Neptune Wellness Solutions Inc. ("Neptune" or the "Company") (NASDAQ: NEPT) (TSX: NEPT), a diversified and fully integrated health and wellness company focused on plant-based, sustainable and purpose-driven lifestyle brands, today announced its financial and operating results for the three-month and twelve-month periods ending March 31, 2022.
"Neptune made significant progress on our path to become a pure play CPG company, with growth year-over-year and positive momentum in our key focus areas of Sprout and Biodroga during the fourth quarter. We expect this trend to continue into our fiscal 2023, with both Sprout and Biodroga continuing to expand their existing popular product offerings, as well as releasing new product lines that cater to different customer groups."
"Neptune's management and Board have made several strategic decisions recently that we believe are in the best interest of the company and its shareholders. In particular, significant cost saving initiatives, the planned divestiture of our cannabis business, and a refocusing of resources on our renewed mission of becoming a leading CPG company. In addition, we have continued our strategic review to help identify further synergies and cost savings. We are looking forward to the next phase for Neptune as we seek to capitalize on our large target addressable markets of personal care & beauty and organic food & beverages, which we believe have the most exciting growth potential. We remain steadfast in our goal to deliver on profitability and shareholder value."
The Company will host a conference call at 11:00 a.m. (Eastern Time) on Monday, July 11, 2022, to discuss these results. The conference call will be webcast live and can be accessed by registering on the Events and Presentations portion of Neptune's Investor Relations website at www.investors.neptunewellness.com. The webcast will be archived for approximately 90 days.
Consolidated Balance Sheets
(in U.S. dollars)
As at | As at | ||||
March 31, | March 31, | ||||
Assets | |||||
Current assets: | |||||
Cash and cash equivalents | $8,726,341 | $59,836,889 | |||
Short-term investment | 19,255 | 19,145 | |||
Trade and other receivables | 7,599,584 | 8,667,209 | |||
Prepaid expenses | 3,983,427 | 3,686,851 | |||
Inventories | 17,059,406 | 17,317,423 | |||
Total current assets | 37,388,013 | 89,527,517 | |||
Property, plant and equipment | 21,448,123 | 37,345,716 | |||
Operating lease right-of-use assets | 2,295,263 | 2,899,199 | |||
Intangible assets | 21,655,035 | 25,956,830 | |||
Goodwill | 22,168,288 | 25,453,372 | |||
Marketable securities | — | 150,000 | |||
Other financial assets | — | 5,615,167 | |||
Total assets | $104,954,722 | $186,947,801 | |||
Liabilities and Equity | |||||
Current liabilities: | |||||
Trade and other payables | $22,700,849 | $19,881,995 | |||
Current portion of operating lease liabilities | 641,698 | 230,016 | |||
Deferred revenues | 285,004 | 1,989,632 | |||
Provisions | 1,118,613 | 2,245,658 | |||
Liability related to warrants | 5,570,530 | 10,462,137 | |||
Total current liabilities | 30,316,694 | 34,809,438 | |||
Operating lease liabilities | 2,063,421 | 2,886,940 | |||
Loans and borrowings | 11,648,320 | 11,312,959 | |||
Other liability | 88,688 | 393,155 | |||
Total liabilities | 44,117,123 | 49,402,492 | |||
Shareholders' Equity: | |||||
Share capital - without par value (5,554,456 shares issued and outstanding as of March 31, 2022; | 317,051,125 | 306,618,482 | |||
Warrants | 6,079,890 | 5,900,973 | |||
Additional paid-in capital | 55,980,367 | 59,625,356 | |||
Accumulated other comprehensive loss | (7,814,163) | (8,567,106) | |||
Deficit | (323,181,697) | (248,209,952) | |||
Total equity attributable to equity holders of the Corporation | 48,115,522 | 115,367,753 | |||
Non-controlling interest | 12,722,077 | 22,177,556 | |||
Total shareholders' equity | 60,837,599 | 137,545,309 | |||
Commitments and contingencies | |||||
Subsequent events | |||||
Total liabilities and shareholders' equity | $104,954,722 | $186,947,801 |
See accompanying notes to the consolidated financial statements. |
Consolidated Statements of Loss and Comprehensive Loss
(in U.S. dollars)
Years ended | ||||||
March 31, | March 31, | |||||
Revenue from sales and services, net of excise taxes of $1,877,543 (2021 - $38,056) | $47,695,828 | $34,261,647 | ||||
Royalty revenues | 1,019,861 | 1,109,678 | ||||
Other revenues | 81,435 | 28,994 | ||||
Total revenues | 48,797,124 | 35,400,319 | ||||
Cost of sales other than loss on inventories, net of subsidies | (52,561,404) | (30,964,709) | ||||
Cost of services | — | (12,846,937) | ||||
Impairment loss on inventories | (3,772,066) | (18,962,254) | ||||
Total Cost of sales and services | (56,333,470) | (62,773,900) | ||||
Gross profit (loss) | (7,536,346) | (27,373,581) | ||||
Research and development expenses, net of tax credits and grants | (880,151) | (1,922,195) | ||||
Selling, general and administrative expenses, net of subsidies | (60,538,424) | (63,824,118) | ||||
Impairment loss related to intangible assets | (1,527,000) | — | ||||
Impairment loss related to property, plant and equipment | (14,765,582) | (10,747,692) | ||||
Impairment loss related to right-of-use assets | — | (107,650) | ||||
Impairment loss related to goodwill | (3,288,847) | (26,898,016) | ||||
Net gain on sale of assets | 6,469 | — | ||||
Loss from operating activities | (88,529,881) | (130,873,252) | ||||
Finance income | 7,123 | 825,745 | ||||
Finance costs | (2,143,978) | (1,786,781) | ||||
Foreign exchange loss | (685,708) | (4,051,418) | ||||
Change in revaluation of marketable securities | (107,203) | 169,216 | ||||
Gain on revaluation of derivatives | 7,035,118 | 7,974,549 | ||||
4,105,352 | 3,131,311 | |||||
Loss before income taxes | (84,424,529) | (127,741,941) | ||||
Income tax recovery | — | 3,477,711 | ||||
Net loss | (84,424,529) | (124,264,230) | ||||
Other comprehensive income | ||||||
Net change in unrealized foreign currency gains on translation of | 750,248 | 6,737,947 | ||||
Total other comprehensive income | 750,248 | 6,737,947 | ||||
Total comprehensive loss | $(83,674,281) | $(117,526,283) | ||||
Net loss attributable to: | ||||||
Equity holders of the Corporation | $(74,971,745) | $(123,170,020) | ||||
Non-controlling interest | (9,452,784) | (1,094,210) | ||||
Net loss | $(84,424,529) | $(124,264,230) | ||||
Total comprehensive loss attributable to: | ||||||
Equity holders of the Corporation | $(74,218,802) | $(116,206,145) | ||||
Non-controlling interest | (9,455,479) | (1,320,138) | ||||
Total comprehensive loss | $(83,674,281) | $(117,526,283) | ||||
Basic and diluted loss per share attributable to: | ||||||
Equity holders of the Corporation | $(15.54) | $(35.55) | ||||
Non-controlling interest | $(1.96) | $(0.32) | ||||
Total loss per share | $(17.50) | $(35.86) | ||||
Basic and diluted weighted average number of common shares | 4,824,336 | 3,465,059 | ||||
See accompanying notes to the consolidated financial statements.
The following table sets out selected consolidated financial information and are prepared in accordance with US GAAP.
Twelve-month periods ended | ||||||||
March 31, | March 31, | |||||||
$ | $ | |||||||
Total revenues | 48.797 | 35.400 | ||||||
Adjusted EBITDA1 | (43.811) | (39.444) | ||||||
Net loss | (84.425) | (124.264) | ||||||
Net loss attributable to equity holders of the | (74.972) | (123.170) | ||||||
Net loss attributable to non-controlling interest | (9.453) | (1.094) | ||||||
Basic and diluted loss per share | (17.50) | (35.86) | ||||||
Basic and diluted loss per share attributable | (15.54) | (35.55) | ||||||
Basic and diluted loss per share attributable | (1.96) | (0.32) | ||||||
As at | As at | As at | ||||
$ | $ | $ | ||||
Total assets | 104.955 | 186.948 | 120.060 | |||
Working capital2 | 7.071 | 54.718 | 15.346 | |||
Non-current financial liabilities | 13.800 | 14.593 | 4.854 | |||
Equity attributable to equity holders of the Corporation | 48.116 | 115.368 | 102.962 | |||
Equity attributable to non-controlling interest | 12.722 | 22.178 | — | |||
1 The Adjusted EBITDA is a non-GAAP measure. It is not a standard measure endorsed by US GAAP requirements. A reconciliation | ||||||
2 Working capital is calculated by subtracting current liabilities from current assets. Because there is no standard method endorsed by | ||||||
Although the concept of Adjusted EBITDA is not a financial or accounting measure defined under US GAAP and it may not be comparable to other issuers, it is widely used by companies. Neptune obtains its Adjusted EBITDA measurement by adding to net loss, net finance costs (income) and depreciation and amortization, and income tax expense (recovery). Other items such as stock-based compensation, non-employee compensation related to warrants, litigation provisions, business acquisition and integration costs, signing bonuses, severances and related costs, impairment losses on non-financial assets, write-downs of non-financial assets, costs related to a cybersecurity incident, revaluations of derivatives, system migration, conversion and implementation, CEO directors and officers insurance, costs related to conversion from IFRS to US GAAP and other changes in fair values are also added back. The exclusion of net finance costs (income) eliminates the impact on earnings derived from non-operational activities. The exclusion of depreciation and amortization, stock-based compensation, non-employee compensation related to warrants, litigation provisions, impairment losses, write-downs revaluations of derivatives and other changes in fair values eliminates the non-cash impact, and the exclusion of acquisition costs, integration costs, signing bonuses, severance and related costs, costs related to cybersecurity and costs related to conversion from IFRS to US GAAP present the results of the on-going business. From time to time, the Company may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. In Q4 2022, the Company added the costs related to the conversion from IFRS to US GAAP as an adjustment to the definition of Adjusted EBITDA. Adjusting for these items does not imply they are non-recurring. For purposes of this analysis, the Net finance costs (income) caption in the reconciliation below includes the impact of the revaluation of foreign exchange rates.
Adjusted EBITDA1 reconciliation, in millions of dollars
Twelve-month periods ended | ||||||||
March 31, | March 31, | |||||||
Net income (loss) for the period | $(84.425) | $(124.264) | ||||||
Add (deduct): | ||||||||
Depreciation and amortization | 6.791 | 8.830 | ||||||
Acceleration of amortization of long-lived non-financial assets | — | 10.552 | ||||||
Revaluation of derivatives | (7.035) | (7.975) | ||||||
Net finance costs | 2.823 | 5.012 | ||||||
Equity classified stock-based compensation | 7.817 | 9.885 | ||||||
Non-employee compensation related to warrants | 0.179 | 1.904 | ||||||
Litigation provisions | 0.627 | 1.290 | ||||||
Business acquisition and integration costs | 1.027 | 0.300 | ||||||
System migration, conversion, implementation | 0.327 | — | ||||||
CEO D&O insurance | 4.697 | — | ||||||
Signing bonuses, severances and related costs | 0.851 | 0.454 | ||||||
Costs related to cybersecurity incident | — | 1.500 | ||||||
Write-down of inventories and deposits | 3.772 | 18.962 | ||||||
Impairment loss on long-lived assets | 18.054 | 37.753 | ||||||
Costs related to conversion from IFRS to US GAAP | 0.577 | — | ||||||
Change in revaluation of marketable securities | 0.107 | (0.169) | ||||||
Income tax expense (recovery) | — | (3.478) | ||||||
Adjusted EBITDA1 | $(43.811) | $(39.444) | ||||||
1 The Adjusted EBITDA is not a standard measure endorsed by US GAAP requirements. |
The audited consolidated financial statements of Neptune Wellness Solutions Inc. were prepared in accordance with U.S. generally accepted accounting principles. The audited consolidated financial statements and management's discussion and analysis of financial condition and result of operations have been filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml, and may also be found on our investor relations website at www.investors.neptunewellness.com. All amounts are in United States dollars except if specified otherwise.
This news release contains a non-GAAP measure, specifically Adjusted EBITDA. We use Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on GAAP financial measures. We believe that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of issuers. Management also uses this non-GAAP measure in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements. Adjusted EBITDA is not recognized, defined or standardized measures under GAAP. Our definition of Adjusted EBITDA will likely differ from that used by other companies (including our peers) and therefore comparability may be limited. Non-GAAP measures should not be considered a substitute for or in isolation from measures prepared in accordance with GAAP. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-GAAP measures and view them in conjunction with the most comparable GAAP financial measures. We obtain our Adjusted EBITDA measurement by adding net loss, net finance costs (income) and depreciation and amortization, and income tax expense (recovery). Other items such as stock-based compensation, non-employee compensation related to warrants, litigation provisions, business acquisition and integration costs, signing bonuses, severances and related costs, impairment losses on non-financial assets, write-downs of non-financial assets, costs related to a cybersecurity incident, revaluations of derivatives, system migration, conversion and implementation, CEO directors and officers insurance, costs related to conversion from IFRS to US GAAP and other changes in fair values are also added back. For more information on our Adjusted EBITDA, please refer to our Management Discussion and Analysis for the quarter.
Pursuant to National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102"), namely Part 4 of NI 51-102, as an "SEC Issuer", given that Neptune has filed its full year 2022 audited financial statements (the "2022 Annual Financial Statements") which have, for the first time, been prepared in accordance with U.S. GAAP, the Company is required to re-file its previously filed interim financial reports that have been filed since its last filing of annual financial statements for its fiscal year ended March 31, 2021, which include: (i) the three-month periods ended June 30, 2021 and 2020, (ii) the three and six-month periods ended September 30, 2021 and 2020; and (iii) the three and nine-month periods ended December 31, 2021 and 2020 (collectively, the "Restated Filings"), with such Restated Filings to be prepared and refiled in accordance with U.S. GAAP. The Restated Filings are required to be refiled at the same time as the filing of the 2022 Annual Financial Statements. Despite substantial efforts, the Company is currently not in a position to file the Restated Filings as a result of heavy workloads by the relevant working groups, including time and dedication spent by the relevant parties for the preparation of the 2022 Annual Financial Statements, and the longer than anticipated time required to restate the Restated Filings under U.S. GAAP. As a result of the foregoing, the Company has obtained a temporary management cease trade order ("MCTO") from the applicable Canadian securities regulatory authorities. The Company intends to satisfy the provisions of the alternative information guidelines in accordance with National Policy 12-203 – Management Cease Trade Orders by issuing bi-weekly status reports in the form of news releases. The applicable Canadian securities regulatory authorities may issue a general cease trade order against the Company if the Company fails to file its status reports during the prescribed time limits.
The Company, along with its board of directors and external auditors, are working expeditiously to meet the Company's filing obligations in the near term and no later than July 22, 2022. Other than the conversion of the Restated Filings into U.S. GAAP, the Company does not expect any other changes to be made to the previously filed interim financial reports, which were previously prepared in accordance with IFRS and are all currently available under the Company's SEDAR and EDGAR profiles at www.sedar.com and www.sec.gov, respectively.
Headquartered in Laval, Quebec, Neptune is a diversified health and wellness company with a mission to redefine health and wellness. Neptune is focused on building a portfolio of high quality, affordable consumer products in response to long-term secular trends and market demand for natural, plant-based, sustainable and purpose-driven lifestyle brands. The Company utilizes a highly flexible, cost-efficient manufacturing and supply chain infrastructure that can be scaled to quickly adapt to consumer demand and bring new products to market through its mass retail partners and e-commerce channels. For additional information, please visit: https://neptunewellness.com/.
This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of applicable securities laws. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates, and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements include, among other things, statements with respect to the Company's strategic review, expected cost savings, projected growth of Sprout and Biodroga, the success of the Company's action plan, including the divestiture of the Company's cannabis business, future increased revenues, expectations regarding expenses, cash needs, cash flow, liquidity and sources of funding, future expansion plans, initiatives and strategies of the Company, and the Company's performance, growth initiatives, profitability, future product launches and plans and gain in market share, as well as the timing for the filing of the Restated Filings.
These forward-looking statements are based on assumptions and estimates of management of the Company at the time such statements were made. Actual future results may differ materially as forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors, among other things, include: the ability of the Company to successfully implement its strategic initiatives; implications of the COVID-19 pandemic on the Company's operations; fluctuations in general macroeconomic conditions; fluctuations in securities markets; changing consumer habits; the ability of the Company to successfully achieve its business objectives and cost cutting plans; plans for expansion; political and social uncertainties; inability to obtain adequate insurance to cover risks and hazards; the ability of the Company to obtain financing on acceptable terms, the adequacy of our capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute our business plan (either within the expected timeframe or at all); the ability of the Company to obtain financing on acceptable terms, expectations regarding the resolution of litigation and other legal and regulatory proceedings, reviews and investigations; employee relations; and the presence of laws and regulations that may impose restrictions in the markets where the Company operates. Although the forward-looking statements contained in this news release are based upon what management of the Company believes, or believed at the time, to be reasonable assumptions, the Company cannot assure shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended. Readers should not place undue reliance on the forward-looking statements and information contained in this news release. The Company assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.
Additional information regarding these and other risks and uncertainties relating to the Company's business are contained under the heading "Risk Factors" in the Company's Annual Report on Form 10-K dated July 7, 2022, for the year ended March 31, 2022.
Neither NASDAQ nor the Toronto Stock Exchange accepts responsibility for the adequacy or accuracy of this release.
1This is a non-GAAP measure. For further information on non-GAAP measures, please refer to the "Non-GAAP Measures" section of this news release. Please also refer to the tables in this news release for a reconciliation of this Non-GAAP measure to the most directly comparable GAAP measure. |
| Last Trade: | US$0.20 |
| Daily Volume: | 0 |
| Market Cap: | US$906K |
January 24, 2024 September 18, 2023 | |
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