WeedMD Inc. (TSX-V:WMD) (OTCQX:WDDMF)
(FSE:4WE) (“
WeedMD” or the
“
Company”), a federally-licensed producer and
distributor of medical-grade cannabis, is pleased to report its
financial and operating results for the three-months ended
September 30, 2019, including net revenue of $6.7 million and gross
margin of 29%.
"In the third quarter, WeedMD was focused on
scaling production at our greenhouse and outdoor cultivation
operations. In our first season of cultivating outdoors, we took
the opportunity to develop best practices and strategies to set us
up for success. Our cultivation costs are amongst the lowest in the
industry at approximately $0.16 per gram for outdoors, and $0.72
per gram for greenhouse cultivation,” said Nichola Thompson, CFO of
WeedMD. “With our extraction hub, CX Industries Inc., we are ready
to process low-cost, quality cannabis to create an assortment of
high-margin finished products which will significantly add to our
topline, contributing to anticipated positive EBITDA in 2020.”
Key Financial Highlights
- Net revenue for Q3 2019 was $6.7 million, representing an
increase of $4.7 million or 232% year over year. Q3 2019 gross
profit before changes in fair value was $1.9 million, a 29% Gross
Margin in Q3 compared to 46% in the prior quarter.
- On September 25, 2019, WeedMD completed a previously
announced bought-deal convertible debenture financing which
resulted in 12,000 convertible debenture
units (“Convertible Debenture Units”) and an additional 1,115
over-allotment units being issued at a price of $1,000
per Convertible Debenture Unit for aggregate gross proceeds of
$13.1 million.
- Between September 23 and November 4, 2019, WeedMD completed the
inaugural harvest of its 27-acre outdoor cannabis cultivation. The
harvest resulted is expected to yield a dry weight of more than
eight tons at a cost to harvest of approximately $0.16 per
gram.
- The weighted average cost per gram sold from greenhouse
operations, inclusive of all costs, direct and indirect, continued
to improve in Q3. Costs to produce and package a gram of cannabis
in Q3 2019 fell to $1.42, compared to $1.84 for Q2 2019 and to
$3.14 in Q3 2018.
- WeedMD holds $22.9 million of inventory and biological assets
as of September 30, 2019.
- WeedMD’s total assets reached $155.2 million as of September
30, 2019.
Summary of Results
|
|
Q3 2019 |
|
Q2 2019 |
|
|
|
($ |
) |
($ |
) |
Net Revenue |
|
6,654,311 |
|
7,979,747 |
|
Gross profit before changes in fair value |
|
1,902,485 |
|
3,663,089 |
|
Gross margin (before changes in fair value) |
|
29 |
% |
46 |
% |
Gross profit |
|
(7,820,941 |
) |
19,190,635 |
|
Income (loss) and comprehensive income (loss) |
|
(13,402,388 |
) |
12,624,640 |
|
Adjusted
EBITDA* |
|
(1,970,742 |
) |
(662,822 |
) |
|
|
|
|
As
at |
|
Sept. 30, 2019 |
|
June 30, 2019 |
|
|
|
($ |
) |
($ |
) |
Cash and cash equivalents |
|
13,703,225 |
|
11,349,687 |
|
Inventory |
|
13,259,514 |
|
12,470,953 |
|
Biological assets |
|
9,605,182 |
|
16,999,784 |
|
Working
Capital |
|
27,464,396 |
|
38,322,049 |
|
*Adjusted EBITDA is not a recognized measurement
under International Financial Reporting Standards (“IFRS”) and this
data may not be comparable to data presented by other companies.
Management believes Adjusted EBITDA to be an important measure of
the Company’s day-to-day operations, by excluding interest, tax,
and depreciation, stock compensation, fair value changes and other
non-cash items, and non-recurring items. This measurement is useful
in assessing the results of operating and strategic decisions.
Acquisition of Starseed Medicinal Inc.
& LPF Strategic Investment
On November 29, 2019, WeedMD also announced that
it has entered into a definitive agreement to acquire Starseed
Holdings Inc. (“Starseed”), a medically-focused,
federally-licensed cannabis company providing cannabis to insured
patients with coverage under their benefit plans (the
“Acquisition”). The all-share Acquisition is
valued at approximately $78 million, and Starseed’s strategic
investor, the Labourers’ Pension Fund of Central and Eastern Canada
(“LPF”), will make a concurrent $25 million equity
investment directly into WeedMD (the “Strategic
Investment” and collectively the
“Transaction”). The Transaction bolsters WeedMD’s
leadership position in the medical cannabis market through
Starseed’s exclusive distribution and patient channels, provides
important growth capital and fortifies the Company’s balance
sheet.
For more details, find press release here.
Q3 Corporate Highlights During and
Subsequent to the Quarter Ended Sept. 30, 2019
Health Canada Licensing. WeedMD
secured the following:
- Licence Amendment for 20 Additional Cultivation &
Processing Rooms. August 2019 - Health Canada’s approval for an
additional 20 cannabis cultivation and processing rooms in
Strathroy. The amendment allows another ten 10,000 sq. ft.
cultivation rooms to be utilized along with 10 more processing and
drying rooms.
- Licence Amendment for 50,000 sq. ft Outdoor Processing
Facility. Newly built 50,000 sq. ft. purpose-built facility
designed for its current and future outdoor cannabis operations on
its 158-acre Strathroy property. This facility will allow for
drying, processing and storing of cannabis. The facility is now
fully operational and is the location for the processing and
storage of WeedMD’s 2019 outdoor harvest.
Outdoor Grow & Harvest. In
early November 2019, WeedMD completed the harvest of over 20,000
cannabis clones planted on 27-acres outdoors in Strathroy, Ontario
in early June 2019. WeedMD is one of the first LPs to introduce and
harvest outdoor cultivation in Canada. Preliminary
outdoor-cultivated test results confirm over 20% THC on some
strains. WeedMD’s harvested cannabis is expected to yield more than
eight tons of biomass at a cost of approximately $0.16/gram
Aylmer Facility Optimization & CX
Industries: WeedMD is on track to completing the retrofit
of its fully-licensed Aylmer facility into a focused extraction and
processing hub. In November 2019, WeedMD’s wholly-owned affiliate
CX Industries Inc. entered commercial operations with the
commissioning of its first Vitalis Q-90 high throughput extractor.
Launched in July 2019, CX Industries specializes in extraction,
toll processing, white labeling services and third-party product
formulation and at peak production will have a throughput of
200,000 kgs of biomass per year. WeedMD intends to utilize the
majority of its 2019 outdoor crop with CX Industries for extraction
and upgrading into finished concentrate products.
Leadership Appointments: In
November 2019, WeedMD announced the appointment of pharma executive
Tricia Symmes as General Manager of CX Industries
Inc. Tricia will be responsible for strengthening sales
channels, building new cannabis product lines and scaling for
growth, positioning WeedMD & CX Industries for long-term
success.
Q3 Conference Call
The Company will host a joint conference call
with Starseed management at 1PM Eastern Time, today, to review the
Transaction and WeedMD’s Q3-2019 financial results and operational
outlook. The call will be hosted by Keith Merker, CEO, Nichola
Thompson, CFO of WeedMD and Angelo Tsebelis, President of Starseed
Medicinal.
Management will be available for analyst and media questions
following opening remarks.
Conference Call Details:
Date: Friday November 29, 2019
Time: 1 p.m. Eastern Time
Dial-in Number: Canada/USA: 1-800-319-4610. International Toll:
+1-604-638-5340 Participants, please dial in and ask to join the
WeedMD call.
Replay Dial - in: Canada/USA: 1-800-319-6413. International
Toll: +1-604-638-9010 Replay Access Code: 3544 Replay will be
available after 12:00 p.m. Eastern Time, until September 29,
2019.
The Company’s financial statements and related
management’s discussion and analysis for the period are available
under the Company’s profile on SEDAR at www.sedar.com. All amounts
are expressed in Canadian dollars and are in accordance with
International Financial Reporting Standards unless otherwise
noted.
About WeedMD Inc.
WeedMD Inc. is the publicly-traded parent
company of WeedMD Rx Inc., a federally-licensed producer of
cannabis products for both the medical and adult-use markets. The
Company owns and operates a 158-acre state-of-the-art greenhouse
and outdoor facility located in Strathroy, ON. The Company also
operates CX Industries, a wholly-owned subsidiary of WeedMD Inc. CX
operates out of the Company’s fully-licensed 26,000 sq. ft. Aylmer,
Ontario production facility which specializes in cannabis
extraction and processing. WeedMD has a multi-channeled
distribution strategy that includes selling directly to medical
patients, strategic relationships across the seniors’ market and
supply agreements with Shoppers Drug Mart as well as six provincial
distribution agencies where WeedMD’s adult-use brand Color Cannabis
is sold.
Follow WeedMD & Color
Cannabis:
Facebook: https://www.facebook.com/weedmd/LinkedIn:
https://www.linkedin.com/company/weedmd/?originalSubdomain=frTwitter:
https://twitter.com/WeedMDInstagram:
https://www.instagram.com/weedmd/Instagram: https://www.instagram.com/callitcolor/
For further information, please
contact:
WeedMD Inc.
For Investor Inquiries:
James Williams Director, Capital Markets Email:
investor@weedmd.com
For Media Inquiries:
Marianella delaBarreraVP, Communications & Corporate
AffairsTel: 416-897-6644Email: marianella@weedmd.com
To learn more, visit us at www.weedmd.com
Forward Looking Information
This press release contains "forward-looking
information" within the meaning of applicable Canadian securities
legislation which are based upon WeedMD's current internal
expectations, estimates, projections, assumptions and beliefs and
views of future events. Forward-looking information can be
identified by the use of forward-looking terminology such as
"expect", "likely", "may", "will", "should", "intend",
"anticipate", "potential", "proposed", "estimate" and other similar
words, including negative and grammatical variations thereof, or
statements that certain events or conditions "may", "would" or
"will" happen, or by discussions of strategy.
The forward-looking information in this news
release is based upon the expectations, estimates, projections,
assumptions and views of future events which management believes to
be reasonable in the circumstances. Forward-looking information
includes estimates, plans, expectations, opinions, forecasts,
projections, targets, guidance or other statements that are not
statements of fact. Forward-looking information in this news
release include, but are not limited to, statements with respect to
internal expectations, expectations with respect to actual
production volumes, expectations for future growing capacity and
the completion of any capital project or expansions.
Forward-looking information necessarily involve known and unknown
risks, including, without limitation, risks associated with general
economic conditions; adverse industry events; loss of markets;
future legislative and regulatory developments; inability to access
sufficient capital from internal and external sources, and/or
inability to access sufficient capital on favourable terms; the
cannabis industry in Canada generally; the ability of
WeedMD to implement its business strategies; competition; crop
failure; and other risks.
Any forward-looking information speaks only as
of the date on which it is made, and, except as required by law,
WeedMD does not undertake any obligation to update or revise any
forward-looking information, whether as a result of new
information, future events or otherwise. New factors emerge from
time to time, and it is not possible for WeedMD to predict all such
factors. When considering this forward-looking information, readers
should keep in mind the risk factors and other cautionary
statements in WeedMD's Annual Information Form dated June 21, 2019
(the "AIF") and other disclosure documents of WeedMD filed with the
applicable Canadian securities regulatory authorities on SEDAR at
www.sedar.com. The risk factors and other factors noted in the AIF
and other disclosure documents could cause actual events or results
to differ materially from those described in any forward-looking
information.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS
REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE
POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR
THE ADEQUACY OR ACCURACY OF THIS RELEASE
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