Mr. Toguri continued, “As we look ahead to our aggressive U.S. growth strategy, we have appointed seasoned veteran, Jessica Hulser as General Manager of our U.S. operations. Jessica’s priority will be to focus the operations, increase sales, and drive our expansion into cannabis distribution in the U.S., starting with California. Jessica has extensive experience in the distribution market from her time with Johnson Brothers. Jessica has expertise in optimizing and restructuring operations and driving profitable growth. We are excited to see the transformation she will have on our U.S. subsidiaries. We remain aggressively focused on becoming the leading cannabis distributor in North America.”
The Company announces that as of February 25, 2022, President and Founder of Windship Trading, Nathan Todd, has stepped away from his position with Humble to explore new opportunities. Mr. Todd will maintain his role on the Board of Directors.
Mr. Toguri concluded, “We want to thank Nathan for his years of leadership and his dedication to building a strong cannabis accessories distribution company. As a passionate advocate and supporter of the cannabis industry, Nathan’s legacy will remain strong as Humble enters its next phase of growth.”
Humble hires new General Manager for U.S. Operations
Jessica Hulser brings over 20 years of experience in performance-based leadership and high-level operational execution in the logistics and distribution industry. Holding top level operational and financial leadership roles within Johnson Brothers of Hawaii, Inc., Hawaiian Ocean Transport, Inc., and Odyssey Logistics, Inc., Ms. Hulser led complex logistical markets into sustained profitability and class leading operational metrics. In her role as General Manager for U.S. Operations, Ms. Hulser will be responsible for increasing sales, driving operational efficiencies, and spearheading the expansion into cannabis distribution in the U.S. Ms. Hulser is to start the role March 7, 2022.
Revenue for the second quarter was $16.9 million, compared to $16.8 million in the same quarter prior year. Second quarter revenue remained relatively flat as a result of on-going efforts to improve gross profit through higher margin products and expansion of the company’s sales agency business. Revenue for the six months ended December 31, 2021 decreased from $36.2 million to $34.9 million. In Canada, revenue increase by 12% over the six months ended December 31, 2021 as a result of increased sales from government accounts, onboarding new customer accounts and realizing higher margin sales from the accessories business. In the U.S., revenue declined by 14% for the six months ended December 31, 2021 as a result of focusing on higher margin products with competitive pricing and discounting tactics.
In the second quarter, gross profit was $2.4 million, which resulted in a gross margin of 14%, compared to $4.2 million, or a gross margin of 25%, year-over-year. The decrease in gross profit margin is primarily due to a change of the company’s inventory impairment provision of $.366 million along with sale of related clearance inventory of $.477 million resulting in a total net impact to gross profit of $.843 million. Gross profit decreased 12% of the six months ended December 31, 2021 compared to the same period prior year, as a result of the sale of related clearance inventory.
Operating loss for the quarter increased to $4.1 million from $1.3 million compared to the same period in the prior year. The increase in operating loss was driven primarily by restructuring costs, such as severance and rent impairments, and legal fee’s related to deal transactions.
Net losses for the quarter increased from $3.1 million to $4.1 compared to the same period in the prior year. Net losses increase was primarily driven by higher operational expense in support of expanding market and restructuring, which was offset by one-time charges related to the fair-value adjustment of the derivative liability for the convertible debenture. Net loss for the six months ended December 31, 2021 improved by $1.2 million due to the settlement of the convertible debenture in June 2021, which resulted in nil accretion and fair value adjustment compared to the same period in the prior year.
Adjusted EBITDA for the quarter was $(3.6) million, compared to $(0.5) million for the same period in the prior year. Changes were driven primarily by one-time adjustments in the fair value of the derivative liability for the convertible debenture and fluctuations in the foreign exchange gain/loss for each period. For the six months ended December 31, 2021, adjusted EBITDA was $(4.9) million compared to $(1.3) million for the same period in the prior year.
Humble & Fume Inc. is a leading North American distributor of cannabis and cannabis accessories, supported by a customer-centric sales team and strong fulfillment infrastructure. As the only fully-integrated cannabis distribution solution, Humble bridges the gap for retailers, licensed cannabis producers, multi-state operators, and cannabis consumers to maximize sales penetration, and increase financial performance. With over 20 years of North American operating experience, Humble has cultivated extensive vendor and customer relationships, distributing premium cannabis consumables and consumption devices. The Company is comprised of subsidiaries that represents its vertical integration across North America: Humble+Fume, B.O.B. Headquarters Inc., Windship Trading LLC, Humble+ Cannabis Solutions and Fume Labs Inc.
EBITDA and Adjusted EBITDA are financial measures that are not defined under IFRS. We define EBITDA as net income (loss), or “earnings”, before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA before: (i) finance expenses (ii) fair value adjustments; (iii) share-based compensation expense; and (iv) foreign exchange (gain) loss. We believe Adjusted EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our operating business performance and other one-time or non- recurring expenses, and also provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein.
This news release contains "forward-looking information" within the meaning of applicable securities laws relating to the Company’s growth and strategic plans for each of its business segments, including distribution of cannabis in the United States and the strategic focus in the United States, as well as expected future results. Any such forward-looking statements may be identified by words such as "expects", "anticipates", "intends", "contemplates", "believes", "projects", "plans" and similar expressions. Readers are cautioned not to place undue reliance on forward-looking statements. Statements about, among other things, Humble & Fume Inc.'s strategic plans including future growth opportunities and strategies in the United States are all forward-looking information. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. Although such statements are based on management's reasonable assumptions, there can be no assurance that such forward-looking statements will occur as described herein. The Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances or actual results unless required by applicable law. Readers are encouraged to refer to the Company’s disclosure available on its SEDAR profile (at www.sedar.com) for information as to the risks and other factors which may effect the Company’s business objectives and strategic plans.