LFST Lifeist Wellness Inc

Lifeist Wellness Inc. (“Lifeist” or the “Company”) (TSXV: LFST) (FRANKFURT: M5B) (OTCMKTS: NXTTF), a health-tech company that leverages advancements in science and technology to build breakthrough companies that transform human wellness, today reported its financial results for year ended November 30, 2021. All financial figures are in Canadian dollars unless otherwise indicated.

Fourth Quarter 2021 Highlights

• While net revenue decreased 11% to $6.4 million in the fourth quarter ended November 30, 2021 (“Q4 2021”) (compared to $7.2 million in the same period last year (“Q4 2020”)), this was mainly due to declines in hardware sales in Europe and medical cannabis sales in Canada, both operations having since been discontinued1. Indeed, the Company demonstrated continued growth of its Canadian recreational cannabis businesses, and subsidiary businesses Australian Vaporizers Pty Ltd (“Australian Vapes”) and Findify AB (“Findify”), such that core Company net revenue, (in other words excluding European hardware sales and medical cannabis sales in Canada), increased 4% in Q4 2021 (compared to Q4 2020).
• Gross profit and margin increased to $0.7 million and 11% of net revenue in Q4 2021 compared to Q4 2020, the second highest result in two years, including $0.5 million gross margin from the Company’s Canadian recreational cannabis business, compared to $0.3 million negative margin from the same business in Q4 2020.
• EBITDA improved substantially by narrowing losses to $2.8 million in Q4 2021 (compared to a $5.7 million loss in Q4 2020 and a $5.4 million loss in the third quarter ended August 30, 2021) noting that Q4 2021 EBITDA loss results are net of incremental investments into emerging businesses including nutraceuticals.
• Working capital position of $16.4 million at year end remains strong.

"The past year was one of transitioning to wellness, sharpening our strategic focus, and investing to drive sustainable growth," said Meni Morim, CEO of Lifeist. "As a portfolio of wellness companies, Lifeist is growing its B2B recreational cannabis distribution and manufacturing business, and expanding its new nutraceutical division. We believe these opportunities provide the most direct and viable path to value creation, enabling Lifeist to leverage its capabilities and expertise to differentiate itself in the growing wellness economy.”

Added Mr. Morim, “With Mikra’s first nutraceuticals product, CELLF, a novel cellular therapeutic compound targeting systemic fatigue, already in pre-orders and our distribution, logistics and CannMart Labs businesses driving growth in our recreational B2B cannabis business, we believe we have the platform for sustainable growth."

Operating Highlights

Cannabis (CannMart Inc. (“CannMart”) and CannMart Labs Inc. (“CannMart Labs”))

• Recreational cannabis continues to be Lifeist’s largest driver of performance accounting for 58% of the Company’s net revenue in Q4 2021, with growing gross margins, improved inventory management, an expanded distribution network, and bringing an award-winning brand to market.
• The cannabis B2B gross margin has trended positively throughout 2021: Q1 -$0.9 million, Q2 -$0.4 million, Q3 $0.2 million, Q4 $0.5 million.
• As a result of more efficient inventory management, Inventory Days on hand improved from 109 days in Q4 2020 to 87 days in Q4 2021, a decrease of 22 days.
• After establishing a supply agreement in Société québécoise du cannabis (“SQDC”) in March 2022, CannMart is now approved for the sale of cannabis and cannabis-derived products from provincial and territorial bodies in Ontario, Alberta, British Columbia, Quebec, Manitoba, New Brunswick, Saskatchewan, Yukon, Nunavut and North West Territories, which provides it with access to 95% of Canada’s population.
• CannMart Labs’ state-of-the-art BHO extraction facility commenced, manufacturing and shipping product in November 2021, and in January 2022, its in-house brand “Roilty”, launched earlier in 2021, won the prestigious “Canadian LP Brand of the Year” award at the 2021 ADCANN Awards. Roilty product is now live in Alberta, Saskatchewan, Manitoba, Yukon, Northwest Territories and Nunavut with purchase orders in place for distribution in Ontario.
• Subsequent to Q4 2021, CannMart completed the successful transfer of registered medical patients to Medicibis, operators of Mendocannabis.ca. The agreement is part of the Company’s strategic initiative to sharpen its focus on B2B recreational cannabis and nutraceuticals.

Nutraceuticals (Mikra)

• Lifeist launched biosciences and consumer wellness company Mikra, Cellular Sciences Inc. (“Mikra”), incorporated in the U.S., which expands the Company’s total addressable market to include the growing $105 billion nutraceutical market2.
• As part of the nutraceuticals endeavor, the Company entered into a wide ranging collaboration with baseball legend Jose Bautista who joined as an advisor to and investor in Lifeist and Mikra. The collaboration includes launching with Bautista, on an exclusive basis, cellular health products and accessories, the first of which is targeted for distribution in the U.S. by mid-2022.
• Mikra filed a patent application with the U.S Patent and Trademark Office to improve walls and moats around its business with a view to improving shareholder value through IP creation, and partnered with InVivo Biosystems, Inc. for pre-clinical genomic trials to further strengthen its patent claim.
• Mikra launched its first product, CELLF, a novel cellular therapeutic compound targeting systemic fatigue, and began pre-sales in March 2022 with a waitlist of over 40,000 people.

Australian Vapes

• Australian Vapes continued to generate solid financial performance in Q4 2021 characterized by strong website traffic growth and positive unit economics, which drove record revenue of $1.9 million in Q4 2021 compared to $1.6 million in Q4 2020, representing an increase of 15%.
• The team is in the process of negotiating lease terms for a larger improved location, upgrading from its recently flood-damaged premises, with a view to resuming optimized and improved operations by the end of April 2022. The Company is confident for a quick and full recovery on account of superior customer service, a high repeat customer rate, and measures already put into place to maintain customer loyalty.

Findify

• Findify delivered its highest revenue quarter ever, with revenue of $470 thousand in Q4 2021 compared to $405 thousand in Q4 2020, representing an increase of 16%.
• Since Findify was acquired by Lifeist in 2018, Findify has taken the time to identify the appropriate consumer market, reorient its sales strategy and retain the appropriate talent to make long-term growth stable and scalable. Findify has since completed changes to its customer mix from an emphasis on small businesses to medium sized businesses.
• In 2022, Findify expects more of its growth to come from continued product innovation. The most significant product release is Active Sync, released in March 2022, which is a new infrastructure that allows for real-time synchronization of any product data with Shopify. Active Sync solves a major pain point for online merchants, which is sync time.

Financial Summary of Q4 2021

Net revenue decreased 11% to $6.4 million in Q4 2021 compared to $7.2 million in Q4 2020. The decrease was driven by declines in hardware sales in Europe through Lifeist Bahamas and declines in medical cannabis sales in Canada through CannMart, all such operations having effectively ceased in 2022. This was partially offset by the continued growth in sales of Canadian recreational cannabis, Australian Vapes hardware revenue which increased 15%, and Findify SaaS revenue which increased 16%. Excluding Lifeist Bahamas hardware and CannMart medical cannabis, net revenue increased 4%.

Gross margin was 11% of net revenue in Q4 2021 compared to a negative 1.1% in Q4 2020. The improvement was due to production efficiencies across all segments and the focus on higher value-added revenue streams in the B2B and recreational markets. Within recreational cannabis, gross margins improved to $0.5 in Q4 2021 compared to a $0.3 million negative margin in Q4 2020, an improvement of $0.8 million.

EBITDA loss narrowed to $2.8 million in Q4 2021 compared to $5.7 million in Q4 2020, due to higher gross margins and improved performance across most business units, and represented the fifth consecutive quarter of EBITDA loss improvements. The reduced EBITDA loss was net of approximately $1 million of investments in emerging businesses including CannMart Labs and Mikra.

Net loss was $4.0 million in Q4 2021 compared to $6.4 million in Q4 2020, due to improved gross margins and a gain of fair value of a convertible note receivable.

Financial Summary of Fiscal 2021

Net revenue decreased 9% to $22.8 million for the year ended November 30, 2021 (“FY2021”) compared to $25.1 million for the year ended November 30, 2020 (“FY2020”). The decrease was driven by declines in hardware sales in Europe through Lifeist Bahamas and declines in medical cannabis sales in Canada through CannMart, all such operations having effectively ceased in 2022. This was partially offset by the continued growth in FY2021 of Canadian recreational cannabis revenue which increased 25%, Findify SaaS revenue which increased 16%, and Australian Vapes hardware revenue which increased 10%, in each case in comparison to FY2020. Excluding Lifeist Bahamas hardware and medical cannabis, net revenue increased 19% compared to FY 2020.

Gross margin was 7% of net revenue in FY2021 compared to 6% in FY2020. The improvement was due to improved efficiencies across all segments.

EBITDA loss narrowed to $21.6 million in FY2021 compared to $23.5 million in FY2020, due to higher gross margins and a decrease in expenses as a result of management focus on more profitable business units.

Net loss improved to $23.8 million in FY2021 compared to $26.4 million in FY2020.

Balance Sheet and Cash Flow

Cash and cash equivalents were $12.7 million as of November 30, 2021, compared to $10.3 million as of November 30, 2020.

Inventories decreased to $5.4 million at November 30, 2021 compared to $8.1 million at November 30, 2020, reflecting the lower exposure related to the Company’s B2B business focus, partially offset by initial inventory levels for nutraceutical products.

Net cash used in operations was $5.2 million in Q4 2021 compared to $4.0 million in Q4 2020.

Other Item

Subsequent to Q4 2021, on December 9, 2021, Fire & Flower Holdings Corp. (“Fire & Flower”) entered into a definitive agreement to acquire Pineapple Express Delivery Inc. (“PED”), a holder of the Company’s convertible loan payable. On January 25, 2022, Fire & Flower completed the acquisition of PED, and, as part of the purchase, Fire & Flower assumed and repaid a $2,040,077 convertible loan receivable owed to the Company by PED. In addition, the Company received 75,100 common shares in Fire & Flower on completion of the acquisition, with a further 258,478 common shares in Fire & Flower having been placed into escrow pending completion of customary working capital adjustments and subject to achievement of certain performance-based milestones in its fiscal 2022 year.

Additional Information

The Company’s complete financial statements and management’s discussion & analysis (“MD&A”) for FY2021 are available on Lifeist’s website (www.lifeist.com) and SEDAR (www.sedar.com).

About Lifeist Wellness Inc.

Sitting at the forefront of the post-pandemic wellness revolution, Lifeist leverages advancements in science and technology to build breakthrough companies that transform human wellness. Portfolio business units include: CannMart, which operates a B2B wholesale distribution business facilitating recreational cannabis sales to Canadian provincial government control boards; CannMart Labs, a BHO extraction facility for the production of high margin cannabis 2.0 products; the CannMart.com marketplace, which provides U.S. customers with access to hemp-derived CBD and smoking accessories; Australian Vapes, Australia’s largest online retailer of vaporizers and accessories; Findify, a leading AI-powered search and discovery platform; and Mikra, a biosciences and consumer wellness company seeking to develop innovative therapies for cellular health.

Information on Lifeist and its businesses can be accessed through the links below:

www.lifeist.comwww.cannmart.comwww.australianvaporizers.com.auwww.wearemikra.com

ContactsLifeist Wellness Inc.Meni Morim, CEOMatt Chesler, CFA, Investor RelationsPh: 647-362-0390Email: ir@lifeist.com

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release or has in any way approved or disapproved of the contents of this press release.

Non-IFRS Financial Measures

Management evaluates the Company’s performance using a variety of measures, including “Net loss before income tax, depreciation and amortization” and “Adjusted EBITDA”. The non-IFRS measures discussed below should not be considered as an alternative to or to be more meaningful than revenue or net loss. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company.

Management uses these and other non-IFRS financial measures to exclude the impact of certain expenses and income that must be recognized under IFRS when analyzing consolidated underlying operating performance, as the excluded items are not necessarily reflective of the Company’s underlying operating performance and make comparisons of underlying financial performance between periods difficult. 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. The exclusion of certain items does not imply that they are non-recurring.

(i) Current and deferred income taxes, depreciation and amortization, and share-based compensation were excluded from the Adjusted EBITDA calculation as they do not represent cash expenditures.(ii) Other income consisting of gain on disposal of subsidiary, interest income, realized gain on disposition of AFS investments, unrealized gain on derivatives and other miscellaneous non-recurring income were excluded from Adjusted EBITDA calculation.(iii) Non-recurring costs related to restructuring and legacy issues were excluded from Adjusted EBITDA calculation.(iv) Impairment loss relating to goodwill, customer list, domains and brand names were excluded from Adjusted EBITDA calculation.(v) Impairment loss relating to receivable is a provision for expected credit loss to an associate and was excluded from Adjusted EBITDA calculation.(vi) Share of associates loss, net of tax, is excluded due to lack of control.

Forward Looking Information

This news release contains “forward-looking information” within the meaning of applicable securities laws. All statements contained herein that are not historical in nature contain forward-looking information. Forward-looking information can be identified by words or phrases such as “may”, “expect”, “likely”, “should”, “would”, “plan”, “anticipate”, “intend”, “potential”, “proposed”, “estimate”, “believe” or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen.

The forward-looking information contained herein, including, without limitation, statements related to: the growth of Lifeist’s B2B recreational cannabis distribution and manufacturing business and the expansion of its new nutraceutical division and such businesses sustained growth, the expected date of distribution of the first nutraceutical product to be developed in collaboration with Bautista, and the timeline relating to Australian Vapes resuming full operations are made as of the date of this press release and is based on assumptions management believed to be reasonable at the time such statements were made, including, without limitation, Lifeist’s ability to continue to increase revenue through its B2B recreational cannabis business and to maintain momentum of expanding its nutraceutical business, its ability to broaden its total addressable market and to evolve into a recognized wellness company, the Company’s expectation that the nutraceutical and wellness market will develop as currently anticipated, the nutraceutical market will continue to be a multi-billion dollar high-margin market, the introduction of new products and brands will generate additional revenue, expectations that CELLF and other cellular health products and accessories to be developed by the Company will gain market acceptance along with the expansion of the market for nutraceutical products, as well as other considerations that are believed to be appropriate in the circumstances. While we consider these assumptions to be reasonable based on information currently available to management, there is no assurance that such expectations will prove to be correct. By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, including known and unknown risks, many of which are beyond our control, could cause actual results to differ materially from the forward-looking information in this press release. Such factors include, without limitation: the inability of the Company to develop its business as anticipated and to increase revenues and/or its profitable margin on such revenues, unanticipated changes to current regulations that would adversely impact the Company’s businesses, the unanticipated decline in demand for cannabis products, unforeseen developments that would delay Mikra’s ability to sell CELLF and any other developed nutraceutical product as anticipated and in a timely manner, the risk that pre-clinical trials relating to CELLF are not as successful as anticipated and do not demonstrate the expected therapeutic benefits and/or fail to strengthen the Company’s patent claim, the risk that the expected demand for nutraceutical products in general and those of Mikra in particular does not develop as anticipated, the failure to convert the current number of subscribers on the pre-sales waitlist to actual sales, regulatory risk, risks relating to the Company’s ability to execute its business strategy and the benefits realizable therefrom and risks specifically related to the Company’s operations. Additional risk factors can also be found in the Company’s current MD&A and annual information form, both of which have been filed under the Company’s SEDAR profile at www.sedar.com. Readers are cautioned not to put undue reliance on forward-looking information. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Source: Lifeist Wellness Inc.

1 The Company has made a decision to discontinue operations of: CannMart Inc.’s medical cannabis business including online sales of hardware and accessories in Canada; CannMartMD Inc. (booking platform for Canadian medical cannabis consultations); and Lifeist Bahamas (hardware sales in Europe), as part of its strategy to focus resources on growing existing businesses and its new nutraceuticals and biosciences division. 2 Global Industry Analysts, Inc., “Nutraceuticals - Global Market Trajectory & Analytics”, July 2021.