EAST.V Report Based On Last Financial Results TSXV: EAST // OTC: HBOSF
Price: $0.025 CDN // $0.014 USD
Common Shares: 100,664,323
Options: 7,440,000
Insider Holdings: 21,441,177
Website: www.eastwestbioscience.com
Below are the recent financials, along with descriptions of several subsidiaries that East West Biosciences controls.
Financials (As of October 31, 2021) – Does not include the $4.91 million raised for their storage locker business subsidiary as this happened after the quarter ended. Same with the 3.1 million shares for debt issued at $0.05
ASSETS
Cash: $971,540
Accounts Receivable: $47,355
Inventory: $215,274
Due From Related Party: $23,794
Prepaid Expenses: $9,993
Property & Equipment: $2,175,548
Intangible Assets: $193,702
Investment In JV: $49,145
Total Assets: $3,686,351
LIABILITIES
Accounts Payable: $1,409,162
Customer Deposits: $95,586
Deferred Revenue: $3,372
Due To Related Party: $363,947
Promissary Note Payable: $237,282
Mortgage Payable: $1,795,200
Loans Payable: $379,048
Total Liabilities: $4,283,597
Discussion of operations (from MD&A):
Eastwest Business Model - Eastwest is a vertically integrated wellness company that provides value and high-quality products and services to its customers in Canada and beyond. To support this vision, Eastwest aims to fully control its supply chain, leverage its assets and currently has several wholly owned operating subsidiaries, from health supplement manufacturing operations to a retail presence across Canada.
Manufacturing – Orchard Vale Naturals Inc. (“OVN”) - OVN is a Health Canada licensed manufacturing facility with capabilities to encapsulate, package and label. OVN manufactures health supplements for its business-to-business (“B2B”) clients. OVN’s unique preposition is that it offers a turnkey solution for small brands and accommodates small quantity orders.
Retail – Sangster’s Group of Companies (“Sangster’s”) - Eastwest acquired Sangster’s on November 30, 2018. The Company established three separate companies to reflect and accommodate the different operational structures and revenue models:
1) Sangster's Health Centres Head Office – 102064495 Saskatchewan Inc. o/a Sangster’s (“495SK”) Head franchisor with 14 franchisees as of October 31, 2021. As the head franchisor, Sangster’s owns the brand rights and manages the franchisor-franchisee distribution relationships. Sangster’s sells supplements and wellness products through its franchise locations and its online eCommerce platform.
2) Sangster’s Corporate Stores – 102064509 Saskatchewan Inc. o/a Sangster’s Corporate Stores (“509SK”) Sangster’s Corporate Stores own and manage Sangster’s corporate owned stores across Canada. As of October 31, 2021, Sangster’s did not maintain any corporate locations.
3) Sangster’s Leases – 102064512 Saskatchewan Inc. o/a Sangster’s Head Office Leasing (“512SK”) 512SK holds the head lease for certain franchise locations with landlord and subleases to franchisees. This allows Sangster's to ensure a franchise is not sold to the competition and to take on corporate stores in case of franchisee retirement, exit or bankruptcy.
Intellectual Property – 1123573 B.C. Ltd. ("573BC") - This subsidiary holds the Health Canada licenses to 187 natural product numbers (“NPNs”) certified by Health Canada. These NPNs are mandatory for supplement products to be marketed in Canada and are valuable assets for any companies that are manufacturing, distributing and marketing supplements in Canada.
Real Estate – 1123568 B.C. Ltd. (“568BC”) - This subsidiary owns and manages the land and building at 260 Okanagan Avenue, Penticton, British Columbia. The facility is a 34,000 square foot facility located off the main street in Penticton. It is equipped with two loading docks, ample parking and is fully secured. Currently it is renting out space to related parties and third-party renters. Current tenants include Eastwest Science Ltd. (“EWS”), OVN and Sangster's.
Self-Storage – 1290185 B.C. Ltd. (“185BC”) - During the year ended July 31, 2021, the Company added self-storage to its already diverse revenue streams through a new subsidiary, 185BC. This subsidiary is an early-stage company intending to build high-quality self-storage facilities across western Canada. The inception of this subsidiary was initiated by the Company’s need to leverage its Penticton facility, which has been underutilized. Eastwest believes that, due to increasing demand in the British Columbia interior, self-storage will be an efficient use for the facility.
Consumer Goods – Eastwest Science Ltd - EWS distributes hemp-based consumer goods to B2B clients, wholesalers, distributors and end consumers. During the year ended July 31, 2021, there has been minimal sales volume.
US Operation – EastWest Science USA Inc. (“EWS USA”) - EWS USA is a Kentucky, USA, based company that was established to allow the Company to pursue US based opportunities, in particular for CBD infused products.
Highlights – For the three months ended October 31, 2021
Startup Phase of the Storage Division and Expenses Incurred (185BC)
Much of the expenses, in the amount of $289,512, incurred during the three months ended October 31, 2021, were due to site development costs, operational expenses and marketing costs of the Storage Division. Since its inception in the spring of 2021, 185BC has two locations under construction: Penticton, British Columbia, and Oliver, British Columbia. The goal of 185BC is to open 3 additional locations by Q1 2022. The demand for storage is expected to be strong and the Company is very confident in the future success of this division.
Restructuring of the Retail Division (Sangster’s Health Centres)
Sangster’s has been impacted by COVID-19. During the three months ended October 31, 2021, the product sales to the franchisees dropped by 30% compared to the same period in the last fiscal year. To overcome these challenges, Sangster’s is undergoing a restructuring process that focus on the following main areas:
• Franchise Stability o The Company will be opening five new locations in the next two quarters o Secure the right locations (new and existing)
• Marketing Effectiveness o Measure investment and performance to make better decisions o eCommerce investment and strategy (nationally and internationally)
• Pricing and Product Strategy o Continual innovation in new products, training and methods o Leverage suppliers and OVN for a competitive price strategy
As part of the restructuring, Sangster’s has engaged a creative marketing agency to refresh its branding and overhaul the current store design. The result is a brand that is modern, fresh, relevant and communicates the brand’s value proposition. Additionally, Sangster’s is developing a unique subscription-based customized supplement program as part of its new product offerings, online and at store level.