MJardin Group Announces Second Quarter 2020 Financial Results

MJardin Group Announces Second Quarter 2020 Financial Results

by ahnationtalk on August 6, 202088 Views

DENVER and TORONTO, Aug. 06, 2020  — MJardin Group, Inc. (“MJardin” or the “Company”) (CSE: MJAR) (OTCQX: MJARF), a leader in premium cannabis production, today announced its financial and operating results for its second quarter ended June 30, 2020. All amounts are expressed in Canadian dollars unless otherwise indicated.

Q2 and YTD 2020 Highlights:

  • MJardin remains on track to achieve measured strategic growth objectives in 2020;
  • Q2 Revenue amounted to $2.1 million;
  • Q2 Adjusted EBITDA loss of $2.2 million;
  • Q2 Net loss of $12.5 million;
  • AtlantiCann Medical Inc. (“AMI”) joint venture contributed $1.3 million to earnings, an increase of ~330% from the prior quarter;
  • First retail sales of MJardin product through AMI and the Nova Scotia Liquor Corporation;
  • Continued improvement of corporate SG&A expenses resulting in a 20% reduction compared to the same period in 2019;
  • Completed first harvest at GRO Facility and loaded WILL flower rooms with ROBES product in anticipation of sales of BLLRDR in H2 2020;
  • Continued to advance negotiations for a supply agreement with a major Canadian License Holder (“LH”) to sell an aggregate of approximately 2,000 kilograms of product during 2020;
  • Identified unique strains for mass production through research and development at the Warman facility with an expected go to market date during Q4 2020.

“While we still have a lot of work to get done to achieve our growth objectives, I am very pleased with the results of our team’s efforts, which have now resulted in a second consecutive quarter of stabilized operations, improved visibility into the future and ultimately better financial performance,” commented Pat Witcher, CEO of MJardin. “We are pursuing growth opportunities through sensible partnerships whereby our expertise and track record can contribute to growth and profitability without the need for additional capital. We continue to run a lean and extremely efficient business to manage margins and overall costs, while focusing our corporate development team’s efforts on creative growth strategies.”

Second Quarter Financial Summary

            Three months ended
June 30, 2020 June 30, 2019
(restated)
$ $
Revenues 2,105,015 6,877,131
Direct operating costs (1,788,792) (4,714,005)
Gross margin before fair value adjustments 316,223   2,163,126
Fair value adjustment on the sale of cultivated inventory 296,269
Unrealized gain on changes in fair value of biological assets (533,865) (1,769,281)
Gross margin   850,088   3,636,138
Operating expenses
Sales, general and administrative 3,691,338 4,573,911
Share-based compensation 594,300 5,588,930
Depreciation and amortization 250,357 205,756
Expected credit loss 229,335 569,232
Total operating expenses 4,765,330 10,937,829
Loss from operations   (3,915,242)   (7,301,691)
Interest expense 4,026,538 3,971,564
Loan fees 351,169 2,267,792
Net earnings from associate (1,322,857) (237,545)
Gain on loan modifications (754,122) (8,076,558)
Foreign exchange loss (gain) 1,220,151 (31,477)
Other expenses 1,151,587 354,904
Total other expenses 4,672,466 (1,751,320)
Loss before income tax and discontinued operations   (8,587,708)   (5,550,371)
Income tax expense (637,115) (550,885)
Loss before discontinued operations   (9,224,823)   (6,101,256)
Loss from discontinued operation (3,271,632)
Net loss   (12,496,455)   (6,101,256)
Three months ended
June 30, 2020 June 30, 2019
(restated)
Net loss   (12,496,455)   (6,101,256)
Adjustments:
Income tax expense 637,155 550,885
Interest expense 4,026,538 3,971,564
Depreciation and amortization 250,357 205,756
EBITDA   (7,582,405)   (1,373,051)
Share based compensation 594,300 5,588,930
Unrealized gain on changes in FV of biological assets (533,865) (1,769,281)
Loss from discontinued operation 3,271,632
Loan fees 351,169 2,267,792
Severance costs 98,915 33,846
Gain on loan modification (754,122) (8,076,558)
Other expenses 1,151,587 354,904
Foreign exchange loss (gain) 1,220,151 (31,477)
Adjusted EBITDA   (2,182,638)   (3,004,895)

Revenue

The Company’s managed services business segment generated $2.1 million in revenue during the quarter. No revenue was recognized from operations at the Canadian cultivation facilities during the second quarter.

Gross Margin

Due to the reduction in revenues from both the managed services and cultivation segments, the Company’s gross margin for the period ending June 30, 2020 was $0.9 million, compared to $3.6 million for the same period in the prior year.

Expenses

General and administrative expenses, including payroll, decreased from the prior year comparable period by 20%. Management continues to search for efficiencies for the balance of 2020.

Adjusted EBITDA

Adjusted EBITDA loss was $2.2 million, compared to an Adjusted EBITDA loss of $3.0 million for the same period in the prior year. As the Company scales cultivation, Adjusted EBITDA is expected to improve.

H2 Outlook

The Company continues to execute on its 2020 business plan with key deliverables for the rest of 2020 as follows:

  • Complete run-rate production at WILL and GRO facilities by the end of Q3;
  • Retail sales of products produced at Canadian facilities in H2 2020;
  • Full licensing of AMI Phase II expansion by/during the Q4;
  • Significant progress on completion of construction at the Warman facility;
  • Continued pursuit of expansion opportunities in select US States.

The Company continues to advance the production from its Canadian assets and plans to continue doing so for the balance of the year. At the same time, the Company plans to continue focusing on securing offtake for production via either firm commitments with retailers or supply agreements with leading licence holders.

Subsequent Events:

August 5, 2020, AMI bought out the previously signed master service agreement with The Company, which was a ten-year term that was executed in 2019. The Company will receive $2 million from AMI within the next 45 days in lieu of ongoing license fee payments. The Company’s cultivation management support for the AMI operation has been substantially reduced in connection with the buyout and is expected to be completed by the end of 2020.

The Canadian Securities Exchange (“CSE”) has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.

About MJardin Group

MJardin Group’s mission is to set the standard for successful ownership and management of assets in the cannabis industry. Our Colorado founders spent a decade refining cultivation methodology, collecting and implementing data driven standards and designing state of the art facilities. Today, MJardin owns or manages multiple operations in two US states and three Canadian provinces, supplying the market with premium products. We are committed to our Canadian First Nation joint ventures and all our partnerships across the cannabis supply chain. MJardin is publicly listed on the CSE (MJAR) with offices in Denver, Colorado and Toronto, Ontario. For more information, please visit www.MJardin.com

Non-IFRS Financial Measures

EBITDA and Adjusted EBITDA are non-IFRS measures that the Company uses to assess its operating performance.

EBITDA is defined as net loss before net finance costs, income tax expense (benefit) and depreciation and amortization expense.

Adjusted EBITDA is an operational and financial metric used by management, calculated as and including, but not limited to: net loss before fair value adjustment to biological assets and inventory; acquisition costs; share-based compensation; depreciation and amortization; (gain) loss on revaluation of derivative liabilities; finance and investment expense (income); interest (income) expense; loss on sale of assets; loss due to rare events; insurance proceeds; foreign exchange loss; impairment of inventory; impairment of property, plant and equipment; impairment of intangible assets and goodwill; current income tax (recovery) expense; and deferred income tax recovery.

The Company uses these non-IFRS measures to provide investors and others with supplemental measures of its operating performance.  The non-IFRS measures should not be construed as an alternative to other financial measures determined in accordance with IFRS. However, the Company believes these non-IFRS measures are important supplemental measures of operating performance because they eliminate items that have less bearing on the Company’s operating performance. Thus, the Company believes the non-IFRS measures highlight trends in the Company’s core business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors and other interested parties frequently use these non-IFRS measures in the evaluation of issuers, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies.

INVESTOR CONTACT:
Ali Mahdavi Pat Witcher
Capital Markets & Investor Relations CEO
416-962-3300 720-613-4019
[email protected] [email protected]

NT4

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