Vancouver, BC, November 4, 2022 – YourWay Cannabis Brands Inc. (CSE:YOUR)(OTC:YOURF)(FSE:HOB) (the “Company” or “YourWay“), a consumer-centric House of Brands committed to redefining the way consumers and cannabis brands interact, is providing an operational update, including initiatives being taken to address the management cease trade order (the “MCTO”), the delays in releasing the Company’s audited annual financial statements for the year ended December 31, 2021 (the “2021 Annual Financial Statements”), details of the Company’s newly appointed leadership team, and the Company’s expansion plans in Arizona.
“There has been significant change and evolution in our business over the past twelve months,” said Acting Chief Executive Officer, Jakob Ripshtein. “We have overhauled the organization from top to bottom, driven by a strategic corporate transformation and renewed corporate vision.”
The transformation began with a corporate rebrand in December 2021 from Hollister Biosciences Inc. to YourWay Cannabis Brands Inc. This update was tied directly to the Company’s revamped strategic commitment to creating intuitive brands, releasing thoughtful products, and working intentionally to create a House of Brands that caters to every moment in a consumer’s life.
The Company is working with the auditors to finalize the 2021 Annual Financial Statements and the related management’s discussion and analysis. Due to a combination of factors, including (i) the complexity associated with a change of the Company’s auditors, which took effect on December 6, 2021; and (ii) changes in the management personnel of the Company, the Company is requiring additional time to support the auditors in finalizing the 2021 Annual Financial Statements. We expect to release our 2021 Annual Financial Statements by the end of 2022. Over the past few months, the Company has instituted enhanced financial and operational controls to improve accuracy, efficiency and reporting compliance.
In addition to the work being done to finalize the 2021 Annual Financial Statements, the board of directors of the Company (the “Board”) resolved to demand repayment of all amounts advanced, which total approximately US$166,325 to Ionic Brands Corp. (“Ionic) pursuant to a demand promissory note dated May 20, 2022 (the “Ionic Promissory Note”). YourWay has provided notice to Ionic of its demand for repayment, but the funds have not yet been returned.
Throughout the year, there have been several adjustments to the leadership team and the Board to oversee the strategic corporate transformation of the Company. Recently, Jacob Cohen resigned as Chief Executive Officer of the Company to focus on his operational role as President of Arizona Operations. Mr. Cohen has extensive hands-on experience in the Arizona cannabis sector, and the Arizona marketplace continues to be a focus of YourWay’s sales and marketing efforts.
The Arizona cannabis marketplace is in flux, and since recreational marijuana sales launched in 2022, the Arizona medicinal market has seen a downturn. The Arizona Department of Health Services has reported a steady decline in the Arizona medicinal market.
This shift in the Arizona market has altered the focus of the Company’s retail customers, and YourWay’s sales team is adapting to satisfy the shift from the medicinal market to the new demand for recreational cannabis products. The Company is making an effort to balance out its portfolio by introducing several established brands to the Arizona marketplace. For example, Old Pal is a well-known and in-demand cannabis brand that has continued to be a strong performer since the Company began Arizona production and shipment in May of 2022. YourWay’s exclusive multi-year licensing agreement to manufacture, produce, promote, distribute, and sell certain Old Pal-branded cannabis products in Arizona, including whole flower, pre-ground flower, pre-rolls, and distillate cartridges in association with the Old Pal brand, has allowed YourWay to capitalize on the shift in demand in the Arizona market.
Additionally, in February of 2022, YourWay signed an exclusive agreement with AIRO, one of the top-selling cannabis brands across multiple markets, including Nevada, Colorado, Illinois, Maryland and Washington. AIRO is currently available in more than 1,300 dispensaries across the United States and Puerto Rico. Expanding the AIRO offerings is currently under consideration by the Company, and under the terms of the exclusive multi-year licensing agreement entered into between YourWay and AIRO, YourWay has exclusive right and license to manufacture, produce, promote, distribute, and sell certain popular AIRO products in Arizona, including the AIROPro®, AIROSport™, and AIROX®, featuring formulations from AIRO’s Strain Series, Artisan Series, and Live Flower Series, plus additional products.
In addition to balancing our portfolio of brands, the Company has made a conscious effort to rationalize existing product SKUs, including price adjustments when appropriate and eliminating non-profitable products. In the past, a large portion of revenue was derived from non-branded bulk distillate and extracted products. Maintaining a reasonable margin within this category has been a challenge, and most related sales have now ceased. Although we expect an impact on total sales revenue based on the termination of this category, this will allow for an increased focus on the YourWay core strategic objective of creating value with its own brands, partner brands and select retailer control brands. The Company will continue to monitor opportunities in the bulk category and maintains the optionality to reactivate this category should business or market conditions change.
YourWay has experienced operational challenges which have hampered the Company’s ability to satisfy some of its contractual arrangements to provide services and generate revenue. While the Company reports cannabis-related revenue and expenditures due to financial reporting requirements under International Financial Reporting Standards, the Company does not have any cannabis licenses itself and, accordingly, is reliant upon third-party license holders, which has limited the Company’s sell-through capabilities during 2022. An ongoing focus by the Company is to address operational challenges, and there are signs of improvement in that area.
While the rapidly expanding recreational Arizona cannabis market provides many growth opportunities for the Company, it also presents an influx of competitor brands across the state. Throughout 2022 all wholesale product prices have decreased. The drop in the high-end market of the Arizona indoor flower price has dipped below those of California, with the breadth of quality and pricing adding to the complexity of retailing in the Arizona cannabis market., To combat this influx of competitors, the Company’s growth strategy includes expanding the Venom Extracts brand, which has been part of the Arizona cannabis market since 2017 and as such, has developed significant brand awareness and loyalty amongst legacy cannabis users. Venom Extracts is positioned as an affordable cannabis brand with a following of consumers who exhibit a tendency for repeat purchases. Plans are in place for several line extensions to the Venom Extracts brand, including pre-rolls and infused pre-rolls.
With COVID-19 restrictions eliminated for most of the hospitality and travel industries across the United States, many states, including Arizona, are seeing a significant increase in tourists. Increased tourist traffic to the state will provide an opportunity to market cannabis brands to visitors who may or may not have readily available legal cannabis for sale in their home state.
Labor force participation in Arizona still remains below pre-pandemic rates and continues to be an issue for many industries in Arizona. Delays in securing the appropriate labor contingent and licensing delays have impacted the Company’s ability to bring the Cottonwood facility (the “Facility”) online. Based on the delays and current state of the market, the Company is strategically reviewing options related to the Facility. The substantial increase in the supply of raw materials with attractive quality and wholesale price points as a result of new facilities coming online throughout the state creates additional optionality for the Company.
About YourWay Cannabis Brands
YourWay is a publicly traded, multi-state and consumer-centric House of Brands committed to redefining the way consumers and cannabis brands interact, with sales and operations in Arizona, California, Oregon and Washington. By building their own brands, partnering with others, and supporting retail partners control brand strategy, they are dedicated to expanding their reach; remolding the cannabis industry and ultimately redefining consumers and cannabis brands interact.
YourWay aims to connect with the cannabis consumer on a deeper level, utilizing decades of brand-building expertise and an integral understanding of the customer experience to create an intuitive suite of branded products that closely aligns with consumer need states. The YourWay portfolio is an all-encompassing house of brands designed to create a sense of belonging for every cannabis consumer regardless of their relationship with the plant. Please visit www.yourwaycannabis.com or follow on Twitter at @yourwaycannabis for the latest news and information about YourWay and its brands.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This news release includes certain “forward-looking information” as defined under applicable Canadian securities legislation, including statements regarding the plans, intentions, beliefs, and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding: the Company’s intentions to finalize the 2021 Annual Financial Statements by the end of 2022; the impact of the Company’s enhanced financial and operational controls; the Company’s expansion plans for the Arizona cannabis market; the repayment of the Ionic Promissory Note; the Company’s continued focus on sales and marketing efforts in the Arizona marketplace; the impact of the decline in the Arizona medicinal cannabis market; the Company’s efforts to introduce established brands to the Arizona marketplace; the expansion of the AIRO offerings in the Arizona cannabis market; the expected impact on the Company’s total sales revenue as a result of the termination of non-branded bulk distillate and extracted products; the Company’s increased focus on its strategic objective of creating value with its own brands, partner brands and select retailer control brands; the Company’s continued efforts to monitor opportunities in the bulk category in order to maintain optionality to reactivate the category if needed; the complexity of retailing in the Arizona cannabis market; the Company’s strategy to expand the Venom brand; the expected increase in demand as a result of Arizona’s increasing tourist traffic; the increasing tourist traffic in Arizona; the Company’s options regarding the Facility; additional optionality for the Company as a result of increased supply of raw materials with attractive quality and wholesale price points; and expectations for other economic, business, and/or competitive factors. Forward-looking information is 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 information.
Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance, or achievements of the Company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the timing for filing the Annual Filings and the Interim Filings; regulatory and licensing risks; changes in consumer demand and preferences; changes in general economic, business and political conditions, including changes in the financial markets; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; compliance with extensive government regulation; public opinion and perception of the cannabis industry; the impact of COVID-19; and the risk factors set out in the Company’s annual information form dated August 28, 2020, filed with Canadian securities regulators and available on the Company’s profile on SEDAR at www.sedar.com.
The Company, through several of its subsidiaries, is indirectly involved in the manufacture, possession, use, sale, and distribution of cannabis in the recreational and medicinal cannabis marketplace in the United States. Local state laws where the Company operates permit such activities however, investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the US Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable United States federal money laundering legislation.
While the approach to enforcement of such laws by the federal government in the United States has trended toward nonenforcement against individuals and businesses that comply with recreational and medicinal cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve the Company of liability under United States federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company. The enforcement of federal laws in the United States is a significant risk to the business of the Company and any proceedings brought against the Company thereunder may adversely affect the Company’s operations and financial performance.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated, or expected. Although the Company has attempted to identify important risks, uncertainties and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information, which speak only as of the date of this news release. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.