Lifeist Reports Fourth Quarter 2022 Financial Results

Fourth Quarter Gross Profit Increases 212% with Margins Expanding from 10% to 29%

/EIN News/ -- TORONTO, March 30, 2023 (GLOBE NEWSWIRE) -- Lifeist Wellness Inc. (“Lifeist” or the “Company”) (TSXV: LFST) (FRANKFURT: M5B) (OTCMKTS: NXTTF), 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 and 12 months ended November 30, 2022 (“Q4 2022”) compared to the same period last year (“Q4 2021”). All financial figures are in Canadian dollars unless otherwise indicated.

Fourth Quarter 2022 Highlights

• Net revenue from continued operations increased 4.6% to $6.2 million in Q4 2022 compared to $6.0 million in Q4 2021, reflecting the decision to significantly curtail CannMart’s licensing of the Phyto brand in August 2022 in favor of higher margin in-house Roilty products. In Q4 2021, sales of Phyto brand products represented approximately $4.9 million in revenue, at low margins.
• Gross profit before inventory adjustment increased 212% to a record $1.8 million in Q4 2022, representing gross margin of 29%, compared to $578,000, or 10% gross margin, in Q4 2021. Q4 2022 gross profit was the highest quarterly gross profit in the company’s history.
• Adjusted EBITDA loss was $4.4 million in Q4 2022 compared to $4.8 million in Q4 2021. The $0.4 million improvement was due higher gross profit and lower operating costs, which more than offset a $1.4 million inventory adjustment.
  

Second Half 2022 Highlights ("2H 2022”)

• Net revenue from continued operations increased 15.1% to $13.1 million in 2H 2022 compared to $11.4 million in 2H 2021.
• Gross profit before inventory adjustment increased 78% to $3.2 million in 2H 2022 compared to $1.8 million in 2H 2021, with margins expanding from 16% to 24%.
• Adjusted EBITDA loss was $5.5 million in 2H 2022 compared to $9.8 million in 2H 2021. The $4.3 million improvement was due to higher gross profit and significantly lower operating costs.
  

Full-Year 2022 Highlights

• Net revenue from continued operations increased 4.4% to $22.1 million in 2022 compared to $21.1 million in 2021.
• Gross profit before inventory adjustment increased 139% to $4.7 million in 2022 compared to $2.0 million in 2021, with margins expanding from 9% to 21%.
• Adjusted EBITDA loss was $13.7 million in 2022 compared to $21.9 million in 2021. The $8.2 million improvement was due to higher gross profit and significantly lower operating costs.
• Working capital position of $7.4 million at year end.

“The wellness-focused Lifeist has made great progress in our efforts to expand profit margins and establish a solid foundation for profitable growth,” said Meni Morim, CEO of Lifeist. “We have strategically divested, discontinued, or de-emphasized components of our business that were dragging our financials, focusing instead on higher-margin, higher-growth opportunities, including our nutraceutical business and our in-house concentrates brand Roilty. The results are already evident, and as we continue to scale these businesses, we should see further margin expansion, both gross margin and operating margin, ultimately leading to profitability and cash generation.”

“Our Mikra division is rapidly emerging as Lifeist’s another major driver of growth and valuation,” continued Morim. “Mikra is expanding its portfolio to include new products including those in a second category – health food & snacks. It is also significantly broadening its distribution network, including launching on Amazon this week and plans to be in brick-and-mortar GNC stores across America over the coming months. The expanded product offering and distribution channels should enable Mikra to accelerate its growth and contribute to Lifeist’s profitability and cash generation at scale.”

“Lifeist’s other major growth engine – CannMart – continues to solidify its position as one of Canada’s largest provincial and retail recreational cannabis distribution networks, and to do so with significantly improved financial performance,” added Morim. “CannMart has successfully transitioned away from its Phyto licensing arrangement with Adastra in favor of its award-winning in-house concentrates brand Roilty and the result is achieving the highest gross margin ever of $1.7 million in Q4 2022 (28% gross margin). We accomplished this while also reducing overhead thus improving the overall bottom line.”

Operating Highlights

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

• Lifeist’s cannabis business made positive strides on its path to profitability in Q4 2022, highlighted by expanding gross profit and a narrowing of Adjusted EBITDA losses for 2H 2022. The improved profitability is being driven by the growth of the higher-margin in-house brand Roilty and the termination of the lower-margin licensing of the Phyto brand from Adastra Holdings, Inc.
• Recreational cannabis revenue grew 5.2% to $4.1 million in Q4 2022, as CannMart was able to more than offset the planned reduction in sales of Phyto-branded products with better-than-expected sales of Roilty products. Roilty brand products represented $3.8 million in Q4 2022 compared to $0.4 million in Q4 2021, whereas Phyto brand products represented just $1.0 million in revenue in Q4 2022 compared to over $4.9 million in Q4 2021. Roilty growth was driven by increased distribution and retail sell-through of an expanding portfolio of products in the premium and mid-range concentrates categories in Canada’s largest provincial markets.
• During Q4 2022, CannMart brought to market two additional product categories including shatter and live resin vapes, both produced in-house at Labs’ state-of-the-art BHO extraction facility. Labs’ fourth product category, THCa diamonds, is in the research and development phase, with plans to launch in Spring 2023.
• CannMart also entered into a distribution agreement with Hamilton Devices, one of the leading U.S. manufacturers and suppliers of vape hardware, becoming Canada’s first distributor of Hamilton Devices’ complete portfolio of innovative consumer facing, extracts-focused vape hardware products across Canada through October 2024, with an initial six-month exclusivity.
• 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’s Q4 2022 financial performance demonstrates the beginning of revenue starting to scale after successfully resolving supply chain hurdles last spring and summer. Leadership has spent the past several months expanding the product portfolio and building distribution channels which is expected to results in accelerated revenue growth and profitability in the coming periods.
• Mikra reported revenue of $610,000 in Q4 2022 compared to no revenue in Q4 2021, and a 65% increase over Q3 2022. Results were driven by sales of flagship product CELLF, which shipped 5,073 orders to customers in the quarter.
• Adjusted EBITDA losses in Q4 2022 were $699,000 compared to $506,000 in Q4 2021. The increased losses were due to investments in new product innovation such as the introduction of RESCUE in December 2022 and the new version of CELLF in February 2023, as well as the development of new distribution channels such as Amazon and GNC stores. The Company anticipates that these investments will set Mikra up for accelerated growth and profitability in the coming quarters.
• Mikra continues to progress on track toward an initial purchase order from GNC Holdings, LLC (“GNC”) pursuant to the distribution agreement that the two parties signed in January 2023. GNC has agreed to be Mikra’s exclusive distribution partner for CELLF and its future derivates in the United States in GNC’s retail stores, at gnc.com and on GNC’s channel on Amazon.com.
• Mikra launched sales of a new and improved formulation of its flagship product CELLF in February 2023. The key improvements to CELLF include significantly better taste, one-handed accessible sachet design, environmentally friendly exterior packaging, and now dairy-free and vegan. Early data indicates that the new formulation has led to the return of customers that had previously churned.
• Mikra launched its second product in December 2022, RESCUE, a 100% naturally derived and rapid-acting digestive aid formulated to relieve negative gastrointestinal symptoms due to suspect food and drink choices. Each high impact dose contains pure, fine-milled activated coconut charcoal powder made from super-heated coconut shells which acts to trap the body’s toxins and chemicals. At a price point of US$18, RESCUE is expected to be a strong performer on Amazon.
• Mikra will also be adding a line of health food and snacks products, with production starting in late spring 2023 with products available for purchase by consumers in the second half of the year. The first foray into this category will be a certified gluten-free, vegan, functional nutrition bar targeting intermittent fasters in need of a low glycemic index meal to break their fast and health-conscious individuals looking for a clean, substantial snack to maintain energy between meals.
• Earlier this week, Mikra began Amazon sales of CELLF in the United States and RESCUE in both the United States and Canada. Selling on the leading e-commerce site marks a significant advancement in distribution for Mikra, which until now has sold its products exclusively through its direct-to-consumer website, wearemikra.com.

Australian Vaporizers Pty Ltd. (“Aus Vapes”)

• Australian Vaporizers revenue decreased by 20% to $1.5 million in Q4 2022 compared Q4 2021, in part due to being more aggressive on price as part of the recovery strategy after the floods that significantly impacted the business in spring 2022. Recent customer activity is resuming toward historical levels and are on track to reach the pre-flood monthly average levels in Q1 2023, validating the strong product offering and loyal customer base of the business.
• Adjusted EBITDA losses in Q4 2022 were $142,000 compared to an Adjusted EBITDA profit of $236,000 in Q4 2021. The reduction is largely due to the lower revenue and an additional inventory write-down of $200,000 at year-end.

Financial Summary

Fourth Quarter 2022

Net revenue from continued operations increased 4.6% to $6.2 million in Q4 2022 compared to $6.0 million in Q4 2021. The increase was driven by a $0.2 million, or 5.1%, increase in Canadian cannabis revenue and $0.6 million contribution from Mikra, partially offset by a $0.4 million decrease at Aus Vapes, which continues to recover from the spring 2022 floods, and $0.2 million from the planned wind-down of hardware sales in Europe through Lifeist Bahamas. A significant contributor to the quarter was the growth of Roilty brand sales ($3.8 million of revenue in Q4 2022 vs. $0.4 million in Q4 2021) which more than offset the planned reduction of Phyto brand products ($1.0 million in Q4 2022 vs. $4.9 million in Q4 2021) with higher margin revenue.

Gross profit before inventory adjustment increased 211% to $1.8 million compared to $578,000 in Q4 2021, with margins expanding from 10% to 28%. The gross profit in Q4 2022 was the highest quarter in the company’s history, highlighting an improving trend over the last several quarters.

Adjusted EBITDA loss was $4.4 million in Q4 2022 compared to $4.8 million in Q4 2021. Net loss was $8.1 million, or ($0.02) per diluted share, in Q4 2022 compared to a loss of $3.9 million, or ($0.01) per share, in Q4 2021. Q4 2022 included a $2.5 million impairment loss on intangibles compared to Q4 2021 which included a $1.8 million gain on change in the fair value of receivables.

Second Half 2022

Net revenue from continuing operations increased 15.2% to $13.1 million in 2H 2022 compared to $11.3 million in 2H 2021. Gross profit before inventory adjustment increased 112% to $3.2 million compared to $1.5 million in 2H 2021, with margins expanding from 13% to 24%.

Adjusted EBITDA loss was $5.5 million in 2H 2022, an improvement of $4.3 million compared to a loss of $9.9 million in 2H 2021. Net loss was $10.1 million, or ($0.02) per diluted share, in 2H 2022 compared to a loss of $9.9 million, or ($0.03) per share, in 2H 2021. 2H 2022 included a $2.5 million impairment loss on intangibles compared to 2H 2021 which included a $1.8 million gain on change in the fair value of receivables.

Full Year 2022

Net revenue from continued increased 4.4% to $21.0 million in 2022 compared to $21.1 million in 2021. Gross profit before inventory adjustment increased 133.5% to $4.6 million compared to $2.0 million in 2021, with margins expanding from 9% to 21%.

Adjusted EBITDA loss was $13.7 million in 2022, an improvement of $8.2 million compared to a loss of $21.9 million in 2021. Net loss was $15.4 million, or ($0.03) per diluted share, in 2022 compared to a loss of $23.8 million, or ($0.06) per share, in 2021. 2022 included a $2.5 million impairment loss on intangibles compared to 2021 which included a $1.8 million gain on change in the fair value of receivables.

Balance Sheet and Cash Flow

Cash and cash equivalents were $3.8 million at November 30, 2022, compared to $12.7 million at November 30, 2021.

Inventories were $4.5 million at November 30, 2022 compared to $5.4 million at November 30, 2021, mainly due to the removal of Phyto inventory by CannMart, offset by an increase in Mikra inventory.

Net cash used in operations was $15.3 million in fiscal 2022 compared to $18.3 million last year, due in part to investments in CannMart and Mikra. Cash provided by operations was $162,000 in Q4 2022, compared to cash used in operations of $5.3 million in Q4 2021 and $3.2 million in Q3 2022. 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 FY2022 are available on Lifeist’s website (www.lifeist.com) and SEDAR (www.sedar.com).

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:

www.lifeist.com
www.cannmart.com
www.australianvaporizers.com.au
www.wearemikra.com

Contacts
Meni Morim, Lifeist Wellness Inc., CEO
Matt Chesler, CFA, FNK IR, Investor Relations
Ph: 647-362-0390
Email: ir@lifeist.com

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 continuing focus and further development efforts relating to its B2B recreational cannabis and nutraceuticals and its expectations from such businesses to increase revenue growth and profitability 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 B2B recreational cannabis business, including through increased sales of Roilty and anticipated sales of shatter and THCa diamonds, and to maintain momentum of expanding its nutraceutical business, including through the anticipated sales of CELLF™ v1.2 and other cellular therapeutics designed for athletes aged over 30, its ability to broaden its total addressable market and to evolve into a recognized wellness company, the Company’s expectation that the nutraceutical and wellness market will develop as currently anticipated, the nutraceutical 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™ v1.2 and other cellular health products and accessories 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, competition from others, unforeseen developments that would impede Mikra’s ability to sell CELLF or CELLF™ v1.2 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 www.sedar.com. 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.