Cansortium Inc. Reports First Quarter Financial Results; Reiterates Full Year 2020 Outlook
MIAMI, July 7, 2020 /PRNewswire/ - Cansortium Inc. (CSE:TIUM.U) (OTCQB: CNTMF) ("Cansortium" or the "Company"), a vertically-integrated provider of premium-quality medical cannabis, today announced financial results for its first quarter ended March 31, 2020 and reiterated its full year 2020 outlook. The Company's unaudited condensed interim consolidated financial statements and accompanying notes, along with the Management Discussion and Analysis (MD&A) are available under the Company's profile on SEDAR at www.sedar.com and are also accessible through a link on the Investor Relations section of the Company's website at www.getfluent.com.
Executive Chairman Neal Hochberg commented, "During the first quarter of 2020 we continued to make significant improvements to the business and achieved positive quarterly Adjusted EBITDA for the first time in the Company's history, driven by strong revenue growth and tightly focused operations. We believe that revenue growth and profitability will continue to strengthen through the remainder of 2020."
Selected First Quarter 2020 Financial Highlights Versus First Quarter 2019 Results
-- Consolidated revenue increased 84 percent to $10.2 million, compared
with revenue of $5.5 million.
-- Consolidated income from operations totaled $2.4 million, compared to
loss from operations of $(12.5) million.
-- Consolidated Adjusted EBITDA((1)) totaled $0.7 million, compared to
Adjusted EBITDA((1)) loss of $(3.4) million, marking the first time the
Company has achieved quarterly Adjusted EBITDA profitability.
-- Consolidated net loss totaled $(13.9) million, or $(0.07) per diluted
share, compared to consolidated net loss of $(16.3) million, or $(0.10)
per diluted share.
-- During the first quarter of 2020, the Company opened its 19(th) medical
marijuana dispensary in Panama City, FL. It operated 9 dispensaries
during the comparable period in 2019. In April, the Company opened its
20(th) Florida dispensary in East Orlando, FL - it's third in the
greater Orlando market.
(1) Adjusted EBITDA is a non-IFRS
financial measure that does not have
any standardized meaning prescribed
by IFRS and may not be comparable to
similar measures presented by other
companies. The Company calculates
adjusted EBITDA from EBITDA plus
(minus) unrealized loss (gain) on
embedded derivatives, plus (minus)
certain one-time non-operating
expenses, as determined by
management. Reconciliations from
EBITDA and Adjusted EBITDA to Net
Loss are included in the
accompanying financial schedules.
Full Year 2020 Outlook
The Company reiterated its full year 2020 outlook for consolidated revenues in the range of $55 million to $60 million and Adjusted EBITDA of more than $15 million. The forecast is based on projected revenues of at least $45 million for Cansortium's Florida operations with additional revenue from the Michigan, Pennsylvania and Texas markets.
The Company expects to open up to six additional Florida dispensaries during the remainder of 2020, contingent upon timing of construction and final permitting. These locations include Coral Gables, Kendall, and Coral Springs. In addition, the Company expects to develop two new dispensaries in the south-central region of Pennsylvania during 2020 that will begin operating by early 2021.
Mr. Hochberg noted, "Our first quarter results and full year 2020 outlook reflect confidence in management's ability to execute Phase 2 of the operational and financial restructuring plan (the "Plan") developed by the Company's Board of Directors and its Special Committee during 2019. Phase 2 of the Plan will focus on growth and long-term shareholder value creation. We believe that Cansortium's projected profitability will enable the Company to pursue the following targeted initiatives:
-- Expand its Florida dispensary network up to 26 by the end of 2020;
-- Augment its Florida cultivation capacity;
-- Utilize technology and various marketing initiatives to increase sales
and customer loyalty;
-- Generate revenue in Michigan during 2020;
-- Grow its Pennsylvania dispensary network to three by 2021; and
-- Continue to promote expansion of the medicinal cannabis market in
Texas."
Mr. Hochberg continued, "We are committed to carefully focusing our capital and other resources on the most promising, actionable U.S. medical marijuana markets to grow revenues, while managing expenses to drive profitability. In Florida, despite the unprecedented challenges presented by the ongoing global COVID-19 pandemic, we are strengthening the Fluent brand's competitive position by serving Florida's growing medical marijuana patient population as a designated essential service. Together with additional opportunities in Michigan, Pennsylvania and Texas, we are positioned to make meaningful progress in 2020 toward enhanced cash flow and profitability."
Company Promotes Marcos Pedreira to Chief Financial Officer
Mr. Hochberg also announced the promotion of Marcos Pedreira to the position of Chief Financial Officer, effective immediately. Mr. Pedreira, who joined the Company in October 2018 as Head of Finance, is a Certified Public Accountant and Certified Internal Auditor with a Master's in Business Administration. He brings nearly 20 years of progressive experience in international accounting and finance, and extensive expertise in financial planning and reporting and internal controls. Before joining Cansortium, Mr. Pedreira served for eight years as Assistant Controller and Senior Director of Finance at Campbell Soup Company.
"I look forward to working closely with Marcos as the Company pursues its strategic growth opportunities in 2020 and beyond," concluded Mr. Hochberg.
ABOUT CANSORTIUM INC.
Headquartered in Miami, Florida, and operating under the Fluent(TM) brand, Cansortium is focused on being the highest quality cannabis company in the State of Florida driven by unrelenting commitment to operational excellence from seed to sale. Cansortium has developed strong proficiencies in each of cultivation, processing, retail, and distribution activities, the result of successfully operating in the highly regulated cannabis industry. In addition to Florida, Cansortium is seeking to create significant shareholder value in the attractive markets of Texas, Michigan and Pennsylvania.
Cansortium Inc.'s common shares and warrants trade on the CSE under the symbol "TIUM.U" and "TIUM.WT.U", respectively, and on the OTCQB Venture Market under the symbol (OTCQB: CNTMF). Investors can find current financial disclosure and Real-Time Level 2 quotes for the Company on www.otcmarkets.com.
Forward-Looking Information
All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties that may cause actual results to differ, perhaps materially. Projections are predicated on the Company's ability to continue successfully implementing the strategic growth and cost-saving initiatives identified by the Special Committee of the Board. In addition, projections are based on the Company's ability to secure and effectively deploy its capital resources toward those initiatives.
Certain information in this news release, may constitute forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events. Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this news release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in the public documents of the Company available at www.sedar.com. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this news release are made as of the date of this news release, and the Company expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.
Financial Tables Follow
Cansortium Inc.
Consolidated Statements of
Financial Position
As of March 31, 2020 and
December 31, 2019
(USD '000)
March 31,
December 31,
2020 2019
Assets
Current assets
Cash and cash equivalents $
4,846 $
2,516
Accounts receivable 136 144
Inventory 8,336 6,709
Biological assets 6,678 3,845
Note receivable 4,209 3,870
Prepaid expenses and other
current assets 1,148 556
---
Total current assets 25,353 17,640
Investment held for sale 324
Assets held for sale 4,210 6,301
Property and equipment, net 19,311 19,128
Intangible assets, net 98,183 98,566
Right-of-use assets 19,532 20,190
Investment in associate 3,240 3,424
Goodwill 1,526 1,526
Other assets 290 291
Total assets $
171,969 $
167,066
===
Liabilities
Current liabilities
Accounts payable 5,858 7,860
Accrued liabilities 4,324 5,135
Income taxes payable 3,218 1,492
Derivative liabilities 13,590 13,198
Current portion of notes
payable 7,849 9,350
Lease obligations 1,852 1,761
---
Total current liabilities 36,691 38,796
Liabilities held for sale 3,017 3,240
Notes payable, net of
current portion 37,895 31,053
Lease obligations, net of
current portion 20,674 21,166
Deferred income taxes 26,065 24,957
Other long-term
liabilities 750 676
Total liabilities 125,092 119,888
---
Shareholders' equity
Share capital 144,481 149,322
Share-based compensation
reserve 3,099 2,977
Equity conversion feature 12,250 7,613
Warrants 13,128 11,773
Accumulated deficit (125,289) (123,785)
Accumulated other
comprehensive loss (633) (563)
Total shareholders' equity
attributable to Cansortium
Inc. shareholders 47,036 47,337
Non-controlling interests (159) (159)
Total shareholders' equity 46,877 47,178
---
Total liabilities and
shareholders' equity $
171,969 $
167,066
===
Cansortium
Inc.
Consolidated
Statement of
Operations
For the
three
months
ended March
31, 2020
and 2019
(USD '000)
For the three months
ended March 31,
2020 2019
Revenue, net
of
discounts $
10,163 $
5,528
Cost of
goods sold 3,660 2,561
---
Gross profit
before fair
value
adjustments 6,503 2,967
Realized
fair value
of
increments
on
inventory
sold 7,562 1,118
Unrealized
change in
fair value
of
biological
assets (12,110) (1,101)
---
Gross profit 11,051 2,950
Expenses
General and
administrative 3,139 9,654
Share-based
compensation 886 604
Sales and
marketing 3,121 2,917
Depreciation
and
amortization 1,502 2,299
---
Total
expenses 8,648 15,474
---
Income
(loss) from
operations 2,403 (12,524)
Discontinued
operations (376)
Other
expense
(income)
Interest
expense,
net 3,759 4,317
Change in
fair market
value of
derivative 1,835 (1,879)
Loss on
investment
in
associate 183
Loss on debt
reestructuring 8,065
Other
expense 16 1,589
Total other
expense
(income) 13,858 4,027
---
Loss before
taxes (11,079) (16,551)
Income taxes 2,833
Net loss (13,912) (16,551)
===
Net loss
attributable
to non-
controlling
interest (270)
Net loss
attributable
to
controlling
interest $
(13,912) $
(16,281)
===
Net loss per
share
Basic $
(0.07) $
(0.10)
Diluted $
(0.07) $
(0.10)
===
Cansortium Inc.
Consolidated Statement
of Cash Flows
For the three months
ended March 31, 2020
and 2019
(USD '000)
For the three months ended March 31,
2020 2019
Operating activities
Net loss $
(13,912) $
(16,551)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Share-based
compensation 806 1,203
Depreciation and
amortization 1,990 2,654
Unrealized gain on
changes in fair value
of biological assets (12,110) (1,101)
Amortization of debt
discount 1,378
Accretion of convertible
debentures 1,822
Discontinued operations (370)
Change in fair market
value of derivative 1,835 (1,879)
Loss (gain) on
investment in associate 184
Loss on debt
reestructuring 8,064
Interest on lease
liabilities 663
Deferred tax expense 1,108
Changes in operating
assets and liabilities:
Accounts Receivable 8 (15)
Inventory (1,627) (1,686)
Biological assets 9,277 1,508
Prepaid expenses and
other current assets (592) (2,148)
Other assets 1 748
Accounts payable 998 1,690
Accrued liabilities 528 (157)
Income taxes payable 1,726
Lease obligations 338
Other current
liabilities 236
Other liabilities 132
Net cash provided by
(used in) operating
activities 531 (13,782)
---
Investing activities
Purchases of property
and equipment (1,132) (2,718)
Notes receivable (339)
Net cash used in
investing activities (1,471) (2,718)
---
Financing activities
Proceeds from IPO 56,178
Proceeds from issuance
of shares and warrants 4,351
Proceeds from issuance
of notes payable 62 13,166
Payment of lease
obligations (1,064) (647)
Principal repayments of
notes payable (9) (44,500)
Net cash provided by
financing activities 3,340 24,197
---
Effect of foreign
exchange on cash and
cash equivalents (70) 136
---
Net increase in cash and
cash equivalents 2,330 7,833
Cash and cash
equivalents, beginning
of period 2,516 2,026
---
Cash and cash
equivalents, end of
period $
4,846 $
9,859
===
Cash $
4,846 $
9,859
Cash included in assets
held for sale
Total cash $
4,846 $
9,859
===
Cash paid during the
period for interest $
409 $
2,627
Non-cash transactions:
Issuance of shares to
acquire additional
interest in
consolidated entity
$ $
12,002
Shares returns for sale
of interest in
subsidiaries $
(3,294)
$
Founders shares return $
(10,970)
$
Note payable amendment $
10,380
$
Cansortium Inc.
Financial Highlights
For the three months ended March 31, 2020 and 2019
(USD '000)
Three months ended
Financial results March March Variance
31, 2020 31, 2019
--- ---
Revenue $
10,163 $
5,528 $
4,635
Gross profit $
11,051 $
2,950 $
8,101
Gross margin 108.7% 53.4% 55.4%
Adjusted gross
profit (loss)(1) $
6,503 $
2,967 $
3,536
Adjusted gross margin(1) 64.0% 53.7% 10.3%
Selling, general and
administrative
expenses $
8,648 $
15,474 $
(6,826)
EBITDA(1) $
(5,330) $
(9,142) $
3,811
Adjusted EBITDA(1) $
715 $
(3,420) $
4,135
Net loss $
(13,912) $
(16,551) $
2,639
Net loss per share
(basic) $
(0.07) $
(0.10) $
0.03
Net loss per share
(diluted) $
(0.07) $
(0.10) $
0.03
(1) Adjusted gross profit, adjusted
gross margin, EBITDA and
Adjusted EBITDA are non-IFRS
financial measures that do not
have any standardized meaning
prescribed by IFRS and may not
be comparable to similar
measures presented by other
companies. Refer to the
reconciliation to IFRS and
quarterly results of operations
sections at the Company's
Management Discussion and
Analysis document for
reconciliation to IFRS.
Cansortium Inc.
Reconciliation of non-IFRS financial measures
For the three months ended March 31, 2020 and 2019
(USD '000)
EBITDA
EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates EBITDA from net income (loss), plus (minus) interest expense (income), plus income taxes, plus depreciation and amortization, as follows:
Three months ended
March March
31, 2020 31, 2019 Variance
Net
income
(loss) $
(13,912) $
(16,551) $
2,639
Interest
expense 3,759 4,317 (558)
Income
taxes 2,833 2,833
Depreciation
and
amortization 1,989 3,092 (1,103)
EBITDA $
(5,330) $
(9,142) $
3,811
===
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA from EBITDA plus (minus) unrealized loss (gain) on embedded derivatives, plus (minus) certain one-time non-operating expenses, as determined by management. The reconciliation from EBITDA to Adjusted EBITDA is as follows:
Three months ended
March March Variance
31, 2020 31, 2019
EBITDA $
(5,330) $
(9,142) $
3,811
Change in fair value
of biological
assets (4,548) 17 (4,565)
Change in fair
market value of
derivative 1,835 (1,879) 3,714
Share based
compensation 886 604 282
Discontinued
operations (376) (376)
Loss on debt
restructuring 8,065 8,065
Other non-recurring
expense 183 6,980 (6,797)
Adjusted EBITDA $
715 $
(3,420) $
4,135
===
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