Toronto, ON — TheNewswire — April 26, 2023 — Hill Street Beverage Company Inc. (TSXV:HILL) (OTC:HSEEF) (“Hill Street” or the “Company“), a progressive innovation company holding a unique portfolio of bioscience-driven, technology-powered consumer solutions that utilizes new technologies to provide innovative cannabis solutions and non-alcoholic beverage products globally, is pleased to provide a letter from CEO, Craig Binkley with an update on the Company’s operations.
We would first like to thank all our shareholders for their support of Hill Street. Our business has evolved and grown significantly as we have solidified the foundation for the Company’s future. As a result, and as we announced last week, we believe that relaunching the Company as “Hill Incorporated” will serve to better reflect its evolution, from its pre-RTO roots as an alcohol-free beverage company to the expanded company that it is today, holding a portfolio of bioscience-driven, technology-powered consumer solutions and licensing rights in the alcohol-free beverage and cannabis industries. At Hill Incorporated, we will continue to build pathways to better and healthier living through our two business units – Hill Street Beverages and Hill Avenue Cannabis.
We have now begun the fourth quarter of FY 2023 and our Q3 results will be released at the end of May. We also look forward to the Company’s Annual General and Special Meeting of Shareholders 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 by webinar. Those interested in participating can join us by registering through the link here. Shareholders properly in attendance at the AGM are welcome to stay for the presentation in-person.
In advance of that presentation, we wanted to take this opportunity to provide a general update on the business beyond what we shared in our latest financial results that were announced on March 1, 2023.
Hill Avenue Cannabis Continues to Advance New DehydraTECH Licensing Agreements, Form Factor Innovations, and Expansion of In-Market DehydraTECH Operations
Our Hill Avenue Cannabis business unit is the DehydraTECH technology licensing, product development and commercialization partner to progressive cannabis brands worldwide who are committed to bringing exceptional, best-in-class cannabis products to market. Hill Avenue Cannabis also provides DehydraTECH-enabled business-to-business (B2B) solutions for cannabis extractors, ingredient suppliers and consumer packaged goods (CPG) manufacturers to produce fast-acting, consistent and premium THC products.
Growth of our DehydraTECH licensing business is a function of four key factors:
1)new licensees – increasing our base of active licensees and brands;
2)new states – new state launches expanding the geographic coverage for active licensees and brands;
3)new product form factors – innovation to expand the number of DehydraTECH-powered consumer product forms and types in market; and
4)deeper penetration of products across operations – driving deeper penetration of the breadth of product forms and brands across current and new states.
Below is a summary of the advances we have made against these key factors since we acquired the exclusive global rights to the DehydraTECH™ technology for use with THC products at the end of 2020.
We have grown all the key metrics as we have expanded from 3 DehydraTECH-powered form factors and 4 states, to 8 product forms more deeply penetrated across 12 states
We have expanded our DehydraTECH product coverage from 1 active licensee with 3 form factors in 4 states, to 8 active licensees at the end of March 2023 with 8 unique product forms across 12 states. As not all products are available across all of the states, we utilize a calculation of Product Penetration Depth to measure the broader availability of DehydraTECH-powered products in the US markets. As the chart shows, we have more than tripled this key measure from 7 to 23 and we continue to both innovate new product form factors and work to drive penetration of many of the form factors across more markets.
1906 has expanded from 4 to 10 states through March and Dehydr8 continues to drive new product innovation and to push forward on the DehydraTECH partner pipeline
1906, the company behind the #1 fast-acting edible 1906 Drops, has advanced from 4 states to 10 through our fiscal Q3, and its April launch of 1906 Beans into New York brings the total to 11 states. 1906 products can now be found in licensed dispensary partners in Arizona, Colorado, Illinois, Massachusetts, Michigan, Missouri, New Jersey, New York, Oklahoma, Ohio, and Pennsylvania.
Dehydr8, Hill Avenue’s R&D and commercialization partner in several key states, continues to operate its roster of DehydraTECH sub-licensees across Michigan, Oregon, Massachusetts and Illinois, to push forward on the pipeline of new DehydraTECH partner initiatives, and to drive advances in product form innovations. Through Dehydr8, we have seen April launches of DehydraTECH-powered, THC-infused K-Cup coffee pods from Refine and hot cocoa beverage mixes from High TeHC in Michigan that will add to both our Product Forms Active and Product Penetration Depth metrics for Q4 FY23.
New DehydraTECH licensing agreement signed with ArcataX in Humboldt County, California enables B2B DehydraTECH ingredient production for California cannabis LPs and brands
During the recently completed Q3, Hill Avenue also signed an important new DehydraTECH licensing agreement with ArcataX, an award-winning extractor, ingredient supplier and manufacturer of cannabis products located in the heart of historic Humboldt County, California.
With this new licensing deal, ArcataX has been licensed to produce DehydraTECH-infused product ingredients for cannabis LPs and brands in California who want to create DehydraTECH-powered THC products. By setting up a DehydraTECH ingredient provider in California, we have created a solution for California LPs and brands to integrate DehydraTECH into their production process without requiring an additional investment in capital equipment or production personnel.
We have assembled a top-notch DehydraTECH R&D, product formulation and development team to guide existing and prospective DehydraTECH licensees in the development of winning cannabis products
Not only does the licensing agreement with ArcataX provide a base of operations to build a DehydraTECH-powered B2B ingredient business in California – the largest cannabis market in the US – ArcataX also provides critical product R&D support and capability to the Hill Avenue Cannabis team as we continue to develop applications of our technology to deliver the true power of the cannabis plant and its extracted cannabinoids to people through premium CPG products.
ArcataX’s deep extraction and formulation expertise adds to the stellar group of science, product formulation and R&D capabilities we have built within the Hill Avenue Cannabis ecosystem, including DehydraTECH creator, Lexaria Bioscience Corp., Dehydr8’s science team, and Bevnology, a leading product development and commercialization consulting firm that we have engaged. This collective group has extensive capabilities and experience working across a range of cannabis extracts, consumer products, form factors, and applications of DehydraTECH, to drive further product development and innovation with DehydraTECH licensees.
We have Launched a New DehydraTECH-THC Website to Further Support Prospective LPs and Brands
To support our continued business development efforts for our licensing business, last week we launched www.DehydraTECH-THC.com as our new DehydraTECH cannabis biodelivery technology site that has been designed primarily to provide information to B2B THC cannabis-infused product brands and manufacturers as we expand awareness and interest in our DehydraTECH technology within the cannabis industry. This website holds important information about the advantages of DehydraTECH, the science behind it, and the product applications that it enables. At this website, we have also provided links to the website of DehydraTECH creator Lexaria Bioscience Corp. (www.lexariabioscience.com), where visitors can access even deeper support for the advantages of DehydraTECH.
Our US operating footprint at the close of FY23 Q3 now covers 12 states with a total population of 130.3M and expected cannabis sales of $24.7B for 20231. With these 12 states, we now operate in states covering over ¾ of the expected total US cannabis sales in 2023.
Brightfield Group projects the total US cannabis market to reach $50.7B in 2028 from an expected $31.8B in 20232, so we are very pleased to be executing the expansion of our growth agenda in this rapidly growing market.
Hill Street Beverages’ New Model for its Alcohol-Free Wine Business Has Driven Revenues and Created a New Sales Cadence
As we have previously communicated, we implemented a significant streamlining of our Vin(Zero) alcohol-free wine operations within our Hill Street Beverages business unit. We made major adjustments across all the key areas of production planning, shipping and logistics, warehousing, sales and retail distribution, as we:
shortened our order-to-cash cycle dramatically;
reduced the level of working capital that we will be holding in finished goods inventory; and
structured our forecasting, operations planning, and inventory logistics models to create a more efficient shipping cycle that will reduce the need for more expensive temperature-controlled containers for our products.
This new business model has led to a new cadence on our quarterly sales revenues. Our sales revenues to our distributor are now spread further apart with less frequent, but more significant volume per order, as we optimize the timing and efficiency of our supply chain by ordering customer inventory during the optimal seasons for minimizing transport costs.
After achieving record revenues in Q4 of FY 2022, Q1 FY 2023 revenues declined as we had expected and communicated. Most recently, we reported in Q2 FY 2023 that we delivered another revenue record of $1,237,941 for the business. Accordingly, we anticipate our next quarter Q3 to again be a low revenue quarter on this business line with the new cadence. However, we have already received an order in Q4 for replenishment of our distributor inventories, and we expect additional orders will be received to build inventory in anticipation of the ‘blackout’ period for shipments between fall 2023 to spring 2024.
New Hill Street Beverages Website Is Targeted Directly to Consumers
We have also renovated our legacy company website at the domain www.hillstreetbeverages.com to specifically provide a consumer-focused website for Vin(Zero) alcohol-free wines. The new design highlights our award-winning products, showcases how they are uniquely crafted through a proprietary de-alcoholization process, provides, and contains the platform for e-commerce sales.
Like the cannabis market, the alcohol-free wine market is enjoying a strong growth trend, expected to grow double digits annually as alcohol consumption is declining worldwide. We have significant opportunities to expand our distribution in existing markets and we also believe that innovation in the alcohol-free beverage category can further accelerate our success in this market.
The Financial Picture of the Company Continues to Improve
The Company grew consolidated net revenues by 46% for FY 2022 and 73% for the first six months of FY 2023 on the strength of both DehydraTECH licensing revenues and the impact of the new business model on Vin(Zero) sales.
Further, we announced record breaking FY2023 Q2 financial results on March 1, 2023 which were driven 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 capital we raised in our private placement financing in December 2022, we anticipate that we will have sufficient cash for at least 12 months under reasonably conservative assumptions.
We Continue to Advance Efforts to Build Awareness and Corporate Reputation
As announced last week, we are proposing a corporate name change following the upcoming AGM, from “Hill Street Beverage Company” to “Hill Incorporated”. To support increased corporate reputation and investor relations efforts, the Company has launched www.Hillincorporated.com as our new website that will serve as our main corporate website. Targeted primarily to investors and businesses, this website includes key information 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 the OTCQB market, increasing our accessibility to the US markets and providing further liquidity for our shareholders. In addition, receiving eligibility for electronic clearing and settlement through the Depository Trust Company in the US last month also improved accessibility by US investors and allowed strengthened trading of our stock in the capital markets.
Again, thank you for your support of Hill Street. We believe that we have achieved significant results on the business and are poised for even greater successes as Hill Incorporated with both Hill Avenue Cannabis and Hill Street Beverages. We look forward to sharing those with you as they come to fruition.
Announcement of Equity Grants
The Company also announces today that the Board has approved the following equity grants to the directors, as Board compensation:
7,000,000 stock options to certain directors (the Options”), which will vest on June 30, 2023 and have an exercise price of $0.05 and an expiry date of 5 years; and
1,000,792 restricted share units (the RSUs”) to a director, which will vest on June 30, 2023. The number of RSUs granted was calculated based on a deemed value of $0.05 per RSU.
The Options and RSUs will be granted subject to the terms of Company equity incentive plans and each vested Option and RSU will 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 speaks volumes that the directors of the Company have agreed to accept equity compensation in lieu of cash Board fees, as they show their continued support of the Company in its goal of preserving its cash reserves to focus on Company growth and expansion.”
About Hill Street Beverage Company Inc. (TSXV: HILL)
Hill Street is a progressive innovation company that utilizes new technologies to provide innovative cannabis solutions and non-alcoholic beverage products globally. We are pioneering the space where craft consumer products meet bioscience by leveraging our deep CPG expertise to commercialize leading-edge technologies to craft superior consumer products. We are currently developing the platform for North American distribution around our rights to use Lexaria Bioscience Corp.’s ground-breaking DehydraTECH patent portfolio for product development, licensing and B2B sales of cannabis ingredients.
For more information on our business activities visit www.hillincorporated.com or to check out Hill Street’s award-winning alcohol-free wine line-up and order product to be delivered straight to your home go to www.hillstreetbeverages.com
If you wish to sign up for the Hill Street mailing list, click HERE.
For more information:
Matthew Jewell, Chief Financial Officer
Statements in this press release may contain forward-looking information. Any statements in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as “may”, “should”, “would”, “could”, “anticipate”, “intends”, “expects”, and similar expressions. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances, such as future availability of capital on favourable terms, may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward-looking statements contained in this press release are made as of the date of this press release. The Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
1 MJBiz Factbook 2023
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