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Christina Lake Cannabis reports third quarter 2023 results

(Globe Newswire) Vancouver — Christina Lake Cannabis Corp. is pleased to report its financial results for the third quarter ended August 31, 2023. All amounts are expressed in Canadian dollars unless otherwise noted.

Q3’23 highlights

— Revenue up 30 per cent to $8.9M over nine-month period end Q3’22;

— Distillate volumes sold increased by 85 per cent compared to the nine-month period ending Q3’22;

— Gross profit of $4.0M or 45.2 per cent before fair value adjustments for the nine-month period;

— Decreased G&A expenses by $137k or 4 per cent from prior year period

“Through a steadfast commitment to meeting our customers’ ever-expanding demands and consistently delivering high quality products, CLC has continued to maintain impressive sales growth in Q3. Our agility in responding to dynamic market conditions is evident through the successful introduction of our expanded product lines, garnering positive customer feedback and substantial reorders. Our continued success is a testament to our relentless pursuit of excellence, our continuous drive for operating efficiency, and our focus on innovation.” — Mark Aiken, CEO, Christina Lake Cannabis.

OPERATIONAL AND FINANCIAL HIGHLIGHTS

                   August 31,   2023   August 31,   2022   $ Change   % Change
   Revenue from the sale of goods    $   8,939,679      $   6,885,968      $   2,053,711      30   %
   Costs of sales       (4,895,324   )      (3,284,724   )      1,610,600      49   %
   Gross profit before fair value adjustment       4,044,355         3,601,244         443,111      12   %
   Changes in fair value of inventory sold       (2,305,915   )      (1,173,677   )      1,132,238      96
   Fair value change growth biological asset       2,614,303         3,002,383         (388,080   )   (13
   Other items       (722,949   )      1,556         (724,505   )   (46562

   Income (loss) per share             0.00         0.02

   Gross margin %             45.2   %      52.3   %

   Financial Position
   Working capital             4,139,795         3,683,558
   Inventory             1,954,344         4,621,213
   Biological assets             4,035,020         4,380,074
   Total assets             18,836,093         21,483,084
   Total liabilities             7,121,404         6,725,056

Distillate volumes sold increased by 85 per cent from the comparative period ending Q3’22 resulting in revenue growth of 30 per cent to $8.9M from $6.9M despite market price compression in the price of distillate. Revenue growth was primarily driven by increased demand in distillate.

Gross Margin Before Fair Value Adjustments was 45.2 per cent compared to 52.3 per cent in the prior year period. The decline in gross margin is primarily attributed to a significant drop in the price of wholesale distillate. Cost of goods sold increased by 49 per cent from the comparative period due to the significant increase in distillate volume produced and sold as noted above. The company continues to work towards production efficiencies to combat price compression in the wholesale distillate market as production and sales continued to ramp up.

Total general & administrative expenses declined by $137k or 4 per cent from prior comparative period, driven by year-over-year reductions in consulting fees, management fees, insurance, marketing, share based compensation and repairs and maintenance expenses, which were partially offset by increases in depreciation, professional fees, research and development, salaries and regulatory fees. G&A decreased to 35 per cent of revenue during the period, compared with 48 per cent in the prior year.

Income (Loss) and comprehensive income (loss) in Q3’23 was $495k which is a $1.7M decrease from the prior year period income of $2.2M. The year-over-year decrease in income is primarily driven by an increase in changes in fair value of inventory sold of $1.1M, a reduction in income from other items relating to a one-time settlement of $258k and debt modification of $386k in the comparative period, and a decrease in the fair value change in biological asset adjustment of $388k.

Cash and working capital

As at August 31, 2023, the company had working capital of $4,139,795 (November 30, 2022 _ $3,683,558) which consisted of cash of $1,728,432 (November 30, 2022 – $1,810,639), receivables of $2,312,232 (November 30, 2022 – $1,906,820), prepaid expenses of $51,757 (November 30, 2022 – $3,885), inventory of $1,954,344 (November 30, 2022 – $5,766,418), Biological assets of $4,035,020 (November 30, 2022 – $Nil). Current liabilities, being accounts payable and accrued liabilities, current portion of loan and current portion of convertible debentures, $5,941,991 (November 30, 2022 _ $5,832,954).