Christina Lake Cannabis Corp. reported its financial results for the third quarter ended August 31, 2023 (“Q3’23”). All amounts are expressed in Canadian dollars unless otherwise noted.
Q3’23 Highlights
- Revenue up 30% to $8.9M over nine-month period end Q3’22;
- Distillate volumes sold increased by 85% compared to the nine-month period ending Q3’22;
- Gross profit of $4.0M or 45.2% before fair value adjustments for the nine-month period;
- Decreased G&A expenses by $137k or 4% from prior year period
“Through a steadfast commitment to meeting our customers’ ever-expanding demands and consistently delivering high quality products, CLC has continued to maintain impressive sales growth in Q3,” said Mark Aiken, Chief Executive Officer of Christina Lake Cannabis. “Our agility in responding to dynamic market conditions is evident through the successful introduction of our expanded product lines, garnering positive customer feedback and substantial reorders. Our continued success is a testament to our relentless pursuit of excellence, our continuous drive for operating efficiency, and our focus on innovation.”
Operational and Financial Highlights
| August 31, 2023 |
August 31, 2022 |
$ Change | % Change | ||||||||
| Revenue from the sale of goods | $ | 8,939,679 | $ | 6,885,968 | $ | 2,053,711 | 30 | % | |||
| Costs of sales | (4,895,324 | ) | (3,284,724 | ) | 1,610,600 | 49 | % | ||||
| Gross profit before fair value adjustment | 4,044,355 | 3,601,244 | 443,111 | 12 | % | ||||||
| Changes in fair value of inventory sold | (2,305,915 | ) | (1,173,677 | ) | 1,132,238 | 96 | % | ||||
| Gross profit from sale of goods | 1,738,440 | 2,427,567 | (689,127 | ) | (28 | %) | |||||
| Fair value change growth biological asset | 2,614,303 | 3,002,383 | (388,080 | ) | (13 | %) | |||||
| General and administrative expenses | (3,134,742 | ) | (3,271,790 | ) | (137,048 | ) | (4 | %) | |||
| Other items | (722,949 | ) | 1,556 | (724,505 | ) | (46562 | %) | ||||
| Income (loss) | 495,052 | 2,159,716 | (1,664,664 | ) | (77 | %) | |||||
| Income (loss) per share | 0.00 | 0.02 | |||||||||
| Gross margin % | 45.2 | % | 52.3 | % | |||||||
| Financial Position | |||||||||||
| Working capital | 4,139,795 | 3,683,558 | |||||||||
| Inventory | 1,954,344 | 4,621,213 | |||||||||
| Biological assets | 4,035,020 | 4,380,074 | |||||||||
| Total assets | 18,836,093 | 21,483,084 | |||||||||
| Total liabilities | 7,121,404 | 6,725,056 | |||||||||
Distillate volumes sold increased by 85% from the comparative period ending Q3’22 resulting in revenue growth of 30% to $8.9M from $6.9M despite market price compression in the price of distillate. Revenue growth was primarily driven by increased demand in distillate.
Gross Margin Before Fair Value Adjustments was 45.2% compared to 52.3% in the prior year period. The decline in gross margin is primarily attributed to a significant drop in the price of wholesale distillate. Cost of goods sold increased by 49% from the comparative period due to the significant increase in distillate volume produced and sold as noted above. The Company continues to work towards production efficiencies to combat price compression in the wholesale distillate market as production and sales continued to ramp up.
Total general & administrative (“G&A”) expenses declined by $137k or 4% from prior comparative period, driven by year-over-year reductions in consulting fees, management fees, insurance, marketing, share based compensation and repairs and maintenance expenses, which were partially offset by increases in depreciation, professional fees, research and development, salaries and regulatory fees. G&A decreased to 35% of revenue during the period, compared with 48% in the prior year.
Income (Loss) and comprehensive income (loss) in Q3’23 was $495k which is a $1.7M decrease from the prior year period income of $2.2M. The year-over-year decrease in income is primarily driven by an increase in changes in fair value of inventory sold of $1.1M, a reduction in income from other items relating to a one-time settlement of $258k and debt modification of $386k in the comparative period, and a decrease in the fair value change in biological asset adjustment of $388k.
Cash and Working Capital
As at August 31, 2023, the Company had working capital of $4,139,795 (November 30, 2022 – $3,683,558) which consisted of cash of $1,728,432 (November 30, 2022 – $1,810,639), receivables of $2,312,232 (November 30, 2022 – $1,906,820), prepaid expenses of $51,757 (November 30, 2022 – $3,885), inventory of $1,954,344 (November 30, 2022 – $5,766,418), Biological assets of $4,035,020 (November 30, 2022 – $Nil). Current liabilities, being accounts payable and accrued liabilities, current portion of loan and current portion of convertible debentures, $5,941,991 (November 30, 2022 – $5,832,954).
About Christina Lake Cannabis Corp.
Christina Lake Cannabis is a licensed producer of cannabis under the Cannabis Act. It has secured a standard cultivation license and corresponding processing amendment from Health Canada (March 2020 and August 2020, respectively) as well as a research and development license (early 2020). Christina Lake Cannabis’ facility consists of a 32-acre property, which includes over 950,000 square feet of outdoor grow space, offices, propagation and drying rooms, research facilities, and a facility dedicated to processing and extraction. Christina Lake Cannabis also owns a 99-acre plot of land adjoining its principal site. CLC focuses its production on creating high quality extracts and distillate for its B2B client base with proprietary strains specifically developed for outdoor cultivation to enhance extraction quality.
