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 the year ending December 31, 2018. All
amounts are expressed in Canadian dollars unless otherwise
indicated.
- Revenue increased 38% Y-o-Y to $27.5 million;
- Completed the acquisition of GrowForce Holdings Inc.
(“GrowForce”), a Canadian LP with a footprint in 3 Canadian
provinces, estimated run rate production of 24,400 KG and strong
strategic relationships with several First Nations;
- Completed the acquisition of the assets of F&L Investments
LLC (“Cheyenne”), a facility located in Las Vegas, Nevada, with
expected production capacity of approximately 5,800 KG;
- Received Cultivation and Sale licenses for the Company’s
facility located in Brampton, ON (“WILL”) and completed first sale
of product;
- From the first harvest in May 2018, MJardin’s WILL facility has
produced average yields of 87 grams of flower and extractable trim
per square foot of bench space, which management believes to be
amongst the top yields in the industry.
Subsequent Events
January 6, 2019, the Company announced a definitive agreement
with Rama First Nation to construct and operate a cultivation and
retail complex. This joint venture, 51% owned by Rama First Nation
and 49% owned by MJardin, is strategically located across from Rama
Casino with 3 million visitors annually.
On April 1, 2019, MJardin announced the sale of 11% of its
position in AtlantiCann Medical Inc. to the 13 Mi’kmaq Nova Scotia
First Nations. In connection with this agreement, MJardin continues
to explore potential retail partnerships between the Company and
the Mi’kmaq First Nations in Nova Scotia. The proceeds
of this transaction were utilized to pay-down existing debt.
On April 22, 2019, the Company announced the acquisition of
Carson City Agency Solutions dba Cannabella (“Cannabella”), a
leading Nevada producer of edible products with distribution
throughout the state. Cannabella’s capabilities position
MJardin to drive stronger margins from its existing Cheyenne
facility as products are transferred into more value-add segments
of the supply chain. The Company expects this transaction to close
in the third quarter of 2019.
In May 2019, MJardin anticipates the completion of construction
of the Company’s 75% owned “GRO” facility. Upon completion, the
Company will submit an Evidence of Readiness to Health Canada for
the purposes of receiving a Cultivation and Processing License.
2018 Year End Financial Highlights
- Total Revenue of $27.5 million, compared to $19.9 million in
2017
- Adjusted net loss from operations of ($27.4) million, excluding
share based compensation
- Adjusted EBITDA of ($12.2) million
Select 2018 Operational Highlights
Asset Snapshot as of Dec 2018 |
Location |
Ownership Structure |
Facilities |
Total Production Volume |
Canada |
Owned/JV Partnerships |
4 Cultivation |
20,300 kg owned/ 24,400 kg managed |
US- Nevada |
Owned |
1* |
5,800 kg |
US- Colorado |
Staffing and Advisory Services |
15 Cultivation, 7 Retail |
20,800 kg |
*pending license
approval |
|
|
|
|
|
- Identified the Canadian market as a key strategic position for
MJardin’s portfolio and acquired GrowForce
- Established partnerships with First Nations in three Canadian
Provinces for cannabis cultivation, processing, distribution and
retail opportunities. Peguis First Nation in Manitoba, all 13
Mi’kmaq First Nations in Nova Scotia and Chippewas of Rama First
Nation in Ontario
- Received both Cultivation and Sales licenses by Health Canada
for WILL facility in Brampton, Ontario
- Completed first commercial sale from WILL in December 2018
- Received both Cultivation and Processing licenses by Health
Canada at AtlantiCann Medical Inc. (AMI) facility in Lower
Sackville, Nova Scotia
- Entered into the Nevada market with the purchase of the assets
of F&L Investments LLC (“Cheyenne”), with agreement to transfer
licenses once MJardin receives regulatory approval from Nevada
adding 30,000 square feet of indoor cultivation to the
portfolio
Quote from CEO about 2018
“2018 was a year of significant change in the company as we
expanded in to another US state, entered the Canadian market via
acquisition, and became a publicly traded company on both the CSE
and OTC,” remarked Adrian Montgomery, Chairman of the Board and
Interim CEO. “In addition, we have restructured our corporate size
and organization to better integrate and align with our core
business goals in both countries. We are in a healthy position
moving into 2019 and are proud to focus on what we do best, deliver
high yield premium cannabis that the market will appreciate.”
Summary of Annual Results
|
|
|
|
|
|
For the period endedDecember 31, 2018 $ |
|
For the period endedDecember 31, 2017 $ |
|
Revenue |
|
27,505,742 |
|
19,938,168 |
|
Cost of sales |
|
(15,855,745 |
) |
- |
|
Gross Margin |
|
11,649,997 |
|
19,938,168 |
|
|
|
|
|
Operating Expenses |
|
|
|
Depreciation |
|
667,106 |
|
57,757 |
|
Payroll
and benefits |
|
8,426,716 |
|
15,450,905 |
|
Stock
based compensation |
|
19,248,717 |
|
- |
|
Sales
General and Administrative |
|
18,609,918 |
|
2,836,399 |
|
Bad
Debts |
|
1,734,205 |
|
- |
|
Agent -
stock based compensation |
|
9,590,105 |
|
- |
|
Total operating expenses |
|
(58,276,767 |
) |
(18,345,061 |
) |
Net
Income (Loss) From Continuing Operations |
|
(46,626,770 |
) |
1,593,107 |
|
|
|
|
|
Interest
expenses |
|
(6,526,231 |
) |
(125,167 |
) |
Equity
pick up from AMI |
|
(125,054 |
) |
- |
|
Other
gains (losses) |
|
(135,069 |
) |
22,983 |
|
Impairment on promissory note |
|
(5,249,992 |
) |
- |
|
Settlement on GMI Royalty on sales |
|
(21,785,920 |
) |
- |
|
Listing
expense |
|
(2,758,683 |
) |
- |
|
Realized
loss on foreign exchange |
|
(1,118,694 |
) |
- |
|
Total other expenses (income) net |
|
(37,699,643 |
) |
(102,184 |
) |
|
|
|
|
Net income (loss) |
|
(84,326,413 |
) |
1,490,923 |
|
|
|
|
|
Income Tax Recovery |
|
78,168 |
|
- |
|
Net Income |
|
(84,248,245 |
) |
1,490,923 |
|
Other Comprehensive Income |
|
|
|
Fair
value change in derivatives |
|
- |
|
- |
|
Foreign currency translation adjustment gain (loss) |
|
3,884,389 |
|
- |
|
|
|
(80,363,856 |
) |
1,490,923 |
|
Comprehensive (loss)
income |
|
|
|
|
|
|
|
Net (loss) attributable to
owners of the company |
|
(80,357,404 |
) |
- |
|
Non-controlling interests |
|
(6,452 |
) |
- |
|
|
|
(80,363,856 |
) |
1,490,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period endedDecember 31, 2018 $ |
|
For the period endedDecember 31, 2017 $ |
|
EBITDA |
|
(77,133,076 |
) |
1,673,847 |
|
Adjustments: |
|
|
|
|
Add: Impairment on promissory note |
|
5,249,992 |
|
- |
|
Add: Stock-based compensation |
|
28,838,822 |
|
- |
|
Add: Settlement on GMI Royalty on sales |
|
21,785,920 |
|
- |
|
Add: RTO listing expenses |
|
2,758,683 |
|
- |
|
Add: GFH acquisition - advisory fees |
|
5,101,297 |
|
- |
|
Add: Realized loss on foreign exchange |
|
1,118,694 |
|
- |
|
Add: Equity loss from AMI |
|
125,054 |
|
- |
|
Adjusted EBITDA |
|
(12,154,614 |
) |
1,673,847 |
|
|
|
|
|
|
|
Non-IFRS Measures
EBITDA, Adjusted EBITDA and Adjusted Net Loss from Operations
are non-IFRS measures that the company uses to assess its operating
performance.
EBITDA is defined as [net earnings (loss) before net finance
costs, income tax expense (benefit) and depreciation and
amortization expense].
Adjusted EBITDA is defined as EBITDA adjusted to exclude:
Impairment, settlements, stock-based compensation, advisory fees
and listing expenses, loss on foreign exchange and loss from equity
investments.
Adjusted Net Loss from Operations is defined as operating income
(loss) adjusted to exclude: Share based compensation.
The company uses these non-IFRS measures to provide investors
and others with supplemental measures of its operating performance.
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 and thus highlight trends in its 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.
2019 OutlookAfter an acquisitive 2018, MJardin
has streamlined operations and remains focused on executing our
goals of completing construction on all current facilities, as well
as the planned expansion to double capacity at the Cheyenne
facility. Management remains focused on drawing from its 10+ years
of commercially growing cannabis at scale in order to maximize
production from the Company’s existing portfolio of assets.
The Canadian cannabis market remains in its infancy with
legalization only occurring in the fourth quarter of 2018. As such,
we continue to witness issues across the sector regarding the
scalability and commercialization of planned production. MJardin is
confident that our cultivation expertise will enable the Company to
materially increase production into the remainder of 2019 and
continue to command premium pricing for sales of both trim and
dried flower.
“WILL” - Cultivation Facility in Brampton,
Ontario: The Company continues to make progress on the
planned expansion of the 32,800 sq. ft WILL Cannabis facility with
all incremental construction scheduled to be completed by Q3 2019.
These improvements will enable MJardin to increase production to
approximately 3,000 KG per year of high yield, premium cannabis.
“AMI” – Cultivation Facility in Lower Sackville, Nova
Scotia: The three-way joint-venture between Nova Scotia
Mi’kmaq (51%), MJardin Group (39%) and the Halef Group (10%)
reached full grow production of its 48,000 square foot indoor
facility Phase 1, in only four months from receiving its
cultivation and processing license in December 2018. Construction
of Phase 2’s 20,000 square foot expansion is currently underway and
expected to be completed within the fourth quarter of 2019.
Additionally, AMI is currently in the initial stages of
establishing an extractions facility within the existing facility
at Lower Sackville and is currently pursing GMP certification for
both the extractions and cultivation facilities. The Company
believes this diversified product mix will drive strong revenue and
margins from the facility once refined products become legalized in
the fourth quarter of 2019.
“GRO” – Cultivation Facility in Dunville,
Ontario: The joint-venture between MJardin Group (75%) and
Grand River Organics (25%) is near construction completion of its
11,000 square foot indoor facility and on track for its next Health
Canada licensing stage. The Company expects its first commercial
sale from the facility in third quarter of 2019.
“WARMAN” – Cultivation Facility in Winnipeg,
Manitoba: The 100% MJardin owned facility is nearing Phase
1 completion within the 120,000 square foot facility. This is the
Company’s largest asset in Canada and the US and the Company
expects receipt of a Cultivation & Processing license from
Health Canada by the fourth quarter of 2019.
US Owned Operations: With the anticipated
closing of the previously announced transaction of “Cheyenne” in
Carson City, Nevada and completion of the facility build out,
MJardin anticipates increased EBITDA margins as production from
Cheyenne via recently acquired “Cannabella” moves into more
value-added refined products vs. sales of dried flower alone.
Premium Wholesale Pricing: Due to the high
quality of MJardin’s production of cannabis strains, the Company
continues to receive premium pricing on all LP-to-LP product sales
from the Company’s WILL facility. MJardin expects this favorable
pricing to continue for the duration of 2019 and be captured by
other facilities as they come online.
Management and Board Composition
Effective immediately, Mr. Rishi Gautam has resigned from the
MJardin’s Board of Directors. The Company and The Board of
Directors wish to thank Rishi Gautam for his contributions to the
Company and wish him well in his future endeavors. The Board has
filled this vacancy and appointed Mr. James Lowe.
Mr. Lowe founded and operates Cloud 9 Support, LLC, a
horticulture supply firm. Mr. Lowe co-founded and served as
President of Cultivation for MJardin from 2014 to 2017, while
scaling it be one of the largest advisory cannabis cultivators in
the world. In 2015, he co-founded and still serves as managing
partner for Potco, LLC, a medical marijuana dispensary and
cultivation brand, and in 2016 founded and owns 100% of Next1 Labs,
currently the largest provider of high terpene/live resin oils in
the state of Colorado. In addition to the foregoing, Mr. Lowe has
been employed as head of cultivation for Cannabis for Health, and
as a cultivation advisor to LightShade Labs.
In addition, Mr. Francis Knuettel II, Chief
Strategy Officer and Mr. Jorge Boone, Chief Operating Officer, have
resigned from the Company, effective immediately. The Board of
Directors has appointed Mr. Pat Witcher as Chief Operating Officer,
effective immediately.
Mr. Witcher is a former law enforcement officer
with the United States Drug Enforcement Administration and the
Kansas City Police Department. Witcher was most recently the
President of Central and Western North America for MJardin. Prior
to this, Mr. Witcher served as the Chief Compliance Officer at
MJardin from October 2017 to April 2018 and the President of Buddy
Boy Brands, one of the largest cannabis retail operations in
Colorado from 2014 to 2017.
A comprehensive discussion of MJardin’s financial position can
be found in the annual management discussion and analysis that is
filed on SEDAR and can be found at www.sedar.com.
About MJardin GroupMJardin is a
cannabis management platform with extensive experience in
cultivation, processing, distribution and retail. For over 10
years, MJardin has refined cultivation methodologies, developed
state of the art facilities and implemented vertical integration
for and on behalf of license owners. MJardin is based in Denver,
Colorado and Toronto, Canada. For more information, please visit
www.mjardin.com
The CSE has not in any way passed upon the
merits of and has neither approved nor disapproved the contents of
this news release.
This news release does not constitute an offer
to sell or a solicitation of an offer to sell any of the securities
in the United States. The securities have not been and will not be
registered under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”) or any state securities laws
and may not be offered or sold within the United States or to U.S.
Persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such
registration is available.
Forward-Looking InformationThis news release
contains forward-looking information based on current expectations.
Statements about, among other things, future developments and the
business and operations of MJardin, our production capacity, our
production results, trading of MJardin’s shares on the OTCQX Best
Market, the closing of the Transaction, the receipt of any pending
regulatory approvals or licenses, the growth of our global
footprint and our intentions to leverage our scale for continued
organic growth and to pursue strategic investments are all
forward-looking information. These statements should not be read as
guarantees of future performance or results. Such statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements to be
materially different from those implied by such statements. Such
factors include, but are not limited to: our ability to identify
and pursue growth, financing and other strategic objectives, and
the regulatory and economic environments in the jurisdictions we
operate or intend to operate or invest in. Although such statements
are based on management’s reasonable assumptions at the date such
statements are made, there can be no assurance that the proposed
acquisition will occur and that such forward-looking information
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such
forward-looking information. Accordingly, readers should not place
undue reliance on the forward-looking information. MJardin assumes
no responsibility to update or revise forward-looking information
to reflect new events or circumstances unless required by
applicable law.
Management Call
The Company will host a conference call on
Friday, May 10, 2019 at 11:00 am ET. Adrian Montgomery, Chairman,
and Chris Seto, Chief Financial Officer, will discuss the Company’s
financial results and growth strategy.
To access the call, please dial 1-866-575-6539
or 1-323-794-2575. A replay of the conference call will be
available from 2:00 pm ET on May 10, 2019, until 11:59 pm ET, May
24, 2019. To access the replay, call 1-844-512-2921 or
1-412-317-6671, followed by passcode 5632963.
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|
INVESTOR CONTACT: |
|
Ali Mahdavi Capital Markets & Investor Relations 416-962-3300
Ali.mahdavi@MJardin.com |
Chris Seto Chief Financial Officer
647-242-0615Chris.Seto@Mjardin.com |
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