LOWLD Lowell Farms Inc (QX)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  March 28, 2024

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Lowell Farms Inc.

(Exact name of registrant as specified in its charter)

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19 Quail Run Circle – Suite B

Salinas, California 93907

(Address of Principal Executive Offices) (Zip Code)

(831) 998-8214

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

_______________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT 99.1

Lowell Farms Inc. Announces Audited Fourth Quarter and Fiscal Year 2023 Financial and Operational Results

SALINAS, Calif., March 28, 2024 (GLOBE NEWSWIRE) -- Lowell Farms Inc. (the “Company”) (CSE: LOWL; OTCQX: LOWLF), a California cannabis company with advanced distribution and production capabilities including extraction, manufacturing, sales and brand management, announces audited revenue and operating results for the fourth quarter and fiscal year (ended December 31, 2023). All figures stated are in US Dollars.

Fourth Quarter and Fiscal Year Financial Highlights:

• Net revenue generated for the quarter ended December 31, 2023 decreased 19% to $7.5 million, as compared to $9.3 million for the fourth quarter last year. Net revenue increased 21% from $6.2 million in the third quarter of 2023. Net revenue for the year ended December 31, 2023 was $28.3 million, down 35% for the year ended December 31, 2022.
  • CPG revenue decreased 19% for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022 and increased 5% compared to the third quarter of 2023.
  • Bulk Product revenue from self-grown wholesale products decreased 28% for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022 and increased 66% compared to the third quarter of 2023.
  • LFS revenue from drying, curing and trimming cannabis plants increased 67% for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022 and increased 102% compared to the third quarter of 2023.
• Gross margin for the year ended December 31, 2023 was negative 26.3% representing a gross loss of $7.4 million and adversely impacted by exiting the cultivation facility.
• Operating loss for the year ended December 31, 2023 was $17.6 million, compared to operating loss of $17.1 million for the year ended December 31, 2022.
• Net loss was $13.1 million for the quarter ended December 31, 2023, compared to a net loss of $11.1 million for the quarter ended December 31, 2022, and a net loss of $20.2 million for the third quarter of 2023. Net loss for the year ended December 31, 2023 was $37.3 million, compared to net loss of $24.6 million for the year ended December 31, 2022. During the year ended December 31, 2023, there was impairment expense including $13.2 million related to the Lowell Brand intangible assets, $9.1 million related to long lived assets at the cultivation facility and $1.9 million of other intangible assets.
• Adjusted EBITDA for the quarter ended December 31, 2023 was negative $4.1 million compared to adjusted EBITDA of negative $4.1 million for the quarter ended December 31, 2022 and adjusted EBITDA of negative $1.3 million for the third quarter of 2023. Adjusted EBITDA for the year ended December 31, 2023 was negative $7.7 million compared to negative $9.5 million for the year ended December 31, 2022. Adjusted EBITDA is a non-GAAP financial measure. See “Use of Non-GAAP Financial Information” below for further information and a detailed reconciliation to Net Loss, the closest comparable GAAP measure.

"As we move through 2024, Lowell stands today as a restructured company. The challenges of the past year have been formidable, but our team's resilience and determination have propelled us through,” said Co-Founder and Chief Executive Officer Mark Ainsworth. “Our strategic decisions have now positioned us favorably and we expect to see a positive impact on the company in the quarters ahead. With our focus sharpened and our foundation strengthened, we are grateful to remain in this ever-evolving landscape that is the California cannabis industry."

Subsequent events to the fourth quarter ended December 31, 2023:

• Lowell Farms Announces Termination of the Zabala Road Lease, January 17, 2024
  • https://ir.lowellfarms.com/news-events/press-releases/detail/118/lowell-farms-inc-announces-termination-of-the-zabala-road
  • In January 2024, the Company surrendered possession of the cultivation facility.
    • Lowell developed relationships with local cannabis growers whereby flower and biomass quantities are readily available at competitive prices to ensure availability of the portfolio products remain consistent.
• Lowell Farms Appoints Jamie Schniedwind as Chief Financial Officer, February 14, 2024
  • https://ir.lowellfarms.com/news-events/press-releases/detail/119/lowell-farms-inc-appoints-jamie-schniedwind-as-chief

Operational Highlights and Ongoing Initiatives:

• Cultivation
  • Lowell Farms saw flower product totaling 5,367 lbs during the fourth quarter of 2023 in comparison to 8,275 lbs in the fourth quarter of 2022.
    • The Company harvested 40 times in the fourth quarter of 2023; in contrast to 41 harvests in the fourth quarter of 2022.
    • The average turn time for the flowering rooms remained consistent with 60 days in the fourth quarter of 2023 compared to 58 days in the fourth quarter of 2022.
    • Average potency was 23% in the fourth quarter of 2023 compared to 28% in the fourth quarter of 2022.
• Lowell Farm Services
  • Lowell Farms processing facility in Salinas Valley.
    • In the fourth quarter of 2023 the Company generated revenue of approximately $0.9 million associated with Lowell Farm Services in comparison to $0.5 million in the fourth quarter of 2022 with 2023 YTD revenue of $1.6 million. LFS revenue includes sales of third party bulk flower.
    • Lowell Farm Services processed approximately 116,762 pounds of wet weight third-party flower in the fourth quarter of 2023 yielding approximately 5,720 pounds of finished flower compared to 70,000 pounds in Q4 2022.
• California Market Trends
  • Owned Brands
    • Sales of owned brands generated revenue of $3.7 million in the fourth quarter ended December 31, 2023, while revenues for the year ended December 31, 2023 totaled approximately $15.4 million compared to approximately $27.7 million for the year ended December 31, 2022.
      • Contributing factors include significant decrease in California market purchasing trends and instability in flower purchase price.
      • Due to these factors, House Weed declined by 82%, with approximately $19 million in sales for the year ended December 31, 2022 versus $3.5 million for the year ended December 31, 2023. 
      • Moon and Original Pot Co., two edible brands in the owned portfolio were largely out of the market for over three quarters in 2023 and have since been active in the first quarter of 2024.
  • Third-Party Brands
    • During the year ended December 31, 2023, the Company re-engaged the third-party brand model strategy and pursued like minded brands to increase revenues and maximize operational efficiency.
      • By the end of the quarter ended December 31, 2023, Lowell had brought on 16 additional third-party brands to round the offerings to dispensary partners.
      • Notably, Lowell placed these third-party brands in over 650 dispensaries throughout California.
      • Sales of third-party brands generated revenue of approximately $2.5 million for the year ended December 31, 2023 compared to a negligible amount of revenue for the year ended December 31, 2022.
• Distribution and Sales Capabilities:
  • The average delivery drop value has decreased year-over-year by 21.9% to approximately $3,809 in the fourth quarter of 2023 from $4,879 in the fourth quarter of 2022.

Q4 and Year End Financial Results Earnings Conference Call Details:
The conference call with management at 8:30 a.m. EDT on Thursday, March 28, can be accessed using the following dial-in information:

Please dial-in at least 10 minutes before the call to register.

The conference call will be webcast live and archived on the investor relations section of the Lowell Farms website at https://ir.lowellfarms.com/.

ABOUT LOWELL FARMS INC.
Lowell Farms Inc. (CSE:LOWL; OTCQX:LOWLF) (the “Company”) is a California-based cannabis company with advanced production capabilities supporting the supply chain, including extraction, manufacturing, brand sales, marketing, and distribution. Lowell Farms has an exclusive portfolio of award-winning brands, including Lowell Herb Co, House Weed, Moon, Cypress Cannabis, and Original Pot Co. for licensed retailers statewide.

Lowell Farms Inc. Media Contact
pr@lowellfarms.com

Lowell Farms Inc. Investor Relations Contact
Bill Mitoulas
416.479.9547
ir@lowellfarms.com

Lowell Farms Inc. Company Contact
Mark Ainsworth
ir@lowellfarms.com

Forward-Looking Information and Statements
This news release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current conditions, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "will continue", "will occur" or "will be achieved.” The forward-looking information and forward-looking statements contained herein may include, but are not limited to, the anticipated growth of Lowell Farm Services and the ability of the Company to successfully achieve its business objectives and expectations for other economic, business, and/or competitive factors. There can be no assurance that such forward-looking information and statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking information and statements. This forward-looking information and statements reflect the Company’s current beliefs and are based on information currently available to the Company and on assumptions the Company believes are reasonable.

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: general business, economic, competitive, political and social uncertainties; general capital market conditions and market prices for securities; operating and development costs; competition; changes in legislation or regulations affecting the Company; the timing and availability of external financing on acceptable terms; the available funds of the Company and the anticipated use of such funds; favorable production levels and outputs; the stability of pricing of cannabis products; the level of demand for cannabis product; the availability of third-party service providers and other inputs for the Company’s operations; lack of qualified, skilled labor or loss of key individuals; and risks and delays resulting from the COVID-19 pandemic. A description of additional assumptions used to develop such forward-looking information and a description of additional risk factors that may cause actual results to differ materially from forward-looking information can be found in the Company’s disclosure documents, such as the Company’s annual information form filed on the SEDAR website at www.sedar.com and the Company's Form 10 filed on the SEC website at www.sec.com. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking information as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Forward-looking information contained in this news release is expressly qualified by this cautionary statement.

The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date. However, the Company expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.

Neither the Canadian Securities Exchange nor its Regulation Service Provider has reviewed, or accepts responsibility for the adequacy or accuracy of, the content of this news release.

Use of Non-GAAP Financial Information

EBITDA is net income (loss), excluding the effects of income taxes (recovery); net interest expense; depreciation and amortization; and adjusted EBITDA also includes noncash fair value adjustments on investments; unrealized foreign currency gains/losses; share-based compensation expense; and other transactional and special expenses, such as out-of-period insurance recoveries and acquisition costs and expenses related to the markup of acquired finished goods inventory, which are inconsistent in amount and frequency and are not what we consider as typical of our continuing operations. Management believes this measure provides useful information as it is a commonly used measure in the capital markets and as it is a close proxy for repeatable cash generated by operations. We use adjusted EBITDA internally to understand, manage, make operating decisions related to cash flow generated from operations and evaluate our business. In addition, we use adjusted EBITDA to help plan and forecast future periods.

This measure is not necessarily comparable to similarly titled measures used by other companies.

A reconciliation of this measure to Net Loss is provided below.

The table below reconciles Net Loss to Adjusted EBITDA
 for the periods indicated.

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