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Cannabis Summary for June 1, 2020

2020-06-01 19:59 ET - Market Summary

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by Stockwatch Business Reporter

The S&P/TSX Cannabis Index lost 1.67 points to 157.76 Monday, while the Canadian Securities Exchange Composite Index lost 6.49 points to 377.21. Cannabis-2.0-focused Auxly Cannabis Group Inc. (XLY) gained 1.5 cents to 42 cents on 3.12 million shares after releasing its first quarter results for 2020. (Before reviewing the results, it is worth noting that, despite Auxly having a share price of just 42 cents, the company has a market cap of $268-million.)

With cannabis 2.0 products being legalized in mid-December, it was the first full quarter in which Auxly was able to sell these products. Accordingly, its net revenue jumped to $9.9-million in Q1 2020, up from $3.1-million in Q4 2019. Of the Q1 sales, $8-million was from cannabis 2.0 products (mostly from vapes). Additionally, sales from British Columbia, Alberta and Ontario made up more than 80 per cent of Auxly's cannabis 2.0 sales.

Auxly lost $13.1-million in Q1 2020, compared with a $57.7-million loss in Q4 2019. Part of what made the Q4 loss so bad was an inventory charge of $29.6-million, which in turn contributed to a negative gross margin of $2.6-million. Those figures improved somewhat in today's Q1 results, with the company recording a positive gross margin of $2.9-million (although in percentage terms the gross margin still comes in at a pedestrian 30 per cent). Today's figures also included an impairment charge, of $1.2-million. Auxly's losses are further compounded by high selling, general and administrative expenses. Its SG&A expenses of $14-million in Q1 exceeded its $9.9-million in revenue.

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