Plus Products Reports Second Quarter 2020 Financial Results
Q2 2020 Financial Highlights
- Revenues: Net revenues reached
$4.3Min Q2 2020, representing 21% year-over-year growth as compared to Q2 2019 net revenues of $3.6M. The Company continues to see revenue growth driven by its core operations in the Californiaadult-use market, with contributions from new brand launches, the Nevadaadult-use market, and its national hemp CBD product line. Sales in Nevadawere negatively impacted by COVID-19 during the quarter due to a market-wide reduction in demand and temporary disruption in supply caused in part by the pandemic.
- Gross Profits: Gross profits climbed to
$1.6Min Q2 2020 compared to $0.7Min Q2 2019. Gross profit margin in Q2 2020 was 36%, up from 20% in Q2 2019. Reduced costs per unit derived from operating at increased scale, along with a higher average selling price per unit, drove the improvement in profitability.
- Operating Profits (Losses): Operating losses were
$(1.4)Min Q2 2020, representing a 71% improvement year-over-year from $(4.6)Min Q2 2019.
- Cash Balance: The Company reported
$13.0Min cash and cash equivalents at June 30, 2020. Cash and cash equivalents fell by $1.1Mduring the second quarter. With a $0.7Msemi-annual interest payment occurring at the end of the period, the Company consumed just $0.4Min cash from normal operating, investing, and financing activities.
Q2 2020 Business Highlights
June 2020, the Company expanded the product offering of its PLUS CBDRelief brand. Following significant demand for the new wellness-based product line,1 the Company introduced a 1:1 Pomegranate CBD:THC ratio product. The new offering contains 5mg of THC and 5mg of CBD per serving along with ellagitannins, which are unique antioxidants found in pomegranates that are associated with anti-inflammatory pathways.2 The new product joins the initial CBDRelief lineup, which includes a 9:1 Tropical Mango gummy with 9mg of CBD and 1mg of THC per serving, and an 18:1 Tart Cherry gummy with 18mg of CBD and 1mg of THC per serving.
June 2020, the Company announced the retirement of its Chief Financial Officer, Jon Paul. The role has been filled by then-current VP of Finance, Nate Pearson. Mr. Pearsonhas significant experience operating within the finance departments of companies in emerging and heavily regulated industries. Following his time at Ernst & Young, Mr. Pearsonworked at Tesla as a Senior Financial Analyst and at Lagunitasas the Director of Financial Planning and Analysis, before ultimately joining PLUS in his role as Vice President of Finance.
July 2020, just after the reporting period, the Company announced the launch of its new HI-CUBES brand. With 10mg of THC packed into each 5 calorie serving, HI-CUBES are the most concentrated gummy products available by volume within the Californiamarket.3 Manufactured with 100% whole-plant full-spectrum oil, the product delivers an array of cannabinoids, flavonoids and aromatic terpenes to create a powerful effect for consumers looking for an intense cannabis experience.
“The first half of 2020 has been about creating a sustainable economic foundation for the business and continuing to lay the groundwork for current and future growth. We are very happy with the progress we have made on both of these fronts,” stated
“Compared to the second half of 2019, in the first half of this year PLUS grew net revenues 29% from
“While shipments from PLUS to its 3rd-party distributor in
“Despite the difficulties we experienced in
“Beyond the improvements we’ve seen in our fundamentals, we made an important strategic transition from a single brand to a portfolio of brands in the first half of this year with the launch of PLUS CBDRelief and HI-CUBES into the
“PLUS continues to believe that
“Moving forward we will continue to drive our 2020 strategy with a focus on: 1) ensuring the safety and health of our employees, customers, and partners during this pandemic; 2) establishing ourselves as the clear, long-term leader in
While cannabis has been deemed an essential business throughout most of
(1) According to PLUS internal sales data, the PLUS CBDRelief brand sold into licensed retailers representing more than 80% of the Company’s
(2)  Li Z, Henning SM, Lee RP, et al. Pomegranate extract induces ellagitannin metabolite formation and changes stool microbiota in healthy volunteers. Food Funct. 2015;6(8):2487-2495. doi:10.1039/c5fo00669d.  Heber D. Pomegranate Ellagitannins. In: Benzie IFF,
(3) According to internal market research
(4) According to sales data received from the Company’s 3rd party distributor, HERBL distribution solutions. Wholesale Depletions do not represent income for the Company but are an indicator of market demand for products sold by PLUS
(5) Arcview Market Research State of the Legal Cannabis Markets 7th Edition Report
Conference Call Details
Participant Dial-In Numbers:
Toll-Free: (866) 220-4156
Toll / International: (864) 663-5231
*Participants should request the Plus Products Earnings Call or provide conference ID: 9094390
Please dial-in or log-on to the webcast at least 15 minutes before the start of the call
The call will also be webcast at https://edge.media-server.com/mmc/p/96527bg3. Please visit the website at least 15 minutes prior to the call to register, download, and install any necessary audio software. Following the conclusion of the call, there will be an archived audio webcast of the conference call available for replay on the Company’s website at PlusProductsInc.com.
PLUS is a cannabis food company focused on using nature to bring balance to consumers’ lives. PLUS’s mission is to make cannabis safe and approachable – that begins with high-quality products that deliver consistent consumer experiences. PLUS is headquartered in
For further information contact:
CEO & Co-founder
Tel +1 213.282.6987
The CSE does not accept responsibility for the adequacy or accuracy of this release.
This press release includes statements containing certain “forward-looking information” within the meaning of applicable securities law (each, a “forward-looking statement”). Forward-looking statements are frequently characterized by words such as “plan”, “continue”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur and include, but are not limited to, statements relating to: the growth of the
These forward-looking statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this press release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These risks include, but are not limited to, the success of the Company’s investments, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of the Company’s products, customer experience and retention, the continued development of adult-use sales channels, managements estimation of consumer demand in jurisdictions where the Company exports, expectations of future results and expenses, the availability of additional capital to complete capital projects and facilities improvements, the ability to expand and maintain distribution capabilities, the impact of competition, the ability of the Company to implement initiatives and the possibility for changes in laws, rules, and regulations in the industry.
Further, the duration and severity of the current COVID-19 pandemic may significantly impact or exacerbate some of the above-listed risks and uncertainties. Risks that may be further impacted by the COVID-19 pandemic relate to the Company’s operations and expansion, including the Company’s ability to grow its brand and sales and to maintain production levels in the event that the Company’s employees are restricted from accessing facilities for a significant period of time; to the Company’s ability to access capital and the level of borrowing costs; the Company’s ability to service obligations under its debt securities and other debt or lease obligations; and the Company’s ability to comply with the covenants contained in the agreements that govern the Company’s existing indebtedness.
The transmission of COVID-19 and efforts to contain its spread have recently resulted in international, national and local border closings, travel restrictions, significant disruptions to business operations, supply chains and customer activity and demand (across all sectors), service cancellations, reductions and other changes, and quarantines, as well as considerable general concern and uncertainty.
The overall severity and duration of COVID-19-related adverse impacts on the Company’s business will depend on future developments that cannot currently be predicted. Even after the COVID-19 outbreak has subsided, the Company may continue to experience material adverse impacts to the businesses as a result of its global economic impact, including any related recession.
The Company is under no obligation and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
Adjusted uncompressed weighted average shares outstanding and loss per share.
The Company has additionally determined the adjusted uncompressed weighted average shares outstanding and loss per share, basic and diluted. The Company believes these measures to be representative of loss and comprehensive loss on a per share basis; however, these performance measures have no standardized meaning. As such, there are likely to be differences in the method of computation when compared to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with GAAP, some investors use this information to evaluate the Company’s performance. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Condensed Interim Consolidated Statements of Financial Position
|Cash and cash equivalents||13,033,390||15,176,184|
|Prepaids and deposits||641,580||1,262,269|
|Prepaids and deposits||947,674||789,521|
|Property and equipment||2,889,287||3,703,597|
|Deferred tax asset||1,950,398||-|
|Accounts payable and accrued liabilities||1,167,271||2,289,393|
|Current portion of vehicle loans||28,248||27,753|
|Current portion of lease liabilities||190,821||284,588|
|Deferred tax liability||285,669||-|
|Accumulated other comprehensive loss||578,592||(229,560||)|
|Total shareholders' equity||5,974,373||8,299,208|
|Total liabilities and shareholders' equity||25,774,514||29,254,971|
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
|Three Months Ended
||Six Months Ended
|Cost of sales||2,757,737||2,855,224||5,843,156||5,408,325|
|Advertising and promotion||171,207||483,260||557,882||710,560|
|Depreciation and amortization||25,318||1,078||50,637||1,078|
|General and administrative||382,806||568,326||843,525||1,028,627|
|Meals and travel expenses||5,951||217,750||137,895||416,310|
|Regulatory fees (recovery)||(1,517||)||2,699||14,035||6,035|
|Research and development||11,819||131,032||19,292||137,019|
|Salaries and benefits||1,411,071||1,797,422||3,154,781||2,853,110|
|Loss from operations||(1,358,252||)||(4,608,684||)||(3,424,229||)||(7,616,412||)|
|Other (income) expense|
|Interest and other income||(23,165||)||(73,578||)||(21,675||)||(74,187||)|
|Accretion finance income||(42,673||)||-||(86,480||)||-|
|Foreign exchange loss (gain)||23,881||90,740||60,661||(66,839||)|
|Gain on lease termination||(12,900||)||-||(12,900||)||-|
|Impairment of property and equipment||10,765||-||10,765||-|
|Loss before income taxes||(2,127,620||)||(5,268,786||)||(5,042,024||)||(8,638,622||)|
|Income tax (recovery) expense||(1,681,718||)||106,271||(1,664,728||)||181,295|
|Loss for the period||(445,902||)||(5,375,057||)||(3,377,296||)||(8,819,917||)|
|Currency translation adjustment||671,973||-||(808,152||)||-|
|Loss and comprehensive loss for the period||(1,117,875||)||(5,375,057||)||(2,569,144||)||(8,819,917||)|
|Weighted average shares outstanding:|
|Basic and diluted||34,778,568||30,715,437||34,300,535||27,814,002|
|Loss per share:|
|Basic and diluted||(0.01||)||(0.17||)||(0.10||)||(0.32||)|
Source: Plus Products Inc.