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Thanks ... An inch at a time ... Aleafia Health Announces New International Partner, Strengthening Connections in High-Potential European Market
New Board Chair Also Named
TORONTO, January 30, 2023 – Aleafia Health Inc. (TSX: AH, OTCQB: ALEAF) (“Aleafia Health” or the “Company”) is pleased to announce that it has signed a new European cannabis distribution partner, representing a one-year, approximately $1 million contract[1], significantly bolstering the Company’s record $1.2 million year-to-date sales in its growing international channel.
“This new announcement is very significant: it builds upon advancements made in August 2022 when the Company revealed a two-year $4.6 million European sales commitment and broadens our international reach,” said Aleafia CEO Tricia Symmes. “The Company is involved in overseas markets because international success leverages both its products and brands, and the addressable European cannabis market is high potential, so this relationship provides another gateway into further European expansion in the medical and potential recreational markets.”
“These international agreements are an important part of our strategic plan for growth and profitability,” said Matt Sale, CFO. “These activities grow revenue, are not subject to excise duties, lock in attractive margins, and improve our overall cash conversion cycle and net working capital performance, continuing to deliver against one of our core sale pillars for FY 2023.”
David Pasieka Replaces Mark Sandler as Aleafia Health Board Chair
The Company also announced that David Pasieka, a director since September 2021, will become its Board Chair, following the January 30th retirement of Mark Sandler, who has served as Chair since July 2021 and is Aleafia Health’s longest serving director having being appointed in 2018. Pasieka, a seasoned public company executive, with extensive formal and board level experience, has served on Aleafia’s FAC and HRC committees and currently serves on the Board of Oakville Hydro / Oakville Enterprise Corporation as well as serving on the Faculty of the Caribbean Governance Institute.
“The Company has been very grateful for Mark Sandler’s counsel and support of the vision for the future as we transitioned from a bulk wholesale cannabis provider into a branded adult-use, medical and international producer. Under his guidance, the Company consistently increased market share, achieved a top 10 standing in multiple formats and markets for Divvy, negotiated the amendment of its $37.3 Million Convertible Debentures while securing a $5.6 million equity financing in June 2022,” said Symmes. “Since becoming CEO in February 2022, I benefited from Mark’s thoughtful insights in our concerted drive toward Adjusted breakeven EBITDA profitability[2], which was achieved two quarters ahead of projections. Now David Pasieka will build on those accomplishments, guiding us to further growth and enhanced profitability.”
For Investor & Media Relations
Matthew Sale, CFO
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
The Company is a federally licensed Canadian cannabis company offering cannabis products in Canadian adult-use and medical markets and in select international markets, including Australia and Germany. The Company operates a virtual medical cannabis clinic staffed by physicians and nurse practitioners which provide health and wellness services across Canada.
The Company owns three licensed cannabis production facilities and operates a strategically located distribution centre all in the province of Ontario, including the largest, outdoor cannabis cultivation facility in Canada. The Company produces a diverse portfolio of cannabis and cannabis derivative products including dried flower, pre-roll, milled, vapes, oils, capsules, edibles, sublingual strips, and topicals.
Cautionary Statement on Non-IFRS Measures
Adjusted EBITDA is not a recognized financial measure under IFRS, does not have a standardized meaning and therefore may not be comparable to similar measures presented by other issuers. For additional information including the definition and purpose of the non-IFRS measure, see “Cautionary Statement re Non-IFRS measures” in the Company’s Management’s Discussion and Analysis for the period ended September 30, 2022 found on SEDAR at www.sedar.com.
Forward Looking Information Cautionary Statement
Certain statements herein relating to the Company constitute “forward looking information”, within the meaning of applicable securities laws, including without limitation, statements regarding the value of contracts. Such forward-looking statements involve unknown risks and uncertainties that could cause actual and future events to differ materially from those anticipated in such statements. Forward looking statements include, but are not limited to, statements with respect to our long term profitability, market share, net revenue, branded cannabis net revenue, Adjusted EBITDA, projected value of contracts and other financial outlook projections for fiscal year 2023, our commercial operations, including production and / or sales of cannabis, quantities of future cannabis production, anticipated revenue in connection with such sales, and other Information that is based on forecasts of future results, estimates of production not yet determinable, and other key management assumptions. The following material factors or assumptions were used to develop the forward looking information: Aleafia’s ability to cultivate, harvest and deliver sufficient flower compliant with regulatory and contractual specifications to meet demand, our new European partner will purchase the minimum quantity contractually required to maintain its exclusivity rights, information provided by our new European partner on their future purchasing plans is accurate, our new European customer will comply with its contractual commitments, Euro to Canadian collar currency conversion rates and costs remain stable, market size and growth of the Canadian adult-use and medical cannabis markets and international markets, retail store penetration, script trends, cultivation and processing capacity, costs of production, gross and net revenue per gram. Actual results may differ materially from those expressed or implied by such forward looking statements and involve risk and uncertainties relating to: currency conversion costs, value of foreign and Canadian currencies, future cultivation yield and quality, actual operating performance of facilities, product launches, facility licenses and amendments, average selling prices, cost of goods sold, operating expenses, Adjusted EBITDA, regulatory changes in the Canadian and international markets, and other uninsured risks. The forward looking information was approved by Management as of January 10, 2023. The Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law. The forward looking information is provided for information purposes only and readers are cautioned that it may not be appropriate for other purposes. This presentation is provided for general information purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security in any jurisdiction.
Aleafia Health Announces New International Partner, Strengthening Connections in High-Potential European Market
https://www.globenewswire.com/news-release/2023/01/30/2597453/0/en/Aleafia-Health-Announces-New-International-Partner-Strengthening-Connections-in-High-Potential-European-Market.html
Aleafia Health Successfully Completes TSX Review and Announces Entry into Fifth Province
https://www.globenewswire.com/news-release/2022/11/28/2563346/0/en/Aleafia-Health-Successfully-Completes-TSX-Review-and-Announces-Entry-into-Fifth-Province.html
If I was buying and flipping I could have made money. This is a sad one.
Aleafia Health Announces Achieving Major Profitability Milestone Ahead of Target and $10.6 Million Total Net Revenue in Q2 FY2023
https://financialpost.com/globe-newswire/aleafia-health-announces-achieving-major-profitability-milestone-ahead-of-target-and-10-6-million-total-net-revenue-in-q2-fy2023/wcm/8e5811f8-1712-44f0-8abc-44fe319efa7b/amp/
GLTA
Good luck.
Thanks FM.
I jumped back in nicely recently as the PPS was hard to resist.
My research into the sales in my local dispensary’s (and my personal experiences with their product lines) led me to do so.
GLTU/A
Aleafia Health to Announce Fiscal Year 2023 Second Quarter Results
TORONTO, November 2, 2022 – Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) will announce on November 9 prior to market open its fiscal year 2023 second quarter results for the period ending September 30, 2022. The Company will also host its earnings conference call the same day at 8:30 a.m. EST. The call will be hosted by CEO Tricia Symmes and CFO Matt Sale.
CONFERENCE CALL & WEBCAST
Date: November 9, 2022
Time: 8:30 a.m. EST
Webcast Link
Phone Registration Link
This conference call will be webcast live over the internet and can be accessed through the link provided above. Audio of the call will be available to participants through both the conference call line and webcast; however, the presentation may only be viewed via the webcast. Participants who miss the live call can view a replay at any time via the link provided.
For Investor & Media Relations:
Matthew Sale, CFO
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
Aleafia Health Expands Sunday Market House of Brands With Coveted Lineup of Winter Product Launches
I am holding and buying more. Imo it is the best play in Canada atm. They are gaining market share and offering new products while the “big” names are slipping. I was considering an exit in the summer but they renegotiated with their lenders who accepted a deal with a price higher than market at the time. It is not possible to apply the same metrics to an emerging market as to a mature one. I have averaged down and honestly think this has a shot at success. Their medical line is expanding and divy sells well according to my local dispensary. Not all my picks are going to make it but I do think this one has a shot.
Haven’t checked in for a while.
Sad to see how corporate mismanagement has decimated the PPS over the past year or two.
I hope there is a turnaround at some point before declaring bankruptcy is necessary.
I have used and used their products and have no complaints with them.
The blame rests on the BOD only.
Why isn't there a chart for half of the companies since the change of the ihub platform? It sucks now I am really disappointed with ihub now. I got great info and was able to get great insights from other users till that change. I will not be renewing my paid participation after this year. I will not pay to be disappointed lol!
Aleafia Health Announces Results of Annual General Meeting
TORONTO, September 29, 2022 (GLOBE NEWSWIRE) -- Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to announce the results of the vote on the election of directors at its annual meeting of shareholders held on September 27, 2022 (the “Meeting”). All six nominees set out in the management information circular of the Company dated August 19, 2022 were elected to the board of directors (the “Board”) of the Company.
Nominee For Against Withheld Non Vote For Against Withheld
Mark Sandler 67,007,871 1,632,272 0 23,208,803 97.62% 2.38% 0.00%
Luciano Galasso 67,165,098 1,475,045 0 23,208,803 97.85% 2.15% 0.00%
Ian Troop 67,240,952 1,399,191 0 23,208,803 97.96% 2.04% 0.00%
David Pasieka 67,167,928 1,472,215 0 23,208,803 97.86% 2.14% 0.00%
Jon Pereira 67,185,790 1,454,353 0 23,208,803 97.88% 2.12% 0.00%
Carlo Sistilli 67,209,871 1,430,272 0 23,208,803 97.92% 2.08% 0.00%
Final voting results on all matters will be filed on the Company’s SEDAR profile at www.sedar.com.
For Investor & Media Relations:
Matthew Sale, CFO
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
Why are we still stuck at a shit price!!!!!
Aleafia Health Announces $12.0 Million Total Net Revenue in First Quarter, Representing a 13% Increase Over the Prior Year
https://mailchi.mp/aleafiahealth.com/aleafia-health-announces-120-million-total-net-revenue-in-first-quarter-representing-a-13-increase-over-the-prior-year?e=02506ded3e
• 31% increase in branded cannabis net revenue[1] to $10.0 million from $7.6 million in the prior year
• #12 ranking for market share in core markets[2] for Q1 FY2023
• In the Ontario value category, Divvy has attained #5 market share in pre-roll and #7 in flower
• Secured new international partnership representing approximately $4.6 million sales commitment
• 12% increase in medical cannabis net revenue[3] over the prior quarter
• 7.5% market share in overall Canadian medical market
• Reaffirmed guidance of $53.0 to $63.0 million in net revenue in FY2023[4]
• Trending towards breakeven Adjusted EBITDA[5] profitability with -$0.9 million in Q1 FY2023; reaffirmed guidance of achieving run-rate breakeven Adjusted EBITDA in FY2023[6]
• Nitecaps, a breakthrough melatonin-CBD product launch in current quarter
TORONTO, August 11, 2022 – Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the three months ended June 30, 2022, its first quarter of its fiscal year ending March 31, 2023 (“FY2023”).
Branded cannabis net revenue, quarter over quarter, increased 25%: Aleafia Health continued its upward sales growth trend, with branded cannabis net revenue increasing 24% to a record $10.0 million from $8.0 million quarter over quarter. In the key branded adult-use market, the Company’s net revenue[7] increased 107% to $6.7 million from $3.2 million in the same period last year.
“Our pivot to a branded cannabis strategy is the success story driving the three pillars of company revenue: adult-use branded cannabis, a ‘sticky’ recurring medical cannabis revenue stream and growing higher margin international sales,” said Aleafia Health CEO Tricia Symmes. “As a result of revenue increases, the Company has achieved the 2nd highest growth rate amongst top 12 Canadian LPs in retail sell through over the prior quarter while achieving a #12 ranking for market share in our core markets for Q2 CY2022.”[8]
“Due to our successful branded growth strategy, the Company continues to target a top 10 standing[9] in our key markets and reaffirms our expectation to reach breakeven Adjusted EBITDA profitability during the second half of FY2023,”[10] said Aleafia Health CFO Matt Sale. “Showing continued success in retail sell through provides us the confidence to reaffirm our guidance to deliver at least $53 million in total net revenue in fiscal year 2023[11], with a current run-rate of $48 million.”
Divvy Brand Leadership: “In each of the three largest revenue categories - flower, pre-rolls and vapes - the Company is gaining in market share and continuing to deliver excellent growth rates,” Symmes said. “In the Ontario value category, Divvy flower enjoys a #7 market share ranking (with 3.4% share), pre-rolls enjoy a #5 ranking (with a 6.9% share), and our recently launched vape products continue to grab market share amidst a highly competitive format, and enjoy a 1.4% market share.”[12]
Medical: The Company reported a 4% increase in medical cannabis net revenue to $2.8 million in Q1 FY2023 over $2.5 million in the prior quarter. This represents a $11 million run-rate net revenue base. Moreover, the Company has attained a milestone 7.5% market share in the overall Canadian medical market, according to Health Canada data.[13] “In a competitive medical cannabis segment, market share has increased and we have restarted our growth trajectory over the last two quarters,” said Symmes. “We continue to penetrate the Quebec market with a 71% quarter over quarter increase in patient registrations. Growth in Quebec has helped to offset industry wide medical channel decline which has also affected our business. Sales to veterans also increased 4% quarter over quarter.”
“Anchored by our Emblem brand, we continue to view medical as a core part of our diversified sales mix, and is synergistic with our branded adult-use channel given the ability to sell products into both segments," said Sale.
International Revenue Growth: “International revenue is a competitive advantage and a differentiating factor for Aleafia, as we leverage our high quality, diversified flower supply and export it to the higher margin international sales markets,” Symmes said. “Current international agreements have led to more than $0.5 million in sales to Germany and Australia this quarter. We have also secured a new European partner with a $4.6 million sales commitment, representing further channel development. International success leverages both the Company’s products and its brands.”
“The newly signed agreement improves revenue and cash flow visibility, locks in attractive margins, and improves our overall cash conversion cycle and net working capital performance,” said Sale.
Continued Cost Rationalization: “We are striving to achieve breakeven Adjusted EBITDA profitability by the end of FY2023,” Sale said. “Firstly, we are increasing revenue by capturing market share. SKU optimization has furthered revenue growth, which aligns the portfolio with the highest selling product formats with strongest margins, coupled with moderate and strategic price increases. Second, we are relentlessly focused on cost rationalization. In addition to difficult headcount reductions and other initiatives, the Company has engaged in vendor consolidation to reduce complexity across sites while negotiating trusted vendor price improvements due to economies of scale. With all of these efforts combined, the Company has extracted $20 million in annualized SG&A savings over the last four quarters, and break-even Adjusted EBITDA profitability is within our grasp during FY2023, a milestone for the Company.”
“On the cultivation side of the business, all processes in our Grimsby, Ont. hybrid greenhouse have been remapped to allow it to meet anticipated growing throughput of high potency THC flower,” said Sale. “With strategic investments to improve flower consistency and quality, we continue to see steady improvements in Grimsby.”
New Nitecaps: “In Q1 FY2023, the Company completed development on a breakthrough product that has just been brought to the Ontario and Alberta markets this month,” said Symmes. “Our Noon & Night Nitecaps softgels with CBD suspended in melatonin and-MCT oil are an industry first.”
“We are highly strategic and thoughtful about our new product roll-outs. In this case, Nitecaps can be leveraged in the adult-use and medical channels as sleep is top-of-mind for many patients, addressing an unmet consumer need,” said Sale.
“Aleafia Health today is a vastly different Company than it was one year ago,” said Symmes. “With an extraordinary team of people at all levels, we are now positioned to reach new heights, supported by cost containment, a transforming balance sheet, and new equity financing. We are now rooted in a new era, with a relentless drive toward profitability and increased market share capture.”
For Investor & Media Relations:
Matthew Sale, CFO
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
The Company is a federally licensed Canadian cannabis company offering cannabis products in Canadian adult-use and medical markets and in select international markets, including Australia and Germany. The Company operates a virtual medical cannabis clinic staffed by physicians and nurse practitioners which provide health and wellness services across Canada.
The Company owns three licensed cannabis production facilities and operates a strategically located distribution centre all in the province of Ontario, including the largest, outdoor cannabis cultivation facility in Canada. The Company produces a diverse portfolio of cannabis and cannabis derivative products including dried flower, pre-roll, milled, vapes, oils, capsules, edibles, sublingual strips, and topicals.
Forward Looking Information
Certain statements herein relating to the Company constitute “forward looking information”, within the meaning of applicable securities laws, including without limitation, statements regarding future estimates, business plans and/or objectives, sales programs, forecasts and projections, assumptions, expectations, and/or beliefs of future performance, are “forward-looking information”. Such forward-looking statements involve unknown risks and uncertainties that could cause actual and future events to differ materially from those anticipated in such statements. Forward looking statements include, but are not limited to, statements with respect to our market share, net revenue, branded cannabis net revenue, Adjusted EBITDA, and other financial outlook projections for fiscal year 2023, our commercial operations, including production and / or sales of cannabis, quantities of future cannabis production, anticipated revenue in connection with such sales, and other Information that is based on forecasts of future results, estimates of production not yet determinable, and other key management assumptions. The following material factors or assumptions were used to develop the forward looking information: market size and growth of the Canadian adult-use and medical cannabis markets, retail store penetration, script trends, cultivation and processing capacity, costs of production, gross and net revenue per gram. Actual results may differ materially from those expressed or implied by such forward looking statements and involve risk and uncertainties relating to: future cultivation yield and quality, actual operating performance of facilities, product launches, facility licenses and amendments, average selling prices, cost of goods sold, operating expenses, Adjusted EBITDA, regulatory changes in the Canadian and international markets, and other uninsured risks. The forward looking information was approved by Management as of August 10, 2022. The Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law. The forward looking information is provided for information purposes only and readers are cautioned that it may not be appropriate for other purposes. This presentation is provided for general information purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security in any jurisdiction.
Unifor members to elect new national president in Toronto this week
Aleafia Health to Announce Fiscal Year 2023 First Quarter Results
TORONTO, August 4, 2022 – Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) will announce on August 11 prior to market open its fiscal year 2023 first quarter results for the period ending June 30, 2022. The Company will also host its earnings conference call the same day at 8:30 a.m. EST. The call will be hosted by CEO Tricia Symmes and CFO Matt Sale.
CONFERENCE CALL & WEBCAST
Date: August 11, 2022
Time: 8:30 a.m. EST
Toll-Free Participant Call-in: (800) 715-9871 Passcode: 2448254
International Participant Call-in: (646) 307-1963 Passcode: 2448254
WEBCAST LINK
This conference call will be webcast live over the internet and can be accessed through the link provided above. Audio of the call will be available to participants through both the conference call line and webcast; however, the presentation may only be viewed via the webcast. Participants who miss the live call can view a replay at any time via the link provided.
For Investor & Media Relations:
Matthew Sale, CFO
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.
Forward Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.
Sadly, the “turn” happened at around $1.40.
Just like the rest of the sector.
May re-enter at some point.
GLTU/A
TURNING!!! INTO ONE BIG!!!!!!!!! PIECE OF SH#$!!!!!!!!!!!!!!!!!!
Because this is a Canadian company.
Why is it when all pot stocks go up, this CRAP!!! always stays the same?? :((((
I just got some very encouraging news at my local dispensary. They said all the Divy products sell very well. I went in the shop and there was a big Sunday Market banner on the wall it showed their brands nicely. They are building brand and not just wholesaling. Very positive events in my opinion. Backing up the truck (more like the mini van but I will take what I can get :) )
My whole family (except me lol) have them as their medical provider and their products have allowed one to get off of sleep meds all together! I am a great fan of their products! Particularly the cbd 100 my Dad notices a huge difference. I am watching him age backwards. So I am not surprised if others are getting the same results. I really like the rollon! Smells great and relives achey knees :)
Does anyone what’s the O/S diluted shares at the moment?
Aleafia Health Continues Ascent in Adult-Use Cannabis Market Share Rankings
https://financialpost.com/globe-newswire/aleafia-health-continues-ascent-in-adult-use-cannabis-market-share-rankings
I just saw this. beggars can't be choosers. They survive for another day.
Aleafia Health Announces Agreement to Amend Convertible Debentures and Equity Financing of $5.6 Million
Provides $11.6 million[1] in additional liquidity to fund working capital and growth initiatives and finance the company attaining break-even Adjusted EBITDA profitability in 2022[2]
Augments the refinancing profile extending the maturity of the Convertible Debentures from 2022 to between 2024 and 2028
Improves the cash flow profile with a 30 month no mandatory interest period for the Convertible Debentures
Together with existing credit facilities, the transactions enable the Company to continue rapidly scaling into a top 10 Canadian LP[3] while building high-margin medical and international businesses
TORONTO, May 12, 2022 -- Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to announce that it has reached an agreement in principle with the convertible debenture holder-nominated steering committee (the “Steering Committee”) to amend certain key commercial terms of its unsecured convertible debentures (TSX: AH.DB), set to mature on June 27, 2022 (the “Convertible Debentures”). The Company has also entered into Subscription Agreements for units, comprising common shares and warrants, representing aggregate gross proceeds of $5.6 million on a private placement basis (the “Private Placement”). The amendment of the Convertible Debentures and the Private Placement are conditional on terms further described below.
“We are delighted that the Steering Committee has reached a successful agreement with the Company, providing debenture holders a pathway to be paid back in full while maintaining the opportunity for meaningful upside potential, and enabling the Company to move forward with financing its ambitious growth initiatives and delivering on its business plan,” said Tricia Symmes, CEO. “We also welcome the commitment of the investors in the Private Placement, and appreciate the confidence they are showing in our strategy, the leadership team, and our Board of Directors.” Symmes continued “We have assembled an amazing team and this is the latest development in creating a renewed Aleafia focused on leveraging our portfolio of value-added branded cannabis products to capture Canadian adult-use market share, building the recurring revenue of our medical business, and expanding into attractive international markets.”
“For the Company, we are very pleased with this outcome, as it is yet another milestone achievement in the restructuring of our balance sheet. This evolution in our balance sheet started in Q3 2021 with securing our first ever senior secured credit facility, and continued late into Q4 2021 securing our second senior secured credit facility. After working tirelessly over the last several months with the Steering Committee and also with our existing and new shareholders, we believe the stage is set for an improved capital markets presence with the financial flexibility to accelerate the growth in our business,” said Matthew Sale, CFO. “The debenture holders will retain the full-face value of the converts, providing an opportunity for them to be paid back in full. Moreover, debenture holders will get the benefit of up to another six years of interest income at 8.5%. For our equity investors, we fully expect they will benefit from the appreciation in the value of the Company as we execute our strategy. This is an important and significant step forward in executing on the Company’s strategic plan.”
The Convertible Debenture Amendments
Under the agreement in principle with the Steering Committee the Convertible Debentures will be exchanged for new convertible debentures (the “New Convertible Debentures”) that will be issued in three equal, separate tranches, maturing in 2, 4 and 6 years from the date of issuance (the “2024 Debentures”, “2026 Debentures”, and “2028 Debentures”, respectively), providing the Company with increased flexibility to finance its growth initiatives. The interest rate will remain at 8.5%, but there will be no mandatory cash interest payment for 30 months as interest will initially be paid-in-kind (“PIK”) with additional New Convertible Debentures (the “PIK Debentures”), reducing near-term debt servicing requirements. The conversion price will be significantly reduced from the existing $1.47, to $0.25 for the 2024 Debentures, $0.30 for the 2026 Debentures, and $0.35 for the 2028 Debentures. The New Convertible Debentures will be granted security against certain assets of the Company, but will be fully subordinated to the Company's existing senior secured debt. The Company will be not be entitled to incur further senior secured indebtedness, subject to certain exceptions including to fund working capital, capital expenditures, and strategically accretive acquisitions. The foregoing amendments, together with certain other proposed amendments, are referred to as the “Debenture Amendments”.
Debenture holders who approve the Debenture Amendments will receive a fee (the “Consent Fee”) calculated as the amount of accrued interest on the existing Convertible Debentures between July 1, 2021 and the effective date of the Debenture Amendments, provided that Debentureholder Approval (described below) is obtained, payable in additional 2028 Debentures at par. For illustration, if the effective date of the Debenture Amendments occurs on June 30, 2022, the Consent Fee payable in additional 2028 Debentures at par would be $254 per debenture, or 8.5%.
The issuance of the New Convertible Debentures will constitute a new private placement and as such, the New Convertible Debentures will be subject to a four month and one day hold commencing on the date of issuance in accordance with applicable Canadian securities laws (the “Hold Period”).[4] The Company has applied to list the New Convertible Debentures on the Toronto Stock Exchange, and such listing will occur following the Hold Period, subject to customary listing conditions. The Debentureholder Amendments will be subject to the satisfaction of certain conditions precedent, including the completion of the Private Placement and approval by way of an extraordinary resolution of debenture holders either at a meeting of debenture holders or in writing (“Debentureholder Approval”). The Debenture Amendments and the Private Placement (together, the “Transaction”) are expected to close in this quarter.
Further to the Company’s previous announcements, the forbearance agreement, entered into between the Company and holders of approximately 62% of the aggregate principal amount of Convertible Debentures outstanding, has been extended until May 26, 2022. The forbearance agreement automatically renews for 14-day periods thereafter unless advance notice to the contrary is provided.
The Private Placement
The Private Placement constitutes the issuance of 68,151,515 units at a price of $0.0825 each (the “Issue Price”). Each unit consists of one common share in the capital of the Company and one-half of one common share purchase warrant. A warrant is exercisable into one common share at an exercise price of $0.1025 for a period of four years from the date of issuance. The expiry date of the warrants can be accelerated by the Company at any time and upon 30 days’ notice, if the closing price of the common shares on the Toronto Stock Exchange (the “TSX”) is greater than $0.165 for any 10 non-consecutive trading days following the date that is 4 months and one day after the date of issuance and prior to the expiry date of the Warrants.
The completion of the Private Placement is conditional on (i) the execution of voting support agreements by holders of at least 66 2/3% of the principal amount of Debentures pursuant to which such holders will agree to vote in favour of the extraordinary resolution, or receipt of Debentureholder Approval ii) access to the full advance rate based on eligible receivables funding under the December 2021 Credit Facility, (iii) granting additional security against certain assets of the Company in favour of the lenders under the Credit Facility entered into in August 2021, which will be fully subordinated to the Company’s December 2021 Credit Facility; and (iv) additional customary closing conditions. The outside date for closing the Private Placement will be June 30, 2022. All of the securities issued in connection with the Private Placement will be subject to a customary four month and one day hold in accordance with applicable Canadian securities laws.
The net proceeds from the Private Placement will be used to fund working capital and capital expenditures for the Company’s continued growth, and other general corporate purposes.
There is no insider participation in the Private Placement, and to the knowledge of the Company no new insiders will be created as a result of the Private Placement. A finder’s fee of 3,407,500 common shares will be paid to certain finders (the “Finders’ Shares”) in connection with the Private Placement.
The Company has applied to the TSX to list the common shares in the capital of the Company issuable pursuant to the Transaction for trading on the TSX and closing of the Private Placement is conditional upon receipt of such listing approval.
Key Expected Benefits to the Company of the Transaction include:
Provides increased financial flexibility to execute the Company’s growth initiatives, with $11.6 million of additional liquidity
Removes any near-term uncertainty around refinancing the Convertible Debentures as the New Convertible Debentures will have an average maturity of 4 years
Improves cash flow as there is no mandatory cash interest payment on the New Convertible Debentures for 30 months
Balances the Company’s refinancing profile with the principal value of the New Convertible Debentures being split into three equivalent tranches instead of one “bullet” payment
Key Anticipated Benefits to Debenture holders include:
Retains face value for debenture holders at a par value of $100
Assuming an effective date of June 30, 2022, a consent fee of approximately 8.5% payable in $254 of additional 2028 Debentures provides an opportunity to recover all accrued and unpaid interest
Additional tenor provides several more years of potential interest income
Adjustment of conversion price improves optionality to convert into common shares and participate in meaningful upside in the Company
Enhanced security profile with direct security interest in the Company’s owned facilities
Potential Dilution
There are three potential sources of dilution resulting from the Debenture Amendments: (i) common shares issuable on conversion of the principal amount of each tranche of New Convertible Debentures into common shares at the stipulated conversion prices (“Principal Shares”); (ii) common shares issuable on conversion of the principal amount of 2028 Debentures to be issued to holders of Convertible Debentures in consideration for the Consent Fee who vote in favour of the Debenture Resolution (the “Consent Fee Shares”); and (iii) Common Shares issuable on conversion of the PIK Debentures (the “PIK Shares”).
The following table outlines the potential maximum dilution resulting from each source, assuming an effective date of June 30, 2022 for the implementation of the Debenture Amendments:
New Debenture Type of Shares Principal Amount Conversion Price Maximum Common Shares Issuable Percentage of Outstanding Common Shares
2024 Debenture Principal Shares $12,450,000 $0.25 49,800,000 15.04%
PIK Shares1 $2,209,727 $0.25 8,838,910 2.67%
2026 Debenture Principal Shares $12,450,000 $0.30 41,500,000 12.53%
PIK Shares1 $2,209,727 $0.30 7,365,758 2.22%
2028 Debenture Principal Shares $12,450,000 $0.35 35,571,429 10.74%
Consent Fee Shares2 $3,161,703 $0.35 9,033,437 2.73%
PIK Shares1 $2,209,727 $0.35 6,313,507 1.91%
TOTAL 158,423,041 47.84%
Notes:
Assumes all interest is paid in additional debentures of the relevant New Debentures during the PIK period, with no cash payments; annual interest 8.5% paid semi-annually. Calculated from the estimated effective date of June 30, 2022 to the estimated maturity dates of the 2024 Debentures (June 30, 2024), 2026 Debentures (June 30, 2026), and 2028 Debentures (June 30, 2028), respectively.
The consent fee will be equal to the accrued and unpaid interest under the existing Convertible Debentures from July 1, 2021 up until the effective date of the Debenture Amendment. This calculation assumes an effective date of June 30, 2022 and also assumes that holders of 100% of the principal amount of Convertible Debentures receive the consent fee.
Calculated based on outstanding common shares of 331,124,351 as of the date hereof.
Assuming 100% conversion of the Convertible Debentures, as amended, and an effective date of June 30, 2022 for the implementation of the Debenture Amendments, an aggregate of up to 158,423,041 Common Shares would be issuable pursuant to the Debenture Amendments, representing approximately 47.84% of the issued and outstanding Common Shares on the date hereof.
Based on an issuance of 68,151,515 Units pursuant to the Private Placement, the aggregate number of Common Shares issuable pursuant to the Private Placement on a fully diluted basis, including the Finders’ Shares, would be 105,634,773 Common Shares, representing approximately 31.9% of the current issued and outstanding Common Shares.
Accordingly, the dilutive effect of the Private Placement and the Debenture Amendments could be up to approximately 79.74% in the aggregate.
Aleafia Health’s Financial Position – Hardship Exemption
The Company remains in serious financial difficulty and based upon a review of the Company’s commitments, prospects, available options and funding requirements, the Board of Directors (other than two directors who abstained from the matter), has concluded that the Transaction is reasonable and presents the only option that the Company can reasonably expect to execute to address its immediate and significant financing needs.
The Company believes that it does not have adequate time available to seek securityholder approval. The Company is facing a limited opportunity to complete the Transaction, with no additional credit facilities available to it to bridge a period of time before a meeting of securityholders of the Company, and with a reasonable expectation that the Company’s current cash reserves would be depleted before securityholder approval can be obtained, which would leave it unable to service its obligations as they become due. Given the Company’s current financial situation, in the absence of completion of the proposed Private Placement and Debenture Amendments, its ability to continue operating as a going concern and to meet its obligations as they come due cannot be assured in the short term.
Financial Hardship Exemption
The Private Placement and Debenture Amendments trigger certain requirements for approval from the holders of a majority of the currently issued and outstanding common shares under Section 607(g) of the TSX Company Manual (the “Manual”), unless an exemption is available. Pursuant to section 607(g)(i) of the Manual, shareholder approval of the Private Placement is required given that the potential dilution exceeds 25% and the Issue Price represents a discount to the market price.
The Debenture Amendments also present two separate triggers for shareholder approval under the Manual. First, in light of the overall potential dilution, the fact that the conversion price of the New Convertible Debentures is not at least the market price at the time of conversion means that shareholder approval would be required under section 607(g)(i) of the Manual. Second, shareholder approval would be required to issue the PIK Shares at the same price as the New Convertible Debentures representing the aggregate principal amount, given that the TSX treats the PIK as a shares-for-debt private placement and the price could only be protected for a 45-day period under the Manual.
The Company applied to the TSX under the provisions of Section 604(e) of the Manual for an exemption from the requirement for shareholder approval of the Transaction on the basis that the Company is in serious financial difficulty (the “Application”). The independent members of the Company’s Board of Directors, each of whom is free from any interest in the Transaction and unrelated to the parties involved in the Transaction, considered the reasonableness and fairness of the Transaction, including assessing against potential alternatives, and approved (i) the Transaction and (ii) that the Company make the Application. There was no contrary view or abstention by any independent director on the resolutions.
In addition, both the independent members of the Board of Directors determined that the Company met the applicable requirements under the Manual, and under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions on the basis of financial hardship, and that the Transaction is reasonable in the circumstances and designed to improve the Company's financial situation.
On May 3, 2022, the TSX approved the Application on the basis of financial hardship and, as a result, the Company will become subject to a remedial delisting review by the TSX. It is routine for the TSX to require any issuer utilizing the financial hardship exemption to be the subject of such review.
The Company intends to issue a further press release shorty with additional details regarding a voting support agreement that debenture holders will be asked to sign, and details regarding the meeting to be called to approve the Debenture Amendments.
For Investor & Media Relations:
Matthew Sale, CFO
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.
Forward Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties, and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward- looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.
[1] Liquidity calculated based on $5.6 million in aggregate gross proceeds from Private Placement and up to $6.0 million undrawn under the revolving credit facility (the “December 2021 Credit Facility”). Availability of December 2021 Credit Facility is based on a lending margin on eligible receivables. On completion of the Transaction, the Company estimates that an additional $3.0 million will be available to be advanced.
[2] Adjusted EBITDA is a non-GAAP measure. Non-GAAP measures are non-standardized and may not be comparable to similar financial measures disclosed by other issuers. Adjusted EBITDA is defined, explained, and reconciled against GAAP financial measures on pages 13 and 25 of the Company’s MD&A filed on SEDAR on February 14, 2022.
[3] Based on HiFyre data for Ontario, Alberta, British Columbia and Saskatchewan markets as of April 30, 2022.
[4] Holders of New Convertible Debentures will, subject to Canadian securities laws, be permitted to sell their securities during the Hold Period subject to the availability of a prospectus exemption.
What do you think about this turn of events? I read it as the only option they really had to stay in business. It seems to be reasonable considering. It will give them some breathing room, hopefully it is enough
Aleafia Health Announces Agreement to Amend Convertible Debentures and Equity Financing of $5.6 Million
https://mailchi.mp/aleafiahealth.com/aleafia-health-announces-agreement-to-amend-convertible-debentures-and-equity-financing-of-56-million?e=9bbb842c5f
Aleafia Health Provides Further Update on its Convertible Debt
April 27, 2022 22:19 ET | Source: Aleafia Health Inc.
Holders representing approximately 62% of total Debentures extend Forbearance Period until May 12, 2022 to allow negotiations to continue
TORONTO, April 27, 2022 (GLOBE NEWSWIRE) -- Aleafia Health Inc. (TSX: AH, AH.DB, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is providing a corporate update regarding its outstanding listed unsecured convertible debentures (TSX: AH.DB), issued on June 27, 2019 and maturing on June 27, 2022 (the “Convertible Debt”).
Further to the Company’s previous announcements, the Forbearance Agreement, entered into between the Company and holders of Convertible Debt representing approximately 62% of the aggregate principal amount of debentures outstanding, has been extended until May 12, 2022. The Agreement automatically renews for 14-day periods thereafter unless advance notice to the contrary is provided.
The parties continue to work expeditiously and in good faith to negotiate a potential transaction to amend the terms associated with the Convertible Debt. While there can be no assurances regarding any outcome, the Company believes significant progress is being made towards a solution that is beneficial to its stakeholders.
For Investor & Media Relations:
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.
Forward Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.
They are not suffocating that badly, I just bought infused pretzels and a bottle of hot sauce for 420. The meds are more available no outages in the last 6 months. They seem to be head down and delivering stronger all the time. Share price does not necessarily reflect the company. That is particularly true in the weird and wonderful land of weed. I know they are in a fragile position at the moment and hope they get through in one piece. Holding long in any case.
They are suffocating--->>>Aleafia Health Provides Further Update on its Convertible Debt
Holders representing approximately 62% of total Debentures extend Forbearance Period until April 26, 2022 to allow negotiations to continue
TORONTO – April 11, 2022 – Aleafia Health Inc. (TSX: AH, AH.DB, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is providing a corporate update regarding its outstanding listed unsecured convertible debentures (TSX: AH.DB), issued on June 27, 2019 and maturing on June 27, 2022 (the “Convertible Debt”).
Further to the Company’s announcements on February 1, and March 1, 16, and 31, 2022, the Forbearance Agreement, entered into between the Company and holders of Convertible Debt representing approximately 62% of the aggregate principal amount of debentures outstanding, has been extended until April 26, 2022. The Agreement automatically renews for 14-day periods thereafter unless advance notice to the contrary is provided.
The parties continue to work expeditiously and in good faith to negotiate a potential transaction to amend the terms associated with the Convertible Debt. While there can be no assurances regarding any outcome, the Company believes progress is being made towards a solution that is beneficial to its stakeholders.
For Investor & Media Relations:
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.
Forward Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.
This girl gets relief from the products Aleafia offers. This is why I am invested in this wonderful company! They relieve intractable pain and misery.
Thank you for the info
Aleafia Health gains market share in adult use cannabis market, provides strong sales outlook
07:47 AM | Aleafia Health Inc. (ALEAF) | By: Khyathi Dalal, SA News Editor
Aleafia Health (OTCQX:ALEAF) indicated that it continues to expand market share by focusing on the highest revenue generating dried flower, pre-roll, and vape product categories.
It also changed business strategy to become a branded cannabis products provider, with branded cannabis representing 80% of total net revenue in 2021 compared to 33% in 2020.
In February, Aleafia Health achieved record 2.06% adult use market share in four major markets, advancing 33% from 1.54% in November 2021; market share in flower rose to 1.86% from 1.47%, pre-rolls rose to 2.62% from 2.09%, vapes rose to 2.18% from 0.92%, and oil rose to 4.01% from 2.68%.
Market share growth were hampered by temporary capacity limitations at the company's Grimsby greenhouse facility.
Besides receiving a $1M purchase order from Ontario for adult use products, it has secured purchase orders in 2022 YTD from Australia and Europe that exceed 2021 second half sales to international markets.
The company is targeting break-even adj. EBITDA profitability in 2H22.
Shares trading 5% down premarket.
So in your best guess, what do you foresee?
Aleafia Health Provides Further Update on its Convertible Debt
• Holders representing approximately 62% of total Debentures extend Forbearance Period until March 28, 2022 to allow negotiations to continue
TORONTO – March 16, 2022 – Aleafia Health Inc. (TSX: AH, AH.DB, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is providing a corporate update regarding its outstanding listed unsecured convertible debentures (TSX: AH.DB), issued on June 27, 2019 and maturing on June 27, 2022 (the “Convertible Debt”).
Further to the Company’s announcements on February 1, 2022 and March 1, 2022, the Forbearance Agreement, entered into between the Company and holders of Convertible Debt representing approximately 62% of the aggregate principal amount of debentures outstanding, has been extended until March 28, 2022. The Agreement automatically renews for 14-day periods thereafter unless advance notice to the contrary is provided.
The parties continue to work expeditiously and in good faith to negotiate a potential transaction to amend the terms associated with the Convertible Debt. While there can be no assurances regarding any outcome, the Company believes progress is being made towards a solution that is beneficial to its stakeholders.
For Investor & Media Relations:
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.
Forward Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.
I really hope they get their act together. lol :)
Over the next 2 years, this company will either succeed, go out of business or be sold?
Unifor president Jerry Dias goes on medical leave to deal with health issues
Unifor president takes leave
The Canadian Press - Feb 16, 2022 / 3:52 pm | Story: 360327
The head of Canada's largest private-sector union has taken a leave of absence to deal with some health issues.
Unifor president Jerry Dias tweeted that his social media account will be quiet for a while.
Dias says he's confident that the Unifor leadership team and staff "will continue the important work of the union in my absence."
A note to local union presidents says Dias started a medical leave on Feb. 6.
The outspoken union leader was first elected national president in August 2013 at its founding convention and re-elected in 2016 and 2019.
National secretary-treasurer Lana Payne says she will work with the union's elected leadership team in Quebec, Ontario, the West and Atlantic Canada "to ensure the important work of our union carries on, in accordance with Unifor’s constitution."
Excellent info. Thank you for posting. I like the plan and hope the growth is solid. I still think the UNIFOR deal is a huge advantage. The youtuber I follow is a medical patient of theirs and she seems to get good results with their products. She was impressed with the effect of their live rosin even tho she is not using it recreationally.
Earnings Call Transcript: Aleafia Health, Inc. (ALEAF) CEO Tricia Symmes on Q4 2021 Results - Earnings Call Transcript
Feb. 15, 2022 2:14 PM ETAleafia Health Inc. (ALEAF)
https://seekingalpha.com/article/4487180-aleafia-health-inc-aleaf-ceo-tricia-symmes-on-q4-2021-results-earnings-call-transcript?mailingid=26720407&messageid=2800&serial=26720407.322&utm_campaign=rta-stock-article&utm_medium=email&utm_source=seeking_alpha&utm_term=26720407.322
Aleafia Health, Inc. (OTCQX:ALEAF) Q4 2021 Earnings Conference Call February 15, 2021 9:30 AM ET
Company Participants
Tricia Symmes - CEO
Matt Sale - CFO
Conference Call Participants
Rahul Sarugaser - Raymond James
Operator
Good day, ladies and gentlemen and welcome to the Aleafia Health 2021 Fourth Quarter and Twelve Months Results Conference Call. This morning Aleafia Health filed on SEDAR its financial statements and associated Management Discussion &Analysis for the 3 and 12 months ended December 31, 2021.
All comments to be made on this call today should be taken with reference to and are qualified in their entirety by those documents. Today's call includes estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in today's press release regarding various factors, assumptions and risks that could cause our actual results to differ.
Furthermore, during this call, we will refer to certain non-IFRS financial measures including branded cannabis net revenue, adjusted gross margin and adjusted EBITDA. These measures do not have any standardized meaning under IFRS, and our approach to calculating these measures may differ from that of other issuers and so these measures may not be directly comparable. Please see this quarter's MD&A for more information about these measures.
I would now pass the call over to our Aleafia Health’s CEO, Tricia Symmes.
Tricia Symmes
Thank you, Howard, and welcome fellow shareholders. I am very excited about Aleafia’s future and an exciting year ahead of us. The prospects for our company are the best they have ever been and we look forward to continuing to show shareholders and investors what great things we can do in this industry.
Our mission is very direct, to improve peoples’ lives and that is what will see us realize our personal and business ambitions. Embracing this mission is now more important than ever. First off, I would like to thank Geoff Benic, our former CEO for the last 3.5 years for his leadership, passion, and mentorship to Aleafia Health. He put together a phenomenal team, got Aleafia off the ground and where we are today and we wish him well in his next challenge.
Now, let’s talk about the company as it is today. The core strategic objectives that will drive Aleafia Health to sustained profitability, reflect a pivot to focus on branded cannabis revenue. In 2021, we transformed our business evolving from a wholesale producer to a branded cannabis company and that is a major change.
Today, you’ll hear the words sticky and hyper growth. Two concepts that are driving us forward. Sticky of course means that sales will occur over and over as customers will be using our products again and again. It occurs in the medical cannabis segment where the revenue is recurring at attractive gross profit margins. And hyper growth characterizes our trajectory in both the adult-use sales channel and the opportunity we see in select international markets.
Now let’s talk about Aleafia’s transformation and what has this meant to our Q4 and 12 months results. Our revenue is driven by three strategic pillars, an exciting CPG branded adult-use portfolio, generating $24 million runrate net revenue. Leadership in medical cannabis with its $10 million runrate net revenue and burgeoning international sales where we are well positioned in three countries, Germany, the UK and Australia and have developed partnerships with key established European supply distributors.
We consider international sales to be an important opportunity and have already delivered products overseas. More to come on that. Another highlight is that we are targeting the second half of 2022 to achieve breakeven adjusted EBITDA profitability. To do this, we are improving adult-use margins through portfolio optimization and we are reallocating the company’s headcount strategically to optimize talent and maximize revenue velocity.
I can tell you today that we are poised to achieve a top 10 market share position in 2022, driven by leadership in the broad ranging adult-use value cannabis category. Our very appealing Divvy value brand is consistently among the top search brands at the Ontario cannabis store. Our five cannabis brands span the spectrum from premium and craft flower to the value category where we enjoy significant leadership.
Since Q4 2020, 37 new SKUs have been launched as we are aggressively pursuing and gaining market share in the three largest categories, dried flower, pre-roll and vape. We are pleased to report that Aleafia delivered a top three change in market share rankings out of 40 Canadian licensed producers from Q1 2021 when we launched our Sunday Market House of Brands to Q4 2021.
Here is what the results tell us. In 2021, the total net cannabis net revenue of $36.1 million represented a highly diversified sales mix with our two hyper growth segments in adult-use and medical cannabis achieving 80% of net revenue, a complete turnaround from 2020 where bulk wholesale products represented 67% of net revenue. This is a complete change.
We are moving away from lower margin bulk wholesale sales where the relationship with the consumer is distant. Our focus now is to understand and deliver what the consumer demands.
To look at it another way, for the 12 months period ending December 31, 2021, branded cannabis net revenue advanced 96% to $28.7 million from $14.6 million in 2020. For Q4 2021 it increased 60% to $8.3 million from $5.2 million in Q4 2020. We are in the top three of Canadian LPs in market share rank increase to number 15 in Q4 2021, up from number 30 in Q1 2021. There was also a 37% rise in Q4 2021 retail sales pull through relative to Q3 2021.
Aleafia is now a branded products company and we are very proud of our Sunday Market House of Brands. It has achieved 396% growth year-over-year and it is anchored around Divvy, the everyday brand focused on quality, high margin and high velocity categories including, dried flower, pre-roll, vapes and select cannabis derivative products.
We delivered top 10 Q4 2021 retail sales increase relative to Q3 with a 37% sales growth. The company’s adult-use market share increased from 0.3 in Q1 2021 to 2.0 in Q4 2021. Adult-use net revenue increased a very impressive 396% to $16 million, compared to $3.2 million in 2020 and increased 326% to $6 million in Q4 2021, compared to $1.4 million in Q4 2020.
So this growth was led by expansion of our flower and pre-roll retail sales, which each grew by 1000% during the last quarters. Our Divvy value brand, a top search brand on OCS.ca reached the tenth percentile in Ontario for its vapes and its oils, our one of the top SKUs in the province.
Our market share is on a dramatic upward trend rising 27% Q4 versus Q3 2021 and achieving 15 positions from 30 at the end of Q1 2021 when the Sunday Market House of Brands was launched to 15 at Q4 2021. In the second half of 2021, there was approximately a three times increase in gross adult-use sales over the first half of 2021.
This momentum has continued into 2022 as you can see our market share rank continues to rise. Over this period, the company delivered strong retail pull-through at each of the three major categories with flower retail sales climbing approximately 1400%, pre-roll increasing approximately 1000% and vape retail sales increasing approximately 200%.
Aleafia is a significant player in the medical cannabis market through our flagship emblem brands and there too revenue is climbing to its sticky and recurring revenue base with strong gross margins. Medical cannabis net revenue increased 33% to $10.6 million in 2021, compared to $8.0 million in 2020, driven by strong script growth and new strategic clinic and benefit provider partnerships that see the benefit in joining the Aleafia medical ecosystem.
Script count increased 17% year-over-year, while the market declined at minus 23%. We had double-digit growth in medical cannabis sales despite the overall market decline. Third-party clinics now represent just about 55% of gross medical revenue and four new unionized employers were added in 2021. Key wins include a 22% increase in Unifor patients in Q4 over Q3, a 67% increase in prescriptions from veteran patients in Q4 2021 over Q3 2021, and a 2000% increase in Quebec scripts in Q4 2021 over Q3 2021.
The medical channel represents a highly scalable sticky recurring revenue base. Through Unifor and our new strategic partnerships, we are poised to accelerate new patient uptake and continue to pursue those patients who reimbursed for their medical cannabis. We are seeing strong fundamentals relative to our competitors with year-over-year script count up 17% from 32,191 in 2020 to 37,779 in 2021and an active patient base, which grew 13% from 17,400 in 2020 to 19,700 in 2021.
One of the important drivers of our competitive advantage is in producing large format dried flower SKUs in Port Perry, one of the only successful outdoor cultivation facilities in Canada. As one of the first operational, large-scale legal outdoor growth in Canadian cannabis history, it launched in 2019 and was an industry disruptor that enabled Aleafia’s strategic pivot as we began to produce large-scale harvest of THC dried flower.
Dry flower and pre-rolls represent more than half of the total adult-use market and we are a high quality and low cost producer of dried flower. A record-breaking outdoor harvest in 2021 puts us in a strong position to supply our burgeoning adult-use sales channel. Thanks to the expertise of the team there, we produced high potency flowers that averaged 22% THC, and reached up to 27% THC, the kind of level consumers are looking for.
We are seeing the market of both such as an addition to potency consumers are paying increasingly more attention to terpenes which ran from 2.7 to 5.7 in 2021, compared to a maximum 3.3 in 2020. The harvest this year is exponentially higher quality than 2020. In high potency flower we cultivated approximately 500 kilos in 2020, versus 11,650 kilos in 2021, all of which is the highest grade flower already being sold at retail under the Divvy brand.
I will now turn the presentation over to Matt Sale, our CFO and he will tell you more about some of Aleafia’s important metrics. Matt?
Matt Sale
Thank you, Tricia. Good morning. It’s great to speak with you all today. In this quarter and the 12 month period, there are many deciding moments that point toward the kind of company Aleafia is rapidly becoming. Our product mix has shifted almost completely to branded cannabis adult-use and medical products from lower margin bulk wholesale products.
Net branded cannabis revenue increased 96% over 2020 to $28.7 million and now represents 80% of our total net revenue. This is a complete turnaround from 2020 where bulk wholesale products represented 57% of total net revenue. This was driven in part by the redirection of high potency flower from our outdoor harvest in Q4 to the adult-use sales channel where it will supply higher revenue per gram products in the first half of 2022.
We have diversified our sales mix with higher quality, direct-to-the consumer, adult-use and medical sales which delivered stronger growth and net realizable margin. They are more stable, provide greater visibility into future revenue and pave the way for sustainable long-term top-line growth. This change leads the emergence of Aleafia as a leading consumer package goods or CPG company with multiple brands.
We call this our House Of Brands and believe they will win consumer loyalty enabling a sticky, quality revenue stream for Aleafia as evidenced by the success of Divvy. With branded cannabis net revenue now representing 80% of our total, we believe this is a significantly more diversified revenue base, while delivering higher growth and net realizable margin.
Now let me unpack some of the key growth drivers in our adult-use business. We generated 1.7 million of net cannabis revenue in Q1 2021, $3.2 million in Q2 2021 and $5 million in Q3, and $8.3 million in the most recently completed Q4 2021 period representing a healthy 19% quarter-over-quarter increase and a 1237% compounded annual growth rate since Q3 2020.
While the Q3 and Q4 increases have been strong, the net cannabis revenue could actually have been meaningfully higher as consumer demand evidenced by purchase orders from the provincial supply boards exceeded our ability to fulfill them as we experienced operational inefficiencies in our Grimsby Ontario indoor growth facility.
Adult-use cannabis, including flower, pre-rolls and vapes is our single largest sales channel with a highest growth rate and is exactly where we want to be. In the second half of 2021 there was an approximate three times increase in the adult-use retail sales pull-through of our products over the first half of 2021 based on Highflyer data.
Catalysts for this growth included accelerated retail penetration, our portfolio optimization, and expanding our cultivation capacity with a continued focus on high value flower at an attractive price point. Our outdoor harvest positions us well to continue ramping adult-use net revenue as this high potency flower can be redirected into the large format pre-rolled category.
We are already seeing robust purchase order activity in the first six weeks of this quarter positioning us well to continue our quarter-over-quarter growth trajectory. As you may recall, Aleafia began its journey in cannabis in the medical sales channels with the acquisition of Emblem and in 2021, we built on that success with the expansion of our medical ecosystem.
This channel is an important one for Aleafia. Our medical business is growing and we are optimistic about its future. Our net revenue over the last eight quarters has increased from $1.4 million in Q1 2020 to $2.2 million in the most recently completed Q4 2021 period representing a CAGR of 30%. We are encouraged to continue this quarter and at numerous favorable tailwinds and initiatives to drive this, we are focused on growing our active patient base. Under our exclusive Unifor partnership, we onboarded four unionized employers in the second half of 2021 and see lots of runway.
With each new employer onboarded, we refine our process to expedite the onboarding our new future new employers. Additionally, we are targeting expanding clinic partnerships by 20% with numerous new potential clinic partnerships in our pipeline with attractive underlying active patient bases. We are focused on serving high value patients that have higher average ordering values or AOVs and order frequency.
As an example, we see certain veteran patients that exhibit AOVs that are 2.7 times that of our non-veteran patient base and order twice as frequently. We are relentlessly focused on better serving our patients and are undertaking a complete restructuring to integrate our physical clinics, our virtual clinic, and third-party clinic platforms and believe this will drive operational efficiencies, reduce our SG&A profile and unlock future revenue growth.
Our medical ecosystem is positioned to continue leading the industry with research education for clinic partners and our active patient base to ensure they all continue engaging with our ecosystem. Reducing adjusted SG&A expenses are a key driver to profitability for us. Adjusted SG&A declined 35% from $11.2 million in Q4 2020 to $7.1 million in the most recently completed Q4 2021 period.
We implemented several initiatives throughout 2021 to reduce our cost profile and make our infrastructure scalable to sustain significantly higher revenue volumes. We implemented an internal direct sales force to sell into both the adult-use and medical channels. We put in place an operational management team at each of our three production facilities who are capable and prepared of managing significantly higher ordering throughput.
We developed a suite of corporate shared services including information technology, finance, human resources and legal, which are now leveraged across all our sales channels. Further, we saw a significant non-recurring cost in the first half of 2021 related to our House of Brands build out which are now largely complete.
The company reviewed its inventory and fixed assets and identified certain slow moving assets primarily related to the bulk wholesale sales channel. As a result of the company’s focus on branded consumer products, the company recorded a $19.6 million inventory provision. Additionally, the company recorded a $28.8 million impairment of property plants and equipment due to changes in marketing conditions for these assets.
Although we have made great progress in 2021 reducing our quarterly adjusted [Indiscernible] by 35% over the last four quarters, while branded net revenue grew 60% over that same time period, we have further initiatives actively underway to reduce costs and enhance profitability. We have a renewed focus on cost discipline to accelerate the pathway to adjusted EBITDA breakeven profitability. We are focused on enhancing gross profit margins.
Total adjusted gross profit margin before fair value adjustments and inventory provision was 27% in Q4 2021, compared to 50% in Q4 2020, primarily due to the company’s focus on branded cannabis products that deliver higher overall net margin per gram. We are undergoing a SKU optimization to align our portfolio and best selling product formats to optimize our margin profile.
Moreover, we believe the market can bear moderate, strategic price increases while still achieving an attractive value proposition for our products. We are optimizing our operating expense profile to further extract cost and drive towards profitability. In that regard, we’ve reviewed our sales channels to embrace those that deliver the highest net realizable margin per gram of flower sold and we methodically reviewed Aleafia’s cost structure to optimize our talent and resources towards those channels.
The company completed a strategic restructuring plan in the second half of 2021 which saw significant headcount reductions. In Q4 alone, the headcount reduction continuing into early January 2022 represents $1.9 million in annualized savings. We are integrating our physical, virtual and third-party clinic medical channels, which is expected to further optimize our cost profile and facilitate new patient onboarding and servicing on an ongoing basis.
In 2021, we delivered $36.1 million in total net revenue and currently our runrate to net revenue is approximately $41.9 million. This is based on approximately $24 million in adult-use, $10 million in medical, and international and $8 million in bulk wholesale net revenue. We have a multipronged growth strategy to scale, distributing $53 million and $63 million in net revenue in fiscal year 2023.
The core pillars to achieve this are, attaining a top 10 market share position in the overall Canadian adult-use market by focusing on quality, high margin, and high velocity sales categories; expanding our leadership position in medical by onboarding additional third-party clinics and accelerating market uptake under our exclusive Unifor partnership; building on existing partnerships to unlock the key European market and continue driving expanded international sales.
To help finance these ambitious growth targets, the company completed two financings in the second half of 2021 including a $10 million senior secured term credit facility in August, and a new $19 million credit facility in December. The new credit facility consists of a $12 million term loan and a revolving receivables facility up to $7 million.
The revolving receivables facility remains undrawn providing the company with liquidity to fund working capital investments required to continue rapidly scaling our adult-use sales. The company is also actively engaging with holders of our listed unsecured convertible debentures maturing on June of 202 with a view to effecting changes in key terms that are equitable to both the holders and the company and provide a sustainable foundation for the company’s continued growth.
We believe these fiscal year 2023 targets for net revenue, adjusted gross profit margin, adjusted SG&A, and adjusted EBITDA are achievable based on the strategies we have outlined here today.
Tricia over to you.
Tricia Symmes
Thank you, Matt. As demonstrated, we have launched a multipronged growth strategy across three high value pillars to achieve these estimated growth projections. The pillars are, adult-use, in which our goal is to attain top 10 market share in the overall Canadian adult-use market; medical, where we will onboard additional third-party clinics and accelerate market uptake under the exclusive Unifor partnership; international, where our goal is to build on existing partnerships to unlock the key European market.
I became CEO on February 7th of this year. Previously, I was the company’s Chief Commercial Officer. My background is in building and rebuilding companies and taking them to the next level of growth and profitability. A big part of our mission is engaging with the consumer and to accomplish that, we’ve attracted a very lean top executive sales and marketing team with an internal sales force that truly understands the CPG marketplace and what consumers want.
Our team is focused on the need to drive value, to secure loyal customers, and drive and maintain market share. Aleafia’s success will be based on understanding the consumer and providing a value proposition that others have not capitalized on and this is why we are achieving hyper growth.
In 2022, we intend to be leaders in our three pillars, adults, medical and international. We are very optimistic and we would like you to share in this optimism. For Aleafia Health the best is yet to come.
Thank you for being here today and listening to this presentation. We will now take questions.
Question-And-Answer Session
Operator
[Operator Instructions] Our first question or comment comes from the line of Rahul Sarugaser from Raymond James. Your line is open.
Rahul Sarugaser
Morning, Tricia and Matt. Thanks so much for taking my questions today. So, congratulations on the large percentage growth that you’ve seen, particularly in the adult-use throughout in the medical channel. So, I guess, my first question is, while those splendid increases are, I would say, on a dollar basis, it’s not, it took to the middle of the pack. And given that market share really is determinant of success in the Canadian market and that Aleafia sitting at around, maybe plus or minus 1.5% to the adult-use and become relevant we need to be at least 1.3% to potentially 5%, how do you plan on – so how does your roadmap drive you towards that sort of relevant market share?
Tricia Symmes
Well, thank you, very much for your question. I think your points are very valid. I would provide a few answers to help clarify. So first of all on the adult-use of the business, I think what’s important to know is that we only entered into the adult-use of the business in the second half of 202. And really this is going to be the first full year that we will see sustainable runrates with the Divvy health – with the Sunday Market House of brands and with Divvy. Our projection this year will help take us north of that 3% market share that you shared on and really what that’s going to be driven by is, obviously the superior and strong brands that we are containing in the value category, but also with us going into larger formats that we discussed in terms of the flower, we know the product and other segments such as these in which those products were not previously launched in the first part of this year.
We’ll also start to see a more of a sustained runrate of these products as we did have some supply challenges in the last part of 2021 where we had actually greater demand for our products than we were able to pull through. We are now starting to see significant improvements in our greenhouse and we are also seeing significant improvements in operational efficiency.
And we really believe that we’ve built a brand that consumers want. It’s really focused around, obviously, high quality product that obviously offering as a value that is sustainable for consumers and strain that we maintaining that sticky revenue. So the adult portion of our business will continue to be a very strong growth driver as we start to realize those consistent runrates and increase exponential growth quarter-over-quarter.
We are also looking at strategic price adjustments within our portfolio. As you know, it’s very important for us to establish the brand first and create a loyal consumer following and as we start to move into some of those higher categories that obviously can generate more improved margins for us and increase the brand strategically just will have a very important effect on the overall adult-use portfolio.
I think the second most important part of our continued growth to generate, obviously, higher market share value the company will be in the medical side of the business. We have an exclusive partnership with Unifor where, as you pointed out there are some good growth improvements in Q3 and Q4. But unfortunately, due to COVID and the challenges that many companies have experienced there, it was very difficult to be present in front of potential patients to be able to onboard them as quickly as possible. We have actually seen excellent growth in new players onboarding with us that will be ratifying those agreements and fee insurance coverage. And we’ve also just acquired the retiree base which represents a significant increase in new medical patients that will have access to over $2,500 per year in reimbursed medical benefits of cannabis. So that will continue to be a very important pivotal part of our growth as the medical part of the business is sticky and recurring revenue and obviously at higher margins.
And then the last portion which is obviously one that we are extremely excited about is the international side of the business. Again it’s a key differentiator for us to help move and improve our market share overall in the Canadian market is that these are at much higher margins and a higher price point. We’ve already established excellent partnerships in the end of 2020. We have leveraged our first shipments in two European markets and we already have a strong base of PO’s export comments that will capitalize on as we move into 2022.
So, it’s really the three pillars that will help to take us to that next level and get us into the top 10 LP status that we just discussed on this call.
Rahul Sarugaser
Great. Thanks for the additional color. So, to drill down then on the medical side specifically and in terms of the Unifor contracts, which is because we cover the healthcare space more broadly, certainly seeing the difficult for sales folks irrespective of where the healthcare industry get into talk to, whether it’s doctors or patients? But now that that’s opening up hopefully, that certainly should benefit your sales team. So, how should we be thinking about that channel starting to provide material and durable revenues and what should we be thinking in terms of the timeline for that?
Tricia Symmes
Yes. Excellent, excellent question. So the medical cannabis pillar of our business, as you mentioned is a key strategic future growth driver. And it’s based kind of on a multi-pronged strategy. The first is, a strong and growing patient base. So we did recognized this in 2021 and we are one of the only medical companies to be able to continue to increase patient base and show growth versus an overall decline in the industry which is largely driven by a lot of consumers moving towards the adult segment. We believe that it’s important to continue to grow this side, it’s a sticky revenue base and it’s also one in which we have a lot of control with our own virtual clinic pipeline. That’s an important transition that we made this year outside of the brick and mortar to be able to seek patients virtually and make sure that access was easier for these patients that will continue to onboard new patients , which you know it’s one of the important points of this is onboarding patients that then continuing to be able to repeat their prescriptions. The other focus for us in the medical side which we are seeing tremendous growth in Q4 over Q4 was based on our third-party partnerships and we’ve taken a strategic look at how we can have exclusive partnership with Unifor over this 300,000 members that more importantly how we can onboard those potential patients at a more rapid level as we commented this COVID period. And that we’ve also looked specifically at other third-party benefit providers, partnerships in both the Quebec market and with veterans that are all a recurring revenue base that will help to strategically grow our medical platform and ensure that this becomes a critical pillar of ours.
I think the other thing that I would mention is, despite the challenges that many of us experienced during this COVID period, we were still able to onboard four new employers. And that only represents less than 5% of the total opportunity with that Unifor base as these agreements begin to become ratified as we have opportunities to be in front of these potential patients in person through education and onboarding and as we start to tap into the retiree group, which just received their reimbursement at the end of January this year. This will help to see substantial increase in growth in our medical platform and we really believe that this will be a catalyst for moving us into that higher insurance covered area for medical patients, which is really income for pharmaceuticals is the most important thing that you have a platform where patients can have reimbursement for their therapy and that is one that can be continuous recurrent and sticky. So this is part of our strategy on the medical side to help inflate and accelerate our growth.
Rahul Sarugaser
Great. Thank you for that and we’ll certainly look forward to seeing growth there. And if you – and just one last question just around margins, given that historically margins were quite dynamic given especially outdoor indoor growth, the mix between wholesale and close to different channels. So, how should we be thinking about margins so that in medium-term as they sort of settle out and as you start to focus on these three primary channels that you highlight?
Matt Sale
Thanks for the questions. I think directionally where Q4 was is a good starting point to think about our margin profile that I will say with the change in sales mix towards branded cannabis products away from wholesale. The biggest benefit we see is in margin per gram sold. So, it’s as a post is looking at eight percentage, wholesale directionally has had quite a bit of volatility over time with some quarters quite higher and in Q3 in particular it was quite a bit lower. Our adult-use portfolio and our medical portfolio, I think will each deliver margins in and around the kind of 30s to 40s with medical I think at the higher end of that and adult at the lower end of that. And depending on our sales mix, it will move around. The guidance we are putting out for fiscal 2023 is to achieve between 32.5 and 37.5.
Rahul Sarugaser
Thanks. That’s actually very helpful. I appreciate you lining those numbers. And thank for taking our questions. I will get back in the queue.
Tricia Symmes
Thank you.
Operator
Thank you. Our next question or comment comes from the line of [Indiscernible] from Research Capital. Your line is open.
Unidentified Analyst
Hey guys. Thank you for taking our questions. My first question was, I was wondering how we should think about the relationship with wholesale going forward?
Matt Sale
Yes. Thanks for the question. So, wholesale, it historically was a very important part of our revenue mix and 2020 represented two-thirds of total net revenue. As we have now launched our House of Brands and are focused on branded cannabis products we see it having a – overall a lower percentage of our total net revenue. I will say it is still a – it can be an important sales channel, particularly for spec or lower quality flower that we are able to maximize the net realizable margin on our entire harvest. But I think going forward, really our focus is you should expect to see a majority of our revenue based on branded cannabis products.
Unidentified Analyst
Okay. Awesome. Thank you. I was also wondering if there will be any seasonality impacts on revenue in Q1?
Matt Sale
Yes, from a seasonality perspective, I think our medical business is the – it has some ebbs and flows, particularly in the summer months, inability or less focus on getting prescriptions refilled. But generally is a sticky recurring type revenue base. So, each quarter is pretty consistent over the period saw that least volatility. Our adult-use business, I think we are having just – strong growth in Q4 growing over 19%. We see that same momentum continuing in Q1of this year and throughout fiscal 2023. I think in the first half of this year, we have the benefit of our outdoor harvest which only comes down once a year. So that will really benefit the first half momentum more so than the second half momentum. And then on international, and wholesale, I’ll say, wholesale is less – we were less able to predict seasonality. I think it’s much more opportunistic and – than the other three sales channels. That – hopefully, that’s helpful to you. Operator, next question?
Operator
Sir I am showing no additional questions in the queue at this time.
Tricia Symmes
Well, thank you very much for spending this morning with us and we look forward to continuing to update on our journey as we move through this next exciting period. Thank you very much.
Matt Sale
Thank you.
Operator
Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect everyone.
I am sitting on a substantial position I wish I sold out at 90¢ ... Aleafia is bleeding money via EBITDA and debt. They were thrown a lifeline that required the change at the CEO level.
We're hanging by a thread.
This is actually very good considering Canopy’s net cannabis revenue was only $89 mil! These are still early days and I am glad I have a good position in this company. I wish I could buy more right now I do not like companies that aspire to be bought out. I want a company that is carving out a place for itself for the long run.
https://ih.advfn.com/stock-market/TSX/WEED/stock-news/87230137/canopy-growth-reports-third-quarter-fiscal-2022-fi
See RED and blue highlights to see how small Aleafia is--->>> Aleafia Health Reports Q4 2021 Financial Results with $11.5 Million Branded Cannabis Gross Revenue, representing a 103% Increase from 2020
• Transforming business towards a branded cannabis provider, with branded revenue representing 80% of total net revenue in 2021 compared to 33% in 2020
• 96% increase in branded cannabis net revenue to $28.7 million in 2021 from $14.6 million in 2020
• 396% increase in adult-use net revenue to $16.0 million in 2021 from $3.2 million in 2020
• 60% increase in branded cannabis net revenue to $8.3 million in Q4 2021 from $5.2 million in Q4 2020
• 33% increase in medical cannabis net revenue to $10.6 million in 2021 from $8.0 million in 2020
• Consolidating medical market share with 17% growth in scripts in 2021 relative to 23% overall market decline
• Average THC potency of 22% with up to 27% levels achieved in record-breaking outdoor harvest
• Projecting Adjusted EBITDA Profitability during the Second Half of 2022
TORONTO – February 14, 2022 – Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the three and 12 months ended December 31, 2021. The Company’s 2021 unaudited, consolidated financial statements and management discussion and analysis for the fourth quarter and 12-month periods will be available in the Investors section of the Company’s website at aleafiahealth.com and will be filed on SEDAR and available at sedar.com.
“The core strategic objectives that will drive Aleafia Health to sustained profitability reflect a pivot to focus on branded cannabis revenue. Branded revenue is comprised of ‘sticky,’ recurring medical revenue at attractive gross margins and robust growth in adult-use cannabis revenue where Aleafia continues to aggressively take market share,” said Aleafia Health CEO Tricia Symmes. “We are focused on achieving Top 10 in total LP market share in 2022, driven by leadership in the value cannabis category. Aleafia’s five cannabis brands span the spectrum from premium and craft flower to the value category with Divvy, where we already enjoy significant leadership. The company’s market share rose from 30th in Q1 2021, when we launched our House of Brands, to 15th in Q4 2021, representing the third highest change in market share rankings out of 40 Canadian Licensed Producers (“LPs”).(1) Q4 retail sales increased 37% relative to Q3. Our Divvy value brand is consistently among the top searched brands at the Ontario Cannabis Store website.”
“In 2021, the total net revenue of $36.1 million represents a highly diversified sales mix. Driven by robust growth in adult-use and medical sales, these two sales channels represented 80% of total net revenue, a complete turnaround from 2020, where bulk-wholesale product represented 67% of total net revenue,” Symmes added. “This is just the beginning, and we are very excited about the future. A record-breaking outdoor harvest that produced average THC potency of 22% allows us to direct this flower into the adult-use market, delivering significantly higher net margin per gram than the bulk wholesale channel. With our highly competitive THC levels, the quality of the brand is the company’s competitive advantage in the value category, and by focusing on the top performing high margin products through portfolio optimization, we are poised to achieve breakeven adjusted EBITDA profitability in the second half of 2022.”
“Aleafia Health’s revenue is driven by three strong business lines: its CPG branded adult-use portfolio, where we aim to enjoy a Top 10 overall market share position, which currently generates $24 million annualized run-rate net revenue, with significant momentum in the first 6 weeks of 2022; leadership in medical cannabis with its highly recurring $10 million annualized run-rate net revenue, and a 17% increase year over year in script counts; and international sales, where we are well positioned in three countries, Germany, the UK and Australia, and have developed partnerships with key established European supply distributors.
Our Sunday Market House of Brands achieved 396% growth year over year and is anchored around our hugely successful everyday Divvy brand, we have moved strongly ahead into categories that consumers want and are providing the innovative products and a value proposition that they demand.”
OPERATIONAL HIGHLIGHTS
• Net revenue was $36.1 million for the 12 months ended December 31, 2021 (“2021”), compared to $44.5 million in the 12 months ending December 31, 2020 (“2020”). For the three months ended December 31, 2021 (“Q4 2021”), net revenue was $8.8 million, compared with $15.2 million in Q4 2020. The decline in net revenue was based on shifting from lower margin, higher volume bulk wholesale commodity cannabis revenue to higher margin, higher potency and innovative adult-use products, offering a unique value proposition. The Company’s branded cannabis revenue includes its “sticky” medical sales and market share consolidating branded adult-use cannabis products along with its burgeoning international sales.
• Branded cannabis net revenue increased 96% to $28.7 million in 2021 compared to $14.6 million in 2020, and increased 60% to $8.3 million in Q4 2021 compared to $5.2 million in Q4 2020, largely attributable to the launch of the Sunday Market House of Brands, which enjoyed 396% growth in 2021 compared to 2020, anchored around Divvy, the everyday brand focused on potency and an exceptional value proposition. Aleafia delivered the top 3 out of 40 Canadian LPs in market share rank increase from Q1 2021 (#30) to Q4 2021 (#15).(1)
• Adult-use net revenue increased 396% to $16.0 million in 2021 compared to $3.2 million in 2020, and increased 326% to $6.0 million in Q4 2021 compared to $1.4 million in Q4 2020. Sales velocity continues to accelerate driving market share capture with 37% retail sales pull through in Q4 2021 relative to Q3 2021.(2)
• Medical cannabis net revenue increased 33% to $10.6 million in 2021 compared to $8.0 million in 2020, driven by strong ordering patterns from its flagship Emblem cannabis brand. Script count increased 17% year over year, to 37,779 in 2021 compared to 32,191 in 2020. The patient base grew 13% to 19,700 in 2021 from 17,400 in 2020. In 2021, the Company onboarded four unionized employers through its exclusive partnership with Unifor, Canada’s largest private sector union, with more than 515,000 members and retirees across the country. The highly scalable new patient onboarding platform is well-positioned to accelerate patient uptake. The Company will continue pursuing its recurring revenue base in which patients receive reimbursement for medical cannabis.
• Bulk wholesale net revenue declined 75% to $7.4 million in 2021 compared to $29.9 million in 2020, which was offset in part by strong growth in branded cannabis revenue. This was driven by the Company’s redirection of its cultivation flower from the bulk wholesale sales channel towards its higher net revenue per gram branded cannabis products.
• The Q4 2021 outdoor harvest delivered over 11,600kg of high potency saleable flower with THC levels averaging 22%. The Company plans to primarily utilize this product in the first half of 2022 in its adult-use branded cannabis products.
• Total gross profit fair value adjustments and inventory provision was 31% in Q4 2021, compared to 59% in Q4 2020, primarily due to the Company’s pivot away from bulk-wholesale towards branded cannabis products that deliver higher overall net margin per gram.
KEY DEVELOPMENTS
In 2021, the Company transformed its business to become a branded cannabis provider. It has produced high potency flower at its Port Perry outdoor growth facility, allowing it to direct that product to higher margin, adult-use products. It has engaged?with the consumer and attracted a top executive sales and marketing team, with an internal sales force, that understands the CPG marketplace, what consumers want and is focused on the need to drive value to secure loyal customers and drive and maintain market share. Higher THC levels as well as the lower cost of input materials has allowed the Company to significantly increase its market share. Other developments include:
• Branded Cannabis Represented 80% of 2021 Total Net Revenue: The Company launched 37 new SKUs since Q4 2020 and built five cannabis brands spanning value to premium, craft. Divvy, an everyday consumer value brand, is consistently a top searched brand on OCS.ca. Twelve new product formats were launched in 2021 including: Craft Dried Flower, Milled Flower, 1g Distillate Vapes, Live Resin Vapes, Live Resin Diamond Sauce, Salted Caramel Pretzel Bites, Cluster Pucks, HotSauce, Omega CBD Soft Gels, Bath Bombs, Freshly Minted Roll-Ons and Topical Creams.
• Significant Increase in Adult-Use Market Share: The Company is aggressively capturing market share. It achieved a top 3 market share rank increase among 40 Canadian LPs in the Q1 2021 (#30) to Q4 2021 (#15) period, based on HiFyre data. Its 37% increase in retail sales pull through from Q3 2021 to Q4 2021 placed it among the top 10 Canadian LPs. The Company’s market share increased from 0.3% in Q1 2021 to 2.0% in Q4 2021. Over this period, the Company delivered strong retail sales pull through in each of the three major categories, with flower increasing approximately 1,400%, pre-roll increasing approximately 1,000% and vape increasing approximately 200%. The Company enjoys 94% penetration at the retail store level in Ontario and 84% in Alberta, and has supply agreements with Saskatchewan and British Columbia.
• Medical Ecosystem Expanded: The Company onboarded four unionized employers in 2021 through its exclusive Unifor partnership. These employers represent less than 5% of the Unifor member base and the Company continues to focus on additional onboardings. Despite restrictions on interacting directly with potential patients due to Covid-19, the Company experienced modest growth in both Unifor-based patients and sales from Q3 2021 to Q4 2021. The Company saw scripts increase 17% year over year, driven primarily by continued onboarding of third-party clinics which represented a largely reimbursed patient base comprising approximately 55% of total medical sales in Q4 2021. The Company launched tailored programs targeted at the Veteran medical demographic and entered the Quebec market.
• International: The Company successfully saw its products exported into three countries Germany, UK and Australia in 2021. The Company established partnerships with key European suppliers and wholesalers to facilitate a ramp-up in pull-through into the European market in 2022.
• Cultivation: The Company owns three licensed cannabis production facilities and operates a strategically located distribution centre all in the province of Ontario, including in Port Perry the first large-scale, outdoor cultivation facility in Canadian history. Port Perry delivered over 11,500 kg of flower with average THC potency of 22% in 2021. THC levels ranged from a record-breaking 21-to 27% and the terpene profile was outstanding, ranging from 2.7% to 5.7%.
• Cost Rationalizations: The Company methodically reviewed its cost structure and optimized its talent and resources towards the sales channels which delivered the highest net realizable margin per gram of flower sold – its branded cannabis products. The Company initiated headcount reductions in Q4 2021, representing approximately 10% of the workforce and approximately $1.9 million in annualized savings. The Company has undergone a SKU optimization to align its portfolio on best-selling product formats with the strongest margin profile. The Company is in the process of integrating its virtual, physical and third-party clinic platform which is expected to generate additional operating expense savings. The Company reviewed its inventory and fixed assets and identified certain slow-moving assets primarily related to the bulk wholesale sales channel. As a result of the Company’s pivot towards focusing on branded cannabis products, the Company recorded a $19.6 million inventory provision. The Company also recorded a $28.8 million impairment of property, plant & equipment due to changes in market conditions for these assets.
• Adjusted EBITDA Profitability: The Company evaluated all facets of the organization and realigned executive management to focus on achieving profitability. Significant non-recurring one-time costs were incurred in 2021 as the Company developed, built, and launched its Sunday Market House of Brands. Most of these costs are not expected to be recurring. Over the last four quarters, the Company saw significant progress and is trending towards achieving breakeven Adjusted EBITDA profitability in the second half of 2022.
• Repositioning the Balance Sheet. The Company completed two senior secured debt financings in Q4 2021, including a $10 million senior secured term credit facility in August 2021 and a new $19 million credit facility in December 2021. The new credit facility consists of a $12 million term loan and a revolving receivables facility of up to $7 million. The revolving receivables facility remains undrawn, providing the Company with liquidity to fund working capital investments required to continue rapidly scaling its adult-use sales. As reflected in the Company’s announcement on February 1, 2022, the Company is actively engaging with holders of its listed unsecured convertible debentures maturing on June 27, 2022 (TSX: AH.DB) with a view to effecting changes in key terms that are equitable to both the holders and the Company, and provide a sustainable foundation for the Company’s continued growth.
Note that the Company announced on February 8, 2022 that it changed its year-end to March 31. As a result, in this transition year, annual audited financial statements for the 15 months ended March 31, 2022 will be issued prior to June 29, 2022.
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NET INCOME & ADJUSTED EBITDA
To see all of the numbers look here:
https://aleafiahealth.com/news-releases/aleafia-health-reports-q4-2021-financial-results-with-11-5-million-branded-cannabis-gross-revenue-representing-a-103-increase-from-2020/
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