Item 9 Labs Corp. Announces Second Quarter FY 2022 Financial Results with Revenue Growth of 9% to $6.6 Million

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Item 9 Labs Corp.

May 16, 2022, 16:24 ET

  • National Unity Rd. Dispensary Franchise Footprint Expands into Three New States
  • Cultivation, Production and Processing Expansion in Nevada Nears Completion with Phase One of Arizona Development also on Track
  • Management to Host Conference Call and Webcast to Discuss Key Operational and Financial Highlights Today at 4:30 p.m. ET

PHOENIX, May 16, 2022 /PRNewswire/ -- Item 9 Labs Corp. (OTCQX: INLB) (the "Company")—a vertically integrated cannabis dispensary franchisor and operator that produces premium, award-winning products—today reported its fiscal second quarter operating and financial results for the three months ended March 31, 2022.

"Last year, our team focused on strengthening our position for future growth, both locally in Arizona and nationally across the U.S.," said Item 9 Labs Corp.'s Chief Executive Officer, Andrew Bowden. "The momentum we've achieved over the past quarter demonstrates the power of this foundation and gives a glimpse into what's ahead for our national growth and product excellence."

Key Business Highlights During Q2 FY2022 (January 1 - March 31, 2022)

Bowden continued, "Focusing on execution sums up our plan for 2022 as we continue our mission to keep the door to cannabis entrepreneurship open to the everyday entrepreneur and bring more high-quality, alternative medicine to consumers nationwide. As large equity holders, our goals remain aligned with our shareholders in creating long-term value and brands that are built to last."

Key Financial Highlights for Q2 FY2022 (compared with Q2 FY2021)

  • Revenue increased 9% to $6.6 million
  • Gross profit totaled $2.7 million
  • Gross margin remained strong at approximately 40%
  • Operating loss of $2.8 million compared with operating income of $0.5 million
  • Net loss of $3.9 million compared with net income of $50 thousand
  • Net loss included $1.1 million ($255,000 paid in cash) of interest expense compared with $.5 million ($143,000 paid in cash)
  • Adjusted EBITDA loss of $0.9 million compared with adjusted EBITDA profit of $1.0 million (invested significantly in franchise expenses, human capital, and infrastructure for expansion)
  • Cash and cash equivalents totaled $0.1 million as of March 31, 2022
  • Escrow deposits of $10.1 million in cash set aside for expansion as of March 31, 2022

Conference Call and Webcast Information – Tuesday, May 16, 2022 at 4:30 p.m. ET (1:30 p.m. PT)

Item 9 Labs Corp.'s Chief Executive Officer Andrew Bowden and Chief Financial Officer Bobby Mikkelsen will host the Company's Q2 FY2022 results call.

  • Date: Monday, May 16, 2022

  • Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)

  • Access by Zoom: A live and archived webcast will be available via Sequire, click on this webcast link to register or access the replay.

  • Access by Phone: Please call the conference telephone number 10-15 minutes prior to the start time: Dial-in number: 669-900-6833 // Meeting ID: 96267842685 // Passcode: 389480

  • Questions: Please submit questions to [email protected] before the presentation begins. The management team will do their best to answer all questions.

ITEM 9 LABS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS







March 31,

September 30,


2022

2021


(unaudited)

ASSETS



Current Assets:



Cash and cash equivalents

$       105,128

$     1,454,460

Accounts receivable, net 

1,177,003

1,448,280

Inventory

4,819,619

6,391,351

Prepaid expenses and other current assets

782,556

802,558

     Total current assets

6,884,306

10,096,649





Property and equipment, net

24,009,739

10,877,848

Right of use asset

730,516

156,938

Construction escrow deposits

10,096,928

17,744,913

Deposits

98,701

600,000

Other assets

1,229,940

608,874

Intangible assets, net

19,590,433

18,659,095

Goodwill

58,233,386

58,064,816

     Total Assets

$120,873,949

$  116,809,133





LIABILITIES AND STOCKHOLDERS' EQUITY



Current Liabilities:



Accounts payable 

$    5,522,921

$     3,759,818

Accrued payroll and payroll taxes

2,646,036

2,678,694

Accrued interest

1,792,925

1,391,766

Accrued expenses

1,241,683

1,169,776

Deferred revenue, current portion

219,992

119,992

Notes payable, current portion, net of discounts

21,136,912

4,536,002

Income tax payable

3,324

-

Operating lease liability, current portion

219,773

56,592

Convertible notes payable, net of discounts

2,815,880

1,277,394

     Total current liabilities

35,599,446

14,990,034





Deferred revenue, net of current portion

345,855

655,851

Operating lease liability, net of current portion

518,520

104,406

Notes payables, net of current portion and discounts

1,645,043

14,957,399





     Total liabilities

38,108,864

30,707,690





Commitments and Contingencies








Stockholders' Equity:



Common stock, par value $.0001 per share, 2,000,000,000 shares authorized; 108,269,428 and 107,074,417 shares issued and 95,969,428 and 94,774,417 shares outstanding at March 31, 2022 and September 30, 2021, respectively

10,827

10,707

Additional paid-in capital

137,280,385

133,414,830

   Accumulated deficit

(41,097,186)

(33,874,094)

Treasury stock

(13,450,000)

(13,450,000)





Total Item 9 Labs Corp. Stockholders' Equity

82,744,026

86,101,443

Non-controlling interest

21,059

-





Total Stockholders' Equity

82,765,085

86,101,443





Total Liabilities and Stockholders' Equity

$120,873,949

$  116,809,133

ITEM 9 LABS CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS











For the three months ended

For the three months ended

For the six months ended

For the six months ended


March 31, 2022

March 31, 2021

March 31, 2022

March 31, 2021









Revenues, net

$                           6,638,186

$                           6,110,631

$                     12,824,197

$                       9,150,195

Cost of revenues

3,960,948

3,121,045

7,748,193

4,729,176

Gross profit

2,677,238

2,989,586

5,076,004

4,421,019









Operating expenses







     Professional fees and outside services

556,721

613,758

1,214,166

907,713

     Payroll and employee related expenses

3,055,244

1,318,842

5,205,950

2,422,146

     Sales and marketing

613,902

84,165

1,053,338

127,346

     Depreciation and amortization

442,477

105,897

881,612

248,442

     Other operating expenses

786,167

349,517

1,632,835

564,054

     Provision for (recovery of) bad debt

(5,000)

-

(5,000)

-

Total expenses

5,449,511

2,472,179

9,982,901

4,269,701









Income (loss) from operations

(2,772,273)

517,407

(4,906,897)

151,318









Other income (expense)







     Interest expense

(1,097,373)

(468,387)

(2,307,763)

(1,176,754)

     Other income

318

-

318

-

Total other income (expense), net

(1,097,055)

(468,387)

(2,307,445)

(1,176,754)









Net income (loss), before income tax provision (benefit)

(3,869,328)

49,020

(7,214,342)

(1,025,436)









Income tax provision (benefit)

3,324

-

3,324

-









Net income (loss)

(3,872,652)

49,020

(7,217,666)

(1,025,436)

Less: Net income attributable to non-controlling interest

5,426

-

5,426

-









Net income (loss) attributable to Item 9 Labs Corp.

$                          (3,878,078)

$                                49,020

$                      (7,223,092)

$                      (1,025,436)









Basic net income (loss) per common share

$                                  (0.04)

$                                   0.00

$                              (0.08)

$                              (0.02)









Basic weighted average common shares outstanding

95,271,726

65,880,141

95,088,960

62,143,521









Diluted net income (loss) per common share

$                                  (0.04)

$                                   0.00

$                              (0.08)

$                              (0.02)









Diluted weighted average common shares outstanding

95,271,726

84,938,235

95,088,960

62,143,521

ITEM 9 LABS CORP. AND SUBSIDIARIES

ADJUSTED EBITDA









Three months ended March 31,

Six months ended March 31,

2022

2021

2022

2021

Net income (loss)

$ (3,872,652)

$       49,020

$ (7,217,666)

$ (1,025,436)

Depreciation and amortization

442,477

105,897

881,612

248,442

Interest expense

1,097,373

468,387

2,307,763

1,176,754

Income tax expense

3,324

-

3,324

-

Stock-based expense

1,363,485

304,672

1,870,779

772,580

Acquisition related costs

23,676

87,060

23,676

266,738

Adjusted EBITDA

$    (942,317)

$ 1,015,036

$ (2,130,512)

$  1,439,078

About Item 9 Labs Corp.
Item 9 Labs Corp. (OTCQX: INLB) is a vertically integrated cannabis operator and dispensary franchisor delivering premium products from its large-scale cultivation and production facilities in the United States. The award-winning Item 9 Labs brand specializes in best-in-class products and user experience across several cannabis categories. The company also offers a unique dispensary franchise model through the national Unity Rd. retail brand. Easing barriers to entry, the franchise provides an opportunity for both new and existing dispensary owners to leverage the knowledge, resources, and ongoing support needed to thrive in their state compliantly and successfully. Item 9 Labs brings the best industry practices to markets nationwide through distinctive retail experience, cultivation capabilities, and product innovation. The veteran management team combines a diverse skill set with deep experience in the cannabis sector, franchising, and the capital markets to lead a new generation of public cannabis companies that provide transparency, consistency, and well-being. Headquartered in Arizona, the company is currently expanding its operations space up to 640,000+ square feet on its 50-acre site, one of the largest properties in Arizona zoned to grow and cultivate flower. For additional information, visit item9labscorp.com.

Use of Non-GAAP Financial Measures
To supplement the Company's financial statements presented on a GAAP basis, Item 9 Labs Corp. provides Adjusted EBITDA as a supplemental measure of its performance. To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding pro forma operations, Item 9 Labs Corp. supplements its consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles, or GAAP, with Adjusted EBITDA as a non-GAAP financial measure of earnings. Adjusted EBITDA represents EBITDA plus stock-based compensation and acquisition related expenses. Item 9 Labs Corp. management uses Adjusted EBITDA as a financial measure to evaluate the profitability and efficiency of the business model. The Company uses these non-GAAP financial measures to assess the strength of the underlying operations of the business. These adjustments, and the non-GAAP financial measures that are derived from them, provide supplemental information to analyze its operations between periods and over time. Item 9 Labs Corp. finds this especially useful when reviewing pro forma results of operations, which include large non-cash amortizations of intangible assets from acquisitions and stock-based compensation. Investors should consider its non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, including, but not limited to, risks and effects of legal and administrative proceedings and governmental regulation, especially in a foreign country, future financial and operational results, competition, general economic conditions, proposed transactions that are not legally binding obligations of the company and the ability to manage and continue growth. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include the introduction of new technology, market conditions and those set forth in reports or documents we file from time to time with the SEC. We undertake no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Media Contact:
Item 9 Labs Corp.
Jayne Levy, VP of Communications
Email: [email protected]

Investor Contact:
Item 9 Labs Corp.
800-403-1140
Email: [email protected] 

SOURCE Item 9 Labs Corp.

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