Simply Solventless Concentrates Ltd.
(TSXV: HASH)
Quick Caps: Microcap Overview
Becoming Canada’s cannabis profit machine — are they making cannabis investing great again?
KR
by Keir Reynolds
December 10th, 2024
Disclaimer
- This presentation is NOT financial advice or a recommendation to invest in the shares of Simply Solventless Concentrates (TSXV: HASH). The content provided here is for informational purposes only and reflects the views and opinions of the presenter at the time of writing.
- The information contained in this presentation is based on publicly available data and is subject to change without notice. No representations or warranties, expressed or implied, are made as to the accuracy, completeness, or reliability of the information presented.
- This presentation contains forward-looking statements which involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from the projected outcomes discussed.
- Investors should conduct their own thorough research and consult with their own financial advisors before making any investment decisions.
- Past performance is not indicative of future results, and investment in any security involves substantial risk, including the risk of total loss.
- Keir Reynolds is a shareholder of $HASH.V and as such is biased.
Simply Solventless Concentrates
Simply Solventless Concentrates Ltd. (TSXV: HASH) is a Canadian cannabis company specializing in solventless concentrates, infused pre-rolls, and branded products. With a track record of eight consecutive profitable quarters and a projected $55M in annualized revenue for 2024, it stands out in a cash-strapped industry. The company has solidified its market position through strategic acquisitions like CannMart and ANC Inc., boosting both vertical integration and distribution reach. Debt-free and growth-focused, Simply Solventless combines operational efficiency with an innovative approach, aiming to be Canada’s most profitable cannabis player.
TSXV: HASH
Trading on the venture exchange - where all the cool kids hang out
Cannabis Concentrates
Specializing in solventless products - because we keep it pure and simple
Est. 2020
Made our TSXV debut in December 2023 via RTO (because IPOs are so mainstream)
Business Overview
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Vision
Become Canada's cannabis profit machine
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Products
Solventless concentrates, infused pre-rolls, branded cannabis swag
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Brands
Astrolab, Frootyhooty, Lamplighter, CannMart
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Market Position
#1 in Concentrates (Manitoba, Saskatchewan), #3 in Concentrates (Alberta)
2024 Highlights
Revenue
$55M projected for 2024. A meteoric rise that's shocking for the cannabis industry.
Profitability
Eight quarters of net income. Yes, actual profits in cannabis—stop clutching your pearls!
Debt-Free
Restructuring worked. It's like Marie Kondo decluttered their balance sheet.
Valuation
P/E and P/S ratios that make industry peers look like amateurs but also based upon trailing results look overvalued. The key is to looking at the forward ratios.
Financial Highlights
688%
Revenue Growth
$6.97M (2023) → $55M (2024 projected)
$10.4M
Normalized Net Income
$0.095/share
39.7%
Q3 2024 Gross Margin
Healthy for a CPG company
0.8
Inventory Turnover
Showing they're not hoarding product
Valuation Ratios
Trailing P/E
49.17 (reflecting high-growth vibes)
Forward P/E (Undiluted)
4.11 (future bargains don't last forever)
Trailing P/S Ratio
4.40 (indicative of investor confidence in revenue scaling)
Trailing EV/EBITDA
24 (Expensive but indicating high-growth)
Return on Equity (ROE)
16.43% (strong efficiency in equity utilization).)
Forward EV/EBITDA
5.43 (Look for typical avgerages of 10 to 15)
Balance Sheet Health
Liquidity
Current Ratio of 1.74—plenty to cover short-term obligations.
Debt-Free
Bye-bye, long-term debt. Thank you, sale-leaseback strategy.
Working Capital
$10.8M. Solid cushion, no bean counting needed.
Strategic Acquisitions
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ANC Inc. (2024)
Pre-roll and white label manufacturer. Adds further vertical integration to SSC.
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CannMart (2024)
Adds $15M in revenue and boosts infused product capacity—think pre-rolls on steroids (the metaphorical kind).
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Lamplighter (2024)
Expands presence in Canada's recreational market. When you want to light up, Lamplighter's got you covered.
Acquisition Payments and Impacts
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ANC Inc. Acquisition
Upfront Payment: $2M funded through warrant acceleration (smart cash grab).
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Future Obligations
$1.25M due in early 2025. $4M due in May 2025.
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Earn-Outs
Additional payments tied to operational and financial performance milestones.
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Integration Synergies
Expected to drive revenue growth and operational efficiencies through vertical integration.
CannMart Acquisition Details
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Purchase Consideration
$500,000 cash upfront. Two million units of Simply Solventless securities valued at $500,000 (at $0.25/unit).
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Promissory Note (VTB Loan)
$1.7M secured against CannMart's assets, with a 3% annual interest rate and monthly repayment terms.
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Repayment Schedule
$100,000 due Oct. 1, 2024. $400,000 due Nov. 1, 2024. $150,000 monthly from Dec. 1, 2024, through Feb. 1, 2025. $100,000 monthly thereafter until fully paid.
Cap Table Summary
The cap table shows Simply Solventless' current share structure, including common shares, warrants, and options. Warrants are approaching expiry (**any remaining unexercised $0.40 Warrants will expire on December 21, 2024), with proceeds use to fund ANC acquisition.
Insiders hold approximately 30% of the fully diluted share structure, demonstrating strong confidence in the company's future.
Key Insights
- Capital Raised via Warrants:
- Total: $5.168M in 2024 ($2.968M at $0.20 + $3.2M expected at $0.40).
- Low Dilution Risk:
- $0.20 warrants fully exercised; $0.40 warrants nearing expiry (accelerated).
- Strong Insider Confidence:
- Insiders contributed 27% of $0.20 warrant proceeds for $800,000 - good shareholder alignment.
Investment Highlights & Risks
Why They're Hot 🔥
- Strategic acquisitions (CannMart, Lamplighter) expanding market reach
- Debt-free balance sheet with $10.8M working capital
- Vertical integration driving operational efficiencies
- Strong ROE at 16.43% showing efficient capital use
- Some selling pressure to end Dec 21st due to warrant acceleration & expiry of $0.40 warrants.
Keep in Mind 🤔
- Future acquisition payments due ($5.25M through 2025)
- Integration execution risks with multiple acquisitions
- Competitive cannabis market pressures (more margin compression?)
While we're excited about our growth trajectory and strategic moves, we believe in transparent communication about both opportunities and challenges.
Conclusion
Simply Solventless Concentrates Ltd. (HASH) is a standout in the cannabis industry for its rare combination of profitability, aggressive revenue growth, and strategic acquisitions. With the successful acquisition of CannMart now closed, HASH has secured a significant foothold in the B2B cannabis wholesale market, complementing its solventless concentrate leadership. The company's forward P/E ratio of 4.11 highlights its potential undervaluation when compared to its trailing P/E of 49.17. This disparity suggests a likely catchup between the two as growth materializes, especially given the cannabis industry average P/E of 10-15. While HASH may seem overvalued on a trailing basis, its forward valuation places it firmly in the "too cheap to ignore" category for high-growth investors.
However, the path forward isn't entirely smooth. HASH faces substantial financial obligations tied to both the ANC Inc. and CannMart acquisitions. These obligations emphasize the importance of sustained cash flow and operational efficiency. Any delays in meeting these payments could result in dilution—a scenario investors should monitor closely.
That said, HASH has demonstrated consistent financial discipline, achieving eight consecutive profitable quarters and maintaining a debt-free balance sheet post-restructuring. The company's ability to manage these obligations while executing on growth initiatives will be the ultimate test of its market leadership.
In summary, Simply Solventless is rewriting the rules in the cannabis sector. With strong fundamentals, an attractive forward-looking valuation, and growing market share, it's poised to deliver substantial upside—provided it can navigate the demands of its ambitious acquisition strategy. Investors should keep an eye on how HASH balances growth with its financial obligations in the quarters ahead.
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