Lifeist Reports First Quarter 2023 Financial Results

(MENAFN- GlobeNewsWire - Nasdaq)

TORONTO, April 28, 2023 (GLOBE NEWSWIRE) -- Lifeist Wellness Inc. (“Lifeist” or the“Company”) (TSXV: LFST) (FRANKFURT: M5B) (OTCMKTS: LFSWF) , a health-tech company that leverages advancements in science and technology to build breakthrough companies that transform human wellness, today reported its financial results for the three months ended February 28, 2023 (“Q1 2023”) compared to the same period last year (“Q1 2022”). All financial figures are in Canadian dollars unless otherwise indicated.

First Quarter 2023 Highlights

  • The success of CannMart's in-house Roilty brand and the launch of the Mikra nutraceuticals business is driving accelerated growth, leading to a 22.5% increase in net revenue (compared to Q1 2022), versus 4.6% in Q4 2022 (compared to Q4 2021) and 4.4% for FY 2022 (compared to 2021), validating the diversified wellness strategy.
  • The strategic focus on high margin activities and operational efficiency continues to pay off with significant improvements in gross profit and reduced Adjusted EBITDA losses continuing Lifeist's clear progress on the path to profitability. Gross profit before inventory adjustment increased 68% to $1.5 million (compared to Q1 2022), one of the highest in the Company's history and equal to 25% gross margin.

“We have made continued progress in transforming ourselves from a low-margin cannabis player in a highly competitive market to a diversified wellness company with a high-margin cannabis business and a rapidly growing nutraceuticals business,” said Meni Morim, CEO of Lifeist.“We are seeing continued growth on all our key metrics, including delivering one of the best gross profit quarters in our company's history. We expect continued improvement and growth in the quarters to follow which paves the way for profitability and cash generation.”

Continued Morim,“Both of our main wellness businesses are leading our performance. CannMart has built one of Canada's fastest-growing cannabis brands in two years, and through continued innovation, strong relationships with provincial buyers and continued support from our retailers, we are driving increased distribution and sell-through of our expanding portfolio of premium and mid-range concentrate products. Mikra, in just a matter of months, has taken itself from a single product selling direct-to-consumer on its own website to a multiple product portfolio selling on Amazon, the largest online direct to consumer platform, and soon launching with GNC the largest brick and mortar wellness chain in the U.S. This is a significant step from where we started to where the business is today. We have strategically been working on scaling distribution, and our ability to secure the two largest channels speaks to the confidence in the brand and products. We anticipate accelerated growth as we shift focus on launching new products and SKUs in these channels.”

Concluded Morim,“Progressing on our path to profitability is a top priority. We are gratified and excited by the confidence and support shown by investors in our recent financings and are working tirelessly to increase shareholder value.”

Operating Highlights

Cannabis: CannMart Inc. (“CannMart”) and CannMart Labs Inc. (“CannMart Labs”)

  • Lifeist's cannabis business continued to make progress on its path to profitability in Q1 2023, highlighted by expanding gross profit and a narrowing of Adjusted EBITDA losses. The improved profitability is being driven by the shift to in-house brand Roilty and the termination of the lower-margin licensing of the Phyto brand from Adastra Holdings Ltd., which has simultaneously improved the product mix (i.e., higher margins) and de-risked the business model (i.e., more ownership, lower dependency on external factors).
  • Recreational cannabis revenue (net of exercise taxes) grew 16.4% to $3.7 million in Q1 2023 compared to $3.1 million in Q1 2022, as CannMart more than offset the planned elimination of sales of Phyto-branded products with better-than-expected sales of Roilty products.
  • Roilty revenue growth was driven by increased distribution and retail sell-through of an expanding portfolio of premium and mid-range concentrate products in all of Canada's provincial markets. Compared to last year, the number of Roilty SKUs in market increased from 8 in February 2022 to 31 in February 2023. Meanwhile, store penetration has increased significantly from February 2022 to February 2023, for example in Manitoba from 61 to 167 and Saskatchewan from 39 to 157.
  • Adjusted EBITDA loss for CannMart improved to $845,000 in Q1 2023 compared to $1,300,000 in Q1 2022. The reduced loss was due to higher revenue combined with higher gross margins and better operational efficiency.
  • In March 2023, Lifeist completed the final base purchase price share issuance related to the CannMart Labs Inc. acquisition.

Nutraceuticals: Mikra Cellular Sciences Inc. (“Mikra”)

  • Mikra took several significant steps to expand its product portfolio and open new distribution channels over the past several months, which is bolstering the platform for future revenue growth.
  • Mikra reported revenue of $551,000 in Q1 2023 compared to no revenue in Q1 2022, with 4,465 orders shipped to customers in the quarter. Results were driven by sales of flagship product CELLF, with additional contribution from RESCUE which was launched in mid-December 2022.
  • Innovation initiatives to expand the product portfolio include:
  • the February 2023 launch of a new and improved formulation of CELLF, offering significantly better taste, a one-handed accessible sachet design; environmentally friendly exterior packaging; and a now dairy-free and vegan recipe,
  • the December 2022 launch of RESCUE, Mikra's second product, which is a 100% naturally derived and rapid-acting digestive aid formulated to relieve negative gastrointestinal symptoms due to suspect food and drink choices, and
  • the January 2023 announcement that Mikra will add a line of health food and snacks products, starting with a gluten-free, vegan, functional nutrition bar.
  • While 100% of Mikra sales through Q1 2023 have been generated on , Mikra is expanding its distribution channels through:
  • the March 28, 2023 launch of an amazon storefront and
  • the signing of an exclusive distribution agreement with GNC Holdings for CELLF and its future derivatives in the United States in GNC's retail stores, at and on GNC's channel on The Amazon storefront has begun to contribute revenue in Q2 2023.
  • Adjusted EBITDA loss for Mikra was $759,000 in Q1 2023 compared to $643,000 in Q1 2022. Mikra has increased its investment in product innovation and a more than doubling of advertising spend to support the introduction of RESCUE in December 2022 and the new version of CELLF in February 2023, as well as to ensure deliveries to both our key partners Amazon and GNC. The Company anticipates that these investments will set Mikra up for accelerated growth and profitability in the coming quarters.

Australian Vaporizers Pty Ltd. (“Aus Vapes”)

  • Aus Vapes revenue increased by 1% to $1.7 million in Q1 2023, stabilizing after the spring 2022 floods. The Aus Vapes team has spent the past few quarters successfully relocating the warehouse into a larger and more modern facility and improving the product assortment, which positions the business to resume its positive pre-flood momentum.

Financial Summary

Net revenue increased 22.5% to $5.9 million in Q1 2023 compared to $4.9 million in Q1 2022. The increase was driven by a $515,000, or 16.4%, increase in Canadian cannabis revenue and $551,000 contribution from Mikra. A significant contributor to the quarter was the growth of higher margin Roilty brand sales which more than offset the planned elimination of lower margin licensing Phyto brand products.

Gross profit before inventory adjustment increased 68.4% to $1.5 million compared to $864,000 in Q1 2022, with margins expanding from 18% to 25%.

Adjusted EBITDA loss improved 22% to $2.9 million in Q1 2023 compared to $3.7 million in Q1 2022. Net loss from continuing operations improved 20% to $3.3 million, or ($0.01) per diluted share, in Q1 2023 compared to a loss of $4.1 million, or ($0.01) per share, in Q1 2022. The improvement is a result of continuing work done to streamline operations by finding efficiencies and reducing operating costs, while growing revenues and gross margin.

Balance Sheet and Cash Flow

Cash and cash equivalents were $1.7 million at February 28, 2023, compared to $3.8 million at November 30, 2022.

Inventories were $4.2 million at February 28, 2023 compared to $4.5 million at November 30, 2022, mainly due to the removal of Phyto inventory by CannMart, offset by an increase in Mikra inventory.

The working capital position was $5.5 million at February 28, 2023.

Net cash used in operations was $3.3 million in Q1 2023 compared to $4.7 million in Q1 2022, due in part to investments in CannMart and Mikra, offset by improved margins and higher revenue. Operating cash flow is expected to improve over the coming quarters due to profitable growth in the overall business.

Additional Information

The Company's complete financial statements and management's discussion & analysis (“MD&A”) for Q1 2023 are available on Lifeist's website ( ) and SEDAR ( ).

About Lifeist Wellness Inc.

Sitting at the forefront of the post-pandemic wellness revolution, Lifeist leverages advancements in science and technology to build breakthrough companies that transform human wellness. Portfolio business units include: CannMart, which operates a B2B wholesale distribution business facilitating recreational cannabis sales to Canadian provincial government control boards; CannMart Labs, a BHO extraction facility for the production of high margin cannabis 2.0 products; Australian Vapes, Australia's largest online retailer of vaporizers and accessories; and Mikra, a biosciences and consumer wellness company seeking to develop innovative therapies for cellular health.

Information on Lifeist and its businesses can be accessed through the links below:

Meni Morim, Lifeist Wellness Inc., CEO
Matt Chesler, CFA, FNK IR, Investor Relations
Ph: 647-362-0390

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

Non-IFRS Financial Measures

Management evaluates the Company's performance using a variety of measures, including“Net loss before income tax, depreciation and amortization” and“Adjusted EBITDA”. The non-IFRS measures discussed below should not be considered as an alternative to or to be more meaningful than revenue or net loss. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company.

Management uses these and other non-IFRS financial measures to exclude the impact of certain expenses and income that must be recognized under IFRS when analyzing consolidated underlying operating performance, as the excluded items are not necessarily reflective of the Company's underlying operating performance and make comparisons of underlying financial performance between periods difficult. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.

(i) Current and deferred income taxes, depreciation and amortization, and share-based compensation were excluded from the Adjusted EBITDA calculation as they do not represent cash expenditures.
(ii) Other income consisting of gain on disposal of subsidiary, interest income, realized gain on disposition of AFS investments, unrealized gain on derivatives and other miscellaneous non-recurring income were excluded from Adjusted EBITDA calculation.
(iii) Non-recurring costs related to restructuring and legacy issues were excluded from Adjusted EBITDA calculation.
(iv) Impairment loss relating to goodwill, customer list, domains and brand names were excluded from Adjusted EBITDA calculation.
(v) Impairment loss relating to receivable is a provision for expected credit loss to an associate and was excluded from Adjusted EBITDA calculation.
(vi) Share of associates loss, net of tax, is excluded due to lack of control.

Forward Looking Information

This news release contains“forward-looking information” within the meaning of applicable securities laws. All statements contained herein that are not historical in nature contain forward-looking information. Forward-looking information can be identified by words or phrases such as“may”,“expect”,“likely”,“should”,“would”,“plan”,“anticipate”,“intend”,“potential”,“proposed”,“estimate”,“believe” or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions“may” or“will” happen.

The forward-looking information contained herein, including, without limitation, statements related to: the Company's growth, distribution, revenue and profitability expectations relating to its diversified wellness business being its high-margin cannabis business and its growing nutraceuticals business are made as of the date of this press release and is based on assumptions management believed to be reasonable at the time such statements were made, including, without limitation, Lifeist's ability to continue to increase revenue through its high margin recreational cannabis business, including through increased sales of Roilty and anticipated sales of other high margin products, and its nutraceutical business, through increased sales of CELLF and RESCUE and other products developed by Mikra, expected increased sales of CELLF upon such product being available for purchase through GNC online and its channel on and in GNC retail stores, continued increasing sales of CELLF and RESCUE through Mikra's Amazon storefront, the Company's ability to broaden its total addressable market and to continue to evolve into a well-recognized wellness company, the Company's expectation that the market for high margin cannabis and nutraceutical products as well as the wellness market in general will develop as currently anticipated, such market will continue to be a multi-billion dollar high-margin market, the introduction of new products and brands will generate additional revenue, expectations that CELLF and RESCUE and other cellular health products to be developed by the Company will gain market acceptance along with the expansion of the market for nutraceutical products, as well as other considerations that are believed to be appropriate in the circumstances. While we consider these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct. By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking information in this press release. Such factors include, without limitation: the inability of the Company to develop its business as anticipated and to increase revenues and/or its profitable margin on such revenues, unanticipated changes to current regulations that would adversely impact the Company's businesses, the unanticipated decline in demand for cannabis products, including in particular a material decrease in Roilty brand sales, competition from others, unforeseen developments that would impede Mikra's ability to continue to sell CELLF and RESCUE as it currently does, if at all, and any other developed nutraceutical products as anticipated and in a timely manner, the risk that pre-clinical trials relating to CELLF are not as successful as anticipated and do not demonstrate the expected therapeutic benefits and/or fail to strengthen the Company's patent claim, the risk that the expected demand for nutraceutical products in general and those of Mikra in particular does not develop as anticipated, the failure to maintain the churn rate of subscription sales of CELLF at anticipated levels, regulatory risk, risks relating to the Company's ability to execute its business strategy and the benefits realizable therefrom and risks specifically related to the Company's operations. Additional risk factors can also be found in the Company's current MD&A which has been filed under the Company's SEDAR profile at . Readers are cautioned not to put undue reliance on forward-looking information. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Source: Lifeist Wellness Inc.


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