Inner Spirit Holdings Announces Year-End 2019 Financial Results
May 13, 2020
Inner Spirit Holdings Announces Year-End 2019 Financial Results
Country’s largest retail cannabis brand network opening 48th Spiritleaf store location this week with more than 30 additional stores projected by end of the year
CALGARY, Alberta (May 13, 2020) – Inner Spirit Holdings Ltd. (“Inner Spirit” or the “Company”) (CSE:ISH), a Canadian company that has established a national network of Spiritleaf retail cannabis stores, today announced it has filed its Audited Consolidated Financial Statements (the “Financial Statements”) and corresponding Management’s Discussion and Analysis (the “MD&A”) for the year ended December 31, 2019. The Financial Statements and MD&A are available for review on the Company’s SEDAR profile at www.sedar.com and the Company’s website at www.innerspiritholdings.com. The filings were postponed due to delays caused by the COVID-19 pandemic outbreak.
“The 2019 year was pivotal for Inner Spirit as we developed our truly national network by opening a new Spiritleaf retail cannabis store approximately every 10 days on average, achieved more than $29 million in system-wide retail sales(1) and served some 740,000 customers. With the infrastructure we have put in place and an iconic brand developed, the Company is well poised for future sales and revenue growth as Canada’s largest retailer in the recreational cannabis industry by store count. We also simplified our business by discontinuing the Watch It! Consolidated Ltd. (“Watch It!”) retail operations so we are entirely focused on the cannabis sector with our continuing operations,” said Darren Bondar, President and CEO of Inner Spirit.
“While our 2019 financial results certainly show impressive year over year growth, we look forward to seeing how the expanding Spiritleaf network of franchised and corporate-owned stores performs as we move into the 2020 reporting periods. We’re receiving excellent support and loyalty from our customers, investors, franchise partners, strategic partners and employees as we continue to build a nationally recognized and financially resilient organization. We have built a foundation that we plan to leverage in 2020 to generate future growth and opportunity with more than 30 additional store locations projected by the end of the year.”
Due to the wind-down of its wholly owned subsidiary, Watch It!, the Company is required to report the historical operations of Watch It! as discontinued operations. The Financial Statements filed today reflect this classification, as does the financial data provided below.
Inner Spirit reported the following financial highlights for the year ended December 31, 2019:
- System-wide retail sales(1) was $29,397,606 compared with $963,243 in 2018(2)
- Total revenue from continuing operations was $8,114,268 compared with $624,216 in 2018(2)
- Total revenue includes:
- Retail revenue from continuing operations was $3,170,775 compared with $20,860 in 2018(2)
- Royalty revenue from continuing operations was $1,328,301 compared with $45,732 in 2018(2)
- Gross profit from continuing operations was $3,733,002 compared with $190,119 in 2018(2)
- Total net loss from continuing operations was $10,849,162, or $0.05 per share, compared with $7,005,308, or $0.05 per share, in 2018(2)
- Total net loss from continuing and discontinued operations was $11,525,168, or $0.06 per share, compared with $11,694,973, or $0.09 per share, in 2018(2)
Inner Spirit reported the following financial highlights for the quarter ended December 31, 2019:
- System-wide retail sales(1) was $13,857,808, an increase of 53% from $9,035,163 in the third quarter of 2019 and an increase of 1,339% from $963,243 in the fourth quarter of 2018(2)
- Total revenue from continuing operations was $3,805,074, an increase of 24% from $3,066,668 in the third quarter of 2019(2) and an increase of 1,598% from $224,065 in the fourth quarter of 2018(2). The growth in total revenue is attributable to the operation of 43 Spiritleaf-branded retail cannabis stores during the fourth quarter of 2019 while in the same quarter of 2018 the Company was still in the process of opening its first stores.
- Total net loss from continuing operations was $4,056,009, compared with $2,506,637 in the third quarter of 2019(2) and compared with $3,362,735 in the fourth quarter of 2018.(2) The increased loss in the fourth quarter of 2019 related mainly to the recording of non-operating expenses of share-based compensation, accretion of right of use assets, financial guarantee liability expense, convertible debenture accretion and accretion on leases.
- Total net loss from continuing and discontinued operations was $4,220,337, or $0.02 per share, compared with $2,490,323, or $0.01 per share, in the third quarter of 2019 and $7,461,669, or $0.05 per share, in the fourth quarter of 2018. The decreased total net loss in the fourth quarter of 2019 was primarily due to the increase in revenue from the growing number of Spiritleaf-branded retail cannabis stores and the smaller loss on discontinued operations compared to 2018.
Inner Spirit achieved the following milestones during the year ended December 31, 2019:
- Opened 39 Spiritleaf retail cannabis store locations in Alberta, British Columbia and Ontario. This included 34 stores (24 franchised, 10 corporate-owned) in Alberta, 4 franchised stores in British Columbia and one retail partner store in Ontario. In 2018, four franchised Spiritleaf retail cannabis stores were opened with three in Alberta and one in Saskatchewan.
- Recorded more than $29 million in system-wide retail sales(1) and served approximately 740,000 customers in 2019
- The Company completed a brokered public offering of 12% senior secured convertible debenture units resulting in gross proceeds of $10 million
- Inner Spirit continued to develop its expansion program for other provinces where the regulatory frameworks have permitted. With the Ontario and Saskatchewan governments announcing late in 2019 that they are moving to an open licensing system, the Company prepared itself to apply for additional retail operator licenses in those provinces in 2020.
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting (the “AGM”) is scheduled for May 15, 2020 at 9:30 am MT in Calgary. Due to physical distancing measures in place to mitigate the COVID-19 pandemic, Inner Spirit has asked shareholders to vote by proxy in advance of the AGM and not attend in person. Shareholders and others who might otherwise attend the AGM in person can access login information included in the Management Information Circular for the AGM which has been distributed to shareholders and posted under Inner Spirit’s profile on SEDAR. President and CEO Darren Bondar will deliver an updated investor presentation after the formal proceedings of the AGM are concluded.
The Spiritleaf retail cannabis store network includes 47 franchised, licensed and corporate-owned stores operating in Alberta, British Columbia, Saskatchewan and Ontario with the 48th store expected to open in Kelowna, British Columbia this Friday in advance of the Victoria Day long weekend. Additional store locations are expected to open in 2020 in Alberta, British Columbia, Saskatchewan, Ontario, and Newfoundland and Labrador.
Please visit www.spiritleaf.ca for up-to-date information on store locations and operating hours. Due to the COVID-19 pandemic, Spiritleaf stores are operating with enhanced customer service processes to ensure the safety of employees and customers. The Spiritleaf Select & Collect service enables customers to pre-shop and order online prior to pick-up. Customers can also connect with their local Spiritleaf store through The Collective customer benefits program to further streamline and individualize their shopping experience.
(1) System-wide retail sales is a Non-IFRS financial measure. For more information, see the “Non-IFRS Financial Measures” section below.
(2) The comparative period has been restated to reflect discontinued operations as discussed in Note 21 of the Financial Statements.
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), Tilray, Inc. (NASDAQ:TLRY) and Prairie Merchant Corporation. 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“). System-wide retail sales 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, as presented in this news release, represents the sum of the revenue reported to Inner Spirit by (i) franchisees of Spiritleaf retail cannabis stores, (ii) the Company’s Spiritleaf retail partner in Ontario, and (iii) Company-owned Spiritleaf retail cannabis 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 and the strength of the Company’s market position relative to its competitors.
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 is typically, but not always, identified by the use of words such as “expected”, “projected”, “plan”, “will”, “poised” and similar words, including negatives thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking information in this news release includes, but is not limited to, statements regarding: the Company’s projected opening of 30 additional Spiritleaf retail cannabis stores by the end of the year; the Company being well poised for future sales and revenue growth; the company’s plan to generate future growth and opportunity in 2020; and the expected opening of the 48th Spiritleaf retail cannabis store in Kelowna, British Columbia this Friday. Such forward-looking information is based on various assumptions and factors that may prove to be incorrect, including, but not limited to, assumptions with respect to: the ability of the Company to successfully implement its strategic plans and initiatives and whether such strategic plans and initiatives will yield the expected benefits; and the receipt of necessary licences from regulatory authorities. Although the Company believes that the assumptions and factors 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 it will prove to be correct or that any of the events anticipated by such forward-looking information will transpire or occur, or if any of them do so, what benefits the Company will derive therefrom. 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 and its franchisees do not receive the necessary retail cannabis licences or that they are not able to open additional retail cannabis stores as anticipated or at all; the ability of management to execute its business strategy, objectives and plans; the impact of general economic conditions in Canada. 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 and CEO
Email: [email protected]
Phone: 1 (403) 930-9300