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Lowell Farms Inc. Announces Audited Fourth Quarter and Fiscal Year 2023 Financial and Operational Results

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SALINAS, Calif., March 28, 2024 (GLOBE NEWSWIRE) — Lowell Farms Inc. (the “Company”) (CSE: LOWL; OTCQX: LOWLF), a California cannabis company with advanced distribution and production capabilities including extraction, manufacturing, sales and brand management, announces audited revenue and operating results for the fourth quarter and fiscal year (ended December 31, 2023). All figures stated are in US Dollars.

Fourth Quarter and Fiscal Year Financial Highlights:

Revenue Summary ($’s in ‘000)
           
          Q4’23 vs Q3’23
  Q4’22 Q3’23 Q4’23   Growth
CPG Revenues $5,682 $4,369 $4,582   5%
Bulk Product $2,768 $1,196 $1,984   66%
LFS $549 $455 $918   102%
Out-of-State Licensing $289 $192 $11   -94%
Total $9,288 $6,212 $7,495   21%
                 

“As we move through 2024, Lowell stands today as a restructured company. The challenges of the past year have been formidable, but our team’s resilience and determination have propelled us through,” said Co-Founder and Chief Executive Officer Mark Ainsworth. “Our strategic decisions have now positioned us favorably and we expect to see a positive impact on the company in the quarters ahead. With our focus sharpened and our foundation strengthened, we are grateful to remain in this ever-evolving landscape that is the California cannabis industry.”

Subsequent events to the fourth quarter ended December 31, 2023:

Operational Highlights and Ongoing Initiatives:

Q4 and Year End Financial Results Earnings Conference Call Details:
The conference call with management at 8:30 a.m. EDT on Thursday, March 28, can be accessed using the following dial-in information:

U.S. and Canadian Toll Free:   1-800-274-8461
International:   1-203-518-9814
Webcast:   Link here
     

Please dial-in at least 10 minutes before the call to register.

The conference call will be webcast live and archived on the investor relations section of the Lowell Farms website at https://ir.lowellfarms.com/.

ABOUT LOWELL FARMS INC.
Lowell Farms Inc. (CSE:LOWL; OTCQX:LOWLF) (the “Company”) is a California-based cannabis company with advanced production capabilities supporting the supply chain, including extraction, manufacturing, brand sales, marketing, and distribution. Lowell Farms has an exclusive portfolio of award-winning brands, including Lowell Herb Co, House Weed, Moon, Cypress Cannabis, and Original Pot Co. for licensed retailers statewide.

Lowell Farms Inc. Media Contact
pr@lowellfarms.com

Lowell Farms Inc. Investor Relations Contact
Bill Mitoulas
416.479.9547
ir@lowellfarms.com

Lowell Farms Inc. Company Contact
Mark Ainsworth
ir@lowellfarms.com

Forward-Looking Information and Statements
This news release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current conditions, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved.” The forward-looking information and forward-looking statements contained herein may include, but are not limited to, the anticipated growth of Lowell Farm Services and the ability of the Company to successfully achieve its business objectives and expectations for other economic, business, and/or competitive factors. There can be no assurance that such forward-looking information and statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking information and statements. This forward-looking information and statements reflect the Company’s current beliefs and are based on information currently available to the Company and on assumptions the Company believes are reasonable.

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: general business, economic, competitive, political and social uncertainties; general capital market conditions and market prices for securities; operating and development costs; competition; changes in legislation or regulations affecting the Company; the timing and availability of external financing on acceptable terms; the available funds of the Company and the anticipated use of such funds; favorable production levels and outputs; the stability of pricing of cannabis products; the level of demand for cannabis product; the availability of third-party service providers and other inputs for the Company’s operations; lack of qualified, skilled labor or loss of key individuals; and risks and delays resulting from the COVID-19 pandemic. A description of additional assumptions used to develop such forward-looking information and a description of additional risk factors that may cause actual results to differ materially from forward-looking information can be found in the Company’s disclosure documents, such as the Company’s annual information form filed on the SEDAR website at www.sedar.com and the Company’s Form 10 filed on the SEC website at www.sec.com. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking information as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Forward-looking information contained in this news release is expressly qualified by this cautionary statement.

The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date. However, the Company expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.

Neither the Canadian Securities Exchange nor its Regulation Service Provider has reviewed, or accepts responsibility for the adequacy or accuracy of, the content of this news release.

Use of Non-GAAP Financial Information

EBITDA is net income (loss), excluding the effects of income taxes (recovery); net interest expense; depreciation and amortization; and adjusted EBITDA also includes noncash fair value adjustments on investments; unrealized foreign currency gains/losses; share-based compensation expense; and other transactional and special expenses, such as out-of-period insurance recoveries and acquisition costs and expenses related to the markup of acquired finished goods inventory, which are inconsistent in amount and frequency and are not what we consider as typical of our continuing operations. Management believes this measure provides useful information as it is a commonly used measure in the capital markets and as it is a close proxy for repeatable cash generated by operations. We use adjusted EBITDA internally to understand, manage, make operating decisions related to cash flow generated from operations and evaluate our business. In addition, we use adjusted EBITDA to help plan and forecast future periods.

This measure is not necessarily comparable to similarly titled measures used by other companies.

A reconciliation of this measure to Net Loss is provided below.

LOWELL FARMS INC.
CONSOLIDATED BALANCE SHEETS
 
    December 31,     December 31,  
    2023     2022  
ASSETS            
Current assets:            
Cash and cash equivalents   $ 2,311     $ 1,098  
Accounts Receivable – net of allowance for doubtful accounts of $959 and $1,053 at December 31, 2023 and December 31, 2022, respectively     2,620       4,163  
Inventory     4,760       10,779  
Prepaid expenses and other current assets     2,397       1,522  
Total current assets     12,088       17,562  
Property and equipment, net     4,099       31,284  
Right of use assets, net     18,327       27,362  
Other intangibles, net     2,544       42,202  
Other assets     555       413  
                 
Total assets   $ 37,613     $ 118,823  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 4,314     $ 2,307  
Accrued payroll and benefits     363       350  
Notes payable, current portion     3       282  
Lease obligation, current portion     1,990       2,659  
Convertible debentures     –       21,398  
Other current liabilities     1,943       3,654  
Total current liabilities     8,613       30,650  
Notes payable     –       3  
Lease obligation     17,522       31,340  
Convertible debentures     –       –  
Mortgage obligation     –       8,713  
Total liabilities     26,135       70,706  
COMMITMENTS AND CONTINGENCIES                
STOCKHOLDERS’ EQUITY                
Share capital     192,445       191,742  
Accumulated deficit     (180,967 )     (143,625 )
Total stockholders’ equity     11,478       48,117  
                 
Total liabilities and stockholders’ equity   $ 37,613     $ 118,823  
LOWELL FARMS INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 
    Years Ended  
    December 31,     December 31,  
    2023     2022  
Net revenue   $ 28,265     $ 43,535  
Cost of goods sold     35,707       45,376  
                 
Gross profit (loss)     (7,442 )     (1,841 )
                 
Operating expenses                
General and administrative     7,302       9,553  
Sales and marketing     2,397       5,274  
Depreciation and amortization     421       448  
Total operating expenses     10,120       15,275  
                 
Loss from operations     (17,562 )     (17,116 )
                 
Other income/(expense)                
Other income (expense)     8,541       2,455  
Unrealized loss on change in fair value of investment     (28 )     (109 )
Impairment expense of long-lived assets     (24,295 )     (3,240 )
Interest expense     (3,837 )     (6,363 )
Total other income (expense)     (19,619 )     (7,257 )
                 
Loss before provision for income taxes     (37,181 )     (24,373 )
Provision for income taxes     161       191  
Net loss   $ (37,342 )   $ (24,564 )
                 
Net loss per share:                
Basic   $ (2.71 )   $ (2.17 )
Diluted   $ (2.71 )   $ (2.17 )
Weighted average shares outstanding:                
Basic     13,790       11,318  
Diluted     13,790       11,318  
LOWELL FARMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    Years Ended  
    December 31,     December 31,  
    2023     2022  
CASH FLOW FROM OPERATING ACTIVITIES            
Net loss   $ (37,342 )   $ (24,564 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     5,117       7,376  
Amortization of debt issuance costs     712       937  
Share-based compensation expense     231       564  
Provision for doubtful accounts     616       517  
Loss on sale of assets     –       59  
Gain on sale leaseback     (3,004 )     –  
Gain on lease settlement     (880 )     –  
Unrealized loss (gain) on change in fair value of investments     28       109 )
Impairment expense     24,295       3,240  
Gain on lease termination     (5,020 )     –  
Changes in operating assets and liabilities:                
Accounts receivable     927       3,542  
Inventory     6,019       2,564  
Prepaid expenses and other current assets     2,731       454  
Other assets     (270 )     (106 )
Operating lease liabilities     (443 )     –  
Accounts payable and accrued expenses     242       (1,136 )
Net cash used in operating activities   $ (6,041 )   $ (6,444 )
CASH FLOW FROM INVESTING ACTIVITIES                
Proceeds from asset sales   $ –     $ 60  
Purchases of property and equipment     (135 )     (4,250 )
Acquisition of business assets, net     –     –  
Net cash used in investing activities   $ (135 )   $ (4,190 )
CASH FLOW FROM FINANCING ACTIVITIES                
Proceeds from convertible notes, net of financing costs   $ –     $ 6,552  
Principal payments on finance lease obligations     (1,527 )     (2,497 )
Payments on notes payable     (75 )     (210 )
Proceeds from sale leaseback     8,991       –  
Issuance costs related to subordinate voting share offering     –     –  
Proceeds from exercise of warrants and options     –       –  
Net cash provided by financing activities   $ 7,389     $ 3,845  
                 
Change in cash and cash equivalents   $ 1,213     $ (6,789 )
Cash and cash equivalents-beginning of year     1,098       7,887  
Cash, cash equivalents-end of period   $ 2,311     $ 1,098  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                
Cash paid during the period for interest   $ 3,689     $ 4,215  
Cash paid during the period for income taxes   $ 87     $ 171  
                 
OTHER NONCASH INVESTING AND FINANCING ACTIVITIES                
Purchase of property and equipment not yet paid for   $ 7     $ 819  
Issuance of subordinate voting shares to acquire purchase rights   $ –     $ 1,800  
Issuance of subordinate voting shares in convertible debenture repurchase   $ 2,027     $ –  

The table below reconciles Net Loss to Adjusted EBITDA
 for the periods indicated.

LOWELL FARMS INC.
EBITDA – Non-GAAP measure
 
    Three Months Ended     Years Ended    
    December 31,     December 31,     December 31,     December 31,    
(in thousands)   2023     2022     2023     2022    
Net loss   $ (13,059 )   $ (11,114 )   $ (37,342 )   $ (24,564 )  
Interest expense(2)     (567 )     1,495       3,837       5,499    
Provision for income taxes     1       (34 )     161       191    
Depreciation and amortization in cost of goods sold     861       1,904       4,696       6,320    
Depreciation and amortization in operating expenses     105       107       421       448    
Depreciation and amortization in other income (expense)             190       –       608    
EBITDA(1)     (12,659 )     (7,452 )     (28,227 )     (11,498 )  
Investment and currency losses     –       7       30       130    
Goodwill Impairment             3,240                    
Inventory revaluation     –       –       (157 )     –    
Impairment Expense     2,267       –       2,267       3,240    
Debt Repurchase Charges(3)     (548 )     –       13,477       –    
Impairment on Cultivation Facility     6,822       –       6,822       –    
Share-based compensation     38       137       231       564    
Other charges(2) (4) (5)                     (2,161 )     (1,984 )  
Adjusted EBITDA(1)   $ (4,080 )   $ (4,068 )   $ (7,718 )   $ (9,548 )  
             
         
(1) Non-GAAP measure
(2) In 2022, net of $864 of financing charges related to the ERC claim, reclassified from interest expense on the Condensed Consolidated Statements of Income (Loss) to transaction and other special charges in the Adjusted EBITDA table.
(3) Comprised of $13,245 of impairment charges on intangible assets and $232 of legal expenses incurred in the year ending December 31, 2023 related to the debt settlement and asset sale. All charges were included in other income (expense) on the Condensed Consolidated Statements of Income (Loss).
(4)For the year ended December 31, 2023, reflects a one time, non-recurring adjustment to prior period yield and processing variances on the Company’s processing facility, included in cost of goods sold on the Condensed Consolidated Statements of Income (Loss)
(5)Includes a $3,884 gain on lease transactions during the year. All charges were included in other income (expense) on the Condensed Consolidated Statements of Income (Loss).


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