TORONTO – SLANG Worldwide Inc. (CNSX: SLNG), (Frankfurt: 84S), (“SLANG” or the “Company”), a leading global cannabis consumer packaged goods (CPG) company with a diversified portfolio of popular brands, today provided an update on several matters including commentary on the potential impact of COVID-19 and progress in its core business.
“First and foremost, the health and safety of our consumers and employees is our top priority during this challenging time,” said SLANG CEO Peter Miller. “We are closely monitoring the developments surrounding COVID-19 and its impact on our workforce, our industry and on capital markets. We will continue to adapt, acting swiftly and efficiently, as circumstances evolve. We remain in close contact with our employees, vendors, and buyers as we navigate these challenges together. Ultimately, the core of our business is rooted in partnership, and that has never been more important than now.”
“Despite the challenging market environment, we are a stronger business now than we were a year ago, through great partnerships, market presence, and a more robust portfolio. Additionally, our cash position is strong, and positions us well to successfully navigate through times of uncertainty,” said Mr. Miller. “We continue to make progress on a number of strategic initiatives as we adapt our business to a rapidly evolving cannabis market. While there is ample concern with regard to the economic impact of COVID-19, we have also seen indications that consumers have recently increased their purchases of cannabis products.”
COVID-19 Update
SLANG’s management is committed to ensuring the wellbeing of all members of the SLANG network, and is working diligently to implement best practices that protect its teams and its customers alike. Providing consistent, reliable access to the Company’s product portfolio has been and continues to be a core priority. Within its own operations, SLANG network teams continue to implement enhanced standard operating procedures to ensure the continuity of its supply chain and the integrity of its manufacturing facilities. These measures include the use of a third-party sanitation partner that leverages EPA-cleared disinfection techniques, including electrostatic sprayers, foggers, and ATP Luminometers to monitor for contamination. The Company is also implementing work-from-home and social distancing measures wherever possible, in accordance with the most up-to-date recommendations of public health authorities. The Company will continue to monitor developments closely and adjust operating plans accordingly in the event that circumstances change in various markets. Above all, the Company is highly focused on maintaining the stability of its operations globally, while diligently protecting the safety of its workforce, as it has done for the last eight years.
The Company’s supply chain includes a range of both domestic and international suppliers, some of which may be susceptible to temporary production delays relating to efforts to reduce their employees’ potential exposure. The Company has sufficient inventory of key materials to meet expected demand for the near-to-medium term, and does not currently anticipate any disruptions. The Company’s strategy to manage the overall impact includes staying in close contact with supply chain partners, identifying alternative suppliers, and adjusting inventory and production levels to minimize potential interruptions.
While the situation remains fluid, initial demand has been strong. The Company continues to operate, and deliveries are still rolling out across the SLANG network. SLANG’s current cash position and robust relationships within the supply chain position the Company to navigate through the prevailing global headwinds.
Business Update
The Company continues to execute on its strategy for measured growth, and has been proceeding with its plan to optimize its operations toward profitability. SLANG’s capital-light business model, which is focused on building strong CPG brands and distribution capabilities, affords the Company multiple strategic options for competing and scaling in various jurisdictions. The maturity of the local cannabis market and the ability to generate profit margins and sustainable growth are the key elements driving strategic choices. The Company’s business model positions it well to act dynamically during ever-evolving market conditions.
SLANG is focused on creating value in core markets with profitable growth trajectories. The Company’s strategy in core markets is to consolidate supply chain assets in order to strengthen unit economics and profitability. SLANG currently considers its core markets to include Colorado and Oregon. As previously announced, the Company has exercised its option to acquire the Allied Concessions Group manufacturing and distribution business in Colorado. The Company recently executed definitive agreements relating to its proposed acquisition of an edibles manufacturing and distribution business belonging to Oregon-based LBA Global Corporation (“LBA”). The Company has subsequently been working to obtain the state regulatory approvals required to complete both transactions.By way of contrast, the Company views emerging markets as those in which medical and recreational cannabis use typically has been more recently legalized or in which the current regulatory or commercial environment makes profitability more challenging. Strategic partnership and brand licensing models have allowed the Company to build brand awareness and sales while reducing the requirement for an up-front investment of capital in what the Company considers “emerging markets”. For SLANG, emerging markets include Florida, Maine, Nevada, New Mexico, Oklahoma, Vermont and Canada. SLANG’s strategy in emerging markets is built around strong local partners in each of these markets who manage production and distribution, such as Trulieve Cannabis Corp. in Florida.
Recent corporate developments consistent with SLANG’s capital-light growth strategy include the following:
Balance sheet: The Company continues to operate with a strong cash position and has not incurred a significant amount of debt with unaffiliated entities. In late November and early December of 2019, the Company strengthened its balance sheet through private placement financings which raised aggregate gross proceeds of approximately $16.8 million. Those proceeds are available for general corporate purposes and to allow the Company to pursue strategic growth opportunities.
Cookies partnership: The Company has expanded its strategic partnership with the cannabis and lifestyle brand Cookies through recently announced licensing and distribution agreements in both Colorado and Oregon, with ongoing discussions relating to other markets. Pursuant to the agreements, SLANG will enter the flower category in partnership with one of the most notable brands in the industry. The partnership is expected to create new revenue opportunities for SLANG and further diversifies the Company’s product portfolio.
Maine: SLANG recently announced a licensing agreement with Northeast Patients Group, doing business as Wellness Connection of Maine (“Wellness Connection”), the state’s largest licensed producer of medical cannabis. The agreement grants Wellness Connection an exclusive license to produce and distribute the SLANG product suite in Maine, where the first adult-use, recreational sales are expected by this summer.
Ohio: In early Q1 2020, the Company announced its expansion into the Ohio medical cannabis market through a licensing agreement with Standard Wellness Company, LLC (“Standard Wellness”). The agreement grants Standard Wellness an exclusive license to produce and distribute the SLANG product suite in Ohio, with sales expected to begin in Q2 2020 with its category-leading O.penVAPE, Pressies, Bakked and District Edibles brands.
Canada: The Company expects several SLANG cannabis-infused products to be available in Canada in the near future, subject to regulatory approval, through its joint venture with Canopy Growth Corporation (NYSE: CGC), Agripharm Corp. The initial launch is expected to include the O.penVAPE RESERVE vaporizer cartridges, the Firefly Mini portable vaporizer and Bakked Dabaratus distillate dabbing solution.
Cultivate Brands Corp: Earlier this month, SLANG announced the entering into of an agreement to acquire Cultivate Brands Corp, a company with a portfolio of brands, intellectual property and other assets including approximately $4.5 million of cash. The transaction is expected to close in April 2020.
“While it’s too early to assess the entire potential impact of COVID-19 on the cannabis industry, and broader economy, our team remains focused on executing our business plan. This plan is particularly well-suited and adaptable to dynamic shifts in our markets,” said Mr. Miller. “We are confident that the team will rise to meet any challenges ahead. We look forward to providing additional details in the near-term during our fiscal-year 2019 earnings call.”
SLANG expects to announce its year-end fiscal 2019 results in the coming weeks. Additional details on timing and a planned investor conference call will be provided in advance.
About SLANG Worldwide Inc.
SLANG Worldwide Inc. is a global leader in the cannabis CPG sector with a diversified portfolio of popular brands distributed across the United States. The Company specializes in acquiring and developing market-proven regional brands as well as launching innovative new brands to seize global market opportunities. SLANG is listed on the Canadian Securities Exchange under the ticker symbol SLNG and on the Frankfurt Stock Exchange under the trading symbol 84S. For more information, please visit www.slangww.com.
