If you are looking for signs of where the cannabis industry is going, take a look at the quarterly reports that two pot companies released late Monday.

U.S. cannabis operator Green Growth Brands Inc. — which once had ambitions of becoming a North American pot giant — reported a steep second-quarter loss of US$35.9 million. It also announced plans to sell its cannabidiol business to The BRN Group, a privately-held company that describes itself as a global brand management firm, for an undisclosed sum.

Meanwhile, Valens GroWorks Corp., a Kelowna, B.C.-based company that extracts raw cannabis biomass and turns it into a refined product that can be used in vapes, edibles or topicals, reported a rarity in the pot industry: A profitable quarter.

The earnings disparity between the two firms offers conflicting clues on where the industry may be going, according to Eight Capital analyst Jenny Wang. While Valens has opted to focus primarily on compelling consumer-driven products in the nascent legal market, Green Growth has pursued growth through acquisitions and retail expansion across the U.S.

“Being acquisitive only works when the capital markets are open where there’s equity available to continuously fund their operations,” Wang said. “It makes it hard for [Green Growth] to execute on their plans because they need more capital to fund that strategy than what they have.”

Green Growth's announcement on Monday came about one year since it made a bid —  which expired in April — for Aphria Inc., and two months after the company walked away from a deal to buy cannabis concentrate producer MXY Holdings LLC for US$310 million.

Columbus, OH.-based Green Growth said its deal to sell its CBD business to BRN is a "related party" transaction after security filings revealed that some of the company's founders are also directors of BRN. Green Growth said in a statement that its board "determined that the company is in serious financial difficulty with limited alternatives" and that a deal with BRN is "reasonable in the company's circumstances."  A representative from Green Growth was not immediately available for comment.

“This is a U.S. company that’s still in the growth phase of its business,” Wang said.  “There’s still high expenditures and negative cash flow they’re dealing with over the near term.”

Contrast that with cash-flow-positive Valens, which reported $4.4 million in net profit and $30.6 million in revenue in its fourth quarter.

Valens, which does not grow the cannabis it refines, said in a statement that it makes 19 products, mainly vape pens, for the so-called Cannabis 2.0 market. It also expects to become a major player in the cannabis-infused beverage market after acquiring Pommies Cider Co. for $7.6 million and signing a five-year contract with Iconic Brewing Co. to make 2.5 million pot-infused drinks.

Wang said there is increasing demand from cannabis producers for the extraction services Valens provides amid an oversupplied market for dried flower in Canada.

“The rollout of products that customers want is growing, and that’s a higher margin business,” she said.

Valens President Jeff Fallows said in a phone interview with BNN Bloomberg on Tuesday there is a shift emerging within the cannabis industry away from traditional growers to companies that develop newer cannabis products.

“Cannabis producers are in a tough spot,” he said. “The market was giving them currency to be bigger and they got bigger. There was too much momentum and too much supply and the sector was a victim of that excitement.”

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new — and controversial — Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.

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