Irwin Naturals Reports Q1 2023 Financial Results

LOS ANGELES, May 31, 2023 (GLOBE NEWSWIRE) -- Irwin Naturals Inc. (CSE: IWIN) (OTC: IWINF) (FRA: 97X) (“Irwin” or the “Company”) today reported its financial results for the first quarter and year ended March 31, 2023, on www.sedar.com.

Financial Highlights for Q1 2023 (all comparisons are for the year ended December 31 unless otherwise indicated):

• Q1 2023 revenue was $22.5 million, down 0.4% from $22.6 million in Q1 2022.
• Income from operations decreased $4.0 million from $2.5 million in Q1 2022 to a loss of $1.5 million in Q1 2023. The decrease is primarily attributed to the continued startup costs related to the Company’s 2022 and 2023 Acquisitions at Irwin Naturals Emergence (the company acquired 13 mental health clinics and one advertising platform) and Irwin Naturals Cannabis (intellectual property licensing to the cannabis industry).
• Q1 2023 net loss of $7.7 million includes $6.5 million of impairment charges related to the 2022 Acquisitions.
  

Financial Highlights for Q1 2023 and Year to Date 2023

• Secured a credit facility as of February 1, 2023 with its existing commercial lender for $40 million, with the potential of being up to $60 million.
• Completed the acquisition of Serenity Health, LLC, one of the leading ketamine clinics in Louisville, KY on February 17, 2023.
• Announced the successful acquisition of Keta Media, LLC, dba Ketamine Media, the nation's foremost advertising company dedicated to raising awareness about the clinical use of ketamine, on March 17, 2023.
  

Operational Highlights

Irwin Naturals has commenced its expansion into the high-growth cannabis and psychedelics sectors. During the first quarter of 2023, the Company launched the first products to the continental cannabis market and has signed ten brand licensing deals that will see Irwin Naturals products enhanced with THC be offered in places like California, Colorado, Mississippi, Michigan, New Mexico, Oregon, Oklahoma, and Canada. Additionally, to date, the Company has announced the acquisition of thirteen clinics and one advertising company specializing in ketamine clinics. The Company will continue to build upon this solid foundation and make the necessary investments to support our growth objectives within the psychedelics sector.

Sean Sand, CFO, stated, “During the first quarter of 2023, we launched the first products related to our licensing in our cannabis sectors. We expanded our mental health clinics footprint in Kentucky through an acquisition and acquired an advertising platform to expand our customer outreach at our mental health clinics.”

About Irwin Naturals

Irwin Naturals has been a household name and best-in-class nutraceutical company since 1994. It is now leveraging its brand into both the cannabis and psychedelic sectors. On a mission to heal the world with plant medicine, Irwin has operated its nutraceutical business profitably for over 28 years. The growing portfolio of products is available in more than 100,000 retail doors across North America, where 80% of households know the Irwin Naturals brand. In 2018, the Company first leveraged its brand to expand into the cannabis industry by launching hemp-based CBD products into the mass market. The Company is now leveraging its famous halo of brand trust to become, perhaps, the first household name brand to offer THC-based products. Its rapidly growing national chain of psychedelic mental health clinics is called Irwin Naturals Emergence.

For investor-related information about the Company, please visit ir.irwinnaturals.com/.

To contact the Company’s Investor Relations department, please call toll-free at [phone] or send an email to [e-mail].

“Klee Irwin”
________________________________
Klee Irwin
Chief Executive Officer
T: 310-306-3636
[e-mail]

Regulatory Overview

The following is a brief summary of regulatory matters concerning ketamine in the United States (“US”). Under the Controlled Substances Act (21 U.S.C. § 811) (the "CSA"), ketamine is currently a Schedule III drug as well as being listed under the associated Narcotic Control Regulations, and psilocybin is currently a Schedule I drug.

Most US States have enacted Controlled Substances Acts (“State CSAs”) which regulate the possession, use, sale, distribution, and manufacture of specified drugs or categories of drugs and establish penalties for State CSA violations and form the basis for much state and local drug laws enforcement activity. State CSAs have either adopted drug schedules identical or similar to the federal CSA schedules or, in some instances, have incorporated the federal scheduling mechanism. Among other requirements, some US States have established a prescription drug monitoring or review programs collect information about prescription and dispensing of controlled substances for the purposes of monitoring, analysis and education.

In the United States, facilities holding or administering controlled substances must be registered with the US Drug Enforcement Agency ("DEA") to perform this activity. As such, medical professionals and/or the clinics in which they operate, as applicable, are also required to have a DEA license to obtain and administer ketamine (a "DEA License"). While ketamine is a controlled substance in the United States, it is approved for general anesthetic induction under the US Food, Drug, and Cosmetic Act. Once a drug is approved for use, physicians may prescribe that drug for uses that are not described in the product’s labelling or that differ from those tested by the manufacturer and approved by the Food and Drug Administration (the "FDA"). Licensed medical practitioners may prescribe ketamine legally in Canada or the United States where they believe it will be an effective treatment in their professional judgment.

Please see Irwin’s filing statement on its SEDAR profile for more information on the regulatory environment and regulations surrounding the US THC industry.

Forward-Looking Information

This news release contains certain forward-looking statements that reflect the current views and/or expectations of management of the Company with respect to performance, business and future events. Forward-looking statements can often be identified by words such as "may", "will", "would", "could", "should", "believes", "estimates", "projects", "potential", "expects", "plans", "intends", "anticipates", "targeted", "continues", "forecasts", "designed", "goal", or the negative of those words or other similar or comparable words. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business and the industry and markets in which the Company operates. The Company does not undertake any obligation to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.

Neither the CSE nor its Market Regulator (as that term is defined in policies of the CSE) accepts responsibility for the adequacy or accuracy of this release. 

SOURCE: Irwin Naturals, Inc.

EBITDA and Adjusted EBITDA - Reconciliation

The Company defines EBITDA and Adjusted EBITDA as per the table below. It should be noted that these performance measures are not defined under IFRS and may not be comparable to similar measures used by other entities. The Company believes that these measures are useful financial metrics as they assist in determining the ability to generate cash from operations. Investors should be cautioned that EBITDA and Adjusted EBITDA should not be construed as an alternative to net earnings or cash flows as determined under IFRS. The reconciling items between net earnings, EBITDA, and Adjusted EBITDA are as follows:

		Three Months Ended March 31
		(in thousands)
		2023				2022				$ Change				% Change
Statement of Profit
Net (loss) income		$	(7,698	)		$	1,581			$	(9,279	)			(100.0	+)
Interest expense, net			511				249				262				100.0	+
Income taxes (recovery)			(639	)			696				(1,335	)			(100.0	+)
Depreciation and amortization			769				405				364				89.9
EBITDA			(7,057	)			2,931				(9,998	)			(100.0	+)
Foreign currency translation adjustments			18				4				14				100.0	+
Gain on contingent consideration			(390	)			—				(390	)			(100.0	)
Intangible assets impairment			3,739				—				3,737				100.0
Goodwill impairment			2,810				—				2,810				100.0
Adjusted EBITDA		$	(880	)		$	2,935			$	(3,815	)			(100.0	+)

Irwin Naturals, Inc. Consolidated Statements of Financial Position As of December 31, 2022 and 2021 (Expressed in US Dollars, rounded in thousands except share data)
		March 31, 2023				December 31, 2022
ASSETS
Current assets:
Cash		$	6,529			$	800
Trade receivables, net		16,347				21,311
Inventory		21,671				22,506
Prepaid expenses and other current assets		3,344				2,932
Total current assets		47,891				47,549
Non-current assets:
Property and equipment, net		353				271
Right-of-use assets		4,741				4,194
Notes receivable from shareholders		6,935				6,014
Notes receivable from related parties		505				255
Goodwill		21,190				10,215
Intangible assets, net		6,160				7,677
Deferred tax asset		2,367				2,367
Other non-current assets		277				259
Total non-current assets			42,528			31,252
TOTAL ASSETS		$	90,419			$	78,801
LIABILITIES
Current liabilities:
Trade and other payables		$	13,747			$	17,997
Reserve for returns		1,891				2,036
Lease liabilities, current		1,495				1,817
Line of credit, net of debt issuance costs		26,373				16,448
Notes payable due to acquiree		5,500				—
Notes payable, current		45				36
Total current liabilities		49,051				38,334
Non-current liabilities:
Lease liabilities, non-current		3,431				2,529
Notes payable, non-current		656				498
Contingent consideration		5,764				6,154
Notes payable due to acquiree		7,000				—
Deferred tax liability		983				983
Total non-current liabilities		17,834				10,164
TOTAL LIABILTIES		$	66,885			$	48,498
EQUITY AND NONCONTROLLING INTEREST
Class B Shares, 320,000,000 shares authorized, issued and outstanding		$	13,750			$	13,750
Subordinate Voting Shares, 3,389,224 shares authorized, issued and outstanding		7,984				7,068
Multiple Voting Shares, 18,240 shares authorized, issued and outstanding		59				59
Proportionate Voting Shares, 2,085,200 shares authorized, issued and outstanding		5,610				5,610
Warrants reserve		30				30
Accumulated other comprehensive income		21				3
Retained (deficit) earnings		(10,955		)		(3,324		)
Total controlling interest		16,499				23,196
Noncontrolling interest		7,035				7,107
TOTAL EQUITY AND NONCONTROLLING INTERST		23,534				30,303
TOTAL LIABILTIES AND EQUITY		$	90,419			$	78,801

Irwin Naturals, Inc. Consolidated Statements of Profit and Comprehensive Income For the Years Ended December 31, 2022 and 2021 (Expressed in US Dollars, rounded in thousands except share data)
		Three Months Ended March 31,
		2023				(Restated) 2022
Operating revenue		$	22,506			$	22,594
Cost of sales		(11,399		)		(11,548		)
Gross profit		11,107				11,046
Selling, general and administrative expenses		12,572				8,520
Income (loss) from operations		(1,465		)		2,526
Other (income) expenses:
Interest expense (income), net		511				249
Loss (gain) on foreign currency exchange		2				––
Goodwill impairment		2,810				––
Intangible assets impairment		3,739				––
Intangible assets amortization		200				––
Gain on contingent liabilities		(390		)		––
Total other expenses (income)		6,872				249
Net (loss) income before income taxes		(8,337		)		2,277
Income tax (recovery) expense		(639		)		696
Net (loss) income		(7,698		)		1,581
Less: net (loss) income attributable to non-controlling interest			(72	)		237
Net (loss) income attributable to controlling interest			(7,626	)		1,344
Comprehensive Income
Net (loss) income		$	(7,698	)		$	1,581
Foreign currency translation adjustments			18			4
Total comprehensive (loss) income			(7,680	)		1,585
Less: net (loss) income attributable to non-controlling interest			(72	)		237
Comprehensive (loss) income attributable to controlling interest		$	(7,608	)		$	1,348
(Loss) earnings per share, controlling interest – basic		$	(2.27	)		$	1.12
(Loss) earnings per share, controlling interest – diluted		$	(2.27	)		$	0.00
Weighted average number of shares outstanding – basic			3,358,211				1,200,001
Weighted average number of shares outstanding – diluted			3,358,211				321,376,574

Irwin Naturals, Inc. Consolidated Statements of Cash Flows For the Years Ended December 31, 2022 and 2021 (Expressed US Dollars, rounded in thousands)
		Three Months Ended March 31,
		2023				2022
Net (loss) income		$	(7,698	)		$	1,581
Adjustments to reconcile to net cash (used in) provided by operating activities:
Depreciation and amortization		769				405
Gain on contingent consideration		(390		)		—
Goodwill impairment		2,810				—
Intangible assets impairment		3,739				—
Change in allowance for doubtful accounts		80				59
Change in inventory reserve		211				(193		)
Change in deferred tax asset		—				332
Notes receivable from shareholder		(900		)		—
Notes receivable from related parties		(250		)		(100		)
Interest expense, net		(18		)		2
Changes to working capital:
Trade receivables		6,228				99
Inventory		624				(1,159		)
Prepaids expenses and other current assets		(401		)		224
Trade and other payables		(3,770		)		2,074
Reserve for returns		(145		)		(323		)
Other non-current assets		(3		)		2
Net cash (used in) provided by operating activities		886				3,003
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(4,384		)		105
Purchases of property and equipment		(15		)		(20		)
Net cash used in investing activities		(4,399		)		85
Cash flows from financing activities:
Proceeds from line of credit		35,773				17,497
Payments to line of credit		(25,165		)		(20,035		)
Payments to notes payable		(124		)		—
Payments of debt issuance costs		(733		)		—
Payments on operating leases		(461		)		(341		)
Purchase of treasury stock		(66		)		—
Net cash provided by (used in) financing activities		9,224				(2,879		)
Effect of foreign exchange on cash		18				19
Net increase in cash		5,729				228
Cash at beginning of the year		800				625
Cash at end of the year		$	6,529			$	853