Terrible for humanity and the global economy, the novel coronavirus pandemic has been so kind to cannabis that a strong argument can be made for COVID-19 bailing out legal marijuana.
The same ironic fortune did not smile on Ignite International Brands, the cannabis-adjacent firm founded and led by Instagram playboy Dan Bilzerian.
According to the company’s most recent earnings statements, filed on Thursday, Ignite—which sells CBD products in the US and markets branded THC cannabis in Canada—is almost out of money. The company is mired neck-deep in debt, is sitting on a mountain of unsold goods, and has a burn rate that could leave the company dead broke… well, just about any day now.
2020 has been great for just about everyone in cannabis, except for Dan Bilzerian.
So far in 2020, the company’s lost $16.3 million, and remains about $37 million in debt, according to the filings.
The company burned $7.6 million over the second quarter of 2020, which ended in June, and ended the quarter with just $5.8 million in cash on hand.
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That’s not nearly as bad things were when the year started. But given that Bilzerian’s firm burned an eye-popping $67 million in 2019—money that funded Bilzerian’s ostentatious lifestyle of models, travel, and celebrity parties, according to a lawsuit filed by a former company president—that’s a low bar.
Shares in Ignite have been traded on the Canadian stock exchange since 2018, when the company went public via a reverse takeover. All figures in this article are in Canadian dollars unless specifically mentioned otherwise.
Linda Menzel, Ignite’s general counsel, did not respond to an email seeking comment on Monday.
Bilzerian himself seemed to anticipate blowback over this raft of not great news. On the day before his company’s money troubles became public, the Ignite CEO tried to get ahead of it, in a way, by comparing his firm to Uber.
“Uber is worth 80 billion, it has never had a profitable month since it started and it lost over 5 billion in one quarter last year,” he posted on Oct. 14.
It may be easy to blame Ignite’s woes on COVID-19—and, in the company’s filings, that’s exactly what management does, even while claiming, hope against hope, that Ignite will be profitable before the end of the year.
“As the quarter has already ended, management believes that the third quarter operating results will show a substantial improvement over the second quarter but the complete reflection of the results from the internal reorganization will not be fully realized until the fourth quarter,” the company claimed. “As a result, management believes the Company will achieve profitability in the fourth quarter.”
But that also runs contrary to almost everything that’s happened in cannabis in 2020.
Early in the pandemic, cannabis retailers were declared essential services. Most dispensaries saw a sizable sales bump that continued throughout the summer. Several multi-state operators made big deals to expand into other markets—and a few weeks ago, some publicly traded companies enjoyed sizable gains after Sen. Kamala Harris, Democratic presidential nominee Joe Biden’s running mate, said a Biden-Harris administration would decriminalize cannabis.
None of that has seemed to help Ignite very much, which reported profit on sales of just below $1 million during the second quarter of 2020. (The company also reported sitting on $8.1 million worth of inventory. That’s a lot of Ignite-branded vodka!)
“The Company will need to raise capital to fund its operations and continue its existing and prospective expansion into strategic markets,” management reported Thursday. “This need may be adversely impacted by uncertain capital market conditions, including those created by the COVID—19 pandemic, and an inability to secure strategic partnerships in key markets.”
The company reported cutting some costs since teetering on the brink of penury (again, pretty hard not to do, given the spending spree in 2019).
In addition to wiggling out of a six-figure-a-month lease on a palatial Los Angeles estate—where Bilzerian gave interviews, worked out on a rooftop gym (still there, as per the landlord), and hosted parties—Ignite has also cut its marketing budget. Instead of wild parties in Las Vegas and LA, the company “has since shifed to a social media strategy… which requires significantly lower investment,” according to its filings.
All that said, Ignite was exactly what you would call lean. Through the first six months of the year, the company spent $9.2 million on administrative costs, including payroll, and will spend $3 million through the end of the year on leases, according to the filing.
(But the company did benefit from government generosity: Ignite took out about $1.2 million worth of Paycheck Protection Program loans from the US Small Business Administration between April and June, and “plans to apply for loan forgiveness” before the end of the year, according to the filing.)
So: Is this it for Ignite? Doesn’t seem that way, at least not yet. This is all old information, from months ago, and the company appears to still be around.
We’re now in the fourth quarter of 2020. And if it does manage to get in the black, that would be something even Uber could envy.