Juva Life Inc. (OTCQB:JUVAF) Q2 2022 Earnings Conference Call September 6, 2022 4:30 PM ET
Company Participants
Doug Chloupek – CEO
Mat Lee – CFO
Sanjeev Gangwar – VP, Chemistry
Conference Call Participants
Operator
Greetings and welcome to the Juva Life Second Quarter 2022 conference call. At this time all participants are in listen-only, and this conference is being recorded. Following the formal remarks, we will conduct a question-and-answer session. questions were submitted ahead of time via email.
Offering remarks today will be the company’s Chief Executive Officer, Vice President of Chemistry and Chief Financial Officer. On this call, management will discuss results from the second quarter of fiscal year 2022 as well as operational results from the cannabis operations and pharmaceutical research outside of the organization. The second quarter earnings release can be found in the investor relations section of Juva’s website, as well as on the SEDAR and OTC websites.
I would like to remind all participants that during this call, management’s prepared remarks may contain forward-looking statement, which are subject to risks and uncertainties, and management may make additional forward-looking statement during the question-and-answer session. When used in this call, the words anticipate could enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions are such forward-looking statement. These statements do not guarantee future performance and therefore, undue reliance should not be placed upon them. The company undertakes no obligation to publicly correct or update the forward-looking statement made during the presentation to reflect future events or circumstances, except as may be required under applicable securities laws.
At this time, it is my pleasure to introduce the Juva Life Chief Executive Officer, Doug?
Doug Chloupek
Thanks, Kyle for the introduction, and welcome everyone to our mid-year update. We’ve had a very exciting first half of the year here at Juva. I describe it as transformative, expansive foundational. What I mean by all this is we were able to really refine our business and expand our cannabis operations, while laying the foundation for further success in our clinical research programs in our pharmaceutical side.
To provide you some further context on what these two pillars really are, first, let’s look at our pharmaceutical program. Last year Juva went through a transition, one that I really believe expanded our upside opportunity in a really profound way. Since our establishment, we focused on building a new kind of company, one that not only acted as the successful operator in the world’s largest cannabis market, California, but one that truly unlocked the therapeutic potential of cannabis plant.
Last year, we doubled down on that founding mission, through our expansion of our research division and the discovery of our two proprietary compounds, Juva-019 and Juva-041 both have shown tremendous potential in treating inflammation, which is one of the world’s most widespread medical conditions.
We’ve all heard of the anecdotal evidence of cannabis, the positive impacts on pain and inflammation, but what most in the scientific community have not been able to determine is what’s the mode of action, what makes it work. We believe here at Juva, we’ve identified this, we’ve patented this, and we’re now moving these compounds through their drug development process.
Later in this call, you’re going to hear from Sanjeev, our Vice President of Chemistry will give you some updates and some further detail on to that discovery, where we’re at in our research, and more importantly, where we’re heading through the remainder of this year and into 2023. Not to spoil it for Sanjeev, but I have to tell you, we fast tracked our research in a time saving cost effective way. I truly believe our shareholders and researchers alike, we’re going to be very excited with what we have to reveal in the coming quarters.
Now with our shifting gears to our second pillar, our cannabis operations, I have to say the first half of 2020 to really set the stage for Juva set for success. Back in March, we announced the completion of a cultivation facility in Stockton, California, which doubled our production potential without raising costs nearly at all. Since then, we’ve continued to optimize that facility.
We’ve increased capacity and quality with every harvest by refining our processes, and decreasing our cost at every step of the way. In fact, this past Friday, we just had our largest harvest to date since we planted our first crop. This is a pure revenue generating milestone. I expect we will continue to break our internal harvest records in the coming months month after month. We’re just starting to realize the increase in revenue that this facility has to offer here in the third and fourth quarter. I’m very eager to share those details with you all in the coming months.
During our last webinar, I gave our shareholders a tour of this facility. In case you missed it, please go to our website, click under the Investor link and you’ll be able to find the video where I encourage all of you to check it out.
So with that, I want to dive a little bit more into our financial results for the second quarter, which is the first half of this year. Then I’m going to go to Sanjeev and talk a little bit about our pharmaceutical research program and have him take a look at where we are now and what the next portion of this year and into early 2023 looks like. And with that, I’d like to introduce you to Mat, our CFO for him to do a little bit of a financial review.
Mat Lee
Thank you so much for the intro, Doug. Some of you may not known, but my name is Matthew Lee, and I’m the Chief Financial Officer of Juva Life. As many of you saw, we released our financial results filing after market on Tuesday, August 30 and put out a press release on Wednesday morning.
We’re happy to report that Juva generated $1.8 million of revenue in Q2 of this year, a 144% increase over the same period and the previous year. Looking at the six-month period ending June 30, 2022, Juva generated a record $2.9 million in revenue, which is a 123% increase from the same period in the previous year. This growth was driven by increases in sales from both our retail delivery business, where we continue to see a major growth opportunity, as well as sales of wholesale bulk cannabis flour, all of which we cultivated at our recently expanded facility in Stockton, California.
Looking at the bottom line, our net loss for the quarter was $1.9 million, a substantial decrease from the same period last year. We believe this is pointing to a positive trend in how we are cutting costs and focusing on healthy and sustainable growth. When looking at our margins over the last year, we continue to increase our margins as well as decrease our operating expenses as a percentage of sales substantially. Also worth noting, in the second quarter, we were able to complete an $11.8 million financing.
Given the capital markets, we feel this was a testament to the positive outlook our investors have in Juva and we were proud to announce the closure of this one. The completion of it allowed for the purchase of our Stockton facility, capitalizing on the $10 million plus in previous leasehold improvements and strengthening our cash balance. The additional funds have allowed us to continue to expand cannabis operations, including the completion of the bulk purchase of the Stockton building a large real estate asset that is fully owned and controlled by Juva, as well as furthering our clinic research programs which we continue to believe hold major upside potential for Juva.
While we are not offering guidance at this very time, I can share that we believe the revenue growth will continue on a similar trajectory in Q3 and Q4 of this year. And I will look forward to sharing those results just as soon as we are able to.
Thank you all again for your attendance today. And with that, I will turn the call back over to Doug.
Doug Chloupek
Thanks, Matt, for that overview. Really appreciate it. Next, we’re going to move on to our chemistry and research division. So before I dive into any of my pieces, I’m going to turn this over to Sanjeev. Let’s let him speak about what these updates are, what they mean for the industry and what that looks like in the next coming couple of months.
Sanjeev Gangwar
Thanks, Doug. My name is Sanjeev Gangwar, and I’m a VP of Chemistry at Juva Life. I would like to give an update where we are in terms of the progress of our two compounds which we have mentioned before, Juva-019 and Juva-041. These are two compound derived essentially from cannabis plant, which had that have shown a very potent anti-inflammatory properties in all [ph] inflammation assays.
Recently these compounds have also shown a very high potency as well as selectivity for a particular CB2 receptor or CB1 receptor. Now, why that is important? It is important because if you take the standard cannabinoid like THC for example, it actually activates both pathways CB1 receptor as well as CB2 receptors. And what literature has researched literature have shown that CB1 receptor is mainly responsible for psychometric properties and actions that has the potential for drug abuse versus, CB2 receptor is the one which is responsible for a lot of its anti-inflammatory property. So it’s important for drug candidate to be developed that has to be better selectivity for CB2 over CB1, otherwise, that has actually dampen the interest and THC as a drug candidate in the past.
So we believe these two compounds hold significant promise and addressing lot of unmet medical need for safe and effective small molecule anti-inflammatory drugs. And all our current efforts are focused on advancing both of these compounds in very typical small molecule drug development process. So the first one is ADME for example, is a stands for absorption, distribution, metabolism, elimination, just to try to understand when we give this drug to the animal or the humans, how does it really get distributed, how fast gets metabolized, how it gets clear.
So those assays those properties, we are understanding, it’s important to understand that’s why we’re doing right now. And then we also establishing a very good pharmacokinetics and pharmacodynamics this is essentially called PK/PD relationship with these compounds which are required for as a good drug candidate.
And then once we have the data from these two, this will dictate also in number of vivo models of the chronic diseases for preclinical development, once we have that these compounds will go through this development process. And then once we have that data that will dictate essentially trigger a toxicology studies later in the mice and the Sinos [ph] and so on and so forth before it reaches to the human.
So this is where we are right now. So I just wanted to give you an update, this will probably take six to nine months. So hopefully in the next my update, I will be able to shed more light on this, how this different sort of assays and you know what we’re learning more about these compounds.
So thank you very much, and I’ll pass it on to Doug again. Thank you.
Doug Chloupek
Thanks, Sanjeev. Really appreciate that update. In addition to everything Sanjeev just told you, he’s working on the chemistry side. We have our Juva Research Division. As some of you may have seen in last month’s press release, we’ve relaunched the JuLi Registry. If you don’t know, the JuLi Registry is a WCG, IRB-approved, multi-year study which is conducted through our research division.
The registry is listed on Clinicaltrials.gov and it aims to amass one of the world’s largest datasets of real world clinical evidence on the potential health benefits of cannabis or cannabis derived products. We have participation from some of the best-in-class cannabis and CBD brands. Those include CannaCraft, dosist, LEVEL, San Benito Hemp Company, Sunderstorm, and WYLD.
As of this past Monday, we have about 130 people who have taken the qualification survey, of which, 81 have consented and are now registered to participate in this study. We’re very excited to see this ramp up and coming weeks as each of these brands will start promoting the JuLi Registry in various ways. Anyone in the U.S. can participate. If you’re interested in participating or learning more, just go to Juvaresearch.com, take the intro qualification survey, and there’s a step-by-step guide to participation from there.
Now we kind of switch back a little bit to the cannabis operations. I’d like to talk about our Redwood City location. Juva’s retail storefront business is a milestone that we’ve strategically worked for nearly two years. We look forward to providing our customers the same five-star service and best-in-class products that were known to offer through our delivery through our new retail storefront location.
The City of Redwood City had a four-phase cannabis application process to ensure that only the best operators received a permit. The process included a rigorous staff led merit-based application process that evaluated each business’s business plan, neighborhood compatibility, security, safety plan, community benefits, and history of successfully operating. I’m proud to say that out of the 28 applicants that applied, the city only awarded six permits. And out of those six Juva Retail RWC Inc. was the highest point applicant with over a 96% score.
To continue on the cannabis side of the business, we recently launched Secret Sauce. Some of you may have seen this in one of our past press releases, but we’ve expanded beyond our bulk flower production and launched our first in-house branded product Secret Sauce. We decided to launch Secret Sauce concentrate line for two reasons. One, because our customers have been asking for a concentrated version of our flours. And two, it’s the ideal time in the market work concentrates represent 26% of the market sales are the fastest growing category according to BDS Analytics. We’ve been busy making a number of other consumer products. Stay tuned in the coming months for more news on each of those.
Now, I have to say overall 2022 has been the culmination of nearly four years of hard work, lots of construction, permitting, core team development, research, product development, and we’re just now starting to reap the rewards of those years of hard work. Our chemistry division is making strides that are unseen in the pharmaceutical industry. Our cultivation division is breaking all internal records. I couldn’t be happier with where Juva stands as a company where Juva’s position in the market and with our chemistry developments that we will be able to disclose in the coming quarters.
With that I think we have a few questions from our shareholders.
Question-and-Answer Session
A – Mat Lee
Awesome. Thank you for that, Doug. Let’s get started with some questions here. Shareholders were encouraged to send questions ahead of this webinar. And we’re going to start off here with, has any pharmaceutical company expressed interest in working with Juva or purchasing any of the assets related to Juva-041 or Juva-019?
Doug Chloupek
We have had some discussions. I can’t elaborate on the details of those discussions quite yet. But the licensing, or full sale of those molecules, and the research side of the company has always been the foundation and core mission of Juva. That is still the foundation. And that is still the direction that Juva was going. And when the time is appropriate, we’ll be able to release some more information to the shareholders.
Mat Lee
Fantastic. Thank you. The next question relates to the cannabis operations. I believe you covered this somewhat in the presentation you just did. But maybe you could elaborate further on maybe some of the metrics. The exact question is, how is it going out in Stockton? And have you been able to increase capacity like you were hoping to?
Doug Chloupek
Yes. This last harvest, nearly doubled our average yield of previous crops. And in addition to that, the completion of construction, doubled the capacities’ ability to harvest. So we’re looking at an add a potentially a fourfold increase in the frequency and volume of harvest coming out of that facility. So I’m extremely excited about what’s — what, Q3-Q4 and going into next quarter sales are going to really look like.
Mat Lee
Awesome, thank you for that. The next one here says, you mentioned in your press release that the increase in revenue is heavily attributed to online sales and delivery sales. Can you expand on where you see that part of the business going?
Doug Chloupek
Revenue that was reported just now did heavily reflect the increase in retail sales, we have a lot of volume coming in. When they say online sales, those are online orders that are then fulfilled by our direct-to-consumer delivery business. In addition, we had a ramp up of some of our cultivation. As I mentioned, most of those cultivation numbers aren’t going to be materialized until Q3-Q4, coming up. So that’s an I really do expect to see a nice bump in those numbers.
Mat Lee
Awesome. Great update. Thank you. I also think you brought this up on the call. But the question is, can you give us an update on the retail location in Redwood City and any timelines associated with it?
Doug Chloupek
Sure. Plans are currently under building review with the city. We’ve started some of the demolition. We’ve refined those plans, so we can really value engineer as much as possible to stretch our investor dollars to maximize the return. And we’re hopeful to have this operational towards the end of this year or by early January-February, kind of the latest. That’s barring any unforeseen, hiccups that we’ll run into with the city or construction are final approvals.
Mat Lee
Awesome. Thank you for that update. That’s really exciting. The next one here is regarding kind of the business as a whole. The question is, how are you going to be able to balance running this pharmaceutical program as well as the cannabis operations side of it? And I guess it’s kind of asking the question, can you chew gum and walk at the same time?
Doug Chloupek
Good question. What some may not realize is we’ve been chewing gum and walk in for the last four years. The business mission has never shifted, we’ve had heavier focuses at times for the first 10-12 months was raising some of the capital building some of the team the next two years was building the infrastructure, the facilities that physical construction.
While that was happening, we had the research and Sanjeev, and [Indiscernible] and the entire research team working stealthily behind the scenes. So we have been operating on this dual parallel path for many, many years. It’s all just now coming to the forefront where shareholders and investors are able to see the fruit. Both of these pathways, paying dividends at this point, and we’re very excited for what’s coming down the next step.
So really, it was five P’s the proper planning, prevents poor performance. And I feel we have executed on all of this.
Mat Lee
That’s an awesome update. Thank you. Looking at here, the next question relates to back to the cultivation facility. Do you foresee the need to expand that any further or are you about where you need to be in that?
Doug Chloupek
No. We do not have any plans to expand any further. We’re now just optimizing and refining our processes, bringing costs down as much as possible so the facility can be as profitable as possible.
Mat Lee
That’s a great update. Thank you for that, Doug. The next question has to do with the financing that was announced in closed in the second quarter. Could you further highlight what the use of those funds were, and the purpose of the fundraising?
Doug Chloupek
Yeah. So we took a debt financing of just a little shy of $12 million as we announced. The bulk of that was really used for the acquisition of the Stockton facility. So while we’ve invested about $10 million into the build out of that Stockton facility, it appraised for almost $17 million. And we just purchased it for $4 million.
So we have a good bit of equity. It was a very smart business decision for the company to own the real estate. We utilized some of the other financing, which is going to be for completion of the chemistry and R&D side, as well as the build out of the retail facility. And then some of that operating capital that bridges the gap until we’re materializing the true potential of the revenue coming out of the cultivation facility coming into Q3-Q4, and then early part of next year.
Mat Lee
Great. Thank you for that. And actually, right along those lines, the next question is, do you foresee the need to do additional raises here in the near future that you can let shareholders know about?
Doug Chloupek
We do expect that the cultivation, it’s like I said, in the very beginning, I built this company by purpose by design for a reason. And that was to allow the cannabis side of the business to fund the research and chemistry side, which then gives this massive halo over the business. And that is — we’re almost done with construction. We just have to finish Redwood City, constructions done in Stockton, we do not have further build out plans. And now it’s maximizing the revenue, the revenue from the retail operations are what will then continue to fund the business in its totality.
Mat Lee
Awesome, thank you for that. I really love your passion on that. The next question here relates to the JuLi Registry. You mentioned you’re working with some large name brands it looks like. And could you expand further on the value that that brings to Juva and I would say actually as the industry as a whole?
Doug Chloupek
Yeah, absolutely. Well, in terms of the reach between the number of brands that I just mentioned, there is some sort of footprint at just about every retail store in the state of California. So the ability to partner with world class brands that have a level of efficacy that a lot of companies haven’t been able to bring to the forefront in this industry and then have distribution through so many retail channels in the State of California.
It was a natural choice for us to partner with these formulated brands, with their products, they have materials, their sales folks have materials, a distribution folks have materials, which are just now starting to be distributed with their distribution and drop offs at the retail stores throughout the state. The goal of this, as I had mentioned is to really amass a data set of real-world clinical evidence. We have so much anecdotal evidence in the cannabis industry that the real science doesn’t work on anecdotal information.
So while we know cannabis has medicinal benefits, the level of scientific rigor to validate that and take it beyond an anecdotal assessment has been severely lacking basically from the inception of the cannabis industry. So this JuLi Registry is fixing that. It will no longer be anecdotal information will be clinically validated using clinical scoring scales by patient reported physician overseen outcomes, which will give us a data set on what things products compounds work for certain patients with certain conditions or don’t for that matter, which then become a baseline against the JuLi, the Juva-019 and Juva-041 products that were developed.
Mat Lee
That’s, that’s very cool. Thank you for sharing that. The next question here has to do with we saw the announcement of a new brand owned by Juva recently released. Can you explain further your brand strategy and how you’ll look to that in the future?
Doug Chloupek
Sure, it really comes down to diversifying our product line. Everything starts with bulk production and then from bulk production, you start to refine those product lines by utilizing your trim or some of the small flours for other product lines, whether that be packaged flours, whether that be extracts, whether that be they prepends or other manufactured products. So this was just the natural progression in utilizing and refining our input material and to diversify in that revenue stream.
Mat Lee
Awesome. Thank you for that. Well, that was the last of our questions. And I really appreciate your time today, Doug and everyone who joined the call. And this will be posted on the investor relations portion of Juva’s website within 24 hours. And thanks so much.
Doug Chloupek
Thank you everyone. Have a great day
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