Bay Street News

Sunniva Inc. Announces Q3 2018 Financial Results and Provides Strategic Update on Canadian Operations

Third Quarter Highlights 

VANCOUVER, British Columbia, Nov. 28, 2018 (GLOBE NEWSWIRE) — Sunniva Inc. (“Sunniva”, the “Company”, “we”, “our” or “us”) (CSE:SNN) (OTCQB:SNNVF), a North American provider of cannabis products and services, today released its financial and operational results and management’s discussion and analysis for the three and nine months for the third quarter of 2018 ended September 30, 2018. All figures are reported in Canadian dollars ($) unless otherwise stated. Sunniva’s financial statements are prepared in accordance with International Financial Reporting Standards.

“We continue to make progress towards completion of Phase 1, the first 325,000 square feet, of our purpose built, high-technology cannabis greenhouse in Cathedral City, California.  While we have remained committed to advancing our operations in order to play a leadership role in the California cannabis market as we launch our first Sunniva branded products in the first quarter of 2019, we have maintained solid performance of our existing operations with $3.8 million in revenue and gross margins of 56% in the third quarter.  We have now generated year to date revenue of $13.4 million, a 30 percent increase over this same period last year,” said Anthony Holler, Chief Executive Officer of Sunniva.

“With our strategic assets in place in California, we are now in a position to accelerate our revenue growth by advancing upon our upstream vertical opportunities.  We will soon demonstrate our ability to become one of the lowest cost operators producing pesticide-free, premium quality cannabis products, and achieving true vertical integration by:

Dr. Holler continued, “In Canada, we concluded our formal engagement with Canaccord Genuity Corp. to conduct a thorough examination of the Canadian cannabis market to define Sunniva’s strategy for our Canadian operations. We can confirm the Company intends to spin-out its Canadian assets (the “Spin-Out”) into a separate Canadian entity (“Spinco”).  Our Canadian assets include Natural Health Services Ltd. (“NHS”), which owns our seven physician-based medical clinics throughout Canada and Sunniva Medical Inc. (“SMI”), which is our licensed producer applicant and owns the 126-acre parcel of land in Okanagan Falls, British Columbia, the site for a large-scale, purpose-built cGMP designed greenhouse (the “Sunniva Canada Campus”).”

Financial Highlights – Three and Nine Months Ended September 30, 2018

Consolidated Financial Highlights expressed in 000’s of CDN$, except per share amounts

    Three Months Ended September 30,
  2018     2017   Change
 
 Revenue   3,739     4,562     (823 )
 Cost of Goods Sold   1,634     2,834     (1,200 )
 Gross Margin   2,105     1,728     377  
 Selling, General and Administrative   6,420     5,089     1,331  
 Share-based Payments   2,303     3,311     (1,008 )
 Amortization Expense   751     660     91  
 Loss from Operations   (7,369 )   (7,332 )   (37 )
 Net Loss   (6,781 )   (6,247 )   (534 )
 Basic Loss Per Share $ (0.21 ) $ (0.25 ) $ 0.04  
 Weighted Average Number of Shares   32,042,054     25,374,940     6,667,114  
 Total Number of Shares Outstanding   32,054,215     26,623,016     5,431,199  
    Nine Months Ended September 30,
  2018     2017   Change
 
 Revenue   13,372     10,215     3,157  
 Cost of Goods Sold   6,386     6,036     350  
 Gross Margin   6,986     4,179     2,807  
 Selling, General and Administrative   16,933     9,830     7,103  
 Share-based Payments   6,408     3,311     3,097  
 Amortization Expense   2,171     1,792     379  
 Loss from Operations   (18,526 )   (10,754 )   (7,772 )
 Net Loss   (17,961 )   (17,953 )   (8 )
 Basic Loss Per Share $ (0.59 ) $ (0.72 ) $ 0.13  
 Weighted Average Number of Shares   30,386,117     25,101,369     5,284,748  
 Total Number of Shares Outstanding   32,054,215     26,623,016     5,431,199  


Results of Operations – Three Months Ended September 30, 2018

For the three and nine months ended September 30, 2018, the Company generated $3.7 million and $13.4 million in revenue, respectively. NHS contributed $2.5 million and $8.4 million, Full-Scale Distributors, LLC (“FSD”) contributed $1.1 million and $4.9 million, and CP Logistics, LLC contributed $0.1 million over these same periods. Net loss for the three and nine months ended September 30, 2018 was $6.8 million and $18.0 million as compared to $6.3 million and $18.0 million during the three and nine months ended September 30, 2017.

The key components contributing to the change in net loss from the three and nine months ended September 30, 2018 compared to the prior comparative periods comprise the following:

Recent Operating Developments Subsequent to September 30, 2018

Copies of our interim financial statements for the three and nine months ended September 30, 2018 and related management’s discussion and analysis of financial results are available on SEDAR at www.sedar.com.

California Operations Update

Canada Operations Update

Spin-Out Steps and Anticipated Timelines

Canada Business Plan

Please see the updated Corporate Presentation and Fact Sheet at www.Sunniva.com/Investors/

To be added to the Sunniva email distribution list, please email Sunniva@kcsa.com with Sunniva in the subject line.

About Sunniva Inc.  

Sunniva, through its subsidiaries, is a vertically integrated cannabis company operating in the world’s two largest cannabis markets – Canada and California. Our ability to leverage our large-scale, purpose-built cGMP designed greenhouses, offering better quality assurance with cannabis products free from pesticides, uniquely positions Sunniva as a leading supplier of safe, high quality products at scale. Through our strategically positioned cultivation and extraction facilities, we are launching Sunniva-branded products in various product categories including premium concentrates, vape cartridges, flower, pre-rolls, and beverages as well as aggressively pursuing upstream vertical opportunities including distribution and retail expansion. Sunniva’s management and board of directors have a proven track record for creating significant shareholder value both in the healthcare and biotech industries.

For more information please visit: www.sunniva.com

Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Canadian Securities Exchange) accepts responsibility for the adequacy or accuracy of this release.

This press release contains forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs of future performance, statements regarding the Company’s operations and growth opportunities, the Company’s expansion of its footprint in the U.S., the Company’s vision to become one of the lowest cost, highest quality vertically integrated cannabis producers in the markets we serve by building large scale purpose-built current cGMP designed greenhouses and expansion of retail locations, offering better quality assurance with cannabis products free from pesticides, providing better customer access to cannabis education and sourcing better therapeutic delivery devices, the profitability of the Company’s facilities and operating subsidiaries, the expected dramatic increase in demand for cannabis in Canada following legalization of cannabis, the costs and expected production at the Sunniva California Campus and the Sunniva Canada Campus, the timing and conditions relating to the Spin-Out, the Sunniva California Campus being operational in Q1 2019 with the first harvest expected in Q2 2019, the ability of the Company to launch Sunniva-branded product lines in California and propagate the Sunniva California Campus with clean clones, the conditions of closing for the acquisition of Vision, the conditions of closing for the acquisition of LTYR, the expectation that LTYR will continue to generate revenues and expand its existing relationships with over 120 licensed dispensaries throughout California, the timing of renovations and receipt of licensing requirements for the warehouse in Long Beach, California, the impact of the transaction with LTYR on the Company and LTYR’s expected role as the Company’s logistics and technology distribution platform, the Company’s expectation that there will be no operational delays from the California licensing requirements for the Sunniva California Campus, the Company’s anticipated production and brand roll-out at the Extraction Facility, the reduction of reliance on purchases of third-party biomass as production from the Sunniva California Campus becomes available, the Company’s goal to pursue other retail acquisitions in California, the Company’s shift in focus from becoming a wholesaler of cannabis to the direct to patient medicinal cannabis market in Canada, the expected growth of the number of registered cannabis patients in Canada, the estimated medical sales price for the next three years and average patient spend, the Company’s expected use of proceeds from financings, and statements regarding the plans, timing and conditions of the Spin-Out, are “forward-looking statements.” Forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, the risk factors included in the Sunniva’s continuous disclosure documents available on www.sedar.com. These factors should be considered carefully, and readers are cautioned not to place undue reliance on such forward-looking statements. Although Sunniva has attempted to identify important risk factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other risk factors that cause actions, events or results to differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. Sunniva assumes no obligation to update any forward-looking statement, even if new information becomes available as a result of future events, new information or for any other reason except as required by law.

Company Contact:

Dr. Anthony Holler
Chairman and Chief Executive Officer
Phone: (866) 786-6482

Investor Contact:                                                          Media Contact:
Phil Carlson / Erika Kay                                                  Katelyn Tumino
KCSA Strategic Communications                                   KCSA Strategic Communications
Phone: (212) 896-1233                                                   Phone: (212) 896-1252
Email: pcarlson@kcsa.com / ekay@kcsa.com               Email: ktumino@kcsa.com