Inner Spirit Holdings Announces Third Quarter 2019 Financial Results

November 21, 2019

Inner Spirit Holdings Announces Third Quarter 2019 Financial Results 

Country’s largest retail cannabis brand efficiently opening stores with 37 Spiritleaf locations operating and more than 40 projected by end of year

CALGARY, Alberta (November 21, 2019) – Inner Spirit Holdings Ltd. (“Inner Spirit” or the “Company”) (CSE:ISH), a Canadian company establishing a national network of retail cannabis stores under its Spiritleaf brand, today announced it has filed its interim Financial Statements and corresponding Management’s Discussion and Analysis for the quarter ended September 30, 2019. The filings are available for review on the Company’s SEDAR profile at www.sedar.com and on the Company’s website at www.innerspiritholdings.com.

“We are advancing our business strategy by efficiently opening Spiritleaf recreational cannabis retail stores in locations where we have secured licences. System-wide retail sales1 from our cannabis retail stores operating in the third quarter exceeded $9 million. We opened more than 25 stores during the quarter and are now the industry leader in Canada with 37 Spiritleaf stores operating. The effort from our staff, franchise partners and suppliers to open these stores has been truly exceptional. Our business model with Spiritleaf franchised locations complemented by corporate-owned stores in jurisdictions where they are permitted is enabling us to grow very effectively. We remain highly focused on expanding the Company’s cannabis retail store network, enhancing our financial performance and creating value for our shareholders,” said Darren Bondar, President and CEO of Inner Spirit.

During the third quarter ended September 30, 2019, Inner Spirit reported the following highlights:

Financial Highlights

  • System-wide retail sales1 was $10,783,152, an increase of 375% from $2,270,798 in the third quarter of 2018. This included $9,035,164 from operating Spiritleaf stores and $1,747,988 from the Company’s Watch It! retail operation. 
  • Total revenue was $3,991,640, an increase of 158% from $1,544,779 for the same period of 2018.
  • Retail revenue was $2,053,446, an increase of 81% from $1,133,625 in the third quarter of 2018.
  • Royalty revenue was $400,776, an increase of 937% from $38,637 for the same period of 2018.
  • Gross margin improved to 47.6% compared with 41.0% in the third quarter of 2018.
  • Total net loss was $2,490,323, or $0.01 per share, which includes an unrealized loss on marketable securities of $970,656, compared with a total net loss of $940,605, or $0.01 per share, in the third quarter of 2018.

Corporate Highlights

  • The Company opened additional franchised and corporate-owned retail cannabis stores in Alberta as well as franchised stores in British Columbia during the quarter and had 33 stores open and operating by the end of the third quarter. This included 27 stores (19 franchised, 8 corporate-owned) in Alberta, 4 franchised stores in British Columbia, one franchised store in Saskatchewan, and one retail partner store in Ontario. 
  • The Company was recognized in the 2019 Canadian Cannabis Awards competition with CEO Darren Bondar nominated for Entrepreneur of the Year and Mona Pinette of Spiritleaf’s Calgary Chinook store nominated for Budtender of the Year.
  • The Company recorded more than $23 million in system-wide retail sales1 and served more than 577,000 customers in its Spiritleaf operations since the legalization of cannabis in Canada on October 17, 2018.

Following completion of the third quarter ended September 30, 2019, Inner Spirit has achieved the following additional highlights:

  • The Company opened franchised retail cannabis stores in Banff, Calgary (Penbrooke), Edmonton (Clareview Crossing) and Sexsmith, Alberta.
  • The Company received cannabis retail store licences from Alberta Gaming, Liquor and Cannabis (the “AGLC”) for franchised locations in Cochrane, Calgary (Sunridge) and Calgary (Hillhurst), and for a corporate-owned location in Edmonton (Garneau). For Alberta, this brings the total number of licences awarded to Spiritleaf locations in Alberta to 35 and applications for the seven remaining stores needed to achieve the AGLC’s stated maximum of 42 have been submitted to the AGLC, with the locations all currently in final development stages. 
  • The Company received a cannabis retail store licence from the British Columbia Liquor and Cannabis Regulation Branch (the “LCRB”) for a franchised location in West Kelowna, British Columbia.
  • The Company launched a cannabis retail e-commerce platform at sk.spiritleaf.ca to provide online sales across the province of Saskatchewan and resumed franchise sales activity in Saskatchewan based on the Province’s announcement that a phased-in open market system for cannabis retail licensing will begin in the spring of 2020.

In recognizing the recent challenges facing the overall Canadian cannabis sector, Bondar noted, “We see that cannabis companies are being severely challenged in the past few weeks, and Inner Spirit’s share price has been impacted. We don’t believe the current price reflects our market value nor represents what we are building as a company. The action we’re taking is to continue doing what we do best: opening Spiritleaf stores, providing consumers with a premium retail shopping experience with superior product choices, and working towards achieving profitability. With 10 corporate-owned stores and 40 franchises projected to be operating by the end of the first quarter of 2020 and Spiritleaf store revenues anticipated to be further enhanced with the introduction of Cannabis 2.0 products, we expect system-wide retail sales1 for Spiritleaf operations to continue growing in the next fiscal year. We have shown a vibrant private retail cannabis sector is positive for this industry and for consumers of recreational cannabis. We have developed Spiritleaf to be a leading cannabis retail brand in the country and expect an open licensing system in Ontario, if and when implemented, to be another significant catalyst for our company and for the Canadian cannabis industry as a whole.”     

(1) System-wide retail sales is a Non-IFRS measure. For more information, see the “Non-IFRS Financial Measures” section below.


About Inner Spirit

Inner Spirit Holdings Ltd. (CSE:ISH) has established a growing network of recreational cannabis stores across Canada under its Spiritleaf brand. The Spiritleaf network includes franchised and corporate-owned stores as well as an Ontario retail partnership, all operated with an entrepreneurial spirit and with the goal of creating deep and lasting ties within their local communities. Spiritleaf aims to be the most knowledgeable and trusted source of recreational cannabis by offering a premium consumer experience and quality curated cannabis products. The Company is led by passionate advocates for cannabis who have years of retail, franchise and consumer marketing experience. Key industry partners and shareholders include Auxly Cannabis Group Inc. (TSX.V:XLY), HEXO Corp (TSX:HEXO) and Tilray, Inc. (NASDAQ:TLRY). Learn more at www.innerspiritholdings.com and www.spiritleaf.ca. 

Non-IFRS Financial Measures 

In this news release, the Company reports “system-wide retail sales”, a financial measure that is not determined or defined in accordance with the International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS“). Such non-IFRS financial measure does not have a standardized meaning prescribed by IFRS and Inner Spirit’s methods of calculating this financial measure may differ from methods used by other companies. Accordingly, such non-IFRS financial measure may not be comparable to similarly titled measures presented by other companies. This measure is provided as additional information to complement IFRS by providing a further understanding of operations from management’s perspective and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. 

System-wide retail sales are the sum of the revenue reported to Inner Spirit by franchisees of Spiritleaf retail cannabis stores, by Company-owned Spiritleaf retail cannabis stores, by franchisees of Watch It! retail stores and by Company-owned Watch It! retail stores. This measure is useful to management and the investment community in evaluating brand scale and market penetration, and is used by management of Inner Spirit to assess the financial and operational performance of the Company.

Forward-looking statements 

This news release contains statements and information that, to the extent that they are not historical fact, may constitute “forward-looking information” within the meaning of applicable securities legislation. Forward-looking information may include financial and other projections, as well as statements regarding future plans, objectives or economic performance, or the assumption underlying any of the foregoing. In some cases, forward-looking information can be identified by terms such as “may”, “would”, “could”, “will”, “likely”, “except”, “anticipate”, “believe”, “intend”, “plan”, “forecast”, “project”, “estimate”, “outlook”, “potential”, or the negative thereof or other similar expressions concerning matters that are not historical facts. Examples of such statements include, but are not limited to, statements with respect to the objectives and business plans of the Company; the number of Spiritleaf retail cannabis stores projected to be opened by the end of 2019; the Company working towards achieving profitability; the number of Spiritleaf retail cannabis stores expected to be operating by the end of the first quarter of 2020; the Company’s anticipation that store revenues will be further enhanced with the introduction of Cannabis 2.0 products; the Company’s anticipation that system-wide retail sales will continue to grow; and the Company’s expectation that an open licensing system in Ontario, if and when implemented, will be a significant catalyst for the Company and for the Canadian cannabis industry as a whole.  Actual results could differ materially from those currently anticipated due to a number of factors and risks, including but not limited to, the risk that the Company may not be able to expand across the Province of Saskatchewan, whether through online retail cannabis sales, through opening franchised retail cannabis stores, or through corporate-owned retail cannabis stores; the risk that the Company or its franchisees do not receive retail cannabis licenses or are not able to open additional retail cannabis stores; the risk that the licensed Spiritleaf retail cannabis stores intended to be opened do not open as anticipated or at all; the risk that the actual benefits from Cannabis 2.0 products will not be as anticipated; the risk that corporate-owned and franchised Spiritleaf retail cannabis stores do not perform as anticipated; the risk that Ontario does not adopt an open retail cannabis licensing framework, and if adopted, the risk that the Company and its franchisees do not benefit from such system as anticipated or at all; and other factors outside of the Company’s control. Readers are cautioned that the foregoing list of factors and risks is not exhaustive. Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because the Company can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. The Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. The forward-looking information included in this news release is made as of the date of this news release and the Company does not undertake an obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.

For further information

Darren Bondar, President & CEO 

Email: [email protected] 

Phone: 1 (403) 930-9300