- Revenue increased 70% in the six months ended July 31, 2021 compared to prior year
- Same store sales increased 41% in the six months ended
July 31, 2021 compared to prior
year
- Operating Expenses decreased from 34% to 29% of revenue in
the three months ended Jul 31,
2021
- Closing of acquisition and new business segment created
July 12, 2021
VANCOUVER, BC, Sept. 28, 2021 /CNW/ - Kiaro Holdings Corp.
(TSXV: KO) ("Kiaro" or the "Company") is pleased to
announce its second-quarter financial results for the three and six
months ended July 31, 2021 and 2020.
With the closing of the acquisition of Sculthorp SEO Inc. on
July 12, 2021, Kiaro created a new
segment in reporting this quarter, and now reports on Retail,
Wholesale, and eCommerce operations, all of which were profitable
during the quarter. All amounts, unless specified otherwise, are
expressed in Canadian dollars.
"Our team continues to deliver fantastic financial results as
proven by our record second quarter. Now that we have closed on the
Acquisition of Hemisphere Cannabis and have 16 stores in operation
we look forward to achieving our ~$43
million annual revenue target" stated Daniel Petrov, Chief Executive Officer of
Kiaro.
Summary of the Second Quarter Financial Results
For the three months ended July 31,
2021, Kiaro recorded revenues of $6.19 million, comprised of $3.72 million from the retail segment,
$2.32 million from the wholesale
segment, and $0.14 million from the
new eCommercesegment, which was reported from only 2 weeks of
operations during the quarter. Comparatively, in the three months
ended July 31, 2020, the Company
recorded total revenues of $4.0
million, comprising $2.79
million from the retail segment and $1.21 million from the wholesale segment. The 55%
increase in revenue in comparison to the prior year is primarily
due to retail same-store sales increases of 21%, and a 92% sales
increase at Kiaro's wholesale subsidiary, National Cannabis
Distribution Inc.
For the three months ended July 31,
2021, Kiaro recorded gross profit of $1.68 million, representing a 35% year-over-year
increase when compared to the three months ended July 31, 2020, where gross profit was
$1.24 million. The consolidated
gross margin decreased due to the higher contribution of revenues
from the wholesale segment. As retail and eCommerce segment
contributions increase from the newly acquired assets, the blended
gross margin is expected to increase as well.
Total operating expenses for the three months ended July 31, 2021, were $2.46
million compared to $2.09
million in the three months ended July 31, 2020. Although the dollar amount
increased, the impact to operating expenses not including
depreciation and amortization and share-based compensation
decreased from 34% to 29% as a percentage of revenue. Salaries and
employee benefits remained between 19% and 20% as a percentage of
revenue in the three months ended July
31, 2021.
Kiaro improved its adjusted EBITDA from negative $0.14 million in the three months ended
July 31, 2020, to negative
$0.10 million in the three months
ended July 31, 2021. Revenue
increases continue to play a contributing factor on EBITDA until
the Company reaches break even scale. This combined with
fundamental management of operating expenses relative to revenue
growth resulted in improvements towards
profitability. 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"
below.
As at July 31, 2021, the Company
had positive working capital of $2,286,928, an improvement since the last fiscal
year end of January 31, 2021, of
$1,611,405. $35,000 in principal debt was repaid during the
quarter.
Select Financial Information
|
|
|
|
|
|
Three months
ended
July 31,
2021
|
Three months
ended
July 31,
2020
|
$
Change
|
% Change
|
|
$
|
$
|
$
|
%
|
Revenue
|
6,190,179
|
4,000,102
|
2,190,077
|
55%
|
Gross
profit
|
1,675,914
|
1,236,856
|
439,058
|
35%
|
Operating
expense
|
(2,464,805)
|
(2,091,454)
|
(373,351)
|
18%
|
Loss from
operations
|
(788,891)
|
(855,208)
|
66,317
|
-8%
|
Other
expenses1
|
(274,707)
|
(588,597)
|
313,890
|
-53%
|
Net loss and
comprehensive loss
|
(1,063,598)
|
(1,443,805)
|
380,207
|
-26%
|
Adjusted
EBITDA2
|
(98,582)
|
(136,363)
|
37,781
|
-28%
|
|
|
Notes:
|
|
(1)
|
In the three months
ended July 31, 2021, other expenses include accretion and interest
expense on debt, and right of use depreciation, and acquisition
costs.
|
(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."
|
Second Quarter Highlights and Recent Developments:
- On March 16, 2021, Kiaro
announced the completion of the Grasshopper Cannabis acquisition in
Kelowna, British Columbia. The
construction for this store has been completed, all municipal
approvals received, and while the Company waits for the final
provincial approval, the store management and staff have been
volunteering at local community events. The store is slated to open
in Q3 of this fiscal year.
- On July 12, 2021, Kiaro announced
the completion of the acquisition of Sculthorp SEO Inc, which
included one licensed and operational brick and mortar location in
Toronto, Ontario, and three
eCommerce business platforms in Canada, the US, and Australia. The two week inclusion of the
eCommerce assets contributed $141,011
in revenue and 16.2% net profit. The full quarter revenues will be
reflected in the Company's third quarter results.
- On September 9, 2021, the Company
held its Annual General and Special Meeting of Shareholders and the
Company's shareholders approved Aegis Brands Inc. ("Aegis") as a
new Control Person of the Company in connection with the Hemisphere
retail location transaction.
- On September 24, 2021, the
Company completed its acquisition of Hemisphere from Aegis in an
all stock transaction, which creates a control person of
approximately 25% of the combined entity.
The total purchase price of $6.13
million was settled by the issuance of 61,300,000 in common
shares of the Company at the market close price of $0.10 per share, issuance of 6,700,000 common
share purchase warrants exercisable at $0.16 with an expiry date of 36 months from the
closing date, and an additional issuance of 6,700,000 shares upon
the achievement of certain commercial milestones during the first
year following closing. No revenues and expenses from operations
are reflected on the current quarterly financial results, and the 5
weeks' and full 3 months' impacts will be reported on Q3 and Q4
respectively.
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
manner similar 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. 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 loss excluding finance
income (expense), income taxes, depreciation, amortization,
share-based compensation, loss on modification and extinguishment
of debt, foreign exchange, changes in fair value of financial
instruments, inventory write-down, lease termination loss, and loss
on sublease and non-cash impairment of equity investments, loss on
sale of financial instruments, impairment of long-lived assets,
goodwill, and other assets, and the transaction cost of certain
transactions. 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 six months
ended July 31, 2021 and 2020, 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 and the Company's Investor Relations
website at investors.kiaro.com.
Kiaro Holdings Corp.
Based in Vancouver, British
Columbia, Kiaro is an independent, omni-channel cannabis
retailer and distributor. Through existing storefronts across
British Columbia, Saskatchewan, and Ontario, and with the completion of the recent
acquisition of Hemisphere Cannabis from Aegis Brands, Kiaro has 16
stores in operation and another two expected in early 2022. This is
in addition to its wholesale distribution division servicing
Saskatchewan, and eCommerce sites
in Canada, the US and Australia. Kiaro is driven to introduce new
and experienced consumers to a lifelong exploration of cannabis.
With more than 70 years of collective retail and wholesale focused
experience, Kiaro's leadership team has a proven track record of
executing on acquisitions and financings, and moreover growing
brands across North America. The
Company plans to continue its growth trajectory through its
consumer-centric retail, eCommerce, and wholesale distribution
segments 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 filing statement of the Company 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.
For more information, visit investors.kiaro.com
For our most recent analyst report, click here
Daniel Petrov
Chief Executive Officer
SOURCE Kiaro Holdings Corp.