Key Financial Highlights for Q1 FY2021 (compared with Q1 FY2020)
- Revenue increased 98% to
- Gross profit increased 195% to
- Gross margin increased 15% to 47%
- Operating loss decreased 70% to
- Operating expenses as a percentage of revenue declined from 110% to 59%
- Positive Adjusted EBITDA of
$0.4 millionincreased by $1.1 millionfrom a loss of $0.7 million
Key Business Highlights for Q1 FY2021
- Finalized merger agreement with
ONE Cannabis Group(“ OCG Inc.“), to add unique franchising capabilities and significantly enhance the Company’s retail distribution network, in December 2020; expected to close in early 2021
- Received approval for 45-acre marijuana cultivation site expansion in
Coolidge, Arizonain November 2020 Arizona’sProposition 207 Adult-Use Cannabis Initiative successfully passed in November 2020
“We are extremely pleased with our strong first-quarter performance, as we continued to grow revenues and improve margins and profitability,” commented
With the successful passage of Proposition 207 for adult use in
“The high penetration of our award-winning products in existing
The Company finalized its merger agreement with
Financial Results for Q1 FY2021, Ended
- Revenue: For the three months ended
December 31, 2020, revenue was $3.0 million, an increase of $1.5 million, or 98%, compared with $1.5 millionfor the three months ended December 31, 2019. This increase was primarily due to increased production outputs, supported by operational improvements, as product demand grew.
- Gross Profit: For the three months ended
December 31, 2020, gross profit was $1.4 million, an increase of $0.9 million, or 195%, compared with $0.5 millionfor the three months ended December 31, 2019. The resulting gross margin was 47%, compared with 32% for the same quarter last year.
The increase in gross profit was due to the ramp-up in production and continued improvement in the operating capacity of the Company’s cultivation and processing facilities. With the Company’s continued production expansion and focus on operational efficiencies and cost reduction, management expects gross profit to continue to grow going forward.
Management believes costs of revenues will increase at a lower rate than revenues in future periods, which is expected to lead to higher profit margins than historical figures illustrate. Through bulk purchasing, production efficiencies, and investments in equipment, management believes that the Company will continue to improve gross profit margins.
- Total Operating Expenses: For the three months ended
December 31, 2020, total operating expenses were $1.8 million, an increase of $0.1 million, or 7%, compared with $1.7 millionfor the same quarter last year. Operating expenses as a percentage of revenue decreased from 110% to 59% for the quarters compared. Management believes this ratio will decrease going forward as the expectation is that revenues will continue to grow at a higher rate than operating expenses.
- Operating Loss: For the three months ended
December 31, 2020, operating loss was $0.4 million, a decrease of $0.8 million, or 70%, compared with operating loss of $1.2 millionfor the same quarter last year.
- Adjusted EBITDA: After adding back non-cash operating expenses, depreciation and amortization, interest and stock-based compensation, Adjusted EBITDA for the three months ended
December 31, 2020was positive $0.4 million, as compared with a loss of $0.7 millionfor the same quarter last year.
- Net Loss: For the three months ended
December 31, 2020, net loss was $1.1 million, a decrease of $0.9 million, or 46%, compared with $2.0 millionfor the three months ended December 31, 2019. Loss per share for the three months ended December 31, 2020was $0.02per share, compared with loss per share of $0.03per share for the same quarter last year.
The Company filed its Form 10-Q on
Use of Non-GAAP Financial Measures
To supplement the Company’s financial statements presented on a GAAP basis, Item 9 Labs provides Adjusted EBITDA as a supplemental measure of its performance.
To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding pro forma operations,
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, including, but not limited to, risks and effects of legal and administrative proceedings and governmental regulation, especially in a foreign country, future financial and operational results, competition, general economic conditions, proposed transactions that are not legally binding obligations of the company and the ability to manage and continue growth. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include the introduction of new technology, market conditions and those set forth in reports or documents we file from time to time with the