- Reports net revenues of $6.7 million with a gross margin of 29%
- Greenhouse cultivation cost improves to $0.72/gram in Q3
- Strategic acquisition of Starseed strengthens medical position in Canada and consolidates distribution channel in accretive all-stock transaction
- A $25 million strategic investment from The Labourers’ Pension Fund of Central and Eastern Canada will result in a pro-forma cash position of $54 million
- Preliminary outdoor-cultivated test results confirm over 20% THC on some strains and harvest expected to yield more than eight tons of biomass at a cost of approximately $0.16/gram
- Joint management call to discuss earnings & acquisition to be held on Nov. 29th at 1PM Eastern
TORONTO, Nov. 29, 2019 (GLOBE NEWSWIRE) — 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|
|Gross profit before changes in fair value||1,902,485||3,663,089|
|Gross margin (before changes in fair value)||29||%||46||%|
|Income (loss) and comprehensive income (loss)||(13,402,388||)||12,624,640|
|As at||Sept. 30, 2019||June 30, 2019|
|Cash and cash equivalents||13,703,225||11,349,687|
*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:
For further information, please contact:
For Investor Inquiries:
Director, Capital Markets
For Media Inquiries:
VP, Communications & Corporate Affairs
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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