Cansortium Inc. Reports 2020 Third Quarter Financial Results

Another strong quarter highlighted by $3.6M of Adjusted EBITDA on $14.3M of revenue

MIAMI, Nov. 23, 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 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, 
20202019
Assets
Current assets
Cash and cash equivalents$4,072$2,516
Accounts receivable65144
Inventory9,5746,709
Biological assets6,1283,845
Note receivable4,8953,870
Prepaid expenses and other current assets1,311556
Total current assets26,04517,640
Investment held for sale324
Assets held for sale6,301
Property and equipment, net18,67719,128
Intangible assets, net97,41898,566
Right-of-use assets19,41020,190
Investment in associate3,0433,424
Goodwill1,5261,526
Other assets390291
Total assets$166,833$167,066
Liabilities
Current liabilities
Accounts payable4,5587,860
Accrued liabilities4,1075,135
Income taxes payable6,4011,492
Derivative liabilities13,43613,198
Current portion of notes payable37,2119,350
Lease obligations1,9791,761
Other current liabilities350
Total current liabilities68,04238,796
Liabilities held for sale3,240
Notes payable, net of current portion12,69531,053
Lease obligations, net of current portion20,72821,166
Deferred income taxes26,65724,957
Other long-term liabilities468676
Total liabilities128,590119,888
Shareholders’ equity
Share capital147,846149,322
Share-based compensation reserve4,1482,977
Equity conversion feature12,2507,613
Warrants13,26511,773
Accumulated deficit(138,891)(123,785)
Accumulated other comprehensive loss(375)(563)
Total shareholders’ equity attributable to Cansortium Inc. shareholders38,24347,337
Non-controlling interests(159)
Total shareholders’ equity 38,24347,178
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,  
2020201920202019
Revenue, net of discounts$14,313$7,387$37,718$19,005
Cost of goods sold4,7842,72213,0116,822
Gross profit before fair value adjustments9,5294,66524,70712,183
Realized fair value of increments on inventory sold6,0513,34118,5666,692
Unrealized change in fair value of biological assets(4,263)(1,109)(23,945)(3,182)
Gross profit7,7412,43330,0868,673
Expenses
General and administrative2,8614,3629,06419,384
Share-based compensation1,6892584,9381,744
Sales and marketing3,5613,34810,1628,972
Depreciation and amortization1,5612,5494,6357,250
Total expenses9,67210,51728,79937,350
Income (loss) from operations(1,931)(8,084)1,287(28,677)
Discontinued operations236(106)
Other expense (income)
Interest expense, net3,8922,92611,4489,786
Change in fair market value of derivative673(2,631)1,680(6,172)
Loss on investment in associate166381
Gain in fair market value of investment in associate(3,388)
Loss on debt restructuring8,065
Loss on disposal of assets7102,2056562,205
Other expense12577285
Total other expense (income)5,4422,75722,2372,716
Loss before taxes(7,609)(10,841)(20,844)(31,393)
Income taxes1,2814327,4221,708
Net loss(8,890)(11,273)(28,266)(33,101)
Net income (loss) attributable to non-controlling interest83(204)
Net loss attributable to controlling interest$(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)$(0.18)
Cansortium Inc.
Consolidated Statement of Cash Flows
For the nine months ended September 30, 2020 and 2019
(USD ‘000)
For the nine months
ended September 30,
20202019
Operating activities
Net loss$(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 compensation4,9382,005
Depreciation and amortization6,1468,252
Discontinued operations(106)
Amortization of debt discount4,497
Accretion of convertible debentures5,974
Interest on lease liabilities3,324
Change in fair market value of derivative1,680(6,172)
Loss on investment in associate381
Gain in fair market value of investment in associate(3,388)
Loss on debt restructuring8,066
Loss on disposal of assets6562,205
Deferred tax expense1,700
Changes in operating assets and liabilities:
Accounts receivable79(51)
Inventory(2,930)(3,715)
Biological assets21,6622,746
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 liabilities2,205(3,357)
Income taxes payable4,9091,838
Lease obligations1,772
Other current liabilities(251)398
Other liabilities(160)
Net cash provided by (used in) operating activities3,723(35,828)
Investing activities
Purchases of property and equipment(3,136)(12,558)
Purchase of intangible assets(319)
Payment of notes receivable350
Notes receivable(1,375)
Proceeds from sale of subsidiary600
Net cash used in investing activities(3,561)(12,877)
Financing activities
Proceeds from IPO56,178
Proceeds from issuance of shares and warrants4,351
Proceeds from issuance of notes payable6241,006
Payment of lease obligations(3,207)921
Interest repayments of notes payable
Principal repayments of notes payable(46,353)
Net cash provided by financing activities1,20651,752
Effect of foreign exchange on cash and cash equivalents188(59)
Net increase in cash and cash equivalents1,5562,988
Cash and cash equivalents, beginning of period2,5162,026
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 endedNine months ended
Financial resultsSeptember
30, 2020
September
30, 2019
VarianceSeptember
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 margin54.1%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 endedNine months ended
September
30, 2020
September
30, 2019
VarianceSeptember
30, 2020
September
30, 2019
Variance
Net loss$(8,890)$(11,273)$2,383$(28,266)$(33,101)$4,835
Interest expense3,8922,92696611,4489,7861,662
Income taxes1,2814328497,4221,7085,714
Depreciation and amortization2,1003,432(1,332)6,1539,753(3,600)
EBITDA$(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 endedNine months ended
September
30, 2020
September
30, 2019
VarianceSeptember
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 assets1,7882,232(444)(5,379)3,510(8,889)
Change in fair market value of derivative673(2,631)3,3041,680(6,172)7,852
Gain in fair value of investment in associate(3,388)3,388
Share-based compensation1,6892581,4314,9381,7443,194
Discontinued operations236236(106)(106)
Loss on debt restructuring8,0658,065
Other non-recurring expense8762,530(1,654)1,0358,935(7,900)
Adjusted EBITDA$3,645$(2,095)$5,740$6,990$(7,224)$14,215

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