10-K: Allied Corp. Reports Fiscal Year 2024 Results, Focuses on International Cannabis Expansion

Allied Corp. reports its fiscal year 2024 results, highlighting a strategic shift towards international cannabis production and distribution, particularly in Colombia, while temporarily pausing other initiatives.

Summary

• Allied Corp., an international cannabis company, has released its annual report for the fiscal year ended August 31, 2024.
• The company is focusing on its Colombian operations, aiming to be a consistent supplier of high-quality medical cannabis to pharmaceutical companies globally.
• Allied has successfully exported cannabis flower from Colombia, including shipments to Australia, Switzerland, and the UK.
• The company has secured a 5-year agreement to supply 1.05 tons of cannabis flower annually to Poland, starting in Q3 2025.
• Allied has increased its THC cannabis flower quota from 8,000 kgs to 50,000 kgs.
• The company estimates its direct agricultural cost of raw flower production to be between $0.05 and $0.075 per gram in Colombia, compared to $1.00 to $2.00 per gram in North America.
• Allied reported a net loss of $3,976,184 for the fiscal year 2024, compared to a net loss of $10,675,671 in 2023.
• The company's revenue for fiscal year 2024 was $96,180, up from $72,096 in 2023.
• Operating expenses decreased to $3,653,052 in 2024 from $6,380,166 in 2023, primarily due to a reduction in stock-based compensation.
• The company has a working capital deficit of $8,834,739 as of August 31, 2024.
• Allied has temporarily paused clinical trials for ALID-11, 11 and Psilonex to focus on its Colombian operations.
• The company is also deferring the pursuit of natural health products and brands until profitability is achieved from its Colombian cannabis sales.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there are positive developments in terms of international sales and low-cost production, the company's financial losses, working capital deficit, and going concern issues raise significant concerns. The strategic shift towards Colombia is promising, but the temporary pause of other initiatives and ongoing litigation add to the uncertainty.

Positives

• Allied has established a track record of producing high-quality cannabis in Colombia at low cost.
• The company has secured significant international sales agreements, including a 5-year deal with a Polish distributor.
• Allied has obtained commercial approval for the production and export of both psychoactive and non-psychoactive cannabis from Colombia.
• The company has increased its THC cannabis flower quota, allowing for greater production capacity.
• Allied has successfully navigated vendor qualification processes with multiple international cannabis and pharmaceutical companies.
• The company has a strong agricultural genetics team and pharmaceutical background, which provides a competitive advantage.
• Allied has demonstrated its ability to meet European Pharmacopeia Standards.
• The company has a scalable land holding of 200 acres in Colombia.

Negatives

• Allied reported a net loss of $3,976,184 for the fiscal year 2024.
• The company has a working capital deficit of $8,834,739 as of August 31, 2024.
• Allied has temporarily paused clinical trials for ALID-11, 11 and Psilonex.
• The company is deferring the pursuit of natural health products and brands until profitability is achieved.
• Allied is involved in ongoing litigation in Nevada related to a building on land which was leased from FIORE who became insolvent.
• The company is dependent on a limited number of customers for the majority of its revenue.
• Allied has a history of operating losses and its management has concluded that factors raise substantial doubt about its ability to continue as a going concern.

Risks

• The company has a history of operating losses and may not be able to achieve profitability.
• Allied may not be able to obtain sufficient additional capital to continue operations.
• The cannabis industry is heavily regulated, and failure to comply with laws could result in penalties.
• There are conflicts between federal and state regulations in the United States regarding cannabis.
• The company depends on a limited number of customers for the majority of its revenue.
• There may be unanticipated delays in the development and introduction of products.
• Allied faces significant competition in the cannabis industry.
• The company is subject to significant regulatory requirements in the United States, Canada, and Colombia.
• The market price for the company's common stock may be volatile.
• The company is subject to cyber-security and privacy risks.
• The company may incur significant costs to defend its intellectual property.
• The company is reliant on certain licenses and authorizations to operate in Colombia.
• The company's operations are subject to the economic, political and tax conditions prevalent in Colombia.
• The company is subject to the inherent risks involved with product recalls.
• The company's products could have unknown side effects.
• The company may not be able to maintain effective quality control systems.
• The company is reliant on third party transportation services and importation services to deliver its products to customers.
• The company may not be able to establish and maintain bank accounts in certain countries.
• The company is dependent on suppliers to supply equipment, parts and components for the operation of its business.
• The company is dependent upon its management and key employees, and the loss of any member of our management team or key employees could have a material adverse effect on our operations.

Future Outlook

Allied Corp. is focused on scaling its Colombian operations and securing long-term contracts to become a reliable global wholesale cannabis supplier. The company plans to leverage its low production costs and cultivation expertise to expand its market presence. The company will resume its focus on natural health products and brands once profitability is achieved from its Colombian cannabis sales.

Management Comments

• Our mission is to be a consistent and reliable supplier of high-quality medical cannabis to pharmaceutical companies globally.
• We aim to make cannabis a primary source of medicine accessible to all and improve patient lives throughout the world.
• Our management team believes that having control over our supply chain should enable us to provide a consistent, rolling-harvest supply to the global cannabis community.
• Allied has now executed on Part 1 (site identification and setup) and Part 2 (cultivation and export) of its plan. With this strong foundation, it is now implementing Part 3 of its journey: while continuing to leverage its Colombian cost advantages, cultivation know-how and pharma expertise, Allied is now focusing on distribution and commercialization to become the most reliable global wholesale cannabis supplier.

Industry Context

Allied Corp.'s focus on low-cost production in Colombia aligns with the trend of cannabis companies seeking to reduce costs and improve margins. The company's international sales agreements reflect the growing global demand for medical cannabis. The company's focus on EU-GMP certification is in line with the increasing regulatory requirements for cannabis imports in Europe.

Comparison to Industry Standards

• Allied's estimated production cost of $0.05 $0.075 per gram in Colombia is significantly lower than the estimated North American production costs of $1.00 $2.00 per gram, giving it a competitive advantage.
• Companies like Aurora Cannabis and Canopy Growth have struggled with high production costs and oversupply issues, highlighting the importance of Allied's low-cost strategy.
• Allied's focus on international exports is similar to other cannabis companies seeking to diversify their revenue streams beyond domestic markets.
• The company's focus on EU-GMP certification is comparable to other companies seeking to access the European market, such as Tilray and Aphria.
• Allied's 5-year supply agreement with Canpoland is similar to other long-term supply agreements in the cannabis industry, such as the agreement between Canopy Growth and Constellation Brands.

Management Changes

Legal Proceedings

• The company is involved in litigation in Nevada related to a building on land which was leased from FIORE who became insolvent.

Related Party Transactions

• The company has entered into consulting agreements with entities controlled by key management personnel.
• The company has settled outstanding payables with related parties through the issuance of common shares.
• The company has received loans from related parties.

Stakeholder Impact

• Shareholders face the risk of further dilution and potential loss of investment due to the company's financial challenges.
• Employees may be affected by the company's cost-cutting measures and strategic shifts.
• Customers may benefit from the company's focus on high-quality, low-cost cannabis products.
• Suppliers may be impacted by the company's changing production and distribution strategies.
• Creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• Allied will continue to scale its Colombian operations.
• The company will focus on fulfilling existing sales agreements and securing new long-term contracts.
• Allied will continue to pursue EU-GMP certification for its products.
• The company will monitor the regulatory landscape in the United States and prepare for potential federal legalization.
• Allied will continue to seek funding to meet operational needs.

Key Dates

Keywords

cannabis, medical cannabis, Colombia, international, export, THC, CBD, production, distribution, pharmaceutical, EU-GMP, sales, agreements, cultivation, quota