2018 is a year shareholders in Harvest One Cannabis Inc (OTCMKTS:HRVOF) quickly wish to forget as it brought with it significant capital losses. In 2017, HRVOF hit a new high of $1 per share following a slow rise. However, the tides quickly turned against investors as the share price dipped considerably to a point the company had lost nearly 80%. At that point, HRVOF was trading at just shy of $.2 per share.Currently, however, it seems like the tides have changed in the bull's favor.Since January, the firm has regained part of its initial value and, in this case, more than doubled its December closing price of $.24 per share. In February, it shocked the market by reaching highs of $.6 per share, its highest price in 2019. Currently, despite a period of decline witnessed during the mid-February period, the share has risen and is trading at $.54 per share.Readers can review the above price action in the chart below: HRVOF Daily ChartWhile the period since January 2019 has been particularly good for investors in the firm, over the past week, the market has witnessed news which has and is expected to continue having a significant impact on the firm’s current and future operating and financial capacity. The result has been that both investors and other market participants have consistently been evaluating the stock as an investment opportunity.This piece is a report of what has been occurring within the firm as well as how this news is expected to affect the operations of the firm.
Background to the Firm
Harvest One Cannabis Inc is a Vancouver-based firm which was formed back in 2008.The firm has oriented itself towards the development and provision of lifestyle and wellness within regulated markets across the globe. As a result, it cultivates, processes and distributes cannabis-based supplement products within Europe. Furthermore, it also develops, markets and distributes sleep shots and powder packets.[embed]https://www.youtube.com/watch?v=eikfArKjQ50[/embed]
Current Events
A lot has happened to HRVOF since our last review – which is accessible here. Back then, our report spoke to the firm having significant upside potential, as a result, its expansion drive which was deemed to have had an impact on their revenue figure. In hindsight, it seems that we hit the nail on the head as everything the piece spoke to has become a reality.Present news speaks to there being a new acquisition which will see HRVOF strengthen its position within the lifestyle and wellness segment as well as increased revenues over the most recent period. These are discussed in detail in the next segment.
The Acquisition: Goals versus Costs
On 4th March, HRVOF announced that they had gotten into a deal to acquire Delivra Corp, a specialty biotechnology company. The all-equity deal which was valued at $14.22 million will see both firms engage in a share-to-share exchange of 0.595 to 1 for Delivra Corp and HRVOF respectively. In total, Delivra will hold about 13.4% of the shares of HRVOF and subsequently become a wholly owned subsidiary of HRVOF.Aside from the financial quantum, the transaction is expected to have a much longer-term impact on the performance of HRVOF, especially so given that the firm is working towards growing its portfolio of lifestyle and wellness brands. This deal will provide HRVOF with access to LivRelief brand as well as Delivra’s entire distribution channel across Canada. Delivra has over 6,000 retail locations for its LivRelief product, some being within large retailers such as Walmart, London Drugs and Pharmasave.Furthermore, Delivra has a robust research base which is useful for the creation of some of their novel products. One of these is the proprietary transdermal delivery system which allows for the transfer of molecules (natural and pharmaceutical) through the skin. This system is licensed to pharmaceutical companies across the globe.Given this, the expected synergies between the two firms are clearer.First, Delivra will be adding the 6,000 locations it has to the over 30,000 retail locations which HRVOF currently works with. With a total of 36,000+ retail locations, HRVOF will easier access the market as well as ensure its brand is known. Second, the transaction enforces the strategic outline which HRVOF had chosen to follow: growing its lifestyle, health and wellness portfolio. With Delivra’s experience within the health, lifestyle and wellness segment, HRVOF can easily harness this to grow their product base. Furthermore, by doing the latter, Delivra will be adding to the revenue base therefore, any new products will provide additions to the firm’s top lines. Finally, Delivra has already begun working on the integration of CBD and THC into their existing product lines. This is especially important given that Canada will soon be legalizing the use of cannabis-infused products federally. As such, this presents a whole new market for HRVOF, one which they seem to be capitalizing on.Through the above transaction, therefore, it is expected that HRVOF will be the main beneficiary and given the firm’s current performance (discussed in the next section), there is a lot which the transaction is expected to benefit from.
Financial Performance
The last quarter saw HRVOF’s revenue increase by 123%, rising to $3.7 million from the previous quarter’s $1.7 million. The firm attributed this to the additional agreements which were signed for recreational marijuana with British Columbia, Ontario, Manitoba, and Saskatchewan. Moreover, the firm had a fair value adjusted gross margin of 47% (following a gross margin of 53%) which is in line with the general market margin. Furthermore, the firm also announced that its balance sheet remained robust, standing at $41 million in total.With this, it continues to become clear why HRVOF is enticing the market towards investing in it. Its additional plans to grow its cultivated product to over 200,000 kilograms per annum by the end of 2019 present further promise for revenue increase. All in all, the entire firm will grow both in the near and distant future.
Conclusion
The future of HRVOF becomes brighter with every additional look at the firm. Its present financial performance and meticulous acquisitions present shareholders with the opportunity for growth. As such, we are bullish about the stock.We will be updating our subscribers as soon as we know more. For the latest updates on HRVOF, sign up below!Disclosure: We have no position in HRVOF and have not been compensated for this article.
Discover Hidden Gems
Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.
