- econd consecutive quarter of stabilized operational performance and solid foundation forming to drive growth
DENVER and TORONTO, Aug. 06, 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 second quarter ended June 30, 2020. All amounts are expressed in Canadian dollars unless otherwise indicated.
Q2 and YTD 2020 Highlights:
- MJardin remains on track to achieve measured strategic growth objectives in 2020;
- Q2 Revenue amounted to $2.1 million;
- Q2 Adjusted EBITDA loss of $2.2 million;
- Q2 Net loss of $12.5 million;
- AtlantiCann Medical Inc. (“AMI”) joint venture contributed $1.3 million to earnings, an increase of ~330% from the prior quarter;
- First retail sales of MJardin product through AMI and the Nova Scotia Liquor Corporation;
- Continued improvement of corporate SG&A expenses resulting in a 20% reduction compared to the same period in 2019;
- Completed first harvest at GRO Facility and loaded WILL flower rooms with ROBES product in anticipation of sales of BLLRDR in H2 2020;
- Continued to advance negotiations for a supply agreement with a major Canadian License Holder (“LH”) to sell an aggregate of approximately 2,000 kilograms of product during 2020;
- Identified unique strains for mass production through research and development at the Warman facility with an expected go to market date during Q4 2020.
“While we still have a lot of work to get done to achieve our growth objectives, I am very pleased with the results of our team’s efforts, which have now resulted in a second consecutive quarter of stabilized operations, improved visibility into the future and ultimately better financial performance,” commented Pat Witcher, CEO of MJardin. “We are pursuing growth opportunities through sensible partnerships whereby our expertise and track record can contribute to growth and profitability without the need for additional capital. We continue to run a lean and extremely efficient business to manage margins and overall costs, while focusing our corporate development team’s efforts on creative growth strategies.”
Second Quarter Financial Summary
|Three months ended|
|June 30, 2020||June 30, 2019|
|Direct operating costs||(1,788,792)||(4,714,005)|
|Gross margin before fair value adjustments||316,223||2,163,126|
|Fair value adjustment on the sale of cultivated inventory||–||296,269|
|Unrealized gain on changes in fair value of biological assets||(533,865)||(1,769,281)|
|Sales, general and administrative||3,691,338||4,573,911|
|Depreciation and amortization||250,357||205,756|
|Expected credit loss||229,335||569,232|
|Total operating expenses||4,765,330||10,937,829|
|Loss from operations||(3,915,242)||(7,301,691)|
|Net earnings from associate||(1,322,857)||(237,545)|
|Gain on loan modifications||(754,122)||(8,076,558)|
|Foreign exchange loss (gain)||1,220,151||(31,477)|
|Total other expenses||4,672,466||(1,751,320)|
|Loss before income tax and discontinued operations||(8,587,708)||(5,550,371)|
|Income tax expense||(637,115)||(550,885)|
|Loss before discontinued operations||(9,224,823)||(6,101,256)|
|Loss from discontinued operation||(3,271,632)||–|
|Three months ended|
|June 30, 2020||June 30, 2019|
|Income tax expense||637,155||550,885|
|Depreciation and amortization||250,357||205,756|
|Share based compensation||594,300||5,588,930|
|Unrealized gain on changes in FV of biological assets||(533,865)||(1,769,281)|
|Loss from discontinued operation||3,271,632||–|
|Gain on loan modification||(754,122)||(8,076,558)|
|Foreign exchange loss (gain)||1,220,151||(31,477)|
The Company’s managed services business segment generated $2.1 million in revenue during the quarter. No revenue was recognized from operations at the Canadian cultivation facilities during the second quarter.
Due to the reduction in revenues from both the managed services and cultivation segments, the Company’s gross margin for the period ending June 30, 2020 was $0.9 million, compared to $3.6 million for the same period in the prior year.
General and administrative expenses, including payroll, decreased from the prior year comparable period by 20%. Management continues to search for efficiencies for the balance of 2020.
Adjusted EBITDA loss was $2.2 million, compared to an Adjusted EBITDA loss of $3.0 million for the same period in the prior year. As the Company scales cultivation, Adjusted EBITDA is expected to improve.
The Company continues to execute on its 2020 business plan with key deliverables for the rest of 2020 as follows:
- Complete run-rate production at WILL and GRO facilities by the end of Q3;
- Retail sales of products produced at Canadian facilities in H2 2020;
- Full licensing of AMI Phase II expansion by/during the Q4;
- 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 doing so for the balance of the year. At the same time, the Company plans to continue focusing on securing offtake for production via either firm commitments with retailers or supply agreements with leading licence holders.
August 5, 2020, AMI bought out the previously signed master service agreement with The Company, which was a ten-year term that was executed in 2019. The Company will receive $2 million from AMI within the next 45 days in lieu of ongoing license fee payments. The Company’s cultivation management support for the AMI operation has been substantially reduced in connection with the buyout and is expected to be completed by the end of 2020.
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.
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 and Adjusted EBITDA 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.
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.
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.
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.