(TheNewswire)
Toronto, ON — TheNewswire --- April 26, 2023 — Hill Street BeverageCompany Inc. ( TSXV:HILL )( OTC:HSEEF ) (" HillStreet ” or the " Company "), a progressiveinnovation company holding a unique portfolio ofbioscience-driven, technology-powered consumer solutions that utilizesnew technologies to provide innovative cannabis solutions andnon-alcoholic beverage products globally, is pleased to provide a letter from CEO, Craig Binkley with an updateon the Company’s operations.
Dear Shareholders,
We would first like to thank all our shareholders fortheir support of Hill Street. Our business has evolved and grownsignificantly as we have solidified the foundation for the Company’sfuture. As a result, and as we announced last week, webelieve that relaunching the Company as “ Hill Incorporated ”will serve to better reflect its evolution, from its pre-RTO roots asan alcohol-free beverage company to the expanded company that it istoday, holding a portfolio of bioscience-driven, technology-poweredconsumer solutions and licensing rights in the alcohol-free beverageand cannabis industries. At Hill Incorporated, we will continue tobuild pathways to better and healthier living through our two businessunits – Hill StreetBeverages and Hill Avenue Cannabis .
We have now begun the fourth quarter of FY 2023 and ourQ3 results will be released at the end of May. We also look forwardto the Company’s Annual General and Special Meeting ofShareholders to be held next week on May 2, 2023 (“ AGM ”).
After the formal business of the AGM, on May 2, 2023, at 2:00 pm ET , investors are invited to attend a Corporate Update Presentation , followed by a Q&A period which will be hosted bywebinar. Those interested in participating can join us byregistering through the link here . Shareholdersproperly in attendance at the AGM are welcome to stay for thepresentation in-person.
In advance of that presentation, we wanted to take thisopportunity to provide a general update on the business beyond what weshared in our latest financial results that were announced on March 1,2023.
Hill Avenue Cannabis Continues toAdvance New DehydraTECH Licensing Agreements, Form Factor Innovations,and Expansion of In-Market DehydraTECH Operations
Our Hill Avenue Cannabis business unit is theDehydraTECH technology licensing, product development andcommercialization partner to progressive cannabis brands worldwide whoare committed to bringing exceptional, best-in-class cannabis productsto market. Hill Avenue Cannabis also provides DehydraTECH-enabledbusiness-to-business (B2B) solutions for cannabis extractors,ingredient suppliers and consumer packaged goods (CPG) manufacturersto produce fast-acting, consistent and premium THC products.
Growth of our DehydraTECH licensing business is afunction of four key factors:
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1) newlicensees - increasing our base of activelicensees and brands;
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2) newstates - new state launches expanding thegeographic coverage for active licensees and brands;
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3) new productform factors - innovation to expand the numberof DehydraTECH-powered consumer product forms and types in market; and
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4) deeperpenetration of products across operations -driving deeper penetration of the breadth of product forms and brandsacross current and new states.
Below is a summary of the advances we have made againstthese key factors since we acquired the exclusive global rights to theDehydraTECH™ technology for use with THC products at the end of2020.
We have grown allthe key metrics as we have expanded from 3 DehydraTECH-powered formfactors and 4 states, to 8 product forms more deeply penetrated across12 states
We have expanded our DehydraTECH product coverage from1 active licensee with 3 form factors in 4 states, to 8 activelicensees at the end of March 2023 with 8 unique product forms across12 states. As not all products are available across all of thestates, we utilize a calculation of Product Penetration Depth tomeasure the broader availability of DehydraTECH-powered products inthe US markets. As the chart shows, we have more than tripled this key measure from 7 to 23and we continue to both innovate new product form factors and work todrive penetration of many of the form factors across more markets.
1906 has expandedfrom 4 to 10 states through March and Dehydr8 continues to drive newproduct innovation and to push forward on the DehydraTECH partnerpipeline
1906 , thecompany behind the #1 fast-acting edible 1906 Drops, has advanced from4 states to 10 through our fiscal Q3, and its April launch of 1906Beans into New York brings the total to 11 states. 1906 products cannow be found in licensed dispensary partners in Arizona, Colorado,Illinois, Massachusetts, Michigan, Missouri, New Jersey, New York,Oklahoma, Ohio, and Pennsylvania.
Dehydr8 , Hill Avenue’sR&D and commercialization partner in several key states, continuesto operate its roster of DehydraTECH sub-licensees across Michigan,Oregon, Massachusetts and Illinois, to push forward on the pipeline ofnew DehydraTECH partner initiatives, and to drive advances in productform innovations. Through Dehydr8, we have seen April launches ofDehydraTECH-powered, THC-infused K-Cup coffee pods from Refine and hotcocoa beverage mixes from High TeHC in Michigan that will add to bothour Product Forms Active and Product Penetration Depth metrics for Q4FY23.
New DehydraTECHlicensing agreement signed with ArcataX in Humboldt County, Californiaenables B2B DehydraTECH ingredient production for California cannabisLPs and brands
During the recently completed Q3, Hill Avenue alsosigned an important new DehydraTECH licensing agreement with ArcataX,an award-winning extractor, ingredient supplier and manufacturer ofcannabis products located in the heart of historic Humboldt County,California.
With this new licensing deal, ArcataX has been licensedto produce DehydraTECH-infused product ingredients for cannabis LPsand brands in California who want to create DehydraTECH-powered THCproducts. By setting up a DehydraTECH ingredient provider inCalifornia, we have created a solution for California LPs and brandsto integrate DehydraTECH into their production process withoutrequiring an additional investment in capital equipment or productionpersonnel.
We have assembleda top-notch DehydraTECH R&D, product formulation and developmentteam to guide existing and prospective DehydraTECH licensees in thedevelopment of winning cannabis products
Not only does the licensing agreement with ArcataXprovide a base of operations to build a DehydraTECH-powered B2Bingredient business in California - the largest cannabis market in theUS - ArcataX also provides critical product R&D support andcapability to the Hill Avenue Cannabis team as we continue to developapplications of our technology to deliver the true power of thecannabis plant and its extracted cannabinoids to people throughpremium CPG products.
ArcataX’s deep extraction and formulation expertiseadds to the stellar group of science, product formulation and R&Dcapabilities we have built within the Hill Avenue Cannabis ecosystem,including DehydraTECH creator, Lexaria Bioscience Corp., Dehydr8’sscience team, and Bevnology, a leading product development andcommercialization consulting firm that we have engaged. Thiscollective group has extensive capabilities and experience workingacross a range of cannabis extracts, consumer products, form factors,and applications of DehydraTECH, to drive further product developmentand innovation with DehydraTECH licensees.
We have Launched aNew DehydraTECH-THC Website to Further Support Prospective LPs andBrands
To support our continued business development effortsfor our licensing business, last week we launched www.DehydraTECH-THC.com as our new DehydraTECH cannabisbiodelivery technology site that has been designed primarily toprovide information to B2B THC cannabis-infused product brands andmanufacturers as we expand awareness and interest in our DehydraTECHtechnology within the cannabis industry. This website holdsimportant information about the advantages of DehydraTECH, the sciencebehind it, and the product applications that it enables. At thiswebsite, we have also provided links to the website of DehydraTECHcreator Lexaria Bioscience Corp. ( www.lexariabioscience.com ), wherevisitors can access even deeper support for theadvantages of DehydraTECH.
Our US operating footprint at the close of FY23 Q3 nowcovers 12 states with a total population of 130.3M and expectedcannabis sales of $24.7B for 2023 1 . With these 12 states, we now operate in states coveringover ¾ of the expected total US cannabis sales in 2023.
Brightfield Group projects the total US cannabis marketto reach $50.7B in 2028 from an expected $31.8B in 2023 2 , so we are verypleased to be executing the expansion of our growth agenda in thisrapidly growing market.
Hill Street Beverages’ New Modelfor its Alcohol-Free Wine Business Has Driven Revenues and Created aNew Sales Cadence
As we have previously communicated, we implemented asignificant streamlining of our Vin(Zero) alcohol-free wine operationswithin our Hill Street Beverages business unit. We made majoradjustments across all the key areas of production planning, shippingand logistics, warehousing, sales and retail distribution, aswe:
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shortened our order-to-cash cycle dramatically;
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reduced the level of working capital that we will beholding in finished goods inventory; and
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structured our forecasting, operations planning, andinventory logistics models to create a more efficient shipping cyclethat will reduce the need for more expensive temperature-controlledcontainers for our products.
This new business model has led to a new cadence on ourquarterly sales revenues. Our sales revenues to ourdistributor are now spread further apart with less frequent, but moresignificant volume per order, as we optimize the timing and efficiencyof our supply chain by ordering customer inventory during the optimalseasons for minimizing transport costs.
After achieving record revenues in Q4 of FY 2022, Q1 FY 2023 revenuesdeclined as we had expected and communicated. Most recently, wereported in Q2 FY 2023 that we delivered another revenue record of$1,237,941 for the business. Accordingly, we anticipate our nextquarter Q3 to again be a low revenue quarter on this business linewith the new cadence. However, we have already received an order inQ4 for replenishment of our distributor inventories, and we expectadditional orders will be received to build inventory in anticipationof the ‘blackout’ period for shipments between fall 2023 to spring2024.
New Hill StreetBeverages Website Is Targeted Directly to Consumers
We have also renovated our legacy company website atthe domain www.hillstreetbeverages.com to specifically provide a consumer-focused website for Vin(Zero)alcohol-free wines. The new design highlights our award-winningproducts, showcases how they are uniquely crafted through aproprietary de-alcoholization process, provides, and contains theplatform for e-commerce sales.
Like the cannabis market, the alcohol-free wine marketis enjoying a strong growth trend, expected to grow double digitsannually as alcohol consumption is declining worldwide. We havesignificant opportunities to expand our distribution in existingmarkets and we also believe that innovation in the alcohol-freebeverage category can further accelerate our success in this market.
The Financial Picture of the CompanyContinues to Improve
The Company grew consolidated net revenues by 46% forFY 2022 and 73% for the first six months of FY 2023 on the strength ofboth DehydraTECH licensing revenues and the impact of the new businessmodel on Vin(Zero) sales.
Further, we announced record breaking FY2023 Q2 financialresults on March 1, 2023 which weredriven by record quarterly revenues from each of our business units -DehydraTECH licensing and alcohol-free beverage business sales.
With this strong revenue growth trend and the capitalwe raised in our private placement financing in December 2022,we anticipate that we will have sufficient cash for at least 12 monthsunder reasonably conservative assumptions.
We Continue to Advance Efforts toBuild Awareness and Corporate Reputation
As announced last week, we are proposing a corporatename change following the upcoming AGM, from “Hill Street BeverageCompany” to “Hill Incorporated”. To support increasedcorporate reputation and investor relations efforts, the Company haslaunched www.Hillincorporated.com as our newwebsite that will serve as our main corporate website. Targetedprimarily to investors and businesses, this website includes keyinformation about the company, its business, news and press releases,as well as other important investor and disclosure documents.
To improve investor exposure to the Company’s stock,during this past quarter, we uplisted the Company’s stock to theOTCQB market, increasing our accessibility to the US markets andproviding further liquidity for our shareholders. In addition,receiving eligibility for electronic clearing and settlement throughthe Depository Trust Company in the US last month also improvedaccessibility by US investors and allowed strengthened trading of ourstock in the capital markets.
Again, thank you for your support of Hill Street. Webelieve that we have achieved significant results on the business andare poised for even greater successes as Hill Incorporated with bothHill Avenue Cannabis and Hill Street Beverages. We look forward tosharing those with you as they come to fruition.
Sincerely,
Craig Binkley
Announcement of E quity Grants
The Company also announces today that the Board hasapproved the following equity grants to the directors, as Boardcompensation:
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7,000,000 stock options to certain directors (the Options ”), which will vest on June 30, 2023 and have an exerciseprice of $0.05 and an expiry date of 5 years; and
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1,000,792 restricted share units (the RSUs ”) to adirector, which will vest on June 30, 2023. The number of RSUsgranted was calculated based on a deemed value of $0.05 perRSU.
The Options and RSUs will be granted subject to theterms of Company equity incentive plans and each vested Option and RSUwill entitle the holder to acquire one common share of the Company,with the payment of the exercise price, as applicable.
Matthew Jewell, CFO comments: “I think it speaksvolumes that the directors of the Company have agreed to accept equitycompensation in lieu of cash Board fees, as they show their continuedsupport of the Company in its goal of preserving its cash reserves tofocus on Company growth and expansion.”
About Hill Street Beverage CompanyInc. (TSXV: HILL)
Hill Street is a progressive innovation company thatutilizes new technologies to provide innovative cannabis solutions andnon-alcoholic beverage products globally. We are pioneering the spacewhere craft consumer products meet bioscience by leveraging our deepCPG expertise to commercialize leading-edge technologies to craftsuperior consumer products. We are currently developing the platformfor North American distribution around our rights to use LexariaBioscience Corp.’s ground- breaking DehydraTECHpatent portfolio for product development, licensing and B2B sales ofcannabis ingredients.
For more information on our business activities visit www.hillincorporated.com orto check out Hill Street’s award-winning alcohol-free wine line-upand order product to be delivered straight to your home go to www.hillstreetbeverages.com
If you wish to sign up for the Hill Street mailinglist, click HERE .
For more information:
Matthew Jewell, Chief Financial Officer
Statements in this press release may containforward-looking information. Any statements in this press release thatare not statements of historical fact may be deemed to beforward-looking statements. Forward-looking statements are oftenidentified by terms such as “may”, “should”, “would”,“could”, “anticipate”, “intends”, “expects”, andsimilar expressions. The reader is cautioned that assumptions used inthe preparation of any forward-looking information may prove to beincorrect. Events or circumstances, such as future availability ofcapital on favourable terms, may cause actual results to differmaterially from those predicted, as a result of numerous known andunknown risks, uncertainties, and other factors, many of which arebeyond the control of the Company. The reader is cautioned not toplace undue reliance on any forward-looking information. Suchinformation, although considered reasonable by management at the timeof preparation, may prove to be incorrect and actual results maydiffer materially from those anticipated. Forward-looking statementscontained in this press release are expressly qualified by thiscautionary statement. The forward-looking statements contained in thispress release are made as of the date of this press release. TheCompany does not undertake any obligation to update publicly or torevise any of the included forward-looking statements, whether as aresult of new information, future events or otherwise, except asrequired by securities law.
Neither TSXVenture Exchange nor its Regulation Services Provider (as that term isdefined in policies of the TSX Venture Exchange) acceptsresponsibility for the adequacy or accuracy of this release.
1 MJBiz Factbook2023
2 https://www.forbes.com/sites/irisdorbian/2023/02/15/despite-some-stumbles-total-sales-in-us-cannabis-market-could-soar-to-507-billion-by-2028-says-top-researcher/?sh=1d4ec9f3164d
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