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Earnings Call Transcript - The Valens Company Inc. (VLNCF) CEO Tyler Robson on Q2 2021 Results - Earnings Call Transcript
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Jul. 15, 2021 5:51 PM ETThe Valens Company Inc. (VLNCF)
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Start Time: 11:00 January 1, 0000 12:02 PM ET
The Valens Company Inc. (OTCQX:VLNCF)
Q2 2021 Earnings Conference Call
July 15, 2021, 11:00 AM ET
Company Participants
Tyler Robson - Chairman and CEO
Sunil Gandhi - CFO
Jeff Fallows - President
Everett Knight - Executive VP, Corporate Development and Capital Markets
Conference Call Participants
David Kideckel - ATB Capital Markets
Harrison Vivas - Cowen and Company
Andrew Partheniou - Stifel
Andrew Bond - Alliance Global Partners
John Chu - Desjardins Capital Markets
Rahul Sarugaser - Raymond James
Scott Fortune - ROTH Capital Partners
Operator
Hello, and welcome to The Valens Company’s Second Quarter Fiscal 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Everett Knight, Executive Vice President of Corporate Development and Capital Markets of The Valens Company. Everett, please go ahead.
Everett Knight
Thank you, operator. Good morning and welcome to The Valens Company’s second quarter 2021 financial results conference call for the period ended May 31, 2021. A replay of this call will be archived on the Investor Relations section of our Web site at thevalenscompany.com/investors.
Before we begin, please let me remind you that during the course of this conference call, Valens’ management may make statements including with respect to management’s expectations or estimates of future performance. All such statements other than statements of historical facts constitute forward-looking information or forward-looking statements within the meaning of the applicable securities laws and are based on expectations, estimates and projections as of the date hereof.
Specific forward-looking statements include without limitation all disclosures regarding future results of operations, economic conditions and anticipated courses of actions. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. For more information on the company’s risks and uncertainties related to forward-looking statements, please refer to the latest Annual Information Form and our latest Management’s Discussion and Analysis otherwise known as the MD&A, each as filed with the Canadian Securities regulatory authorities at sedar.com or on The Valens Company’s Web site at thevalenscompany.com.
The risks described in the Annual Information Form, which may cause the actual financial results, performance or achievements of The Valens Company to materially different from estimated future results, performance or achievements expressed by the forward-looking information or forward-looking statements are hereby incorporated by reference herein. Although these forward-looking statements reflect management’s current beliefs and reasonable assumptions based on current available information to management as of the date hereof, we cannot be certain that the actual results would be consistent with the forward-looking statements in the future. We caution you not only to place undue reliance upon such forward-looking results. For any reconciliation of non-IFRS measured and discussed, please consult our latest MD&A as filed on SEDAR.
Now, joining me on the call today are Mr. Tyler Robson, Chief Executive Officer; Mr. Sunil Gandhi, our new Chief Financial Officer; and Mr. Jeff Fallows, President.
With that, I would now like to hand the call over to Tyler. Tyler, please go ahead.
Tyler Robson
Thank you, Everett, and welcome to everyone that has joined our earnings call to discuss our results for the second quarter ended May 31, 2021. I'll start by giving a recap of our most recent highlights before Jeff goes into more detail on our operational and strategic accomplishments from the quarter and Everett discusses our capital markets activities.
I'd also like to welcome Sunil Gandhi, our newly appointed Chief Financial Officer, who will give an overview of our financial results for the quarter. Sunil brings strong corporate and operational finance experience to Valens, and we're very fortunate to have him on board as we move through the second half of our fiscal year and continue to execute our growth plans.
But before I kind of jump into my part, I want to be fully transparent with everybody. That was a tough financial quarter, but I think there's some very good things that came out of it that we'll dive into later today. When you really look at how we entered the quarter to how we exited, it's night and day, really jumping into our philosophy of fewer, bigger, better. I truly believe we're executing that.
And one thing I want to bring to light is the very clear distinction between what is a manufactured SKU and what is a listing of the provincial board. So we only added four new manufacturing processes to drive velocity and depletion rates at the provincial board, but what we did was take a lot of our products to the other provinces for faster depletions, more operational efficiencies that will increase our gross margin long term.
So when you really look at what we've done, it's really an operational win for a quarter even though the financial results lagged. Getting into it, we really created a winning portfolio of products having such great selling success and working with the provincial boards, strengthening our sales and marketing team and again going back to velocity and depletion rates, which we're seeing month-over-month, week-over-week.
Another thing we really did in the second quarter was operationalize pre-rolls. When you look at our efficiencies that we hit with pre-rolls, taking those to the provincial boards, we're going to succeed and we're going to win the pre-roll category. Across new categories we've also launched new edibles, launched a number of baked goods, the first double chocolate brownie in addition to one of our bath products, the nuance Soothing Eucalyptus CBD bath bomb in Ontario and we're hearing great things.
Another thing we did this quarter was really start to turn on the innovation of rare and strategic cannabinoids. When you look at the CBN, CBG and Delta-8s in Canada, very few people have the ability to commercialize those. We've had great success which you guys will see some of those in the later half of the year.
With that overview, I'll now turn the call over to Jeff Fallows, President of The Valens Company to dive deeper into the operational achievements and strategic initiatives for 2021.
Jeff Fallows
Thank you, Tyler. While our second quarter financial results were impacted by the effects of retail closures and both inventory right-sizing and administrative listing delays at the provincial level, we made significant operational strides at all three of our facilities and believe our strategy continued to demonstrate its effectiveness as we gain significant market penetration in a difficult market environment.
This was demonstrated by a 76% increase in countrywide provincial listings to 132 compared to 75 SKU listings in the first quarter of 2021. We attribute our SKU listings success to the product development and commercialization strategy we introduced at the beginning of the fiscal year. This strategy is broken down into three core phases; launch, grow, optimize.
More specifically, we are now moving firmly to our launch phase and are manufacturing and gaining listings for products across all cannabis categories. Our primary focus in the launch phase is to commercialize a core product portfolio with the largest possible addressable market, which is why we decided to enter the flower, pre-rolls and topical markets in addition to making the acquisitions necessary to accelerate our edibles footprint and expand our offering in the health and wellness vertical in Canada and the U.S.
Our recent launches in these four new categories complements our existing product offering and nicely rounds out a complete offering of cannabis products. Although the cost required to scale up and commercialize these new products led to a decrease in gross margin and adjusted EBITDA in the second quarter, we expect to drive margin growth in future quarters as we improve efficiency, optimize utilization levels and expand volumes across the country with these unique new offerings.
In the second quarter, Valens manufactured 57 SKUs across all cannabis categories, only an 8% increase in comparison to 53 SKUs in Q1 2021. Keeping in line with our fewer, bigger, better approach, the significant increase in provincial SKU listings was accomplished with only a minor increase in our total SKU count.
Further, the aggressive SKU launched in previous quarters is transitioning into a portfolio management exercise, which is focused on identifying and discontinuing underperforming SKUs, focusing resources on successful SKUs and strategically launching new and innovative SKUs into targeted market segments.
We believe we have done an excellent job of preempting consumer demand thus far. And as the market matures, we will continue to closely monitor our portfolio offering and the popularity of all our products in order to optimize our productive capacity, adapt to market trends, gain market share in targeted segments and drive continued overall revenue growth.
Looking to the next several quarters, we will look to enter our growth phase where we expect to continue our listing success, grow volumes on our existing listings, launch selective new and innovative products in targeted market segments and expand our provincial reach to all markets in Canada.
Since the end of Q2 2021, 9 additional listings were achieved and another 40 listings have been accepted by provincial distributors with the first shipments expected in Q3 2021 or early Q4 2021. Of the 132 SKUs mentioned earlier, 32 were listed at the end of the quarter, with sales expected to be recognized in the balance third quarter results. This means our momentum is only beginning and offers a clear indication that our products are winning. In short, provincial boards are recognizing that retailers and consumers are looking for our products.
To further increase Valens’ ability to capture market share in Canada, we expanded our Canadian distribution network to supply Manitoba, New Brunswick and Yukon Territory with Valens’ manufactured products. The company is now in six provinces and one territory, including Alberta, British Columbia, Ontario and Saskatchewan, and nationally through Medical Cannabis by Shoppers platform.
Valens will bring its latest innovative products to consumers in all regions of Canada with these latest network expansions and we expect to include more eastern provinces in the second half of fiscal 2021, with Quebec remaining a top priority. By the end of fiscal 2021, we expect to be in all provinces and territorial markets in Canada.
Once we have fully established our Canadian distribution network, we will be in a position to enter our optimized phase where we will work to further drive margin and efficiencies on popular winning SKUs, which we will measure by market share, consumer and retail feedback and market sales trends.
Quarter-over-quarter, our estimated share of the growing extract-based market remained stable at 5% in Alberta, British Columbia and Ontario in Q2 2021, based on Hifyre data and not including B2B LP manufacturing. We expect this number to increase as we expand our portfolio of products, and as we increase our partnership network over the course of the year.
Our estimated share of the cannabis-infused beverage category grew to 8% in Q2 2021 from 5.5% in Q1 in Alberta, British Columbia and Ontario, based on Hifyre data with only one customer in this category to date. Cannabis-infused beverages accounted for approximately 1.7% share of the Canadian cannabis market in April, remaining stable since the beginning of the calendar year according to Hifyre data.
Valens expects to contribute to category variety and market share in the coming quarters when the GTA facility comes online and we can begin to engage with more partners for source-based beverage manufacturing. We are expecting to report strong results in the second half of the year as we grow our leadership position in the Canadian cannabis product manufacturing market and crucially execute our U.S. strategy now that we have closed the Green Roads acquisition.
Over the second quarter, we transformed our future prospects by breaking into the U.S. market with the acquisition of Green Roads for US$40 million. This valuation equates to approximately 1.8x 2020 revenue with a maximum amount of $20 million subject to achieving certain EBITDA milestones in 2022, which if fully achieved implies approximately 4.5x fiscal 2022 EBITDA.
Valens now has significant presence in the largest cannabinoid market in the world, which is a monumental step in our international expansion strategy. Additionally, the acquisition strengthens our capabilities to supply global markets with an expanded product offering and increases our speed to market with a U.S.-based manufacturing and co-manufacturing platform. The integration of the two companies is ahead of schedule, and we expect international shipments to continue to grow with the combination.
Collectively, Valens and Green Roads products are sold in 11 countries and discussions continue regarding various international distribution opportunities in Latin America, Asia Pacific and Europe. Additionally, Valens plans to invest approximately $10 million into Green Roads to strengthen the company's resources across various business lines, including sales and marketing, to capitalize on strategic opportunities expected to rise as the U.S. market matures.
Our Canadian domestic footprint remains one of the strongest in the country with our expanded capacity from our K2 facility, the newly acquired LYF facility which is scaling quickly and the GTA facility, which will focus on the formulation, co-packing and manufacturing of cannabis-infused beverages and other customized 2.0 and 3.0 products using SoRSE by Valens emulsion technology.
I'm pleased to say that the GTA facility has recently received the last few pieces of major equipment. And with our Health Canada license expected imminently, we expect to begin manufacturing, commercializing and shipping products from the facility in the second half of fiscal 2021.
Our manufacturing expertise is unparalleled and our sophisticated platform is best positioned to capitalize on the future of the cannabis industry every day [ph] extract-based consumer packaged goods. Over the remainder of 2021, we will continue to expand into new markets, strengthen our partnership network and bring our acclaimed products to new customers.
I'll now turn the call over to Everett to discuss industry trends and market updates.
Everett Knight
Thank you, Jeff. As Tyler and Jeff have made clear, we believe we have maneuvered Valens to provide a platform to seek to capitalize on huge opportunities ahead of us as the Canadian market matures and we’ll continue to aggressively position the company for strategic opportunities as global markets begin to open up and large CPG players continue to enter the space through strategic avenues.
The importance of this is more apparent as we shift towards a more favorable regulatory landscape in the U.S. as just yesterday, Senator Chuck Schumer introduced a draft of the Cannabis Administration and Opportunity Act, which could deschedule, regulate and tax cannabis in the United States, in addition to other social justice measures, although we cannot predict with certainty if or when cannabis will be federally legal in the U.S.
Our balance sheet remains strong as we successfully raised an additional financing from our bought deal transaction for proceeds of 46 million, which closed on June 1. This opportunistic equity raise provides the company with the ability to continue to pursue its strategic initiatives, specifically by taking an opportunistic approach to additional accretive acquisitions, and to further secure our entrance into additional cannabis 2.0 and 3.0 product verticals on a global scale.
This quarter, we were busy and launched a range of innovative products in four new categories; including edibles, topicals, flower and pre-rolls. Since closing the acquisition of LYF, The Valens Company is formulated, manufactured and distributed over 15 new edibles products with various partners in a wide variety of formats; including chocolate, soft chews, and baked goods.
This includes unique chocolate offerings, including such as milk chocolate coffee quinoa with no added sugar, toffee crunch, ice cream sandwich chocolate bites, acai berry chocolate, cherry milk chocolate fruit chews, chocolate truffles, and the newly-launched double chocolate brownie from Verse Cannabis, one of the first confectionery products of its kind to hit the Canadian recreational market. Additionally, consumers can find soft chews in a wide variety of fruit flavors, including pineapple coconut, lemonade, cherry, watermelon, blackberry acai, blue raspberry, and green apple.
We've also entered the growing topicals market with our products that are crafted with all natural plant-derived essential oils and infused with 100 milligrams of premium CBD. The nuance CBD bath bomb is the first Valens-manufactured topical product and we are proud to say currently largest bath bomb available in the Canadian market.
In partnership with Verse Cannabis, The Valens Company also introduced a variety of flower and pre-roll products under the Verse Originals line, including BC God Bud Flower, Dreamweaver Pre-Rolls, and Amp Pre-Rolls, the first flower products sourced and manufactured by Valens to enter the Canadian marketplace. Since launched, Valens has experienced strong selling through this line of products across its Canada-wide distribution network.
As you can see, our low cost innovative and adaptable product manufacturing platform has facilitated the efficient expansion of our operation and entry into new product verticals. Even with the new product launches, we were able to get finished products to consumers in a record time, which allowed us to grow our SKU listings quarter-over-quarter significantly.
As Jeff mentioned, our product development and manufacturing capabilities now span all cannabis categories, increasing Valens' total addressable market and market share capture ability. The company expects to launch a range of new innovative products in the second half of 2021 in various formats, as well as introducing Green Roads’ award winning CBD products to the Canadian market, offering consumers a wider range of products in the health and wellness segment.
In parallel, we are strengthening our licensed producer partnership network with the addition of two leading Canadian producers. Valens will provide extraction and custom manufacturing for Rubicon Organics and pre-roll manufacturing and distribution services for Citizen Stash Cannabis Corp., otherwise previously known as Experion Biotechnologies with the potential to expand these agreements to include additional product development and manufacturing services as the relationship strengthens.
After the quarter, we entered into a custom manufacturing agreement with Gallery Brands to manufacture both beverages and edibles for two of their flagship brands, Blessed and flir. Alongside these operational achievements, we remain keenly focused on completing our listing on the NASDAQ, which has been fortified by our U.S. entry. These initiatives will be instrumental in advancing our global opportunities and are expected to lead to Valens accomplishing its strategic and operational growth objectives, which we believe will be transformational for the company.
We expect to be trading on the NASDAQ Capital Market in the third quarter of 2021 calendar year and have been working diligently to complete all requirements necessary prior to listing. We expect to provide more information to the market in the next few months. We believe this will be a large step in the right direction for access to institutions and a greater liquidity which seems to have dried up among small cap companies globally during the summer as COVID restrictions have lifted.
We believe an anticipated NASDAQ listing, U.S. operations, growing market share and entry into the flower category has justified a further narrowing of the multiple gap between us and our peer group. And we intend to continue to execute on our business plan to show the market that we'll be leaving 2021 as a very different company than we started.
With that, I'll now turn the call over to Sunil Gandhi, CFO, to run through financial results for the second quarter of fiscal 2021. Sunil recently joined Valens and has already taken the reins and is demonstrating that it will be a great value-add to the team. He brings over 25 years of corporate and operational finance experience largely in the consumer packaged goods and beverage industries.
Most recently, he was Chief Financial Officer of Trophy Foods, a leading supplier of nut-based snacks, baking and confectionery products with operations in Canada and the U.S. He is going to be a great asset and we are very pleased to have him with us on this journey.
With that, I'll turn the call over to Sunil.
Sunil Gandhi
Thank you for the kind introduction, Everett. I'd like to extend my thanks to the entire Valens team for their warm welcome and for their support in bringing me up to speed in my new role as the CFO of the company. There's no doubt that Valens is one of the most innovative manufacturers in the cannabis industry, and I'm pleased to join at such an exciting time in its evolution with recent and important actions in terms of strategic acquisitions, launching various new products and creating one of the most adaptable product manufacturing platforms in the Canadian market. I hope to leverage my financial operational experience across the consumer packaged goods space to build upon the strategic plan that Valens has set in motion towards becoming a multibillion dollar global leader in the cannabis space.
Now, moving on to our second quarter 2021 financial results. Net revenue increased by 6.5% to 18.8 million for the three months ended May 31, 2021 compared to 17.6 million in the same period of fiscal 2020. The increase in revenue is driven by cannabis operations revenue and more specifically by an increase of $7 million or 70.5% in product sales as a result of a scale up of Valens platform to develop and commercialize a range of new and innovative product formats, including beverages, drink drops, edibles, bath bombs, flower, pre-rolls, hash and crumble, in addition to sourcing both winterized and distillate oil for our partner products.
Offsetting this increase was a $5.8 million decline in revenue associated with total extraction in co-packing services, which is reflective of our transition away from our previous focus on toll processing. Valens also incurred a reduction in shipments of biomass from extraction partners as they continue to adjust their workforce and operations to manage through the uncertainty created by the pandemic.
Compared to the previous quarter ended February 28, 2021, net revenue decreased by 1.3 million or 6.2% for the three months ended May 31, 2021, which was compared to $20 million in the previous quarter. This decline was mainly driven by a $1 million decrease in revenue from product sales due to decreased activity from cannabis partners sourcing bulk winterized and distillate oil, combined with administrative delays with provincial boards in sourcing and listing cannabis 2.0 and 3.0 products as all parties continue to work through the effects of the COVID-19 pandemic with ongoing brick and mortar store limitations and closures.
We are optimistic that the bottlenecks are being alleviated as pandemic restrictions ease in many regions of Canada as this is demonstrated by the number of incremental listings we achieved towards the end of the second quarter. Listings increased by 76% to 132 compared to 75 listings only in Q1 of 2021 with only a modest increase in the physical number of SKU count. Of greatest significance is the fact that 32 listings were achieved at the end of the quarter in key categories such as concentrates, pre-rolls, flower, topicals, and beverages, with sales starting to be recognized in Valens’ third and fourth quarter fiscal year results.
Gross profit for the second quarter was 22% compared to 24% in the first quarter of 2021 and 35.8% for the same quarter in the prior year. In addition to the factors impacting net revenues, gross profit was negatively impacted as the company experienced the inherent inefficiencies associated with new product launches and the transition away from the historical focus on toll processing to the current strategic focus on product development and manufacturing. It is expected that gross profit will improve over time as production volumes increase.
Operating expenses for the quarter were approximately $15 million compared to $10 million in the same period last year. 1.3 million of the increased expenses were driven by professional fees associated with specific transactions such as the acquisitions of Green Roads and LYF. In addition, the company experienced higher advertising and promotion expenses, depreciation and amortization and the overall general administrative costs associated with the build-up of the organization to aggressively execute our product development and manufacturing growth strategy.
Valens ended the second quarter 2021 with adjusted EBITDA of negative $5 million compared to negative $2.2 million for the quarter ended February 2021. The decrease of adjusted EBITDA can be attributed to increased cost to innovate and produce unique products with lower utilization. However, as Valens continues to focus on capturing market share and increased provincial listings, we expect to achieve higher utilization and anticipated recurring revenue of these products that is expected to drive value for quarters to come. Additionally, the integration of LYF contributed to a small decrease in adjusted EBITDA.
We remain confident that our continued business transformation to the product development and manufacturing platform and our acquisitions of Green Roads and LYF Food Technologies will allow us to experience positive EBITDA performance in future quarters. We are also excited about the rest of 2021 where we will continue to leverage our updated business model, recent acquisitions and expansion to create long-term sustainable value for all shareholders and stakeholders.
Valens continues to monitor inventory levels and balances outstanding with our partners to ensure a strong financial balance sheet position. As at May 31, 2021, we had $38.8 million in accounts receivable and expected loss rate for overdue balances of 0.8 million based on subsequent collections and various discussions with associated partners and analysis of creditworthiness. Valens has subsequently collected and has trade accounts payable outstanding with the same partners or has recorded an impairment loss provision, representing almost half of the total accounts receivable balance which is outstanding at May 31, 2021.
It is acknowledged that this balance is higher than in previous quarters due to a combination of factors, such as two significant balances with core customers which had extended payment terms coming due in Q3 and the relative timing of shipments in Q2. In the coming quarters we expect our accounts receivable balance to decrease as provincial sales increase and more revenues collected from provincial boards are more efficient and favorable payment processes in place.
Valens had $23.9 million of cash as of May 31, 2021 compared to $20.3 million as at November 30, 2020, which includes gross proceeds from various bought deal financing from 2020 and the first quarter of 2021. As of June 1st, Valens closed a bought deal financing in which we issued 13.9 million units valued at $46 million which were comprised of one common share of the company and one-half share purchase warrant. Each full share purchase warrant is exercisable at a price of $4.15 per share for a period of 36 months from the date of closing.
With that, I will turn the call over to the operator to open the line for the question-and-answer session.
Question-and-Answer Session
Operator
Thank you. Ladies and gentlemen, at this time we will begin a question-and-answer session. [Operator Instructions]. Our first question comes from the line of David Kideckel with ATB Capital Markets. Please proceed with your question.
David Kideckel
Hi. Good morning. Thanks for taking my question and congratulations on the quarter. I just want to go back to some of your prepared remarks here. So you've put in the market now 132 SKUs this quarter, which is about 75% quarter-over-quarter growth. By our back-of-the-napkin math, that's right up there with just about any of the Canadian LPs in general. My question for you guys is how have you been able to achieve this, especially with Ontario Cannabis Store, for example, the OCS pulling back and right-sizing inventory, how have you been able to achieve this to that level? But also, just from a consumer perspective, how confident are you guys that these are the SKUs that are really going to be important for consumer preference? Thanks.
Tyler Robson
Yes. Thanks, David. Obviously, Tyler here. A couple of things. One, [indiscernible] do we remain confident? Yes, absolutely, we remain confident. We picked the right SKUs and kind of internally I’ll say men lie, women lie, numbers don't. The SKUs we've gone forward with we've achieved the listings. So when we have the listings of the provinces, they're very different than the SKUs manufactured. And clearly, they're winning for multiple reasons. One, we bring a value proposition to the table no one else does. And number two, I guess, is we have cannabis IP that no one else has. So when you look at the form factors, the different delivery methods, no one can touch our platform, whether it's in edibles or even concentrates, beverages, we bring something to the table no one else does. And yes, our listing SKUs are starting to compete with some of the Tier 1 LPs with multibillion dollar market caps. But at the end of the day, numbers won't lie. And you'll see quarter-over-quarter growth with some of these depletion rates. And that's one thing that a lot of people aren't talking about. Yes, it's great to have a lot of listed items at the provincial boards, but let's chat depletion rate, let's chat inventory health and see how fast those SKUs are moving the velocity. So when we really put our best foot forward with these SKUs, which we did win everything we wanted to, you'll see it in the next couple of quarters.
Jeff Fallows
And David, sorry, this is Jeff. I just want to add one quick thing to that. We want to be very clear the difference between a SKU manufactured and a SKU listed. The SKU manufactured is only increased by 4 SKUs. That’s 57 SKUs or 57 products that we make. The 132 was the number of listings those 57 products [indiscernible] across the company.
David Kideckel
Yes, that's really great color, guys. Okay, thanks. Moving along as well, just to -- your pre-roll and flower category seems like you're doubling down to some extent on that area. I'm just wondering from gross margins here, not EBITDA margins but gross margins, how do you view that as impacting your overall business, increased or decreased gross margins, mainly because given you guys are in the 2.0 and 3.0 product category and those already command the highest margins in this space? So in other words, do you see the pre-roll and flower categories actually being a negative to your overall margin profile or neutral or positive for that matter? Thanks.
Jeff Fallows
Yes, David. Hi. This is Jeff. I'll take this one to start. So yes, we're the largest buyer of biomass in the Canadian market. So we get favorable pricing and we are able to be very selective on the SKUs and the flower profiles that we bring in-house. But that said, these SKU offerings or these product offerings for our customers are really designed to help them round out their brand portfolios. For example, the launch of the Verse SKUs, really the target for them was to round out their product portfolio, so they could own the shelf, so to speak, in the value-focused category. From a Valens perspective, the gross margin for us on that would be lower than, say, other products where our IP and technology has been added, say, a source-based product. It's true, but we're very comfortable with the overall gross margin profile that’s adding those to our product set gives us.
David Kideckel
Okay, thanks. And if I can just squeeze in one more here just with your U.S. strategy -- and congratulations by the way for closing Green Roads. Besides Green Roads on the CBD side, is there any other opportunities that you're openly considering, whether this be in, say, in MSO space or manufacturing or partnering space, or how should we think of your U.S. strategy in general? Is it stopping right now at least or starting, I should say, with Green Roads and potentially down the road you'll look to something further? Thanks.
Jeff Fallows
Yes, I guess this one's more to me again, David. So from a growth perspective, that is really the first piece of the puzzle. I think in 12 months, David, we're going to be talking about what a great transaction and opportunity that was for the Valens platform as we are actively looking to increase not only our B2B business through the Green Roads platform, but also expand that business throughout the U.S. So yes, we expect to be active. Yes, it's the first step of many and we think that we've got the team and the brand portfolio out at Green Roads that we can do that.
David Kideckel
Okay. Thanks very much. Congrats on the quarter. I'll pass it along.
Operator
Our next question comes from the line of Gerald Pascarelli with Cowen and Company. Please proceed with your question.
Harrison Vivas
Great. Thanks so much for taking the question. And this is Harrison Vivas on for Gerald today. So with the Green Roads acquisition now closed, we’d just love to get your thoughts on the U.S. CBD backdrop, in particular at the brick and mortar retail level now becoming -- is reopening and that appears broadly faster than expected and given discretionary income should also now benefit from tax credits, which started today. So any thoughts on potential momentum to the category and how has this evolved over the past few months, that'd be great? Thank you.
Tyler Robson
Everett, why don’t you tackle that one?
Everett Knight
Sure. Thanks for the questions. Yes, I think we're finally seeing an inflection point, not only in Canada with COVID but in the U.S. as well, where you're finally seeing these mom and pop shops that got hit so hard that were selling CBD now start coming back online, where you can actually get those distribution channels that we had previously in 2019, or Green Roads had previously in 2019, and really focus on the online network too. With people going out and actually doing things and being more active and getting out, it really -- that health and wellness segment really is a part of that and really benefits from it. So if you look even at conferences, we're having our first conferences with Green Roads which truly drive that revenue and what we haven't been able to do to drive that brand to those next level and mom and pop shops and new consumers. With that said, though, the benefit of Green Roads is really the online network where if you look at the return on advertising spend and cost of customer acquisitions comparatively to other companies, I think they've been very strong in that category. And regardless of -- I think the net benefit is now just another positive on that B2B side. But the overall online network continues to chug along very well.
Harrison Vivas
That's super helpful. I guess just to squeeze in a follow up on that. Can you just talk about what you're seeing in terms of the pricing environment in your CBD? Last year, we saw a lot of the large publicly traded companies taking a 15%, 20% price reduction to manage through a pretty deflationary environment. So as it stands today, do you believe the U.S. CBD pricing landscape is rationale and are you comfortable with your relative price grabs?
Tyler Robson
Yes, maybe I’ll handle this one, Everett. Feel free to comment after. Extremely comfortable with where it's at. We looked at everybody, we've talked to everybody, we have a good understanding of where things are at and price doesn't care -- quality doesn't care about price. When you look at a bottle of wine in a liquor store, not everything is priced the same. People are willing to pay more for a premium product that's tested. And the one thing on the Green Roads platform that very few people in the U.S. are doing is standardized testing across the board where you can actually see a COA. So what we're seeing right now is the price per gram is higher than our industry competition right now, because it's transparent. Everett, go ahead.
Everett Knight
Yes, on that note on that COA, Green Roads is one of the only companies in the U.S. where a consumer can actually scan the barcode and go and find that COA. I think it's about trust for the consumer. And in the CBD space really in 2018 with the Farm Bill going, everyone [indiscernible] was trying to start a CBD brand. And what the consumer hasn't really had is that trust. The reason we thought Green Roads was the right partner for us is because it has that trust with the consumer. And it shows with their price point being higher than a lot of others. And what I’d look for third party data is how stable Green Roads pricing has been comparatively to others. And if you look at the different price channels, the other reason that Green Roads is advantaged, the online channel really has a better margin profile and pricing and that's where it's really more sophisticated. So the more revenue you can do on that online segment, which consumers still like the best, is really a margin enhancer and you can have more price protection on that.
Harrison Vivas
Great. Thanks very much. I'll jump back in the queue.
Operator
Our next question comes from the line of Andrew Partheniou with Stifel. Please proceed with your question.
Andrew Partheniou
Hi. Good morning. Thanks for taking my question. Maybe just a follow-on on your flower and pre-roll offerings coming out of the gate, obviously very strong here in terms of positioning. Could you give us a little bit more color on your overall strategy? Why is it that you chose to launch your first products in this fashion? And how do you see yourselves different from your peers?
Tyler Robson
Yes, I appreciate the question. Happy to touch on that. So yes, we did have a successful pre-roll and flower launch, but I want to be very clear. We left a lot of money on the table in this quarter with supply chain issues, and it's almost like we're in a fight with one arm tied behind our back. We couldn't get tins for the pre-roll units in time. So we have opened provincial orders that we couldn't fulfill in time that we had to bump. So it's one of those things where it's just the product of the environment that we're currently in and we will clean those up. And as the world comes back around from the pandemic, supply chains will tighten up and we'll be able to get access to materials that we need. As far as the product offering how we're going to be competitive, the best way to think about the Valens strategy for flower is we're here to be a challenger. We're not going to be the biggest, but we're going to be a value proposition that no one can touch. And what sets us apart is we're not tied to a specific genetic. If you look at company X that's cultivating 420 days, they're tied to whatever genetic or whatever biomass comes down at the end of the harvest. We're buying selective strains, selective terpene profiles, and we're launching products for different value propositions. And again, being the largest purchaser of biomass and the lowest cost producer, we can add value where no one else can touch us. We're currently buying way lower than people are producing it for and I'll call it strategic. We buy from different people at different time and we play quarters. So depending on who has a quarter coming up, if they're trying to meet their top line revenue, we’ll grab biomass that we're looking for at a significant discount to market. So the best way to think about our flower strategy today is we're going to be a challenger in this space.
Andrew Partheniou
Thanks for that great color. And maybe switching gears, correct me if I'm wrong, but it seems like you have a pro forma cash balance sheet now of around 50 million. 10 million of that is going to the Green Roads, building out the presence there. Could you talk a little bit more about what you guys plan to use the rest of your war chest for? Any color around strategy behind M&A, what you're looking for, where you're looking for things and what you find attractive?
Tyler Robson
Yes. Jeff, why don't you tackle that one?
Jeff Fallows
Sure. So, first important part to talk about is the CapEx that we needed to finish to get our K2 facility up and running, CapEx at LYF to get that running the way we wanted it and also [indiscernible]. So the majority of that is largely done. And as we said when we did the bought deal financing, we were continuing to see opportunities both North and South of the border that meant that we should have a balance sheet that allow us to be flexible and opportunistic in achieving those. So the vast majority of that war chest, as you call it, that's a good way to put it, that's how we view that balance sheet. We brought it on board to be strategic and to further our strategy. And that includes in a large sense opportunistic acquisitions in key market segments.
Andrew Partheniou
Okay. And maybe if I can squeeze one more in here. Could you talk about where you are in terms of facility utilization or capacity utilization throughout your footprint in Canada?
Jeff Fallows
Yes, sure. I'm happy to tackle that. So I’d say -- we're largely still getting started, so as you know, our K2 facility just came on at the end of November and we've been scaling up that facility. So if I was to -- it’s a little bit challenging to say because we’d have to go product by product and sort of the capacity. But I'd say if push comes to shove, I'd say we're maybe sitting around 40% today in our capacity and it's still the best days ahead of us in terms of filling out that capacity and driving those operational efficiencies.
Andrew Partheniou
Okay. Thanks for taking my questions. I'll get back in the queue.
Operator
Our next question comes from the line of Aaron Grey with Alliance Global Partners. Please proceed with your question.
Andrew Bond
Good morning. This is Andrew Bond on the line for Aaron Grey. Thank you for taking our questions. You have a number of new SKU listings been launched and we've been hearing more about increased difficulty in getting SKUs listed. So I know you touched on your increased SKU listings earlier in the call, but just curious on how your conversations have gone with provincial buyers? And are you seeing any difficulty in getting listings in some of the more saturated categories? Thank you.
Tyler Robson
Yes, absolutely. Maybe I'll tackle this and Everett, feel free to comment. We are having zero issues with the provincial board. And the dialogue is very, very warm. We're more of an ally than an enemy in this space. So we're very collaborative with a lot of provincial boards asking what's working, what isn't? What price points are moving velocity going back to our strategy of fewer, bigger, better? We're using a sniper rifle rather than a shotgun. So we're not even having conversations around something we really want to get behind at this point and the provinces are extremely open. Again, pricing, we can be more competitive than a lot of our industry peers. So the provinces understand that, and now they're coming to us with ideas like, hey, guys, have you ever thought about doing X, Y, or Z? We believe there's whitespace. We're talking to retailers directly. Our provincial board strategy has to be one of the better ones in the entire space. So zero issues with maneuvering at the provincial board.
Andrew Bond
That's great to hear. And thank you for the detail. I'll pass it along.
Operator
Our next question comes from the line of John Chu with Desjardins Capital Markets. Please proceed with your question.
John Chu
Hi. Good morning. Just wanted to touch on the listing here. And so in a very simplistic way, if you have 57 SKUs that you're manufacturing and you've got six provinces, and hypothetically you list every one of those SKUs in those six provinces, then technically you would have over 300 listings, I guess, is the basic way of understanding that. But obviously, you're not going to have every single SKU as I said in every single province. But as you're adding four more provinces by year end, as what was stated earlier, and then some new products coming along as well, maybe help us understand what's a normalized listing number that you might expect to see once all the provinces are added to your distribution list? And now that you have these 57 SKUs, what would be kind of a more normal listing across Canada? Is that something you can give us a handle on?
Tyler Robson
I can't really touch on that, because it's almost impossible. Every provincial board is so different. And what we're seeing win in BC might not win on Ontario. So we're tailoring our approach for the specific provinces. And if you look at beverage, for example, if you look at where we're at currently in BC and Alberta, we're not quite there in Ontario, because Ontario doesn't have the same beverage depletion rates or inventory health. And if you look at how they went to click and collect, obviously beverages aren't as popular in Ontario as of today. So it's really impossible. We're going to tailor each provincial board to the consumer needs and wants, and then again optimize as we go in time. So I don't think I can give you a specific number. And again, when you look at Saskatchewan and Manitoba, sometimes less is more. So we're really getting behind core SKUs in some of the smaller markets to again just drive operational efficiency. So if you look at our core product offerings under Verse, for example, you'll see whole flower, pre-rolls, Sunset Peach vape pen and Tropical Lemon in every market, but we're being very concise and strategic on some of the other SKUs we're launching, and again almost proof of concept. So we'll launch it in specific markets for specific reasons. And then once we have that data and once we're comfortable and really getting behind the product, then we'll launch in other markets.
John Chu
Okay. So just a follow up on that then. So as you get more data and obviously some of these products are very new, very unique. And so that might take some time for some of the provinces to get on board. But is it safe to say that there's potentially some significant upside to the 132 listings, because some of these products like brownies and bath bombs are just so new, so there is potential for significant upside for more listings?
Tyler Robson
Yes, I don't want to be overly promotional, but there is significant upside and there's blatantly huge upside in what we're doing. Again, we've been very concise. And a lot of people think we've been in the provincial boards longer than we have, it hasn't even been 12 months since we've been listing in provincial boards and we're winning. And I know our financial results might not show that today. But when you go back and look at February, March, April on some of the milestones we've achieved with the product calls that don't go live until August, September, October, it’s going to be a completely different story going forward. And we're winning the provincial listings. A ton of upside left on the board, and again I'll touch back on some of the open POS [ph]. Supply chain has been an issue and we're not hiding behind it by any means. We'll take it on the chin if need be. But we're fighting with one arm tied behind our back right now. And we will win the provincial board listings and continue to drive depletion rates, and you'll see that in the future.
John Chu
Okay. And then just -- I want to touch a little bit more on the flower and the pre-roll angle here. By our estimates, that's 70% of industry sales. And so you getting into that market just really increases that addressable market. So we like that move. But if you can give us just a bit more color because it just sounds like you've just been in the early stages of launching some of these first products, so are there more flower strains and SKUs coming in pre-rolls as well, and is there an opportunity for another third party partner to come in on top of -- in addition to Verse?
Jeff Fallows
Yes. John, this is Jeff. Verse was the first and really the impetus where they came to us and asked us to render their portfolio to dig deeper in and analyze the opportunity. So that's the first. What's going on obviously from a B2B side which is not in these numbers and not something we've talked about yet, I’d say the feedback and the opportunity for us to support our LP partners is great. So the demand we've seen, the poll we've seen, the opportunity to fill volumes and fill our machines, we started with one machine. We've already had to buy a second. So we think the opportunity in pre-rolls in particular is very, very strong. And you're not going to see that from a B2B perspective.
John Chu
Okay, great. And maybe just last question here. You've introduced some fairly unique new form factors recently, and obviously the store restrictions I'm guessing hampered some of those sales because presumably they're going to want to take a look at it in person versus buying something online sight unseen for something new. So is that a fair statement that some of these new form factors, whether it's bath bombs or baked goods, you really need the stores to be open to really start to generate more hype behind that?
Tyler Robson
Yes, you're 100% right, and Everett feel free to jump in. The online platform is very different than the brick and mortar physical locations. And a lot of our products are priced accordingly to be an add-on at the end of a transaction. So if you look at hypothetically a pre-roll or bath bomb, you're going in there for two beverages and a brownie. You add on that at the point of sale when you're at the physical rehabilitation, but not on e-commerce. So we've seen trend shift away from some product and we're already seeing depletion rate to pick up now that Ontario is open. So yes, you're 100%, right. The market is just different than e-commerce or brick and mortar stores.
Everett Knight
John, what I'd add on to that is if you look at the innovative products, these products are brand new to the Canadian markets. What really helps is that storefront environment to give back consumer education. And frankly, at the end of our quarter as of May 31, most of those storefronts were click and collect. So I think that after that you were seeing as a tailwind in the third quarter, where you're seeing that the stores’ open and also that consumer education app. And so for 2.0 products, there's obviously a correlation to storefronts open and greater demand in those product categories. And that's not new. You can see that on the Hifyre data and in the U.S.
John Chu
Okay, great. I appreciate the time, guys. Thanks.
Operator
Our next question comes from the line of Rahul Sarugaser with Raymond James. Please proceed with your question.
Rahul Sarugaser
Good morning, gentlemen. Thanks so much for taking my question today. [Indiscernible] focused on the Green Roads acquisition, congrats on getting that closed. So, on the call after the acquisition, you talked a little bit about synergies expected. Maybe you can give us a little bit of an update on how the synergies are expected to roll out, how that strategy is evolving? And in particular, how Green Roads’ management specifically is influencing the broader strategy in Valens?
Tyler Robson
Yes, absolutely. Everett, why don't you start and then Jeff and I will jump in?
Everett Knight
Sure. So Rahul, as you said, it closed in the third quarter, so we don't have any Green Roads results. So we'll have partial results coming in the third quarter as well as the management team being a bigger part of the corporation. So if you look at Dale Baker, he's now our President of The Valens Company U.S. And I think it's going to be a key part of that strategy. From an integration standpoint today, we're well ahead of schedule. I think where we really hit the ground running was on international where we're now utilizing that CBD platform for international sales, Rahul. And now what we're doing is focusing on cost structure. Even just leveraging Tyler's relationships, we've already been able to lessen the cost of goods sold on isolate. So we've found decrease in prices as well as one thing that the Green Roads team isn't in today, they're really sophisticated, as you know, on that online platform, but they haven't got into the MSO retailer, right, and some of these other retail relationships. So that's really the concentration right now and getting that up to speed, and we're well into our 100-day integration plan. And we'll give updates to the market in due time. And as well as I would say, just to kind of update on the overall kind of market is the nice thing to see is the questions earlier, as we're seeing kind of an inflection point in kind of Canada and the U.S. where openings are happening. So Green Roads will be going to its first conference here which really can drive that brand recognition sales to new B2B channels, where there are already sophisticated on that B2C side. So that's a key thing is opening up on that front. And I'm sure Dale can tell you about that in future quarters.
Rahul Sarugaser
Perfect. Thanks very much.
Jeff Fallows
Sorry, I’ll maybe add one more element to that conversation as well. So we're already seeing and when we say in our prescribed remarks that we’re ahead of schedule in terms of integration, we sort of outlined three phases of -- and we did this in our public communication, three phases of our synergies. One of the key areas is on the B2B side and we're already seeing two important parts. Number one, some of our existing partners coming to us to handle U.S.-focused manufacturing, number one. And number two, already involved in discussions to help facilitate big box store shelf listings with Green Roads products. So two key areas for big, big volume improvements already well underway and it’s only been three weeks since we closed.
Rahul Sarugaser
Perfect. Thanks for that, Jeff. I think you just answered my second question, so I'll pick another second question then. So now extrapolating those relationships, particularly you highlighted Tyler's relationships again on the call last time, and if Green Roads seem able to leverage that in the U.S., how about internationally? Can you give us a little bit more, just like you did in sort of clarity there in terms of U.S., structures and verticals you're going after? Anything more that you can share about the international trajectory?
Tyler Robson
Yes, I think it wouldn't be a surprise to you, Rahul, to note that potentially Green Roads was focusing on some markets where we were focusing as well. So one of the first things we realized as we had a conversation was, hey, wait a minute, we're both having different avenues or different inroads into this. Let's combine the efforts and formalize where Green Roads was ahead, how can we leverage that to funnel more Valens products assuming where Valens was ahead, how can we maneuver to get more Green Roads opportunities there? Those conversations have already started to happen and are already formulating. So that's from an international perspective. I think that's an avenue where you're going to see a lot of integration between the approaches of [indiscernible]. From a U.S. market perspective, obviously, Green Roads starts from a great space and left to its own devices will do great for us with little integration, aside from these synergies that we're talking about, but from an international perspective, the combined effort there really is one plus one is four or five.
Jeff Fallows
And Rahul, [indiscernible] expand to is from a strategy standpoint, now we have a manufacturing hub in Canada for the medical markets that we can distribute and obviously into Australia and other markets. But then also -- then we have a more flexible platform at Green Roads with cGMP facility there going due to the CBD channels, right, internationally. So I think that together, we're seeing the synergies and saying, okay, some markets we can shift through our facility, some we can shift to theirs. And it has some unique synergy, so we'll keep you updated on that.
Rahul Sarugaser
Terrific. Thanks so much for taking my questions and best of luck with the integration.
Operator
Our next question comes from the line of Scott Fortune with ROTH Capital Partners. Please proceed with your question.
Scott Fortune
Hi. Good morning. Thanks for the questions. A lot have been answered. A real quick follow through on the Green Roads up in Canada, kind of the opportunity there to build CBD there as distributions that kind of focus on the timing? It doesn't seem like a lot are going after that market and big opportunity for Green Roads to kind of step into [indiscernible] for it and timing wise.
Jeff Fallows
Yes. I think we -- this is Jeff. Thanks for your question. We do think that there's an opportunity for Green Roads products in Canada. We're already starting that conversation. Key will be around the portfolio that we bring to market. Again, we're focused on volume and efficiency. Fewer, bigger, better is our mantra here. So there are some key Green Roads products that we will be looking to bring up in target market segments. But we have also a lot of our custom manufacturing partners who are also coming through Valens to bring specific products to market, and we will manage all those relationships on an overall portfolio basis to make sure that we're driving volumes in all SKUs.
Scott Fortune
And then lastly, timing on really kind of Canada market for CBD opening up and pricing here?
Jeff Fallows
So the key difference from the Canadian market obviously is that the sale of CBD products is regulated the same as THC, right? So when you say the market opening up from a CBD perspective, I'd say two things. Number one, CBD products are out there and are selling through the dispensary and provincial channels. But number two, we have big opportunity and yet to be realized opportunity particularly for companies like Valens relate to the health and wellness side of the equation, and that's what -- many of the products that we've launched and will continue to launch are focused on that health and wellness market. That's predominantly a CBD-based market. And so we are pushing that agenda and talking about market segment with our partners in Canada. If you were talking specifically about when CBD will be deregulated from THC environments and sold in, say, over-the-counter and in like a lot more shoppers or some of those channels, when that timeline is going to occur? We're not clear. We are encouraged with some of the conversations ongoing that it's within our sights, but we don't make a call on specifically when that's going to happen.
Scott Fortune
Okay. That’s perfect. I appreciate it. Thank you.
Operator
There are no more questions in the queue. I'd like to hand the call back to management for closing remarks.
Tyler Robson
Thank you, operator, and thank you to everyone who's joined. Obviously, we had a tough quarter. Not the financial results we wanted. But operational, we came out stronger than we went in. We're confident in our ability to deliver, and I think you're going to see that in the listings of the SKUs we have already manufactured and you're going to see greater distribution in Canada. And one of the things you'll see is greater distribution in the U.S. post integration of Green Roads. Our fundamentals are strong and everything's kind of coming together operationally and we will deliver. We're looking forward to our Q3 call and providing more updates.
With that, I’ll ask the operator to close the call. Thank you.
Operator
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.
You will be the ultimate guru if you are correct.
New products rolling out with Green roads. Yea, 28 to 30 mil.
Twice disappointed ... leaves me feeling you're target is ambitious.
I'm ok with it, still need to hear the CC and pull the filings. I believe they will be close to 28-30 mil next qt, but we'll see
Disappointing...Short of my own hopes by $3M--->>>THE VALENS COMPANY REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 2021
Valens entered the US market with the acquisition of Green Roads, securing a global leadership position in the health and wellness market
* Country-wide SKU listings increased 76.0% to 132 as of the end of Q2 2021, compared to 75 in Q1 2021
* Nine additional SKU listings were achieved since the end of Q2 2021, and another 40 SKU listings have been accepted by provincial distributors with first shipments expected in Q3 or Q4 2021 bringing total to 181
* Estimated share of the growing extract-based market remained stable at ~5% in Alberta, British Columbia, and Ontario in Q2 2021, based on Hifyre data and not including B2B LP manufacturing
* Entered into four new product categories, including flower, pre-rolls, topicals, and edibles, significantly increasing Valens’ total addressable market in Canada and beyond
Kelowna, B.C., July 14, 2021 – The Valens Company Inc. (TSX: VLNS) (OTCQX: VLNCF) (the “Company,” “The Valens Company” or “Valens”), a leading manufacturer of cannabis products, is pleased to report its second quarter financial results for the period ended May 31, 2021.
Tyler Robson, Chief Executive Officer, Co-Founder and Chair of The Valens Company, said: “We believe that our business model remained resilient despite ongoing challenges presented by the pandemic, and our strategy continued to demonstrate its effectiveness as we gained significant market penetration across the country. We are proud to share that in the second quarter alone, Valens had 132 SKUs listed in Canada – a 76% increase in comparison to 75 SKUs listed in the first quarter of 2021. This material growth in SKU listings stands in stark contrast to many of our competitors in the sector and is a testament to the innovation and quality we are bringing consumers and retailers.”
Robson continued, “Importantly, we are seeing this momentum continue into the third quarter with an additional 40 SKUs accepted by the provincial boards with shipments during the third and fourth quarters. These new listings include products from four newly entered categories during the second quarter, such as flower, pre-rolls, topicals, and edibles, with many of them already receiving high consumer acclaim. Additionally, we have enhanced our platform with increased technical capabilities and greater efficiency to develop and commercialize winning products, which we expect will drive revenue growth in the second half of fiscal 2021. We look forward to continuing to drive new product innovation in the sector, specifically in the flower, pre-roll, beverage, concentrates, and edibles categories. With our recent distribution wins into New Brunswick, Manitoba, and Yukon, we are positioned well to capitalize on these investments.”
Key Highlights
Gross revenue increased 16.1% in Q2 2021 to $20.5 million compared to $17.6 million in Q2 2020
Net revenue increased 6.5% in Q2 2021 to $18.8 million compared to $17.6 million in Q2 2020
Product sales increased 70.5% in Q2 2021 to $16.9 million compared to $9.9 million in Q2 2020
The year-over-year increase in product sales was driven by successful new product launches across multiple cannabis categories as partners expanded their portfolios in parallel with Valens’ scaled-up manufacturing capabilities
Product sales as a percentage of net revenue remained at ~90.0% in Q2 2021
SKU listings increased by 76.0% to 132 in Q2 2021 compared to 75 in Q1 2021
Of these 132 SKU listings, 24.2% had their first shipments towards the end of Q2 2021, meaning Q3 2021 will be the first full quarter of contribution from these SKU listings
Subsequent to the end of Q2 2021, Valens obtained an additional 9 SKU listings, and another 40 SKU listings have been accepted by provincial distributors with first shipments expected in Q3 2021 or early Q4 2021
Estimated share of the growing extract-based market remained stable at ~5% in Alberta, British Columbia, and Ontario in Q2 2021, based on Hifyre data and not including B2B LP manufacturing
Estimated share of the cannabis-infused beverage category grew to 8.0% in Q2 2021 from 5.5% in Q1 2021 in Alberta, British Columbia, and Ontario, based on Hifyre data with only one customer in this category to date
Valens expects to bring on more partners in this category with the launch of the GTA Facility expected in the second half of fiscal 2021
Launched the number one selling baked good, the Verse Double Chocolate Brownie, in addition to the number one selling bath product, the nuance Soothing Eucalyptus CBD Bath Bomb, at the Ontario Cannabis Store (“OCS”) in June 2021, according to OCS sales data
Manufactured 57 SKUs in Q2 2021 within a carefully curated portfolio across all cannabis categories, compared to 53 SKUs in Q1 2021, with a focus on driving higher efficiencies through increased listings across provinces
Ended the quarter with a strong cash position of ~$23.9 million, prior to the closing of a $46 million bought deal financing on June 1, 2021
*The term “SKU listings” refers to the total number of provincial and territorial listings of products manufactured and distributed by The Valens Company
Corporate and Operational Highlights:
In the second quarter, The Valens Company continued to execute on its corporate strategy and advance its global manufacturing platform, as illustrated by the following milestones and initiatives:
Entered the US market with the acquisition of Green Roads for US$40 million, which closed in June. In combination with Green Roads, Valens more than triples its total addressable market and secures a global leadership position in the cannabis health and wellness vertical with one of the largest CBD brands by market share. Additionally, the acquisition strengthens Valens’ capabilities to supply global markets with an expanded product offering and increased speed to market with a US-based manufacturing and cGMP certified co-manufacturing platform.
Expanded Canadian distribution network to supply Manitoba, New Brunswick, and Yukon Territory with Valens-manufactured products. The Company now distributes its products in six provinces and one territory, including Alberta, British Columbia, Ontario, and Saskatchewan.
Expansion of Valens’ distribution platform continues to be a top priority and the Company intends to bring its innovative product portfolio to consumers in all regions of Canada including the remaining Eastern provinces in the second half of fiscal 2021, with entry into Quebec being a top priority.
Launched a range of innovative products in four new categories, including edibles, topicals, flower, and pre-rolls.
Edibles: Since closing the acquisition of LYF during the second quarter, The Valens Company has formulated, manufactured, and distributed over 15 new edibles products with various partners in a wide variety of formats, including chocolate, soft chews, and baked goods. Available at select provincial retailers, chocolate offerings include milk chocolate coffee quinoa with no added sugar, toffee crunch, ice cream sandwich cookies & cream milk chocolate bites, acai berry dark chocolate, cherry milk chocolate fruit chews, chocolate truffles, and the newly-launched double chocolate brownie from Verse Cannabis – one of the first confectionery products of its kind to hit the Canadian recreational market. Additionally, soft chews are offered in a wide variety of fruit flavours, including pineapple coconut, lemonade, cherry, watermelon, blackberry acai, blue raspberry, and green apple.
Topicals: Crafted with all-natural plant-derived essential oils and infused with 100mg of premium CBD, the nuance CBD Bath Bomb is the first Valens-manufactured topical product and currently the largest bath bomb available in the Canadian market. The bath bomb joins nuance’s brand lineup of premium wellness products and is offered in two formats, Soothing Eucalyptus and Revitalizing Grapefruit, at select provincial retailers.
Flower & Pre-Rolls: In partnership with Verse Cannabis, The Valens Company introduced a variety of flower and pre-roll products under the Verse Originals line, including BC God Bud Flower, Dreamweaver Pre-Rolls, and the Amp Pre-Roll – the first flower products sourced and manufactured by Valens to enter the Canadian market. Since they have launched, Valens has experienced strong sell-through for this line of products across its Canada-wide distribution network.
Strengthened Licensed Producer partnership network with the addition of two leading Canadian producers. Valens will provide extraction and custom manufacturing services for Rubicon Organics, and pre-roll manufacturing and distribution services for Citizen Stash Cannabis Corp. with the potential to expand these agreements to include additional product development and manufacturing services as the relationship strengthens.
Bolstered Management team and Board of Directors. Sunil Gandhi has been appointed Chief Financial Officer, bringing 25 years of corporate and operational finance experience largely in the consumer packaged goods and alcohol beverage industries, most recently at Trophy Foods as CFO and prior, at one of North America’s largest beverage companies. Adam Shea has been appointed Chief Commercial Officer, bringing over 16 years of experience in commercial strategy, sales, and marketing, with various consumer-focused organizations in the food, beverage, tobacco, and cosmetics industries, including Weston Foods, Coty Beauty, and British American Tobacco. Dr. Guy Beaudin, executive leadership advisor, and Drew Wolff, former Starbucks executive, were elected to the Company’s Board of Directors at its Annual and Special Meeting of Shareholders on May 25, 2021.
Financial Summary
Net revenue increased 6.5% to $18.8 million in Q2 2021 compared to $17.6 million in Q2 2020 and decreased by 6.2% compared to $20.0 million in Q1 2021
Net Revenue Breakdown (in thousands of Canadian dollars) Three months ended May 31, 2021
$
Three months ended May 31, 2020
$
Product Sales 16,884 9,905
Toll Processing and Co-Packing 1,489 7,328
Analytical Testing 391 394
Total Net Revenue 18,764 17,627
Product sales revenue, including both provincial sales and B2B sales of finished goods, distillate, isolate, and other ingredients:
Increased 70.5% to $16.9 million in Q2 2021 over the same time last year, comprising ~90% of total net revenue, as a result of increased volume through the execution of white label product offerings and additional manufacturing agreements with branded partners
Administrative delays with provincial board sourcing and listing Cannabis 2.0 and 3.0 products, in addition to store limitations and closures brought on by the pandemic, led to a decrease in provincial sales quarter-over-quarter
The retail store environment has since improved as a result of pandemic restrictions being eased in many regions in Canada, demonstrated by the number of listings Valens achieved toward the end of the second quarter and to date in the third quarter
Gross profit was $4.1 million, or 22.0% of revenue, in Q2 2021 compared to $6.3 million, or 35.8% of revenue, in Q2 2020
Gross margin percentage was impacted due to various factors related to pandemic restrictions across the country including provincial inventory rationalization and retail store limitations. In addition, the opportunistic launch of a larger than forecasted number of products burdened our cost structure with revenue and operating efficiencies expected to drive margin improvement in future quarters.
Adjusted EBITDA(1) was $(5.0) million in Q2 2021, compared to $2.7 million, or 15.3% of revenue in Q2 2020
The decrease in adjusted EBITDA can be attributed to the integration of LYF and increased costs related to the launch of a number of new and innovative products with predictable start-up costs and lower short-term capacity utilization. However, as the Company continues to focus on volumes, capturing market share, and increasing targeted SKU listings across the country, Valens expects to achieve revenue growth, margin expansion, and higher utilization as these products take hold in the coming quarters.
Jeff Fallows, President of The Valens Company, said: “Over the second quarter, we made significant strides building and launching our newly enhanced manufacturing and distribution platform in addition to expanding our partnership network and broadening our product offerings. These accomplishments allowed us to win a significant number of provincial SKU listings which are expected to materialize into market share gains throughout Canada over the next several quarters.
Predictably, our accelerated launch of a targeted portfolio of high-volume SKUs resulted in an increase in costs which impacted our adjusted EBITDA in the quarter. However, we expect these costs to produce accelerated revenue and margin growth in the coming quarters particularly as we achieve greater utilization of our largely completed manufacturing platform.”
Fallows continued, “Our team’s successful execution of the Green Roads acquisition in June marks our entry into the rapidly accelerating US market and represents a pivotal accomplishment in our mission to lead the global cannabis health and wellness market. We continue to dedicate efforts and remain keenly focused on completing our listing on the Nasdaq which we expect to be completed in the third quarter of the 2021 calendar year, and which has been fortified by our US entry. These initiatives will be instrumental in advancing global market opportunities and will lead to Valens accomplishing its strategic and operational growth objectives which we believe will be transformational for the company, generate additional sources of sustainable revenue, and drive shareholder value. We continue to maintain a strong balance sheet as we successfully raised additional capital from our bought deal financing which closed after the quarter. This equity raise provides Valens with the capital to pursue its strategic initiatives, specifically by taking an opportunistic approach to additional accretive acquisitions and to further secure our entrance into additional Cannabis 2.0 and 3.0 product verticals. With a global platform taking shape, we believe Valens is best positioned to capitalize on large CPG players who continue to look for large-scale entry into the cannabis sector through various strategic avenues.”
The following table of financial highlights is presented in thousands of Canadian dollars, except per share, biomass extracted amounts, and number of SKUs manufactured.
See the financials at this link:
https://thevalenscompany.com/press-releases/the-valens-company-reports-financial-results-for-the-second-quarter-of-fiscal-2021/
The Valens Company Reports Financial Results for The Second Quarter of Fiscal 2021
Jul. 14, 2021 5:00 PM ETThe Valens Company Inc. (VLNCF)
Valens entered the US market with the acquisition of Green Roads, securing a global leadership position in the health and wellness market
Country-wide SKU listings increased 76.0% to 132 as of the end of Q2 2021, compared to 75 in Q1 2021
Nine additional SKU listings were achieved since the end of Q2 2021, and another 40 SKU listings have been accepted by provincial distributors with first shipments expected in Q3 or Q4 2021 bringing total to 181
Estimated share of the growing extract-based market remained stable at ~5% in Alberta, British Columbia, and Ontario in Q2 2021, based on Hifyre data and not including B2B LP manufacturing
Entered into four new product categories, including flower, pre-rolls, topicals, and edibles, significantly increasing Valens' total addressable market in Canada and beyond
KELOWNA, BC, July 14, 2021 /PRNewswire/ - The Valens Company Inc. (TSX: VLNS) (OTCQX: VLNCF) (the "Company," "The Valens Company" or "Valens"), a leading manufacturer of cannabis products, is pleased to report its second quarter financial results for the period ended May 31, 2021.
https://mma.prnewswire.com/media/1574479/The_Valens_Company_Inc__The_Valens_Company_Reports_Financial_Res.jpg
Tyler Robson, Chief Executive Officer, Co-Founder and Chair of The Valens Company, said: "We believe that our business model remained resilient despite ongoing challenges presented by the pandemic, and our strategy continued to demonstrate its effectiveness as we gained significant market penetration across the country. We are proud to share that in the second quarter alone, Valens had 132 SKUs listed in Canada – a 76% increase in comparison to 75 SKUs listed in the first quarter of 2021. This material growth in SKU listings stands in stark contrast to many of our competitors in the sector and is a testament to the innovation and quality we are bringing consumers and retailers."
Robson continued, "Importantly, we are seeing this momentum continue into the third quarter with an additional 40 SKUs accepted by the provincial boards with shipments during the third and fourth quarters. These new listings include products from four newly entered categories during the second quarter, such as flower, pre-rolls, topicals, and edibles, with many of them already receiving high consumer acclaim. Additionally, we have enhanced our platform with increased technical capabilities and greater efficiency to develop and commercialize winning products, which we expect will drive revenue growth in the second half of fiscal 2021. We look forward to continuing to drive new product innovation in the sector, specifically in the flower, pre-roll, beverage, concentrates, and edibles categories. With our recent distribution wins into New Brunswick, Manitoba, and Yukon, we are positioned well to capitalize on these investments."
Key Highlights
Gross revenue increased 16.1% in Q2 2021 to $20.5 million compared to $17.6 million in Q2 2020
Net revenue increased 6.5% in Q2 2021 to $18.8 million compared to $17.6 million in Q2 2020
Product sales increased 70.5% in Q2 2021 to $16.9 million compared to $9.9 million in Q2 2020
The year-over-year increase in product sales was driven by successful new product launches across multiple cannabis categories as partners expanded their portfolios in parallel with Valens' scaled-up manufacturing capabilities
Product sales as a percentage of net revenue remained at ~90.0% in Q2 2021
SKU listings increased by 76.0% to 132 in Q2 2021 compared to 75 in Q1 2021
Of these 132 SKU listings, 24.2% had their first shipments towards the end of Q2 2021, meaning Q3 2021 will be the first full quarter of contribution from these SKU listings
Subsequent to the end of Q2 2021, Valens obtained an additional 9 SKU listings, and another 40 SKU listings have been accepted by provincial distributors with first shipments expected in Q3 2021 or early Q4 2021
Estimated share of the growing extract-based market remained stable at ~5% in Alberta, British Columbia, and Ontario in Q2 2021, based on Hifyre data and not including B2B LP manufacturing
Estimated share of the cannabis-infused beverage category grew to 8.0% in Q2 2021 from 5.5% in Q1 2021 in Alberta, British Columbia, and Ontario, based on Hifyre data with only one customer in this category to date
Valens expects to bring on more partners in this category with the launch of the GTA Facility expected in the second half of fiscal 2021
Launched the number one selling baked good, the Verse Double Chocolate Brownie, in addition to the number one selling bath product, the nuance Soothing Eucalyptus CBD Bath Bomb, at the Ontario Cannabis Store ("OCS") in June 2021, according to OCS sales data
Manufactured 57 SKUs in Q2 2021 within a carefully curated portfolio across all cannabis categories, compared to 53 SKUs in Q1 2021, with a focus on driving higher efficiencies through increased listings across provinces
Ended the quarter with a strong cash position of ~$23.9 million, prior to the closing of a $46 million bought deal financing on June 1, 2021
*The term "SKU listings" refers to the total number of provincial and territorial listings of products manufactured and distributed by The Valens Company
Corporate and Operational Highlights:
In the second quarter, The Valens Company continued to execute on its corporate strategy and advance its global manufacturing platform, as illustrated by the following milestones and initiatives:
Entered the US market with the acquisition of Green Roads for US$40 million, which closed in June. In combination with Green Roads, Valens more than triples its total addressable market and secures a global leadership position in the cannabis health and wellness vertical with one of the largest CBD brands by market share. Additionally, the acquisition strengthens Valens' capabilities to supply global markets with an expanded product offering and increased speed to market with a US-based manufacturing and cGMP certified co-manufacturing platform.
Expanded Canadian distribution network to supply Manitoba, New Brunswick, and Yukon Territory with Valens-manufactured products. The Company now distributes its products in six provinces and one territory, including Alberta, British Columbia, Ontario, and Saskatchewan. Expansion of Valens' distribution platform continues to be a top priority and the Company intends to bring its innovative product portfolio to consumers in all regions of Canada including the remaining Eastern provinces in the second half of fiscal 2021, with entry into Quebec being a top priority.
Launched a range of innovative products in four new categories, including edibles, topicals, flower, and pre-rolls.
Edibles: Since closing the acquisition of LYF during the second quarter, The Valens Company has formulated, manufactured, and distributed over 15 new edibles products with various partners in a wide variety of formats, including chocolate, soft chews, and baked goods. Available at select provincial retailers, chocolate offerings include milk chocolate coffee quinoa with no added sugar, toffee crunch, ice cream sandwich cookies & cream milk chocolate bites, acai berry dark chocolate, cherry milk chocolate fruit chews, chocolate truffles, and the newly-launched double chocolate brownie from Verse Cannabis – one of the first confectionery products of its kind to hit the Canadian recreational market. Additionally, soft chews are offered in a wide variety of fruit flavours, including pineapple coconut, lemonade, cherry, watermelon, blackberry acai, blue raspberry, and green apple.
Topicals: Crafted with all-natural plant-derived essential oils and infused with 100mg of premium CBD, the nuance CBD Bath Bomb is the first Valens-manufactured topical product and currently the largest bath bomb available in the Canadian market. The bath bomb joins nuance's brand lineup of premium wellness products and is offered in two formats, Soothing Eucalyptus and Revitalizing Grapefruit, at select provincial retailers.
Flower & Pre-Rolls: In partnership with Verse Cannabis, The Valens Company introduced a variety of flower and pre-roll products under the Verse Originals line, including BC God Bud Flower, Dreamweaver Pre-Rolls, and the Amp Pre-Roll – the first flower products sourced and manufactured by Valens to enter the Canadian market. Since they have launched, Valens has experienced strong sell-through for this line of products across its Canada-wide distribution network.
Strengthened Licensed Producer partnership network with the addition of two leading Canadian producers. Valens will provide extraction and custom manufacturing services for Rubicon Organics, and pre-roll manufacturing and distribution services for Citizen Stash Cannabis Corp. with the potential to expand these agreements to include additional product development and manufacturing services as the relationship strengthens.
Bolstered Management team and Board of Directors. Sunil Gandhi has been appointed Chief Financial Officer, bringing 25 years of corporate and operational finance experience largely in the consumer packaged goods and alcohol beverage industries, most recently at Trophy Foods as CFO and prior, at one of North America's largest beverage companies. Adam Shea has been appointed Chief Commercial Officer, bringing over 16 years of experience in commercial strategy, sales, and marketing, with various consumer-focused organizations in the food, beverage, tobacco, and cosmetics industries, including Weston Foods, Coty Beauty, and British American Tobacco. Dr. Guy Beaudin, executive leadership advisor, and Drew Wolff, former Starbucks executive, were elected to the Company's Board of Directors at its Annual and Special Meeting of Shareholders on May 25, 2021.
Here Are The Full Details Of The New Federal Marijuana Legalization Bill From Chuck Schumer And Senate Colleagues
Cannabis makes it to the Senate. It's going to be a BIG money maker for the FEDs.
Valens is positioning itself to take advantage of legalization.
Published 4 hours ago on July 14, 2021
By Kyle Jaeger
The first draft of a long-anticipated Senate bill to federally legalize marijuana has been released—and its sponsors are asking for public input to further improve the legislation before it is formally introduced.
Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ) are unveiling the draft at a press conference on Wednesday. It’s an extensive bill, titled the Cannabis Administration and Opportunity Act, that weighs in at 163 pages.
The main features of the legislation largely align with what advocates and stakeholders expected. It would federally deschedule cannabis, expunge prior convictions, allow people to petition for resentencing, maintain the authority of states to set their own marijuana policies and remove collateral consequences like immigration-related penalties for people who’ve been criminalized over the plant.
“Cannabis prohibition, a key pillar of the failed war on drugs, has caused substantial harm to our communities and small businesses, and especially for communities of color,” Wyden said. “It’s as simple as this: Senators Booker, Schumer and I want to bring common sense to the federal government, end prohibition and restore the lives of those hurt most and set them up for opportunity.”
The bill would also impose a federal tax on marijuana products and put some of that revenue toward grant programs meant to support people from communities most impacted by prohibition who want to participate in the industry.
Further, the legislation would transfer regulatory authority over cannabis from the Drug Enforcement Administration (DEA) to the Food and Drug Administration (FDA), the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Alcohol and Tobacco Tax and Trade Bureau (TTB).
There’s a lot of ground to cover on the proposal. And while the senators are confident that it addresses key concerns from stakeholders, advocates, public health officials and law enforcement alike, they recognize that this is not the final form the bill will take. To that end, a public comment period is open until September 1.
“The War on Drugs has been a war on people—particularly people of color. The Cannabis Administration and Opportunity Act aims to end the decades of harm inflicted on communities of color by removing cannabis from the federal list of controlled substances and empowering states to implement their own cannabis laws,” the senators said in a summary of the bill that was shared with Marijuana Moment. “Descheduling cannabis is a critical step towards achieving justice for those targeted and hard hit by the War on Drugs. But that alone is not enough.”
The bill is multifaceted and deals with a large number of complex issues that have arisen under the umbrella of federal prohibition.
The basic components
Perhaps the most immediately consequential provision would be a requirement that the attorney general to remove marijuana from the Controlled Substances Act within 60 days of the bill’s enactment.
But it’s important to keep in mind that this legislation—like other federal legalization bills moving through Congress—would not make it so marijuana is legal in every state. The proposal specifically preserves the right of states to maintain prohibition if they want. It stipulates, for example, that shipping marijuana into a state where the plant is prohibited would still be federally illegal.
However, the measure would make it clear that states can’t stop businesses from transporting cannabis products across their borders to other states where the plant is permitted.
FDA would be “recognized as the primary federal regulatory authority with respect to the manufacture and marketing of cannabis products, including requirements related to minimum national good manufacturing practice, product standards, registration and listing, and labeling information related to ingredients and directions for use,” according to the summary.
Meanwhile, TTB would have jurisdiction over marijuana tax and trade practices. That would include cannabis tax revenue collection, tax law enforcement and tracking and tracing of marijuana products.
“The agencies would have dual jurisdiction related to certain aspects of cannabis product labeling and packaging, advertising, and other consumer information,” the document says.
Social equity
As promised, the senators are including language into the bill that would promote social justice for those who’ve been disproportionately impacted by the war on drugs.
“Communities that have been most harmed by cannabis prohibition are benefitting the least from the legal marijuana marketplace,” the findings section of the bill says, noting that a “legacy of racial and ethnic injustices, compounded by the disproportionate collateral consequences of 80 years of cannabis prohibition enforcement, now limits participation in the industry.”
“Historically disproportionate arrest and conviction rates make it particularly difficult for people of color to enter the legal cannabis market- place, as most States bar these individuals from participating,” it says.
A key barrier for such individuals is the fact that people from communities of color have been most targeted by cannabis criminalization, despite the fact that use is comparable across races. The bill seeks to repair that harm by mandating each federal district to expunge arrests and convictions for non-violent marijuana offenses within one year, and it also allows people who are still under a criminal sentence for cannabis to obtain a resentencing review hearing.
Grants
There would be three grant programs established under the bill.
One would “fund nonprofits that provide services to individuals adversely impacted by the War on Drugs, such as job training, reentry services and legal aid, among other services,” according to the summary. It would be distributed through a new Cannabis Justice Office under the Justice Department.
Another would “provide funding to eligible states and localities to make loans to assist small businesses in the cannabis industry owned by socially and economically disadvantaged individuals” through the Small Business Administration (SBA).
Finally, the Equitable Licensing Grant Program would “provide funding to eligible states and localities to implement cannabis licensing programs that minimize barriers for individuals adversely affected by the War on Drugs.”
“To be eligible for these SBA grants, states and localities must take steps to create an automatic process to expunge criminal records for cannabis offenses and violations for individuals under criminal supervision for cannabis offenses,” the summary says.
Consumers’ rights
People could not be denied federal benefits due to the use or possession of marijuana or for a conviction for a cannabis offense. That includes preventing the revocation of security clearances for federal employees.
However, one component of the new bill that advocates have taken issue with—which has been previously included in past reform legislation—would let agencies “continue to include cannabis for purposes of drug testing of Federal employees.”
Additionally, the measure would authorize physicians with the U.S. Department of Veterans Affairs (VA) to issue recommendations for medical cannabis to veterans. That’s another topic that’s been the focus of separate, standalone legislation in recent sessions.
Taxes and permits
A gradual federal tax rate would be imposed on marijuana sales, starting at 10 percent for the first year after the bill’s enactment and the first, subsequent calendar year. Then it would be increased annually, rising from 15 percent to 20 percent to 25 percent. Starting in the fifth year post-enactment, the tax would be a “per-ounce or per-milligram of THC amount determined by the Secretary of the Treasury equal to 25 percent of the prevailing price of cannabis sold in the United States in the prior year.”
In an effort to support small cannabis enterprises, the legislation says that “small cannabis producers with less than $20 million in sales annually would be eligible for a 50 percent reduction in their tax rate, via a tax credit.”
“Producers with more than $20 million in sales would be eligible for a tax credit on their first $20 million of cannabis sold annually, with sales above that amount subject to tax at the full rate. Similar to the reduced rates for alcohol producers, certain anti-abuse rules would limit the tax benefit only to products produced or substantially modified by the small producer, in order to limit the benefit received by large producers and to prevent a double-benefit.”
The legislation also lays out a structure for how marijuana businesses will be approved and regulated. For example, companies selling taxable marijuana products, or cannabis at the wholesale level, would require Treasury Department approval. Marijuana producers would further need to be registered with FDA.
A cannabis permit “may be denied or revoked if the premises is inadequate to prevent tax evasion or diversion, operation of the premises do not comply with federal or state law, or an applicant fails to disclose material information or makes a false statement,” the summary says. “In addition, a cannabis permit application may be denied if the applicant has been convicted of a disqualifying offense.”
“For these purposes, a disqualifying offense is a felony criminal offense that occurred after enactment of this Act and within the preceding three years related to cannabis diversion or cannabis tax evasion. An applicant may apply to the Cannabis Products Advisory Committee for a waiver with respect to a disqualifying offense if the Committee finds that the applicant has established sufficient evidence of mitigation or rehabilitation and fitness to maintain cannabis operations in compliance with state and federal law.”
FDA would have “authority over cannabis products in intrastate commerce,” the summary says. Under the agency, a new Center for Cannabis Products and a Cannabis Products Regulatory Advisory Committee would be created.
Cannabis products would not be regulated as dietary supplements, but the bill would “authorize manufacturers of cannabis products to make claims about the benefits of their products in the same manner that manufacturers of dietary supplements do today.”
It would, however, stipulate the FDA must create a regulatory pathway for CBD to be marketed as a dietary supplement.
The bill would further require “owners and operators of establishments that are engaged in the manufacture, preparation, compounding, or processing of a cannabis product to register their establishments with FDA upon first engaging in such activities and annually thereafter.” The agency would “issue regulations pertaining to distribution of cannabis products and good manufacturing practice.”
Another provision would mandate that FDA create a program to “expedite the development and review of applications for drugs containing cannabis that are manufactured by a small businesses owned and controlled by socially and economically disadvantaged individuals that operate in the cannabis industry.”
Under the legislation, the Treasury secretary would be compelled to establish a track-and-trace regime to prevent illicit distribution of cannabis products. And the official would also be mandated to start a program to facilitate “the lawful delivery of hemp that inadvertently exceeds the permissible THC limitations for hemp to a permitted cannabis enterprise for the proper processing of such products.”
The Consumer Product Safety Commission would be authorized to issue regulations setting standards for special packaging of cannabis products.
Federal law would be amended to explicitly state that SBA programs and services available to marijuana businesses and companies that work with them.
Although the bill does not specifically mention banking, its provisions ending the federal prohibition of marijuana would automatically remove any penalties that financial institutions currently potentially face as a result of working with licensed cannabis businesses because those operations would no longer be federally illegal.
Federal studies
The bill further directs the Government Accountability Office (GAO) to facilitate a number of studies into marijuana policy.
The office must conduct a “review of federal laws, regulations, and policies, to identify additional areas in need of change, including a study on replacing the term ‘marijuana’ and ‘marihuana’ with ‘cannabis’ through the U.S. Code and regulations,” the summary says. It must also study the demographics of those with federal cannabis convictions.
GAO would also have to evaluate the “societal impact of legalization” in states with recreational marijuana laws on the books.
Additionally, the Bureau of Labor Statistics (BLS) would need to compile demographic data on “business owners and employees in the cannabis industry.” Those figures could help inform social justice efforts, as there’s been widespread criticism of the industry over a lack of diversity despite advocates’ push for equity.
The U.S. Department of Health and Human Services (HHS) would be required to work with the National Institutes of Health (NIH) on ways to promote research into cannabis impacts. And meanwhile, HHS would be mandated to collaborate with the U.S. Department of Transportation (DOT) on data collection for marijuana-impaired driving while also supporting research into “an impairment standard for driving under the influence of cannabis.”
More details
The senators’ bill would establish a federal standard to make it so only those 21 and older can purchase recreational marijuana products. Each state that currently allows adult-use cannabis maintains that age restriction.
In order to reduce illegal diversion, the legislation would cap cannabis sales, stating that adults could only buy up to 10 ounces at a time.
Vaping delivery system products that contain added natural or artificial flavors would be banned under the proposal.
A newly created definition of “cannabis” would be created under federal law, but it would retain the exception for hemp that now exists.
The senators want feedback on the draft bill
Here’s an overview of some of the main points that the are seeking comment on:
-Measuring the potency of cannabis products, the overlap of definitions for hemp and marijuana, regulations for synthetic THC, regulatory responsibilities for various federal agencies and FDA funding.
-Coordinating federal and state law enforcement responsibilities for cannabis, state “primacy regarding cannabis regulation” and interstate commerce.
-Balancing efforts to reduce barriers to entry to the marijuana industry while mitigating the influence of illicit cannabis operators.
-Determining whether cannabis products should go through a premarket review before being marketed.
-How to deal with international treaty obligations with respect to marijuana.
Interested parties are encouraged to submit comments on these and other issues to Cannabis_Reform@finance.senate.gov by September 1.
The bill has been highly anticipated
Advocates have been anxiously awaiting this legislation, which Schumer has repeatedly said was coming “soon” after he, Wyden and Booker first pledged in February that it would be ready “in the early part of this year.”
Since then, the majority leader has been making the case for reform everywhere from the Senate floor on 4/20 to a cannabis rally in New York City.
The three senators formally started their efforts on the legalization bill by holding a meeting earlier this year with representatives from a variety of advocacy groups to gain feedback on the best approach to the reform.
Schumer made a point in March to say that it will specifically seek to restrict the ability of large alcohol and tobacco companies to overtake the industry. Instead, it will prioritize small businesses, particularly those owned by people from communities most impacted by prohibition, and focus on “justice, justice, justice—as well as freedom,” he said.
He also urged voters to reach out to their congressional representatives and tell them that “this is long overdue.”
Activists are encouraged by the introduction of the lengthy and detailed proposal.
“The days of federal prohibition are numbered,” NORML Executive Director Erik Altieri said in a press release. “These actions by Senate Majority Leader Schumer and Senators Booker and Wyden reflect the fact that the supermajority of Americans are demanding that Congress take action to end the cruel and senseless policy of federal prohibition.”
“It is time for legislators to comport federal law with the laws of the growing number of states that have legalized the plant, and it is time for lawmakers to facilitate a federal structure that allows for cannabis commerce so that responsible consumers can obtain high-quality, low-cost cannabis grown right here in America without fear of arrest and incarceration,” he said.
Shaleen Title, CEO of the Parabola Center, said that the bill’s filing “sends a clear signal to the states to keep making progress on cannabis policy.”
“We’re encouraged by the senators’ inclusive process and intend to join other equity advocates in offering ways for the federal government to protect and build on the states’ progress toward social justice in cannabis policy,” she said. “Millions of people fought for an end to prohibition. We see this as an opportunity to stop the arrests and to shape the national marketplace for legal marijuana to be open to all, not just a wealthy few.”
Meanwhile, a separate House bill to federally legalize marijuana and promote social equity in the industry was reintroduced in May.
The legislation, sponsored by Judiciary Committee Chairman Jerrold Nadler (D-NY), was filed with a number of changes compared to the version that was approved by the chamber last year.
The Marijuana Opportunity, Reinvestment and Expungement (MORE) Act passed the House but did not advance in the Senate under GOP control. But this time around, advocates are optimistic that the policy change could be enacted now that Democrats run both chambers and the White House, and as more states are moving to enact legalization.
President Joe Biden, however, is an outlier within the Democratic Party, maintaining an opposition to adult-use legalization despite the widespread and increasingly bipartisan public popularity of the reform. It remains to be seen whether the president—who campaigned on more modest pledges to decriminalize cannabis possession, expunge prior records and respect state legalization laws—would stand in the way of a comprehensive policy change by threatening to veto the bill that’s ultimately produced.
Wyden, who under the chamber’s new Democratic majority assumed the top spot on the Senate Finance Committee—where the new legislation is likely to be referred once formally introduced—recently said his goal will be to “end the prohibition and come up with sensible tax and regulatory oversight at the federal level.”
He said in February that “it’s not enough in my view to just end cannabis prohibition,” and “I think we need to restore the lives of people who’ve been hurt most by the failed war on drugs and especially black Americans.”
All three senators—Schumer, Wyden and Booker—have in past years introduced marijuana legalization bills that never got hearings or votes.
Separately, a proposal to federally deschedule marijuana that does not include social equity components was recently filed by a pair of Republican congressmen.
Read the full text of the new federal marijuana legalization bill below:
Scroll down at this link to see the actual bill:
https://www.marijuanamoment.net/here-are-the-full-details-of-the-new-federal-marijuana-legalization-bill-from-chuck-schumer-and-senate-colleagues/
Welcome back to the board 'Power-Fade'. See post #3812
Very well stated, Funman. Hard to disagree with any of it.
Since Valens PPS is moving in the opposite direction of the press release news, it can only be because The Street has been putting pressure on the overall cannabis industry and specifically regarding Valens, doesn't like dilution, anticipates revenues aren't growing fast enough and profits will continue to be deferred.
Some of that might be short sighted if your view is long term.
Any significant downward PPS movement will have to be viewed as a buying opportunity if Valens revenue expansion and EBITDA indicates they continue to execute on their growth plans, but struggle to make net profits. To me that indicates more patience is needed, because they are moving in the right growth direction.
Their last USA acquisition (Green Roads) should add significant revenues, but they announced they are investing approximately $10 million into the business to capitalize on the anticipated growth of the US CBD market. Revenue growth will follow, but $10M CapEx has to dampen EPS expectations.
The Street wants cannabis profits now. We're looking for the Green Roads EBITDA indicator which they probably won't break out for us.
But our measure will be if all the performance Milestones are met in 2022, and they end up paying $40M for the acquisition, the transaction represents approximately 4.5x fiscal 2022 EBITDA. That's an incredibly reasonable price to pay when other cannabis company M&A's having them spending like drunken sailors. (For example, look at Trulieve's M&A of Harvest Health for approximately $2.1B, and GTI's $80M Dharma Pharmaceuticals M&A for 1 store and 4 licenses in the newly announced rec legal state of VA.)
Lastly, let's not forget that Valens reloaded the M&A coiffures.
They didn't load the gun without having another M&A move in mind.
Valens is a very good long term cannabis play.
I expect to make up all of my MediPharm losses right here, and leave my Medi shares to ride throughout their international expansion which may take years. It's a crap shoot to see if they can execute or end up "a failed also ran"?
Right now Valens is the obvious original Extractor winner.
Unfortunately, we've had the opposite of a run-up before tomorrow's earnings report. Hope that all changes after the numbers are released.
Could be exciting!?!?!?!? REMINDER // Make sure to join us for our conference call on Thursday, July 15, 2021, at 11 AM ET | 8 AM PT to discuss The Valens Company's Q2 financial results and business outlook.
Dial-in details can be found here:
https://bit.ly/3dT9F8d
REMINDER // Make sure to join us for our conference call on Thursday, July 15, 2021, at 11 AM ET | 8 AM PT to discuss The Valens Company's Q2 financial results and business outlook.
— The Valens Company (@TheValensCo) July 12, 2021
Dial-in details can be found here: https://t.co/PP0QvidrjS
$VLNS $VLNCF pic.twitter.com/0O1zlt1Ouw
In April, the Canadian recreational cannabis market hit an all-time high for monthly sales. Watch our corporate presentation from Everett Knight, to learn more on what's to come in the Canadian cannabis market.
In April, the Canadian recreational cannabis market hit an all-time high for monthly sales. Watch our corporate presentation from Everett Knight, to learn more on what's to come in the Canadian cannabis market.
— The Valens Company (@TheValensCo) July 7, 2021
See the presentation here:https://t.co/hZ8Vi6ghHj $VLNS $VLNCF pic.twitter.com/c6uk647c8k
Cannabis took a beating today along with the market.
Looking forward to it. Price action today almost feels like they're trying to scare people out of their shares.
THE VALENS COMPANY TO HOLD CONFERENCE CALL TO DISCUSS FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2021
https://thevalenscompany.com/press-releases/the-valens-company-to-hold-conference-call-to-discuss-financial-results-for-the-second-quarter-of-2021/
Kelowna, B.C., July 8, 2021 – The Valens Company Inc. (TSX: VLNS) (OTCQX: VLNCF) (the “Company,” “The Valens Company” or “Valens”), a leading manufacturer of cannabis products, is pleased to announce it will issue its second quarter 2021 financial results, for the period ended May 31, 2021, on Wednesday, July 14, 2021, after markets close.
CONFERENCE CALL DETAILS
The Company will host a conference call the following day, Thursday, July 15, 2021, at 11:00 am Eastern Time / 8:00 am Pacific Time to discuss the financial results and business outlook.
Participant Dial-In Numbers:
Toll-Free: 1-877-407-0792
Toll / International: 1-201-689-8263
*Participants should request The Valens Company Earnings Call or provide confirmation code 13720844.
The call will be available via webcast on the Valens investor page of the Company website at https://thevalenscompany.com/investors/ or at this link. Please visit the website at least 15 minutes prior to the call to register, download, and install any necessary audio software. A replay of the call will be available on the Valens investor page approximately two hours after the conference call has ended.
Tyler Robson, Chief Executive Officer, Sunil Gandhi, Chief Financial Officer, Jeff Fallows, President, and Everett Knight, Executive Vice President of Corporate Development and Capital Markets, will be conducting a question-and-answer session following the prepared remarks.
ABOUT THE VALENS COMPANY
The Valens Company is a leading manufacturer of cannabis products with a mission to bring the benefits of cannabis to the world. The Company provides proprietary cannabis processing services, in addition to best-in-class product development, manufacturing, and commercialization of cannabis consumer packaged goods. The Valens Company’s high-quality products are formulated for the medical, health and wellness, and recreational consumer segments, and are offered across all cannabis product categories with a focus on quality and innovation. The Company also manufactures, distributes, and sells a wide range of CBD products in the United States through its subsidiary Green Roads, and distributes medicinal cannabis products to Australia through its subsidiary Valens Australia. In partnership with brand houses, consumer packaged goods companies and licensed cannabis producers around the globe, the Company continues to grow its diverse product portfolio in alignment with evolving cannabis consumer preferences in key markets. Through Valens Labs, the Company is setting the standard in cannabis testing and research and development with Canada’s only ISO17025 accredited analytical services lab, named The Centre of Excellence in Plant-Based Science by partner and scientific world leader Thermo Fisher Scientific. Discover more on The Valens Company at http://www.thevalenscompany.com.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Jeff Fallows
The Valens Company
Investor Relations
ir@thevalenscompany.com
1 647.956.8254
KCSA Strategic Communications
Phil Carlson / Elizabeth Barker
VLNS@kcsa.com
1 212.896.1233 / 1 212.896.1203
Media
KCSA Strategic Communications
Anne Donohoe
adonohoe@kcsa.com
1 212.896.1265
Well, ya I would hope so. The RSI is getting close to oversold {36}. Were in the dog days of summer, not much in this sector is on fire.
Ok. Maybe when news comes out this will go on a nice run
No, I don’t see any changes that would account for it. Again it’s easy to push around with this low volume.
Any idea why this is dropping so low
I would think the 2qt numbers should come out in about 2 weeks. The Green Road effect will begin in the 3rd 4th quarters.
Volume over all is still light, easy to push around, for now.
Interesting. I don’t think I would be happy with a broker that reduces or limits my options. Just saying.
Time to switch brokers.
Who is your broker?
My account wont let me buy this anmore uggh calling it a penny stock.
More on GE's big piece of news. Thanks GE--->>>THE VALENS COMPANY ENTERS AGREEMENT TO MANUFACTURE BEVERAGES AND EDIBLES FOR GALLERY BRANDS, A PREMIER CANNABIS BRAND HOUSE
The Valens Company Enters Agreement to Manufacture Beverages and Edibles for Gallery Brands, a Premier Cannabis Brand House.
https://finance.yahoo.com/news/valens-company-enters-agreement-manufacture-110000498.html
Agreed. Valens is surfing on a growth wave with accretive acquisitions.
I expect the latest capital raise announcement will lead to another acquisition. They don't need to dilute anymore to keep the lights on.
Hard to say. The whole sector is running very weak right now. This company however is coming out hot with expanding their capabilities over the last few months.
i.e. Green roads -- Green Roads represents the first piece of the puzzle in Valens US strategy, securing a leading CBD business with distribution across physical retailers and online direct-to-consumer.
Verse Cannabis-- “The Valens Company” or “Valens”), a leading manufacturer of cannabis products, today announced that it has launched several new products in partnership with Verse Cannabis (“Verse”) in the flower, pre-roll, concentrates, and edibles categories. With the continued launch of next-generation, high quality cannabis products across various categories, Valens continues to partner with Verse to further its mission to provide all Canadians with best-in-class formulations in innovative formats at value price points.
Lyf-- With the addition of the LYF facility, the Company now has the capability to produce a wide range of edible products in various formats and dosages as part of its central platform. The added product development and manufacturing flexibility makes the platform easily adaptable to evolving consumer preferences and changing market regulations around edible products as Valens looks to expand both in Canada and globally.
They are rolling. Blend some time in and away we go.
I've had a long-time buy limit order set at 2.25. I'm wondering if it will be picked up or not. Either way is fine with me. However, I have to admit that I didn't think we'd see 2:40 again, but we got there today.
Here's a tie into our new partner in regards to the CBD.
https://crsreports.congress.gov/product/pdf/IF/IF11860/2
The big piece of that is direct entry into the US market. That's a build out plan and I do like it.
With a leading market share in the US CBD industry and a strong consumer-focused brand, @greenroadsworld has prioritized product accessibility with the development of a robust e-commerce platform consisting of +30,000 five-star reviews.
With a leading market share in the US CBD industry and a strong consumer-focused brand, @greenroadsworld has prioritized product accessibility with the development of a robust e-commerce platform consisting of +30,000 five-star reviews.
— The Valens Company (@TheValensCo) June 24, 2021
More here: https://t.co/CFF6U4R8pM pic.twitter.com/w0fBLKPEco
Wow, 56k traded, 134 trades total. 309k traded in CAN.
Are you kidding me. 36k shares traded so far.
Unnecessary Obstacles for the Canadian Edibles Market
By Steven Burton
June 22, 2021
Can Canada fix the obvious problem?
Read this article and then think about how a real fix will improve the LYF FOOD acquisition revenue contribution.
Why aren't Cannabis lobbyists screaming about this? - FUNMAN
https://cannabisindustryjournal.com/feature_article/unnecessary-obstacles-for-the-canadian-edibles-market/
The most likely reason they said they should hear back by the end of June is because NASDAQ probably says they will respond within 60 days.
Responding with questions on the application is different than getting the approval which is the expectation you are hoping for.
I think questions are more likely than approval.
GE_Jim Tuesday, 06/22/21 11:05:29 AM
Re: FUNMAN post# 3781
Post # 3782 of 3782
If they would have said nothing, then what would have used for the reasonableness to the recent reverse split we just approved?
No, I like it when there open to the shareholders.
If they would have said nothing, then what would have used for the reasonableness to the recent reverse split we just approved?
No, I like it when there open to the shareholders.
Valens should have never said that. They raised expectations. Chances are they are going to underperform and disappoint.
Better to "over-perform" and make the announcement when they definitively know something.
GE_Jim Tuesday, 06/22/21 10:49:28 AM
Re: FUNMAN post# 3779
Post # 3780 of 3780
Well, I maybe getting ahead of myself in regards to being listed. I we'll just be happy to know they will be.
Per the company "The Company currently expects that Nasdaq will make a decision on the Company's application by the end of June 2021"
For right now that's all I need to hear.
Well, I maybe getting ahead of myself in regards to being listed. I we'll just be happy to know they will be.
Per the company "The Company currently expects that Nasdaq will make a decision on the Company's application by the end of June 2021"
For right now that's all I need to hear.
Obviously the sooner the better, but why the end of the month? It's not their "Quarterly End". They only submitted an "initial NASDAQ application" on April 28, 2021. They will unquestionably have to do a follow-up submission on NASDAQ application comments and questions.
I wonder if they will announce THAT they resubmitted when and if?
I am looking most forward to their 8-31 Q3 ER when the Green Roads will contribute revenues for 2 months, LYF FOOD will contribute for a full 3 months, and hopefully we learn by then about the next acquisition.
The Street will begin to believe in Valens if the acquisitions perform, prove to be accretive, Valens grows existing product lines organically and they start posting net profits.
If those things happen, AND the NASDAQ application is approved by "summer's end", then IMO the PPS will scream past $5.
GE_Jim Monday, 06/21/21 06:22:52 PM
Re: FUNMAN post# 3777
Post # 3778 of 3778
Well, I agree Valen’s is clearly not done expanding. However, the bigger deal right now for me is if they will be in the NAS by the end of the month. I’m waiting to hear the word.
Well, I agree Valen’s is clearly not done expanding. However, the bigger deal right now for me is if they will be in the NAS by the end of the month. I’m waiting to hear the word.
The newest "cash raise" is for something new too, and I don't believe it will be a Canadian acquisition as was LYF FOOD TECHNOLOGIES INC.
IMO, Valens plans to firmly put it's footprint in the USA. We're inside my 90 day window with plenty of time left.
A key pivot for us for the US markets. I like this acquisition a lot.
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