Pathway Health Corp. Reports Second Quarter 2022 Financial Results

• Second quarter 2022 revenues came in at $2.8 million and were up approximately 9% sequentially over the first quarter 2022.
• The Company entered into a $1.0 million bridge loan in the second quarter that rolled into a $3.5 million revolving line of credit subsequent to quarter end.
• The Company has applied for a non-possession sales license that is currently under review with Health Canada.

TORONTO, Aug. 25, 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 six-month period ended June 30, 2022. Unless otherwise noted, all amounts are in Canadian dollars and are prepared in accordance with International Financial Reporting Standards ("IFRS").

"With the $3.5 million line of credit in place, Pathway can continue building a solid foundation to support its future growth. In the second half of fiscal 2022, we will remain focused on ways to control costs, streamline and leverage our existing business assets (including our partnerships with approximately 2,000 pharmacies), establish new partnerships, develop new integrated programs targeted to better serve patient groups such as veterans, first responders, and contractors, and exploring international opportunities where we can leverage our experience, know-how and existing partnerships," said Ken Yoon, Pathway's Chief Executive Officer.    

Recent Highlights

• Revenues were $2.8 million this quarter, up approximately 9% from Q1 2022 ($2.5 million), showing signs of recovery from the COVID-19 restrictions experienced in various provinces.
• The Company entered into a bridge loan with a related party for available proceeds of up to $1.0 million. This facility was rolled into a larger $3.5 million revolving line of credit subsequent to quarter end.
• The Company has applied for a non-possession sales license (Cannabis license Class-Federal sale for medical purposes without possession), which is currently under review with Health Canada. The Company believes this license will help it deliver more efficient patient care, potentially assist in its international initiatives, and provide insights to inform future Cannabis Health Product ("CHP") strategy.
• The recent recommendations by the Science Advisory Committee to Health Canada on over-the-counter CBD based cannabis health products (CHPs) that included potentially having the CHPs only available in pharmacies are in-line with Pathway's CHP strategic direction and should allow the Company to leverage its relationship with over 2,000 pharmacies should the recommendations be implemented. 
• Subsequent to quarter end, the Company added Dr. Rakesh Jetly and Mark Goldhar to the Board of Directors. Dr. Jetly is a retired Colonel and former Chief of Psychiatry for the Canadian Armed Forces. The Company looks to leverage his expertise and insights in mental health as it continues to expand the services offered to their patients. Mr. Goldhar is a finance professional with a strong background raising capital and leading companies through rapid growth phases.

Summary of the Results for the Three Months Ended June 30, 2022 (Q2 2022) compared to the Three Months Ended June 30, 2021 (Q2 2021), unless otherwise noted

Revenues were $2.8 million and $2.9 million for the three months ended June 30, 2022, and 2021, respectively. Cannabis education revenues were impacted by a reduction in marketing fees previously provided by licensed producers as clinics moved to a telemedicine platform. However, revenues for Q2 2022 were $2.8 million, a 9% growth over Q1 2022, showing signs of recovery from COVID-19 restrictions in the first quarter.

Gross margins were $1.3 million and $1.5 million for the three months ended June 30, 2022, and 2021, which represented 47% and 53% of gross revenues, respectively. The variance is mainly a result of the increase in products and provincially insured and non-insured physician services as a total percentage of overall revenue.

Selling, general and administrative expenses ("SG&A") were $3.1 million and $2.9 million for the three months ended June 30, 2022, and 2021, respectively. The $0.1 million increase in wages and benefits over the prior year period are consistent with inflationary pressures in the economy and the growth of the operations of the Company as it explores other potential avenues of business including cannabis health products and the international cannabis markets. Public company costs and insurance have increased by $0.1 million each over the prior year as the Company began trading on the TSXV on June 17, 2021, and have incurred additional expense related to listing fees, investor relations, and directors' and officers' insurance. This is offset by a $0.1 million reduction in professional and consulting fees, which were unusually high in the prior year as they reflected the additional listing fees, legal and professional fees related to the Reverse Takeover transaction which closed on May 31, 2021. General office expenses also decreased by $0.1 million over the prior year period as the Company looks to reduce costs and streamline processes.

The Company incurred a net loss of $2.4 million and had a basic and diluted loss per share of $0.03 for the three months ended June 30, 2022, compared to a net loss of $3.1 million and a basic and diluted loss per share of $0.05 for the same period prior year.

Earnings before interest, tax, depreciation, and amortization ("EBITDA")¹ was a loss of $2.1 million and adjusted EBITDA¹ was a loss of $1.7 million for the three months ended June 30, 2022, compared to an EBITDA and adjusted EBITDA loss of $2.5 million and $0.6 million respectively in the prior year.

Cash as of June 30, 2022, was $0.2 million compared with $2.6 million on December 31, 2021. As of June 30, 2022, the Company had drawn down $0.2 million from the bridge loan. On July 29, 2022, the Company entered into an agreement with a related party to establish a $3.5 million credit facility, inclusive of the amounts advanced under the bridge loan.

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 June 30,			For the six months ended June 30,
		2022	2021		2022	2021
Net (loss) attributable to shareholders		$          (2,375,703)	$          (3,076,636)		$          (4,314,544)	$          (4,104,409)
Adjustments:
	Amortization of intangible assets	35,490	22,976		70,980	54,636
	Depreciation	184,484	192,834		371,511	357,563
	Finance expense*	78,898	360,143		149,364	452,468
EBITDA		$          (2,076,831)	$          (2,500,683)		$          (3,722,689)	$          (3,239,742)
Share-based compensation		99,125	164,099		231,259	260,878
Loss of control of related company		6,108	76,539		12,216	76,539
Fair value (gain) loss of guarantee		-	100,001		-	100,001
Impairment of intangible assets		102,920	-		102,920	-
Impairment of goodwill		225,046	-		225,046	-
Gain on remeasurement of contingent consideration		(21,943)	(50,534)		(21,943)	(74,534)
Reverse takeover transaction cost		-	1,251,608		-	1,251,608
Additional professional fees due to RTO Transaction		-	365,770		-	652,715
Additional professional fees due to Asset Acquisition Transaction		-	3,285		-	125,591
Adjusted EBITDA		$          (1,665,575)	$             (589,915)		$          (3,173,191)	$             (846,944)
*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: 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)
	June 30, 2022		December 31, 2021
Assets
Current
Cash	$           189,309		$        2,603,429
Restricted cash	75,000		75,000
Accounts and other receivables	1,058,540		811,587
Deferred cost	42,762		54,978
Inventory	330,579		340,340
Prepaids	259,863		249,579
	1,956,053		4,134,913
Due from related parties	51,847		117,362
Property and equipment	2,606,084		2,914,078
Intangible assets	517,547		691,447
Goodwill	279,855		504,901
Investment in related company	308,789		475,824
	3,764,122		4,703,612
Total assets	$        5,720,175		$        8,838,525
Liabilities and Shareholders' equity
Current
Acccounts payable and accrued liabilities	$        2,544,528		$        1,585,558
Bridge loan	180,029		-
Current portion of lease liability	567,548		545,515
Due to related parties	43,540		20,459
	3,335,645		2,151,532
Lease liability	2,054,415		2,292,993
Government loan payable	73,474		67,574
	2,127,889		2,360,567
Total liabilities	5,463,534		4,512,099
Shareholders' equity
Share capital	42,644,224		42,630,724
Warrants	1,866,866		1,866,866
Contributed surplus (deficiency)	(30,699,149)		(30,930,408)
Deficit	(13,555,300)		(9,240,756)
	256,641		4,326,426
Total liabilities and shareholders' equity	$        5,720,175		$        8,838,525

Pathway Health Corp. (formerly Colson Capital Corp.)
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
For the three and six months ended June 30, 2022
(Unaudited)
	For the three months ended June 30,			For the six months ended June 30,
	2022	2021		2022	2021
Revenue	$   2,769,375	$   2,934,258		$   5,307,529	$   5,562,465
Cost of sales
Consultants	1,110,573	1,055,161		2,101,895	2,012,138
Cost of goods sold	207,309	197,180		399,492	344,536
Clinic and medical supplies	148,808	133,553		270,853	221,940
Total cost of sales	1,466,690	1,385,894		2,772,240	2,578,614
Gross margin	1,302,685	1,548,364		2,535,289	2,983,851
Selling, general and administrative expenses	3,073,282	2,922,517		5,947,269	5,240,666
Loss before other items	(1,770,597)	(1,374,153)		(3,411,980)	(2,256,815)
Other expenses (income)
Reverse takeover transaction cost	-	1,251,608		-	1,251,608
Finance expense	78,898	360,143		149,364	452,468
Impairment of intangible assets	102,920	-		102,920	-
Impairment of goodwill	225,046	-		225,046	-
Share-based compensation	99,125	164,099		231,259	260,878
Amortization of intangible assets	35,490	22,976		70,980	54,636
Share of loss of equity-accounting investment	79,462	32,979		132,722	32,979
Loss of control of related company	6,108	76,539		12,216	76,539
Fair value loss of guarantee	-	100,001		-	100,001
Government grant	-	-		-	(25,558)
Gain on remeasurement of contingent consideration	(21,943)	(50,534)		(21,943)	(74,534)
Gain on disposal of intangible assets and goodwill	-	(255,328)		-	(255,328)
	605,106	1,702,483		902,564	1,873,689
Loss before income taxes	(2,375,703)	(3,076,636)		(4,314,544)	(4,130,504)
Income tax expense	-	-		-	-
Net loss and comprehensive loss	(2,375,703)	(3,076,636)		(4,314,544)	(4,130,504)
Net loss attributable to:
Shareholders	(2,375,703)	(3,076,636)		(4,314,544)	(4,104,409)
Non-controlling interest	-	-		-	(26,095)
	$  (2,375,703)	$  (3,076,636)		$  (4,314,544)	$  (4,130,504)
Basic and diluted loss per share	$          (0.03)	$          (0.05)		$          (0.05)	$          (0.13)
Weighted average shares outstanding
Basic and diluted	93,722,085	62,562,816		93,715,455	31,467,493

SOURCE Pathway Health Corp.

Robin Cook, Corporate Development, [phone], [email protected]