ALBUQUERQUE, N.M. –
CRAFT 1861 Global Holdings Inc. (NEO: HUMN) (NEO: HUMN.WT.A) (the “Company” or “Craft Global”) announced the filing of the Company’s annual information form, its audited annual financial statements and corresponding management’s discussion and analysis for the year ended December 31, 2022, (collectively, the “Annual Filings”) and unaudited interim consolidated financial statements and corresponding management’s discussion and analysis for the period ended March 31, 2023, (collectively, the “Interim Filings”, and together with the Annual Filings, the “Annual & Interim Filings”). The Annual & Interim Filings are available for download from the Company’s SEDAR profile.
The filling of the Annual & Interim Filings is an automatic application to the Ontario Securities Commission to revoke the previously-disclosed Failure to File Cease Trade Order (the “FFCTO”). Trading is expected to resume on Neo Exchange Inc. operating as Cboe Canada (the ” Exchange”) shortly after the revocation of the FFCTO.
Management Update
On March 8, 2023, the Company’s auditor resigned, with GreenGrowth CPAs Inc. (“GreenGrowth”) being appointed as successor auditor. The Company worked diligently with GreenGrowth to complete the reviews necessary for the release and filing of the Annual Filings. In addition to the delays related to the Company’s preparation of the Annual Filings, the Company experienced difficulties in receiving and accessing the cash proceeds of the investment (the “Brott Investment”) made by Brott LCC (the “Brott Funds”). The Brott Investment, which will be used to fund the Company’s growth strategy, is comprised of a $100 million equity investment and a USD$900 million line of credit. The delays in receiving and accessing the Brott Funds are the result of restrictions in the U.S. banking industry regarding the cannabis industry. The Company continues to work with its banking partners to resolve these issues and will update the market on any further developments.
2022 Annual Filings Highlights
The Company reported revenue for the year ended December 31, 2022 of $2,011,885, an increase of $310,072, or 18%, compared to revenue of $1,701,813 as of the year ended December 31, 2021. The increase in revenue was primarily the result of an increase in sales with 1861 Market. 1861 Market is a State of New Mexico legal retail cannabis operating entity. Craft 1861 (CBD) revenue for the year ended December 31, 2022 was $90,091, an increase of $51,591, or 134%, compared to revenue of $38,500 for the year ended December 31, 2021.
Costs of goods sold, excluding adjustments to the fair value of biological assets and inventory sold for the year ended December 31, 2022 was $767,600, an increase of $33,617 or 5%, compare to cost of goods sold, excluding adjustments to the fair value of biological assets and inventory sold of $733,983 for the year ended December 31, 2021. The Company reported gross profit for the year ended December 31, 2022 of $3,247,602, an increase of $820,661 or 34% compared to gross profit of $2,426,941 for the year ended December 31, 2021. The increase in gross profit is directly attributable to an increase in revenue and an increase in unrealized gain on changes in the fair value of biological assets.
The Company reported total operating expenses for the year ended December 31, 2022 of $31,049,967, an increase of $19,607,448 or 1,714% compared to $11,442,519 for the year ended December 31, 2021. The increase in total operating expenses was primarily attributable to an increase in the amortization of intangibles, subcontractor expenses and management fees and an increase in SG&A investment preparing for the next phase of company growth. Operating loss for the year ended December 31, 2022 was $(27,802,365), an increase in loss of $18,786,787, or 2,084%, compared to the operating loss of $9,015,578 for the year ended December 31, 2021. Net loss for the year ended December 31, 2022 was $(21,924,377), an increase in loss of $12,511,610, or 1,329%, compared to a $(9,412,767) loss for the year ended December 31, 2021. The increase in net loss was primarily driven by increases in operating expenses.
2023 First Quarter Interim Filings Highlights
The Company reported revenue for the three months ended March 31, 2023 of $482,319, an increase of $291,926, or 153%, compared to revenue of $190,393 as of the three months ended March 31, 2022. The increase in revenue was primarily the result of an increase in sales with 1861 Market due to the approval of recreational sales in the State of New Mexico on April 1, 2022.
Costs of goods sold, excluding adjustments to the fair value of biological assets and inventory sold for the three months ended March 31, 2023 was $(184,021), an increase of $158,345, or 616%, compare to cost of goods sold, excluding adjustments to the fair value of biological assets and inventory sold of $(25,676) for the three months ended March 31, 2022. The Company reported gross profit for the three months ended March 31, 2023 of $865,416, an increase of $773,396, or 884% compared to gross profit of $92,020 for the three months ended March 31, 2022. The increase in gross profit was primarily driven by the increase in unrealized gain on changes in fair value of biological assets on-hand.
The Company reported total operating expenses for the three months ended March 31, 2023 of $18,565,912, an increase of $9,603,679, or 107% compared to $8,962,233 for the three months ended March 31, 2022. The increase in total operating expenses was primarily attributable to an increase in in the depreciation and amortization of intangible assets and an unrealized foreign exchange on loss of sponsorship liabilities. Operating loss for the three months ended March 31, 2023 was $(17,700,496), an increase in loss of $8,830,283, or 100%, compared to the operating loss of $(8,870,213) for the three months ended March 31, 2022. Net loss for the three months ended March 31, 2023 was $(60,393,864), an increase in loss of $50,865,548), or 537%, compared to a $(9,442,127) loss for the three months ended March 31, 2022. The increase in net loss was primarily driven by the listing expense, the depreciation and amortization of intangible assets, and unrealized foreign exchange loss on revaluation of sponsorship liability.
Project Timing for Launch of Business Segments
As a result of the delay in the receipt of and access to the Brott Funds, the Company is experiencing related delays in the achievement of certain business objectives and milestones previously set out in BGP Acquisition Corp.’s final prospectus filed December 2, 2022. In particular, the Company now expects (i) to ramp up sales in its CBD operations in Q1, 2024 (previously Q2, 2023), (ii) the launch of its e-commerce business in Q1, 2024 (previously Q1, 2023), (iii) the launch of business-to-business sales in Q1, 2024 (previously Q2, 2023), and (iv) the full launch of its strategic partnerships in Q1, 2024 (previously Q2, 2023).
Forward Looking Statements
This press release may contain forward–looking information within the meaning of applicable securities legislation, which reflects the Company’s current expectations regarding future events. The words “expect”, “aim”, “believe”, and similar expressions or words suggesting future outcomes are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking statements. Forward-looking statements are not historical facts, nor guarantees or assurances of future performance but instead represent management’s current beliefs, expectations, estimates and projections regarding future events and operating performance. Specific forward-looking information contained in this press release includes, but is not limited to statements concerning the Company’s business objectives and milestones.
Forward-looking statements reflect management’s current beliefs, expectations and assumptions and are based on information currently available to management, management’s historical experience, perception of trends and current business conditions, expected future developments and other factors which management considers appropriate. With respect to the forward-looking statements included in this press release, the Company has made certain assumptions with respect to, among other things, the Company’s ability to access the Brott Funds, the expectation that no unforeseen changes in the legislative and operating frameworks for the Company will occur; that Craft Global will meet its future objectives and priorities; that Craft Global will have access to adequate capital to fund its future projects and plans; that Craft Global’s future projects and plans will proceed as anticipated; as well as assumptions concerning legislative frameworks, general economic and industry growth rates, prices, currency exchange and interest rates, competitive intensity, future pandemics or other material outbreaks of disease, safety issues, recalls, and no unplanned material changes in Craft Global’s facilities, equipment or customer and employee relations. Forward–looking information is based on a number of assumptions, opinions, and estimates and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to: the Company’s ability to access the Brott Funds; limited long-term data with respect to the efficacy, side effects and safety of cannabis products; uncertainties regarding U.S. hemp regulation; product recalls; failure or deterioration of quality control systems; limited shelf life of products; limited operating history; Craft Global’s ability to successfully manage its growth; Craft Global’s ability to achieve or maintain profitability; the popularity of Craft Global’s brand portfolio; future outbreaks of infectious diseases; potential future sales of shares; execution of Craft Global’s business strategies; reliance on management and conflicts of interest; competition; risks relating to new, well-capitalized entrants developing large-scale operations; reliance on key inputs; dependence on suppliers and skilled labour; Craft Global’s ability to obtain high quality product for its growth needs; climate change; litigation; reliance on third-party distributors; intellectual property risks; protection of trade secrets; fraudulent or illegal activity by employees, contractors and consultants; prohibition against public company ownership of cannabis businesses in some jurisdictions; information technology systems and cyber-attacks; security breaches; high bonding and insurance costs; costs and requirements of being a public company and risks associated with failure to comply with such requirements; no planned dividends; future acquisitions or dispositions; U.S. federal income tax; net operating loss limitations; withholding tax on dividends; risk of U.S. tax classification as a U.S. real property holding company; market price volatility; sales of a substantial number of Subordinate Voting Shares; future equity financings; loss of foreign private issuer status; limitations on certain remedies; global financial conditions; impairment of goodwill and intangible assets; Craft Global’s ability to comply with regulatory requirements; regulatory restrictions on international sales of Craft Global’s products; lack of clarity regarding the future of hemp regulation; designation of cannabinoids as an impermissible adulterant; Federal Trade Commission enforcement actions; status of cannabis as a controlled substance under the Controlled Substances Act; changes in enforcement of cannabis laws; difficulty accessing capital and banking services; differing regulatory requirements across jurisdictions; risks relating to civil asset forfeiture; the uncertain future of the cannabis industry; heightened scrutiny by regulators; risks relating to expansion into other markets; restrictions on deductions of certain expenses; enforceability of contracts; risks relating to changes in U.S. controlled substance laws and regulations; lack of reliable cannabis industry data; contractual right of action; and retention of key personnel, as well as the factors discussed under “Risk Factors” in the Company’s annual information form.
If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. Accordingly, undue reliance should not be placed on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents the Company’s expectations as of the date of this news release and are subject to change after such date. The Company does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
The Exchange does not accept responsibility for the adequacy or accuracy of this press release.
