CannaRoyalty Corp (OTCMKTS:ORHOF) is a stock that keeps rewarding dip buyers. Shares are up over 50% off the December lows. Considering the strong start to the New Year for many cannabis names, the run in ORHOF could just be starting.
CannaRoyalty is also known as Origin House. ORHOF is a growing cannabis product and brands company operating across key markets in the U.S. and Canada, with a strategic focus on becoming a preeminent global house of cannabis brands. The Company’s foundation is in California, the world’s largest regulated cannabis market, where it delivers over 130 branded cannabis products to the majority of licensed dispensaries. Its brand development platform is operated out of five licensed facilities located across California and provides distribution, manufacturing, cultivation and marketing services for its brand partners. The Company is actively developing infrastructure to support the proliferation of its brands internationally, initially through its acquisition of Canadian retailer 180 Smoke.
The one thing the company, its management, and major shareholders are concerned about is a hostile takeover attempt. There are many cannabis companies sitting on a high market cap, but lack brands and a significant business behind that paper. ORHOF is aware of this and wants to protect what the company has built. In order to protect ORHOF, shareholders representing approximately 26% of the common shares of the Company on a fully-diluted basis have entered into voluntary voting support agreements with the Company, in support of its vision, strategic direction and business plan.
In recent months, Origin House was approached by several public cannabis companies contemplating stock-based offers to acquire the Company. To date, these approaches have not culminated in transaction terms that recognize the long-term value of Origin House. Accordingly, in the estimation of management, there is a growing risk of hostile takeover activity with respect to the Company’s shares. The Support Agreements were prepared in consultation with the Company’s legal and strategic advisors to protect shareholders from coercive activity. The Support Agreements were executed by 100% of shareholders who were approached, including the Company’s CEO, Marc Lustig, its President and General Counsel, Afzal Hasan, all members of the Company’s Board of Directors, as well as shareholders from the acquired companies that form the core of Origin House’s business: Alta, Kaya, RVR, FloraCal and 180 Smoke.
Third-quarter results were very impressive. Highlights included:
- revenues were $6.6 million as compared to $744,302, an increase of 790%;
- gross margin was $298,619 as compared $128,010, an increase of 133%;
- operating expenses were $10.1 million as compared to $2.8 million, an increase of 261%;
- net loss of $7.5 million as compared to $3.3 million, an increase of 128%;
- net loss per basic and dilutive shares of $0.12 as compared to $0.08; and
- adjusted EBITDA loss of $4.5 million as compared to a loss of $1.8 million.
The following is a summary of key balance sheet totals as at September 30, 2018, compared to December 31, 2017.
- cash was $75.3 million as compared to $4.5 million an increase of 1,565%;
- total assets of $220.2 million as compared to $46.1 million, an increase of 377%;
- current assets of $90.8 million as compared to $7.9 million, an increase of 1,043%;
- current liabilities of $27.2 million as compared to $2.1 million, an increase of 1,172%; and
- long-term debt of $28.2 million as compared to $2.3 million, an increase of 1,147%.
Currently trading with a market cap of $324 million, ORHOF is an exciting story among pot stocks. After a warrant conversion, ORHOF is now sitting on over C$87 million in cash. With the company sitting on that much cash and trading at just 2.8x book value, we can easily see why the founders and management want to protect the company from a hostile bid. The new bull run in ORHOF could just be getting started.
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Disclosure: We have no position in ORHOF and have not been compensated for this article.
Image courtesy of Boss Tweed via Flickr