1933 Industries Reports Second Quarter 2021 Financial Results
1933 Industries reported strong Q2 2021 financial results, with revenues reaching $3.4 million, a 27% increase from the prior quarter. The company achieved a gross margin of 57%, significantly reducing its net loss by 78% to $1.4 million. Adjusted EBITDA loss improved by 98% year-over-year. Major advancements included streamlining operations and expanding premium cannabis product offerings, as well as completing a private placement raising $5 million. However, the pandemic's impact on tourism has affected Canna Hemp™ sales.
- Revenue of $3.4 million in Q2 2021, up 27% from Q1 2021.
- Gross margin improved to 57%, compared to gross margin loss in Q2 2020.
- Net loss reduced by 78%, indicating significant operational improvements.
- 98% improvement in Adjusted EBITDA loss from $4.8 million in Q2 2020.
- Completed oversubscribed private placement raising $5 million.
- Net loss still significant at $1.4 million.
- Working capital deficiency of $3.7 million due to the reclassification of convertible debentures.
- Impact of COVID-19 on Canna Hemp™ sales affecting overall revenue.
The Company reports strong results from its previous year:
- Positive gross margin
57% Decrease in expenses78% Decrease in net loss98% Improvement in Adjusted EBITDA
VANCOUVER, BC / ACCESSWIRE / April 1, 2021 / 1933 Industries Inc. (the "Company" or "1933 Industries") (CSE:TGIF)(OTCQB:TGIFF), a vertically integrated cannabis consumer packaged goods company, is pleased to announce its second quarter ("Q2 2021") financial results for the period ended January 31, 2021. All amounts expressed are in Canadian dollars.
Financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). Detailed information regarding the Company's financial results as well as management's discussion and analysis can be found at https://sedar.com/ and https://1933industries.com/.
Mr. Paul Rosen, Chairman and CEO, Management Commentary
The Company has set as key priorities the goals of achieving profitability, becoming cash-flow positive and building shareholder value. After considerable work undertaken over the last several months, I am pleased to report that the Company is in a stronger financial position today than a year ago. We have laid a strong foundation for long term growth with a strengthened balance sheet, a substantially improved debt-to-equity ratio and the capacity to maximize our output and optimize the quality of our products and assets, which enable us to deliver exceptional consumer experiences.
Over the reporting period, the Company continued to make progress in improving and streamlining operations in an effort to right-size costs, improve the balance sheet and drive revenue, resulting in significant improvements in net loss, gross margins, expenses and Adjusted EBITDA. The Company's focus has been to bring its assets into continuous production, develop premium strains, expand its extraction capacities, expand distribution for its CBD line, and improve margins. The Company has continued to minimize non-revenue generating costs and is carefully managing its cash position.
During Q2 2021, the Company expanded the output of premium flower and concentrates resulting in record sales in January 2021. Revenues increased by
Q2 2021 Financial Highlights
Q2 2021 (Jan 31, 2021) | Q1 2021 (Oct 31, 2020) | Q2 2020 (Jan 31, 2020) | ||||||||||
Revenues | $ | 3,406,826 | $ | 2,687,516 | $ | 3,139,265 | ||||||
Gross margin | $ | 1,694,994 | $ | 728,700 | $ | (775,917 | ) | |||||
Expenses | $ | 3,104,154 | $ | 3,544,687 | $ | 5,630,016 | (i) | |||||
Net loss | $ | (1,409,063 | ) | $ | (2,818,577 | ) | $ | (6,421,360 | ) | |||
Comprehensive loss | $ | (2,745,087 | ) | $ | (2,929,123 | ) | $ | (6,031,828 | ) | |||
Adjusted EBITDA loss | $ | (117,741 | ) | $ | (1,351,212 | ) | ( | |||||
Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.02 | ) | |||
Cash balance | $ | 1,687,750 | $ | 2,044,574 | $ | 9,144,470 | ||||||
Total assets | $ | 43,500,424 | $ | 45,431,525 | $ | 55,289,649 | ||||||
Total liabilities | $ | 24,656,642 | $ | 26,714,275 | $ | 25,833,196 | ||||||
Total equity | $ | 18,843,782 | $ | 18,717,250 | $ | 29,456,453 | ||||||
(i) These figures have been re-stated from SEDAR filed financial statements and MD&A to conform with current period presentation of discontinued operations.
Operating Results
- Total revenue for Q2 2021 was
$3.4 million and$6.1 million for the six months ended January 31, 2021 compared to$3.1 million in Q2 2020 and$7.0 million for the same period last year. The Company reports a27% improvement in revenue from the previous quarter, largely attributed to increased sale of Alternative Medicine Association ("AMA") branded cannabis products. During the reporting period, the Company focused on increasing the production and sale of premium smokable flower and pre-rolls, which make up the largest portion of cannabis sales in Nevada. The Company continues to build its inventory, improve its plant genetics and quality of its output, and optimize its cultivation and production operations. The Company's craft-style flower, pre-rolls and concentrates continue to be in high demand due to a strong local cannabis market in Nevada. - The Company reported a
57% decrease in general and administration expenses comparing Q2 2021 to Q2 2020. Expenses were$3.1 million for Q2 2021 and$5.6 million for Q2 2020. G&A decreased by12% from the previous quarter, demonstrating the Company's ongoing commitment to reducing expenses, improving its cost structure and creating a leaner organization. - Gross margin was
$1.7 million for Q2 2021, compared to a gross margin loss of$0.8 million for Q2 2020. The Company has become less reliant on purchases of third-party biomass and continues to improve the margins across its large portfolio of well-established cannabis and CBD product lines. - The Company's net loss in Q2 2021 was
$1.4 million which is a78% improvement over net loss of$6.4 million from Q2 2020, placing the Company on the path toward profitability in the near future. - Adjusted EBITDA loss was
$0.1 million for Q2 2021, representing a98% improvement from$4.8 million for Q2 2020. - AMA, the Company's licensed wholesaler of premium cannabis flower and concentrates, reported revenues of
$2.7 million and gross margin of$1.3 million for Q2 2021. The Company's CBD product manufacturing subsidiary, Infused MFG, reported revenues of$0.7 million and gross margin of$0.3 million in Q2 2021. The impact of the pandemic on brick-and-mortar retail across the US has had an effect on Canna Hemp™ CBD product sales. The Company believes that growth of the brand will come from its e-commerce efforts and will continue to build on its online presence.
Balance Sheet
- Cash at January 31, 2021 was
$1.7 million . In Q2 2021, the Company used$0.3 million in cash for operating activities compared$3.4 million in Q2 2020. Cash used in investing activities in Q2 2021 was$0.1 million compared to$1.6 million in Q2 2020. Cash provided from financing activities in Q2 2021 was$0.7 million compared to cash used in financing activities of$1.0 million in Q2 2020. Subsequent to the reporting period, on March 4, 2021, the Company closed an oversubscribed bought deal private placement for proceeds totalling$5.0 million . - Total assets at January 31, 2021 were
$43.5 million , compared to$46.6 million at July 31, 2020, a decrease of7% . - Working capital at January 31, 2021 was a deficiency of
$3.7 million , compared to working capital surplus of$6.1 million at July 31, 2020, a decrease of161% , primarily due to the reclassification of$10.0 million in convertible debentures to current liabilities as they mature on September 14, 2021. The Company has made substantial progress in converting the outstanding debentures and believes that this trend will continue. As of the date of this report, there is an aggregate of$3,876,000 principal balance of convertible debentures outstanding and the Company has called an Extraordinary Meeting of Debentureholders to consider an amendment to extend the maturity date for the debentures to September 14, 2022.
Q2 2021 Key Developments
Corporate
- The Company signed a Membership Interest Purchase Definitive Agreement ("Agreement") to purchase the remaining
9% interest in AMA Production thereby resulting in the Company's100% ownership of the subsidiary which contains the property located at 5035 Geist Ave., Las Vegas, Nevada and gave complete managerial control of AMA to the Company. The Agreement was entered among the Company, its subsidiary FN Pharmaceuticals, E. Mark Zobrist and Linmark Enterprises Corp. In consideration of the acquisition of the remaining9% , the Company issued, in the aggregate, 3,700,000 non-transferable share purchase warrants, exercisable at a price of$0.07 5 per share expiring on June 13, 2024. The warrants, and any shares exercised pursuant to the warrants, are subject to a four month and one day hold period as required by applicable securities laws in Canada and such additional restrictions as may be applicable pursuant to U.S. securities laws. - In addition, as part of the transaction, a total of 1,650,000 outstanding warrants and 2,050,000 options were cancelled.
- The Company announced that its Chief Executive Officer, Mr. Paul Rosen, has been appointed to the Board of Directors and that Mr. Eugene Ruiz is no longer President of 1933 Industries.
- With the goal of enhancing the user-experience, the Company launched a new Canna Hemp™ website, featuring more intuitive navigation and improved education to assist consumers select products that suit their individual lifestyles and needs. Featuring a large selection of high-quality hemp and CBD products with specific outcomes and delivery formats, the new Canna Hemp™ was launched to bring natural wellness to consumers across the United States.
Financing Activities
- Pursuant to the closure of a private placement, the Company issued 13,920,000 Units at a price of
$0.06 6 (USD$0.05) per Unit for gross proceeds of$918,720 (USD$696,000) . All proceeds were raised and paid in US dollars. The warrant exercise price was also payable in US dollars and as a result, the actual Canadian equivalent of cash received may vary having regard for the current foreign exchange rates. Each Unit consists of one common share of the Company and one transferable share purchase warrant. Each warrant entitles the holder to acquire one common share of the Company at an exercise price of$0.10 6 (US$0.08) per Unit for a period of 18 months from the closing date. - The Company issued 30,489,128 common shares pursuant to the conversion of
$2,813,000 of convertible debentures and interest payable on the convertible debentures of$235,913.
Developments Subsequent to January 31, 2021
Financing Activities
- On March 4, 2021, the Company closed a bought deal private placement of units for aggregate gross proceeds of
$4,955,052 (the "Offering"). Pursuant to the Offering, the Company sold a total of 45,045,929 units at a price of$0.11 per unit. Each unit was comprised of one common share of the Company and one common share purchase warrant. Each common share purchase warrant will be exercisable to acquire one common share of the Company at an exercise price of$0.16 per common share of the Company until March 4, 2023, subject to a warrant acceleration right exercisable by the Company if, at any time following the date that is four months and one day from the closing date of the Offering, the daily volume weighted average trading price of the common shares on the CSE is greater than$0.30 for the preceding 10 consecutive trading days and shall be exercised by notice in writing to the holders of common share purchase warrants and the underwriter. Pursuant to Canadian securities laws, all securities in respect of the Offering will be subject to a four month and one day hold period expiring on July 5, 2021. - In connection with the Offering, the Company issued 2,638,869 broker warrants and 514,346 advisory warrants (the "Compensation Warrants"). Each Compensation Warrant entitles the holder to purchase one additional unit of the Company (each a "Compensation Unit") at a price of
$0.11 per Compensation Unit until March 4, 2023. The Compensation Units have the same terms as the Units sold pursuant to the Offering. - On March 14, 2021, 10,000,000 share purchase warrants expired.
- The Company issued 48,913,159 common shares pursuant to the conversion of
$4,395,000 of its convertible debentures and$496,317 in accrued interest. There is an aggregate of$3,876,000 principal balance of convertible debentures outstanding as of the date of this report.
Please note the next financial release dates in accordance with the continuous disclosure schedule set out by the British Columbia Securities Commission:
Q3 2021 (June 29, 2021);
Q4/YE 2021 (November 29, 2021)
About 1933 Industries Inc.
1933 Industries is a vertically-integrated, growth-orientated company, focusing on the cultivation and manufacturing of cannabis consumer branded goods in a wide range of product formats. Operating through two subsidiaries, the Company controls all aspects of the value chain with cultivation, extraction, processing, and manufacturing assets supporting its diversified portfolio of cannabis brands and licensing partners. The Company owns
About Alternative Medicine Association
AMA is a licensed medical and adult-use cannabis cultivation and extraction subsidiary that produces its own branded line of unique cannabis products and manufactures third-party brands. AMA's extensive menu of cannabis products include: craft cannabis flower, pre-rolls, full spectrum oils, high quality distillates, proprietary blends of terpenes, vaporizer products and boutique concentrates such as shatter, crumble, batter, sugar wax, diamonds, and live resin. With state-of-the-art cultivation and extraction facilities based in Las Vegas, Nevada, AMA seeks to offer medical patients and recreational users alike a cannabis experience that's exceptional, potent, and consistent in quality.
About Canna Hemp™
With an extensive product line that includes topicals, creams, vapes, elixirs, capsules, lip balms and pre- and post-workout recovery sports products, 1933 Industries' proprietary Canna Hemp™ brand utilizes the power of hemp and CBD to bring natural wellness. The Company's flagship products, the Canna Hemp™ Relief Cream and Canna Hemp X™ Recovery Cream are recognized as best topicals in the market. Canna Hemp X™ is a CBD sports recovery cream for athletes, bridging the gap between recovery and top performance. All products are triple and third-party tested for safety with test results embedded via QR codes for traceability.
For further information please contact:
Alexia Helgason, VP, IR and Corporate Communications
604-674-4756 (ext. 1)
alexia@1933industries.com
Paul Rosen, CEO
604-674-4756 (ext. 1)
Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.
Notice regarding Forward Looking Statements: This news release contains forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. These statements speak only as of the date of this news release. Actual results could differ materially from those currently anticipated due to a number of factors and risks including various risk factors discussed in the Company's disclosure documents, which can be found under the Company's profile on www.sedar.com. 1933 Industries undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
SOURCE: 1933 Industries Inc.
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