- Quarterly revenue from continuing operations increase of 354% over the comparative period
- Year-to-date revenue from continuing operations increase of 326% over the comparative period
VANCOUVER, British Columbia,
"While the third quarter saw further progress with the construction of the Cathedral City Glasshouse as we move towards its completion, significant cost overruns have resulted in delays in payments and disputes over responsibility to cover construction costs. Sunniva has already funded over US
"If the
Financial Highlights – Three and nine months ended
Consolidated Financial Highlights expressed in 000's of CAD$, except per share amounts
Three Months Ended | |||
2019 | 2018 | Change | |
Revenue | $ 5,361 | $ 1,182 | $ 4,179 |
Cost of Goods Sold | 3,788 | 968 | 2,820 |
Gross Margin | 1,573 | 214 | 1,359 |
Selling, General and Administrative | 6,545 | 4,543 | 2,002 |
Production Facility Costs | 1,262 | - | 1,262 |
Share-based Payments | 293 | 2,303 | (2,010) |
Amortization Expense | 612 | 251 | 361 |
Loss from Continuing Operations | (7,139) | (6,883) | (256) |
Net Loss | $ (20,462) | $ (6,781) | $ (13,681) |
Basic Loss Per Share | $ (0.52) | $ (0.21) | $ (0.31) |
Weighted Average Number of Shares | 39,174,040 | 32,042,054 | 7,131,986 |
Nine Months Ended | |||
2019 | 2018 | Change | |
Revenue | $ 21,228 | $ 4,980 | $ 16,248 |
Cost of Goods Sold | 15,942 | 4,171 | 11,771 |
Gross Margin | 5,286 | 809 | 4,477 |
Selling, General and Administrative | 18,518 | 10,788 | 7,730 |
Production Facility Costs | 3,051 | - | 3,051 |
Share-based Payments | 1,821 | 6,408 | (4,587) |
Amortization Expense | 1,763 | 678 | 1,085 |
Loss from Operations | (19,867) | (17,065) | (2,802) |
Net Loss | $ (38,888) | $ (17,961) | $ (20,927) |
Basic Loss Per Share | $ (1.00) | $ (0.59) | $ (0.41) |
Weighted Average Number of Shares | 39,014,649 | 30,386,117 | 8,628,532 |
Results of Operations – Three and nine months ended
For the three and nine months ended
The key components contributing to the change in net loss from the three and nine months ended
- Revenue increased by
$4.2 million and$16.2 million during the three and nine months endedSeptember 30, 2019 . CPL revenue increased by$2.5 million and$14.0 million over the comparative periods due to increased sales from the extraction business line and the commencement of CPL's packaging business line. FSD revenue increased by$1.7 million and$2.2 million over these comparative periods due to growth from existing customers and an increased customer base year over year.
- Gross margin increased by
$1.4 million and$4.5 million during the three and nine months endedSeptember 30, 2019 due to the significant increase in sales noted above. On a percentage basis, gross margin increased from 18% and 16% in the three and nine months endedSeptember 30, 2018 to 29% and 25% in the three and nine months endedSeptember 30, 2019 due to the commencement of operations in CPL, which realized larger margins than FSD.
- Selling, general and administration expenses increased by
$2.0 million and$7.7 million during the three and nine months endedSeptember 30, 2019 . The increase is due to the continued expansion of US operations, while incurring additional costs in relocating the corporate functions fromVancouver, British Columbia toCarlsbad, California . In addition, the Company recognized a provision on accounts receivable of$1.4 million and$4.2 million for the three and nine months endedSeptember 30, 2019 compared to$0.1 million for the three and nine months endedSeptember 30, 2018 .
- Production facility costs of
$1.3 million and$3.1 million were incurred for the three and nine months endedSeptember 30, 2019 . The Company had no such costs in the comparative periods.
- Share-based payment expenses decreased from
$2.3 million and$6.4 million in the three and nine months endedSeptember 30, 2018 to$0.3 million and$1.8 million in the three and nine months endedSeptember 30, 2019 . The decrease is due to several option holders departing with the corporate transition and the accounting under IFRS where under the recognition of share-based payment expense decreases as options continue to vest.
- Fair value changes in derivative instruments due to the revaluation of secured convertible promissory notes and warrants decreased from a gain of
$1.1 million and$0.8 million for the three and nine months endedSeptember 30, 2018 to no impact and a loss of$0.5 million for the three and nine months endedSeptember 30, 2019 . This was due to all derivative instruments being settled in early 2019.
- Amortization and depreciation expense increased by
$0.4 and$1.1 million during the three and nine months endedSeptember 30, 2019 due to a higher cost base of the assets in 2019.
- Loss from discontinued operations increased by
$11.3 million and$12.9 million during the three and nine months endedSeptember 30, 2019 due to theNHS impairment of$9.6 million . The impairment reduced the net carrying book value ofNHS to the recoverable amount based on the purchase agreement.
Key Developments in the Third Quarter 2019
- On
July 18, 2019 , the Company announced the receipt of a non-refundable payment of deposit in the amount of$1.0 million as part of a share purchase agreement (the "SMI Share Purchase Agreement") with respect to the sale of SMI to CannaPharmaRx, Inc. (the "SMI Transaction"). The SMI Transaction was initially expected to close inAugust 2019 . OnOctober 3, 2019 , the settlement of the purchase price was amended from an all cash deal of$20.0 million to$16.0 million in cash and$4.0 million by way of promissory note. In addition, the Company received an incremental non-refundable deposit of$0.7 million . As atNovember 26, 2019 , the terms of the SMI Transaction are not final and the closing date is yet to be determined. The Company and CannaPharmaRx continue to work towards the closing of the SMI Transaction.
- On
August 1, 2019 , the Company closed a non-brokered private placement (the "August Unit Offering") of 5.77 million units ("August Units") of the Company for gross proceeds of$5.77 million . OnAugust 29, 2019 the Company closed a second tranche of the August Unit Offering of 1.46 million August Units for gross proceeds of$1 .46 million. OnSeptember 12, 2019 , the Company closed a third tranche of 0.33 million August Units for gross proceeds of$0.33 million . In aggregate, a total of 7.56 million August Units were issued, with each August Unit consisting of a principal amount of unsecured promissory notes of the Company ("Promissory Notes") bearing interest at a rate of 10% per annum and 0.40 common share purchase warrants of the Company ("Warrants") at an exercise price of$2.50 per Warrant. The Promissory Notes mature 6 months from the respective closing dates.
- On
August 28, 2019 , the Company closed a non-brokered private placement (the "Subsequent August Unit Offering") of 1.5 million units ("Subsequent August Units") of the Company for gross proceeds of$2.0 million (US$1.5 million ). Each Subsequent August Unit consists of a principal amount of Promissory Notes bearing interest at a rate of 10% per annum and 1.11 Warrants at an exercise price of$1.20 (US$0.90 ) per Warrant. The Promissory Notes mature 18 months from the respective closing dates.
- On
September 10, 2019 , the Company entered into a share purchase agreement (the "NHS Share Purchase Agreement") among the Company,NHS ,Cura-Can Health Corp. ("Cura-Can") andThe Clinic Network Canada, Inc. ("TCNC") to sell all of the issued and outstanding shares in the capital ofNHS to TCNC for gross proceeds of$9.0 million payable by way of$4.5 million in cash and$4.5 million of security consideration through the issuance of 4,500,000 preferred shares of TCNC (the "NHS Transaction"). As discussed below this agreement is expected to be amended. The transaction is expected to close in the fourth quarter of 2019.
Recent Operating Developments Subsequent to
- On
October 15, 2019 , the Company closed a second tranche of the Subsequent August Unit Offering of 6.0 million Subsequent August Units for gross proceeds of$8.0 million (US$6.0 million ). In aggregate, a total of 7.5 million Subsequent August Units were issued for total gross proceeds raised by the Subsequent August Unit Offering of$10.0 million (US$7.5 million ).
- On
October 16, 2019 , the Company announced an amendment to the terms of 718,473 performance warrants (the "Performance Warrants") issued in conjunction with the acquisition ofLTYR Logistics, LLC onDecember 31, 2018 . The Performance Warrants were convertible into 718,473 common shares of the Company ("Performance Shares") upon the satisfaction of certain operational milestones (the "Milestones"). The Performance Warrants were amended by replacing the original Milestone of opening a distribution business at the Company's facility inLong Beach, California with the opening of a distribution business at the Company's facility inCoachella, California . Upon amendment of the Performance Warrants, the Milestones were satisfied and the Company converted the Performance Warrants into Performance Shares.
- On
November 25, 2019 , the Company received a 30-day notice of termination and a notice of default fromSunniva Production Campus, LLC for items related to payment of outstanding balances and failure to meet certain conditions of the build to suit lease agreement for Cathedral City Glasshouse. In addition, the Company received a notice of default from a promissory note holder for not applying a certain portion of the note proceeds to agreed upon outstanding amounts. The Company is currently consulting with its legal counsel and intends to defend its position. The ramifications of these notices are uncertain at this time. As a result of these notices, the timing of receipt of the Company's certificate of occupancy for the Cathedral City Glasshouse cannot be estimated at this time.
- The Company,
NHS , Cura-Can and TCNC have entered into a non-binding agreement to amend and restate theNHS Share Purchase Agreement, whereby Cura-Can (parent of TCNC) would acquire the share ofNHS . Under the amended terms, the purchase price of$9.0 million is payable by way of$250,000 in cash and$8.75 million of security consideration of 5.83 million in Class A common share of Cura-Can (parent company of TCNC). The Company will be entitled to certain conversion and redemption rights for the Cura-Can shares based on Cura-Can's ability to affect a liquidity event for TCNC. The consideration replaces the prior consideration forNHS pursuant to the original agreement of$4.5 million in cash and$4.5 million of security consideration through the issuance of 4,500,000 preferred shares of TCNC. As ofNovember 26, 2019 , the terms of theNHS Share Purchase Agreement are not final, and the closing date is yet to be determined.
Copies of our consolidated financial statements for the three and nine months ended
The Company's executive management will discuss the results during a conference call on
For more information about the Company please visit: www.sunniva.com and view our construction photo gallery and progress videos at www.sunniva.com/sunniva-campus/california-campus.
To be added to the Sunniva email distribution list please register at www.sunniva.com/email-alerts.
Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.
About
Sunniva, through its subsidiaries, is building a vertically integrated cannabis company operating in two of the world's largest legal cannabis markets – California and Canada. In Canada, Sunniva's wholly owned subsidiary
Forward Looking Statements
This press release contains forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs of future performance, statements regarding the Company's operations and growth opportunities; the expected timing of completion of the Cathedral City Glasshouse, including the timing of receipt of the certificate of occupancy; the timing of the expected completion of the SMI Transaction; the anticipated timing of completion of the
Company Contacts: | |
Sunniva Inc. | Investor Relations Contact |
Dr. Anthony Holler | Rob Knowles |
Chairman and Chief Executive Officer | VP Corporate Development |
Phone: (866) 786-6482 | Phone: (587) 430-0680 |
Email: IR@Sunniva.com |
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