Cansortium Inc. Reports Fourth Quarter and Full Year 2019 Financial Results; Provides Preliminary First Quarter 2020 Metrics and Initial Full Year 2020 Outlook

05/19/2020

MIAMI, May 19, 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 fourth quarter and full year ended December 31, 2019. The Company also provided preliminary first quarter 2020 financial metrics and its initial full year 2020 outlook.  The Company's audited consolidated financial statements and accompanying notes for fiscal 2019, 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, "Cansortium took significant strides in the second half of 2019 to improve the Company's balance sheet and establish a platform for profitable growth in our core markets of Florida, Michigan, Pennsylvania and Texas. During 2019, we expanded our dispensary footprint in Florida to 18 locations and we operationalized our key cultivation facility in Tampa, which is the cornerstone of our vertically integrated operations in Florida. Since the beginning of 2020, we have continued to make significant improvements to the business and are pleased to share that Q1 2020 marked the first time in the Company's history that Cansortium generated positive EBITDA, driven by strong revenue growth. We believe that revenue growth and profitability will continue to strengthen through the remainder of 2020."

Selected Fourth Quarter 2019 Financial Highlights Versus Fourth Quarter 2018 Results

  • Consolidated revenue increased 52 percent to $9.5 million, compared with revenue of $4.9 million for the fourth quarter of 2018
  • Consolidated loss from operations totaled $(5.8) million, compared to loss from operations of $(10.2) million for the same period of 2018
  • Consolidated Adjusted EBITDA(2) totaled $0.1 million, compared to Adjusted EBITDA(2) loss of $(10.3) million for the same period of 2018

Selected Full Year 2019 Financial Highlights Versus Full Year 2018 Pro-Forma Results(1) 

  • Consolidated revenue increased 51 percent to $28.5 million, compared with pro-forma revenue of $18.9 million
  • Consolidated loss from operations totaled $(30.9) million, compared with pro-forma loss from operations of $(14.0) million
  • Consolidated Adjusted EBITDA(2) loss totaled $(6.9) million, compared to Adjusted pro-forma EBITDA(2) loss of $(16.0) million for the same period of 2018

(1)

Pro-forma measures reflect the consolidation of Knox Servicing, which was accounted for as an equity method investment until August 15,
2018, the date on which the Company acquired the remaining interest in Knox Servicing and became the sole member, and 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.

(2)

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.

Preliminary First Quarter Financial Metrics

The Company intends to avail itself of the 45-day filing extension provided by the Canadian Securities Administrators as blanket relief, and Ontario Instrument 51-502: Temporary Exemption from Certain Corporate Finance Requirements (the "Order"), for periodic filings normally required to be made by issuers during the period from March 23, 2020 to June 1, 2020. Accordingly, the Company will be postponing the filing of its quarterly financial statements for the three months ended March 31, 2020 and the related management's discussion and analysis beyond the original filing deadline of May 31, 2020. In the interim, it is providing the following select preliminary financial metrics for the period.

  • Preliminary, unaudited consolidated revenues for the first quarter ended March 31, 2020 totaled approximately $10.2 million, an 85% increase as compared with revenues of $5.5 million in the first quarter of 2019. During the first quarter of 2020, the Company opened its 19th medical marijuana dispensary in Panama City, FL. It operated 9 dispensaries during the comparable period in 2019. In April, the Company opened its 20thFlorida dispensary in East Orlando, FL – it's third in the greater Orlando market.

  • Q1 2020 marked the first time the Company was EBITDA positive, achieving preliminary EBITDA of $0.1 million and adjusted EBITDA of $0.9 million, compared with EBITDA loss of $(5.5) million and adjusted EBITDA loss of $(3.3) million in the comparable period of 2019.

Initial Full Year 2020 Outlook

The Company is projecting consolidated revenues for 2020 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 projects that it will open six additional Florida dispensaries during the remainder of 2020. These locations include Coral Gables, Kendall, South Beach (Miami Beach), Coral Springs, Fort Pierce and Deerfield Beach. In addition, the Company expects to develop two new dispensaries in the south-central region of Pennsylvania during 2020 that will begin operating in early 2021.

Mr. Hochberg noted, "Our preliminary first quarter results and full year 2020 outlook reflect confidence in management's ability to execute the operational and financial restructuring plan (the "Plan") developed by the Company's Board of Directors and its Special Committee."  The successful completion of Phase One of the Plan included:

  • significant staff rationalization and cost savings
  • improvements to the Company's main cultivation facility in Tampa to reach full operational capacity
  • sale of non-core operations in Canada and Puerto Rico
  • extension of near-term debt maturities and reduction of nearly $10 million of contingent liabilities
  • completion of a private equity placement for gross proceeds of approximately U.S.$4.6 million to fund strategic growth opportunities
  • establishment of a strategic partnership with Moxie to improve cultivation, branding and product mix.

Mr. Hochberg added, "We are proud of management's accomplishments during the past six months and we are now entering Phase Two of the Plan which 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 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
  • Continue to promote expansion of the medicinal cannabis market in Texas

Mr. Hochberg concluded, "We are committed to carefully focusing our capital and other resources on the most promising, actionable U.S. medical marijuana markets. In Florida, despite the unprecedented challenges presented by the ongoing global COVID-19 pandemic, we are strengthening the Fluent brand's competitive position by continuing to serve Florida's growing medical marijuana patient population as a designated essential service and we continue to grow revenues while managing expenses to drive profitability. Together with additional opportunities in Michigan, Pennsylvania and Texas, we are positioned to make meaningful progress in 2020 toward enhanced cash flow and profitability."

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.

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 December 31, 2019 and 2018



(USD '000)





Restated


 December 31,

 December 31,


2019

2018

Assets



Current assets



Cash and cash equivalents

$

2,516

$

2,026

Accounts receivable

144

62

Inventory

6,709

2,837

Biological assets

3,845

2,549

Note receivable

3,870

-

Prepaid expenses and other current assets

556

543

Total current assets

17,640

8,017




Assets held for sale

6,301

-




Property and equipment, net

19,128

18,573

Intangible assets, net

98,566

105,657

Right-of-use assets

20,190

-

Investment in associate

3,424

-

Goodwill

1,526

7,498

Other assets

291

721

Total assets

$

167,066

$

140,466




Liabilities



Current liabilities



Accounts payable

$

7,860

$

4,910

Accrued liabilities

5,135

3,936

Income taxes payable

1,492

-

Derivative liabilities

13,198

10,810

Current portion of notes payable

9,350

43,845

Lease obligations

1,761

-

Other current liabilities

-

1,350

Total current liabilities

38,796

64,851




Liabilities held for sale

3,240

-




Notes payable, net of current portion

31,053

9,454

Lease obligations, net of current portion

21,166

-

Deferred income taxes

24,957

-

Other long-term liabilities

676

450

Total liabilities

119,888

74,755




Shareholders' equity



Share capital

149,322

91,655

Share-based compensation reserve

2,977

-

Equity conversion feature

7,613

-

Warrants

11,773

296

Accumulated deficit

(123,785)

(25,237)

Accumulated other comprehensive loss

(563)

(488)

Total shareholders' equity attributable to Cansortium Inc. shareholders

47,337

66,226

Non-controlling interests

(159)

(515)

Total shareholders' equity

47,178

65,711




Total liabilities and shareholders' equity

$

167,066

$

140,466

 

Cansortium Inc



Consolidated Statement of Operations



For the years ended December 31, 2019 and 2018



(USD '000)




 For the years ended

December 31,




 Restated


2019

2018




Revenue, net of discounts

$

28,511

$

8,061

Cost of goods sold

10,596

6,447

Gross profit before fair value adjustments

17,915

1,614




Realized fair value of increments on inventory sold

9,594

1,612

Unrealized change in fair value of biological assets

(9,735)

(2,866)

Gross profit

18,056

2,868




Expenses



General and administrative

21,720

16,094

Share-based compensation

7,161

963

Sales and marketing

12,165

4,333

Depreciation and amortization

7,869

1,729

Total expenses

48,915

23,119




Loss from operations

(30,859)

(20,251)




Discontinued operations

12,415

-




Other expense (income)



Interest expense, net

14,811

3,794

Change in fair market value of derivative

(328)

4,519

Loss (gain) on investment in associate

353

(2,761)

Gain in fair market value of investment in associate

-

(25,693)

Loss on disposal of assets

2,909

-

Other expense

462

944

Total other expense (income)

18,207

(19,197)




Loss before taxes

(61,481)

(1,054)




Income taxes

4,164

-




Net loss

(65,645)

(1,054)




Net loss attributable to non-controlling interest

(313)

(727)




Net loss attributable to controlling interest

$

(65,332)

$

(327)




Net loss per share



Basic

$

(0.35)

$

(0.01)

Diluted

$

(0.35)

$

(0.01)

 

Cansortium Inc



Consolidated Statement of Cash Flows



For the years ended December 31, 2019 and 2018



(USD '000)





 Restated



 (Note 22)


2019

2018

Operating activities



Net loss

$

(65,645)

$

(1,054)

Adjustments to reconcile net loss to net cash used in operating activities:



Share-based compensation

6,652

3,690

Depreciation and amortization

8,871

2,599

Unrealized gain on changes in fair value of biological assets

(9,735)

(2,866)

Accretion of convertible debentures

5,578

895

Discontinued operations

12,415

-

Change in fair market value of derivative

(328)

4,519

Loss (gain) on investment in associate

353

(2,761)

Loss of disposal of property and equipament

2,909

570

Gain in fair market value of investment in associate

-

(25,693)

Interest on lease liabilities

2,281

-

Deferred tax expense

2,671

-

Changes in operating assets and liabilities:



Accounts Receivable

(165)

(30)

Inventory

(4,026)

27

Biological assets

8,439

1,762

Prepaid expenses and other current assets

(506)

148

Other assets

403

(713)

Accounts payable

3,565

1,743

Accrued liabilities

2,487

3,398

Income taxes

1,492

-

Other current liabilities

(1,261)

-

Other liabilities

870

1,747

Net cash used in operating activities

(22,680)

(12,019)




Investing activities



Purchases of property and equipment

(13,844)

(9,529)

Purchase of intangible assets

(319)

(219)

Notes receivable

(3,870)

-

Business acquisitions, net of cash acquired

-

(88)

Net cash used in investing activities

(18,033)

(9,836)




Financing activities



Proceeds from IPO

50,836

-

Proceeds from issuance of shares

-

22,046

Proceeds from issuance of notes payable

37,584

1,495

Proceeds from sale of property and equipment

204

-

Distribution to initial investors

-

(600)

Payment of lease obligations

(3,500)

-

Payment of business acquisition contractual obligation

-

(1,150)

Principal repayments of notes payable

(43,840)

(448)

Net cash provided by financing activities

41,284

21,343

Effect of foreign exchange on cash and cash equivalents

(75)

(495)

Net increase in cash and cash equivalents

496

(1,007)

Cash and cash equivalents, beginning of period

2,026

3,033

Cash and cash equivalents, end of period

$

2,522

$

2,026




Cash

$

2,516

$

2,026

Cash included in assets held for sale

6

-

Total cash

$

2,522

$

2,026




Cash paid during the period for interest

$

4,144

$

641




Non-cash transactions:



Notes payable issued to acquire additional non-controlling



interest of subsidiary

$

-

$

50,199

Issuance of shares to acquire additional non-controlling



non-controlling interest of subsidiary

$

9,000

$

11,341

Issuance of equity for business acquisition

$

-

$

16,874

Issuance of shares for investment in Green Standard

$

3,777

$

-

Future equity price guarantee

$

2,597

$

3,561

Conversion of capital contributions to notes payable

$

-

$

1,809

Conversion of accrued interest and notes payable to equity

$

2,440

$

4,910

 

Cansortium Inc

Financial Highlights

For the three months ended December 31, 2019 and 2018

(USD '000)






Three months ended

 

Financial results

December

31, 2019

December

31, 2018

Variance





Revenue

$

9,505

$

4,900

$

4,605





Gross profit

$

9,382

$

1,404

$

7,978

Gross margin

98.7%

28.6%

70.1%





Adjusted gross profit (loss)(1)

$

5,731

$

(436)

$

6,167

Adjusted gross margin(1)

60.3%

-8.9%

69.2%





Selling, general and administrative expenses

$

15,177

$

11,558

$

3,619





EBITDA(1)

$

(24,058)

$

(11,571)

$

(12,487)

Adjusted EBITDA(1)

$

95

$

(10,297)

$

10,392





Net loss

$

(32,770)

$

(14,896)

$

(17,875)

Net loss per share (basic)

$

(0.18)

$

(0.11)

$

(0.07)

Net loss per share (diluted)

$

(0.18)

$

(0.11)

$

(0.07)

 

(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

Financial Highlights

For the years ended December 31, 2019 and 2018

(USD '000)






PRO-FORMA(1)


Year ended


Year ended

Financial results

December

31, 2019

December

31, 2018

Variance


December

31, 2018

Variance

vs. 12/31/19








Revenue

$

28,511

$

8,061

$

20,450


$

18,850

$

9,661








Gross profit

$

18,056

$

2,868

$

15,188


$

15,502

$

2,554

Gross margin

63.3%

35.6%

27.8%


82.2%

-18.9%








Adjusted gross profit(2)

$

17,915

$

1,614

$

16,301


$

10,321

$

7,594

Adjusted gross margin(2)

62.8%

20.0%

42.8%


54.8%

8.1%








Selling, general and administrative expenses

$

48,915

$

23,119

$

25,796


$

29,543

$

19,372








EBITDA(2)

$

(35,686)

$

4,796

$

(40,482)


$

(16,869)

$

(18,817)

Adjusted EBITDA(2)

$

(6,936)

$

(16,099)

$

9,163


$

(15,998)

$

9,062








Net income (loss)

$

(65,645)

$

(1,054)

$

(64,591)


$

(23,294)

$

(42,351)

Net income (loss) per share (basic)

$

(0.35)

$

(0.01)

$

(0.35)


$

(0.17)

$

(0.18)

Net income (loss) per share (diluted)

$

(0.35)

$

(0.01)

$

(0.35)


$

(0.17)

$

(0.18)

 

(1)

Pro-forma measures reflect the consolidation of Knox Servicing, which was accounted for as an equity method investment until August 15,
2018, the date on which the Company acquired the remaining interest in Knox Servicing and became the sole member, and 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.

(2)

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 TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(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


December

December



31, 2019

31, 2018

Variance





Net income (loss)

$

(32,770)

$

(14,896)

$

(17,875)

Interest expense

5,025

2,217

2,808

Income taxes

2,456

-

2,456

Depreciation and amortization

1,231

1,108

123

EBITDA

$

(24,058)

$

(11,571)

$

(12,487)

 






PRO-FORMA(1)


Year ended


Year ended


December

December

Variance


December

Variance


31, 2019

31, 2018


31, 2018

Net income (loss)

$

(65,645)

$

(1,054)

$

(64,591)


$

(23,294)

$

(42,351)

Interest expense

14,811

3,794

11,017


3,800

11,011

Income taxes

4,164

-

4,164


-

4,164

Depreciation and amortization

10,984

2,056

8,928


2,625

8,359

EBITDA

$

(35,686)

$

4,796

$

(40,482)


$

(16,869)

$

(18,817)

 

(1)

Pro-forma measures reflect the consolidation of Knox Servicing, which was accounted for as an equity method investment until
August 15, 2018, the date on which the Company acquired the remaining interest in Knox Servicing and became the sole member,
and 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.


 

CANSORTIUM INC.
RECONCILIATION OF NON-IFRS FINANCIAL MEASURES
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018
(USD '000)

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


December

31, 2019

December

31, 2018

Variance

EBITDA

$

(24,058)

$

(11,571)

$

(12,487)

Change in fair value of biological assets

(3,651)

(1,840)

(1,811)

Change in fair market value of derivative

5,844

1,580

4,264

Share based compensation

5,416

963

4,453

Discontinued operations

12,415

-

12,415

Other non-recurring expense

4,129

570

3,559

Adjusted EBITDA

$

95

$

(10,297)

$

10,392

 






PRO-FORMA(1)


Year ended


Year ended


December

December

Variance


December

Variance


31, 2019

31, 2018


31, 2018

EBITDA

$

(35,686)

$

4,796

$

(40,482)


$

(16,869)

$

(18,817)

Change in fair value of biological assets

(141)

(1,254)

1,113


(5,181)

5,040

Change in fair market value of derivative

(328)

4,519

(4,847)


4,519

(4,847)

Gain in fair market value of investment in associate

-

(25,693)

25,693


-

-

Share based compensation

7,161

963

6,198


963

6,198

Discontinued operations

12,415

0

12,415


-

12,415

Other non-recurring expenses

9,643

570

9,073


1,533

8,110

Adjusted EBITDA

$

(6,936)

$

(16,099)

$

9,163


$

(15,035)

$

8,099

 

(1)

Pro-forma measures reflect the consolidation of Knox Servicing, which was accounted for as an equity method investment until August 15,
2018, the date on which the Company acquired the remaining interest in Knox Servicing and became the sole member, and 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.

 

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SOURCE Cansortium Inc

www.getfluent.com; Cansortium Investors and Media: Neal Hochberg, Executive Chairman, [email protected], 646-752-5736, [email protected]