A Letter From The CEO
It’s been six months since I took on the position of CEO at Nutritional High and as I reflect on the past months, I feel inclined to speak directly to our shareholders. I want to provide some clarity and share my perspective on the challenges we’ve encountered and the achievements we have made during this period.
Before I took on this role, I spent time gaining an understanding of the businesses and financial statements, so I was aware of the business challenges.
What I knew coming in:
The corporate strategy needed to reflect our emphasis on manufacturing and our own brands.
The balance sheet was a major issue that needed to be fixed before we could really grow the company again.
I visited Calyx in late 2019 and agreed with the decision to limit infusing any more capital into the business and to start the sale process.
We needed to preserve capital, as our balance sheet and the deterioration in the cannabis capital markets would prevent the Company from accessing the markets for financing.
Key achievements in the past six months:
In the first quarter of 2020, we initiated changes to our financing and lease arrangements to reduce our monthly burn rate. With a focus on the preservation of cash, we took control of our payable balances and, in early August, settled on over $1.1 million. This effort will continue as we work towards improving our balance sheet and right-sizing our business.
In May, we signed a purchase agreement for Palo Verde LLC. in Colorado and are awaiting regulatory approval. This will be a key component of Nutritional going forward and once we have control; we can more effectively manage the business and allocate capital to profitably grow the business substantially over the next couple of years.
In the first and second quarter of 2020, we closed on two successive tranches of financing backed by our assets in Colorado. This financing coupled with extremely tight cost controls helped us continue our restructuring process.
At Calyx, we took an active role in changing management and addressing the working capital issues which have arisen as a result of the loss of a significant customer. Working with the new management team at Calyx, we have successfully managed debt settlements and lease restructuring while dealing with the COVID-19 pandemic and California riots.
In June, we signed an agreement to acquire a Thailand-based psychedelic company. The deal closed on August 17th, came well-financed and will provide us with research capabilities (through a partnership with Rangsit University in Thailand) to develop products utilizing the cactai plant.
In early August, we signed a purchase agreement for the sale of our distribution business, Calyx. Once closed, this will help eliminate over $7 million in liabilities while still providing us with the upside in a larger and potentially more profitable distribution business.
As you can see, it’s been a busy six months at Nutritional High, but there is still work to be done. To get the company to the next stage, we will continue to work down our debt overhang, close on the acquisition of Palo Verde LLC, close the Calyx sale, and achieve operational milestones in both our Cannabis and Psychedelic businesses.
To that extent, we are also re-entering the Oregon market this month and will be re-entering the California market on a capital-light approach or through a strategic acquisition. We have also decided to exit the Washington market, as we do not want to be in markets where we cannot control the business, due to regulatory constraints with licenses. Finally, we continue to work with Green Therapeutics to explore our options within the Nevada market and I look forward to finalizing an option within the next few months.
From my previous background, I am keenly aware of the negative impact when the cost of capital is cheap. This was evident from the capital allocation decisions made across the cannabis sector over the past few years (Nutritional High is not the exception). Capital allocations will be tightly vetted for CapEx, new market opportunities and strategic acquisitions.
These last six months in a global pandemic have been some of the most challenging times in this generation, however difficult times often bring positive change. Likewise, I believe the difficult decisions we must make as we restructure Nutritional High will lead to prosperous growth in the future.
Please continue to be safe and healthy!
John Durfy, CEO
Nutritional High International Inc.