MJardin Group Announces First Quarter 2020 Financial Results

  • Results in-line with management expectations as well as analyst consensus resulting from focused and measured execution of the strategic plan
  • Revenue amounted to $2.2 million

DENVER and TORONTO, July 14, 2020 (GLOBE NEWSWIRE) — MJardin Group, Inc. (“MJardin” or “the Company”) (CSE: MJAR) (OTCQX: MJARF), a leader in premium cannabis production, today announced its financial and operating results for its first quarter ending March 31, 2020. All amounts are expressed in Canadian dollars unless otherwise indicated.

Q1 and YTD 2020 Highlights:

  • Overall business is on track to achieve measured strategic objectives in 2020;
  • Revenue amounted to $2.2 million;
  • Adjusted EBITDA loss of $3.2 million;
  • Net loss of $8.1 million;
  • AMI joint venture contributes $0.3 million to net earnings, marking its third consecutive quarter of contribution to MJardin’s financial results;
  • Improved efficiencies by reducing corporate overhead by 43% compared to comparable period in the prior year;
  • Continued to advance licensing at Canadian facilities, receiving both a cultivation license for the GRO facility and approval to expand cultivation at the WILL facility;
  • Sales license received for AMI facility;
  • Advanced negotiations for a supply agreement with a major Canadian License Holder to sell approximately an incremental 2,000 kilograms of product;
  • Improvements in management and technology contribute to a significant 14.4% increase in yields for managed service clients;
  • Warman operations on track to add 3 new high quality varieties per month, with production runs of these new varieties available for sale in Q4 2020.

”During the first quarter we remained focused on the completion of our cultivation assets as we continue to push aggressively towards being prepared to penetrate the Canadian recreational market with our products, and ramping up revenues starting in the second half of 2020,” commented Pat Witcher, CEO of MJardin. “I am very encouraged with the progress our team is making with bringing our assets online as well as exploring strategic growth opportunities which could start contributing to our profitability in the foreseeable future.”

First Quarter Financial Summary 

 Three months ended
 March 31, 2020 March 31, 2019
Restated
 
 $ $ 
Revenues  2,203,582   10,779,006 
Direct operating costs  (1,917,960)  (6,723,855)
Gross margin before fair value adjustments  285,622   4,055,151 
Unrealized gain on changes in fair value of biological assets  (112,335) 
Gross margin   397,957    4,055,151 
   
Operating expenses  
Sales, general and administrative  3,830,770   6,678,092 
Share-based compensation  605,952 7,126.502 
Depreciation and amortization  695,505   423,490 
Expected credit loss   552,798 
Total operating expenses  5,132,227 14,780,882 
Loss from operations  (4,734,270)(10,725,731)
   
Interest expense4,134,033 4,579,816 
Net (earnings) loss from associate(289,272)224,065 
Gain on disposition of equity investment (1,433,706)
Foreign exchange (gain) loss(2,188,697)93,212 
Other income(15,619)(18,983)
Total other expenses1,640,445 3,444,404 
   
Loss before income tax, discontinued operations  (6,374,715)(14,170,135)
Income tax expense  (480,812)  (655,555)
Loss before discontinued operations  (6,855,527)(14,825,690)
Loss from discontinued operation  (1,257,708) 
Net loss  (8,113,235)(14,825,690)
 Three months ended
March 31, 2020 March 31, 2019 
Net loss(8,113,235)(14,825,690)
Adjustments: 
Income tax expense480,812 655,555 
Interest expense4,134,033 4,579,816 
Depreciation and Amortization695,505 423,490 
EBITDA(2,802,885)(9,166,829)
  
Share-based compensation605,952 7,126.502 
Unrealized gain on changes in FV of biological assets(112,335) 
Loss from discontinued operation1,257,708  
Gain on disp. of equity investment (1,433,706)
Other gains(15,619)(18,983)
Severance costs37,156  
Foreign exchange (gain) loss (2,188,697)93,212 
Adjusted EBITDA(3,218,720)(3,399,804)

Revenue
The Company’s Managed Services business generated $2.2 million in revenue during the quarter. Canadian cultivation facilities are currently mid way through the grow cycle, as such, no revenue was recognized at these facilities during the first quarter.

Gross Margin

Due to the reduction in revenues, from both Managed Services and Cultivation, the Company’s Gross Margin for the period ending March 31, 2020 was $0.4 million, compared to $4.1 million for the prior year comparable period. 

Expenses

General and administrative expenses as well as payroll decreased from the prior year comparable period by 43%. Management continues to search for efficiencies for the balance of 2020. 

Adjusted EBITDA

Adjusted EBITDA loss was $3.2 million compared to an Adjusted EBITDA loss of $3.4 million for the prior year comparable period. As the company scales cultivation, Adjusted EBITDA is expected to improve.

Q2 and 2020 Outlook

The Company continues to execute on its 2020 business plan with key deliverables for the full year 2020 as follows:

  • Complete run-rate production at WILL and GRO facilities by the end of the third quarter;
  • Retail sales of Canadian production by the end of the third quarter;
  • Full licensing of AMI Phase II expansion by during the fourth quarter;
  • Significant progress on completion of construction at the Warman facility;
  • Continued pursuit of expansion opportunities in select US States;

The Company continues to advance the production from its Canadian assets and plans to continue this for the balance of the year. In tandem with this, the Company plans to continue to focus on securing offtake for production via either firm commitments with retailers or supply agreements with leading license holders.

Subsequent Events:

  • May 29, 2020 – the Company announced the termination of its previously announced acquisition of Carson City Agency Solutions, dba Cannabella.
     
  • April 30, 2020 – the Company announced an amendment to its borrowing obligations with its senior lender to defer principal and interest payments until 2021.

The Canadian Securities Exchange (“CSE”) has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

About MJardin Group

MJardin Group’s mission is to set the standard for successful ownership and management of assets in the cannabis industry. Our Colorado founders spent a decade refining cultivation methodology, collecting and implementing data driven standards and designing state of the art facilities. Today, MJardin owns or manages multiple operations in two US states and three Canadian provinces, supplying the market with premium products. We are committed to our Canadian First Nation joint ventures and all our partnerships across the cannabis supply chain. MJardin is publicly listed on the CSE (MJAR) with offices in Denver, Colorado and Toronto, Ontario. For more information, please visit www.MJardin.com 

Non-IFRS Financial Measures

EBITDA, Adjusted EBITDA and Adjusted Net loss from Operations are non-IFRS measures that the Company uses to assess its operating performance.

EBITDA is defined as net loss before net finance costs, income tax expense (benefit) and depreciation and amortization expense.

Adjusted EBITDA is an operational and financial metric used by management, calculated as and including, but not limited to: net loss before fair value adjustment to biological assets and inventory; acquisition costs; share-based compensation; depreciation and amortization; (gain) loss on revaluation of derivative liabilities; finance and investment expense (income); interest (income) expense; loss on sale of assets; loss due to rare events; insurance proceeds; foreign exchange loss; impairment of inventory; impairment of property, plant and equipment; impairment of intangible assets and goodwill; current income tax (recovery) expense; and deferred income tax recovery.

Adjusted Net loss from operations is defined as operating loss adjusted to exclude share-based compensation and promissory principal impairments.

The Company uses these non-IFRS measures to provide investors and others with supplemental measures of its operating performance.  The non-IFRS measures should not be construed as an alternative to other financial measures determined in accordance with IFRS. However, the Company believes these non-IFRS measures are important supplemental measures of operating performance because they eliminate items that have less bearing on the Company’s operating performance. Thus, the Company believes the non-IFRS measures highlight trends in the Company’s core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors and other interested parties frequently use these non-IFRS measures in the evaluation of issuers, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies.

Forward-Looking Information

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as, ‘may,’ ‘will,’ ‘should,’ ‘could,’ ‘would,’ ‘expects,’ ‘plans,’ ‘anticipates,’ ‘believes,’ ‘estimates,’ ‘projects,’ ‘predicts,’ ‘potential’ or ‘continue’ or the negative of those forms or other comparable terms. Statements about, among other things, future developments and the business and operations of MJardin, our production capacity, our production results, the completion of any transactions, including the disposition of GreenMart of Nevada LLC (dba Cheyenne), the receipt of any pending regulatory approvals or licenses, the growth of our global footprint and our intentions to leverage our scale for continued organic growth and to pursue strategic investments are all forward-looking information. These statements should not be read as guarantees of future performance or results. The Company’s forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to: our ability to identify and pursue growth, financing and other strategic objectives, and the regulatory and economic environments in the jurisdictions we operate or intend to operate or invest in.  Reference should also be made to those risks discussed under “Risk Factors” in the company’s CSE Listing Statement filed with SEDAR. Readers are cautioned that the foregoing list of factors is not exhaustive. Although such statements are based on management’s reasonable assumptions at the date such statements are made, there can be no assurance that any proposed transactions will occur or that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking information. Accordingly, readers should not place undue reliance on the forward-looking information. No assurances are given as to the future trading price or trading volumes of MJardin’s shares, nor as to the Company’s financial performance in future financial periods. The Company does not intend to update any of these factors or to publicly announce the result of any revisions to any of the Company’s forward-looking statements contained herein, whether as a result of new information, any future event or otherwise. Except as otherwise indicated, this press release speaks as of the date hereof. The distribution of this press release does not imply that there has been no change in the affairs of the Company after the date hereof or create any duty or commitment to update or supplement any information provided in this press release or otherwise. MJardin assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by applicable law.

Financial Outlook

This press release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of MJardin to provide an outlook for 2020 and may not be appropriate for any other purpose. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed under the heading “Forward Looking Information” above and assumptions with respect to production, pricing, and demand. The actual results of the Company’s operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading “Forward Looking Information” above, it should not be relied on as necessarily indicative of future results. Except as required by applicable Canadian securities laws, the Company undertakes no obligation to update the financial outlook.

MJardin undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its securities, or financial or operating results (as applicable).

Caution Regarding Cannabis Operations in the United States

Investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the US Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable US federal money laundering legislation.

While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve the Company of liability under US federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company. The enforcement of federal laws in the United States is a significant risk to the business of the Company and any proceedings brought against the Company thereunder may adversely affect the Company’s operations and financial performance.

INVESTOR CONTACT: 
Ali MahdaviPat Witcher
Capital Markets & Investor RelationsCEO
416-962-3300720-613-4019
Ali.mahdavi@MJardin.com Pat.Witcher@MJardin.com

Source: Globe Newswire

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