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, 2019Restated |
|
|
$ |
|
$ |
|
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 expense |
4,134,033 |
|
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 expenses |
1,640,445 |
|
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 expense |
480,812 |
|
655,555 |
|
Interest expense |
4,134,033 |
|
4,579,816 |
|
Depreciation and
Amortization |
695,505 |
|
423,490 |
|
EBITDA |
(2,802,885 |
) |
(9,166,829 |
) |
|
|
|
Share-based compensation |
605,952 |
|
7,126.502 |
|
Unrealized gain on changes in
FV of biological assets |
(112,335 |
) |
- |
|
Loss from discontinued
operation |
1,257,708 |
|
- |
|
Gain on disp. of equity
investment |
- |
|
(1,433,706 |
) |
Other gains |
(15,619 |
) |
(18,983 |
) |
Severance costs |
37,156 |
|
- |
|
Foreign exchange (gain)
loss |
(2,188,697 |
) |
93,212 |
|
Adjusted EBITDA |
(3,218,720 |
) |
(3,399,804 |
) |
RevenueThe 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
Mahdavi |
Pat
Witcher |
Capital
Markets & Investor Relations |
CEO |
416-962-3300 |
720-613-4019 |
Ali.mahdavi@MJardin.com |
Pat.Witcher@MJardin.com |
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