Rubicon Organics Reports Third Quarter Financial Results and Operational Milestones
- Reported net revenue of $3.2 million, an increase of 219% as compared to Q2 2020
- Executed Letter of Understanding with SQDC to sell its flagship Simply BareTM Organic super-premium flower in Qubec
- Advanced cannabis 2.0 product innovation pipeline with agreements to bring CBD Relief Sticks and CBD Cool Sticks, PAX® ERA™ pods and proprietary concentrate products to the Canadian market
- Announced acceleration of warrant expiry date for 3.1 million warrants at an exercise price of $3.50 per share
VANCOUVER, British Columbia, Nov. 25, 2020 (GLOBE NEWSWIRE) -- Rubicon Organics Inc. (“Rubicon Organics” or the “Company”) (TSXV:ROMJ) (OTCQX:ROMJF), today reported its financial results for the third quarter ended September 30, 2020 (“Q3 2020”). All amounts are expressed in Canadian dollars.
“The net revenue increase we delivered in Q3 2020 is only the beginning of Rubicon Organics demonstrating its potential. We have been operating at full capacity for six months now, and more and more Simply BareTM Organic product continues to hit the shelves across the country with customers and cannabis connoisseurs giving strong endorsements of our super-premium organic products. Our journey is only going to get more exciting from here. We have invested in world class personnel that will help bring new brands and products to market that will capture the desire of consumers to drive our growth in revenue and profitability,” said Jesse McConnell, Chief Executive Officer.
Q3 2020 Highlights:
- Earned $3.2 million of net revenue, an increase of $2.2 million or 219% as compared to Q2 2020;
- Entered into a brand licensing agreement with Wildflower Brands Inc. (CSE:SUN) for the production of Wildflower-branded CBD Relief Sticks and CBD Cool Sticks in Canada;
- Commenced trading on the TSX Venture Exchange on September 22, 2020;
- Entered into a distribution agreement with PAX LABS®, Inc. subsequent to quarter-end to launch pods for the closed-loop PAX® ERA™ system under its Simply Bare™ Organics brand;
- Signed a cannabis 2.0 product distribution agreement subsequent to quarter-end with Canada House Wellness Group Inc. (CSE: CHV) for the distribution Rubicon Organics’ line of concentrate products;
- Completed the amalgamation of subsidiaries which allows for over $20 million of tax losses to be applied against future profits; and
- On November 16, 2020, announced the acceleration of the warrant expiry date for 3.1 million warrants at an exercise price of $3.50 per share.
Q3 2020 Select Financial and Operational Results:
| | For the three months ended
September 30, 2020 |
| | 2020 | | 2019 | |
| | $ | | $ | |
| | | (restated)* | |
| Gross revenue | 3,725,367 | | — | |
| Net revenue | 3,166,786 | | — | |
| Other income | 491,405 | | — | |
| Loss from continuing operations | (4,279,330 | ) | (2,776,605 | ) |
| Loss from discontinued operations | (37,918 | ) | (1,677,848 | ) |
| Net loss for the period | (4,317,248 | ) | (4,454,453 | ) |
| Total comprehensive loss | (4,187,147 | ) | (4,299,700 | ) |
| Adjusted EBITDA | (2,576,373 | ) | (2,542,130 | ) |
| Loss per share from continuing operations | (0.09 | ) | (0.07 | ) |
| Loss per share | (0.09 | ) | (0.12 | ) |
In Q3 2020, Rubicon Organics earned $3.2 million of net revenue which is an increase of $2.2 million or 219% as compared to the second quarter Q2 2020. This increase in net revenue is attributable to higher sales volume through direct sales to provincial suppliers and under the Agro-Greens Agreement.
The Company reported an Adjusted EBITDA loss of $2.6 million in Q3 2020, as compared to a loss of $2.5 million in Q2 2020 and a loss of $2.5 million in the prior year. The sequential change in Adjusted EBITDA is attributable to the increase in net revenue in Q3 2020, offset by additions to senior personnel and compensation across the organization, and general and administrative expenses.
The Company reported a net loss of $4.3 million in Q3 2020, as compared to a net loss of $1.8 million in Q2 2020 and net loss of $4.5 million in the prior year. The sequential change in profitability reflects fair value changes in the Company’s cannabis assets and the variance relative to Q3 2019 reflects the increase to net revenue offset by the impact of fair value changes on cannabis assets and discontinued operations.
Outlook
Rubicon Organics is focused on building its portfolio of premium brands in the Canadian market that is anchored by its flagship Simply BareTM Organic cannabis brand. The Company intends to launch additional brands into the market in both the flower and extract categories, along with a diverse portfolio of cannabis 2.0 products. The Company has also established distribution channels to Germany with the expectation to enter international markets in 2021.
The Company has direct supply agreements with the OCS, BCLDB and AGLC and has recently signed with the SQDC. The Company expects to ramp up product deliveries to these markets as well as initiate product shipment to Quebec in December 2020. The Company plans to continue to use local distributors in Saskatchewan and Manitoba.
Following approval from Health Canada on May 5, 2020 for site amendments that included the use of its land at the Delta Facility for an outdoor grow, the Company launched a pilot scale outdoor grow. Following on from the lessons of this pilot scale program, the Company is assessing the scale and viability of a larger outdoor grow program in 2021.
The Company has installed additional high-performance LED lighting in the final three of its five flowering compartments to increase quality and yield throughout the year. The Company is performing an assessment of areas for additional capital expenditure which would increase throughput and efficiency. Renovations to the Delta Facility’s processing area are underway to facilitate compliance with EU-GMP requirements thereby providing access to the German market through the Company’s supply agreement with Canacur GmbH. The Company has developed an extensive product innovation pipeline and is preparing to bring the first phase of those products to market.
The Company is determined to achieve positive operating cash flow and profitability. The Company currently expects to achieve positive adjusted EBITDA on a monthly basis by year-end 2020 and to achieve monthly positive cash flow from operations in the first half of 2021. The Company expects to generate significant operating leverage by maintaining moderate increases in production costs and operating expenses, with linear increases in inventory expensed to costs of sales relative to net revenue, but at a lower per unit cost.
The Company expects to refinance debt maturing in 2021 to a long-term mortgage financing facility, potentially with more favourable terms, and may seek other capital through equity, and other debt arrangements.
The COVID-19 outbreak was declared a pandemic by the World Health Organization in 2020. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include an impact on our ability to maintain operations, to obtain debt and equity financing, access to necessary supplies, credit risk associated with our accounts receivable, impairments in the value of our long-lived assets, or potential future decreases in revenue or the profitability of our ongoing operations. The Company continues to work diligently to ensure operations continue and product is delivered while continuing to emphasize the safety of our product and employees.
Conference Call
The Company will be hosting a conference call to discuss Q3 2020 results on November 25, 2020. Conference call details are as follows:
ABOUT RUBICON ORGANICS INC.
Rubicon Organics Inc. is becoming the global brand leader in organic cannabis products. Through its wholly owned subsidiary Rubicon Holdings Corp, a licensed producer, the Company cultivates and sells organic certified, sustainably grown, super-premium cannabis from its state-of-the-art hybrid greenhouse located in Delta, BC, Canada. Rubicon Organics is focused on achieving industry leading profitability through the development of brands and cannabis 2.0 products, including its flagship super-premium brand Simply BareTM Organic.
CONTACT INFORMATION
Margaret Brodie
Chief Financial Officer
Phone: +1 (437) 929-1964
Email: ir@rubiconorganics.com
Cautionary Statement Regarding Forward Looking Information
This press release contains forward-looking information 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 Rubicon Organics' proposed brand launches and path to market are "forward-looking statements". Forward-looking information can be identified by the use of words such as “will” or variations of such word or statements that certain actions, events or results "will" be taken, occur or be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward looking statements. The forward-looking information in this press release is based upon certain assumptions that management considers reasonable in the circumstances, including the launch of new brands and cannabis products, establishing distribution to Germany, that its capital needs will be as currently projected, the timing of becoming EBITDA and cash flow positive, the timing of entering the market in Quebec, and the Company’s ability to refinance its debt. Risks and uncertainties associated with the forward looking information in this press release include, among others, dependence on obtaining and maintaining regulatory approvals, including acquiring and renewing federal, provincial, local or other licenses and any inability to obtain all necessary governmental approvals licenses and permits for construction at its facilities in a timely manner; regulatory or political change such as changes in applicable laws and regulations, including bureaucratic delays or inefficiencies or any other reasons; any other factors or developments which may hinder market growth; Rubicon Organics' limited operating history and lack of historical profits; reliance on management; and the effect of capital market conditions and other factors on capital availability; competition, including from more established or better financed competitors; and the need to secure and maintain corporate alliances and partnerships, including with customers and suppliers; and the effects of the COVID-19 pandemic. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. Although Rubicon Organics has attempted to identify important risk factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other risk factors that cause actions, events or results to differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. Rubicon Organics assumes no obligation to update any forward-looking statement, even if new information becomes available as a result of future events, new information or for any other reason except as required by law.
Non-GAAP Financial Measures
This press release contains certain financial performance measures that are not recognized or defined under IRFS (“Non-GAAP Measures”) including, but not limited to, “EBITDA”. As a result, this data may not be comparable to data presented by other cannabis companies. For an explanation and reconciliation of these measures to related comparable financial information presented in the financial statements prepared in accordance with IFRS for the third quarter ended September 30, 2020, please refer to the “Results of Operations” section in the MD&A for the third quarter ended September 30, 2020. The Company believes that these Non-GAAP Measures are useful indicators of operating performance and are specifically used by management to assess the financial and operational performance of the Company.
