Hollister Biosciences Inc. Announces Launch of Pre-Roll Production and Distribution in Arizona

Rhea-AI Summary

Hollister Biosciences Inc. (OTC: HSTRF) announces the commencement of pre-roll production in Arizona, aiming to meet rising consumer demand following the state's adult-use legalization. Initially targeting white-label customers, production capacity is set to increase from 10,000 to 30,000 units per day by Q4. Arizona's cannabis market is robust, with over $1 billion in 2020 sales and projected revenues of $400 million in its first year of adult-use sales. The company owns Venom Extracts, which accounted for approximately 95% of its total sales. Venom is well-positioned for growth in the Arizona market.

Positive

• Commencement of pre-roll production to meet growing consumer demand in Arizona after adult-use legalization.
• Planned increase in production capacity from 10,000 to 30,000 units per day by Q4.
• Strong market presence with Venom Extracts contributing about 95% of total sales.
• Arizona's cannabis market showing significant potential with over $1 billion in sales and projected growth.

Negative

• None.

VANCOUVER, BC, June 28, 2021 /PRNewswire/ - Hollister Biosciences Inc. (CSE: HOLL) (OTC: HSTRF) (FRANKFURT: HOB) (the "Company", "Hollister Cannabis Co." or "Hollister") a diversified cannabis branding company is pleased to announce that it has commenced pre-roll production and distribution in Arizona to complement the Company's existing cannabis concentrate product suite in the state through its wholly owned Venom Extracts ("Venom") subsidiary.

Pre-roll production will initially be launched for existing and new white-label customers and will be expanded to include branded offerings in Q3 that leverage Venom's strong existing brand equity in the state. The company has prepared for initial production of up to 10,000 units per day, with plans to expand capacity to 30,000 units per day by Q4.

"As a result of adult use legalization in Arizona, we have witnessed growing consumer demand for pre-rolls in the state. Integrating our capabilities and brands between California and Arizona has been a key operational initiative for the Company and we are proud to share this exciting update. We look forward to  introducing our California Hashbone pre-roll brand and our brand partners into Arizona to broaden our higher margin product offerings throughout the state", shared Carl Saling, Co-Founder and CEO of Hollister.

Arizona Market

The state boasts a population of 7.3 million, approximately 70% of which are of legal consumption age, which makes it the 5th most populous state with an active legal adult-use market. Arizona is one of the largest medical marijuana markets in the world with over $1 billion in 2020 sales. The state has nearly 308,000  registered medical patients, making it the third largest medical program in absolute terms, and the second highest in terms of patient penetration rate. Legal sales of adult-use cannabis in Arizona commenced midday on Friday January 22nd, several months ahead of industry expectations, and the fastest that any of the 15 states with recreational marijuana has gone from voter approval to actual sales. The state realized over $2.9 million in recreational sales within 10 days of legalization. "Marijuana Business Daily projects that the state's recreational market could generate up to $400 million in revenue its first year and more than $700 million by 2024."

"Arizona transitioned to adult-use in late January, but this is the first month that BDSA included adult-use sales. Total cannabis sales grew 68% to $124.9 million, with adult-use representing $52.8 million. Medical cannabis sales fell 17% to $72.1 million. Growth was strong across all categories, but the highest growth by far was in pre-rolls, which gained 156%." - New Cannabis Ventures

Venom Highlights

In March 2020 Hollister Biosciences completed the acquisition of Venom Extracts, one of the industry's premier award-winning cannabis concentrate brands. Venom sales were consolidated with Hollister's sales starting after the closing in March and contributing approximately 95% of the Company's overall sales. Venom's product suite is a category leader in Arizona with over 4 million grams sold in 2020, accounting for up to 30 percent of category sales state-wide (per BDS Analytics). Venom is positioned for continued growth in Arizona, it has a strong brand recognition and distribution network, with products in the vast majority of dispensaries statewide.

Venom operates an 11K sq. ft. facility located in Phoenix, AZ which can produce approximately 5 million grams of extract annually in its current configuration. With planned equipment and production enhancements its expected production capacity will be greater than 15 million grams of concentrate products and over 8 million pre-rolls per year.

• In 2020 Venom produced greater than 4 million grams of product
• In Q1 2021 Venom produced approximately 2 million grams of product

This expansion reinforces the company's focus on operational efficiencies and profit margins through product mix and same customer sales. Adding Pre-Rolls as the next product category for Arizona leverages existing capabilities from California, and a large existing distribution network to enhance revenue and profitability of the Arizona operations. The Company looks forward to sharing additional details as this initiative progresses.

About Hollister Biosciences Inc.

Hollister Biosciences Inc. is a multi-state company with a portfolio of innovative, high-quality cannabis & hemp branded consumer products and white-labeling manufacturing. Our products are sold in 370 dispensaries across Arizona and California. Hollister Biosciences wholly owned brand, Venom Extracts, is a category-leading brand that sold more than 4 million grams in 2020, accounting for up to 30 percent of category sales in Arizona. The Company is one of the leaders in the cannabis industry with Q1 2021 revenue of $23.1 million and Adjusted EBITDA of $2.8 million respectively (See Press Release dated June 1st, 2021)

Products from Hollister Biosciences Inc. include HashBone, the brand's premier artisanal hash-infused pre-roll, along with concentrates (shatter, budder, crumble), distillates, solvent-free bubble hash, pre-packaged flower, pre-rolls, tinctures, vape products and full-spectrum high CBD pet tinctures. Our wholly owned California subsidiary Hollister Cannabis Co is the 1st state and locally licensed cannabis company in the city of Hollister, CA, birthplace of the "American Biker".

Website: www.hollisterbiosciences.co

Use of Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures as defined by the SEC. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are included below. This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. Our management uses adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. Our management believes adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the items that we exclude. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.

Reconciliation of Non-GAAP Financial Measures

The table below reconciles Net income (loss) to Adjusted EBITDA for the periods indicated.

		For the three months ended March 31, 2021	For the three months ended March 31, 2020
		$	$
Net income (loss) and comprehensive income (loss)		1,986,802	(2,153,479)
Add (deduct) impact of:
Accretion		-	3,150
Depreciation		304,041	77,099
Finance costs		101,182	109,682
Foreign exchange gain		(28,296)	-
Interest expense		17,514	12,500
Transaction costs		-	828,100
Interest income		(25,610)	-
Income tax expense		808,000	-
Deferred income tax recovery		(55,000)	-
Foreign currency translation adjustment		(298,166)	75,713
Adjusted EBITDA		2,810,467	(1,047,235)

The CSE, nor its regulation services provider, does not accept responsibility for the adequacy or accuracy of this release.

Forward-Looking Information: This news release includes certain statements that may be deemed "forward-looking statements". The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "would", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. These statements speak only as of the date of this News Release. Actual results could differ materially from those currently anticipated due to a number of factors and risks including various risk factors discussed in the Company's disclosure documents which can be found under the Company's profile on www.sedar.com.

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SOURCE Hollister Biosciences Inc.

FAQ

What is Hollister Biosciences Inc. doing in Arizona?

Hollister Biosciences Inc. has commenced pre-roll production and distribution in Arizona to meet increasing consumer demand for cannabis products.

What is the production capacity for pre-rolls at Hollister Biosciences?

Hollister aims to increase its pre-roll production capacity from 10,000 to 30,000 units per day by Q4.

How has the cannabis market in Arizona performed recently?

Arizona's cannabis market generated over $1 billion in sales in 2020, and projections indicate it could reach up to $400 million in revenue during its first year of adult-use sales.

What percentage of Hollister's sales come from Venom Extracts?

Venom Extracts accounted for approximately 95% of Hollister Biosciences' overall sales.

When did adult-use cannabis sales begin in Arizona?

Adult-use cannabis sales in Arizona began on January 22, 2021, ahead of industry expectations.