the U.S. and Canada, with a strategic focus on becoming a preeminent global house of cannabis brands. Origin House’s foundation is in California, the world’s largest regulated cannabis market, where it delivers over 130 branded cannabis products from 50+ brands to the majority of licensed dispensaries. Origin House’s brand development platform is operated out of five licensed facilities located across California, and provides distribution, manufacturing, cultivation and marketing services for its brand partners. Origin House is actively developing infrastructure to support the proliferation of its brands internationally, initially through its acquisition of Canadian retailer 180 Smoke. Origin House’s shares trade on the CSE under the symbol “OH” and on the OTCQX under the symbol “ORHOF”. Origin House is the registered business name of CannaRoyalty Corp. For more information, visit www.originhouse.com.