• 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] 

 

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SOURCE Item 9 Labs Corp.

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