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 third quarter and nine months ended September 30, 2020. 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.cansortium.com.
Selected Third Quarter 2020 Financial Highlights
- Consolidated revenue of $14.3 million, an increase of 94 percent or $6.9 million compared with consolidated revenue of $7.4 million in the third quarter of 2019.
- Consolidated loss from operations of $(1.9) million, compared to loss from operations of $(8.1) million in the third quarter of 2019.
- Consolidated Adjusted EBITDA(1) of $3.6 million, compared to Adjusted EBITDA(1) loss of $(2.1) million in the third quarter of 2019.
- Consolidated net loss of $(8.9) million, or $(0.04) per diluted share, compared to consolidated net loss of $(11.3) million, or $(0.06) per diluted share for the same period last year.
- During the third quarter of 2020, the Company opened its 21st medical marijuana dispensary in Coral Springs, FL. It operated 16 dispensaries during the comparable period in 2019. In October and November of 2020, the Company opened its 22nd and 23rd Florida dispensary in Coral Gables, FL and Kendall, FL, respectively.
| (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. |
Selected Year-to-Date 2020 Financial Highlights
- Consolidated revenue of $37.7 million, an increase of 50 percent or $18.7 million compared with consolidated revenue of $19.0 million during the nine months ended September 30, 2019.
- Consolidated income from operations of $1.3 million, compared to loss from operations of $(28.7) million during the nine months ended September 30, 2019.
- Consolidated Adjusted EBITDA(1) of $7.0 million, compared to Adjusted EBITDA(1) loss of $(7.2) million during the nine months ended September 30, 2019.
- Consolidated net loss of $(28.3) million, or $(0.14) per diluted share, compared to consolidated net loss of $(33.1) million, or $(0.18) per diluted share for the same period last year.
| (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 has continued to make progress on its targeted initiatives focused on growth and long-term shareholder value creation. In its home state of Florida, the Company secured an additional cultivation and production facility during the second quarter of 2020 with minimum capital outlay, with operations anticipated to commence in the fourth quarter of 2020, and has opened five of the six dispensaries planned for 2020. In Pennsylvania, the Company is actively pursuing two additional dispensary locations to augment the strong sales of its existing Hanover dispensary. In Michigan, the Company enhanced the cultivation team on the ground with the engagement of Freedom Town. Finally, in Texas, the Company recently secured an extension of its convertible notes to allow the Company to continue to seek longer-term solutions there. The Company reiterates its full year 2020 outlook for consolidated revenues in the range of $55 million to $60 million and Adjusted EBITDA of approximately $14 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.
ABOUT CANSORTIUM INC.
Headquartered in Miami, Florida, and operating under the Fluent™ 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.
Conference Call
The Company will host a conference call and live audio webcast on, November 24, 2020 at 5:00 P.M. Eastern time, to discuss its third quarter 2020 financial results.
All interested parties can join the conference call by dialing 1-800-319-4610 (Canada/USA) or +1-604-638-5340 (international). Callers should dial in 5 to 10 minutes prior to the scheduled start time and ask to join the call. A live audio webcast of the conference call will be available at: http://services.choruscall.ca/links/cansortium20201123.html
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 September 30, 2020 and December 31, 2019 | ||||
| (USD ‘000) | ||||
| September 30, | December 31, | |||
| 2020 | 2019 | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 4,072 | $ | 2,516 |
| Accounts receivable | 65 | 144 | ||
| Inventory | 9,574 | 6,709 | ||
| Biological assets | 6,128 | 3,845 | ||
| Note receivable | 4,895 | 3,870 | ||
| Prepaid expenses and other current assets | 1,311 | 556 | ||
| Total current assets | 26,045 | 17,640 | ||
| Investment held for sale | 324 | – | ||
| Assets held for sale | – | 6,301 | ||
| Property and equipment, net | 18,677 | 19,128 | ||
| Intangible assets, net | 97,418 | 98,566 | ||
| Right-of-use assets | 19,410 | 20,190 | ||
| Investment in associate | 3,043 | 3,424 | ||
| Goodwill | 1,526 | 1,526 | ||
| Other assets | 390 | 291 | ||
| Total assets | $ | 166,833 | $ | 167,066 |
| Liabilities | ||||
| Current liabilities | ||||
| Accounts payable | 4,558 | 7,860 | ||
| Accrued liabilities | 4,107 | 5,135 | ||
| Income taxes payable | 6,401 | 1,492 | ||
| Derivative liabilities | 13,436 | 13,198 | ||
| Current portion of notes payable | 37,211 | 9,350 | ||
| Lease obligations | 1,979 | 1,761 | ||
| Other current liabilities | 350 | – | ||
| Total current liabilities | 68,042 | 38,796 | ||
| Liabilities held for sale | – | 3,240 | ||
| Notes payable, net of current portion | 12,695 | 31,053 | ||
| Lease obligations, net of current portion | 20,728 | 21,166 | ||
| Deferred income taxes | 26,657 | 24,957 | ||
| Other long-term liabilities | 468 | 676 | ||
| Total liabilities | 128,590 | 119,888 | ||
| Shareholders’ equity | ||||
| Share capital | 147,846 | 149,322 | ||
| Share-based compensation reserve | 4,148 | 2,977 | ||
| Equity conversion feature | 12,250 | 7,613 | ||
| Warrants | 13,265 | 11,773 | ||
| Accumulated deficit | (138,891) | (123,785) | ||
| Accumulated other comprehensive loss | (375) | (563) | ||
| Total shareholders’ equity attributable to Cansortium Inc. shareholders | 38,243 | 47,337 | ||
| Non-controlling interests | – | (159) | ||
| Total shareholders’ equity | 38,243 | 47,178 | ||
| Total liabilities and shareholders’ equity | $ | 166,833 | $ | 167,066 |
| Cansortium Inc. | |||||||||
| Consolidated Statement of Operations | |||||||||
| For the three and nine months ended September 30, 2020 and 2019 | |||||||||
| (USD ‘000) | |||||||||
| For the three months ended September 30, | For the nine months ended September 30, | ||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||
| Revenue, net of discounts | $ | 14,313 | $ | 7,387 | $ | 37,718 | $ | 19,005 | |
| Cost of goods sold | 4,784 | 2,722 | 13,011 | 6,822 | |||||
| Gross profit before fair value adjustments | 9,529 | 4,665 | 24,707 | 12,183 | |||||
| Realized fair value of increments on inventory sold | 6,051 | 3,341 | 18,566 | 6,692 | |||||
| Unrealized change in fair value of biological assets | (4,263) | (1,109) | (23,945) | (3,182) | |||||
| Gross profit | 7,741 | 2,433 | 30,086 | 8,673 | |||||
| Expenses | |||||||||
| General and administrative | 2,861 | 4,362 | 9,064 | 19,384 | |||||
| Share-based compensation | 1,689 | 258 | 4,938 | 1,744 | |||||
| Sales and marketing | 3,561 | 3,348 | 10,162 | 8,972 | |||||
| Depreciation and amortization | 1,561 | 2,549 | 4,635 | 7,250 | |||||
| Total expenses | 9,672 | 10,517 | 28,799 | 37,350 | |||||
| Income (loss) from operations | (1,931) | (8,084) | 1,287 | (28,677) | |||||
| Discontinued operations | 236 | – | (106) | – | |||||
| Other expense (income) | |||||||||
| Interest expense, net | 3,892 | 2,926 | 11,448 | 9,786 | |||||
| Change in fair market value of derivative | 673 | (2,631) | 1,680 | (6,172) | |||||
| Loss on investment in associate | 166 | – | 381 | – | |||||
| Gain in fair market value of investment in associate | – | – | – | (3,388) | |||||
| Loss on debt restructuring | – | – | 8,065 | – | |||||
| Loss on disposal of assets | 710 | 2,205 | 656 | 2,205 | |||||
| Other expense | 1 | 257 | 7 | 285 | |||||
| Total other expense (income) | 5,442 | 2,757 | 22,237 | 2,716 | |||||
| Loss before taxes | (7,609) | (10,841) | (20,844) | (31,393) | |||||
| Income taxes | 1,281 | 432 | 7,422 | 1,708 | |||||
| Net loss | (8,890) | (11,273) | (28,266) | (33,101) | |||||
| Net income (loss) attributable to non-controlling interest | – | 83 | – | (204) | |||||
| Net loss attributable to controlling interest | $ | (8,890) | $ | (11,356) | $ | (28,266) | $ | (32,897) | |
| Net loss per share | |||||||||
| Basic | $ | (0.04) | $ | (0.06) | $ | (0.14) | $ | (0.18) | |
| Diluted | $ | (0.04) | $ | (0.06) | $ | (0.14) | $ | (0.18) |
| Cansortium Inc. | ||||
| Consolidated Statement of Cash Flows | ||||
| For the nine months ended September 30, 2020 and 2019 | ||||
| (USD ‘000) | ||||
| For the nine months ended September 30, | ||||
| 2020 | 2019 | |||
| Operating activities | ||||
| Net loss | $ | (28,266) | $ | (33,101) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Unrealized gain on changes in fair value of biological assets | (23,945) | (3,182) | ||
| Share-based compensation | 4,938 | 2,005 | ||
| Depreciation and amortization | 6,146 | 8,252 | ||
| Discontinued operations | (106) | – | ||
| Amortization of debt discount | – | 4,497 | ||
| Accretion of convertible debentures | 5,974 | – | ||
| Interest on lease liabilities | 3,324 | – | ||
| Change in fair market value of derivative | 1,680 | (6,172) | ||
| Loss on investment in associate | 381 | – | ||
| Gain in fair market value of investment in associate | – | (3,388) | ||
| Loss on debt restructuring | 8,066 | – | ||
| Loss on disposal of assets | 656 | 2,205 | ||
| Deferred tax expense | 1,700 | – | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | 79 | (51) | ||
| Inventory | (2,930) | (3,715) | ||
| Biological assets | 21,662 | 2,746 | ||
| Prepaid expenses and other current assets | (492) | (5,561) | ||
| Right-of-use assets | (1,439) | – | ||
| Other assets | (99) | (1,116) | ||
| Accounts payable | (309) | 102 | ||
| Accrued liabilities | 2,205 | (3,357) | ||
| Income taxes payable | 4,909 | 1,838 | ||
| Lease obligations | – | 1,772 | ||
| Other current liabilities | (251) | 398 | ||
| Other liabilities | (160) | – | ||
| Net cash provided by (used in) operating activities | 3,723 | (35,828) | ||
| Investing activities | ||||
| Purchases of property and equipment | (3,136) | (12,558) | ||
| Purchase of intangible assets | – | (319) | ||
| Payment of notes receivable | 350 | – | ||
| Notes receivable | (1,375) | – | ||
| Proceeds from sale of subsidiary | 600 | – | ||
| Net cash used in investing activities | (3,561) | (12,877) | ||
| Financing activities | ||||
| Proceeds from IPO | – | 56,178 | ||
| Proceeds from issuance of shares and warrants | 4,351 | – | ||
| Proceeds from issuance of notes payable | 62 | 41,006 | ||
| Payment of lease obligations | (3,207) | 921 | ||
| Interest repayments of notes payable | – | – | ||
| Principal repayments of notes payable | – | (46,353) | ||
| Net cash provided by financing activities | 1,206 | 51,752 | ||
| Effect of foreign exchange on cash and cash equivalents | 188 | (59) | ||
| Net increase in cash and cash equivalents | 1,556 | 2,988 | ||
| Cash and cash equivalents, beginning of period | 2,516 | 2,026 | ||
| Cash and cash equivalents, end of period | $ | 4,072 | $ | 5,014 |
| Cash paid during the period for interest | $ | 2,457 | $ | 585 |
| Non-cash transactions: | ||||
| Issuance of shares to acquire additional interest in consolidated entity | $ | – | $ | 13,786 |
| Shares returns for sale of interest in subsidiaries | $ | (4,374) | $ | – |
| Founders shares return | $ | (10,970) | $ | – |
| Note payable amendment | $ | 10,380 | $ | – |
| Issuance of share for convertible debentures amendment | $ | 2,082 | $ | – |
| Cansortium Inc. | |||||||||||||
| Financial Highlights | |||||||||||||
| For the three and nine months ended September 30, 2020 and 2019 | |||||||||||||
| (USD ‘000) | |||||||||||||
| Three months ended | Nine months ended | ||||||||||||
| Financial results | September 30, 2020 | September 30, 2019 | Variance | September 30, 2020 | September 30, 2019 | Variance | |||||||
| Revenue | $ | 14,313 | $ | 7,387 | $ | 6,926 | $ | 37,718 | $ | 19,005 | $ | 18,713 | |
| Gross profit | $ | 7,741 | $ | 2,433 | $ | 5,308 | $ | 30,086 | $ | 8,673 | $ | 21,413 | |
| Gross margin | 54.1% | 32.9% | 21.1% | 79.8% | 45.6% | 34.1% | |||||||
| Adjusted gross profit (1) | $ | 9,529 | $ | 4,665 | $ | 4,864 | $ | 24,707 | $ | 12,183 | $ | 12,524 | |
| Adjusted gross margin (1) | 66.6% | 63.2% | 3.4% | 65.5% | 64.1% | 1.4% | |||||||
| Selling, general and administrative expenses | $ | 9,672 | $ | 10,517 | $ | (845) | $ | 28,799 | $ | 37,350 | $ | (8,552) | |
| EBITDA (1) | $ | (1,617) | $ | (4,483) | $ | 2,867 | $ | (3,243) | $ | (11,854) | $ | 8,611 | |
| Adjusted EBITDA (1) | $ | 3,645 | $ | (2,095) | $ | 5,740 | $ | 6,990 | $ | (7,224) | $ | 14,215 | |
| Net loss | $ | (8,890) | $ | (11,273) | $ | 2,383 | $ | (28,266) | $ | (33,101) | $ | 4,835 | |
| Net loss per share (basic) | $ | (0.04) | $ | (0.06) | $ | 0.01 | $ | (0.14) | $ | (0.18) | $ | 0.04 | |
| Net loss per share (diluted) | $ | (0.04) | $ | (0.06) | $ | 0.01 | $ | (0.14) | $ | (0.18) | $ | 0.04 |
| (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 and nine months ended September 30, 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 | Nine months ended | ||||||||||||
| September 30, 2020 | September 30, 2019 | Variance | September 30, 2020 | September 30, 2019 | Variance | ||||||||
| Net loss | $ | (8,890) | $ | (11,273) | $ | 2,383 | $ | (28,266) | $ | (33,101) | $ | 4,835 | |
| Interest expense | 3,892 | 2,926 | 966 | 11,448 | 9,786 | 1,662 | |||||||
| Income taxes | 1,281 | 432 | 849 | 7,422 | 1,708 | 5,714 | |||||||
| Depreciation and amortization | 2,100 | 3,432 | (1,332) | 6,153 | 9,753 | (3,600) | |||||||
| EBITDA | $ | (1,617) | $ | (4,483) | $ | 2,866 | $ | (3,243) | $ | (11,854) | $ | 8,611 |
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 | Nine months ended | ||||||||||||
| September 30, 2020 | September 30, 2019 | Variance | September 30, 2020 | September 30, 2019 | Variance | ||||||||
| EBITDA | $ | (1,617) | $ | (4,483) | $ | 2,866 | $ | (3,243) | $ | (11,854) | $ | 8,611 | |
| Change in fair value of biological assets | 1,788 | 2,232 | (444) | (5,379) | 3,510 | (8,889) | |||||||
| Change in fair market value of derivative | 673 | (2,631) | 3,304 | 1,680 | (6,172) | 7,852 | |||||||
| Gain in fair value of investment in associate | – | – | – | – | (3,388) | 3,388 | |||||||
| Share-based compensation | 1,689 | 258 | 1,431 | 4,938 | 1,744 | 3,194 | |||||||
| Discontinued operations | 236 | – | 236 | (106) | – | (106) | |||||||
| Loss on debt restructuring | – | – | – | 8,065 | – | 8,065 | |||||||
| Other non-recurring expense | 876 | 2,530 | (1,654) | 1,035 | 8,935 | (7,900) | |||||||
| Adjusted EBITDA | $ | 3,645 | $ | (2,095) | $ | 5,740 | $ | 6,990 | $ | (7,224) | $ | 14,215 |
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