TORONTO, Aug. 9, 2018 /CNW/ - Newstrike Brands Ltd.
(TSXV:HIP) (the "Company" or "HIP") announced today the achievement
of significant milestones and a strengthened financial position for
the three and six months ended June 30,
2018. The Company's wholly-owned subsidiary, UP Cannabis
Inc. ("Up Cannabis"), is a licensed producer of cannabis and
related products under the Access to Cannabis for Medical Purposes
Regulations (the "ACMPR"). The Company is pleased to report that
its interim financial statements and management's discussion and
analysis for the three and six months ended June 30, 2018 and its amended and re-stated
interim financial statements and management's discussion and
analysis for the three and six months ended June 30, 2017 (the "Amended Statements") are
available on SEDAR at www.sedar.com.
SECOND QUARTER ENDED JUNE 30,
2018 HIGHLIGHTS:
- Completed bought-deal equity offering raising net proceeds of
approximately $48.4 million; bringing
cash and cash equivalents to approximately $124.5 million, further enhancing the Company's
strong financial position to drive its growth strategies;
- Entered into an investment agreement with Inner Spirit Holdings
Ltd. ("Inner Spirit") pursuant to which the Company and Inner
Spirit agreed to acquire equity interests in each other and enter
into a companion strategic alliance agreement for the retail
distribution of Up Cannabis products and the creation and operation
of Up Cannabis-branded customer lounges or "Experiential Hubs" in
each of Inner Spirit's stores;
- Completed the divestiture of Enderlein Nurseries Ltd.
("Enderlein"), which was previously identified as a
non-core/non-strategic asset;
- Continued and accelerated the construction and expansion of the
Company's Niagara Facility (defined below);
- Engaged in numerous branding and marketing activities to build
Up Cannabis brand and consumer awareness; and
- Appointed a new Chief Financial Officer and an independent lead
director to the Board of Directors.
SELECTED SUMMARY OF QUARTERLY RESULTS:
|
Q2 2018
QTD
($)
|
Q2 2017
QTD
($)
|
%
change
|
Q2 2018
YTD
($)
|
Q2 2017
YTD
($)
|
%
change
|
Unrealized gain on
changes in fair value of Biological Assets
|
1,098,557
|
-
|
-
|
1,995,377
|
-
|
-
|
Expenses
|
(9,911,843)
|
(1,134,994)
|
773%
|
(16,704,949)
|
(1,810,899)
|
822%
|
Other
items
|
180,758
|
(7,322,460)
|
(102%)
|
9,170,358
|
(7,269,056)
|
(226%)
|
Net and
comprehensive loss
|
(8,632,528)
|
(8,457,454)
|
2%
|
(5,539,214)
|
(9,079,955)
|
(39%)
|
Net and
comprehensive loss per share (basic and diluted)
|
(0.02)
|
(0.06)
|
(69%)
|
(0.01)
|
(0.10)
|
(88%)
|
The Company recorded a net and comprehensive loss of
$8,632,528 in the quarter and a net
and comprehensive loss of $5,539,214
year-to-date.
The Company's major costs relate to: branding and marketing
efforts of $2,729,604 for the quarter
and $3,266,461 year-to-date;
share-based compensation charges of $3,454,246 for the quarter and $7,194,855 year-to-date; wages and benefits of
$1,769,010 for the quarter and
$2,390,449 year-to-date; consulting
and professional fees of $927,877 for
the quarter and $2,204,718
year-to-date; and other growth-related costs including travel,
telecommunications and information technology.
The above noted expenses were partially offset by the favorable
revaluation of biological assets of $1,098,557 for the quarter and $1,995,377 year-to-date.
Included in other items is the $180,758 gain for the quarter as a result of
interest income of $175,153 and the
divestiture of Enderlein of $139,321,
partially offset by accretion expense of ($27,660) and a fair market value change
recognized on a strategic investment made in another cannabis
business ($107,500). The loss of
$7,322,460 in the prior quarter was
due to the listing fee for the acquisition of HPI Holdings Ltd. and
reverse takeover of the Company ($7,099,152), accretion and interest expenses
($200,808) and unrealized losses on
marketable securities ($22,500). The
gain of $9,170,358 year-to-date was
due to a termination fee paid to the Company related to the
CanniMed Therapeutics Inc. transaction (the "Termination Fee") of
$9,500,000, interest income of
$224,506, the divestiture of
Enderlein of $139,321, partially
offset by accretion and interest expenses ($614,648) and the fair market value change
recognized on a strategic investment made in another cannabis
business ($107,500). The loss of
($7,269,056) in the prior
year-to-date was due to the listing fee ($7,099,152), accretion and interest expenses
($147,404), and unrealized losses on
marketable securities ($22,500).
STRONG FINANCIAL POSITION:
On June 19, 2018, the Company
completed a bought deal equity offering issuing 69 million common
shares, including an over-allotment option, at $0.75 per share, and 34.5 million common share
purchase warrants at an exercise price of $1.00 exercisable within 60 months, for total net
proceeds of approximately $48.4
million. 4.1 million compensation warrants exercisable
within 24 months at an exercise price of $0.75 were also issued as part of this bought
deal equity offering. The June 19,
2018 equity offering followed the February 22, 2018 bought deal equity offering,
whereby the Company issued a total of 69.7 million common shares,
including an over-allotment option, at $1.32 per share, and 73.8 million common share
purchase warrants (which included 4.2 million compensation
warrants) at an exercise price of $1.75 exercisable within 24 months, for total net
proceeds of approximately $86.0
million.
As at June 30, 2018 the Company
had total assets of $163.2 million,
including cash and cash equivalents of $124.5 million, up from total assets of
$24.9 million, including cash and
cash equivalents of $0.8 million, as
at December 31, 2017. The increase is
due to the net proceeds from the two bought deal equity offerings,
the receipt of the Termination Fee, and the positive revaluation of
biological assets.
SIGNIFICANT MILESTONES ACHIEVED:
The Company has accumulated dried and finished goods cannabis
inventory valued at $8.2 million as
at June 30, 2018. The inventory
increase, combined with the licensing of the Niagara greenhouse
facility (the "Niagara Facility") for the cultivation of cannabis
and the pending approval of the Niagara Facility sales licence
amendment application, further positions the Company to capitalize
on growing demand for its products in anticipation of the
legalization of adult-use cannabis.
The Company has continued the construction and expansion of its
Niagara Facility, engaged in various marketing initiatives, and
added experienced production and management personnel to build the
Company's Up Cannabis brand and consumer awareness.
The Company currently operates cannabis production facilities of
approximately 167,600 square feet of indoor and greenhouse
production capacity, in the aggregate, of which approximately 7,600
square feet is currently operating at or near full production
capacity at its Brantford Facility and approximately 160,000 square
feet at its Niagara Facility that is currently being retrofitted.
The Company has broken ground and begun construction on the Phase
II Niagara expansion which includes 40,000 square feet of
processing space and 160,000 square feet of additional greenhouse
space dedicated to cannabis production.
THE AMENDED STATEMENTS:
The Amended Statements have been amended to correct errors in
the original interim financial statements and management's
discussion and analysis. Certain line items in the statements of
financial position, comprehensive loss, cash flows, and changes in
shareholders' equity have been reclassified according to the nature
of the transactions. Corresponding amendments were also made to the
Company's management's discussion and analysis.
About Newstrike and Up Cannabis
Newstrike is the
parent company of Up Cannabis Inc., a licensed producer of cannabis
that is licensed to both cultivate and sell cannabis in all
acceptable forms. Newstrike, through Up Cannabis and together with
select strategic partners, including Canada's iconic musicians The Tragically Hip,
is developing a diverse network of high quality cannabis brands.
For more information visit www.up.ca or www.newstrike.ca.
Forward-Looking Information
This news release contains
forward-looking statements. Forward-looking statements involve
known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of Newstrike
to be materially different from any future results, performance or
achievements expressed or implied by the 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. These forward-looking statements
include, but are not limited to, statements relating to Newstrike's
expectations with respect to its performance and achievements
including expected sales and construction timeline and completion.
Accordingly, readers should not place undue reliance on the
forward- looking statements and information contained in this press
release. Since forward-looking statements and information address
future events and conditions, by their very nature they involve
inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. Readers are
cautioned that the foregoing list of factors is not exhaustive. The
forward-looking statements contained in this news release are made
as of the date of this release and, accordingly, are subject to
change after such date.
Newstrike does not assume any obligation to update or revise any
forward-looking statements, whether written or oral, that may be
made from time to time by us or on our behalf, except as required
by applicable law.
Neither 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 Newstrike Brands Ltd.