RE:RE:Beacon Securities CoverageIscfa I am not sure what Beacon comments were on receivables, but Trickle Research has been covering Vext for the past year and they have a good grasp on Vext's receivables, I suggest you take a look. They have a few reports on Vext. Here is what they say about it in their last update
https://www.trickleresearch.com/vext-science-inc/
First, to reiterate a theme that is threaded throughout the coverage to this point, the relationship between VEXT and its (Arizona) customers, largely boils down to cash flow. In its simplest form, VEXT has provided the capital and the infrastructure to operate the core business, which amounts to two fully integrated Arizona based enterprises (“HWC” and “Organica”). However, Arizona law requires that the licensees of any/all Arizona cannabis operations be owned by non-profits entities. Recall, while as a result of those state requirements, VEXT does not own these operations per se (which effectively means they can never actually own any cannabis at any point in the supply chain), it does provide nearly all of the operating functions of these businesses. As a result, VEXT provides capital and facility leases, personnel services and other managed services to these businesses, as well as selling them goods that include a variety of non-cannabis related products (cannabis delivery systems such as vape pens and cartridges, packaging and others). Keep in mind, both HWC and Organica are integrated operations, which means that they grow, and process cannabis along with having dispensaries that sell it. As a result, as they harvest and then process the cannabis (creating inventories of both flower and refined products) those inventories must be held by the respective licensees, even though it was VEXT’s capital that created those inventories. Further, it takes those licensee time to sell that inventory through and turn it into cash and profits. In the meantime, VEXT recognizes a receivable from the customers, which again it must collect as those customers sell inventory through. Obviously, that creates a situation where VEXT is “swapping” capital and operating outlays (cash) upfront, in exchange for a receivable that is paid down over time as its customers sell through the inventory in the future. As an extension, the aggregate customer receivable grows especially as the operations of each or both are either initiated (in the case of Organica this year) or expanded ( in the case of HWC), because each is in effect creating more inventory than it was the prior periods. We understand why investors might view the expanding receivable with some trepidation, but in a more conventional environment (one where VEXT simply owned the licenses and the cannabis itself for instance) VEXT would carry a finished goods inventory instead of a concentrated receivable, which we suspect might make some investors feel more comfortable with the respective assets, even though, at least in this case they are, at least in part, one in the same.