OTTAWA, ONTARIO -- (Marketwired) -- 11/28/17 -- CannaRoyalty Corp. (CSE: CRZ)(CSE: CRZ.CN)(CNSX: CRZ)(OTCQX: CNNRF) ("CannaRoyalty" or the "Company") today announced the Company's financial results for the three and nine-month periods ended September 30, 2017. All figures are reported in Canadian dollars ($), unless otherwise indicated. CannaRoyalty's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS").
"Q3 was a transitional period for our business as we focused on ramping up production of CR Brands products in California through River's distribution network," said Marc Lustig, CEO of CannaRoyalty. "Through our investees and wholly-owned subsidiaries, we now have a presence in seven key legal North American cannabis markets with specific exposure to value-added downstream segments including manufacturing, distribution, product development, technology, marketing and brands. The experience our team has gained over the past three years in most major North American markets has led us to phase two of our journey and to California."
Marc added, "This morning, we announced the signing of binding term sheets to acquire two leading California cannabis companies that generated approximately C$12 million(i) in consolidated revenue to the end of October 2017. These acquisitions are transformative for CannaRoyalty, and will provide the Company with foundational assets to execute on our California expansion strategy. Our plan over the next twelve months is to leverage our current asset base, expertise and portfolio of brands to build a leading downstream cannabis consumer products business and generate revenue growth, with a focus on California. We have outlined this strategy in a shareholder letter below and in our MD&A."
Recent Developments
For a comprehensive overview of CannaRoyalty's top holdings, please refer to the Company's Management's Discussion and Analysis of the Financial Condition and Results of Operations for the Three and Nine Months Ended September 30, 2017.
-- The Company recently launched its Soul Sugar Kitchen edibles products,
which experienced rapid retail penetration in the initial launch and
distribution period. Shortly after, the Company completed the first
commercial production of its GreenRock Botanicals ("GRB") vape pens. The
Company will continue ramping up production of these products, as well
as other products within its existing and growing CR Brands portfolio.
-- CR Brands is currently retrofitting its new Santa Rosa facility (the
"Facility") to produce the growing suite of CR Brands products for the
California market. The Facility is located in a commercial complex with
several tenants that have been licensed for cannabis production and
distribution by the city of Santa Rosa, and the Company is in the
process of applying for its own processing license. The Facility has
significant capacity to accommodate growth in the CR Brands portfolio,
and for the manufacture of additional products.
-- The Company executed a letter of intent to launch its CR Brands into the
Nevada market, with a focus on Las Vegas. This was accomplished through
a CR Advisory engagement with AEther Gardens that focuses on the
production and launch of CR Brands products in the Nevada market. AEther
Gardens is a vertically-integrated cannabis cultivator, extractor, and
manufacturer based in Clark County, Nevada.
-- The Company's investee, Resolve Digital Health, signed major exclusive
product deals with Aphria Inc., one of Canada's largest legal cannabis
producers, and with Liberty Health Sciences Inc., an operator and
investor in the medical cannabis market in Florida.
-- The Company's investee, AltMed, was recently awarded an authorization to
commence medical cannabis cultivation in Florida. There are only 12
other Medical Marijuana Treatment Center (MMTC) licensees in Florida,
placing AltMed Florida in a uniquely competitive position, in a growing
market that now has over 51,000 registered patients. Additionally,
AltMed also opened its first Arizona dispensary during Q3, which has
been ramping up its distribution and sales efforts.
-- On November 9, the Company announced that Mr. R. Wilkinson, the
principal of Rich Extracts, was arrested in Nebraska for possession of
marijuana with intent to distribute. The possession and distribution of
marijuana are illegal in Nebraska. This development has accelerated the
Company's efforts to enforce on its security interest in Rich Extracts
and remove Mr. Wilkinson from the Rich Extracts extraction business.
-- On November 23, 2017, the Company received its first draw of $3,000,000
from the Sprott Credit Facility and intends to use the funds for general
corporate purposes.
(i) Last twelve months' ("LTM") revenues to October 31st, 2017, based on unaudited financial statements. This figure represents a consolidation of the LTM revenues for Kaya and Alta. Converted at 1.2735 USD/CAD based on November 27, 2017 Bank of Canada noon rate.
Financial Highlights - Q3-2017
Revenue Components
----------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
----------------------------------------------------------------------------
Products $ 298,866 $ - $ 703,193 $ -
Services 41,451 - 314,594 -
Royalties 385,001 136,329 928,095 136,329
Interest 18,984 (8,622) 59,688 3,796
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Total $ 744,302 $ 127,707 $ 2,005,570 $ 140,125
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue by Operating Division
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
----------------------------------------------------------------------------
CR Holdings $ 403,985 $ 127,707 $ 987,783 $ 140,125
CR Brands 298,866 - 703,193 -
CR Advisory 41,451 - 314,594 -
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Total $ 744,302 $ 127,707 $ 2,005,570 $ 140,125
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Income Statement
All comparisons below are to Q3-2016, unless otherwise noted
-- Revenues were $744,302 as compared to $127,707.
-- Gross margin was $128,010 as compared to $91,269.
-- Net loss per share of $0.08 as compared to $0.07.
-- Adjusted EBITDA(1) loss of $1,762,145 as compared to a loss of
$1,198,522.
-- Adjusted EBITDA(1) loss per share of $0.04 as compared to a loss a
$0.05.
Balance Sheet
All comparisons below are to December 31, 2016, unless otherwise noted
-- Total assets of $46,166,044 as compared to $32,197,938. -- Total investments(2) of $19,960,949 as compared to $8,363,922. -- Cash and cash equivalents of $2,593,914 as compared to $2,945,895.
(1)Adjusted EBITDA and Adjusted EBITDA per share are non-IFRS measures. See "Adjusted EBITDA" in the Company's Management's Discussion and Analysis for the three and nine-month periods ended September 30, 2017.
(2)This represents the sum of investments, royalty investments, and interests in equity method investees
Top Holdings - Recent Updates
For a comprehensive overview of CannaRoyalty's top holdings, please refer to the Company's Management's Discussion and Analysis of the Financial Condition and Results of Operations for the Three and Nine Months Ended September 30, 2017.
Regulatory Developments
Two key regulatory events also occurred subsequent to the end of Q3.
-- First, both the Canadian Securities Exchange ("CSE") and the Canadian
Securities Administrators ("CSA") released statements (CSA: Staff Notice
51-352; CSE: Press Release dated October 16) providing clarity and
certainty for Canadian public companies with US cannabis activities,
such as CannaRoyalty. Both the CSA and the CSE reinforced their rights
to determine eligibility of listing companies that meet the relevant
listing and eligibility requirements. The Company viewed both of these
notices as favourable, as they provide increased transparency and
certainty regarding the views of its exchange and its regulator of its
existing operations and strategic business plan. On November 24, the TMX
Group provided an update regarding issuers with U.S. marijuana-related
activities. The update confirmed that the TMX Group will rely on the
Canadian Securities Administrators' recommendation to defer to
individual exchange's rules for companies that have U.S. marijuana-
related activities and to determine the eligibility of individual
issuers to list based on those exchanges' listing requirements. The TMX
also confirmed there is no current CDS ban on the clearing of securities
of issuers with marijuana-related activities in the U.S.
-- The second regulatory event was the release of Health Canada's Proposed
Approach to the Regulation of Cannabis (the "Proposed Regulations"),
which was released to the public on November 22, 2017. The Proposed
Regulations contemplate a variety of cannabis product forms not
currently allowed under the Access to Cannabis for Medical Purposes
Regulations (the "ACMPR"), including: edible products containing
cannabis (like food or beverages), pre-rolls, and cannabis concentrates
including vaporizing solutions. The Proposed Regulations suggest these
product forms are to be permitted after one year of the proposed
Cannabis Act coming into effect, which is expected on or before July
1st, 2018. Accordingly, the Proposed Regulations provide a platform for
CannaRoyalty to commercialize a significant portion of its products,
brands, intellectual property, and know-how into the Canadian market.
Results of Operations (Summary)
The following tables set forth consolidated statements of financial information for the three and nine- month periods ending September 30, 2017 and September 30, 2016. For further information regarding the Company's financial results for these periods, please refer to the Company's Management's Discussion and Analysis for the periods ended September 30, 2017 and September 30, 2016 and the Company's Financial Statements for the periods ended September 30, 2017, published on CannaRoyalty's issuer profile on SEDAR at www.sedar.com and the Company's website at www.cannaroyalty.com.
Cost of sales by revenue type
----------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
----------------------------------------------------------------------------
Products $ 327,986 $ - $ 688,917 $ -
Services 23,961 - 61,656 -
Royalties 264,345 36,438 460,833 48,422
----------------------------------------------------------------------------
Total $ 616,292 $ 36,438 $ 1,211,406 $ 48,422
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----------------------------------------------------------------------------
Gross margin amounts and percentages by revenue type
----------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
----------------------------------------------------------------------------
Products $ (29,120) $ - $ 14,276 $ -
Services 17,490 - 252,938 -
Royalties 120,656 99,891 467,262 87,907
Interest 18,984 (8,622) 59,688 3,796
----------------------------------------------------------------------------
Total $ 128,010 $ 91,269 $ 794,164 $ 91,703
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----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016
----------------------------------------------------------------------------
Products (10%) n/a 2% n/a
Services 42% n/a 80% n/a
Royalties 31% 73% 50% 64%
Interest 100% 100% 100% 100%
----------------------------------------------------------------------------
All Types 17% 71% 40% 65%
----------------------------------------------------------------------------
Operating Expenses
----------------------------------------------------------------------------
Three months ended %
Sept 30, 2017 Sept 30, 2016 Change
----------------------------------------------------------------------------
Sales and marketing $ 422,362 $ 86,190 390%
Research and development 275,839 168,498 64%
General and administrative 1,943,675 1,670,264 16%
Amortization of intangibles 193,063 - n/a
----------------------------------------------------------------------------
Total $ 2,834,939 $ 1,924,952 47%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended %
Sept 30, 2017 Sept 30, 2016 Change
----------------------------------------------------------------------------
Sales and marketing $ 1,068,443 $ 97,132 1000%
Research and development 900,932 848,153 6%
General and administrative 6,058,597 3,409,395 78%
Amortization of intangibles 601,413 - n/a
----------------------------------------------------------------------------
Total $ 8,629,385 $ 4,354,680 98%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA(1)
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30 September 30 September 30
2017 2016 2017 2016
----------------------------------------------------------------------------
Net loss for the
period $ (3,295,477) $ (1,866,945) $ (7,816,773) $ (4,646,283)
Add (Subtract)
Amortization
of property
and equipment 46,532 36,438 137,730 48,422
Amortization
of intangible
assets 193,063 - 601,413 -
Amortization
of royalty
investments 245,753 - 411,145 -
Interest
expense 85,935 41,097 122,054 314,904
Interest
income (18,984) 8,622 (59,688) (3,796)
Deferred
income tax
recovery (73,649) - (230,702) -
----------------------------------------------------------------------------
EBITDA $ (2,816,827) $ (1,780,788) $ (6,834,821) $ (4,286,753)
Listing
expense - - 38,193 -
Penalties from
non-
completion of
transactions (6,498) - 214,555 -
Gain on
disposal of
equipment (3,000) - (91,674) -
Share based
compensation 695,144 582,266 2,499,356 671,651
Unrealized
loss on
embedded
derivatives 369,036 - 369,036 -
Gain on
dilution of
equity
accounted
investment - - (1,132,107) -
----------------------------------------------------------------------------
TOTAL ADJUSTED
EBITDA $ (1,762,145) $ (1,198,522) $ (4,937,462) $ (3,615,102)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average
number of
common shares
outstanding -
basic and
diluted 42,156,344 25,814,087 40,961,436 19,247,759
ADJUSTED EBITDA
per share -
basic and
diluted $ (0.04) $ (0.05) $ (0.12) $ (0.19)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) EBITDA,Adjusted EBITDA and Adjusted EBITDA per share are non-IFRS measures. See "Adjusted EBITDA" in the Company's Management's Discussion and Analysis for the three and nine-month periods ended September 30, 2017.
Message from the CEO
Fellow Shareholders,
Three years ago, as interest in the Canadian cannabis capital markets grew, CannaRoyalty was formed to pursue investment opportunities in the legal cannabis industry. It was clear that the use of cannabis was going to be legalized in many jurisdictions around the world and many U.S. states already had active and thriving cannabis industries. This provided us with plentiful opportunities to invest in a well-established, albeit historically illicit sector that existing consumer goods companies and traditional providers of capital, such as banks, would have difficulty entering and exploiting. We determined that there was an opening for a nimble finance company to take advantage of investment opportunities in an industry poised for explosive growth in North America.
The one investment option to which we chose to significantly limit exposure was the financing of undifferentiated pure-play cannabis cultivation. We believe mass produced cannabis flower will become an agricultural commodity in the long-term, which will eventually be subject to relatively low average margins and commodity-based pricing. We feel that investors will be better served in the long term by the return potential of a basket of key value-added cannabis assets, and recent capital market activity suggests to us that other investors are beginning to share this view.
In Phase 1 of our growth plan, we set about executing on this view, investing in a basket of companies in value-added areas of the legal cannabis market in North America: manufacturing, marketing, technology, research and development, products, brands, and distribution. Under this plan, we've deployed over $30 million into equity, debt and royalty investments.
The experience our team has gained over the past three years in the North American cannabis markets, and in particular the launch of our CR Brands division earlier this year, has led us to Phase 2 of our journey and a focus on California.
California is a global entertainment and cultural hub, which shapes consumer perceptions for a multitude of commercial products and services. The state is transitioning to a full adult-use cannabis market in January 2018. It is the largest cannabis market in the world (currently estimated to be $5.2 billion USD in 2018 according to Forbes magazine) and has a history of over 20 years of medical legalization. California has a broad range of permitted cannabis products for use and as a result, it is home to some of the most sophisticated and discerning cannabis consumers in the marketplace today. In our view, only superior products and brands will be able to succeed in this market over the long term. We believe that a company that wins in California will have a unique advantage competing not only in other U.S. jurisdictions, but also in Canada and across the globe.
In Phase 2 of our business, we will focus on leveraging our current asset base, expertise and portfolio of brands to build a leading cannabis consumer products business, centered in California. We have already begun this journey. Through CR Brands, we recently announced the commercial manufacture and launch, through River Distribution, of two in-house brands, Soul Sugar Kitchen™ gourmet edibles and GreenRock Botanicals™ vape pens.
Specifically, we are focused on three primary opportunities over the next 12 months in California:
1. Continue to drive growth of CR Brands product portfolio and points of
distribution through River and other distribution channels;
2. Make prudent acquisitions of promising products or leading brands; and
3. Increase commercial production in our Santa Rosa facility and gradually
drive efficiencies.
At this early stage in our growth trajectory, we are primarily focused on continuing to set a strong foundation for the future. We are making investments in the most exciting cannabis market in the world. Our team has substantial experience developing and commercializing successful brands and we are confident that our business will generate substantial and lasting shareholder value.
Many thanks for your support as we enter this exciting next phase for our business.
Marc Lustig, CEO
Share Capital
The Company's authorized share capital is an unlimited number of common shares of which 42,391,900 were issued and outstanding as at September 30, 2017 (December 31, 2016 - 36,006,956 common shares). The Company has issued 3,093,150 RSUs that have not been exercised as at September 30, 2017 including 1,546,920 that have vested (December 31, 2016 - 2,774,800 including 1,065,637 that had vested). As of September 30, 2017, there are share purchase warrants and broker warrants outstanding that can potentially be converted to 5,475,212 shares (December 31, 2016 - 1,113,633).
Conference Call and Slide Presentation
CannaRoyalty will host a conference call on, Thursday, November 28, 2017 at 8:30 a.m. (Eastern Time) to discuss its 2017 third quarter financial results. The call will be chaired by Marc Lustig, Chief Executive Officer and Francois Perrault, Chief Financial Officer.
The conference call will include a slide presentation and webcast. A link to the slide presentation and webcast is below, and slides will also be available 30 minutes prior to the call in the Investors section of CannaRoyalty's website at: cannaroyalty.com.
----------------------------------------------------------------------------
Participant Dial- Webcast Reference Number
in
----------------------------------------------------------------------------
Conference Call 647-427-7450; or http://bit.ly/2xYB
DJQ
1-888-231-8191
----------------------------------------------------------------------------
Replay 416-849-0833; 97386572
(available for 2 613-667-0035; or
weeks)
1-855-859-2056
----------------------------------------------------------------------------
About CannaRoyalty
CannaRoyalty is an active investor and operator in the legal cannabis sector. Our focus is building and supporting a diversified portfolio of growth-ready assets in high-value segments of the cannabis sector, including research, consumer brands, devices and intellectual property. Our management team combines a hands-on understanding of the cannabis industry with seasoned financial know-how, assembling a platform of holdings via royalty agreements, equity interests, secured convertible debt, licensing agreements and its own branded portfolio.
Forward Looking Statements
Statements in this news release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed here and elsewhere in CannaRoyalty's periodic filings with Canadian securities regulators. When used in this news release, words such as "will, could, plan, estimate, expect, intend, may, potential, believe, should," and similar expressions, are forward- looking statements.
Forward-looking statements may include, without limitation, statements including the Company's expectations with respect to pursuing new opportunities and its future growth and other statements of fact.
Although CannaRoyalty has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in the forward-looking statements, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended, including, but not limited to: dependence on obtaining regulatory approvals; investing in target companies or projects which have limited or no operating history and are engaged in activities currently considered illegal under US Federal Laws; changes in laws; limited operating history; reliance on management; requirements for additional financing; competition; hindering market growth and state adoption due to inconsistent public opinion and perception of the medical-use and adult-use marijuana industry and; regulatory or political change.
There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. As a result of these risks and uncertainties, the results or events predicted in these forward-looking statements may differ materially from actual results or events.
Accordingly, readers should not place undue reliance on forward-looking statements. The forward- looking statements in this news release are made as of the date of this release. CannaRoyalty disclaims any intention or obligation to update or revise such information, except as required by applicable law, and CannaRoyalty does not assume any liability for disclosure relating to any other company mentioned herein.
Unaudited Condensed Interim Consolidated Statements of Loss and
Comprehensive Loss
In Canadian dollars
----------------------------------------------------------------------------
Three months ended Nine months ended
Sept 30, 2017 Sept 30, 2016 Sept 30, 2017 Sept 30, 2016
----------------------------------------------------------------------------
Revenue $ 744,302 $ 127,707 $ 2,005,570 $ 140,125
Cost of sales (616,292) (36,438) (1,211,406) (48,422)
------------------------------------------------------------
Gross margin 128,010 91,269 794,164 91,703
Operating
expenses
Sales and
marketing 422,362 86,190 1,068,443 97,132
Research and
development 275,839 168,498 900,932 848,153
General and
administrative 1,943,675 1,670,264 6,058,597 3,409,395
Amortization of
brands and
technologies 193,063 - 601,413 -
------------------------------------------------------------
Loss from
operations (2,706,929) (1,833,683) (7,835,221) (4,262,977)
Other income
(expenses)
Gain (loss) on
disposal of
equipment 3,000 - 91,674 -
Profit (loss)
from equity
accounted
investees, net
of tax (137,093) 2,023 706,821 2,023
Unrealized loss
on embedded
derivatives (369,036) - (369,036) -
Adjustment from
non-completion
of share swap
transaction 6,498 - (214,555) -
Listing expense - - (38,193) -
Foreign exchange
gain (loss) (79,631) 5,098 (266,911) (70,642)
Interest expense (85,935) (41,097) (122,054) (314,904)
------------------------------------------------------------
Net loss before
tax (3,369,126) (1,867,659) (8,047,475) (4,646,500)
Deferred tax
recovery 73,649 - 230,702 -
------------------------------------------------------------
Net loss for the
period $ (3,295,477) $ (1,867,659) $ (7,816,773) $ (4,646,500)
------------------------------------------------------------
------------------------------------------------------------
Other
comprehensive
loss for the
period
Foreign currency
translation
differences (323,484) 714 (860,619) 217
------------------------------------------------------------
Total
comprehensive
loss for the
period $ (3,618,961) $ (1,866,945) $ (8,677,392) $ (4,646,283)
------------------------------------------------------------
Net loss per
common share -
basic and
diluted $ (0.08) $ (0.07) $ (0.19) $ (0.24)
Total
comprehensive
loss per common
share - basic
and diluted $ (0.09) $ (0.07) $ (0.21) $ (0.24)
Weighted average
number of
common shares
outstanding 42,156,344 25,814,087 40,961,436 19,247,759
- basic and
diluted
Total
comprehensive
loss for the
period
attributable
to:
Owners of the
company $ (3,610,203) $ (1,866,945) $ (8,641,017) $ (4,646,283)
Attributable to
non-controlling
interest (8,758) - (36,375) -
------------------------------------------------------------
$ (3,618,961) $ (1,866,945) $ (8,677,392) $ (4,646,283)
------------------------------------------------------------
------------------------------------------------------------
Unaudited Condensed Interim Consolidated Statements of Financial Position
In Canadian dollars
----------------------------------------------------------------------------
September 30, 2017 December 31, 2016
----------------------------------------------------------------------------
ASSETS
Current
Cash and equivalents $ 2,593,914 $ 2,945,895
Amounts receivable 1,606,374 556,170
Inventory 788,561 641,350
Prepaid and other assets 267,628 110,834
Loans receivable 4,208,174 2,943,161
-----------------------------------------
9,464,651 7,197,410
Convertible notes receivable 866,999 864,806
Derivative assets 95,006 114,505
Interest in equity accounted
investees 8,463,603 3,541,281
Investments 2,478,750 2,228,750
Royalty investments 9,018,596 2,593,891
Warrants issued with secured credit
facility 1,853,931 -
Property and equipment 1,114,113 1,393,112
Intangible assets and goodwill 12,810,395 14,264,183
-----------------------------------------
36,701,393 25,000,528
-----------------------------------------
$ 46,166,044 $ 32,197,938
-----------------------------------------
-----------------------------------------
LIABILITIES
Current
Amounts payable and accrued
liabilities $ 3,789,656 $ 1,886,189
Loan payable 421,330 451,618
-----------------------------------------
4,210,986 2,337,807
Convertible debt 1,426,118 1,414,414
Derivative liabilities 507,453 100,586
Deferred tax liability 2,588,528 3,001,766
-----------------------------------------
$ 8,733,085 $ 6,854,573
-----------------------------------------
SHAREHOLDERS' EQUITY
Share capital $ 44,974,883 $ 30,636,253
Shares and contingent shares to be
issued 2,010,000 4,520,000
Warrants reserve 5,180,305 628,623
Contributed surplus 7,541,256 3,154,582
Accumulated other comprehensive
loss (963,381) (102,762)
Accumulated deficit (21,270,725) (13,490,327)
Non-controlling interest (39,379) (3,004)
-----------------------------------------
37,432,959 25,343,365
-----------------------------------------
$ 46,166,044 $ 32,197,938
-----------------------------------------
-----------------------------------------
Unaudited Condensed Interim Consolidated Statements of Cash Flows
In Canadian dollars
----------------------------------------------------------------------------
Three months ended Nine months ended
Sept 30, 2017 Sept 30, 2016 Sept 30, 2017 Sept 30, 2016
----------------------------------------------------------------------------
CASH FLOWS FROM
(USED IN)
OPERATING
ACTIVITIES
Total
comprehensive
loss for the
period $ (3,618,961) $ (1,866,845) $ (8,677,392) $ (4,646,283)
Items not
affecting cash:
Bad debts
expense
(recovery) 5,951 94,363 (7,268) 94,363
(Income) loss
from equity
accounted
investees 137,093 (2,023) (706,821) (2,023)
Amortization
of property
and equipment 46,532 36,438 137,730 48,422
Amortization
of
intangibles 193,063 - 601,413 -
Amortization
of royalties 245,753 - 411,145 -
Amortization
of warrants
issued for
credit
facility 68,469 - 68,469 -
Share based
compensation 695,144 582,266 2,499,356 671,651
Consulting
fees paid via
issuance of
shares 30,000 - 30,000 -
Transaction
adjustment
paid via
issuance of
shares 204,060 - 204,060 -
Deferred tax
recovery (73,649) - (230,702) -
Loss related
to change in
fair value of
embedded
derivatives 369,036 - 369,036 -
Gain on
disposal of
equipment (3,000) - (91,674) -
Foreign
currency
translation
differences 323,484 (714) 860,619 (217)
------------------------------------------------------------
(1,377,025) (1,156,515) (4,532,029) (3,834,087)
Changes in non-
cash items
relating to
operations:
Increase in
amounts
receivable (317,148) (304,060) (1,064,247) (316,560)
Increase in
inventory (74,703) - (147,211) -
Decrease
(increase) in
prepaid and
other assets (60,774) 5,829 (156,794) (57,832)
Increase
(decrease) in
accounts
payable and
accruals (227,632) 874,823 (1,021,754) 1,756,979
------------------------------------------------------------
(2,057,282) (579,923) (6,922,035) (2,451,500)
------------------------------------------------------------
CASH FLOWS FROM
(USED IN)
INVESTING
ACTIVITIES
Purchase of
property and
equipment (19,847) (14,620) (151,861) (155,234)
Increase in
share
subscription
receivable - - - (2,500)
Purchase of
equity
investments (316,666) (827,250) (1,917,884) (1,511,010)
Royalty
financing
arrangements (1,211,500) 12,222 (3,962,131) (181,966)
Purchase of
Intangible
assets - (51,776) - (68,838)
Loans advanced
to debtors, net
of repayment (347,218) (1,283,148) (1,488,018) (2,084,605)
Convertible
loans advanced
to debtors, net
of repayment - (638,592) - (934,861)
------------------------------------------------------------
(1,895,231) (2,803,164) (7,519,894) (4,939,014)
------------------------------------------------------------
CASH FLOWS FROM
(USED IN)
FINANCING
ACTIVITIES
Proceeds from
shares in
private
placements, net
of issuance
costs - 2,126,261 - 7,627,414
Proceeds from
shares in
bought deal
financing, net
of issuance
costs - - 10,958,243 -
Proceeds from
issuance of
warrants,
including
broker warrants - 1,125,000 2,787,000 1,125,000
Proceeds from
exercise of
warrants 112,500 - 404,592 -
Proceeds from
issuance of
stock options - - 25,000 -
Net advances /
(repayment to)
lenders - 131,826 - (426,412)
Tax withholding
paid on
exercise of
restricted
share units (7,376) - (84,887) -
Decrease in
share
subscriptions
payable - - - (684,486)
------------------------------------------------------------
105,124 3,383,087 14,089,948 7,641,516
------------------------------------------------------------
INCREASE
(DECREASE) IN
CASH (3,847,389) - (351,981) 251,002
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD 6,441,303 309,925 2,945,895 58,923
------------------------------------------------------------
CASH AND CASH
EQUIVALENTS,
END OF PERIOD $ 2,593,914 $ 309,925 $ 2,593,914 $ 309,925
------------------------------------------------------------
Contacts:
Marc Lustig
CEO
info@cannaroyalty.com
1-844-556-5070
www.cannaroyalty.com
Jonathan Ross
LodeRock Advisors Inc.
jon.ross@loderockadvisors.com
416-283-0178
