- $3.5 Million-Plus in Reductions in Annual Operating Expenses
- On the Heels of its Return to Positive Adjusted EBITDA, Vertically Integrated Cannabis Dispensary Franchisor and Operator Takes Steps to Restructure Debt and Streamline Balance Sheet
- Doug Bowden Named Interim Chief Executive Officer
Item 9 Labs Corp. (OTCQX: INLB) (the “Company”)—a vertically integrated cannabis dispensary franchisor and operator that produces premium, award-winning products—today announced it has executed a major restructuring in an effort to right-size its operations and cost structure while working toward national expansion of its Item 9 Labs product brand and return to profitability.
Executive Management and Board of Directors Changes and Update:
- Michael Weinberger has resigned as Chief Executive Officer and member of the Board of Directors and entered into a Strategic Advisor agreement to focus on the Company’s retail franchise, Unity Rd.
- Chairman Doug Bowden has been named Interim Chief Executive Officer.
- Director Jeffrey Rassás has been appointed to Strategic Advisor and will be primarily driving investor & public relations as well as capital needs.
- Chris Wolven, current Chief Operating Officer, will now oversee all Company entities and operations and will be the primary Company-facing executive for Item 9 Labs Corp.
- Michael Keskey has resigned as Chief Legal Officer.
- Lawrence X. Taylor has resigned as a member of the Board of Directors.
With the continued evolution of the cannabis and capital markets, Item 9 Labs Corp. has implemented significant cost reductions to build on its $400 thousand of positive Adjusted EBITDA in its fiscal second quarter 2023 in an effort to return to profitability. The Company anticipates that the operating expenses and overhead reductions should total more than $3.5 million annually. In addition to the reductions in operating costs, the Company is in discussions with current and prospective lenders to restructure its outstanding debts to clean up the balance sheet and reduce overall interest expense.
Item 9 Labs Corp.'s Chairman and Interim Chief Executive Officer, Doug Bowden, has invested more than $15 million into Item 9 Labs Corp. over the past several years. After observing continuing challenges and with Weinberger’s resignation, Bowden is taking a more active role to support Wolven and Rassás as well as a streamlined board.
Bowden said, “The care and stringent processes that go into our Item 9 Labs products to create a consistent, high-quality experience is truly impressive and it shows in the dedication from our loyal customer base in Arizona.”
Item 9 Labs is a top 10 cannabis brand in the $1 billion-plus Arizona market, according to BDSA, and boasts its products in 65% of Arizona's dispensaries. With back-to-back months of record-breaking numbers, the Item 9 Labs brand saw 30% year-over-year increases in units sold in both January and February 2023.
Item 9 Labs Corp. Chief Operating Officer Chris Wolven said, “Our success in the Arizona market comes largely from our brand name and reputation for delivering consistent, high-quality cannabis products that consumers can rely on. Our solid operations are a testament to our cultivation and manufacturing teams' tight-knit processes and ability to creatively navigate the challenges of a fast-evolving industry.”
Wolven added, “We expect the combination of refined systems at our cultivation & manufacturing facility and reductions in the cost of outsourced materials will result in higher gross profit margins. As we continue to decrease our cost of goods sold, we are driving increased volumes of our most popular products. Securing our first positive Adjusted EBITDA in months demonstrates the productive shifts we’ve made to bolster our entities for growth.”
Beyond enhancing current cultivation and production in Arizona, the Company is focused on expanding the Item 9 Labs brand to new state markets through various capital light models.
“We’ve always had our eyes set beyond the Arizona market for Item 9 Labs,” Wolven added. “Through our new development approach, we will be able to move more quickly into new markets without the significant capital expenditure that often comes with it.”
In addition to domestic expansion, the Company is continuing to work toward closing its proposed acquisition of Sessions Cannabis, which would bring its Unity Rd. cannabis franchise to Canada.
Bowden continued, “We were at the finish line of this [Sessions Cannabis] transaction when the recent bank collapse sent ripples through multiple markets. Since then, we have been working diligently with our finance partner to see this acquisition through but may have to source other capital to close the transaction.”
Jeffrey Rassás, director and strategic advisor of Item 9 Labs Corp., commented, “Although the Company previously announced a strategic initiative to streamline operations back in December, we needed to make more aggressive reductions now to manage our cash. With the rightsizing of our overall business, we are seeking new opportunities for funding and look forward to providing updates over the next few weeks.”
On May 17, 2023, Mr. Michael Weinberger voluntarily resigned as Chief Executive Officer and member of the Board of Directors of Item 9 Labs Corp. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices. Mr. Weinberger will remain with the Company as a Strategic Advisor.
On May 17, 2023, Mr. Michael Keskey voluntarily resigned as Chief Legal Officer of Item 9 Labs Corp. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
On May 5, 2023, Mr. Lawrence X. Taylor resigned from the Board of Directors of Item 9 Labs Corp. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices. The Company is appreciative of Mr. Taylor’s service to the Company as a director.
About Item 9 Labs Corp.
Item 9 Labs Corp. (OTCQX: INLB) is a vertically integrated cannabis operator and dispensary franchisor delivering premium products from its large-scale cultivation and production facilities in the United States. The award-winning Item 9 Labs brand specializes in best-in-class products and user experience across several cannabis categories. The company also offers a unique dispensary franchise model through the national Unity Rd. retail brand. Easing barriers to entry, the franchise provides an opportunity for both new and existing dispensary owners to leverage the knowledge, resources, and ongoing support needed to thrive in their state compliantly and successfully. Item 9 Labs brings the best industry practices to markets nationwide through distinctive retail experience, cultivation capabilities, and product innovation. The veteran management team combines a diverse skill set with deep experience in the cannabis sector, franchising, and the capital markets to lead a new generation of public cannabis companies that provide transparency, consistency, and well-being. For additional information, visit item9labscorp.com.
Use of Non-GAAP Financial Measures
To supplement the Company's financial statements presented on a GAAP basis, Item 9 Labs Corp. provides Adjusted EBITDA as a supplemental measure of its performance. To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding pro forma operations, Item 9 Labs Corp. supplements its consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles, or GAAP, with Adjusted EBITDA as a non-GAAP financial measure of earnings. Adjusted EBITDA represents EBITDA plus stock-based compensation and acquisition related expenses. Item 9 Labs Corp. management uses Adjusted EBITDA as a financial measure to evaluate the profitability and efficiency of the business model. The Company uses these non-GAAP financial measures to assess the strength of the underlying operations of the business. These adjustments, and the non-GAAP financial measures that are derived from them, provide supplemental information to analyze its operations between periods and over time. Item 9 Labs Corp. finds this especially useful when reviewing pro forma results of operations, which include large non-cash amortizations of intangible assets from acquisitions and stock-based compensation. Investors should consider its non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, including, but not limited to, risks and effects of legal and administrative proceedings and governmental regulation, especially in a foreign country, future financial and operational results, competition, general economic conditions, proposed transactions that are not legally binding obligations of the company and the ability to manage and continue growth. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include the introduction of new technology, market conditions and those set forth in reports or documents we file from time to time with the SEC. We undertake no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.