GATINEAU, QC--(Marketwired - November 02, 2017) - The Hydropothecary Corporation (
"As Hydropothecary enters the next stage of its journey working towards becoming a great cannabis brand, we want our shareholders to know that we will remain focused on execution, quality and cost control. Moving forward, I also want to underscore our commitment to safe, responsible cannabis use. At Hydropothecary, we are conscious that with great opportunity also comes great responsibility," said Sebastien St-Louis, CEO.
The Company is pleased to report revenue of $4.1M for the fiscal year ended July 31, 2017 compared with $1.9M for the fiscal year ended July 31, 2016. The Company reported a decrease in revenue from $1.2M for the third quarter of fiscal 2017 to $862K for the fourth quarter of fiscal 2017 as the result of a 14 day stop sale.
Fiscal Year 2017 Highlights
Highlights for the fiscal year ended July 31, 2017 include:
Fourth Quarter Fiscal 2017 Highlights
Highlights for the fourth quarter ended July 31, 2017 include:
Financial Reporting Highlights
|For the three months ended||For the twelve months ended|
|Income Statement Snapshot||31-Jul-17||31-Jul-16||31-Jul-17||31-Jul-16|
|Income (loss) from operations||$||715,724||$||(1,148,098||)||$||(1,483,474||)||$||(2,714,189||)|
|Net other income/expenses||$||218,817||$||(222,892||)||$||(10,934,096||)||$||(640,107||)|
|Net income (loss)||$||934,541||$||(1,370,990||)||$||(12,417,570||)||$||(3,354,296||)|
|Weighted average shares outstanding||71,782,223||32,626,409||58,556,121||31,538,886|
|Net income (loss) per share||$||0.01||$||(0.04||)||$||(0.21||)||$||(0.11||)|
Revenue increased 119% to $4.1M for the year ended July 31, 2017, from $1.9M in the prior year. The Company also realized a 203% increase in year over year shipments for the year ended July 31, 2017, with 404,158 grams shipped compared with 133,493 grams shipped in the year ended July 31, 2016. The growth of revenue year over year is driven by an increase in the number of clients since sales commenced in October 2015.
Revenue decreased approximately 18% from $1.1M in the third quarter of 2017 to $860k in the fourth quarter of 2017, as the result of a 14 day stop sale. Revenue per gram increased in the fourth quarter of 2017 to $9.00 from $8.62 in the third quarter of 2017 as the Company saw the growth in the sale of products with a higher per gram cost of between $10 and $15, this increase was offset by the continued effects of changes in reimbursement caps for medical cannabis implemented by Veterans Affairs.
Cost of Sales
With the completion of Building 5 in the second quarter of fiscal 2017, the Company continued to increase production capacity in the new facility to meet anticipated demand related to the Company's newly launched H2 and Decarb product lines and consequently saw an increase in production expenses as well as a significant increase in the revaluation of biological assets related to the change in the fair value per gram used. Cost of sales for the year ended July 31, 2017 includes a write down of inventory of $495K related to the Company's voluntary recalls in May 2017 and $118k of inventory that was subject to water damage. The Company also realized a decrease in the cash cost of finished goods inventory per gram from $1.54 at April 30, 2017 to $1.05 at July 31, 2017.
Operating expenses increased 101% from $3.9M in the year ended July 31, 2016 to $7.9M in the year ended July 31, 2017. There were increased payroll related costs as the Company's continued expansion resulted in growth in the number of full-time employees from 30 in the prior year to 89 in the year ended July 31, 2017. There was also an increase in facility expenses as Building 5 commenced full production, along with an increase in costs related to the Company's compliance costs as a public company following the completion of the business combination between BFK and Predecessor THCX, and marketing costs as the Company continued to expand its product offerings and patient outreach.
|For the three months ended||For the twelve months ended|
|Net gain (loss) and comprehensive loss attributable to shareholders||934,541||(1,370,990||)||(12,417,570||)||(3,354,296||)|
|Stock option expense||193,088||125,955||658,620||293,564|
|Amortization of property, plant and equip.||134,560||24,278||359,967||126,516|
|Amortization of intangible assets||64,326||77,591||231,685||173,382|
|Write-off of inventory||138,562||464,792||613,074||464,792|
|Recall testing expense||59,260||-||259,260||-|
|RTO listing expense||154,549||-||951,024||-|
|Revaluation of financial instruments||(978,921||)||-||9,169,275||-|
|Fair value adjustment to biological assets||(3,254,560||)||(125,252||)||(5,663,161||)||(595,658||)|
"Adjusted EBITDA" is a non-GAAP financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. It is a metric used by management which is net loss, as reported, and adjusted by removing interest, tax, other non-cash items, including the stock based compensation expense, depreciation, and the non-cash effects of accounting for biological assets and inventories. Management believes "Adjusted EBITDA" is a useful financial metric to assess its operating performance on a cash basis before the impact of non-cash items and acquisition related activities.
"This is an exciting time to be at the helm of THCX as we continue on our journey working towards becoming a great cannabis brand. In the last two years, we have helped thousands of Canadians access safe and responsible medical cannabis and have brought new, unique and exciting cannabis products to market. Our goal for the next three years is to continue to innovate our product offerings and to become a national adult-use cannabis brand with the eventual legalization of that market," said Sebastien St-Louis, CEO.
"By necessity, we started out as a cultivation company. We are now a products company. Next, we hope to become a great brand. Great products alone won't build a great brand. We will need world-class distribution. To enable that distribution, we plan to work with the largest retail partners in Canada to address their needs: reliable supply at scale and great products at a fair price."
"Our greenhouse expansion and the accompanying infrastructure for consumer packaged-goods, is scheduled to be completed in time for the expected legalization of recreational adult-use cannabis on July 1, 2018. With these new capabilities, we expect to produce 25 tons of dried cannabis per year."
"We expect to raise $69 million in our latest bought deal financing round and significantly bolster our balance sheet to enable growth. By being one of the best capitalized companies in the industry, and through our responsible stewardship of capital, we've moved beyond the "licensing barrier to entry" and we are now deploying our capital in support of our evolution into a cannabis products company."
"Getting better at innovation and bringing a systematic approach to research and product development will be hallmarks on our path to cannabis products excellence. With a strong balance sheet, plans to expand our facility and our dedicated team, we believe we have the tools to become a leading cannabis brand for the adult-use market."
"As we prepare for the legalization of recreational cannabis in Canada, we expect to play a leading role in bringing the industry together to develop wholesale and retail solutions for the market."
"As the only Quebec-based licenced producer, we are committed to working with our partners in Quebec to build a Quebec cannabis industry and to ensure that Quebec shares in the economic and social benefits of the cannabis industry."
"Throughout our journey, there has been one constant, our commitment to bring safe and responsible cannabis experiences to people. As we prepare to capitalize on the opportunities before us, I want to assure our customers and our shareholders that our commitment to safe and responsible cannabis use will always serve as our guiding light," continued Mr. St-Louis.
About The Hydropothecary Corporation
The Hydropothecary Corporation is an authorized licensed producer and distributor of medical marijuana licensed by Health Canada under the Access to Cannabis for Medical Purposes Regulations (Canada). Hydropothecary provides naturally grown and rigorously tested medical marijuana of uncompromising quality. Hydropothecary's branding, marijuana product offering, patient service standards and product pricing are consistent with THCX's positioning as a premium brand for a legal source for medical marijuana within this new marketplace. In addition to medical marijuana production and sales, Hydropothecary explores various research and development opportunities for cannabinoid extracts, drugs and combinatory chemistry. In addition, the company is investigating the development and patenting of novel technologies related to medical marijuana, as well as the import and export of medical marijuana.
This press release contains forward-looking information based on current expectations. Examples of such forward-looking information include statements about future operational and production capacity, including expected resulting production cash costs, the impact of enhanced facilities and production capabilities, and expected available product selection. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. The forward-looking statements included in this press release are made as of the date of this press release and the Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by applicable securities legislation.
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