WeedMD Inc. (
TSX-V:WMD)
(OTCQX:WDDMF) (FSE:4WE) (“
WeedMD”
or the “
Company”), a federally-licensed producer
and distributor of medical-grade cannabis, announced today its
financial results for the three months ended March 31, 2020,
including net revenue of $12.2 million, a 327% sequential increase
compared with $2.9 million for the fourth quarter of 2019, and a
265% increase from the $3.3 million of revenue generated for the
prior year period.
“Our significant sequential sales growth in the
first quarter was driven by our increased brand recognition, higher
product availability and customer acquisition initiatives,” said
Angelo Tsebelis, CEO of WeedMD. “We ramped-up retail engagement of
our Color brand in the adult-use market and expanded our
distribution network with new partners in the insured medical
cannabis channel with the addition of Starseed. Additionally,
WeedMD completed a substantial sale of its inaugural
outdoor-cultivated biomass earmarked for extraction and
international markets, contributing to record revenue of over $12
million. With our unique medical platform and expanded market
presence of our mass-craft adult-use products, we are
well-positioned to advance our customer-centric strategy and
capitalize on positive market trends in the Canadian cannabis
market.”
Summary of
Results
For the Quarter-Ended |
|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
|
($000’s |
) |
($000’s |
) |
Net revenue |
|
12,185 |
|
2,850 |
|
Gross profit before changes in fair value |
|
1,370 |
|
(2,006 |
) |
Gross margin % before changes in fair value |
|
11% |
|
(70% |
) |
Income (loss) and comprehensive (loss) |
|
(9,002 |
) |
(7,211 |
) |
Adjusted
EBITDA* (loss) |
|
(5,075 |
) |
(8,191 |
) |
As
at |
|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
|
($000’s) |
|
($000’s) |
|
Cash and cash equivalents |
|
14,183 |
|
8,184 |
|
Inventory |
|
33,418 |
|
31,287 |
|
Biological assets |
|
4,417 |
|
7,666 |
|
Working
Capital |
|
46,991 |
|
30,619 |
|
*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 defines Adjusted EBITDA as EBITDA adjusted to exclude
interest, tax, and depreciation, stock compensation, fair value
changes and other non-cash items, and non-recurring items. This
data is furnished to provide additional information and does not
have any standardized meaning prescribed by IFRS. The Company uses
this non-IFRS measure to provide shareholders and others with
supplemental measures of its operating performance. The Company
also believes that securities analysts, investors and other
interested parties, frequently use this non-IFRS measure in the
evaluation of companies, many of which present similar metrics when
reporting their results. As other companies may calculate Adjusted
EBITDA differently than the Company, this metric may not be
comparable to similarly titled measures reported by other
companies. We caution readers that Adjusted EBITDA should not be
substituted for determining net loss as an indicator of operating
results, or as a substitute for cash flows from operating and
investing activities.
Key Financial Highlights
- For the three months ended March 31, 2020, WeedMD recorded net
sales of $12.2 million, representing a year-over-year increase of
265% as compared to the first quarter of 2019 and a 327% increase
from the fourth quarter of 2019.
- Gross profit before changes in fair value was $1.4 million,
representing a 11% gross margin compared to a gross loss of 70% in
the prior quarter, mainly attributable to increased revenue from
the sale of dried cannabis and revenue generated during the period
from the full quarter post the Starseed acquisition.
- Cultivation cost was $0.84 per gram for the quarter, a 13%
improvement from Q4 2019 of $0.96.
- The Company sold 5,084 kgs of dried cannabis, representing an
increase of 744% from the previous quarter.
- As of March 31, 2020, WeedMD holds $37.8 million in inventory
and biological assets and its total assets sit at $213.7
million.
- Adjusted EBITDA* loss totalled $5.1 million for the three-month
period ended March 31, 2020, mainly driven by increased selling,
general and administrative expenses before changes in fair value of
$2.0 million driven by the sales increase.
“The first quarter began to show the benefits of
our combination with Starseed, as exemplified in our sales revenue
mix along with the $25 million strategic equity investment we
received from the LiUNA Pension Fund of Central and Eastern
Canada,” said Lincoln Greenidge, CFO of WeedMD. “We have both the
operational infrastructure and balance sheet to support our
continued commercial growth and broader distribution channels. We
look forward to meeting the growing demand for our quality-produced
brands - while continuing to focus on operational improvements and
disciplined cash and inventory management.”
Corporate Highlights During &
Subsequent to First Quarter Ended March 31, 2020
Launches Cannabis 2.0 Product Line Of
Medical Vaporizers
Strain-Specific Medicinal Vaporizer Pens
(Vapes): In June 2020, WeedMD completed the launch of its
innovative line of strain-specific medicinal vapes. The ‘Aurum’
vapes are available to Starseed patients across Canada as part of
the Company’s expanding medical cannabis product portfolio. The
Aurum vapes are produced and formulated in-house at WeedMD’s
extraction hub CX Industries with premium cannabis extracts derived
from biomass cultivated from the Company’s indoor and outdoor
harvests. The new product line was launched with the Company’s
high-regarded Ghost Train Haze strain, to be followed by other
strains and formulations as well as a launch in the adult-use
market under WeedMD’s Color Cannabis brand.
Outdoor Cultivation Enters Second
Year
Outdoor Cultivation: WeedMD completed the
planting of 18,000 clones across seven core cultivars on its
27-acre outdoor field in June, making WeedMD one of only a handful
of licensed-producers entering its second year of outdoor
operations. The harvest is expected to support CX Industries with
cannabinoid-rich, low cost cannabis biomass, and provide attractive
input material for certain flower and extract products.
Business Development
Milestones
Expanded Medical Channel: With the addition of
Starseed, WeedMD also welcomed new and direct channels to a patient
base with insurance coverage for medical cannabis. The potential
access to a substantial and direct consumer audience of over
350,000 individuals is expected to drive growth and margin
expansion.
Four new partners and their benefits providers
were added in February 2020:
- LiUNA Local 1059 (London, Ontario)
- The International Union of Painters and Allied Workers
- The Insulators Local 95 Health and Welfare Trust Fund
- myHSA
‘PatientDirect’ Kicks Off With Express
Delivery to Toronto-Area Patients
Same-Day Delivery Service: In June 2020, WeedMD
launched its same-day medical cannabis home delivery service. The
pilot project called ‘PatientDirect’ services
local patients in the greater Toronto-area, with order fulfillment
from the Company’s Bowmanville, Ontario distribution centre located
just outside Toronto. PatientDirect is intended to ease potential
third-party postal and delivery service disruptions resulting from
current business conditions. The service is being offered to new
and existing Starseed Medicinal patients and will expand to WeedMD
patients.
Strengthens Balance Sheet and Adds
Financial Flexibility
Senior Secured Credit Facility: At the end of
the second quarter, WeedMD amended certain terms of its senior
secured credit facility entered into on March 29, 2019 (the “Credit
Facility”) (the “Credit Agreement Amendment). Under the terms of
the Credit Agreement Amendment, the Company secured a deferral of
certain financial covenants by 12 months to June 30, 2021 and
quarterly principal repayments are rescheduled to commence at the
end of 2020. Additionally, the Company agreed to a 50 basis point
increase in the applicable interest rate margin on the Credit
Facility.
$25 Million Strategic Equity Investment: WeedMD
secured a $25 million strategic equity investment from the LiUNA
Pension Fund of Central and Eastern Canada following receipt of
shareholder approval in February 2020.
Leadership Appointments
Following the acquisition of Starseed, WeedMD
combined its experienced senior leadership team and board of
directors and in February 2020 in order to accelerate the Company’s
commercial growth, appointed Angelo Tsebelis as
CEO of WeedMD. Formerly President of WeedMD and Starseed,
Angelo brings a renewed focus on expanding strategic commercial and
sales distribution initiatives to execute on delivering
high-margin, quality products.
In April 2020, the Company appointed
Lincoln Greenidge as Chief Financial Officer.
Lincoln brings over 20 years of corporate finance, capital markets
as well as mergers and acquisition experience and is leading the
Company’s financial integration and strategic shift to
commercialize WeedMD’s cultivation platform.
COVID-19 Operational
Response
In response to the COVID-19 global pandemic,
WeedMD established a number of safety protocols and risk mitigation
strategies to ensure the health and safety of its employees and
communities. The Company temporarily closed its corporate offices
in London and Toronto in accordance with emergency measures enacted
by the Province of Ontario - with applicable employees adopting a
work-from-home policy that remains in effect until further notice.
While its production sites continue to operate, employees are
observing strict social distancing and safety measures put in place
by the Company. WeedMD also introduced cost-leadership tactics that
included salary reductions across its senior leadership levels.
The Company also confirmed in March 2020 that it
donated over 23,000 face masks and gloves in varying sizes to
Ontario-area hospitals in need during that time.
Conference Call Information:
WeedMD will host a conference call with Angelo
Tsebelis, CEO and Lincoln Greenidge, CFO on July 15, 2020.
Management will be available for analyst and media questions
following opening remarks.
Conference Call Details:
Date: |
Wednesday July 15, 2020 |
|
|
Time: |
10 a.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:
1-604-638-9010Replay Access Code: 4771Available after 12:00 p.m.
Eastern Time, until August 15, 2020 |
Check here for upcoming corporate
events and to access WeedMD’s latest Investor Presentation and
latest Corporate Update Video.
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. and Starseed
Medicinal Inc., federally-licensed producers of cannabis products
for both the medical and adult-use markets. The Company owns and
operates a 158-acre state-of-the-art greenhouse, outdoor and
processing facility located in Strathroy, Ontario as well as CX
Industries Inc., a wholly-owned subsidiary which specializes in
cannabis extraction from the Company’s fully-licensed 26,000 sq.
ft. Aylmer, Ontario processing facility. With the addition of
Starseed, a medical-centric operator based in Bowmanville, Ontario,
WeedMD has expanded its multi-channeled distribution strategy.
Starseed’s industry-first, exclusive partnership with LiUNA, the
largest construction union in Canada, along with other employers
and union groups complements WeedMD’s direct sales to medical
patients. The Company maintains strategic relationships in the
seniors’ market and supply agreements with Shoppers Drug Mart as
well as six provincial distribution agencies where adult-use brands
Color Cannabis and Saturday are sold.
Follow WeedMD, Color Cannabis &
Starseed:
LinkedIn: https://ca.linkedin.com/company/weedmdTwitter: https://twitter.com/WeedMDInstagram: https://www.instagram.com/weedmd/Instagram: https://www.instagram.com/callitcolor/&Instagram: https://www.instagram.com/starseedca/
For further information, please
contact:
For Investor Enquiries:Valter
PintoManaging Director KCSA Strategic
Communications1-212-896-1254weedmd@kcsa.com
For Media Enquiries:Marianella
delaBarreraVP, Communications & Corporate
Affairs416-897-6644marianella@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; the COVID-19 pandemic;
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 disclosure documents filed with the
applicable Canadian securities regulatory authorities on SEDAR at
www.sedar.com. The risk factors and other factors noted in the
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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