Australis Capital Inc. (CSE: AUSA) (OTC: AUSAF) (“AUSA” or the “Company”), doing business as AUDACIOUS, today announced that the Company has filed its unaudited financial statements and management discussion and analysis for the first quarter of fiscal year 2022, the period ending June 30, 2021.
Terry Booth, CEO, commented, “Continuing the strong performance recorded in Q4 of fiscal 2021, AUSA has transformed itself into a rapidly growing MSO in the U.S. cannabis space. With revenues soaring by over 2,600% over last year, improving gross margin and adjusted EBITDA, we are showing the power of our execution on a unique strategy. This is just the beginning. We are exceptionally well positioned with operations in new jurisdictions coming online, new brands launched, and a number of very interesting transactions and partnerships progressing well towards signing. Going forward, shareholders can expect AUDACIOUS to continue transforming the business and execute towards becoming a unique and uniquely successful MSO.”
Financial Highlights
Driven by a full quarter of ALPS revenues and Green Therapeutics (“GT”)-related management fee income, AUSA revenues reached $1.7 million, its best quarter ever and far surpassing revenues in any complete fiscal year since inception. Revenues soared by 2,652% over the prior year Q1, and by 266% sequentially compares to the prior quarter, Q4 2021. ALPS, acquired on March 9, 2021 saw revenues grow by 90% sequentially, on a pro forma basis comparing Q1 2022 to Q4 2021.
Gross margin came in at a strong 62% and climbed to $1.1 million, a 1,814% increase over Q1 last year, led by strong consulting revenues from ALPS along with management fee income related to GT. Margins from the cannabis business will kick in once the pending license transfer from GT is approved in Nevada to complete the balance of the GT acquisition.
The Company recorded a net loss of $(9.5) million or $(0.04) per share, driven primarily by a decrease during Q1 in the price of Body and Mind (“BaM”) shares held. To date in Q2 FY 2022, BaM has rebounded back to the per share price as of March 31, 2021. Without the revaluation of the BaM shares, Adjusted EBITDA was comparable to a year ago. Adjusted EBITDA remained at a slight loss of $(0.01) per share or $(1.6 million), a sequential 15% improvement from $(1.8 million) in Q4 FY 2021. There were very little other impairment costs, as AUSA’s new management has completed most of the restructuring of various deals or disputes as of FY 2021.
The table below provides financial highlights for the quarter.
CAD $ |
Q1 FY 2022 |
Q1 FY 2021 |
Change |
Revenue |
$1.73M |
$0.06M |
2652% |
Gross Profit |
$1.06M |
$0.06M |
1814% |
Operating Loss |
($3.42M) |
($2.52M) |
(35%) |
Adjusted EBITDA1 |
($1.58M) |
($1.43M) |
(11%) |
Q1 FY 2022 |
Q4 FY 2021 |
Change |
|
Cash, and Securities |
$8.7M |
$16.3M |
(47%) |
Total Assets |
$74.5M |
$82.4M |
(10%) |
Owners Equity |
$62.4M |
$66.9M |
(6%) |
1 Non- GAAP unaudited measure which the Company feels better reflects operating results |
Management commentary and Operational Highlights
Please refer to the recent August 26, 2021, Q4 FY 2021 press release.
Q1 2022 Overview
Revenue grew by over 2,650% in Q1 FY 2022 vs. Q1 FY 2021, due mainly to a full quarter of ALPS revenue, along with revenues earned from management fees related to the GT transaction. Gross profit grew by over 1,800% in the same period, with strong gross profit from the ALPS business and fees earned from GT. Operating expenses increased due to the addition of ALPS, along with additional personnel at the corporate level as the Company prepares to expand as an operating company. The net loss increased to $9.5 million, due to a decrease in the investment valuation on the BaM shares of $5.9 million. Adjusted EBITDA, however, increased only slightly in Q1 FY 2022 vs. Q1 FY 2021, as much of the higher operating expenses pertained to share based compensation for new personnel and amortization of intangibles such as customer relationships from the ALPS acquisition.
Quarter Ending |
|||||
Q1 FY 22 |
Q4 FY 21 |
Q3 FY 21 |
Q2 FY 21 |
Q1 FY 21 |
|
June 30, |
March 31, |
December 31, |
September 30, |
June 30, |
|
2021 |
2021 |
2020 |
2020 |
2020 |
|
$ |
$ |
$ |
$ |
$ |
|
Revenue |
1,728,363 |
459,171 |
90,378 |
104,800 |
62,802 |
Cost of goods sold |
(663,824) |
(435,508) |
(256,426) |
(220,920) |
(7,188) |
Gross profit (loss) |
1,064,539 |
23,663 |
(166,048) |
(116,120) |
55,614 |
Operating expenses |
|||||
Wage and benefits |
948,029 |
801,390 |
3,451,617 |
708,731 |
936,770 |
Share-based payments |
1,370,845 |
998,651 |
(1,263,126) |
732,982 |
921,651 |
Selling general and administrative |
1,700,089 |
1,810,246 |
2,557,961 |
1,032,553 |
547,223 |
Depreciation and amortization |
460,974 |
99,531 |
152,341 |
171,250 |
172,764 |
4,479,937 |
3,709,818 |
4,898,793 |
2,645,516 |
2,578,408 |
|
Loss from operations |
(3,415,398) |
(3,686,155) |
(5,064,841) |
(2,761,636) |
(2,522,794) |
Gain (loss) on investments |
(5,864,934) |
3,235,433 |
(1,223,902) |
(303,662) |
(747,605) |
Gain (loss) on impairments, settlements, provisions |
(226,200) |
3,676,862 |
(12,935,065) |
(2,641,312) |
– |
Other expense |
(164,338) |
(213,611) |
(198,280) |
(108,571) |
(42,326) |
(6,255,472) |
6,698,684 |
(14,357,247) |
(3,053,545) |
(789,931) |
|
Net income (loss) before tax |
(9,670,870) |
3,012,529 |
(19,422,088) |
(5,815,181) |
(3,312,725) |
Revenue
Total revenues for the three months ended June 30, 2021 and 2020 were $1.7 million and $0.06 million, respectively. Q1 FY 2022 includes revenues from ALPS (acquired in March 2021), and management fees from GT.
Cost of Sales
Cost of sales for the three months ended June 30, 2021 and 2020, were $0.7 million and $0.01 million, respectively. The Q1 FY 2022 cost is largely ALPS labor costs for professionals advising greenhouse clients.
Gross Profit
Gross profit for the three months ended June 30, 2021 and 2020, were $1.1 million and $0.06 million, respectively. The Q1 FY 2022 amounts are predominantly from high margin ALPS business plus management fees with GT.
Wages and Benefits
Wages and benefits for the three months ended June 30, 2021 and 2020 were unchanged at $0.9 million. The addition of ALPS was partially offset by lower personnel levels and wages from changes in senior management after the dissident battle. Wages and benefits did increase by $0.1 million over Q4 FY 2021, with new management hires during Q4 FY 2021 that were now in place for a full quarter in Q1 FY 2022.
Share-based Payments
Share-based payments for the three months ended June 30, 2021, and 2020 were $1.4 million and $0.9 million, respectively. The increase is due primarily to the additional options granted with the March 2021 acquisitions of ALPS and GT as well as to the new management team at corporate.
Selling General and Administrative
SG&A expenses for the three months ended June 30, 2021, and 2020 were $1.7 million and $0.5 million, respectively. The increase from prior year is due to the addition of ALPS personnel as well as higher legal, professional and board of director fees.
Operating Loss
The operating loss was $3.4 million for the three months ended June 30, 2021, compared to $2.5 million for the three months ended June 30, 2020. Higher SG&A costs more than offset the increase in gross profit. However, the operating loss in Q1 FY 2022 was $0.3 million less than Q4 FY 2021 and $1.6 million less than Q3 FY 2021.
Other Expenses
Total other expenses for the three months ended June 30, 2021, and 2020 were $6.3 million and $0.8 million, respectively. The current period total includes a $5.9 million decrease in the value of the BaM holdings and a $0.2 million adjustment for the Rapid Cash settlement. The small amount of activity in impairments, settlements and provisions compared to FY 2021 reflects that new management had these matters mostly resolved by March 31, 2021. The prior year total includes a $0.7 million reduction in the value of the BaM investment.
Net Loss
The net loss for the three months ended June 30, 2021, and 2020 were $9.7 million and $3.3 million, respectively. The decrease in value of the BaM holdings along with higher personnel and professional fees were offset partially by higher gross margins.
Adjusted EBITDA
For the three months ended |
||
June 30, |
June 30, |
|
2021 |
2020 |
|
$ |
$ |
|
Loss from operations |
(3,415,398) |
(2,522,794) |
Share-based payments |
1,370,845 |
921,651 |
Depreciation and amortization |
460,974 |
172,764 |
Adjusted EBITDA |
(1,583,579) |
(1,428,379) |
Adjusted EBITDA per share |
(0.01) |
(0.01) |
For the three months ended |
||
June 30, |
June 30, |
|
2021 |
2020 |
|
$ |
$ |
|
Loss from operations |
(3,415,398) |
(2,522,794) |
Share-based payments |
1,370,845 |
921,651 |
Depreciation and amortization |
460,974 |
172,764 |
Adjusted EBITDA |
(1,583,579) |
(1,428,379) |
Adjusted EBITDA per share |
(0.01) |
(0.01) |
The Company believes a non-GAAP measure, adjusted EBITDA, is a better reflection of operating results. Adjusted EBITDA had a slightly higher loss for Q1 2021 with additional personnel costs from the acquisition of ALPS.
Working Capital & Liquidity
Working capital as of June 30, 2021, was $10.4 million, as compared to $16.4 million as at March 31, 2021 resulting in a decrease to working capital of $6.0 million. The decrease was due primarily to a decline in the value of the publicly traded BaM holdings and a sale of land held for sale. Subsequent to June 30, 2021, the unit value of the BaM shares has rebounded to the March 31, 2021 per share value.
Conference call details
Management will host a conference call discussing the results and the go forward business on Monday August 30, 2021 at 11 AM EST. The call can be accessed via telephone or via webcast per the details provided below.
Canada: |
1.647.792.1241 |
North American Toll Free: |
1.800.430.8332 |
Webcast URL: |
https://produceredition.webcasts.com/starthere.jsp?ei=1485895&tp_key=3e12ff453c |
Confirmation #: |
8208118 |
A replay of the call will be available until September 5, 2021. The replay can be accessed as follows: |
|
Encore Replay Canada: |
1.647.436.0148 |
Encore Replay North American Toll Free: |
1.888.203.1112 |
Encore Replay Entry Code: |
8208118 |
About AUSA
AUDACIOUS is at its roots a community and culture-based cannabis company. After the completion of a dissident shareholder battle that ended with convincing shareholder approval, Terry Booth, former Aurora CEO, who had to step away from AUSA upon spin off, re-joined AUSA as CEO on March 9, 2021. Since then, the company has reset the direction of AUSA and in just 3 months closed multiple accretive transactions, improved legacy contracts, established a world class Executive Team, and resolved previous executive and board exits.
Also, in the same 3-month time frame, AUSA with its acquisition of ALPS has entered the global Sustainable Controlled Environment Agriculture Industry, a rapidly growing segment of the global horticulture market. ALPS provides customized designs along with multiple services that allow operators to maximize yield and quality while minimizing inputs and resources, including labor. ALPS at present is active in cannabis and traditional horticulture projects across the globe, including the U.S., Canada, Denmark Finland, Iceland, Germany, Netherlands, Bahrein, United Arab Emirates, Southeast Asia, Australia, as well as other jurisdictions.
Total Capex committed by ALPS’ clients since Aurora divested its interest just 12 short months ago during the Covid crisis, stands at approximately $1 billion, with a rapidly growing business development pipeline in excess of $7 billion in total Capex to be spent by potential clients over the next 24 months.
AUSA’s business assets include: a 51% ownership interest in ALPS, a milestone weighted deal with an option to acquire the remaining 49% of ALPS –- AUSA and Green Therapeutics, an award-winning MSO, have finalized and agreed to all terms with respect to AUSA’s 100% acquisition (subject to regulatory state licensing approvals). AUSA also owns land assets in Bellingham, Washington – as well as the iconic West Coast brand Mr. Natural and the ingestibles brand LOOS with a footprint in the California market.
AUSA also has a supply partnership with Belle Fleur, founded by the team behind Rapper Weed and the discoverer or Machine Gun Kelly, who stated: “I just bought $1,000 worth of Rapper Weed at Cookies in Maywood. These guys have the best flower in the game.” AUSA and Belle Fleur are working towards a broader arrangement to include brand partnerships in Massachusetts and other jurisdictions the companies intend entering into.
AUSA furthermore has investments in Body and Mind Inc., a U.S. MSO, Quality Green, a Canadian licensed producer and Cocoon, a company changing the dispensary customer user experience through self-service kiosks The Company also has executed a term sheet for a JV partnership with U.S. and Canada based 3 Rivers Biotech for plant tissue culture, genetics clean-up and micro propagation.
AUSA cannabis assets and ALPS projects are presently located in Massachusetts, Arizona, Nevada, Washington, Michigan, Missouri, Oklahoma, and California with many other deals in other states presently being evaluated and negotiated.
The Company’s common shares trade on the CSE under the symbol “AUSA” and on the OTCQB under the symbol “AUSAF”.
The audited consolidated annual financial statements for the year ended March 31, 2021 are available on SEDAR and EDGAR and should be read in connection with this news release.
Adjusted EBITDA is a Non-GAAP metric used by management that does not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other companies. Management defines the Adjusted EBITDA as the Income (loss) from operations, as reported, before interest, taxes, and adjusted for removing other non-cash items, including the stock-based compensation expense, depreciation, and further adjustments to remove one-time expenses pertaining to personnel costs and fees resulting from the dissident battle and subsequent restructuring. Management believes Adjusted EBITDA is a useful financial metric to assess its operating performance on a cash adjusted basis before the impact of non-cash items and acquisition activities. The most comparable financial measure calculated and presented in accordance with U.S. GAAP is net operating income (loss), which was presented above prior to the Adjusted EBITDA figure.
“Terry Booth“
________________________________
Terry Booth
Chief Executive Officer