Cansortium Inc. Reports 2020 Third Quarter Financial Results

<br /> Cansortium Inc. Reports 2020 Third Quarter Financial Results<br />

PR Newswire



Another strong quarter highlighted by

$3.6M

of Adjusted EBITDA on

$14.3M

of revenue


MIAMI

,

Nov. 23, 2020

/PRNewswire/ –

Cansortium

Inc. (CSE: TIUM.U) (OTCQB: CNTMF) (“Cansortium” or the “Company”), a vertically-integrated provider of premium-quality medical cannabis, today announced financial results for its third quarter and nine months ended

September 30, 2020

. The Company’s unaudited condensed interim consolidated financial statements and accompanying notes, along with the Management Discussion and Analysis (MD&A) are available under the Company’s profile on SEDAR at

www.sedar.com

and are also accessible through a link on the Investor Relations section of the Company’s website at

www.cansortium.com

.

The Company will host a conference call and live audio webcast on,

November 24, 2020

at

5:00 P.M. Eastern time

, to discuss its third quarter 2020 financial results. All interested parties can join the conference call by dialing 1-800-319-4610 (

Canada

/

USA

) or +1-604-638-5340 (international). Callers should dial in 5 to 10 minutes prior to the scheduled start time and ask to join the call. A live audio webcast of the conference call will be available at:

http://services.choruscall.ca/links/cansortium20201123.html



Selected Third Quarter 2020 Financial Highlights

  • Consolidated revenue of

    $14.3 million

    , an increase of 94 percent or

    $6.9 million

    compared with consolidated revenue of

    $7.4 million

    in the third quarter of 2019.
  • Consolidated loss from operations of

    $(1.9) million

    , compared to loss from operations of

    $(8.1) million

    in the third quarter of 2019.
  • Consolidated Adjusted EBITDA

    (1)

    of $3.6 million, compared to Adjusted EBITDA

    (1)

    loss of $(2.1) million in the third quarter of 2019.
  • Consolidated net loss of

    $(8.9) million

    , or

    $(0.04)

    per diluted share, compared to consolidated net loss of

    $(11.3) million

    , or

    $(0.06)

    per diluted share for the same period last year.
  • During the third quarter of 2020, the Company opened its 21

    st

    medical marijuana dispensary in

    Coral Springs, FL.

    It operated 16 dispensaries during the comparable period in 2019. In October and November of 2020, the Company opened its 22

    nd

    and 23

    rd

    Florida

    dispensary in

    Coral Gables, FL

    and Kendall, FL, respectively.



Selected Year-to-Date 2020 Financial Highlights

  • Consolidated revenue of

    $37.7 million

    , an increase of 50 percent or

    $18.7 million

    compared with consolidated revenue of

    $19.0 million

    during the nine months ended

    September 30, 2019

    .
  • Consolidated income from operations of

    $1.3 million

    , compared to loss from operations of

    $(28.7) million

    during the nine months ended

    September 30, 2019

    .
  • Consolidated Adjusted EBITDA

    (1)

    of

    $7.0 million

    , compared to Adjusted EBITDA

    (1)

    loss of

    $(7.2) million

    during the nine months ended

    September 30, 2019

    .
  • Consolidated net loss of

    $(28.3) million

    , or

    $(0.14)

    per diluted share, compared to consolidated net loss of

    $(33.1) million

    , or

    $(0.18)

    per diluted share for the same period last year.


(1)


Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA from EBITDA plus (minus) unrealized loss (gain) on embedded derivatives, plus (minus) certain one-time non-operating expenses, as determined by management. Reconciliations from EBITDA and Adjusted EBITDA to Net Loss are included in the accompanying financial schedules.



Full Year 2020 Outlook

The Company reiterates its full year 2020 outlook for consolidated revenue of

$55 million

to

$60 million

with anticipated Adjusted EBITDA of approximately

$14 million

. The forecast is based on projected revenue of at least

$45 million

for Cansortium’s

Florida

operations with additional revenue from the

Michigan

,

Pennsylvania

and

Texas

markets.



Initial 2021 and 2022 Outlook

The Company has continued to make progress on its targeted initiatives focused on growth and long-term shareholder value creation. In its home state of

Florida

, the Company secured an additional cultivation and production facility with operations anticipated to commence in

December 2020

and further expansion expected during 2021 and 2022 and will continue to grow its retail footprint with a total of 33 dispensaries anticipated to be operational by the end of 2022. In Pennsylvania, the Company has secured an additional dispensary location that is expected to open in early 2021 in order to augment the strong sales of its existing

Hanover

dispensary. A third location is expected to come online in the first half of 2021. In Michigan, the Company enhanced the cultivation team on the ground and is pursuing expansion opportunities. Finally, in

Texas

, the Company has rights to expand the cultivation facility up to 400,000 additional sq. ft. as demand requires.

The Company is projecting revenue of

$95 million

to

$100 million

and

$140

to

$145 million

for 2021 and 2022, respectively, and Adjusted EBITDA of

$30 million

to

$35 million

and

$60

to

$65 million

for 2021 and 2022, respectively.



About Cansortium Inc.

Headquartered in

Miami, Florida

, and operating under the Fluent™ brand, Cansortium is focused on being the highest quality cannabis company in the

State of Florida

driven by unrelenting commitment to operational excellence from seed to sale. Cansortium has developed strong proficiencies in each of cultivation, processing, retail, and distribution activities, the result of successfully operating in the highly regulated cannabis industry. In addition to

Florida

, Cansortium is seeking to create significant shareholder value in the attractive markets of

Texas

,

Michigan

and

Pennsylvania

.

Cansortium Inc.’s common shares and warrants trade on the CSE under the symbol “TIUM.U” and “TIUM.WT.U”, respectively, and on the OTCQB Venture Market under the symbol (OTCQB: CNTMF). Investors can find current financial disclosure and Real-Time Level 2 quotes for the Company on

www.otcmarkets.com

.



Forward-Looking Information

All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties that may cause actual results to differ, perhaps materially. Projections are predicated on the Company’s ability to continue successfully implementing the strategic growth and cost-saving initiatives identified by the Special Committee of the Board. In addition, projections are based on the Company’s ability to secure and effectively deploy its capital resources toward those initiatives.

Certain information in this news release, may constitute forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “is positioned”, “estimates”, “intends”, “assumes”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events. Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this news release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in the public documents of the Company available at

www.sedar.com

. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this news release are made as of the date of this news release, and the Company expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

Financial Tables Follow



Cansortium Inc.



Consolidated Statements of Financial Position



As of September 30, 2020 and December 31, 2019



(USD ‘000)



September 30,



December 31,



2020



2019



Assets


Current assets


Cash and cash equivalents


$


4,072


$


2,516


Accounts receivable


65


144


Inventory


9,574


6,709


Biological assets


6,128


3,845


Note receivable


4,895


3,870


Prepaid expenses and other current assets


1,311


556


Total current assets


26,045


17,640


Investment held for sale


324




Assets held for sale




6,301


Property and equipment, net


18,677


19,128


Intangible assets, net


97,418


98,566


Right-of-use assets


19,410


20,190


Investment in associate


3,043


3,424


Goodwill


1,526


1,526


Other assets


390


291



Total assets


$



166,833



$



167,066



Liabilities


Current liabilities


Accounts payable


4,558


7,860


Accrued liabilities


4,107


5,135


Income taxes payable


6,401


1,492


Derivative liabilities


13,436


13,198


Current portion of notes payable


37,211


9,350


Lease obligations


1,979


1,761


Other current liabilities


350




Total current liabilities


68,042


38,796


Liabilities held for sale




3,240


Notes payable, net of current portion


12,695


31,053


Lease obligations, net of current portion


20,728


21,166


Deferred income taxes


26,657


24,957


Other long-term liabilities


468


676


Total liabilities



128,590



119,888



Shareholders’ equity


Share capital


147,846


149,322


Share-based compensation reserve


4,148


2,977


Equity conversion feature


12,250


7,613


Warrants


13,265


11,773


Accumulated deficit


(138,891)


(123,785)


Accumulated other comprehensive loss


(375)


(563)


Total shareholders’ equity attributable to Cansortium Inc. shareholders


38,243


47,337


Non-controlling interests




(159)


Total shareholders’ equity


38,243


47,178



Total liabilities and shareholders’ equity



$



166,833



$



167,066



Cansortium Inc.



Consolidated Statement of Operations



For the three and nine months ended September 30, 2020 and 2019



(USD ‘000)



For the three months

ended September 30,



For the nine months

ended September 30,



2020



2019



2020



2019


Revenue, net of discounts


$


14,313


$


7,387


$


37,718


$


19,005


Cost of goods sold


4,784


2,722


13,011


6,822


Gross profit before fair value adjustments


9,529


4,665


24,707


12,183


Realized fair value of increments on inventory sold


6,051


3,341


18,566


6,692


Unrealized change in fair value of biological assets


(4,263)


(1,109)


(23,945)


(3,182)


Gross profit


7,741


2,433


30,086


8,673


Expenses


General and administrative


2,861


4,362


9,064


19,384


Share-based compensation


1,689


258


4,938


1,744


Sales and marketing


3,561


3,348


10,162


8,972


Depreciation and amortization


1,561


2,549


4,635


7,250


Total expenses


9,672


10,517


28,799


37,350


Income (loss) from operations


(1,931)


(8,084)


1,287


(28,677)


Discontinued operations


236




(106)




Other expense (income)


Interest expense, net


3,892


2,926


11,448


9,786


Change in fair market value of derivative


673


(2,631)


1,680


(6,172)


Loss on investment in associate


166




381




Gain in fair market value of investment in associate








(3,388)


Loss on debt restructuring






8,065




Loss on disposal of assets


710


2,205


656


2,205


Other expense


1


257


7


285


Total other expense (income)


5,442


2,757


22,237


2,716


Loss before taxes


(7,609)


(10,841)


(20,844)


(31,393)


Income taxes


1,281


432


7,422


1,708


Net loss


(8,890)


(11,273)


(28,266)


(33,101)


Net income (loss) attributable to non-controlling interest




83




(204)


Net loss attributable to controlling interest


$


(8,890)


$


(11,356)


$


(28,266)


$


(32,897)


Net loss per share


Basic


$


(0.04)


$


(0.06)


$


(0.14)


$


(0.18)


Diluted


$


(0.04)


$


(0.06)


$


(0.14)


$


(0.18)



Cansortium Inc.



Consolidated Statement of Cash Flows



For the nine months ended September 30, 2020 and 2019



(USD ‘000)



For the nine months

ended September 30,



2020



2019



Operating activities


Net loss


$


(28,266)


$


(33,101)


Adjustments to reconcile net loss to net cash used in operating activities:


Unrealized gain on changes in fair value of biological assets


(23,945)


(3,182)


Share-based compensation


4,938


2,005


Depreciation and amortization


6,146


8,252


Discontinued operations


(106)




Amortization of debt discount




4,497


Accretion of convertible debentures


5,974




Interest on lease liabilities


3,324




Change in fair market value of derivative


1,680


(6,172)


Loss on investment in associate


381




Gain in fair market value of investment in associate




(3,388)


Loss on debt restructuring


8,066




Loss on disposal of assets


656


2,205


Deferred tax expense


1,700




Changes in operating assets and liabilities:


Accounts receivable


79


(51)


Inventory


(2,930)


(3,715)


Biological assets


21,662


2,746


Prepaid expenses and other current assets


(492)


(5,561)


Right-of-use assets


(1,439)




Other assets


(99)


(1,116)


Accounts payable


(309)


102


Accrued liabilities


2,205


(3,357)


Income taxes payable


4,909


1,838


Lease obligations




1,772


Other current liabilities


(251)


398


Other liabilities


(160)




Net cash provided by (used in) operating activities


3,723


(35,828)



Investing activities


Purchases of property and equipment


(3,136)


(12,558)


Purchase of intangible assets




(319)


Payment of notes receivable


350




Notes receivable


(1,375)




Proceeds from sale of subsidiary


600




Net cash used in investing activities


(3,561)


(12,877)



Financing activities


Proceeds from IPO




56,178


Proceeds from issuance of shares and warrants


4,351




Proceeds from issuance of notes payable


62


41,006


Payment of lease obligations


(3,207)


921


Interest repayments of notes payable






Principal repayments of notes payable




(46,353)


Net cash provided by financing activities


1,206


51,752


Effect of foreign exchange on cash and cash equivalents


188


(59)


Net increase in cash and cash equivalents


1,556


2,988


Cash and cash equivalents, beginning of period


2,516


2,026


Cash and cash equivalents, end of period


$


4,072


$


5,014


Cash paid during the period for interest


$


2,457


$


585


Non-cash transactions:


Issuance of shares to acquire additional interest in consolidated entity


$




$


13,786


Shares returns for sale of interest in subsidiaries


$


(4,374)


$




Founders shares return


$


(10,970)


$




Note payable amendment


$


10,380


$




Issuance of share for convertible debentures amendment


$


2,082


$





Cansortium Inc.



Financial Highlights



For the three and nine months ended September 30, 2020 and 2019



(USD ‘000)



Three months ended



Nine months ended



Financial results



September

30, 2020



September

30, 2019



Variance



September

30, 2020



September

30, 2019



Variance


Revenue


$


14,313


$


7,387


$


6,926


$


37,718


$


19,005


$


18,713


Gross profit


$


7,741


$


2,433


$


5,308


$


30,086


$


8,673


$


21,413


Gross margin



54.1%



32.9%



21.1%



79.8%



45.6%



34.1%


Adjusted gross profit

(1)


$


9,529


$


4,665


$


4,864


$


24,707


$


12,183


$


12,524


Adjusted gross margin

(1)



66.6%



63.2%



3.4%



65.5%



64.1%



1.4%


Selling, general and administrative expenses


$


9,672


$


10,517


$


(845)


$


28,799


$


37,350


$


(8,552)


EBITDA

(1)


$


(1,617)


$


(4,483)


$


2,867


$


(3,243)


$


(11,854)


$


8,611


Adjusted EBITDA

(1)


$


3,645


$


(2,095)


$


5,740


$


6,990


$


(7,224)


$


14,215


Net loss


$


(8,890)


$


(11,273)


$


2,383


$


(28,266)


$


(33,101)


$


4,835


Net loss per share (basic)


$


(0.04)


$


(0.06)


$


0.01


$


(0.14)


$


(0.18)


$


0.04


Net loss per share (diluted)


$


(0.04)


$


(0.06)


$


0.01


$


(0.14)


$


(0.18)


$


0.04


(1)


Adjusted gross profit, adjusted gross margin, EBITDA and Adjusted EBITDA are non-IFRS financial measures that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Refer to the reconciliation to IFRS and quarterly results of operations sections at the Company’s Management Discussion and Analysis document for reconciliation to IFRS.


Cansortium Inc.

Reconciliation of non-IFRS financial measures

For the three and nine months ended

September 30, 2020

and 2019

(USD ‘000)



EBITDA

EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates EBITDA from net income (loss), plus (minus) interest expense (income), plus income taxes, plus depreciation and amortization, as follows:



Three months ended



Nine months ended



September





30, 2020



September





30,


2019



Variance



September





30, 2020



September





30, 2019



Variance


Net loss


$


(8,890)


$


(11,273)


$


2,383


$


(28,266)


$


(33,101)


$


4,835


Interest expense


3,892


2,926


966


11,448


9,786


1,662


Income taxes


1,281


432


849


7,422


1,708


5,714


Depreciation and amortization


2,100


3,432


(1,332)


6,153


9,753


(3,600)


EBITDA


$


(1,617)


$


(4,483)


$


2,866


$


(3,243)


$


(11,854)


$


8,611



Adjusted EBITDA

Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA from EBITDA plus (minus) unrealized loss (gain) on embedded derivatives, plus (minus) certain one-time non-operating expenses, as determined by management. The reconciliation from EBITDA to Adjusted EBITDA is as follows:



Three months ended



Nine months ended



September

30, 2020



September

30, 2019



Variance



September

30, 2020



September

30, 2019



Variance


EBITDA


$


(1,617)


$


(4,483)


$


2,866


$


(3,243)


$


(11,854)


$


8,611


Change in fair value of biological assets


1,788


2,232


(444)


(5,379)


3,510


(8,889)


Change in fair market value of derivative


673


(2,631)


3,304


1,680


(6,172)


7,852


Gain in fair value of investment in associate










(3,388)


3,388


Share-based compensation


1,689


258


1,431


4,938


1,744


3,194


Discontinued operations


236




236


(106)




(106)


Loss on debt restructuring








8,065




8,065


Other non-recurring expense


876


2,530


(1,654)


1,035


8,935


(7,900)


Adjusted EBITDA


$


3,645


$


(2,095)


$


5,740


$


6,990


$


(7,224)


$


14,215

Cision
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Cansortium Inc. Reports 2020 Third Quarter Financial Results

<br /> Cansortium Inc. Reports 2020 Third Quarter Financial Results<br />

PR Newswire



Another strong quarter highlighted by

$3.6M

of Adjusted EBITDA on

$14.3M

of revenue


MIAMI

,

Nov. 23, 2020

/PRNewswire/ –

Cansortium

Inc. (CSE: TIUM.U) (OTCQB: CNTMF) (“Cansortium” or the “Company”), a vertically-integrated provider of premium-quality medical cannabis, today announced financial results for its third quarter and nine months ended

September 30, 2020

. The Company’s unaudited condensed interim consolidated financial statements and accompanying notes, along with the Management Discussion and Analysis (MD&A) are available under the Company’s profile on SEDAR at

www.sedar.com

and are also accessible through a link on the Investor Relations section of the Company’s website at

www.cansortium.com

.

The Company will host a conference call and live audio webcast on,

November 24, 2020

at

5:00 P.M. Eastern time

, to discuss its third quarter 2020 financial results. All interested parties can join the conference call by dialing 1-800-319-4610 (

Canada

/

USA

) or +1-604-638-5340 (international). Callers should dial in 5 to 10 minutes prior to the scheduled start time and ask to join the call. A live audio webcast of the conference call will be available at:

http://services.choruscall.ca/links/cansortium20201123.html



Selected Third Quarter 2020 Financial Highlights

  • Consolidated revenue of

    $14.3 million

    , an increase of 94 percent or

    $6.9 million

    compared with consolidated revenue of

    $7.4 million

    in the third quarter of 2019.
  • Consolidated loss from operations of

    $(1.9) million

    , compared to loss from operations of

    $(8.1) million

    in the third quarter of 2019.
  • Consolidated Adjusted EBITDA

    (1)

    of $3.6 million, compared to Adjusted EBITDA

    (1)

    loss of $(2.1) million in the third quarter of 2019.
  • Consolidated net loss of

    $(8.9) million

    , or

    $(0.04)

    per diluted share, compared to consolidated net loss of

    $(11.3) million

    , or

    $(0.06)

    per diluted share for the same period last year.
  • During the third quarter of 2020, the Company opened its 21

    st

    medical marijuana dispensary in

    Coral Springs, FL.

    It operated 16 dispensaries during the comparable period in 2019. In October and November of 2020, the Company opened its 22

    nd

    and 23

    rd

    Florida

    dispensary in

    Coral Gables, FL

    and Kendall, FL, respectively.



Selected Year-to-Date 2020 Financial Highlights

  • Consolidated revenue of

    $37.7 million

    , an increase of 50 percent or

    $18.7 million

    compared with consolidated revenue of

    $19.0 million

    during the nine months ended

    September 30, 2019

    .
  • Consolidated income from operations of

    $1.3 million

    , compared to loss from operations of

    $(28.7) million

    during the nine months ended

    September 30, 2019

    .
  • Consolidated Adjusted EBITDA

    (1)

    of

    $7.0 million

    , compared to Adjusted EBITDA

    (1)

    loss of

    $(7.2) million

    during the nine months ended

    September 30, 2019

    .
  • Consolidated net loss of

    $(28.3) million

    , or

    $(0.14)

    per diluted share, compared to consolidated net loss of

    $(33.1) million

    , or

    $(0.18)

    per diluted share for the same period last year.


(1)


Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA from EBITDA plus (minus) unrealized loss (gain) on embedded derivatives, plus (minus) certain one-time non-operating expenses, as determined by management. Reconciliations from EBITDA and Adjusted EBITDA to Net Loss are included in the accompanying financial schedules.



Full Year 2020 Outlook

The Company reiterates its full year 2020 outlook for consolidated revenue of

$55 million

to

$60 million

with anticipated Adjusted EBITDA of approximately

$14 million

. The forecast is based on projected revenue of at least

$45 million

for Cansortium’s

Florida

operations with additional revenue from the

Michigan

,

Pennsylvania

and

Texas

markets.



Initial 2021 and 2022 Outlook

The Company has continued to make progress on its targeted initiatives focused on growth and long-term shareholder value creation. In its home state of

Florida

, the Company secured an additional cultivation and production facility with operations anticipated to commence in

December 2020

and further expansion expected during 2021 and 2022 and will continue to grow its retail footprint with a total of 33 dispensaries anticipated to be operational by the end of 2022. In Pennsylvania, the Company has secured an additional dispensary location that is expected to open in early 2021 in order to augment the strong sales of its existing

Hanover

dispensary. A third location is expected to come online in the first half of 2021. In Michigan, the Company enhanced the cultivation team on the ground and is pursuing expansion opportunities. Finally, in

Texas

, the Company has rights to expand the cultivation facility up to 400,000 additional sq. ft. as demand requires.

The Company is projecting revenue of

$95 million

to

$100 million

and

$140

to

$145 million

for 2021 and 2022, respectively, and Adjusted EBITDA of

$30 million

to

$35 million

and

$60

to

$65 million

for 2021 and 2022, respectively.



About Cansortium Inc.

Headquartered in

Miami, Florida

, and operating under the Fluent™ brand, Cansortium is focused on being the highest quality cannabis company in the

State of Florida

driven by unrelenting commitment to operational excellence from seed to sale. Cansortium has developed strong proficiencies in each of cultivation, processing, retail, and distribution activities, the result of successfully operating in the highly regulated cannabis industry. In addition to

Florida

, Cansortium is seeking to create significant shareholder value in the attractive markets of

Texas

,

Michigan

and

Pennsylvania

.

Cansortium Inc.’s common shares and warrants trade on the CSE under the symbol “TIUM.U” and “TIUM.WT.U”, respectively, and on the OTCQB Venture Market under the symbol (OTCQB: CNTMF). Investors can find current financial disclosure and Real-Time Level 2 quotes for the Company on

www.otcmarkets.com

.



Forward-Looking Information

All projections related to anticipated future results are forward-looking in nature and are subject to risks and uncertainties that may cause actual results to differ, perhaps materially. Projections are predicated on the Company’s ability to continue successfully implementing the strategic growth and cost-saving initiatives identified by the Special Committee of the Board. In addition, projections are based on the Company’s ability to secure and effectively deploy its capital resources toward those initiatives.

Certain information in this news release, may constitute forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “is positioned”, “estimates”, “intends”, “assumes”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates and projections regarding future events. Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by the Company as of the date of this news release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in the public documents of the Company available at

www.sedar.com

. These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this news release are made as of the date of this news release, and the Company expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

Financial Tables Follow



Cansortium Inc.



Consolidated Statements of Financial Position



As of September 30, 2020 and December 31, 2019



(USD ‘000)



September 30,



December 31,



2020



2019



Assets


Current assets


Cash and cash equivalents


$


4,072


$


2,516


Accounts receivable


65


144


Inventory


9,574


6,709


Biological assets


6,128


3,845


Note receivable


4,895


3,870


Prepaid expenses and other current assets


1,311


556


Total current assets


26,045


17,640


Investment held for sale


324




Assets held for sale




6,301


Property and equipment, net


18,677


19,128


Intangible assets, net


97,418


98,566


Right-of-use assets


19,410


20,190


Investment in associate


3,043


3,424


Goodwill


1,526


1,526


Other assets


390


291



Total assets


$



166,833



$



167,066



Liabilities


Current liabilities


Accounts payable


4,558


7,860


Accrued liabilities


4,107


5,135


Income taxes payable


6,401


1,492


Derivative liabilities


13,436


13,198


Current portion of notes payable


37,211


9,350


Lease obligations


1,979


1,761


Other current liabilities


350




Total current liabilities


68,042


38,796


Liabilities held for sale




3,240


Notes payable, net of current portion


12,695


31,053


Lease obligations, net of current portion


20,728


21,166


Deferred income taxes


26,657


24,957


Other long-term liabilities


468


676


Total liabilities



128,590



119,888



Shareholders’ equity


Share capital


147,846


149,322


Share-based compensation reserve


4,148


2,977


Equity conversion feature


12,250


7,613


Warrants


13,265


11,773


Accumulated deficit


(138,891)


(123,785)


Accumulated other comprehensive loss


(375)


(563)


Total shareholders’ equity attributable to Cansortium Inc. shareholders


38,243


47,337


Non-controlling interests




(159)


Total shareholders’ equity


38,243


47,178



Total liabilities and shareholders’ equity



$



166,833



$



167,066



Cansortium Inc.



Consolidated Statement of Operations



For the three and nine months ended September 30, 2020 and 2019



(USD ‘000)



For the three months

ended September 30,



For the nine months

ended September 30,



2020



2019



2020



2019


Revenue, net of discounts


$


14,313


$


7,387


$


37,718


$


19,005


Cost of goods sold


4,784


2,722


13,011


6,822


Gross profit before fair value adjustments


9,529


4,665


24,707


12,183


Realized fair value of increments on inventory sold


6,051


3,341


18,566


6,692


Unrealized change in fair value of biological assets


(4,263)


(1,109)


(23,945)


(3,182)


Gross profit


7,741


2,433


30,086


8,673


Expenses


General and administrative


2,861


4,362


9,064


19,384


Share-based compensation


1,689


258


4,938


1,744


Sales and marketing


3,561


3,348


10,162


8,972


Depreciation and amortization


1,561


2,549


4,635


7,250


Total expenses


9,672


10,517


28,799


37,350


Income (loss) from operations


(1,931)


(8,084)


1,287


(28,677)


Discontinued operations


236




(106)




Other expense (income)


Interest expense, net


3,892


2,926


11,448


9,786


Change in fair market value of derivative


673


(2,631)


1,680


(6,172)


Loss on investment in associate


166




381




Gain in fair market value of investment in associate








(3,388)


Loss on debt restructuring






8,065




Loss on disposal of assets


710


2,205


656


2,205


Other expense


1


257


7


285


Total other expense (income)


5,442


2,757


22,237


2,716


Loss before taxes


(7,609)


(10,841)


(20,844)


(31,393)


Income taxes


1,281


432


7,422


1,708


Net loss


(8,890)


(11,273)


(28,266)


(33,101)


Net income (loss) attributable to non-controlling interest




83




(204)


Net loss attributable to controlling interest


$


(8,890)


$


(11,356)


$


(28,266)


$


(32,897)


Net loss per share


Basic


$


(0.04)


$


(0.06)


$


(0.14)


$


(0.18)


Diluted


$


(0.04)


$


(0.06)


$


(0.14)


$


(0.18)



Cansortium Inc.



Consolidated Statement of Cash Flows



For the nine months ended September 30, 2020 and 2019



(USD ‘000)



For the nine months

ended September 30,



2020



2019



Operating activities


Net loss


$


(28,266)


$


(33,101)


Adjustments to reconcile net loss to net cash used in operating activities:


Unrealized gain on changes in fair value of biological assets


(23,945)


(3,182)


Share-based compensation


4,938


2,005


Depreciation and amortization


6,146


8,252


Discontinued operations


(106)




Amortization of debt discount




4,497


Accretion of convertible debentures


5,974




Interest on lease liabilities


3,324




Change in fair market value of derivative


1,680


(6,172)


Loss on investment in associate


381




Gain in fair market value of investment in associate




(3,388)


Loss on debt restructuring


8,066




Loss on disposal of assets


656


2,205


Deferred tax expense


1,700




Changes in operating assets and liabilities:


Accounts receivable


79


(51)


Inventory


(2,930)


(3,715)


Biological assets


21,662


2,746


Prepaid expenses and other current assets


(492)


(5,561)


Right-of-use assets


(1,439)




Other assets


(99)


(1,116)


Accounts payable


(309)


102


Accrued liabilities


2,205


(3,357)


Income taxes payable


4,909


1,838


Lease obligations




1,772


Other current liabilities


(251)


398


Other liabilities


(160)




Net cash provided by (used in) operating activities


3,723


(35,828)



Investing activities


Purchases of property and equipment


(3,136)


(12,558)


Purchase of intangible assets




(319)


Payment of notes receivable


350




Notes receivable


(1,375)




Proceeds from sale of subsidiary


600




Net cash used in investing activities


(3,561)


(12,877)



Financing activities


Proceeds from IPO




56,178


Proceeds from issuance of shares and warrants


4,351




Proceeds from issuance of notes payable


62


41,006


Payment of lease obligations


(3,207)


921


Interest repayments of notes payable






Principal repayments of notes payable




(46,353)


Net cash provided by financing activities


1,206


51,752


Effect of foreign exchange on cash and cash equivalents


188


(59)


Net increase in cash and cash equivalents


1,556


2,988


Cash and cash equivalents, beginning of period


2,516


2,026


Cash and cash equivalents, end of period


$


4,072


$


5,014


Cash paid during the period for interest


$


2,457


$


585


Non-cash transactions:


Issuance of shares to acquire additional interest in consolidated entity


$




$


13,786


Shares returns for sale of interest in subsidiaries


$


(4,374)


$




Founders shares return


$


(10,970)


$




Note payable amendment


$


10,380


$




Issuance of share for convertible debentures amendment


$


2,082


$





Cansortium Inc.



Financial Highlights



For the three and nine months ended September 30, 2020 and 2019



(USD ‘000)



Three months ended



Nine months ended



Financial results



September

30, 2020



September

30, 2019



Variance



September

30, 2020



September

30, 2019



Variance


Revenue


$


14,313


$


7,387


$


6,926


$


37,718


$


19,005


$


18,713


Gross profit


$


7,741


$


2,433


$


5,308


$


30,086


$


8,673


$


21,413


Gross margin



54.1%



32.9%



21.1%



79.8%



45.6%



34.1%


Adjusted gross profit

(1)


$


9,529


$


4,665


$


4,864


$


24,707


$


12,183


$


12,524


Adjusted gross margin

(1)



66.6%



63.2%



3.4%



65.5%



64.1%



1.4%


Selling, general and administrative expenses


$


9,672


$


10,517


$


(845)


$


28,799


$


37,350


$


(8,552)


EBITDA

(1)


$


(1,617)


$


(4,483)


$


2,867


$


(3,243)


$


(11,854)


$


8,611


Adjusted EBITDA

(1)


$


3,645


$


(2,095)


$


5,740


$


6,990


$


(7,224)


$


14,215


Net loss


$


(8,890)


$


(11,273)


$


2,383


$


(28,266)


$


(33,101)


$


4,835


Net loss per share (basic)


$


(0.04)


$


(0.06)


$


0.01


$


(0.14)


$


(0.18)


$


0.04


Net loss per share (diluted)


$


(0.04)


$


(0.06)


$


0.01


$


(0.14)


$


(0.18)


$


0.04


(1)


Adjusted gross profit, adjusted gross margin, EBITDA and Adjusted EBITDA are non-IFRS financial measures that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Refer to the reconciliation to IFRS and quarterly results of operations sections at the Company’s Management Discussion and Analysis document for reconciliation to IFRS.


Cansortium Inc.

Reconciliation of non-IFRS financial measures

For the three and nine months ended

September 30, 2020

and 2019

(USD ‘000)



EBITDA

EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates EBITDA from net income (loss), plus (minus) interest expense (income), plus income taxes, plus depreciation and amortization, as follows:



Three months ended



Nine months ended



September





30, 2020



September





30,


2019



Variance



September





30, 2020



September





30, 2019



Variance


Net loss


$


(8,890)


$


(11,273)


$


2,383


$


(28,266)


$


(33,101)


$


4,835


Interest expense


3,892


2,926


966


11,448


9,786


1,662


Income taxes


1,281


432


849


7,422


1,708


5,714


Depreciation and amortization


2,100


3,432


(1,332)


6,153


9,753


(3,600)


EBITDA


$


(1,617)


$


(4,483)


$


2,866


$


(3,243)


$


(11,854)


$


8,611



Adjusted EBITDA

Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA from EBITDA plus (minus) unrealized loss (gain) on embedded derivatives, plus (minus) certain one-time non-operating expenses, as determined by management. The reconciliation from EBITDA to Adjusted EBITDA is as follows:



Three months ended



Nine months ended



September

30, 2020



September

30, 2019



Variance



September

30, 2020



September

30, 2019



Variance


EBITDA


$


(1,617)


$


(4,483)


$


2,866


$


(3,243)


$


(11,854)


$


8,611


Change in fair value of biological assets


1,788


2,232


(444)


(5,379)


3,510


(8,889)


Change in fair market value of derivative


673


(2,631)


3,304


1,680


(6,172)


7,852


Gain in fair value of investment in associate










(3,388)


3,388


Share-based compensation


1,689


258


1,431


4,938


1,744


3,194


Discontinued operations


236




236


(106)




(106)


Loss on debt restructuring








8,065




8,065


Other non-recurring expense


876


2,530


(1,654)


1,035


8,935


(7,900)


Adjusted EBITDA


$


3,645


$


(2,095)


$


5,740


$


6,990


$


(7,224)


$


14,215

Cision
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