OTTAWA, Aug. 27, 2014 /CNW/ - Tweed Marijuana Inc. (TSXV:
TWD) ("Tweed" or the "Company"), today announced its second quarter
(Q2) financial results for the three month period ended
June 30, 2014. Tweed's wholly owned
subsidiaries Tweed Inc. and Prime 1 Constructions Services Corp.,
doing business as Park Lane Farms, are Licensed Producers under the
Canadian Marihuana for Medical Purposes Regulations
("MMPR"), making Tweed the first publicly traded, multi-licensed
producer of medical marijuana in Canada.
Financial and Operational Highlights
During Q2 Tweed attained the following milestones:
- On April 3 the Company began
trading on the TSX-V as TWD;
- The Company shipped its first product on May 5, 2014;
- On May 16 the Company concluded a
bought deal for gross proceeds of $15,000,000;
- Established 25 strains, 3 rooms of production and began
repeated cycles of production;
- The Company acquired Park Lane Farms in Niagara-on-the-Lake on June 19;
- The Company has conducted more than 1,900 educational
interactions with healthcare practitioners;
- Subsequent to the close of the quarter Park Lane Farms received
approval from Health Canada to become a Licensed Producer and has
commenced production in its facility.
REVENUES
The Company reported initial sales of $188,736, coming from the last two months of the
quarter.
OPERATING EXPENSES
Operating expenses for the quarter ended June 30, 2014 was $1,134,427 as compared to $1,194,591 for the quarter ended March 31, 2014. These expenses have been incurred
as the Company hired employees in the areas of operations,
production and administration, pursued and invested in specific
educational and outreach initiatives as well as the required
government permits, engaged expertise in developing its business
and production strategies, and incurred costs of implementing and
expanding the growing operations.
Share-based compensation expenses of $147,797 in Q2 and $306,223 for the six months ended June 30, 2014 relate to the expense associated
with the stock options granted to employees and consultants during
fiscal 2013 and the two quarters of 2014.
Amortization of intangible assets for the first quarter ending
June 30, 2014 amounted to
$5,755, and for the six months ended
June 20 2014, to $8,222. These relate to the amortization of the
cost associated with the acquisition of the tweed.com domain name,
which is being amortized over a five-year period.
Amortization of property, plant and equipment for the first
quarter ending June 30, 2014 amounted
to $43,734. Assets in leasehold
construction in progress totaling $5,309,951 have been transferred to property,
plant and equipment on June 30, 2014
as construction was complete and the leasehold was available for
use. Amortization on these assets will commence July 1, 2014.
NET LOSS
The net loss for the quarter ending June
30, 2014 was $1,160,317 and
for the six month period ended June 30,
2014 was $3,778,197.
Liquidity
The table below sets out the cash, short-term investments, and
working capital at December 31, 2013
and June 30, 2014.
|
|
As at June 30,
2014
|
|
As at December 31, 2013
|
Cash
|
|
$12,249,087
|
|
$2,089,794
|
Short term investments
|
|
10,000
|
|
10,000
|
Working capital
|
|
12,264,190
|
|
1,817,024
|
The increase in the working capital of $10,447,166 is mainly due to the equity financing
raised in the period, partially offset by cash used in operating
activities and the investment in long-term assets for the business.
The long-term assets are primarily the leasehold assets that relate
to the infrastructure for business production and operations.
The chart below highlights the Company's cash flows year to date
ending June 30, 2014.
Net cash provided by (used
in):
|
|
Six months ended
June 30, 2014
|
Operating activities
|
|
$(6,076,672)
|
Investing activities
|
|
(7,289,048)
|
Financing activities
|
|
23,525,013
|
Increase in
cash
|
|
10,159,293
|
As at June 30, 2014, the Company
had cash available of $12,249,087.
For the three months ended June 30,
2014, the Company consumed $3,506,018 in operating activities; generated
cash from equity financing activities in the amount of $13,843,029 and used cash of $5,788,031 for investing activities associated
with long-term assets. The Company has incurred losses to date. The
Company expects to generate increased revenue commencing in the
third quarter of 2014 and will incur losses for the balance of
2014.
On May 5, 2014 Tweed Inc.
commenced shipping medical marijuana to registered patients.
On May 14, 2014, the Company
announced that it had closed a short form prospectus offering, on a
bought deal basis, of 4,687,500 common shares for aggregate gross
proceeds of $15,000,000 (the
"Offering"). The Offering was completed at a price of $3.20 per common share (the "Offering Price") by
a syndicate of underwriters led by GMP Securities L.P. and
including Jacob Securities Inc. (the "Underwriters"). The Company
also granted the Underwriters an over-allotment option to purchase
up to an additional 703,125 common shares at the Offering Price,
exercisable in whole or in part, at any time on or prior to the
date that is 30 days following the closing of the Offering.
Such over-allotment option was not exercised.
On June 18, 2014 the Company
purchased 100% of all the issued and outstanding shares of Prime 1
Construction Services Corp. The purchase price was $2,000,000 in cash and stock. This gives the
Company 350,000 square feet of greenhouse environment in the
Niagara-on-the-Lake area.
Sector Insights and Management Structure Update
The MMPR structure was announced on June
19, 2013, and represents one of the most comprehensive and
safe frameworks for the private production and sale of medical
marijuana in the world. In response to this legislation Tweed has
taken the approach of seeking to establish a platform that is large
scale, multi-licensed, and with diverse growing environments. It is
Management's view that this approach holds the potential for
economies of scale and scope that may enable Tweed to be the leader
in the sector. This approach has required Tweed to pursue a range
of initiatives that could be considered ground breaking. For
example, the acquisition announced June 19,
2014 of the greenhouse in Niagara-on-the-Lake creates a new and
potentially dramatic diversification to Tweed's product mix, cost
bases and production volume.
The scale of production, reliability of available product, and
development of market demand are all aspects of the business that
Tweed has placed increased priority and focus upon over the last
quarter. Financial note 5 in the financial statements sets out that
Tweed had a harvest in-process inventory of $967,863 at the end of June, and continues to
build on the volume of product in-production. To this end Tweed is
pleased to confirm that the number of operational flowering rooms
has doubled to six effective August 28,
2014. The construction program was delivered on schedule and
below budget. Management is confident the number of flowering rooms
in production at the Smiths Falls
site will again double prior to year end. The number of flowering
rooms in production by year end would be twelve of the potential
total of thirty rooms in Smiths
Falls. Production was also commenced at Niagara-on-the-Lake on August 10th.
The build-out program, production process, and active medical
education program have provided some insight to the market and
potential offering. Tweed believes the facilities constructed and
licensed by the end of 2014 will have the production potential of
approximately 7,000,000 grams on an annualized basis. The price
range for the product is forecast to be an average of $7 per gram in 2015. The target margin at the
2014 run rate of production is estimated to be approximately
seventy percent. Tweed is on schedule to have an on-site lab
operational by early Q4, which is expected to reduce time to
market, lower testing costs, and facilitate further research and
development.
The Board recognizes the opportunity for Tweed to continue to
accelerate. Tweed is now a multi-license, multi-site company that
has established a platform that could produce significant growth.
Chuck Rifici has made key
contributions to date as the CEO and Co-Founder. Having led Tweed
through its startup phase, Chuck is stepping down as CEO to help
the company recruit a CEO with the skills and experience to take
Tweed to the next level of expected high-volume and rapid growth in
this aggressive market segment.
Effective immediately the Chairman and Co-Founder, Bruce Linton will act as the interim CEO. The
Board looks forward to Chuck's continued involvement on the
Board.
Teleconference Call
Bruce Linton, the Company's
Chairman and Co-Founder, and Don
Gibbs, the Company's CFO, will host a conference call on
August 28, 2014 at 10:00 a.m. ET to discuss the Company's financial
results.
Date:
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August 28th,
2014
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Time:
|
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10:00 a.m.
ET
|
Where:
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|
888-231-8191 (Toll
free in North America)
1-647-427-7450 (International)
|
A replay of the call will be available beginning August 29, 2014 at 2:30
p.m. ET through 11:59 p.m. ET
on September 11, 2014 and can be
accessed by dialing 855-859-2056 (toll free in North America) or 416-849-0833 (International)
and using access code 95293348.
About Tweed Marijuana Inc.
Tweed Marijuana Inc. is a TSX Venture Exchange listed company.
Its wholly owned subsidiaries Tweed Inc. and Prime1 Construction
Services Corp. (Park Lane Farms) are licensed producers of medical
marijuana in Canada. The principal activities of Tweed are the
production and sale of marijuana out of its facility in
Smiths Falls and through its
wholly owned subsidiary Prime1 Construction Services Corp (Park
Lane Farms) in Niagara-on-the-Lake, Ontario as regulated
by the Marihuana for Medical Purposes Regulations.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Notice regarding Forward Looking Statements
This news release contains forward-looking statements.
Often, but not always, forward-looking statements can be identified
by the use of words such as "plans", "expects" or "does not
expect", "is expected", "estimates", "intends", "anticipates" or
"does not anticipate", or "believes", or variations of such words
and phrases or state that certain actions, events or results "may",
"could", "would", "might" or "will" be taken, occur or be
achieved. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Tweed Marijuana
Inc. or Tweed Inc. to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements. Examples of such statements include:
(A) predictions of future demand; (B) plans to increase capital
expenditure and construction related expenses; (C) anticipated
production yields; (D) completion of construction and availability
of new production rooms; and (E) forecasted available product
selection. Actual results and developments are likely to differ,
and may differ materially, from those expressed or implied by the
forward-looking statements contained in this news release. Such
forward-looking statements are based on a number of assumptions
which may prove to be incorrect, including, but not limited to: the
ability to obtain any necessary financing; the economy generally;
the yield from Tweed's marijuana growing operations; consumer
interest in products; competition; regulation and anticipated and
unanticipated costs and delays. Although Tweed Marijuana Inc. has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in forward-looking statements, there may be other factors
that cause actions, events or results not to be as anticipated,
estimated or intended. Readers should not place undue reliance on
forward-looking statements. The factors identified above are not
intended to represent a complete list of the factors that could
affect Tweed Marijuana Inc. or Tweed Inc. Additional factors are
noted under "Part IV - Description of Risk Factors Associated with
the Acquisition" in the Filing Statement of Tweed Marijuana Inc.
dated as of June 30, 2014 and available at www.SEDAR.com. The
forward-looking statements included in this news release are made
as of the date of this news release and Tweed Marijuana Inc. does
not undertake an obligation to publicly update such forward-looking
statements to reflect new information, subsequent events or
otherwise unless required by applicable securities legislation.
SOURCE Tweed Marijuana Inc.