PR Newswire | Aug 26, 2020 09:03AM EDT

08/26 08:00 CDT

Cansortium Inc. Reports Second Quarter Financial Results MIAMI, Aug. 26, 2020

Company achieves record revenue, more than doubling last year's second quarter revenue

MIAMI, Aug. 26, 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 second quarter and six months ended June 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.

Selected Second Quarter 2020 Financial Highlights

* Consolidated revenue of $13.2 million, an increase of 117 percent or $7.1 million compared with consolidated revenue of $6.1 million in the second quarter of 2019. * Consolidated income from operations of $0.8 million, compared to loss from operations of $(8.1) million in the second quarter of 2019. * Consolidated Adjusted EBITDA(1) of $2.6 million, compared to Adjusted EBITDA(1) loss of $(1.7) million in the second quarter of 2019. * Consolidated net loss of $(5.5) million, or $(0.03) per diluted share, compared to consolidated net loss of $(5.3) million, or $(0.03) per diluted share for the same period last year. * During the second quarter of 2020, the Company opened its 20th medical marijuana dispensary in East Orlando, FL. It operated 11 dispensaries during the comparable period in 2019. On August 21st, the Company opened its 21st Florida dispensary in Coral Springs, FL.

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(1) 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.

Chief Financial Officer Marcos Pedreira commented, "We delivered strong results during the second quarter of 2020. Revenue more than doubled from a year ago and we continue to make significant improvements to deliver the 2020 projected financial results."

Selected Year-to-Date 2020 Financial Highlights

* Consolidated revenue of $23.4 million, an increase of 101 percent or $11.8 million compared with consolidated revenue of $11.6 million in the first half of 2019. * Consolidated income from operations of $3.2 million, compared to loss from operations of $(20.6) million in the first half of 2019. * Consolidated Adjusted EBITDA(1) of $3.3 million, compared to Adjusted EBITDA(1) loss of $(5.1) million in the first half of 2019. * Consolidated net loss of $(19.4) million, or $(0.10) per diluted share, compared to consolidated net loss of $(21.8) million, or $(0.12) per diluted share for the same period last year.

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(1) 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 has continued to make progress on its targeted initiatives focused on growth and long-term shareholder value creation. In the second quarter, the Company completed its exit from the non-core markets of Canada and Puerto Rico, streamlining operations and freeing up capital for its U.S. markets. In its home state of Florida, the Company secured an additional cultivation and production facility with minimum capital outlay, with operations anticipated to commence in the fourth quarter of 2020, and has opened three of the seven dispensaries planned for 2020. In Pennsylvania, the Company is actively pursuing two additional dispensary locations to augment the strong sales of its existing Hanover dispensary. In Michigan, the Company enhanced the cultivation team on the ground with the engagement of Freedom Town. Finally, in Texas, the Company recently secured an extension of its convertible notes to allow the Company to continue to seek longer-term solutions there. The Company reiterates its full year 2020 outlook for consolidated revenues in the range of $55 million to $60 million and Adjusted EBITDA of more than $15 million. The forecast is based on projected revenues of at least $45 million for Cansortium's Florida operations with additional revenue from the Michigan, Pennsylvania and Texas markets.

ABOUT CANSORTIUM INC.

Headquartered in Miami, Florida, and operating under the Fluent(tm) 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 June 30, 2020 and December 31, 2019

(USD '000)

June December 30, 31,

2020 2019

Assets

Current assets

Cash and cash equivalents $ 5,202 $ 2,516

Accounts receivable 133 144

Inventory 12,045 6,709

Biological assets 5,747 3,845

Note receivable 4,416 3,870

Prepaid expenses and other current assets 1,408 556

Total current assets 28,951 17,640

Investment held for sale 324 -

Assets held for sale - 6,301

Property and equipment, net 19,334 19,128

Intangible assets, net 97,800 98,566

Right-of-use assets 19,152 20,190

Investment in associate 3,209 3,424

Goodwill 1,526 1,526

Other assets 375 291

Total assets $ 170,671 $ 167,066

Liabilities

Current liabilities

Accounts payable 5,835 7,860

Accrued liabilities 5,011 5,135

Income taxes payable 5,902 1,492

Derivative liabilities 12,762 13,198

Current portion of notes payable 35,060 9,350

Lease obligations 1,998 1,761

Other current liabilities 100 -

Total current liabilities 66,668 38,796

Liabilities held for sale - 3,240

Notes payable, net of current portion 12,671 31,053

Lease obligations, net of current portion 20,335 21,166

Deferred income taxes 26,819 24,957

Other long-term liabilities 761 676

Total liabilities 127,254 119,888

Shareholders' equity

Share capital 145,060 149,322

Share-based compensation reserve 4,075 2,977

Equity conversion feature 12,250 7,613

Warrants 13,128 11,773

Accumulated deficit (130,717) (123,785)

Accumulated other comprehensive loss (379) (563)

Total shareholders' equity attributable to Cansortium 43,417 47,337Inc. shareholders

Non-controlling interests - (159)

Total shareholders' equity 43,417 47,178

Total liabilities and shareholders' equity $ 170,671 $ 167,066

Cansortium Inc.

Consolidated Statement of Operations

For the three and six months ended June 30, 2020 and 2019

(USD '000)

For the three For the six months months ended June 30, ended June 30,

2020 2019 2020 2019

Revenue, net of discounts $ 13,241 $ 6,091 $ 23,404 $ 11,619

Cost of goods sold 4,567 1,540 8,227 4,100

Gross profit before fair value 8,674 4,551 15,177 7,519adjustments

Realized fair value of increments on 4,953 2,233 12,515 3,351inventory sold

Unrealized change in fair value of (7,572) (972) (19,682) (2,073)biological assets

Gross profit 11,293 3,290 22,344 6,241

Expenses

General and administrative 3,064 5,369 6,202 15,022

Share-based compensation 2,362 883 3,249 1,487

Sales and marketing 3,481 2,705 6,602 5,623

Depreciation and amortization 1,572 2,403 3,074 4,701

Total expenses 10,479 11,360 19,127 26,833

Income (loss) from operations 814 (8,070) 3,217 (20,592)

Discontinued operations 34 - (342) -

Other expense (income)

Interest expense, net 3,798 2,543 7,557 6,860

Change in fair market value of (828) (1,662) 1,007 (3,542)derivative

Loss on investment in associate 31 - 215 -

Gain in fair market value of - (3,388) - (3,388)investment in associate

Loss on debt reestructuring - - 8,065 -

Gain on disposal of assets (54) - (54) -

Other expense (income) (8) (1,562) 7 28

Total other expense (income) 2,939 (4,069) 16,797 (42)

Loss before taxes (2,159) (4,001) (13,238) (20,550)

Income taxes 3,308 1,276 6,141 1,276

Net loss (5,467) (5,277) (19,379) (21,826)

Net loss attributable to - (270) - (353)non-controlling interest

Net loss attributable to controlling $ (5,467) $ (5,007) $ (19,379) $ (21,473)interest

Net loss per share

Basic $ (0.03) $ (0.03) $ (0.10) $ (0.12)

Diluted $ (0.03) $ (0.03) $ (0.10) $ (0.12)

Cansortium Inc.

Consolidated Statement of Cash Flows

For the six months ended June 30, 2020 and 2019

(USD '000)

For the six months ended June 30,

2020 2019

Operating activities

Net loss $ (19,379) $ (21,826)

Adjustments to reconcile net loss to net cash used inoperating activities:

Unrealized gain on changes in fair value of biological (19,682) (2,073)assets

Share-based compensation 3,249 1,747

Depreciation and amortization 4,059 5,412

Discontinued operations (342) -

Amortization of debt discount - 2,910

Accretion of convertible debentures 3,834 -

Interest on lease liabilities 1,987 -

Change in fair market value of derivative 1,007 (3,542)

Loss on investment in associate 215 -

Gain in fair market value of investment in associate - (3,388)

Loss on debt reestructuring 8,065 -

Gain on disposal of right-of-use assets (54) -

Deferred tax expense 1,862 -

Changes in operating assets and liabilities:

Accounts receivable 11 (104)

Inventory (5,401) (3,881)

Biological assets 17,780 2,201

Prepaid expenses and other current assets (646) (1,555)

Right-of-use assets (728) -

Other assets (84) 1,375

Accounts payable 968 956

Accrued liabilities 1,083 (3,386)

Income taxes payable 4,410 1,406

Lease obligations - 1,357

Other current liabilities - 285

Other liabilities 115 -

Net cash provided by (used in) operating activities 2,329 (22,106)

Investing activities

Purchases of property and equipment (2,126) (9,049)

Payment of notes receivable 150 -

Notes receivable (696) -

Proceeds from sale of subsidiary 600 -

Net cash used in investing activities (2,072) (9,049)

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 (2,133) (1,305)

Principal repayments of notes payable (35) (45,341)

Net cash provided by financing activities 2,245 50,538

Effect of foreign exchange on cash and cash equivalents 184 (34)

Net increase in cash and cash equivalents 2,686 19,349

Cash and cash equivalents, beginning of period 2,516 2,026

Cash and cash equivalents, end of period $ 5,202 $ 21,375

Cash paid during the period for interest $ 865 $ 2,124

Non-cash transactions:

Issuance of shares to acquire additional interest in $ - $ 13,786consolidated entity

Shares returns for sale of interest in subsidiaries $ (4,374) $ -

Founders shares return $ (10,970) $ -

Note payable amendment $ 10,380 $ -

Cansortium Inc.

Financial Highlights

For the three and six months ended June 30,2020 and 2019

(USD '000)

Three months ended Six months ended

Financial results June June Variance June June Variance 30, 2020 30, 2019 30, 2020 30, 2019

Revenue $ 13,241 $ 6,091 $ 7,150 $ 23,404 $ 11,619 $ 11,785

Gross profit $ 11,293 $ 3,290 $ 8,003 $ 22,344 $ 6,241 $ 16,103

Gross margin 85.3% 54.0% 31.3% 95.5% 53.7% 41.8%

Adjusted gross $ 8,674 $ 4,551 $ 4,123 $ 15,177 $ 7,519 $ 7,658profit ^(1)

Adjusted gross 65.5% 74.7% -9.2% 64.8% 64.7% 0.1%margin^(1)

Selling, generaland $ 10,479 $ 11,360 $ (881) $ 19,127 $ 26,833 $ (7,706)administrativeexpenses

EBITDA^(1) $ 3,703 $ 1,772 $ 1,931 $ (1,628) $ (7,369) $ 5,741

Adjusted EBITDA^ $ 2,629 $ (1,709) $ 4,338 $ 3,343 $ (5,128) $ 8,471(1)

Net loss $ (5,467) $ (5,277) $ (191) $ (19,379) $ (21,826) $ 2,447

Net loss per $ (0.03) $ (0.03) $ 0.00 $ (0.10) $ (0.12) $ 0.02share (basic)

Net loss per $ (0.03) $ (0.03) $ 0.00 $ (0.10) $ (0.12) $ 0.02share (diluted)

Adjusted gross profit, adjusted gross margin, EBITDA and Adjusted EBITDA are non-IFRS financial measures that do not have any standardized meaning(1) 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 measuresFor the three and six months ended June 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 Six months ended

June June June June

30, 2020 30, 2019 Variance 30, 2020 30, 2019 Variance

Net income (loss) $ (5,467) $ (5,277) $ (190) $ (19,379) $ (21,826) $ 2,447

Interest expense 3,798 2,543 1,255 7,557 6,860 697

Income taxes 3,308 1,276 2,032 6,141 1,276 4,865

Depreciation and 2,064 3,230 (1,166) 4,053 6,322 (2,269)amortization

EBITDA $ 3,703 $ 1,772 $ 1,931 $ (1,628) $ (7,369) $ 5,741

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 Six months ended

June June June June 30, 30, 2019 Variance 30, 2020 30, 2019 Variance 2020

EBITDA $ 3,703 $ 1,772 $ 1,931 $ (1,628) $ (7,369) $ 5,741

Change in fair value (2,619) 1,261 (3,880) (7,167) 1,278 (8,445)of biological assets

Change in fair market (828) (1,662) 834 1,007 (3,541) 4,548value of derivative

Gain in fair value ofinvestment in - (3,388) 3,388 - (3,388) 3,388associate

Share based 2,362 883 1,479 3,249 1,487 1,762compensation

Discontinued 34 - 34 (342) - (342)operations

Loss on debt - (1,134) 1,134 8,065 - 8,065restructuring

Other non-recurring (23) 559 (582) 159 6,405 (6,246)expense (income)

Adjusted EBITDA $ 2,629 $ (1,709) $ 4,338 $ 3,343 $ (5,128) $ 8,471

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SOURCE Cansortium Inc