TORONTO, Nov. 28, 2019 – Trichome Financial Corp. (formerly 22 Capital Corp.) (the “Company” or “Trichome Financial“) (TSXV: TFC) today announced its financial results for the three and nine-month periods ended September 30, 2019. 

The complete Financial Statements and Management’s Discussion and Analysis for the three- and nine-month periods ended September 30, 2019, along with additional information about the Company and all of its public filings are available at www.sedar.com.

Third quarter highlights


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Highlights during the quarter ended September 30, 2019:

  • Entered into a $5.5 million senior secured term loan to MYM Nutraceuticals Inc. (CSE:MYM), of which $3 million was funded on closing, and a $2.35 million senior secured term loan to Good Buds Company International Inc.;
  • Received full repayment of loans to C.G.S. Foods Inc. (an Ontario cannabis retailer doing business as ‘Ganjika House’) in the amount of $1.25 million and early repayment of the Company’s loan to Blissco Holdings Ltd. in the amount of $1.4 million
  • Total par value of investments increased to $8.9 million with a further $2.5 million in commitments, compared to $0.5 million as of December 31, 2018; and
  • Appointed Karl Grywacheski as Chief Financial Officer and Dan Cohen as Vice President, General Counsel of Trichome Financial.

Highlights subsequent to the quarter ended September 30, 2019:

  • Completed a reverse takeover with 22 Capital Corp. on October 4, 2019, and listed on the TSXV under ticker symbol “TFC” on October 10, 2019;
  • Closed a private placement on October 4, 2019, raising gross proceeds of approximately $16.5 million resulting in pro forma cash of $21.1 million and pro forma working capital of $24.4 million;
  • Increased the loan agreement to James E. Wagner Cultivation Corporation (“JWC”) (TSXV:JWCA) to $7.5 million from $3.5 million;
  • Entered into the Company’s first receivables financing facility with JWC for up to $5.0 million; and
  • Received conditional approval to list its common shares on the Canadian Securities Exchange, with successful listing to allow the Company to expand its addressable market for credit solutions to include the cannabis sector in the United States.

“The operational and funding challenges the cannabis sector has experienced in the last six months have been a significant tailwind to Trichome Financial. Our deal pipeline continues to increase, and the quality of actionable opportunities has high-graded materially. Consequently, we believe the risk-return profile of our investment opportunities remains very attractive,” said Michael Ruscetta, Chief Executive Officer. “The need for credit in the cannabis sector is expected to continue increasing at a rapid pace and Trichome Financial remains in an excellent position to capitalize on these opportunities.”

Outlook

The current environment in the cannabis sector is highly favourable for Trichome Financial. Our business model is unique in that it benefits from both the structural, long-term growth of the global cannabis industry as well periods of market volatility when investor confidence wanes. Since the middle of 2019, a series of events have contributed to creating a negative feedback loop for investor confidence in the cannabis sector. A detailed discussion of these events, as well as key learnings by management of Trichome Financial over the last 18 months was published by the Company in a press release on October 7, 2019. Since then, operational and financial performance in the cannabis sector have only deteriorated. This has led to a highly favourable environment for Trichome Financial characterized by an increase in the number of companies in need of Trichome’s solutions, an increase in overall borrower quality as a result of being able to select from an even larger pool of opportunities and improving risk-adjusted return profiles through increasing contractual returns, higher warrant and equity coverage and more favourable structural enhancements.

Trichome has raised gross proceeds of approximately $31.8 million and is in the process of constructing a portfolio of diligently underwritten and structured income generating credit investments. To date, Trichome has closed seven credit transactions to six unique counterparties, with three of those loans having been fully repaid. As at September 30, 2019 the par value of loans outstanding was $8.9 million, with a further $2.5 million committed. Subsequent to quarter end, the par value of loans outstanding increased to $11.7 million with a further $3.7 million committed. The weighted average effective interest rate of the portfolio is approximately 14%, excluding warrants and equity consideration, and the annualized interest revenue from the portfolio is approximately $1.8 million. Interest revenue is expected to grow commensurately with further deployment of the Company’s cash into income-generating credit investments. This amount could be partially offset by any prepayments or early terminations. Total cash-based operating expenses are estimated to be approximately $1.9 million on an annualized basis, excluding one-time listing and fund set-up costs, which could increase by approximately $0.6 million if annual bonus payments are merited. Management expects modest increases in the expense base to continue the buildout of Trichome’s infrastructure. No capital expenditures are planned. Management believes that the proceeds from the disposition of warrants and shares, fee income from the launch of Trichome Financial Cannabis Private Credit Fund (“Trichome Private Credit”), the accretive effect of adding portfolio leverage, and the potential to launch complimentary business lines has the potential to materially increase overall profitability.

Financial results for the three months ended September 30, 2019

For the quarter ended September 30, 2019, interest revenue increased to $412,304 from $9,437 compared to the quarter ended September 30, 2018. This is the result of the par value of total investments increasing over the course of the year to $8.9 million at quarter end, from $0.5 million as of December 31, 2018.

Trichome Financial realized an adjusted loss of $343,276 as compared to $514,847 in the prior year. Offsetting the increase in interest revenue were increases to operating expenses related to hiring new employees, leasing office space, insurance and expenses incurred to perform due diligence on new loans, such as legal, professional, and travel costs. Adjusted loss is calculated by excluding certain non-cash and non-recurring items from net loss as calculated under IFRS.

Cash and restricted cash totaled $15.9 million as of September 30, 2019, compared to $13.8 million on December 31, 2018. Subsequent to its private placement on October 4, 2019, the Company had pro forma cash of $21.1 million and pro forma working capital of $24.4 million.

Summary of operations

Three months ended September
30, 2019

Three months ended
September 30, 2018

Nine months ended
September 30, 2019

Nine months ended
September 30, 2018






Interest revenue

$

412,304

$

9,437

$

693,368

$

12,930

Operating loss

(548,879)

(888,297)

(1,794,874)

(1,099,807)

Total net and comprehensive loss

(1,117,908)

(923,784)

(3,147,227)

(1,135,294)

Adjusted loss1

(343,276)

(514,847)

(888,795)

(679,122)








As at September 30, 2019

As at September 30, 2018






Cash and restricted cash2


$15,928,799

$13,810,095






Loan book:

 Term / Interest rate 

Loan amount

 Term / Interest rate 

Loan amount

James E. Wagner Cultivation Corporation (JWC)

24 months / 9.25%

$3,500,000

Good Buds Company International Inc. (Good Buds)

13 months / 11.5%

$2,350,000

MYM Nutraceuticals Inc. (MYM)

12 months / 12.0%

$3,000,000

180 Smoke Inc. (180 Smoke)

12 months / 10.0%

$425,000

Total loan book

$8,850,000


$425,000

Committed capital:

MYM:

$2,500,000


JWC (factoring):

$5,000,000


180 Smoke:

$2,075,000

Other highlights:





Fair value of warrants


$574,216

$17,314



Loan amount


Loan amount

Loans fully repaid during year:

180 Smoke

$425,000


Blissco Holdings Ltd.

$1,500,000

 

C.G.S. Food Inc. d/b/a Ganjika House

$1,250,000

(1) Refer to Adjusted losssection within Management’s Discussion and Analysis 

(2) Restricted cash was converted to free cash on October 4, 2019. Additional $6 million cash raised in October 2019

About Trichome Financial Corp.

Trichome Financial is a specialty finance company focused on providing flexible and creative credit solutions to the global legal cannabis market. Trichome was created to address the lack of credit availability in the large, growing and increasingly complex cannabis market. Founded by industry leaders Origin House and Stoic Advisory, Trichome Financial’s experienced management team has a unique edge to capitalize on proprietary deal flow and industry insight while developing a first mover advantage as a global cannabis focused specialty finance company. Trichome Financial provides customized financing solutions across the industry value chain to support growth, capital expenditures, mergers, acquisitions, working capital and other needs.  Leveraging the combined resources and knowledge of its founders, it is able to offer significant value-added financial, product, market and operational support to its partner companies. Trichome Financial’s current assets are all based in Canada and it has no operations or assets in the United States.

For further information about Trichome Financial please visit us at www.trichomefinancial.com or @trichomefinance on Twitter and refer to the joint information circular of Trichome Financial and 22 Capital dated May 29, 2019 which is available on the Company’s SEDAR profile at www.sedar.com.

READER ADVISORY

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate to, among other things: the Company’s effective cash interest yield, effective interest rate, interest revenue, cash-based operation expenses, the development of the global cannabis industry and trends in the cannabis capital markets, the future market opportunity for Trichome Financial and factors that may improve future profitability. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; and the delay or failure to receive board, shareholder or regulatory approvals. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, Trichome Financial assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act“), or any state securities laws and may not be offered or sold within the United States or to United States Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Non-IFRS Financial Measures

The Company reports non-IFRS financial measures, including adjusted loss and adjusted loss per share, as key measures used by management to evaluate performance of the business, to compensate employees and to facilitate a comparison of quarterly and annual results of ongoing operations.  While used to assist in evaluating the operating performance of the Company, readers are cautioned that adjusted loss as reported by the Company may not be comparable in all instances to adjusted loss as reported by other companies.  For a detailed explanation of how the Company’s non-IFRS measures are calculated, please refer to the Company’s MD&A filing for the three and nine months ended September 30, 2019, which can be accessed via the SEDAR Web site (www.sedar.com).

SOURCE Trichome Financial Corp.

Trichome Financial Reports Q3 2019 Financial Results and Provides Outlook

For further information: Michael Ruscetta, CEO, [email protected]; Marc Charbin, Investor Relations, Telephone: (416) 467-5229, Email: [email protected]