Cannara Biotech Inc. Reports Fiscal Second Quarter 2022 Financial Results

Published: April 29, 2022

Cannara Biotech Inc. Reports Fiscal Second Quarter 2022 Financial Results

 Cannara Biotech Inc., a vertically integrated producer of premium-grade cannabis and derivative products with two mega  facilities based in Québec spanning over 1,650,000 sq. ft., today announced its fiscal second quarter 2022 financial and operating results for the three and six-month periods ended February 28, 2022.

Fiscal Second Quarter 2022 Financial and Operational Highlights

  • Posted quarterly revenues of $7.4 million, an increase of 229% from the same quarter in the previous year;
  • Recorded a gross profit before fair value adjustments of $2.6 million or 36% more than the same quarter in the previous year;
  • Achieved fourth consecutive quarter of positive Adjusted EBITDA while significantly expanding its production footprint within the facility located in Valleyfield, Québec (the “Valleyfield Facility”). Revenues from the Valleyfield Facility will start to be realized in the third quarter of 2022;
  • Positive Adjusted EBITDA of $1 million for the first six months of 2022 while supporting over $1 million in startup expenses for the Valleyfield Facility compared to a negative Adjusted EBITDA of $(2.4) million in the same period of prior year;
  • Successfully harvested its first growing zone in its newly redesigned Valleyfield Facility and has sold, subsequent to quarter-end, the finished product generated from this first harvest;
  • Completed the activation of its second and third 25,000 square foot growing zones in the Valleyfield Facility, effectively increasing its overall production capacity by more than 200% when comparing to the production capacity at its Farnham Facility;
  • Increased working capital to $14.8 million from a working capital of $12.4 million as at August 31, 2021;
  • Invested $7.4 million in capital expenditures towards the Company’s assets in order to increase production capacity and processing capabilities;
  • Granted an aggregate total of 7,710,000 stock options to certain employees and 225,000 stock options to board members at an exercise price of $0.18 per common share, subject to certain vesting conditions.


Highlights Subsequent to Quarter End

  • Introduced a new genetic strain under the Tribal brand to the Quebec market: Terple. The product is available in a 3.5g can and five 0.5g pre-rolls;
  • The Company completed the activation of its fourth 25,000 square foot growing zone and is currently ahead of its objective of activating 6 growing zones by August 2022;
  • The Company was selected as one of only three cannabis producers by the Ontario Cannabis Store (“OCS”) to have a headlining product for their 420 event; To support this, the Company created a special edition of its Early Lemon Berry pre-rolls, offering a 12 x 0.6g joint format with innovative packaging design;
  • The Company successfully harvested its second growing zone at its Valleyfield Facility;
  • Granted an aggregate total of 600,000 stock options to certain employees at an exercise price of $0.18 per common share, subject to certain vesting conditions;
  • Exercise of 500,000 stock options at an exercise price of $0.10 for a total proceed of $50,000.

“We are proud of the advances we made in the second quarter. We planted three 25,000 square foot growing zones and successfully harvested our first zone in February,” commented Zohar Krivorot, President & Chief Executive Officer of Cannara. “By redesigning the Valleyfield Facility and receiving consistent positive consumer feedback on our first harvest, we have successfully confirmed our ability to grow premium cannabis at scale. Our objective for the year is to turn on six growing zones by August 2022 at Valleyfield and we remain on schedule to do so”.

Nicholas Sosiak, Chief Financial Officer of Cannara commented, “While we are focused on investing into our own assets, we continue to outperform from a financial standpoint. This was our fourth consecutive quarter of positive Adjusted EBITDA while continuing to support and significantly grow our production footprint. We added over 40 new employees to help support the growth at the Valleyfield Facility yet the revenues from this Facility will only start to be realized in the third quarter of 2022. We are working extremely hard this quarter and next to expand our distribution channels and get products listed in new markets. I am looking forward to the coming quarters as we harvest and sell our products from the new operating zones at our Valleyfield Facility and expand our footprint into new markets across Canada.”

Three-month periods ended

Six-month periods ended

Selected Financial Highlights

February 28,
2022

February 28,
2021

February 28,
2022

February 28,
2021

Gross revenue1

$             7,272,059

$             1,969,103

$           13,599,394

$             3,303,441

Other income

150,295

288,651

387,536

322,494

7,422,354

2,257,754

13,986,930

3,625,935

Gross profit, before fair value adjustments

2,635,607

1,298,261

5,649,632

1,794,407

  %2

36%

58%

40%

49%

Gross profit (loss)

3,015,577

2,095,208

5,635,619

1,597,849

  %3

41%

93%

40%

44%

Operating expenses

3,388,404

2,506,013

5,991,691

5,166,575

Net finance expense

772,996

451,951

1,320,250

789,062

Net income (loss)

$            (1,145,823)

$               (862,756)

(1,676,322)

(4,357,788)

  %4

-15%

-38%

-12%

-120%

Adjusted EBITDA5

$                   33,998

$               (850,509)

1,008,319

(2,423,630)

  %5

0%

-38%

7%

-67%

Basic earnings (loss) per share

$                      (0.01)

$                      (0.01)

$                      (0.01)

$                      (0.01)

Diluted earnings (loss) per share

$                      (0.01)

$                      (0.01)

$                      (0.01)

$                      (0.01)

February 28, 2022

August 31, 2021

Cash

$             8,258,006

$             8,159,305

Accounts receivable

3,098,917

2,847,725

Biological assets

2,261,997

1,902,206

Inventory

7,753,462

5,508,258

Working capital6

14,745,234

12,412,935

Total assets

101,691,030

92,022,613

Total current liabilities

7,910,429

6,833,798

Total non-current liabilities

31,237,792

21,073,003

Net assets

62,542,809

64,115,812

1 Gross revenue included revenue from sale of goods, net of excise taxes, services revenues and lease revenues.

2 Gross profit before fair value adjustments % is determined as Gross profit before fair value adjustments divided by Total revenues.

3 Gross profit (loss) % is determined as Gross profit (loss) divided by Total revenues.

4 Net income (loss) % is determined as Net income (loss) divided by Total revenues.

5 Adjusted EBITDA and working capital are non-GAAP financial performance measures with no standard definition under IFRS.
   A reconciliation of these measures is presented elsewhere in this MD&A.

   Adjusted EBITDA % a non-GAAP financial ratio and is determined as Adjusted EBITDA divided by total revenues.

6 Working capital is determined as total current assets minus total current liabilities.

Three-month periods ended

Six-month periods ended

Adjusted EBITDA

February 28,
2022

February 28,
2021

February 28,
2022

February 28,
2021

Net loss

$            (1,145,823)

$               (862,756)

$            (1,676,322)

$            (4,357,788)

Adjustments:

   Changes in fair value of inventory sold

1,269,679

447,885

3,136,159

651,195

   Unrealized gain on changes in fair value of biological assets

(1,649,649)

(1,244,832)

(3,122,146)

(454,637)

   Amortization, including amortization in cost of good sold

629,027

251,634

1,221,586

738,290

   Loss on disposal of property, plant and equipment

6,444

54,224

31,106

54,224

   Gain on sublease

(12,876)

   Share-based compensation, including share-based  
     compensation in cost of good sold

151,324

51,385

110,562

156,024

   Net finance expense 

772,996

451,951

1,320,250

789,062

Adjusted EBITDA1

$                   33,998

$               (850,509)

$             1,008,319

$            (2,423,630)

Adjusted EBITDA is a non-GAAP financial performance measure with no standard definition under IFRS. 


Outstanding Shares
As at the date of this report, the Company had 876,981,321 common shares and 40,645,781 stock options issued and outstanding. For further information, the complete Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis for the three and six-month periods ended February 28, 2022 and 2021, along with additional information about the Company and all of its public filings are available at sedar.com and the Company’s investor website, investors.cannara.ca.

About Cannara Biotech Inc.
Cannara Biotech Inc. is a vertically integrated producer of premium-grade cannabis and cannabis-derivative products for the Québec and Canadian markets. Cannara owns two mega facilities based in Québec spanning over 1,650,000 sq. ft., providing the Company with 125,000kg of potential annualized cultivation output. Leveraging Québec’s low electricity costs, Cannara’s facilities produce premium-grade cannabis products at an affordable price. For more information, please visit cannara.ca.

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