Cannara Biotech Inc. Reports Fiscal Second Quarter 2022 Financial Results

April 27, 2022 |

8 min read

Cannara Biotech Inc. today announced its fiscal second quarter 2022 financial and operating results for the three and six-month periods ended February 28, 2022.

Company recorded $7.4 million in quarterly revenues and delivers fourth consecutive quarter of positive Adjusted EBITDA while continuing to rapidly scale production capacity at the Valleyfield Facility

Completed first harvest from the Valleyfield Facility with positive market feedback consistent with the quality of products Cannara is known for

All financial results are reported in Canadian dollars, unless otherwise stated.

MONTREAL, April 27, 2022 /PRNewswire/ - Cannara Biotech Inc. (“Cannara” or the “Company”) (TSXV: LOVE) (OTCQB: LOVFF) (FRA: 8CB), a vertically integrated producer of premium-grade cannabis and derivative products with two mega facilities based in Québec spanning over 1,650,000 sq. ft., today announced its fiscal second quarter 2022 financial and operating results for the three and six-month periods ended February 28, 2022.

Fiscal Second Quarter 2022 Financial and Operational Highlights

Posted quarterly revenues of $7.4 million, an increase of 229% from the same quarter in the previous year;
Recorded a gross profit before fair value adjustments of $2.6 million or 36% more than the same quarter in the previous year;
Achieved fourth consecutive quarter of positive Adjusted EBITDA while significantly expanding its production footprint within the facility located in Valleyfield, Québec (the “Valleyfield Facility”). Revenues from the Valleyfield Facility will start to be realized in the third quarter of 2022;
Positive Adjusted EBITDA of $1 million for the first six months of 2022 while supporting over $1 million in startup expenses for the Valleyfield Facility compared to a negative Adjusted EBITDA of $(2.4) million in the same period of prior year;
Successfully harvested its first growing zone in its newly redesigned Valleyfield Facility and has sold, subsequent to quarter-end, the finished product generated from this first harvest;
Completed the activation of its second and third 25,000 square foot growing zones in the Valleyfield Facility, effectively increasing its overall production capacity by more than 200% when comparing to the production capacity at its Farnham Facility;
Increased working capital to $14.8 million from a working capital of $12.4 million as at August 31, 2021;
Invested $7.4 million in capital expenditures towards the Company’s assets in order to increase production capacity and processing capabilities;
Granted an aggregate total of 7,710,000 stock options to certain employees and 225,000 stock options to board members at an exercise price of $0.18 per common share, subject to certain vesting conditions.

Highlights Subsequent to Quarter End

Introduced a new genetic strain under the Tribal brand to the Quebec market: Terple. The product is available in a 3.5g can and five 0.5g pre-rolls;
The Company completed the activation of its fourth 25,000 square foot growing zone and is currently ahead of its objective of activating 6 growing zones by August 2022;
The Company was selected as one of only three cannabis producers by the Ontario Cannabis Store (“OCS”) to have a headlining product for their 420 event; To support this, the Company created a special edition of its Early Lemon Berry pre-rolls, offering a 12 x 0.6g joint format with innovative packaging design;
The Company successfully harvested its second growing zone at its Valleyfield Facility;
Granted an aggregate total of 600,000 stock options to certain employees at an exercise price of $0.18 per common share, subject to certain vesting conditions;
Exercise of 500,000 stock options at an exercise price of $0.10 for a total proceed of $50,000.

“We are proud of the advances we made in the second quarter. We planted three 25,000 square foot growing zones and successfully harvested our first zone in February,” commented Zohar Krivorot, President & Chief Executive Officer of Cannara. “By redesigning the Valleyfield Facility and receiving consistent positive consumer feedback on our first harvest, we have successfully confirmed our ability to grow premium cannabis at scale. Our objective for the year is to turn on six growing zones by August 2022 at Valleyfield and we remain on schedule to do so”.

Nicholas Sosiak, Chief Financial Officer of Cannara commented, “While we are focused on investing into our own assets, we continue to outperform from a financial standpoint. This was our fourth consecutive quarter of positive Adjusted EBITDA while continuing to support and significantly grow our production footprint. We added over 40 new employees to help support the growth at the Valleyfield Facility yet the revenues from this Facility will only start to be realized in the third quarter of 2022. We are working extremely hard this quarter and next to expand our distribution channels and get products listed in new markets. I am looking forward to the coming quarters as we harvest and sell our products from the new operating zones at our Valleyfield Facility and expand our footprint into new markets across Canada.”

	Three-month periods ended		Six-month periods ended
Selected Financial Highlights	February 28, 2022	February 28, 2021	February 28, 2022	February 28, 2021

Gross revenue¹	$ 7,272,059	$ 1,969,103	$ 13,599,394	$ 3,303,441
Other income	150,295	288,651	387,536	322,494
	7,422,354	2,257,754	13,986,930	3,625,935

Gross profit, before fair value adjustments	2,635,607	1,298,261	5,649,632	1,794,407
%²	36%	58%	40%	49%
Gross profit (loss)	3,015,577	2,095,208	5,635,619	1,597,849
%³	41%	93%	40%	44%

Operating expenses	3,388,404	2,506,013	5,991,691	5,166,575
Net finance expense	772,996	451,951	1,320,250	789,062

Net income (loss)	$ (1,145,823)	$ (862,756)	(1,676,322)	(4,357,788)
%⁴	-15%	-38%	-12%	-120%

Adjusted EBITDA⁵	$ 33,998	$ (850,509)	1,008,319	(2,423,630)
%⁵	0%	-38%	7%	-67%

Basic earnings (loss) per share	$ (0.01)	$ (0.01)	$ (0.01)	$ (0.01)
Diluted earnings (loss) per share	$ (0.01)	$ (0.01)	$ (0.01)	$ (0.01)



			February 28, 2022	August 31, 2021

Cash			$ 8,258,006	$ 8,159,305
Accounts receivable			3,098,917	2,847,725
Biological assets			2,261,997	1,902,206
Inventory			7,753,462	5,508,258

Working capital⁶			14,745,234	12,412,935

Total assets			101,691,030	92,022,613
Total current liabilities			7,910,429	6,833,798
Total non-current liabilities			31,237,792	21,073,003
Net assets			62,542,809	64,115,812


¹ Gross revenue included revenue from sale of goods, net of excise taxes, services revenues and lease revenues.
² Gross profit before fair value adjustments % is determined as Gross profit before fair value adjustments divided by Total revenues.
³ Gross profit (loss) % is determined as Gross profit (loss) divided by Total revenues.
⁴ Net income (loss) % is determined as Net income (loss) divided by Total revenues.
⁵ Adjusted EBITDA and working capital are non-GAAP financial performance measures with no standard definition under IFRS. A reconciliation of these measures is presented elsewhere in this MD&A.
Adjusted EBITDA % a non-GAAP financial ratio and is determined as Adjusted EBITDA divided by total revenues.
⁶ Working capital is determined as total current assets minus total current liabilities.


	Three-month periods ended		Six-month periods ended
Adjusted EBITDA	February 28, 2022	February 28, 2021	February 28, 2022	February 28, 2021

Net loss	$ (1,145,823)	$ (862,756)	$ (1,676,322)	$ (4,357,788)

Adjustments:
Changes in fair value of inventory sold	1,269,679	447,885	3,136,159	651,195
Unrealized gain on changes in fair value of biological assets	(1,649,649)	(1,244,832)	(3,122,146)	(454,637)
Amortization, including amortization in cost of good sold	629,027	251,634	1,221,586	738,290
Loss on disposal of property, plant and equipment	6,444	54,224	31,106	54,224
Gain on sublease	-	-	(12,876)	-
Share-based compensation, including share-based compensation in cost of good sold	151,324	51,385	110,562	156,024
Net finance expense	772,996	451,951	1,320,250	789,062

Adjusted EBITDA¹	$ 33,998	$ (850,509)	$ 1,008,319	$ (2,423,630)


¹Adjusted EBITDA is a non-GAAP financial performance measure with no standard definition under IFRS.

Outstanding Shares

As at the date of this report, the Company had 876,981,321 common shares and 40,645,781 stock options issued and outstanding. For further information, the complete Condensed Interim Consolidated Financial Statements and Management’s Discussion and Analysis for the three and six-month periods ended February 28, 2022 and 2021, along with additional information about the Company and all of its public filings are available at sedar.com and the Company’s investor website, investors.cannara.ca.

About Cannara Biotech Inc.

Cannara Biotech Inc. (TSXV: LOVE) (OTCQB: LOVFF) (FRA: 8CB) is a vertically integrated producer of premium-grade cannabis and cannabis-derivative products for the Québec and Canadian markets. Cannara owns two mega facilities based in Québec spanning over 1,650,000 sq. ft., providing the Company with 125,000kg of potential annualized cultivation output. Leveraging Québec’s low electricity costs, Cannara’s facilities produce premium-grade cannabis products at an affordable price. For more information, please visit cannara.ca.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Statement Regarding “Forward-Looking” Information

This information release contains certain forward-looking information. Such information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by statements herein, and therefore these statements should not be read as guarantees of future performance or results. All forward-looking statements are based on the Company’s current beliefs as well as assumptions made by and information currently available to it as well as other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Due to risks and uncertainties, including the risks and uncertainties identified by the Company in its public securities filings, actual events may differ materially from current expectations. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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SOURCE Cannara Biotech Inc.

Company Codes: OTC-QB:LOVFF, TorontoVE:LOVE, Frankfurt:8CB, OTC-BB:LOVFF, OTC-PINK:LOVFF

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