- Revenues of $5.19 million, an
increase of 30% compared to $4.0
million in the second quarter
- Kiaro's first recorded quarter of positive Adjusted
EBITDA1
- Gross margin of 38.2% for retail operations, an improvement
of 6% compared to Q3 Fiscal Year 2020
VANCOUVER, BC, Dec. 16, 2020 /CNW/ - Kiaro Holdings Corp.
(TSXV: KO) ("Kiaro" or the "Company") today announced its third
quarter financial results for the fiscal year 2021 ended
October 31, 2020. All amounts, unless
specified otherwise, are expressed in Canadian dollars.
"Following a successful previous quarter, seeing Q3 revenues
increase by 30% sequentially and reporting positive Adjusted
EBITDA, reinforces Kiaro's approach to operations. Achieving
adjusted EBITDA with 7 cannabis retail locations means that Kiaro
has achieved a foundation suitable for increased scale," stated
Daniel Petrov, Chief Executive
Officer of Kiaro.
"While COVID has brought about many challenges for Canadians, we
have taken steps to ensure our staff and customers stay safe. I
want to thank our team once again for ensuring this is their top
priority," continued Mr. Petrov.
Summary of Fiscal Year 2021 Third Quarter Financial
Results
For the three months ended October 31,
2020, Kiaro recorded revenues of $5.19 million, $3.68
million from the retail segment and $1.51 million from the wholesale segment.
Comparatively, in the three months ended October 31, 2019, the Company recorded total
revenues of $1.87 million,
$0.78 million from the retail segment
and $1.09 million from the wholesale
segment. The 177% increase in revenue in comparison to the prior
year is primarily due to the opening of four new retail locations,
same store sales increases, and forecasted increases from the
wholesale cannabis business that was acquired in March 2019.
For the three months ended October 31,
2020, Kiaro recorded a gross profit of $1.56 million, $1.40
million from the retail segment and $0.16 million from the wholesale segment. This
represents a 234% year over year increase when compared to the
three months ended October 31, 2019,
where gross profit was $0.47
million.
Total operating expenses for the three months ended October 31, 2020, were $2.32 million compared to $2.66 million in the three months ended
October 31, 2019. The decrease in
operating expenses, despite the addition of four retail stores, is
a testament to the current management's controls and efforts
towards operational excellence.
For the three months ended October 31,
2020, Kiaro recorded adjusted EBITDA of positive
$29,561. Comparatively, in the three
months ended July 31, 2020, the
adjusted EBITDA was negative $136,363. Strong revenue increases combined with
fundamental management of operating expenses relative to revenue
growth resulted in the improvements towards profitability.
As at October 31, 2020, the
Company had positive working capital of $1.54 million (July 31,
2020 – negative $0.41
million).The increase in working capital is related to the
Qualifying Transaction which resulted in an increase in cash and
cash equivalents by approximately $2
million, a decrease in convertible debentures in principal
and accrued Interest by approximately $6.5
million, and an increase in both retail and wholesale
segment EBITDA contributions.
Select Financial Information
|
Three months
ended
October 31,
2020
|
Three months
ended
July 31,
2020
|
$
Change
|
% Change
|
|
$
|
$
|
$
|
%
|
Revenue
|
5,190,930
|
4,000,102
|
1,190,828
|
30%
|
Gross
profit
|
1,563,791
|
1,236,246
|
327,545
|
26%
|
Operating
expense
|
(2,320,858)
|
(2,091,454)
|
(229,404)
|
-11%
|
Loss from
operations
|
(757,067)
|
(855,208)
|
98,141
|
11%
|
Other
expenses1
|
(2,136,725)
|
(588,597)
|
(1,548,128)
|
-263%
|
Net loss and
comprehensive loss
|
(2,893,792)
|
(1,443,805)
|
(1,449,987)
|
-100%
|
Adjusted
EBITDA2
|
29,561
|
(136,363)
|
165,924
|
121%
|
(1)
|
In the three months
ended October 31, 2020, other expenses included one-time costs
totaling $1.72 million relating to the Qualifying Transaction. Of
the $1.72 million, $0.24 million relates to transaction costs paid
and $1.48 million represents the consideration of the DCA common
shares less the net assets acquired.
|
(2)
|
Adjusted EBITDA is a
non-GAAP financial measure and is not a recognized, defined, or
standardized measure under IFRS. Refer to "Cautionary Note
Regarding Non-GAAP Measures".
|
Fiscal Year 2021 Third Quarter Highlights and Recent
Developments:
The Company:
- On September 8, 2020, the Company
opened its seventh retail location in Nanaimo, British Columbia, Kiaro's third store
opened in B.C. since the province declared a state of emergency on
March 18, 2020. The Company had 95
employees as of October 31, 2020.
- On October 13, 2020, the Company
completed the reverse takeover of DC Acquisition Corp. ("DCA")
pursuant to an amalgamation agreement on June 9, 2020 by way of a three-cornered
amalgamation of Kiaro Brands Inc. with 1251542 B.C. Ltd., a wholly owned subsidiary of
DCA (the "Qualifying Transaction"). Upon completion of the
Qualifying Transaction, convertible debenture holders with a
principal and accrued interest balance of approximately
$6.5 million converted to common
shares in accordance with the terms of such debentures. The Company
received approximately $2.0 million
in cash, being the net assets acquired of DCA, and commenced
trading on the TSX Venture Exchange (the "Exchange") under the
symbol "KO" on October 20, 2020.
- On October 28, 2020, Kiaro
announced the promotion of its current President of Operations,
Eleanor Lynch, to the position of
Chief Operating Officer, effective October
28, 2020. In this role, she will be responsible for leading
operations, customer experience and overall execution of the
Company's plans.
Cautionary Note Regarding Non-GAAP Measures
This news release refers to certain financial performance
measures that are not defined by and do not have a standardized
meaning under IFRS (termed "Non-GAAP measures"). These Non-GAAP
measures are defined in the MD&A. Non-GAAP measures are used by
management to assess the financial and operational performance of
the Company. The Company believes that these Non-GAAP measures, in
addition to conventional measures prepared in accordance with IFRS,
enable investors to evaluate the Company's operating results,
underlying performance and prospects in a similar manner to the
Company's management. As there are no standardized methods of
calculating these Non-GAAP measures, the Company's approaches may
differ from those used by others, and accordingly, the use of these
measures may not be directly comparable. Accordingly, these
Non-GAAP measures are intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
- Adjusted EBITDA is calculated as net income (loss) excluding
finance income (expense), accretion, income taxes, depreciation,
amortization, share-based compensation, loss on debt modification
and extinguishment of debt, foreign exchange, changes in fair value
of financial instruments, lease termination loss and loss on
sublease and non-cash impairment of equity investments, goodwill,
and other assets. Adjusted EBITDA is intended to provide a proxy
for the Company's operating cash flow and is widely used by
industry analysts to compare Kiaro to its competitors, and derive
expectations of future financial performance for Kiaro. Adjusted
EBITDA increases comparability between comparative companies by
eliminating variability resulting from differences in capital
structures, management decisions related to resource allocation,
and the impact of fair value adjustments on financial instruments,
which may be volatile and fluctuate significantly from period to
period.
Consolidated Financial Statements and MD&A
The results discussed herein are a summary and are qualified in
their entirety by reference to the Company's unaudited interim
condensed consolidated financial statements and accompanying notes
(the "Financial Statements") for the three and nine months ended
October 31, 2020 and the three and
ten months ended October 31, 2019 and
related MD&A (the "MD&A") of financial condition and
results of operations, copies of which are available under the
Company's profile on SEDAR at www.sedar.com and on the Investor
Relations section of the Company's website at www.kiaro.com.
Readers of this press release are encouraged to refer to the
Financial Statements and the MD&A for complete details about
Kiaro's financial results for the period ended October 31, 2020.
Kiaro Holdings Corp.
Based in Vancouver, British
Columbia, Kiaro is an independent, omni-channel cannabis
retailer and distributor. Through existing storefronts across
British Columbia and Saskatchewan, a wholesale distribution
division servicing Saskatchewan,
and plans for national expansion, Kiaro is driven to introduce new
and experienced consumers to a lifelong exploration of cannabis.
With more than 40 years of collective retail-focused experience,
Kiaro's leadership team has a proven track record of growing retail
brands across North America and
plans to open multiple retail locations nationwide over the coming
years.
Forward-Looking Information
This news release contains statements that may constitute
"forward-looking information" within the meaning of applicable
Canadian securities legislation. Forward-looking information may
include, among others, statements regarding the future plans,
costs, objectives or performance of Kiaro, or the assumptions
underlying any of the foregoing. In this news release, words such
as "may", "would", "could", "will", "likely", "believe", "expect",
"anticipate", "intend", "plan", "estimate" and similar words and
the negative form thereof are used to identify forward-looking
statements. In this news release, forward-looking statements
relate, among other things, to: proposed retail expansion plans and
management's ability to execute on same, overall growth of the
Canadian cannabis market and retail opportunities, the award of new
operating permits and licenses in various jurisdictions, and the
timing and amount of any dispositions of the Company's common
shares. Forward-looking statements should not be read as guarantees
of future performance or results, and will not necessarily be
accurate indications of whether, or the times at or by which, such
future performance will be achieved. No assurance can be given that
any events anticipated by the forward-looking information will
transpire or occur. Forward-looking information is based on
information available at the time and/or management's good-faith
belief with respect to future events and are subject to known or
unknown risks, uncertainties, assumptions and other unpredictable
factors, many of which are beyond Kiaro's control. These risks,
uncertainties and assumptions include, but are not limited to,
those described in Kiaro Filing Statement dated September 29, 2020, a copy of which is available
on SEDAR at www.sedar.com, and could cause actual events or results
to differ materially from those projected in any forward-looking
statements. Furthermore, any forward looking information with
respect to future expansion plans is subject to the qualification
that management of Kiaro may decide, and the assumptions that any
construction or conversion would not be cost prohibitive, required
permits will be obtained and the labour, materials and equipment
necessary to complete such construction or conversion will be
available. Accordingly, readers should not place undue reliance on
the forward-looking statements and information contained in this
news release. Kiaro does not intend, nor undertake any obligation,
to update or revise any forward-looking information contained in
this news release to reflect subsequent information, events or
circumstances or otherwise, except if required by applicable
laws.
Neither 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.
1 Adjusted EBITDA is a non-GAAP financial
measure and is not a recognized, defined, or standardized measure
under IFRS. Refer to "Cautionary Note Regarding Non-GAAP
Measures".
SOURCE Kiaro Brands Inc.