Irwin Naturals Inc. (CSE: IWIN) (OTC: IWINF) (FRA: 97X) (“Irwin” or the “Company”) reported its financial results for its third quarter of fiscal 2023, the period ended September 30, 2023, on www.sedar.com.
Financial Highlights for Q3 2023
- Q3 revenue was $19.1 million, down 13.4% from $22.0 million in Q3 2022.
- Income from operations decreased $2.9 million from $0.6 million in Q3 2022 to a loss of $2.3 million in Q3 2023. The decrease is primarily attributed to the continued startup costs related to the Company’s 2022 and 2023 Acquisitions at Irwin Naturals Emergence.
- Sold the assets of underperforming clinics and shifted its focus on the clinics wholly-owned and operated by Irwin Naturals Emergence.
Financial Highlights for Year-to-Date September 30, 2023
- Completed the acquisition of Serenity Health, LLC, one of the leading ketamine clinics in Louisville, KY on February 17, 2023.
- Announced the successful acquisition of Keta Media, LLC, dba Ketamine Media, the nation’s foremost advertising company dedicated to raising awareness about the clinical use of ketamine, on March 17, 2023.
During the first half of 2023, the Company launched the first products to the continental cannabis market and has signed ten brand licensing deals that will see Irwin Naturals products enhanced with THC being offered in places like California, Colorado, Mississippi, Michigan, New Mexico, Oregon, Oklahoma, and Canada. Additionally, to date, the Company owns and operates five mental health clinics and one advertising company specializing in ketamine treatments. The Company will continue to build upon this solid foundation and make the necessary investments to support our growth objectives within the psychedelics sector.
“During the first three quarters of 2023, we successfully launched our branded licensing initiative in our cannabis sector. Sales have exceeded our expectations and we look forward continuing our licensing efforts in the space. We also continued to expand our mental health footprint through the acquisition of an industry leading marketing and patient acquisition platform, Ketamine Media, enabling greater treatment availability and market expansion.”
Irwin Naturals has been a household name and best-in-class nutraceutical company since 1994. It is now leveraging its brand into both the cannabis and psychedelic sectors. On a mission to heal the world with plant medicine, Irwin has operated its nutraceutical business profitably for over 28 years. The growing portfolio of products is available in more than 100,000 retail doors across North America, where 80% of households know the Irwin Naturals brand. In 2018, the Company first leveraged its brand to expand into the cannabis industry by launching hemp-based CBD products into the mass market. The Company is now leveraging its famous halo of brand trust to become, perhaps, the first household name brand to offer THC-based products. Its rapidly growing national chain of psychedelic mental health clinics is called Irwin Naturals Emergence.
To contact the Company’s Investor Relations department, please call toll-free at (800) 883-4851 or send an email to Investors@IrwinNaturals.com.
The following is a brief summary of regulatory matters concerning ketamine in the United States (“US”). Under the Controlled Substances Act (21 U.S.C. § 811) (the “CSA”), ketamine is currently a Schedule III drug as well as being listed under the associated Narcotic Control Regulations, and psilocybin is currently a Schedule I drug.
Most US States have enacted Controlled Substances Acts (“State CSAs”) which regulate the possession, use, sale, distribution, and manufacture of specified drugs or categories of drugs and establish penalties for State CSA violations and form the basis for much state and local drug laws enforcement activity. State CSAs have either adopted drug schedules identical or similar to the federal CSA schedules or, in some instances, have incorporated the federal scheduling mechanism. Among other requirements, some US States have established a prescription drug monitoring or review programs collect information about prescription and dispensing of controlled substances for the purposes of monitoring, analysis and education.
In the United States, facilities holding or administering controlled substances must be registered with the US Drug Enforcement Agency (“DEA“) to perform this activity. As such, medical professionals and/or the clinics in which they operate, as applicable, are also required to have a DEA license to obtain and administer ketamine (a “DEA License“). While ketamine is a controlled substance in the United States, it is approved for general anesthetic induction under the US Food, Drug, and Cosmetic Act. Once a drug is approved for use, physicians may prescribe that drug for uses that are not described in the product’s labelling or that differ from those tested by the manufacturer and approved by the Food and Drug Administration (the “FDA“). Licensed medical practitioners may prescribe ketamine legally in Canada or the United States where they believe it will be an effective treatment in their professional judgment.
Please see Irwin’s filing statement on its SEDAR profile for more information on the regulatory environment and regulations surrounding the US THC industry.
Forward-Looking Information
This news release contains certain forward-looking statements that reflect the current views and/or expectations of management of the Company with respect to performance, business and future events. Forward-looking statements can often be identified by words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business and the industry and markets in which the Company operates. The Company does not undertake any obligation to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.
Neither the CSE nor its Market Regulator (as that term is defined in policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
SOURCE: Irwin Naturals, Inc.
EBITDA and Adjusted EBITDA – Reconciliation
The Company defines EBITDA and Adjusted EBITDA as per the table below. It should be noted that these performance measures are not defined under IFRS and may not be comparable to similar measures used by other entities. The Company believes that these measures are useful financial metrics as they assist in determining the ability to generate cash from operations. Investors should be cautioned that EBITDA and Adjusted EBITDA should not be construed as an alternative to net earnings or cash flows as determined under IFRS. The reconciling items between net earnings, EBITDA, and Adjusted EBITDA are as follows:
| | Three Months Ended
September 30, | | | | | | Nine Months Ended
September 30, | | | | | |
| | (in thousands) | | | | | | (in thousands) | | | | | |
| | 2023 | | 2022 | | $ Change | | % Change | | 2023 | | 2022 | | $ Change | | % Change | |
| Statement of Profit | | | | | | | | | | | | | | | | | | | | | | | | |
| Net (loss) income | $ | (1,964 | ) | $ | (583 | ) | $ | (1,381 | ) | % | 100.0 | + | $ | (15,064 | ) | $ | 1,109 | | $ | (16,173 | ) | % | (100.0 | +) |
| Interest expense, net | | 685 | | | 181 | | | 504 | | | 100.0 | + | | 1,982 | | | 541 | | | 1,441 | | | 100.0 | + |
| Income tax (recovery) expense | | (1,059 | ) | | 1,024 | | | (2,083 | ) | | (100.0 | +) | | (4,249 | ) | | 2,003 | | | (6,252 | ) | | (100.0 | +) |
| Depreciation and amortization | | 687 | | | 467 | | | 220 | | | 47.1 | | | 2,202 | | | 1,298 | | | 904 | | | 69.6 | |
| EBITDA | | (1,651 | ) | | 1,089 | | | (2,740 | ) | | (100.0 | +) | | (15,129 | ) | | 4,951 | | | (20,080 | ) | | (100.0 | +) |
| Foreign currency translation adjustments | | — | | | 1 | | | (1 | ) | | (100.0 | +) | | 3 | | | 1 | | | 2 | | | 100.0 | + |
| Gain on contingent consideration | | — | | | (42 | ) | | 42 | | | (100.0 | +) | | (6,154 | ) | | (305 | ) | | (5,849 | ) | | 100.0 | + |
| Intangible assets impairment | | — | | | — | | | — | | | — | | | 5,587 | | | — | | | 5,587 | | | 100.0 | + |
| Goodwill impairment | | — | | | — | | | — | | | — | | | 11,922 | | | — | | | 11,922 | | | 100.0 | + |
| Adjusted EBITDA | $ | (1,651 | ) | $ | 1,048 | | $ | (2,699 | ) | % | (100.0 | +) | $ | (3,771 | ) | $ | 4,647 | | $ | (8,418 | ) | % | (100.0 | +) |
| |
Irwin Naturals, Inc.
Consolidated Interim Statements of Financial Position (Unaudited)
As of September 30, 2023 and December 31, 2022
(Expressed in thousands of US dollars, except share amounts)
| |
| | September 30, 2023 | | December 31, 2022 |
| ASSETS | | | |
| Current assets: | | | |
| Cash | $ | 5,484 | | | $ | 800 | |
| Trade receivables, net | 12,626 | | | 21,311 | |
| Inventory | 17,369 | | | 22,506 | |
| Prepaid expenses and other current assets | 2,418 | | | 2,932 | |
| Notes receivable from related parties, current | 38 | | | 255 | |
| Total current assets | 37,935 | | | 47,804 | |
| Non-current assets: | | | | | |
| Property and equipment, net | 348 | | | 271 | |
| Right-of-use assets | 3,134 | | | 4,194 | |
| Notes receivable from shareholders | 7,141 | | | 6,014 | |
| Notes receivable from related parties, non-current | 183 | | | — | |
| Goodwill | 11,611 | | | 10,215 | |
| Intangible assets, net | 3,617 | | | 7,677 | |
| Deferred tax asset | 6,623 | | | 2,367 | |
| Other non-current assets | 263 | | | 259 | |
| Total non-current assets | 32,920 | | | 30,997 | |
| TOTAL ASSETS | $ | 70,855 | | | $ | 78,801 | |
| | | | | | | | |
| LIABILITIES | | | |
| Current liabilities: | | | |
| Trade and other payables | $ | 14,643 | | | $ | 17,997 | |
| Reserve for returns | 648 | | | 2,036 | |
| Lease liabilities, current | 1,652 | | | 1,817 | |
| Line of credit, net of debt issuance costs | 25,666 | | | 16,448 | |
| Notes payable due to acquiree, current | 5,750 | | | — | |
| Notes payable, current | 42 | | | 36 | |
| Total current liabilities | 48,401 | | | 38,334 | |
| Non-current liabilities: | | | | | |
| Lease liabilities, non-current | 1,671 | | | 2,529 | |
| Notes payable, non-current | 668 | | | 498 | |
| Contingent consideration | — | | | 6,154 | |
| Notes payable due to acquiree, non-current | 5,250 | | | — | |
| Deferred tax liability | 983 | | | 983 | |
| Total non-current liabilities | 8,572 | | | 10,164 | |
| TOTAL LIABILITIES | $ | 56,973 | | | $ | 48,498 | |
| | | | | | |
| EQUITY AND NONCONTROLLING INTEREST | | | | | |
| Class B Shares, 320,000,000 shares authorized, issued and outstanding | $ | 13,750 | | | $ | 13,750 | |
| Subordinate Voting Shares, 2,643,668 shares authorized, issued and outstanding | 6,198 | | | 7,068 | |
| Multiple Voting Shares, 18,240 shares authorized, issued and outstanding | 59 | | | 59 | |
| Proportionate Voting Shares, 1,066,000 shares authorized, issued and outstanding | 2,697 | | | 5,610 | |
| Warrants reserve | 30 | | | 30 | |
| Accumulated other comprehensive income | (12 | ) | | 3 | |
| Retained (deficit) earnings | (15,568 | ) | | (3,324 | ) |
| Total controlling interest | 7,154 | | | 23,196 | |
| Noncontrolling interest | 6,728 | | | 7,107 | |
| TOTAL EQUITY AND NONCONTROLLING INTEREST | 13,882 | | | 30,303 | |
| TOTAL LIABILITIES AND EQUITY | $ | 70,855 | | | $ | 78,801 | |
| | | | | | | |
Irwin Naturals, Inc.
Consolidated Interim Statements of Profit and Comprehensive Income (Unaudited)
For the Three and Nine Months Ended September 30, 2023 and 2022
(Expressed in thousands of US dollars, except share and per share amounts)
| |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Operating revenue | $ | 19,069 | | | $ | 22,024 | | | $ | 63,704 | | | $ | 66,427 | |
| Cost of sales | (11,270 | ) | | (11,421 | ) | | (34,912 | ) | | (35,219 | ) |
| Gross profit | 7,799 | | | 10,603 | | | 28,792 | | | 31,208 | |
| Selling, general and administrative expenses | 10,084 | | | 9,981 | | | 34,393 | | | 27,555 | |
| Income (loss) from operations | (2,285 | ) | | 622 | | | (5,601 | ) | | 3,653 | |
| Other (income) expenses: | | | | | | | | | | | |
| Interest expense, net | 685 | | | 181 | | | 1,982 | | | 541 | |
| Loss (gain) on foreign currency exchange | –– | | | –– | | | 3 | | | –– | |
| Goodwill impairment | –– | | | –– | | | 11,922 | | | –– | |
| Intangible assets impairment | –– | | | –– | | | 5,587 | | | –– | |
| Intangible assets amortization | 98 | | | –– | | | 417 | | | –– | |
| Gain on termination of leases | (45 | ) | | –– | | | (45 | ) | | –– | |
| Gain on contingent liabilities | –– | | | –– | | | (6,154 | ) | | –– | |
| Total other (income) expenses | 738 | | | 181 | | | 13,712 | | | 541 | |
| Net (loss) income before income taxes | (3,023 | ) | | 441 | | | (19,313 | ) | | 3,112 | |
| Income tax (recovery) expense | (1,059 | ) | | 1,024 | | | (4,249 | ) | | 2,003 | |
| Net (loss) income | (1,964 | ) | | (583 | ) | | (15,064 | ) | | 1,109 | |
| Less: net (loss) income attributable to non-controlling interest | | (228 | ) | | 90 | | | (379 | ) | | 441 | |
| Net (loss) income attributable to controlling interest | | (1,736 | ) | | (673 | ) | | (15,747 | ) | | 668 | |
| | | | | | | | | | | | | |
| Comprehensive Income | | | | | | | | | | | | |
| Net (loss) income | $ | (1,964 | ) | | $ | (583 | ) | | $ | (15,064 | ) | | $ | 1,109 | |
| Foreign currency translation adjustments | | (1 | ) | | (33 | ) | | (15 | ) | | (45 | ) |
| Total comprehensive (loss) income | | (1,965 | ) | | (616 | ) | | (15,079 | ) | | 1,064 | |
| Less: net (loss) income attributable to non-controlling interest | | (228 | ) | | 90 | | | (379 | ) | | 441 | |
| Comprehensive (loss) income attributable to controlling interest | $ | (1,737 | ) | | $ | (706 | ) | | $ | (14,685 | ) | | $ | 623 | |
| | | | | | | | | | | | |
| (Loss) earnings per share, controlling interest – basic | $ | (0.56 | ) | | $ | (0.49 | ) | | $ | (4.48 | ) | | $ | 0.53 | |
| (Loss) earnings per share, controlling interest – diluted | $ | (0.56 | ) | | $ | (0.49 | ) | | $ | (4.48 | ) | | $ | 0.00 | |
| Weighted average number of shares outstanding – basic | | 3,105,169 | | | 1,375,552 | | | 3,281,259 | | | 1,259,295 | |
| Weighted average number of shares outstanding – diluted | 3,105,169 | | | 1,375,552 | | | 3,281,259 | | | 322,425,690 | |
| | | | | | | | | | | | | |
Irwin Naturals, Inc.
Consolidated Interim Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2023 and 2022
(Expressed thousands of US dollars)
| |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
| Net (loss) income | $ | (15,065 | ) | | $ | 1,109 | |
| Adjustments to reconcile to net cash provided by (used in) operating activities: | | | | | |
| Depreciation and amortization | 2,202 | | | 1,298 | |
| Gain on contingent consideration | (6,154 | ) | | (305 | ) |
| Goodwill impairment | 11,922 | | | — | |
| Intangible assets impairment | 5,587 | | | — | |
| Change in allowance for doubtful accounts | 243 | | | 11 | |
| Change in inventory reserve | 161 | | | (3,765 | ) |
| Change in deferred tax assets | (4,256 | ) | | 1,455 | |
| Notes receivable from shareholders | (1,050 | ) | | (1,800 | ) |
| Notes receivable from related parties | (260 | ) | | (255 | ) |
| Loss on disposal of fixed assets / Loss on termination of leases | (47 | ) | | — | |
| Interest (income) expense, net | (98 | ) | | 42 | |
| Changes to working capital: | | | | | |
| Trade receivables | 9,282 | | | 2,226 | |
| Inventory | 4,976 | | | (1,130 | ) |
| Prepaid expenses and other current assets | 338 | | | (641 | ) |
| Trade and other payables | (2,776 | ) | | 711 | |
| Reserve for returns | (1,387 | ) | | (323 | ) |
| Other non-current assets | (3 | ) | | (75 | ) |
| Net cash provided by (used in) operating activities | 3,615 | | | (1,442 | ) |
| | | | | | |
| Cash flows from investing activities: | | | | | |
| Business combinations, net of cash acquired (Note 5) | (6,195 | ) | | 303 | |
| Purchases of property and equipment | (110 | ) | | (86 | ) |
| Net cash (used in) provided by investing activities | (6,305 | ) | | 217 | |
| | | | | | |
| Cash flows from financing activities: | | | | | |
| Proceeds from line of credit | 75,205 | | | 68,430 | |
| Payments to line of credit | (65,429 | ) | | (64,399 | ) |
| Payments to notes payable | (117 | ) | | (1,098 | ) |
| Payments of debt issuance costs | (764 | ) | | — | |
| Payments on operating leases | (1,424 | ) | | (1,100 | ) |
| Purchase of treasury stock | (112 | ) | | — | |
| Net cash provided by (used in) financing activities | 7,389 | | | 1,833 | |
| Effect of foreign exchange on cash | (15 | ) | | (28 | ) |
| Net increase in cash | 4,684 | | | 580 | |
| Cash at beginning of the year | 800 | | | 625 | |
| Cash at period end | $ | 5,484 | | | $ | 1,205 | |
