Irwin Naturals Files Q3 2022 Financials


Successful Execution on Ketamine Clinic
Rollup Strategy and Cannabis Licensing to Accelerate Future Growth

LOS ANGELES, Dec. 05, 2022 (GLOBE NEWSWIRE) -- Irwin Naturals Inc. (CSE: IWIN) (OTC: IWINF) (FRA: 97X) (“Irwin” or the “Company”) announced the Company filed results for its third quarter of fiscal 2022, the period ended September 30, 2022 on www.sedar.com.

Sean Sand, CFO, stated, “Despite cost pressures continuing through the quarter, we were able to grow our Gross Margins by +4.8% over Q3 2021. The Gross Margin increase can be attributed to sales mix coupled with the early success of a targeted price increase across the market. In addition, we were still able to maintain positive Operating Profits despite the additions in the cost base to support the early phases of the Emergence and Licensing businesses.”

Mr. Sand continued, “Our balance remains strong, and have access to considerable working capital to fund our accelerated growth plans. To date we have closed or announced agreements to acquire entities or assets amounting to 18 clinics and anticipate several more closing as we exit 2022 and in the coming quarters. In addition, we are continuing our rollout of our licensing deals, which now sees us in six states and in Canada.”

Financial Summary

 Three months ended     Nine Months Ended    
(in thousands)September 30, $ % September 30, $ %
Combined Statement of Profit2022 2021 Change Change 2022
 2021
 Change Change
Non-CBD operating revenue$20,346  $20,899  $(553) -2.6% $61,205  $66,334  $(5,129) -7.7%
CBD operating revenue 1,679   2,774   (1,095) -39.5%  5,221   8,067   (2,846) -35.3%
Total Operating Revenue 22,024   23,673   (1,649) -7.0%  66,427   74,401   (7,974) -10.7%
                
Gross Profit 10,603   10,117   486  4.8%  31,208   33,970   (2,762) -8.1%
                
Income from Operations 622   1,232   (610) -49.5%  3,653   8,170   (4,517) -55.3%
                
Net Profit / (Loss) (583)  (1,466)  883  60.2%  1,109   5,226   (4,117) -78.8%
                
 As of As of $ %        
Statement of Financial PositionSept 30, 2022Dec 31, 2021Change Change        
Total assets 71,527   47,219   24,308  51.5%        
Total liabilities 41,027   24,103   16,924  70.2%        
                

Klee Irwin, CEO, commented, “In Q3, Irwin Naturals moved close to becoming the world’s largest chain of dedicated psychedelic mental health clinics. In addition, we are rapidly on our way to doubling our profits from last year on an annualized basis based on potential acquisitions in the psychedelic mental. The mental healthcare industry is a 1.5 trillion dollar behemoth in desperate need of a disruptive sea change. With standard treatments having an average effectiveness of approximately 17%, the drastic improvements of results from psychedelic treatments is that sea change. We currently have no meaningful competitors in our rearview mirror and intend to be the world’s first chain of clinics in this sector to exceed 100 locations.”

Financial Highlights

  • The 7% decline in overall operating revenues were due largely to supply issues in the CBD segment, related to a reduction in supply at a key supplier. The decline, though still down from prior year, is recovering quarter over quarter. Production of CBD products has restarted at the Company’s manufacturer. Other factors impacting sales related to order timing and the loss of distribution of certain non-CBD mass market products.
  • Income from operations in Q3 2022 came in at $0.6 million, as compared to $1.2M million for the same period in the prior year. The reduction in income was driven primarily by the aforementioned decrease in business volume and startup costs related to Emergence by Irwin Naturals (ketamine clinics) and Irwin Naturals Cannabis (intellectual property licensing to the cannabis industry).
  • The overall decrease in business volume paired with startup costs related to the Company’s initiatives in cannabis and the aforementioned startup costs, resulted in a decrease in Adjusted EBITDA1 to $0.5 million.

 Three months ended     Nine months ended    
(in thousands)September 30, $ % September 30, $ %
 2022 2021 Change Change 2022 2021 Change Change
Net Profit$(583) $(1,466) $883  60.2% $1,109  $5,226  $(4,117) -78.8%
Interest Expense 181   34   147  432.4%  541   91   450  494.5%
Income Tax Expense 1,024   162   862  532.1%  2,003   351   1,652  470.7%
Depreciation and Amortization 468   353   115  32.6%  1,299   1,061   238  22.4%
EBITDA$1,090  $(917) $2,007  218.9% $4,952  $6,729  $(1,777) -26.4%
                
Foreign Exchange (Gain) / Loss (33)  -   (33) 100.0%  (45)  -   (45) 100.0%
Listing Expenses -   2,502   (2,502) 0.0%  -   2,502   (2,502) 0.0%
Other Income -   -   -  100.0%  -   -   -  0.0%
Adjusted EBITDA$1,057  $1,585  $(528) -33.3% $4,907  $9,231  $(4,324) -46.8%
                

1EBITDA is a non IFRS metric that management believes provides a metric for rapid analysis of the underlying strength of the business. A reconciliation from IFRS to EBITDA is provided in the accompanying table above and at the end of this release.

  • Cash provided by operating activities by Irwin were $3.6 million and $14.6 million for the nine months ended September 30, 2022 and 2021, respectively. The decrease in operating cash flows is primarily due to lower operating revenue and temporary unfavourability to working capital led by the timing of payments to the Company’s primary product manufacturer couple with increased cash related to Emergence startup costs.

Operational Highlights & Subsequent Events

Irwin Naturals is executing on an aggressive expansion strategy into the high-growth cannabis and psychedelics sectors. The Company intends to leverage its household name brand status to drive an aggressive rollup of mental health clinics (the Company is focused on ketamine clinics, as this is currently the only FDA-approved and/or regulated psychedelic substance). Furthermore, the Company has begun executing on its brand licensing strategy throughout the US. To date, the Company has announced agreements to acquire entities or assets; or completed the acquisition of such entities or assets amounting to 17 clinics, as well as the signing of seven brand licensing deals that will see Irwin Naturals products enhanced with THC be offered in California, Colorado, New Mexico, Mississippi, Ohio, Michigan and Canada.

StateClinic Acquisitions
FloridaKetamine Health Centers (5 clinics)
Florida Mind Health (3 clinics)
Dura Medical (1 clinic)
IowaMidwest Ketafusion
New HampshireNew England Ketamine
MexicoKetamine Health Centers
VermontPreventive Medicine
GeorgiaInvictus Clinics (2 clinics)
WashingtonTri-Cities Infusion
IdahoKetamine Infusions of Idaho
OhioHappier You
KentuckySerenity Health


StateBrand License Recipients
CaliforniaThe Hive Laboratory, LLC
ColoradoLarsen Group II, LLC
OhioBeneLeaves, Ltd
New MexicoAssurance Laboratories, LLC
CanadaEntourage Health Corp.
MississippiMockingbird Cannabis, LLC
Michigan42 Degrees Processing, LLC


Business highlights and subsequent events

NOV 30, 2022 - Irwin Naturals Leverages Household Brand Status in Effort to be World’s Largest Chain of Psychedelic Mental Health Clinics
NOV 09, 2022 - Irwin Naturals Looks to Add Pacific Northwest Ketamine Clinic to Its National Footprint
NOV 07, 2022 - Irwin Naturals THC Products to be Available In Mississippi Dispensaries
NOV 03, 2022 - Irwin Naturals Looks to Add to Florida Foothold in Expanding Chain of Healthcare Clinics
NOV 01, 2022 - Irwin Naturals Looks to Add to Florida Foothold, Expanding Chain of Healthcare Clinics
OCT 04, 2022 - Irwin Naturals Agrees to Add Idaho Clinic to Its National Chain of Psychedelic Mental-Health Clinics
SEP 29, 2022 - Irwin Naturals Acquiring Ketamine Media
SEP 23, 2022 - Company Announces Normal Course Issuer Bid for Subordinate Voting Shares of the Corporation
SEP 06, 2022 - Irwin Naturals Emergence to Add Ohio Ketamine Clinic

About Irwin Naturals

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 profitably for over 27 years1. 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 brand2. 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.

For investor-related information about the Company, please visit ir.irwinnaturals.com/

To contact the Company’s Investor Relations department, please call toll-free at (800) 883-4851 or send an email to Investors@IrwinNaturals.com.

Klee Irwin
________________________________
Klee Irwin
Chief Executive Officer
T: 310-306-3636
investors@irwinnaturals.com 

IR Information

Press Contact

Irwin Naturals Investor Relations
Cassandra Bassanetti-Drumm
T: 310-306-3636
investors@irwinnaturals.com 

Regulatory Overview

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     Nine months ended    
(in thousands)September 30, $ % September 30, $ %
 2022 2021 Change Change 2022 2021 Change Change
Net Profit$(583) $(1,466) $883  60.2% $1,109  $5,226  $(4,117) -78.8%
Interest Expense 181   34   147  432.4%  541   91   450  494.5%
Income Tax Expense 1,024   162   862  532.1%  2,003   351   1,652  470.7%
Depreciation and Amortization 468   353   115  32.6%  1,299   1,061   238  22.4%
EBITDA$1,090  $(917) $2,007  218.9% $4,952  $6,729  $(1,777) -26.4%
                
Foreign Exchange (Gain) / Loss (33)  -   (33) 100.0%  (45)  -   (45) 100.0%
Listing Expenses -   2,502   (2,502) 0.0%  -   2,502   (2,502) 0.0%
Other Income -   -   -  100.0%  -   -   -  0.0%
Adjusted EBITDA$1,057  $1,585  $(528) -33.3% $4,907  $9,231  $(4,324) -46.8%
                

Irwin Naturals Unaudited Condensed Combined Consolidated Interim Statements of Financial Position

    September 30, December 31,
  Notes 2022
 2021
ASSETS      
Current Assets:      
Cash   $1,205  $625 
Other Financial Assets    -   1 
Trade Receivables 15  14,236   16,394 
Inventory 6  23,547   18,652 
Prepaid Expenses and Other Current Assets5  2,182   1,469 
Total Current Assets    41,170   37,141 
       
Non-Current Assets:      
Property and Equipment 7  247   190 
Right-of-Use Assets 9  4,200   3,722 
Notes Receivable from IN Nevada Shareholders 18  5,349   3,264 
Goodwill 4  18,154   - 
Intangible Assets 11  87   87 
Other Non-Current Assets    255   165 
Deferred Tax Asset 20  2,065   2,650 
Total Non-Current Assets    30,357   10,078 
       
TOTAL ASSETS   $71,527  $47,219 
       
LIABILITIES      
Current Liabilities:      
Trade and Other Payables 10 $15,767  $13,310 
Reserve for Returns    491   814 
Lease Liability - Current 9  2,110   1,366 
Line of Credit 8  10,209   6,178 
Total Current Liabilities    28,577   21,668 
       
Non-Current Liabilities:      
Lease Liability - Non Current 9  2,182   2,434 
Note Payable - Non Current 14  489   - 
Contingent Consideration 4  8,908   - 
Deferred Tax Liability 20  871   1 
Total Non-Current Liabilities    12,450   2,435 
       
TOTAL LIABILITIES   $41,027  $24,103 
       
EQUITY      
Subordinate Voting Shares 12  3,689   3,000 
Proportionate Voting Shares 12  5,610   - 
Multiple Voting Shares 12  59   59 
Class B Non Voting Shares 12  13,750   13,750 
Accumulated Other Comprehensive Income    (33)  (11)
Retained Earnings    855   189 
Total Controlling Interest    23,930   16,987 
Non-Controlling Interest of IN Nevada 19  6,570   6,129 
Total Equity    30,500   23,116 
TOTAL LIABILITIES & EQUITY   $71,527  $47,219 
       

Irwin Naturals Unaudited Condensed Combined Consolidated Interim Statements of Profit and Comprehensive Income

  For the Three Months Ended For the Nine Months Ended
  September 30, September 30, September 30, September 30,
   2022   2021   2022   2021 
Operating Revenue $22,024  $23,673  $66,427  $74,401 
Cost of Sales  (11,421)  (13,556)  (35,219)  (40,431)
Gross Profit  10,603   10,117   31,208   33,970 
         
Operating Expenses:        
Selling, General and Administrative Expenses  9,981   8,885   27,555   25,800 
Income from Operations  622   1,232   3,653   8,170 
         
Other Expense:        
Interest Expense  (181)  (34)  (541)  (91)
Listing Expense  -   (2,502)  -   (2,502)
Total Other Income / (Expense)  (181)  (2,536)  (541)  (2,593)
         
Profit / (Loss) before Income Taxes  441   (1,304)  3,112   5,577 
         
Income Tax Expense (Note 20)  (1,024)  (162)  (2,003)  (351)
         
Net Profit / (Loss)  (583)  (1,466)  1,109   5,226 
Less: Net Profit / (Loss) Attributable to        
Non-Controlling Interest of IN Nevada  (90)  (142)  (441)  - 
Net Profit / (Loss) Attributable to Controlling Interest $(673) $(1,608) $668  $5,226 
         
Foreign Currency Translation Differences  (33)  39   (45)  39 
         
Total Comprehensive Income / (Loss)  (616)  (1,427)  1,064   5,265 
Less: Comprehensive Income / (Loss) Attributable to        
Non-Controlling Interest of IN Nevada  (90)  (142)  (441)  611 
Comprehensive Income / (Loss) Attributable to Controlling Interest $(706) $(1,569) $623  $5,876 
         
Earnings per share - basic $(0.39) $(1.22) $0.73  $4.35 
Earnings per share - diluted $(0.00) $(0.00) $0.00  $0.02 
Weighted average number of shares outstanding - basic  1,509,516   1,200,001   1,509,547   1,200,001 
Weighted average number of shares outstanding - diluted  323,529,359   312,218,241   322,483,202   312,218,241 
         

Irwin Naturals Unaudited Condensed Combined Consolidated Interim Statements of Cash Flows

  For the Nine Months Ended
  September 30, September 30,
  2022 2021
     
Net Profit $1,109  $5,265 
Adjustments to Reconcile Net Profit to Net Cash Provided by Operating Activities:    
Depreciation and Amortization  2,230   1,061 
Change in Allowance for Doubtful Accounts  11   97 
Change in Inventory Reserve  (3,766)  - 
Deferred Tax Asset  585   - 
Non-Cash Share Capital from Share-Based Payment Transaction  -   3,012 
Non-Cash Share Capital from Acquisitions  (689)  - 
Interest Income  -   - 
Interest Expense  499   92 
Income Taxes Expense  1,424   351 
Changes in Working Capital:    
Trade Receivables  981   3,526 
Inventory  (1,130)  (1,731)
Prepaid Expenses and Other Assets  (713)  615 
Trade and Other Payables  3,475   2,320 
Reserve for Returns  (323)  (7)
Changes in Other Non-Current Assets  (90)  (29)
Net Cash Provided by Operating Activities  3,603   14,572 
     
Cash Flow from Investing Activities:    
Purchase of Investments  -   (1)
Purchase of Property and Equipment  (142)  (47)
Contingent Consideration  8,908   - 
Goodwill  (18,154)  - 
Net Cash Used in Investing Activities  (9,388)  (48)
     
Cash Flow from Financing Activities:    
Proceeds from Line of Credit  686   18,614 
Payments on Line of Credit  6,863   (23,924)
Notes Receivable from Related Parties  (2,085)  - 
Distributions to Shareholders  -   (8,021)
Payments on Lease Liability  955   (991)
Net Cash Used in Financing Activities  6,419   (14,322)
Effect of Foreign Exchange on Cash  (54)  - 
Net Increase in Cash  580   202 
Cash at Beginning of the Period  625   442 
Cash at End of the Period $1,205  $644 
     

_____________________
1 Under several corporate structures, Klee Irwin has operated the Irwin brand profitably since 1994, as measured by EBITDA adjusted for extraordinary costs.
2 Based on a Company survey with a sample size of 500 randomly selected adults.