- 962% increase in Q3 2017 revenue over the comparable prior
year period
- Establishing low-cost capacity through joint venture in
Israel
- Strengthened liquidity position by $72.3 million since the start of Q3 2017
- Positive cash flow from operations in the quarter ended
September 30, 2017
TORONTO, Nov. 29, 2017 /CNW/ - Cronos Group Inc. (TSX-V:
MJN) (OTC Nasdaq International Designation: PRMCF) ("Cronos Group"
or the "Company") today reported financial results for the third
quarter ended September 30,
2017. Financial results and the management discussion and
analysis are available on the Company's website
(www.thecronosgroup.com) and SEDAR (www.sedar.com).
"We have successfully transformed the Company over the past year
and a half. We are now focused on executing our strategy to
generate accelerated revenue growth and create long term
shareholder value," says Mike
Gorenstein, CEO of Cronos Group.
QUARTERLY BUSINESS HIGHLIGHTS AND RECENT DEVELOPMENTS POST
QUARTER-END
Substantial increase in revenue
The Company generated $1.3 million
in revenue during the three-month period ended September 30, 2017, an increase of 104%
quarter-over-quarter and an increase of 962% year-over-year.
Expanding capacity and establishing a low-cost, global
production footprint
Cronos Israel
In September 2017, the Company announced a joint
venture with Israeli agricultural collective settlement Gan Shmuel
("Gan Shmuel") to produce and distribute medical cannabis in
Israel. Israel has an ideal
growing climate for cannabis with abundant sunlight to support
year-round greenhouse cultivation without the need for supplemental
lighting. Cronos Israel anticipates producing high quality cannabis
at significantly lower production costs than production costs in
Canada due to Israel's favorable growing climate and Gan
Shmuel's skilled labor force, existing manufacturing
infrastructure, and ample on-site water access. In addition,
Gan Shmuel is situated on over 4,900 acres of mixed-use
agricultural / industrial land, which allows Cronos Israel to
significantly expand production capacity beyond the phase I
facility.
Peace Naturals Capacity Expansion
The Company
is constructing additional capacity at Peace Naturals Project, Inc.
("Peace Naturals") via a 286,000 sq. ft. production facility
("Building 4") and a 28,000 sq. ft. greenhouse (the "Peace Naturals
Greenhouse"). Construction of Building 4 is on
schedule. The steel superstructure is complete, and the
Company is now working on completing the interiors of the
facility. Production from Building 4 is expected to commence
in the second half of 2018. The Peace Naturals Greenhouse is
expected to be operational in Q4 2017 and fully-operational for
production in the first half of 2018.
Increasing oil sales and formulation capabilities with a
state-of-the-art oil extraction lab
In November 2017, Health Canada approved the
Company's state-of-the-art, custom extraction laboratory at Peace
Naturals, which uses supercritical and subcritical CO2 and
commercial oil production methodologies. The resulting
increased oil production will facilitate the introduction of new
formulations, such as capsules, tinctures, and ointments.
Subsequent to quarter-end, the Company released a number of new
strain-specific cannabis oils that have been received favorably by
patients. Unlike most alternatives on the market, these new
cannabis oils do not require any secondary refinement using harsh
solvents like ethanol, which means that the natural balance of the
plant is kept intact. This is important because of the
"entourage effect," or the concept that all cannabis compounds work
together synergistically to yield the desired therapeutic
effect. As Cronos continues to place an emphasis on product
quality, this production methodology for extracted products is
expected to create an ongoing competitive advantage in the
marketplace.
Augmented global sales and distribution network with
additions in Germany
In
October 2017, Cronos Group entered
into a strategic partnership and five-year exclusive distribution
agreement with G. Pohl-Boskamp GmbH & Co. KG to distribute
Peace Naturals branded cannabis products within Germany in up to 12,000 pharmacies. With
a population of over 82 million people, Germany is currently one of the largest legal
cannabis markets in the world and serves as the Company's gateway
to cannabis markets in the European Union.
Preparing for the launch of the Canadian recreational
market
Cronos Group is preparing for the anticipated
legalization of the Canadian recreational market, currently
expected to occur in July 2018. In October 2017, the Company rebranded its
wholly-owned subsidiary and licensed producer In The Zone Ltd. to
Original BC Ltd ("OGBC"). OGBC will serve as the Company's
recreational cannabis platform from which it will launch its
recreational brand portfolio.
Launched marketing upgrades to the medical cannabis
platform
Peace Naturals seeks to offer accessible,
high-quality products, building sincere relationships with patients
while supporting them with medications that can be life-changing.
As a result, the Company redesigned the Peace Naturals
packaging to better reflect the licensed producer's identity as a
trusted and dependable unisex medicinal cannabis brand. Concurrent
with this transition, Peace Naturals is updating its entire patient
shopping experience and marketing materials to reflect the brand's
goal of improving the lives of others, one patient at a time.
This transition began in October and is expected to be completed in
the first quarter of 2018.
Update on Production Operations
The Company is now
growing cannabis in all of Buildings 2 and 3. Once a full
cycle of harvests has been completed, the Company expects
significantly more capacity than what has been historically
produced (operating out of just Building 2). In addition, the
Company has commenced production in newly renovated rooms in
Building 1. The new Building 1 production methodology
utilizes two-tier hydroponic rolling benches and full spectrum LED
lighting. Similar to the existing operational production
facility at OGBC, the Company will use Building 1 to grow cultivars
that have non-standard flower cycles which the Company anticipates
will fulfil niche market needs.
Strengthened liquidity position while minimizing equity
dilution
Since the beginning of Q3 2017, the Company has
raised $72.3 million to fund its
operations and capacity expansion plans. Total capital raised
includes: (i) a $40.0mm senior
secured credit facility, the largest straight debt offering in the
cannabis industry to date, based on publicly available information,
and (ii) several equity raises at increasing share price
levels. In order to minimize equity dilution, the company did
not issue convertible notes or warrants in connection with these
financings.
CONFERENCE CALL
Cronos Group will host its third
quarter conference call on Wednesday,
November 29, 2017 at 8:00 a.m.
Eastern Time. The call will last approximately one
hour. Instructions for the conference call are provided
below:
Conference ID: 8776138
Topic: Cronos Group Inc. Q3 2017 Financial Results
Toll-free dial-in number: (888) 231-8191
International dial-in number: (647) 427-7450
Additionally, an audio replay of the conference call will be
available two hours after the call's completion and until
11:59 p.m. Eastern Time on
December 13, 2017. Instructions
for the audio replay are provided below:
Toll-free dial-in number: (855) 859-2056
Passcode: 8776138
ABOUT CRONOS GROUP INC.
Cronos Group is a
geographically-diversified and vertically-integrated cannabis
company that operates two wholly-owned Licensed Producers ("LPs")
regulated within Health Canada's Access to Cannabis for Medical
Purposes Regulations (the "ACMPR") and holds a portfolio of
minority investments in other Licensed Producers. The Company's
flagship LPs, Peace Naturals Project Inc. (Ontario) and Original BC Ltd. (British Columbia), are collectively situated
on over 125 acres of agricultural, licensed land. Cronos Group is
focused on building an international iconic brand portfolio,
providing patients with personalized care, and creating value for
our shareholders.
FORWARD-LOOKING STATEMENTS
This news release may
contain "forward-looking information" and "forward-looking
statements" within the meaning of applicable Canadian securities
legislation. All information contained herein that is not
clearly historical in nature may constitute forward-looking
information. Forward-looking statements are necessarily based
upon a number of estimates and assumptions that, while considered
reasonable by management, are inherently subject to significant
business, economic and competitive risks, uncertainties and
contingencies that may cause actual financial results, performance
or achievements to be materially different from the estimated
future results, performance or achievements expressed or implied by
those forward-looking statements and the forward-looking statements
are not guarantees of future performance. Except as required
by law, Cronos Group disclaims any obligation to update or revise
any forward-looking statements. Readers are cautioned not to
put undue reliance on these forward-looking statements. This
news release contains information obtained by Cronos Group from
third parties. Cronos Group believes such information to be
accurate but has not independently verified such 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.
SOURCE Cronos Group Inc.