Lifeist Wellness Inc., a health-tech company that leverages advancements in science and technology to build breakthrough companies that transform human wellness, today reported its financial results for the three months ended February 28, 2022 (“Q1 2022”) compared to the same period last year (“Q1 2021”). All financial figures are in Canadian dollars unless otherwise indicated.
First Quarter 2022 Highlights
- Net revenue decreased 1% to $5.45 million in Q1 2022 (compared to $5.51 million in Q1 2021), entirely due to declines in hardware sales in Europe and medical cannabis sales in Canada, both operations having since been discontinued1. Excluding these two businesses, revenue increased 20% in Q1 2022 (compared to Q1 2021), led by Canadian recreational cannabis, Australian Vaporizers Pty Ltd (“Australian Vapes”) and Findify AB (“Findify”).
- Gross profit before inventory adjustment tripled to $1.4 million in Q1 2022 as compared to $0.5 million in Q1 2021, the highest in the past two years, with margins expanding to 26% from 8%.
- EBITDA improved substantially by narrowing losses to $4.2 million in Q1 2022 (compared to a $7.0 million loss in Q1 2021), representing the sixth consecutive quarter of EBITDA loss improvements. The Q1 2022 EBITDA loss was net of incremental investments into emerging businesses including approximately $650,000 in nutraceuticals.
- Working capital position of $12.4 million at quarter end remains strong.
“Our first quarter results reflect progress and momentum in our transition to a wellness-driven company,” said Meni Morim, CEO of Lifeist. “We have sharpened our focus within cannabis on our B2B platform and this in turn is fueling meaningful increases in gross profit for all of Lifeist. We accomplished a tripling of gross profit versus the same quarter last year while simultaneously winding down unprofitable businesses and investing in our wellness future. This includes scaling our innovative health-tech company Mikra, which is going after the large and growing nutraceuticals market, and seeing promising early consumer interest for its first product which commenced pre-sales last month.”
Mr. Morim continued, “We have also been optimizing the wellness portfolio with moves designed to improve our financials and provide value for shareholders. In addition to exiting the consumer-focused medical cannabis by transferring patients to a third-party, we formally ceased operations of Lifeist Bahamas which sold hardware in Europe through the everyonedoesit.uk ecommerce website. As we execute on our wellness strategy, we are confident that the assets at the heart of the Lifeist value proposition will deliver sustained and tangible shareholder value.”
Operating Highlights
Cannabis (CannMart Inc. (“CannMart”) and CannMart Labs Inc. (“CannMart Labs”))
- Recreational cannabis continues to be Lifeist’s largest driver of performance accounting for 58% of the Company’s net revenue in Q1 2022, with growing gross margins, improved inventory management, an expanded distribution network, and bringing an award winning brand to market.
- CannMart completed the successful transfer of registered medical patients to Medicibis, operators of Mendocannabis.ca, in February 2022. The agreement is part of the Company’s strategic initiative to sharpen its focus on B2B recreational cannabis and nutraceuticals.
- The cannabis B2B gross margin increased to $0.7 million in Q1 2022 as compared to a negative gross margin of $0.9 million in Q1 2021, continuing the positive trend seen throughout 2021 (Q1 -$0.9 million, Q2 -$0.4 million, Q3 $0.2 million, Q4 $0.5 million), driven by sales of higher-margin Roilty products and improved overhead efficiencies.
- After establishing a supply agreement with the Société Québécoise du Cannabis (“SQDC”) in March 2022, CannMart is now approved for the sale of cannabis and cannabis-derived products from provincial and territorial bodies in Ontario, Alberta, British Columbia, Quebec, Manitoba, New Brunswick, Saskatchewan, Yukon, Nunavut and the Northwest Territories, which provides it with access to 95% of Canada’s population.
- CannMart Labs’ state-of-the-art BHO extraction facility commenced manufacturing and shipping product in November 2021, and in January 2022, its in-house brand “Roilty”, launched earlier in 2021, won the prestigious “Canadian LP Brand of the Year” award at the 2021 ADCANN Awards. Roilty product is now live in Alberta, Saskatchewan, Manitoba, Yukon, the Northwest Territories and Nunavut with purchase orders in place for distribution in Ontario.
Nutraceuticals (Mikra)
- Mikra launched its first product, CELLF, a novel cellular therapeutic compound targeting systemic fatigue, and after launching pre-sales in March 2022, began shipping and deliveries in April 2022. In partnership with InVivo Biosystems, Mikra has commenced its genomic and transcriptomic clinical studies to gather evidence for CELLF™ at a molecular and cellular level. These in vivo studies will demonstrate how CELLF™ impacts healthy aging and inflammation pathways at a cellular level.
- In April 2022, Mikra expanded its professional athlete roster with Olympic medalists Ashley Wagner and Cullen Jones. Ashley and Cullen join baseball hero Jose Bautista who joined Mikra in November 2021 to ideate and launch a new athletic therapeutic.
Findify
- Findify delivered another record quarter, with revenue of $588,000 in Q1 2022 compared to $401,000 in Q1 2021, representing an increase of 47%. The accelerated growth is coming from the strategic plan, which was launched in mid-2021, sharpening Findify’s focus on product innovation and catering to higher tier customers. The most significant release is a new infrastructure that allows for real time synchronization of any product data with Shopify.
- EBITDA loss increased to $447,000 in Q1 2022 as compared to $265,000 in Q1 2021 due to strategic investments in various innovation initiatives to help drive long-term revenue growth.
Financial Summary of Q1 2022
Net revenue decreased 1% to $5.45 million in Q1 2022 compared to $5.51 million in Q1 2021. The decrease was driven by the planned wind down of hardware sales in Europe through Lifeist Bahamas and medical cannabis sales in Canada through CannMart, with these operations effectively ceasing in 2022. This was offset by the continued growth in sales of Canadian recreational cannabis, Findify SaaS revenue which increased 47%, and Australian Vapes hardware revenue which increased 12%. Excluding Lifeist Bahamas hardware and CannMart medical cannabis, net revenue increased 20%.
Gross margin was 26% of net revenue in Q1 2022 compared to 8% in Q1 2021. The improvement was due to production efficiencies across all segments and the focus on higher value-added revenue streams in the B2B and recreational markets. Within recreational cannabis, gross margins improved to $1.4 million in Q1 2022 compared to a $0.5 million negative margin in Q1 2021, particularly due to Roilty product sales.
EBITDA loss narrowed to $4.2 million in Q1 2022 compared to $7.0 million in Q1 2021, due to higher gross margins and improved performance across most business units, and represented the sixth consecutive quarter of EBITDA loss improvements. The reduced EBITDA loss was net of incremental investments in emerging businesses including approximately $650,000 in nutraceuticals. Net loss was $4.6 million in Q1 2022 compared to $7.4 million in Q1 2021, due to improved gross margins and lower non-operating write-downs, as compared to Q1 2021.
Balance Sheet and Cash Flow
Cash and cash equivalents were $9.2 million as of February 28, 2022, compared to $12.7 million as of November 30, 2021. Inventories increased to $6.4 million at February 28, 2022 compared to $5.4 million at November 30, 2021, mainly due to new inventory purchased for CannMart Labs and Mikra, both which started their own production in Q1 2022. Net cash used in operations was $3.4 million in Q1 2022 compared to $2.5 million in Q1 2021. The increase was largely due to investments in emerging businesses including CannMart Labs and Mikra.
Other Item
During the quarter, Fire & Flower Holdings Corp. (“Fire & Flower”) purchased Pineapple Express Delivery Inc. (“PED”), a holder of the Company’s convertible loan payable. As part of the purchase, Fire & Flower assumed and repaid a $2,040,077 convertible loan receivable owed to the Company by PED. In addition, the Company received 75,100 common shares in Fire & Flower, with a further 258,478 common shares in Fire & Flower having been placed into escrow pending completion of customary working capital adjustments and subject to achievement of certain performance-based milestones in its fiscal 2022 year.
About Lifeist Wellness Inc.
Sitting at the forefront of the post-pandemic wellness revolution, Lifeist leverages advancements in science and technology to build breakthrough companies that transform human wellness. Portfolio business units include: CannMart, which operates a B2B wholesale distribution business facilitating recreational cannabis sales to Canadian provincial government control boards; CannMart Labs, a BHO extraction facility for the production of high margin cannabis 2.0 products; the CannMart.com marketplace, which provides U.S. customers with access to hemp-derived CBD and smoking accessories; Australian Vapes, Australia’s largest online retailer of vaporizers and accessories; Findify, a leading AI-powered search and discovery platform; and Mikra, a biosciences and consumer wellness company seeking to develop innovative therapies for cellular health.
