Franchisor and operator of vertically integrated cannabis dispensaries Section 9 Labs Corp. (OTCQX: INLB) reported operating and financial results for the first quarter of its 2022 fiscal year ended December 31, 2021.
Key Financial Highlights for the First Quarter of Fiscal 2022
- Revenue increased 104% year over year at $6.2 million.
- Gross profit increased 68% year over year at $2.4 million.
- Gross margin remained strong at around 39%.
- Operating loss of $2.1 million compared to an operating loss of $0.4 million for the same period last year.
- Operating expenses were $4.5 millionan increase of $2.7 million, or 152%, compared to $1.8 million for the quarter ended December 31, 2020.
- Net loss of $3.3 million compared to a net loss of $1.1 million in the corresponding quarter of fiscal 2021.
- The net loss includes $1.2 million ($76,000 paid in cash) of interest expense, compared to $0.70 million ($319,000 paid in cash) in the prior year period.
- Loss of adjusted EBITDA of $1.2 million compared to an adjusted EBITDA profit of $0.4 million in the first quarter of last year.
- Escrow deposits of $12.8 million in cash set aside for the expansion.
Q1 2022 and Recent Business Highlights
- Arizona culture and lab site expansion launched – as part of the main site expansion, the company recently acquired the neighboring 45 acres and plans to increase its operating space to over 640,000 square feet, an increase of 3,100% over its current operations.
- Earned five podium finishes at the 710 Degree Cup.
- Signed asset purchase agreement for Colorado Dispensary Kickstarts national growth plan – Item 9 plans to aggressively expand its dispensary franchise, Unity Rd., by acquiring and converting retail stores in cannabis retail, forming the local team and selling the business to new and existing Unity Rd. franchise partners.
- First Partner Signed Through Local Alliance Program – Unity Rd. launched its Local Alliance Program in 2021 to support existing dispensary owners and operators and signed its first partner in January 2022 with an Oklahoma dispensary City, Ringside Medical. The store is located at 14201 N. May Ave. #205 and will be renamed Unity Rd.
- Signed first Unity Rd. agreement in South Dakota that will bring the brand’s first store to the Mount Rushmore State. The retailer has partnered with local serial entrepreneur BJ Olson and his business partner to develop at least one Unity Rd. store and is currently guiding them through the state dispensary licensing process.
- The company’s 20,000 square foot facility in Pahrump, Nevada is currently approximately 95% complete.
“Demand remains strong for Item 9 Labs in Arizona, and we expect it to only accelerate further,” Andrew Bowden, Company CEO, noted. “Our product offerings will continue to expand over the coming year to better meet the needs and interests of today’s modern cannabis consumer,” Mike Weinberger, the company’s director of franchises, noted.
“The continued legalization and awareness of our dispensary franchise opportunity keeps our development pipeline strong. Unity Rd. now has a franchise store open in Boulder, Colorado along with agreements with nearly 20 partners to open more than three dozen stores in 9 states A majority in development are in various stages of state licensing, we also have a wide range of attractive markets in our acquisition pipeline and expect to make more announcements in the coming month. “
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