Auxly Cannabis (TSXV: XLY) reported its third quarter financial results this morning, revealing $1.61 million in revenues for the three month period ended September 30, 2019. Revenues were down 41% on a quarter over quarter basis, with Auxly indicating that they had refocused their efforts on second generation cannabis products.
The firm posted a negative gross profit during the quarter of ($0.96 million), which was the result of a $1.07 million impairment on current inventory. Total expenses were up considerably during the quarter, from $16.15 million in the second quarter to $22.96 million in the current quarter. The increase was largely seen in selling, general, and administrative expenses which rose to $16.49 million during the three month period.
Auxly posted a net loss of $17.5 million during the third quarter.
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In terms of operating cash flow, things improved notably over the quarter for the issuer, with negative cash flow decreasing from ($19.44 million) to that of ($13.24 million). While spending on capex increased to $40.32 million, the third quarter also saw a significant investment from Imperial Brands, providing $120.96 million in cash to Auxly’s coffers. Total cash during the quarter increased from $119.12 million to $185.52 million as a result.
As a result of Auxly’s lack of sales, inventory grew from $15.56 million to $48.09 million on a quarter over quarter basis. Notes receivable also increased during the period, from $14.3 million to $48.09 million. Total current assets during the quarter rose from $167.54 million to $274.31 million.
This cash position isn’t a perfect representation however of the current state of Auxly’s bank account. Subsequent to quarter end, the firm dealt with the majority of its outstanding convertible debentures that were to come due January 17, 2020. Of the total $98.79 million remaining to be paid off, $80.0 million were paid back in the form of cash, while $16.0 million was converted into common shares of the issuer. The benefit however, is that the extinguishment of this debt significant cleans up the firms balance sheet as they head into the fourth quarter.
As of September 30, Auxly had a total $49.75 million in accounts payable outstanding. Combined with the $97.24 million current liability of the convertible debentures that were outstanding at the time of reporting, the firm had total current liabilities of $154.66 million, providing a working capital of $119.65 million.
Auxly Cannabis last traded at $0.73 on the TSX Venture.
Information for this briefing was found via Sedar and Auxly Cannabis Group Inc. The author is no position in this security and has no affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
