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Cansortium Inc. Reports Second Quarter Financial Results

08/26/2020
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Company achieves record revenue, more than doubling last year's second quarter revenue

MIAMI, Aug. 26, 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 second quarter and six months ended June 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 Second Quarter 2020 Financial Highlights

  • Consolidated revenue of $13.2 million, an increase of 117 percent or $7.1 million compared with consolidated revenue of $6.1 million in the second quarter of 2019.
  • Consolidated income from operations of $0.8 million, compared to loss from operations of $(8.1) million in the second quarter of 2019.
  • Consolidated Adjusted EBITDA(1) of $2.6 million, compared to Adjusted EBITDA(1) loss of $(1.7) million in the second quarter of 2019.
  • Consolidated net loss of $(5.5) million, or $(0.03) per diluted share, compared to consolidated net loss of $(5.3) million, or $(0.03) per diluted share for the same period last year.
  • During the second quarter of 2020, the Company opened its 20th medical marijuana dispensary in East Orlando, FL. It operated 11 dispensaries during the comparable period in 2019. On August 21st, the Company opened its 21st Florida dispensary in Coral Springs, FL.

(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.

Chief Financial Officer Marcos Pedreira commented, "We delivered strong results during the second quarter of 2020. Revenue more than doubled from a year ago and we continue to make significant improvements to deliver the 2020 projected financial results."

Selected Year-to-Date 2020 Financial Highlights

  • Consolidated revenue of $23.4 million, an increase of 101 percent or $11.8 million compared with consolidated revenue of $11.6 million in the first half of 2019.
  • Consolidated income from operations of $3.2 million, compared to loss from operations of $(20.6) million in the first half of 2019.
  • Consolidated Adjusted EBITDA(1) of $3.3 million, compared to Adjusted EBITDA(1) loss of $(5.1) million in the first half of 2019.
  • Consolidated net loss of $(19.4) million, or $(0.10) per diluted share, compared to consolidated net loss of $(21.8) million, or $(0.12) 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 the second quarter, the Company completed its exit from the non-core markets of Canada and Puerto Rico, streamlining operations and freeing up capital for its U.S. markets. In its home state of Florida, the Company secured an additional cultivation and production facility with minimum capital outlay, with operations anticipated to commence in the fourth quarter of 2020, and has opened three of the seven 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 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. 

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 June 30, 2020 and December 31, 2019

(USD '000)





 June 30, 

 December 31, 

2020

2019

Assets

Current assets

Cash and cash equivalents

$

5,202

$

2,516

Accounts receivable

133

144

Inventory

12,045

6,709

Biological assets

5,747

3,845

Note receivable

4,416

3,870

Prepaid expenses and other current assets

1,408

556

Total current assets

28,951

17,640



Investment held for sale

324

-

Assets held for sale

-

6,301



Property and equipment, net

19,334

19,128

Intangible assets, net

97,800

98,566

Right-of-use assets

19,152

20,190

Investment in associate

3,209

3,424

Goodwill

1,526

1,526

Other assets

375

291

Total assets

$

170,671

$

167,066



Liabilities

Current liabilities

Accounts payable

5,835

7,860

Accrued liabilities

5,011

5,135

Income taxes payable

5,902

1,492

Derivative liabilities

12,762

13,198

Current portion of notes payable

35,060

9,350

Lease obligations

1,998

1,761

Other current liabilities

100

-

Total current liabilities

66,668

38,796



Liabilities held for sale

-

3,240



Notes payable, net of current portion

12,671

31,053

Lease obligations, net of current portion

20,335

21,166

Deferred income taxes

26,819

24,957

Other long-term liabilities

761

676

Total liabilities

127,254

119,888



Shareholders' equity

Share capital

145,060

149,322

Share-based compensation reserve

4,075

2,977

Equity conversion feature

12,250

7,613

Warrants

13,128

11,773

Accumulated deficit

(130,717)

(123,785)

Accumulated other comprehensive loss

(379)

(563)

Total shareholders' equity attributable to Cansortium Inc. shareholders

43,417

47,337

Non-controlling interests

-

(159)

Total shareholders' equity 

43,417

47,178



Total liabilities and shareholders' equity

$

170,671

$

167,066

 

Cansortium Inc.

Consolidated Statement of Operations

For the three and six months ended June 30, 2020 and 2019

(USD '000)


 For the three months
ended June 30,  

 For the six months
ended June 30,  

2020

2019

2020

2019






Revenue, net of discounts

$

13,241

$

6,091

$

23,404

$

11,619

Cost of goods sold

4,567

1,540

8,227

4,100

Gross profit before fair value adjustments

8,674

4,551

15,177

7,519






Realized fair value of increments on inventory sold

4,953

2,233

12,515

3,351

Unrealized change in fair value of biological assets

(7,572)

(972)

(19,682)

(2,073)

Gross profit

11,293

3,290

22,344

6,241






Expenses




General and administrative

3,064

5,369

6,202

15,022

Share-based compensation

2,362

883

3,249

1,487

Sales and marketing

3,481

2,705

6,602

5,623

Depreciation and amortization

1,572

2,403

3,074

4,701

Total expenses

10,479

11,360

19,127

26,833






Income (loss) from operations

814

(8,070)

3,217

(20,592)






Discontinued operations

34

-

(342)

-






Other expense (income)




Interest expense, net

3,798

2,543

7,557

6,860

Change in fair market value of derivative

(828)

(1,662)

1,007

(3,542)

Loss on investment in associate

31

-

215

-

Gain in fair market value of investment in associate

-

(3,388)

-

(3,388)

Loss on debt reestructuring

-

-

8,065

-

Gain on disposal of assets

(54)

-

(54)

-

Other expense (income)

(8)

(1,562)

7

28

Total other expense (income)

2,939

(4,069)

16,797

(42)






Loss before taxes

(2,159)

(4,001)

(13,238)

(20,550)






Income taxes

3,308

1,276

6,141

1,276






Net loss

(5,467)

(5,277)

(19,379)

(21,826)






Net loss attributable to non-controlling interest

-

(270)

-

(353)






Net loss attributable to controlling interest

$

(5,467)

$

(5,007)

$

(19,379)

$

(21,473)






Net loss per share




Basic

$

(0.03)

$

(0.03)

$

(0.10)

$

(0.12)

Diluted

$

(0.03)

$

(0.03)

$

(0.10)

$

(0.12)

 

Cansortium Inc.

Consolidated Statement of Cash Flows

For the six months ended June 30, 2020 and 2019

(USD '000)


 For the six months ended
June 30, 

2020

2019

Operating activities

Net loss

$

(19,379)

$

(21,826)

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

Unrealized gain on changes in fair value of biological assets

(19,682)

(2,073)

Share-based compensation

3,249

1,747

Depreciation and amortization

4,059

5,412

Discontinued operations

(342)

-

Amortization of debt discount

-

2,910

Accretion of convertible debentures

3,834

-

Interest on lease liabilities

1,987

-

Change in fair market value of derivative

1,007

(3,542)

Loss on investment in associate

215

-

Gain in fair market value of investment in associate

-

(3,388)

Loss on debt reestructuring

8,065

-

Gain on disposal of right-of-use assets

(54)

-

Deferred tax expense

1,862

-

Changes in operating assets and liabilities:

Accounts receivable

11

(104)

Inventory

(5,401)

(3,881)

Biological assets

17,780

2,201

Prepaid expenses and other current assets

(646)

(1,555)

Right-of-use assets

(728)

-

Other assets

(84)

1,375

Accounts payable

968

956

Accrued liabilities

1,083

(3,386)

Income taxes payable

4,410

1,406

Lease obligations

-

1,357

Other current liabilities

-

285

Other liabilities

115

-

Net cash provided by (used in) operating activities

2,329

(22,106)



Investing activities

Purchases of property and equipment

(2,126)

(9,049)

Payment of notes receivable

150

-

Notes receivable

(696)

-

Proceeds from sale of subsidiary

600

-

Net cash used in investing activities

(2,072)

(9,049)



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

(2,133)

(1,305)

Principal repayments of notes payable

(35)

(45,341)

Net cash provided by financing activities

2,245

50,538

Effect of foreign exchange on cash and cash equivalents

184

(34)

Net increase in cash and cash equivalents

2,686

19,349

Cash and cash equivalents, beginning of period

2,516

2,026

Cash and cash equivalents, end of period

$

5,202

$

21,375



Cash paid during the period for interest

$

865

$

2,124



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

$

-

 

Cansortium Inc.

Financial Highlights

For the three and six months ended June 30, 2020 and 2019

(USD '000)


Three months ended

Six months ended

Financial results

June
30, 2020

June
30, 2019

Variance

June
30, 2020

June
30, 2019

Variance








Revenue

$

13,241

$

6,091

$

7,150

$

23,404

$

11,619

$

11,785









Gross profit

$

11,293

$

3,290

$

8,003

$

22,344

$

6,241

$

16,103

Gross margin

85.3%

54.0%

31.3%

95.5%

53.7%

41.8%








Adjusted gross profit (1)

$

8,674

$

4,551

$

4,123

$

15,177

$

7,519

$

7,658

Adjusted gross margin(1)

65.5%

74.7%

-9.2%

64.8%

64.7%

0.1%








Selling, general and administrative expenses

$

10,479

$

11,360

$

(881)

$

19,127

$

26,833

$

(7,706)








EBITDA(1)

$

3,703

$

1,772

$

1,931

$

(1,628)

$

(7,369)

$

5,741

Adjusted EBITDA(1)

$

2,629

$

(1,709)

$

4,338

$

3,343

$

(5,128)

$

8,471








Net loss

$

(5,467)

$

(5,277)

$

(191)

$

(19,379)

$

(21,826)

$

2,447

Net loss per share (basic)

$

(0.03)

$

(0.03)

$

0.00

$

(0.10)

$

(0.12)

$

0.02

Net loss per share (diluted)

$

(0.03)

$

(0.03)

$

0.00

$

(0.10)

$

(0.12)

$

0.02

(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 six months ended June 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

Six months ended

June

June

June

June

30, 2020

30, 2019

Variance

30, 2020

30, 2019

Variance

Net income (loss)

$

(5,467)

$

(5,277)

$

(190)

$

(19,379)

$

(21,826)

$

2,447

Interest expense

3,798

2,543

1,255

7,557

6,860

697

Income taxes

3,308

1,276

2,032

6,141

1,276

4,865

Depreciation and amortization

2,064

3,230

(1,166)

4,053

6,322

(2,269)

EBITDA

$

3,703

$

1,772

$

1,931

$

(1,628)

$

(7,369)

$

5,741

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

Six months ended

June
30, 2020

June
30, 2019

Variance

June
30, 2020

June
30, 2019

Variance

EBITDA

$

3,703

$

1,772

$

1,931

$

(1,628)

$

(7,369)

$

5,741

Change in fair value of biological assets

(2,619)

1,261

(3,880)

(7,167)

1,278

(8,445)

Change in fair market value of derivative

(828)

(1,662)

834

1,007

(3,541)

4,548

Gain in fair value of investment in associate

-

(3,388)

3,388

-

(3,388)

3,388

Share based compensation

2,362

883

1,479

3,249

1,487

1,762

Discontinued operations

34

-

34

(342)

-

(342)

Loss on debt restructuring

-

(1,134)

1,134

8,065

-

8,065

Other non-recurring expense (income)

(23)

559

(582)

159

6,405

(6,246)

Adjusted EBITDA

$

2,629

$

(1,709)

$

4,338

$

3,343

$

(5,128)

$

8,471

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SOURCE Cansortium Inc

www.getfluent.com; Cansortium Investors and Media, Marcos Pedreira, Chief Financial Officer, marcos.pedreira@getfluent.com, 786-530-3959, investors@cansortium.com