Medmen Enterprises (CSE: MMEN) filed their second quarter 2020 financials this evening after the bell, revealing revenues of $44.0 million for the thirteen week period ended December 28, 2019. The firm posted a net loss of $40.6 million for the quarter despite cost cutting measures the firm undertook during the quarter and subsequent to the period.
While revenues were relatively flat on a quarter over quarter basis, increasing just 0.20% from the first quarters revenues of $43.9, the firms cost of goods sold skyrocketed during the period. Costs of goods sold in the second quarter rose to $39.5 million, from that of $22.1 million just a quarter earlier, increasing 78.4%. Gross margin as a result came in at $4.5 million, or 10.31%.
Expenses were also up on a quarter over quarter basis despite posturing done by Medmen throughout the quarter, with total operating expenses increasing to $69.2 million from $66.1 million in the prior quarter. Previous guidance issued by the company has stated that the firm intends to cut its operating expenses to just $65 million for the full fiscal year by that of the third quarter. General and administrative expenses rose to $52.4 million, while sales and marketing accounted for $3.6 million.
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Moving to Medmen’s balance sheet, the company reported a cash position of $26.0 million, which decreased from that of $42.2 million in the prior quarter. Inventory also decreased, from $40.4 million to $34.7 million, while assets held for sale increased to $55.2 million from $8.4 million. Total current assets increased overall to $151.1 million, with assets currently held for sale accounting for 36.5% of the firms total current assets.
Medmen’s total current liabilities also increased substantially, climbing to $188.8 million in the second quarter, compared to that of $129.9 million in the first quarter. The largest portion of current liabilities is made up of accounts payable at $83.9 million, which increased significantly on a quarterly basis from $53.8 million. The imbalance between current cash and accounts payable is likely the reason for the company being found to be paying vendors in the form of Class B Suboridinate shares of the company.
The company currently has a negative working capital of approximately -$37.6 million, and a current ratio of 0.80. Excluding assets currently held for sale, working capital drops to -$92.9 million, while the current ratio falls to roughly 0.50.
Lastly, the company announced in this evenings earnings release that they had signed a definitive agreement to sell the Illinois property in which it was to receive as part of the PharmaCann settlement. The property, referred to as the Hillcrest Facility, is being sold to an undisclosed third party for $17.0 million. An initial payment of $10 million for the asset has been received, with the remainder to be received in the coming weeks.
Medmen Enterprises last traded at $0.40 on the CSE.
Information for this briefing was found via Sedar and MedMen Enterprises. The author 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.
