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Classified in: Health, Business
Subject: ERN

Pathway Health Corp. Reports Third Quarter 2022 Financial Results


TORONTO, Nov. 24, 2022 /CNW/ - Pathway Health Corp. (TSXV: PHC) (Frankfurt: KL1) (formerly Colson Capital Corp.) ("Pathway" or the "Company"), a Canadian leader in chronic pain solutions and management services, is pleased to report its financial results for the three and nine-month period ended September 30, 2022. Unless otherwise noted, all amounts are in Canadian dollars and are prepared in accordance with International Financial Reporting Standards ("IFRS").

"We remain committed to our goals to support a patient's journey to wellbeing through a comprehensive suite of services and products from both traditional and alternative sources of medicine.  In the third quarter, we have taken another step toward achieving these goals with the acquisition of the operating assets of IRP Health Ltd., a multidisciplinary pain management and physical therapy program that will allow us to better serve at-risk patient groups such as veterans, RCMP and first responders," said Ken Yoon, Pathway's Chief Executive Officer.  "We are excited about the Company's path forward, as it looks to continue to expand its service offerings to these patient groups in need throughout Canada and potentially international markets." 

Recent Highlights

Summary of the Results for the Three Months Ended September 30, 2022 (Q3 2022) compared to the Three Months Ended September 30, 2021 (Q3 2021), unless otherwise noted

Revenues were $2.4 million and $2.7 million for the three months ended September 30, 2022, and 2021, respectively. Cannabis education revenues were partially impacted by a reduction in marketing fees previously provided by licensed producers as clinics moved to a telemedicine platform. The decline in revenue also reflects the continued downward trend in the Canadian medical cannabis market.  However, the Company hopes to offset this by focusing on specialty group markets and offering more comprehensive services to these targeted markets. 

Gross margins were $1.2 million and $1.3 million for the three months ended September 30, 2022, and 2021, which represented 50% and 53% of gross revenues, respectively. The difference is mainly a result of the increase in products and provincially insured and non-insured physician services as a total percentage of overall revenue compared to the same prior year period.

Selling, general and administrative expenses ("SG&A") were $2.7 million and $2.8 million for the three months ended September 30, 2022, and 2021, respectively. The combined decrease in wages and benefits, marketing, public company costs and expenses totaled $0.2 million as a result of continued cost cutting and streamlining measures taken on by management.  This was offset by a $0.04 million increase in professional fees due to additional costs related to the change in auditors and an increase of $0.03 million in rent and utilities reflecting the physical expansion in 2022. 

The Company incurred a net loss of $1.9 million and had a basic and diluted loss per share of $0.02 for the three months ended September 30, 2022, compared to a net loss of $1.6 million and a basic and diluted loss per share of $0.02 for the same period prior year.

Earnings before interest, tax, depreciation, and amortization ("EBITDA")1 was a loss of $1.5 million and adjusted EBITDA1 was a loss of $1.3 million for the three months ended September 30, 2022, compared to an EBITDA and adjusted EBITDA loss of $1.3 million and $1.4 million respectively in the prior year.

Cash as of September 30, 2022, was $0.3 million compared with $2.6 million on December 31, 2021. As of September 30, 2022, the Company had a principal balance of $1.9 million outstanding from its Credit Facility. As of November 23, 2022, the Company had a principal balance of $2.8 million outstanding from its Credit Facility.


About Pathway Health

Pathway Health is an integrated healthcare company that provides products and services to patients suffering from chronic pain and related conditions. The Company owns and operates eleven community-based clinics across four provinces where its team of health professionals work together to help patients through a variety of evidence-based approaches and products, including medical cannabis. Pathway Health's patient care programs utilize an interdisciplinary approach that is guided by trained pain specialists, physical and occupational therapists, psychologists, nurses, and other healthcare providers. Pathway is also the leading provider of medical cannabis services in Canada and has established itself as the leading partner with national and regional pharmacy companies for the delivery of medical cannabis services to their customers. The Company is working with several pharmacy companies on the development of Cannabis Health Products (CHPs) for OTC product distribution through retail pharmacy locations across the country following anticipated changes to the Cannabis Act.

For more information, visit Pathway Health's website: www.pathwayhealth.ca 

1Non-IFRS financial measures
The non-IFRS measures included in this MD&A are not recognized measures under IFRS, and do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from its perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. Despite the importance of these measures to management in goal setting and performance measurement, these are non-IFRS measures that may be limited in their usefulness to investors.

Management uses non-IFRS measures, such as EBITDA and Adjusted EBITDA to provide investors with a supplemental measure of the Company's operating performance and thus highlight trends in the Company's core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also believes that securities analysts, investors, and other interested parties frequently use non-IFRS measures in the valuation of issuers. Management also uses non-IFRS measures to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess the Company's ability to meet its future debt service, capital expenditure and working capital requirements. The definition and reconciliation of EBITDA and Adjusted EBITDA used and presented by the Company to the most directly comparable IFRS measures follows below:

EBITDA and Adjusted EBITDA

EBITDA is defined as net (loss)/income adjusted for income tax, depreciation of property and equipment, amortization of intangible assets, interest on long-term debt and other financing costs, interest income, and changes in fair values of derivative financial instruments. Management uses EBITDA to assess the Company's operating performance. Adjusted EBITDA is defined as EBITDA adjusted for, as applicable, share-based compensation, loss of control of related company, fair value loss of guarantee, impairment of intangible assets, impairment of goodwill, gain on remeasurement of contingent consideration, reverse takeover transaction costs and additional professional fees due to the reverse takeover transaction and Asset Acquisition Transaction costs. We use Adjusted EBITDA as a key metric in assessing our business performance when we compare results to budgets, forecasts, and prior years. Management believes Adjusted EBITDA is a good alternative measure of cash flow generation from operations as it removes cash flow fluctuations caused by non-cash expenses, or extraordinary and non-recurring items, including changes in working capital. A reconciliation of net (loss)/income to EBITDA (and Adjusted EBITDA) is set out below:



For the three months ended
September 30, 


For the nine months ended
September 30, 



2022

2021


2022

2021

Net (loss) attributable to shareholders

$           (1,923,469)

$           (1,597,308)


$           (6,238,013)

$           (5,701,717)

Adjustments:







Amortization of intangible assets

34,378

25,878


105,358

80,514


Depreciation on property and equipment

177,743

189,654


549,254

547,217


Finance expense*

189,411

76,074


338,775

528,542

EBITDA

$           (1,521,937)

$           (1,305,702)


$           (5,244,626)

$           (4,545,444)








Share-based compensation

181,331

125,856


412,590

386,734

Loss of control of related company

6,108

6,108


18,324

82,647

Related party bad debt expense

-

(25,001)


-

75,000

Impairment of intangible assets

-

-


102,920

-

Impairment of goodwill

-

-


225,046

-

Gain on remeasurement of contingent consideration

-

-


(21,943)

-

Reverse takeover transaction cost

-

-


-

1,251,608

Additional professional fees due to RTO Transaction

-

(143,463)


-

509,252

Additional professional fees due to Asset Acquisition Transaction

-

(12,699)


-

112,891

Adjusted EBITDA

$           (1,334,498)

$           (1,354,901)


$           (4,507,689)

$           (2,127,312)

*this figure includes interest expense, financing expense, fair value of financing facilities and accretion expense.





CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: the Company's ability to continue as a going concern, general business, economic, competitive, political, and social uncertainties; delay or failure to receive applicable approvals; and the results of operations. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Pathway disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this Press Release. The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Pathway Health Corp. (formerly Colson Capital Corp.)



Interim Condensed Consolidated Statement of Financial Position

(Unaudited)













September 30,
2022


December 31,
2021

Assets




Current




Cash

$              271,995


$           2,603,429

Restricted cash

75,000


75,000

Accounts and other receivables

832,149


811,587

Deferred cost

36,654


54,978

Inventory

313,456


340,340

Prepaids

206,936


249,579


1,736,190


4,134,913





Due from related parties

70,827


117,362

Property and equipment

2,428,931


2,914,078

Intangible assets

483,169


691,447

Goodwill

279,855


504,901

Investment in related company

254,059


475,824


3,516,841


4,703,612





Total assets

$           5,253,031


$           8,838,525









Liabilities and Shareholders' equity 




Current




Accounts payable and accrued liabilities

$           2,293,994


$           1,585,558

Credit facility

1,837,701


-

Current portion of lease liability

582,933


545,515

Due to related parties

44,368


20,459


4,758,996


2,151,532





Lease liability

1,902,864


2,292,993

Government loan payable

76,668


67,574


1,979,532


2,360,567





Total liabilities

6,738,528


4,512,099





Shareholders' (deficiency) equity 




Share capital

42,644,224


42,630,724

Warrants

1,866,866


1,866,866

Contributed surplus (deficiency)

(30,517,818)


(30,930,408)

Deficit

(15,478,769)


(9,240,756)


(1,485,497)


4,326,426





Total liabilities and shareholders' (deficiency) equity 

$           5,253,031


$           8,838,525

 

Pathway Health Corp. (formerly Colson Capital Corp.)





Interim Condensed Consolidated Statements of Loss and Comprehensive Loss


For the three and nine months ended September 30, 2022




(Unaudited)























For the three months ended
September 30, 


For the nine months ended
September 30, 


2022

2021


2022

2021













Revenue

$    2,418,886

$    2,663,249


$    7,726,415

$    8,225,714







Cost of sales






Consultants

879,965

942,444


2,981,860

2,954,582

Cost of goods sold

219,339

199,514


618,831

544,050

Clinic and medical supplies

105,174

108,243


376,027

330,183

Total cost of sales

1,204,478

1,250,201


3,976,718

3,828,815







Gross margin

1,214,408

1,413,048


3,749,697

4,396,899







Selling, general and administrative expenses

2,671,919

2,762,453


8,619,188

8,003,119

Loss before other items 

(1,457,511)

(1,349,405)


(4,869,491)

(3,606,220)







Other expenses (income)






Reverse takeover transaction cost

-

-


-

1,251,608

Finance expense

189,411

76,074


338,775

528,542

Impairment of intangible assets

-

-


102,920

-

Impairment of goodwill

-

-


225,046

-

Share-based compensation

181,331

125,856


412,590

386,734

Amortization of intangible assets

34,378

25,878


105,358

80,514

Share of loss of equity-accounting investment

54,730

56,796


187,452

89,775

Loss of control of related company

6,108

6,108


18,324

82,647

Fair value loss of guarantee

-

(25,001)


-

75,000

Government grant

-

-


-

(25,558)

Gain on remeasurement of contingent consideration

-

(17,808)


(21,943)

(92,342)

Gain on disposal of intangible assets and goodwill

-

-


-

(255,328)


465,958

247,903


1,368,522

2,121,592







Loss before income taxes

(1,923,469)

(1,597,308)


(6,238,013)

(5,727,812)







Income tax expense 

-

-


-

-







Net loss and comprehensive loss

(1,923,469)

(1,597,308)


(6,238,013)

(5,727,812)







Net loss attributable to:






Shareholders

(1,923,469)

(1,597,308)


(6,238,013)

(5,701,717)

Non-controlling interest 

-

-


-

(26,095)


$   (1,923,469)

$   (1,597,308)


$   (6,238,013)

$   (5,727,812)







Basic and diluted loss per share 

$             (0.02)

$             (0.02)


$             (0.07)

$             (0.14)

Weighted average shares outstanding






Basic and diluted 

93,722,085

93,187,251


93,717,689

42,018,337

SOURCE Pathway Health Corp.


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