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Kreditech to Break Even in Cash Flow in 2020




Kreditech’s financial statement for the financial year 2018[1] shows that the company is on track to reach profitability in the near future. The performance of the Hamburg-based fintech has improved significantly as a result of a new strategy that was implemented in 2018. The net financial result improved by 76% compared to the 2017 – driven by a strong focus on achieving profitability, evolution of the product portfolio, investment in innovations and effective cost-management measures. A recent capital injection from both existing and new investors has provided the company with funds to continue its transformation and focus on growth.

Kreditech combines market-leading tech capabilities and data science, with sound insight into consumer borrowing needs and extensive experience in Point of Sale (POS) and e-commerce partnerships. The company lends through its consumer brands Monedo Now and Kredito24, as well as through partners in four markets: IndiaPolandRussia and Spain. In 2018, the company focused on pivoting its operations toward the near-prime lending market, with installment loans as a key product. A new management team was installed in early 2018 and, since that time, has focused its efforts on improving Kreditech’s operational efficiency, risk- and cost-management capabilities, and driving toward profitability. Throughout 2019, the company has successfully transitioned back to growth in its core installment loan product and has achieved its highest-ever levels of monthly installment loan issuance.

“Our results for 2018 clearly indicate that we have made excellent progress towards achieving our strategic objectives. We successfully expanded into the near-prime segment in most of our major markets, and we have continued – and will continue – in this strategic direction throughout the whole of 2019. Our growth is supported by investments in core infrastructure and the successful opening of exciting new possibilities, such as obtaining an NBFC license in India, which enables us to expand in this high-potential market,” says David Chan, company CEO.

The Kreditech CEO believes that changes implemented in 2018 have resulted in further growth of the Kreditech business in all key areas in 2019. “2019 has proven to be a period of further stabilization, and we are confidently looking towards a sustainable and profitable growth trajectory in all our strategic markets,” comments David Chan.

The Kreditech Profit and Loss (P&L) statement for 2018 indicates a significant improvement and change in the company’s performance. The fintech’s net losses fell by 76%, from EUR 58.4 million in 2017 to EUR 13.9 million for 2018. The result was driven by improved profitability of sales operations, combined with effective risk- and cost management. Although revenue fell by 21.4% (from EUR 71.4 million in 2017 to EUR 56.1 million in 2018), this was more than made up for by a reduction in impairments. The net result is an increase in gross margin (+32.3%) and a much-improved gross rate of return (38.7% in 2018, up from 23.0% in 2017).

In 2018, Kreditech issued EUR 107.3 million of credit across all of the markets in which it provides lending services. The company generated revenue from core products amounting to EUR 56.1 million. This represents a decline of approximately 21% compared to the previous financial year, which is a reflection of Kreditech’s shift in strategic product focus from high-yield and short-term microloans with higher risk, to long-term installment loans, demand for which is growing at a disproportionately higher rate. “Our focus on more long-term and lower-risk products enables us to profitably scale our business at a healthy pace, and creates a sustainable and reliable cash flow,” remarked Mariusz Dąbrowski, Kreditech CFO.

With the main focus being on achieving profitability, the 2018 issuing volume (nominal value of the total of newly issued consumer loans) declined by around 42%, from EUR 185.2 million in 2017 to EUR 107.3 million“We have consciously kept our issuing dynamics under strict control, to allow for a smooth transition to a new technical infrastructure,” says David Chan, CEO. With the aim of being a global platform of choice for tech-based lending, Kreditech has been investing in the infrastructure that underpins its services. This investment will enable Kreditech to benefit from enhanced scalability, resiliency, and the ability to add features and capabilities quickly and cost effectively. Kreditech’s new core system – a cloud-based banking platform called Mambu – was successfully deployed in Poland in Q1 2019 and in Spain in Q3 2019.

With Kreditech’s focus being on the improvement of its portfolio quality, the level of impairments has been significantly reduced. Net impairment expenses for credit losses were reduced by 13 percentage points (p.p.), from 69% of revenue (EUR 49 million) in 2017 to 56% of revenue (EUR 31.4 million) in 2018. “This change was driven by an increase in the proportion of much lower-risk installment loans. We are happy to report that impairments are dramatically lower, contributing to our improved results. This reduction in impairments demonstrates our ability to effectively manage this area of our operations,” says Mariusz Dąbrowski.

Kreditech reported a 55% reduction in operating expenses (down to EUR 32.3 million) in 2018, which enabled operating losses to be reduced by 81% (from EUR 53 million in 2017, to EUR 10.3 million in 2018). A focus on deeper commercial engagement resulted in streamlined processes, which enabled the company to benefit from lower customer acquisition costs while increasing conversion rates. For the whole of 2018, Kreditech’s customer acquisition costs (CAC) were just EUR 3.7 million, which amounts to just 7% of gross revenue (compared to CAC amounting to 30% of gross revenue in 2017).

Kreditech generated a positive cash flow from lending activities in 2018 (EUR 26 million compared to EUR 15.1 million in 2017) and the negative cash flow from operations was dramatically reduced (from EUR 89.2 million in 2017 to 13.8 million in 2018), thanks to decreased refinancing costs, better interest rates from new loan facilities and an overall reduction in spending. “We are proud to report that the positive cash trends have continued in 2019 and will result in a projected break even in 2020. This is a clear indication that our strategic decisions are making Kreditech a healthy, profitable and growing business,” says David Chan.

Kreditech’s mission is to be the global leader in technology-enabled consumer lending and the platform of choice in the near-prime market. Headquartered in Hamburg, Germany, Kreditech currently employs more than 300 people across seven countries. With well-established and growing operations in PolandSpain and Russia, Kreditech’s near-term focus will be on rapidly scaling its business in India. The company also has plans to further expand in other major consumer-lending markets in the coming years.


SOURCE Kreditech


C21 Investments Restructures Debt Servicing and Terms of Phantom Farms Acquisition




C21 Investments Inc. (“C21 Investments” or the “Company”) (CSE: CXXI and OTC: CXXIF) today announced that it has reached an agreement to restructure payments for the $21.8 million balance remaining on the secured promissory note issued on January 15, 2019 (“Note”) to Mr. Sonny Newman in connection with the Company’s purchase of Silver State Relief LLC and Silver State Cultivation LLC. The Company has also agreed to revised terms for the acquisition of Phantom Venture Group LLC and Phantom Brands LLC (together, “Phantom Farms”). These changes are designed to maintain positive cash flow for C21 Investments and position it for future growth. All figures are in US dollars unless stated otherwise.

Restructuring highlights include:

  1. December principal payment to Mr. Newman cancelled; monthly debt service obligations reduced by 70% to $600,000 per month starting Jan 1, 2020.
  2. Consolidation of the Oregon business operations including the sale lease-back with the vendors of the Phantom Farms’ properties on favourable terms.
  3. Reduction of future share issuance obligations by approximately 6 million shares.
  4. Aggregate annual run-rate cost reductions now tracking in excess of $6 million.

Demonstrating his flexibility and commitment to shareholders, President and CEO Sonny Newman, has agreed to cancel the December 1, 2019 principal payment of $800,000, lower the monthly payments due thereafter by $1,400,000 to $600,000 per month, and reduce the annual interest rate on the Note to 9.5% from 10%.  These terms will be effective through July 1, 2020 at which time the balance of the Note will be due and payable.

“This restructuring will allow the Company to move forward with its strategic plans and as the Company’s largest shareholder, I continue to fully support the Company,” said Sonny Newman. “In my letter to shareholders dated July 16, 2019, I identified right-sizing and integration of our operations in Oregon as a top priority. Today’s announcement marks a significant milestone in achieving this goal.”

C21 Investments has revised the terms of its acquisition of Phantom Farms.  Under the revised agreement, the real estate assets of Phantom Farms (“Properties”) will transfer back to the vendors. C21 Investments will have a third-party appraise the value of the Properties and will issue to the vendors in shares priced at CAD$1.05 for any difference between the Properties’ current value and the original agreement of $8.01 million due in October 2020. This represents a reduction in share issuance obligations for the Company of approximately 6 million shares. This transaction is scheduled to close in January 2020. In addition, under the new terms, the vendors will decrease the lease rates for C21 Investments on the Properties to 7% of the assessed value, and the Company will retain an option to purchase the properties.  The Phantom Farms’ vendors will retain their earn-out shares per the original agreement.

Having successfully negotiated new debt service and acquisition terms, C21 Investments has formally engaged Eight Capital as its exclusive financial advisor to identify and assess strategic opportunities for the Company. Eight Capital is a Canadian, full-service investment dealer with a leading practice in the cannabis sector.

“The cannabis space continues to evolve rapidly and we want to ensure that all avenues for increasing shareholder value are considered by management and the Board,” said Sonny Newman.


SOURCE C21 Investments Inc.

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Core One Labs’ Subsidiary, Agrotech LLC, Completes 1,600 Pound Harvest of Sacramento Farm




Core One Labs Inc. (CSE: COOL), (OTCQX: CLABF), (Frankfurt: LD6, WKN: A14XHT) (“COOL” or the “Company”) announces that its 50%-owned subsidiary, Agrotech LLC, has harvested 1,600 pounds from the Sacramento farm it manages and has completed drying and testing of the biomass.

Agrotech LLC has harvested a section of the two- and one-half acre farm in Sacramento. The harvest yielded over 1,600 pounds of biomass which was dried and tested, then processed for classification into flower, which is expected to yield approximately 60%, and trim for both the production of CannaStripsTM and retail distribution and sales. The remainder of the farm’s crop will continue to provide additional bio-mass late into November.

The harvest of the farm provided research data and further affirmation of the Company’s ability to cultivate outdoors without the use of pesticides or fungicides. The harvest has received a Certificate of Analysis (“COA”) confirming those positive expectations. Operationally, this harvest is evidence that the Company no longer has to rely on third party cultivations and incur the additional risk and the significant margins that reliance represents. The Company now can produce high quality cannabis without contaminates at a much lower cost outdoors, thereby reducing the cost of goods across all the product lines.

Core One Labs CEO, Brad Eckenweiler, stated, “This outdoor cultivation is one more accomplishment for the Company as it continues to build its expertise and operational structure towards a vertically integrated cannabis company from genetics and seed to the customer’s doorstep.” The current market in California for wholesale flower is between USD$600 and USD$1,200 per pound with a COA confirmation.

The Company will be updating the market as to the progress on the farm as new information becomes available.

In addition, the Company is announcing that it has reached an agreement with an arms-length party for a CAD$300,000 one-year unsecured convertible debenture (the “Debenture”). The principal advanced under the Debenture will accumulate interest at 6% per annum compounded monthly and may be converted, together with accrued interest, in whole, or in part, into shares of the Company’s common stock at CAD$0.64 per share.

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Lotus Ventures Finalizes First Shipment with Auxly Cannabis Group Inc.




Lotus Ventures Inc. (CSE: J) (FRA: LV9) (OTC: LTTSF) (the “Company” or “Lotus“) has finalized the details of its first shipment to Auxly Cannabis Group Inc. (TSXV: XLY), and expects the shipment to be sent out next week. Pursuant to Lotus and Auxly’s definitive agreement (the “Agreement”) dated September 11, 2018, Auxly is entitled to purchase the first 50% of Lotus’ cultivation at a fixed price, with a right of first offer to purchase the remaining 50% at market prices. Auxly has agreed to purchase 100% of the initial crop and has an ongoing interest in our high-quality flower production.

Lab Testing:
Lotus was pleased with its initial batch yielding more cannabis than originally expected, while passing all quality control measures. The Company grew multiple strains in its initial batch, optimizing the growing environment and learning what strains worked best for the current market demand. Out of the initial batch, one strain tested at 22.6% THC while the average amongst the group tested at approximately 19.1% THC. As per market demand, Lotus plans to grow higher THC products and anticipates higher THC results in future batches now that the growing environment has been standardized.

Market Trends:
As per multiple industry reports, as well as internal data, Canadian cannabis consumers are currently demanding premium dried flower with a high THC% content. Our analysis finds that indoor produced craft products with a high THC% have been able to either maintain or increase selling prices in retail since legalization, while lower-to-mid grade products have seen selling price compression since legalization. Lotus continues to be focused on exceeding consumer expectations as a reliable low-cost producer of high-quality flower grown from exotic and premium strains.

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