48North Cannabis Corp (TSXV: NRTH) reported its first quarter fiscal 2020 financials this evening, posting net revenues of $1.45 million, a 14% increase from the previous years figures, and a significant increase from last quarters revenues of $0.48 million. Net income for the quarter was positive, at $2.2 million, compared to a loss of $1.0 million in the year ago period.
Gross profit before fair value adjustments came in at $0.7 million, whereas biological adjustments brought the final figure to $9.4 million. The significant increase in biologicals is a direct result of the outdoor harvest, which is believed to have commenced during the quarter. Total biological adjustments amounted to a net increase of $8.6 million.
48North posted total expenses during the quarter of $5.7 million, with general and administrative expenses amounting to $3.1 million. Sales and marketing was the next largest expense at $1.9 million, followed by share based compensation of $0.8 million.
The three month period saw a negative operational cash flow of $8.0 million, thanks in part to increasing receivables. Further investing activities to the tune of $4.5 million, and marginal funding from financing activities of $0.2 million resulted in 48North’s cash position decreasing from $52.7 million to $40.3 million during the quarter.
Looking at the balance sheet, receivables increased from $1.0 million to $2.5 million, representing 175% of net revenues during the quarter. However, much like Deep Dive guest writer Michael Miller highlighted over the weekend, this does not include purely accounts receivable. GST/HST recoverables amounted to $1.5 million, or 60% of total receivables. Biological assets increased significantly on a quarter over quarter basis, from $2.1 million to $10.6 million, while inventories rose from $4.7 million to $6.7 million, resulting in total current assets of $62.5 million.
Liabilities during the quarter largely stayed the same, increasing from a total of $4.7 million to $4.9 million. Accounts payable and accrued liabilities made up the bulk of current liabilities, decreasing from $4.7 million to $4.4 million. Total working capital during the quarter increased marginally to $57.6 million.
In terms of product estimates, 48North elected to break out certain costing between its indoor and outdoor production centres. The firm identified that its assumptions are based on 70 grams per plant yield for indoor grown cannabis, while outdoor is based on 40 grams per plant. Selling prices were significantly different as well, with indoor estimated to yield $5.00 per gram, while outdoor was half that at $2.50 per gram.
The firm however admitted to some production issues related to licensing, with only one of three hoop houses receiving licenses from Health Canada. This impacted the drying and processing of outdoor grown cannabis, hampering the ability of 48North to convert mature plants into dry flower and biomass. The firm is thus expecting less than initially anticipated volumes of dried cannabis from its outdoor grow.
As of November 21, 2019, 48North has harvested 12,000 kilograms of outdoor grown cannabis from its 100 acres of field, however it is still unclear what THC and CBD levels these plants will test at. The firm is also uncertain at what grade the cannabis will come in at, whether that be suitable for sale as dried flower or utilized for extraction purposes.
48North closed today’s session at $0.44 on the TSX Venture.
Information for this briefing was found via Sedar and 48North Cannabis Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.