Nutritional High (CSE: EAT) announced this week that it will be selling a controlling interest in its primary revenue generating asset Calyx Brands via a recently entered letter of intent. The move is being conducted as a means of receiving the capital injection required to keep the distribution operation running.
The sale of Nutritional High’s majority ownership in that of Calyx Brands will result in the company taking a severe financial hit in terms of revenue. Due to only now maintaining an minority ownership, to which the percentage is undisclosed, the company will no longer be able to consolidate revenues from the subsidiary.
Last quarter, Nutritional High generated a total of $6.69 million in revenues for the period ended October 31, 2019. Of those revenues, Calyx provided $6.67 million out of the total, or the equivalent of 99.78%. Nutritional High’s Pass Verde assets within the state delivered $0.00 in revenues, while the firms Oregon assets delivered $14,566.
Comparatively, in fiscal 2019, Calyx Brands generated $23.4 million out of Nutritional High’s total revenues of $23.6 million, or 99.15% of the firms revenues for fiscal 2019. Assets aside from Calyx generated only $199,780, account for 0.84% of all revenues.
The company has stated that the sale of Calyx will enable Nutritional High to focus on its “core manufacturing footprint and brand development capabilities,” while focusing on the higher margin portion of the business.
The transaction, which is to take place with an undisclosed third party, will see the partner fund the ongoing operations of Calyx. The partner is also expected to integrate its ongoing flower processing and supply management operation into the business of Calyx. Nutritional High is expected to receive contingent payouts based on operating milestones. Its unclear what compensation Nutritional High will be receiving up front.
We are extremely pleased to have secured this partnership. While this transaction will reduce top line revenue for the Company, it will allow for our concentration on higher margin, lower working capital intensive, manufacturing. We believe that strength in manufacturing is essential to grow and develop our FLI brand in the market and achieve positive cash flow.Robert Wilson, CFO of Nutritional High
The sale of Nutritional High’s Calyx Brands follows the news that the company lost their major distribution client Plus Products late last year.
Nutritional High last traded at $0.035 on the CSE.
Information for this briefing was found via Sedar and Nutritional High. 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.
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