Fire & Flower Announces First Quarter 2019 Financial and Operational Results

Published: June 27, 2019

Fire & Flower Holdings Corp.  announced its financial and operational results for the thirteen weeks ended May 4, 2019.

Financial and Operational Highlights for the thirteen weeks ended May 4, 2019

  • System sales of $10,895,626 and recognized revenue of $9,538,348 at a gross margin of 38.5%, compared to $Nil for the thirteen weeks ended May 5, 2018.
  • 17 branded cannabis retail stores operating system-wide across the provinces of AlbertaSaskatchewan and Ontario.
  • Received $34,544,793 of net proceeds from the private placement which closed on November 1, 2018, upon completion of the Company’s Qualifying Transaction and subsequently became listed on the TSX Venture Exchange.

Subsequent Financial and Operational Highlights post May 4, 2019

  • On May 14, 2019, acquired 4 retail cannabis store licenses in Saskatchewan.
  • On May 28, 2019, acquired 2 licenced retail cannabis stores in Vancouver, British Columbia and intends to open these stores at its earliest opportunity.
  • On May 29, 2019, acquired a proposed cannabis retail store in the town of Banff, Alberta.
  • On June 6, 2019 Fire & Flower announced a bought deal private placement for total gross proceeds of $25,000,000with an agents’ option for additional gross proceeds up to $5,000,000.
  • On June 9, 2019, achieved system sales of $25,000,000.

“These results provide a solid foundation upon which Fire & Flower will continue to execute on our growth strategy. Our growth plan is well funded and in addition to the strength of our retail network, we have set ourselves apart as a modern retail company through the Hifyre digital cannabis platform that is reflective in our financial performance,” said Trevor Fencott, Fire & Flower’s Chief Executive Officer.

Selected Summary of Quarterly Results

Statement of Loss and Comprehensive Loss

Q1 2019

Q1 2018

$

%

(in thousands of dollars, except per share amounts)

Ended

Ended

Change

change

4-May-19

5-May-18

Revenue

$ 9,538

$ –

$ 9,538

NM

Cost of goods sold

5,870

5,870

NM

Gross margin

3,668

3,668

NM

Expenses

8,962

2,470

6,492

>100%

Other expenses

(11,763)

(11,763)

NM

Net loss and comprehensive loss

(17,058)

(2,470)

(14,587)

>100%

Net loss per share, basic and diluted

$   (0.17)

$   (0.05)

NM – Not meaningful

During the thirteen weeks ended May 4, 2019, the Company generated revenue of $9.5 million including cannabis and cannabis-related accessory sales of $9.0 million and digital development revenue of $0.5 million. Revenues are expected to continue to increase as the Company acquires new licences and opens additional retail cannabis stores, subject to the issuance of new licenses and the entry of the Company into markets that permit private cannabis retail stores.

Total gross profit for the thirteen weeks ended May 4, 2019 was $3.7 million or 38.5% of revenue with retail and wholesale operations delivering $3.2M, or 35.6%, gross profit. Excluding digital development revenue, gross profit for the thirteen weeks ended May 4, 2019 was $3.2 million or 35.6% of the corresponding revenue.

The Company’s major expenses incurred during the thirteen weeks ended May 4, 2019 are related to salaries and benefits of $3.3 million, depreciation and amortization of $1.5 million, share based payment of $1.3 million, consulting and professional fees of $1.3 million and $0.7 million in other operating costs.

Included in other expense primarily is a $9.0 million charge related to the amendment of the Company’s convertible debentures in order to maintain compliance with various provincial regulations relating to the ownership of a cannabis retail licensee by a cannabis licensed producer and $1.8 million for costs associated with the Qualifying Transaction.

The Company recorded a net comprehensive loss of $17.1 million, or a net loss per share of $0.17.

Retail Operations Update

The Company intends to establish the leading brand of cannabis retail stores in provinces across Canada where private retail is permitted. There are currently 21 licensed Fire & Flower branded stores operating across AlbertaSaskatchewanand Ontario. The Company will continue to refine its retail experience using consumer insights collected within the Hifyre digital cannabis platform.

Hifyre Digital Cannabis Retail Platform

The Company continues to develop and commercialize the Hifyre digital cannabis platform that collects and analyzes consumer data to develop insights around purchase preferences. The Hifyre platform provides real time reporting and analysis to the Company’s marketing, retail experience and merchandising teams and is supplied to Licensed Producers to assist in demand forecasting, product development and sales reporting.