OTTAWA,
May 30, 2014 /CNW/ - Tweed Marijuana
Inc. (TSXV: TWD) ("Tweed" or the "Company"), today announced its
first quarter (Q1) financial results for the three month period
ended March 31, 2014. Tweed's wholly
owned subsidiary Tweed Inc. is a licensed producer ("LP") under the
Canadian Marihuana for Medical Purposes Regulations
("MMPR"), making Tweed the first publicly traded producer of
medical marijuana in Canada.
Financial and Operational Highlights
Chuck Rifici, CEO
and Co-founder of the Company noted "I am pleased to report our
progress in this first quarter as a public company. During this
period, the Company's focus and operating spending has been on
achieving commercial production to be able to sell medical
marijuana to Canadians in need." Positioning itself to be a major
player in the medical marijuana market, which became exclusively
legislatively governed by the MMPR on April
1, 2014, the Company has in particular focused efforts on a
number of priorities including:
- Designing and constructing the production facilities and growth
operations;
- Hiring and developing the in-house expertise for the
operations, production, management, and professional services
requirements of the business;
- Commencing the grow operations in order to be in a position to
supply the marketplace;
- The Company shipped its first product on May 5, 2014.
REVENUES
The Company has no revenue to report, as it had
not shipped product as of March 31,
2014.
OPERATING EXPENSES
Operating expenses for the quarter ended
March 31, 2014 was $2,751,210 as compared to $nil for the quarter
ended March 31, 2013. $1,259,792 of these expenses were listing
expenses and reverse acquisition costs and are non-occurring. These
expenses commenced in the first quarter of fiscal 2014 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 associated with consumables used in
implementing and commencing the growing operations.
Stock compensation expense of $158,426 related to the expense associated with
the stock options granted to employees and consultants during
fiscal 2013 and the first quarter 2014.
Amortization of intangible assets for the first
quarter ending March 31, 2014
amounted to $2,467 and relates 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 March 31,
2014 amounted to $5,555.
Assets within leasehold construction in progress will be
transferred to property, plant and equipment when construction is
complete and they are available for use. At that point,
amortization on those assets will commence.
Other net expenses of $5,070 relate to foreign exchange losses and
interest income during the period.
NET LOSS
The net loss for the quarter ending March 31, 2014 was $2,756,280.
Liquidity
The table below sets out the cash, short-term
investments, and working capital at December
31, 2013 and March 31,
2014.
|
As at March 31, 2014 |
|
As at December 31, 2013 |
Cash and equivalents |
$7,700,107 |
|
$2,089,794 |
Short term investments |
10,000 |
|
10,000 |
Working capital |
6,713,693 |
|
1,817,024 |
The increase in the working capital from
$1,817,024 to $6,713,693 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 construction in
progress assets that relate to the infrastructure for business
production and operations.
The chart below highlights the Company's cash
flows during the quarter ending March 31,
2014.
Net cash provided by (used in): |
|
Three months ended March
31 |
|
|
2014 |
2013 |
Operating activities |
|
$7,700,107 |
$2,089,794 |
Investing activities |
|
10,000 |
10,000 |
Financing activities |
|
6,713,693 |
1,817,024 |
As at March 31,
2014, the Company had cash available of $7,700,107. The Company consumed $2,907,054 in operating activities during the
quarter; generated cash from equity financing activities in the
amount of $9,820,384 and used cash of
$1,501,017 for investing activities
associated with long-term assets. The Company has incurred losses
to date. The Company expects to generate limited revenue commencing
in the second quarter of 2014 and will incur losses until revenues
reach a level where operations become profitable.
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
remains outstanding unexercised as of the date of this
MD&A.
Options Update
On April 4, 2014
the Company announced that it had granted options to purchase
251,210 common shares to directors and officers of the Company. The
TSX Venture Exchange did not accept those options for filing and,
as a result, such options were cancelled.
Sector Insights
"Canada is
leading the world with respect to regulatory and product standards
for the production of medical marijuana, and Tweed has clearly
asserted its leadership role within Canada," stated Bruce
Linton, Co-Founder and Chairman of Tweed. "This is a sector
that was established through the MMPR less than a year ago and,
while much work remains, Canadians will benefit from this bold
leadership."
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. It provides a national
basis for both controlled supply and quality verification,
requiring LPs to achieve product testing standards not previously
applied in Canada, and setting a
standard as high as any in the world. This is to the benefit of the
patient's health. For example, MMPR LPs are prohibited from the use
of virtually all pesticides, fungicides, and herbicides, yet must
produce a product that is without molds or other bacteria, tested
to a microscopic level. Tweed executes comprehensives tests on all
medicine prior to having it available for shipment. Third party
labs are currently being used as Tweed is in the process of
constructing its in-house laboratory. At the end of the
approximately four month growing period, the drying, trimming,
curing, testing, cold pasteurizing (as required), re-testing and
packaging process can add as many as 5 weeks of production time to
the seed-to-sale process following harvesting. This time commitment
has merit, yet as Tweed has experienced, it does delay the initial
production for volume release. Tweed began harvesting its first
full size commercial growing room on April
21st, and shipped this harvest on May 5, 2014.
As market participants are aware, an injunction
announced on March 21, 2014 allowed
current growers and patients under the previous regulatory regime
to continue growing until a legal challenge is completed. At
present, the priority for many LPs, including Tweed, remains
production of sufficient product to meet patient demand, even with
the injunction in place. While production is a function that can be
accelerated - and in the case of Tweed has been accelerated -
the complexities of dealing with a crop in a highly regulated
environment translate into added variables beyond the addition of
further capital or personnel. The function of construction and
production are serially linked, such that a multiple month time lag
exists between decisions to expand capacity and the availability of
new medical marijuana in the market. This constraint has been more
impactful than anticipated by Tweed, has been a frustration to
patients, and appears likely to be the singular limiter on growth
in revenues for the balance of 2014. The sector as a whole has
several participants that appear to be working through the same
production volume challenge.
A further key variable surrounding the medical
marijuana market is the significant effort and uncertainty involved
in becoming an MMPR Licensed Producer. Based on publicly available
information, the total number of LPs remains below 20, yet the
number of submissions to Health Canada continues to grow, possibly
exceeding 800 applications. Every indication is that the approval
process is becoming elongated as the large number of applications
creates an additional licensing burden. New entrants will face a
further operational burden given the method to attain seeds, plants
and starting genetic materials was restricted effective
April 1, 2014, effectively
necessitating that new LPs can now only secure materials from other
LPs or with an approved import permit. Prior to April 1, 2014, Tweed and other LPs could acquire
these materials from participants under the legacy regime of
production.
In order to drive medium term demand in the
sector, Tweed has commenced educational programs and hired initial
staff to liaise with the medical community. This is to bridge the
information and research gap and to facilitate the acceptance of
medical marijuana as a treatment under appropriate circumstances
and for relevant conditions. This work, combined with the work of
the Canadian Medical Cannabis Industry Association (of which Tweed
is a founding director) will continue to drive forward increased
awareness and understanding of the sector.
Tweed is actively seeking and reviewing
acquisition opportunities as it is management's view that the
sector will present opportunities for consolidation. There can,
however, be no assurances that any such acquisition opportunities
will materialize or be completed by Tweed.
Teleconference Call
Chuck Rifici, the
Company's CEO, and Don Gibbs, the
Company's CFO, will host a conference call on June 2, 2014 at 8:15 a.m.
ET to discuss the Company's financial results.
Date: |
June 2, 2014 |
Time: |
8:15 a.m. ET |
Where: |
888-231-8191 (toll free in North America) |
|
1-647-427-7450 (international) |
Participant Code: |
54175332 |
A replay of the call will be available beginning
June 2, 2014 at 2:30 p.m. ET through 11:59
p.m. ET on June 16, 2014 and
can be accessed by dialing 855-859-2056 (toll free in North America) or 403-451-9481 (international)
and using access code 54175332.
About Tweed Marijuana Inc.
Tweed Marijuana Inc. is a TSX Venture Exchange
listed company. Its wholly owned subsidiary, Tweed Inc., is a
licensed producer of medical marijuana in Canada. The principal activities of
Tweed are the production and sale of marijuana out of its facility
in Smiths Falls, 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 March 25, 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.