Metals Update 31/05/2021

Quinsam Capital grants options, issues DSUs for debt

Quinsam Capital Corp. has issued an aggregate of 2.24 million options with an exercise price of 19 cents per share. The options, which are vested on grant, expire on May 31, 2026.

The company also wishes to announce that it has issued 774,000 deferred share units at 20 cents per deferred share unit, a premium to the market price, in satisfaction of compensation owing that was accrued in the 2020 financial statements.

Metamaterial loses $55.07-million in Q1

Metamaterial Inc. has released its first quarter 2021 results. Please visit the Investors section of our website to view the Q1 2021 Shareholder Letter.

The interim financial statements and the associated management discussion and analysis for the quarter ended March 31, 2021 are available on the Investors section of our website as well as under the Company’s profile on SEDAR at http://www.sedar.com.

One-time non-cash loss on conversion of debt

In Q1 2021, the Company recorded a $50.1 million (55c per share) one-time, non-cash debt revaluation expense resulting from the conversion of $12.8 million of secured and unsecured debt of the Company into common stock at varying share prices of between $0.50 per share and $0.70 per share. These conversions were announced by the Company at varying dates during Q1 2021 and the creditors included Tom Welsh, Ann Lambert, Dicot Holdings, Lark Investments and BDC Capital. Typically, expenses booked in the profit and loss would flow to shareholder's deficit thereby reducing overall shareholder's equity. The accounting method chosen by the Company for its debt valuations provides, in part, that this non-cash expense be recorded in common stock to reflect the issuance of new shares to the creditors.

The accounting method described above resulted in the Company reporting, for the first time since becoming a public company, positive shareholder's equity of $277,680 at the end of the quarter.

The conversions had the beneficial effect of significantly reducing the Company's liabilities and eliminating broad-based security interests in all of the Company's assets previously held by the creditors. The creditors exchanged their secured and unsecured debt for common stock of the Company at conversion prices that were established at the time the instruments were created and, at which time, represented a conversion above the then market price of the common stock. Had the Company been permitted to pay off the debts in cash at the time of conversion, fewer shares would have been required to be issued and a lower loss would have been recorded. However, the terms of the instruments prevented any pre-payment of the debts by the Company.

As a result of the above one-time non-cash loss on conversion of debt, the Q1 2021 net loss was $55,079,277, 60c per share on 91,277,328 weighted average shares, compared to a Q1:2020 net loss of $5,392,355, 12c per share on 46,587,115 weighted average shares. The total Q1:2021 revenue was $756,144, an increase of 26.5% compared to Q1:2020 revenue of $597,575.

Vitalhub outlines S12 Solutions growth since February

Vitalhub Corp.’s newly acquired subsidiary, S12 Solutions, has achieved significant market penetration since February, 2021.

S12 Solutions is a U.K.-based company, which helps mental health professionals efficiently complete Mental Health Act 1983 (MHA) processes. S12 Solutions is a digital platform, which connects approved mental health professionals (AMHPs) with approved Section 12 (S.12) doctors for MHA assessments in England. AMHPs are able to find available, local doctors, create S.12 doctor claims, and both AMHPs and doctors can create, complete and share electronic statutory MHA forms.

Founded in 2017, S12’s platform supports mental health crisis care pathway efficiency through timely access to the best available assessing team for service users, more assessment preparation time for AMHPs, and greater control over contact information and S.12 work for doctors. Since February, 2021, S12 has added new users totalling 562 AMHPs, 267 S.12 doctors and 16 claims processors. S12 contracts signed since February, 2021, include:

  • Leicester, Leicestershire and Rutland: three clinical commissioning groups (CCGs), one trust and three local authority (LA) as a new contract;
  • Hertfordshire: two CCGs, one trust and one LA as a new contract;
  • Coventry and Warwickshire: one trust and two LAs as an expansion of the existing contract;
  • North Cumbria: one CCG, two trusts and one LA as a contract renewal;
  • Central and northwest London: one CCG, one trust and five LAs as a new contract;
  • Kent: one CCG, one trust, two LAs as a new contract;
  • Devon: one trust and two LAs as a new contract.

Moreover, since February, 2021, the following contracts went live:

  • Leicester, Leicestershire and Rutland: standard platform;
  • Lincolnshire: standard platform;
  • CNWL: standard platform;
  • OXLEAS: standard platform;
  • Hampshire and Southampton: additional feature to existing implementation.

“We are delighted with the continued progress and traction being achieved by the S12 team,” said Dan Matlow, chief executive officer of Vitalhub. “The S12 platform solves a significant market need through addressing the bottleneck in the delivery of care imposed by the Mental Health Act processes. We see significant opportunity to leverage the S12 technology platform toward continuing expansion, both within its current mental health application, and to disrupt additional health care market verticals.”

Tinley products to be sold at Harborside

The Tinley Beverage Company Inc.’s products will launch this week at Harborside Inc.’s dispensaries, one of California’s oldest and most prominent dispensary chains. The company also expects increasing daily utilization of its Long Beach manufacturing facility throughout the month of June. The company’s non-infused products continue to expand retail placements in California, Tennessee, Alberta and Ontario. The company believes that this growth is driving the diversification of the company’s revenue streams, enabled by the full commissioning of the company’s facility in Q4 2020.

Retail expansion

Harborside is a vertically integrated California-focused licensed cannabis business with retail locations in Oakland, San Jose, San Leandro and Desert Hot Springs, a 47-acre farm and production facility in Monterey county, and over 365,000 registered customers. Harborside is one of the oldest and most respected cannabis retailers in the world. Tinley’s products are expected to launch in all four locations over the next one to two weeks.

Tinley’s infused products are now available in two of northern California’s highest-volume retail groups, in addition to being direct-to-consumer enabled through one of the state’s largest retail home delivery networks. The company is working with these groups on structured, system-wide marketing initiatives to drive trial and sell-through, both in store and on-line.

The company’s Beckett’s non-alcoholic spirits and cocktails now have approximately 65 facings in approximately 20 cantina, liquor and convenience stores in Tennessee. This expansion is being led by Lipman Brothers, Tennessee’s oldest wine and spirits distributor. The company is working with Todd Chrisley on in-store merchandising and appearance programs to drive local brand awareness and sell through. Todd Chrisley is one of NBC Universal’s top-rated reality television stars nationally, and Nashville is his top-rated market.

Beckett’s is now available at Summerhill Market’s Annex and Forest Hill stores in Toronto. The company has also restocked Alberta’s Liquor Connect and is continuing its expansion throughout the province and has scheduled production of additional inventory in June to meet growing demand. Additionally, the company has received interest from on premise accounts which, pending successful arrangement of logistics, would make the products available on menus in many Canadian provinces.

Third party manufacturing

The company expects increasing capacity utilization through the month of June at its cannabis beverage manufacturing facility in Long Beach, Calif., for its previously disclosed third party beverages. This reflects the rapid growth in demand for its third party manufacturing services since entering into its first such agreement four months ago.

The company also expects production to include three additional third party brands. These include products to be produced on the company’s new canning line, which is now in the process of final commissioning.

The three additional third party brands include Fable, a line of four cannabis-infused botanical beverages created by advertising industry veteran Ben Kennedy and his wife and co-founder Kristin. Each 12-ounce bottle will deliver three non-alcoholic cocktail servings, each containing a microdose of four milligrams tetrahydrocannabinol and two mg cannabidiol per serving. Flavours include:

  • Night Flight: ginger yields to cucumber, blackberry and hibiscus notes while spearmint and lemon peel lend brightness;
  • Hive Society: lemongrass and basil blend with a honeyed whisper of jasmine;
  • Best Zest: a bouquet of grapefruit, orange and lime open. Cinnamon and cardamom finish with warmth;
  • Into the Woods: Hints of rosemary and peach are grounded by juniper and white oak.

“Making a great happy hour drink, minus the alcohol, was challenging,” said Fable chief executive officer and co-founder Ben Kennedy. “The viscosity, the bite, the quality of ingredients and how they all work together are the foundation of Fable. Our four cocktails deliver a tasting experience that is just as special as the cannabis buzz.”

“It’s exciting to see our bottling equipment operating so frequently,” said Rick Gillis, president of Tinley Western USA. “After a lengthy buildout, we are delighted to be attracting such a high calibre of third party brands, and their sell through is proving to be strong. Together with the placement of our infused products in large dispensary chains and our non-infused products in an increasing number of states and provinces, we’re beyond excited to at long last see the Tinley vision come to life.”

Revenue diversification

With increased capacity utilization and expanded distribution for the company’s own branded products, the company’s revenue is increasingly becoming diversified across its three business lines: third party cannabis beverage manufacturing, Tinley’s infused beverages and Beckett’s non-infused beverages. While only a small portion of third party beverage manufacturing revenues have been recognized thus far, owing to such production runs only having begun shipping in March, such revenue is now driving a significantly larger portion of the company’s revenue. In 2020, revenue was mostly generated by non-infused beverage sales, primarily due the company’s lack of access to scaled infused beverage production for the majority of the year. The company expects the bottling capacity utilization at its permanent, scaled facility in Long Beach to continue to increase, and this facility enables the company to manufacture and sell its own Tinley-branded products in greater scale as well. The company notes that uncertainty inherently exists in any new manufacturing operation surrounding the throughput achieved on any given bottling day as well as the repeatability of client demand. Therefore, the company does not provide specific guidance on revenue and does not disclose the details of third party brand agreements unless required to do so by applicable regulations. The company expects its increasingly diversified revenue to continue to balance and accelerate growth in the coming quarters.