SMITHS FALLS, ON, Nov. 26, 2015 /CNW/ - Canopy Growth
Corporation ("Canopy Growth" or "the Company") (TSXV: CGC) is
pleased to release financial results for the second quarter of
fiscal year 2016 (Q2) ended September 30th,
2015. This is the first reporting period for the Company
following an all-stock acquisition of Bedrocan Cannabis Corp.
(Bedrocan) on August 28th, 2015. Q2
reflects three full months of operations for wholly owned
subsidiaries Tweed Inc. (Tweed)
and Tweed Farms Inc. (Tweed Farms) and approximately one month of
operations for wholly owned subsidiary Bedrocan.
Financial and Operational Highlights
- The Company reported Q2 sales of $2,466,121, a 44% increase over Q1 sales in
Fiscal 2016. Year to date sales total $4,176,278.
- The Adjusted Product ContributionNote 1, a
non-GAAP metric which adjusts the reported gross margin by removing
the fair value measures under IFRS, was 62% for the second quarter
and 61% for the six months ended September
30, 2015.
- Net income for Q2 was $3,929,514,
or $0.05 per share on a diluted
basis, inclusive of the unrealized gain on changes in fair value of
biological assets. Year to date, net income was $4,941,297, or $0.07 per share on a diluted basis, inclusive of
the unrealized gain on changes in fair value of biological
assets.
- The cash position was $7,726,240
at the end of the second quarter. As of today, and after closing
the bought deal on November 18, 2015
and warrants exercised since quarter end, the Company had cash and
cash equivalents of approximately $24
million.
- Patients as of today's announcement is over 7,300.
The Company's financial results are described in more detail
under the Financial Summary further in this press release.
Q2 and the events since then mark several strategic milestones
that management believes differentiate Canopy Growth as the leader
in the marijuana industry in Canada. Most notably, acquiring Bedrocan and
renaming the listed combined corporation to reflect its position as
a multi-brand holding company, which positions Canopy Growth to
operate in multiple markets as the non-medical and medical
frameworks as set out by the new federal leadership.
"During Q2, we made a series of moves to position for any
regulatory environment. Now that the environment appears to be
headed for a mix of medical and non-medical use, we're continuing
to drive the organization to appeal to doctors, patients and
potentially non-medical consumers," said Bruce Linton, Chairman and CEO of Canopy
Growth.
Diversified client acquisition strategies, best-in-class
customer service and an industry-leading variety of strains have
all contributed to accelerated customer onboarding and minimal
customer churn. Canopy Growth services the needs of over 7,300
registered customers as of November
25th, 2015. Facility enhancements completed as of
today can support tens of thousands of additional customers.
Financial Summary
Revenue for the second quarter
was $2,446,121. Q2 revenue increased by 44% from the first
quarter and was almost 8 times the reported sales in the
corresponding quarter in the previous year. Year to date
revenue totalled $4,176,278 as
compared to $504,353 for the same six
month period last year.
Total product sold in Q2 was approximately 319,000 grams
at an average price of $7.54 per gram, as compared to Q1 2016
when approximately 216,000 grams were sold at an average price
of $7.74 per gram, and up from approximately 45,000 grams
sold at an average price of $7.38 per gram in the comparative quarter
ended September 30, 2014. The Company has sold
approximately 535,000 grams in the six month period this fiscal
year.
The gross margin, including the unrealized gain on changes in
fair value of biological assets, in accordance with IFRS,
was $9,447,608, or 383% of sales, for the three-month period
ended September 30, 2015. In the three months
ended September 30, 2014, the reported gross margin on the
same basis was 55% of sales. Year to date, the gross margin,
inclusive of the unrealized gain on changes in fair value of
biological assets was $13,542,215, or
324% of sales, as compared to $284,646, or 56% of sales, last year for the same
period.
The Company's "Adjusted Product Contribution"Note
1 is a metric used by management which adjusts the
reported gross margin by excluding the fair value measurements as
required by IFRS and measures the cost of sales for the grams
actually sold in the period. Management believes this measure
provides useful information as it reflects the gross margin based
on the Company's weighted average cost per gram from seed to sale
against the grams sold. The resulting Adjusted Product
Contribution is $1,535,126, or 62% of
sales, in the second quarter of Fiscal 2016 and $2,562,947, or 61% of sales, on a year to date
basis to September 30, 2015.
Sales, branding and medical outreach and education costs for the
three-month period ended September 30,
2015 were $872,352 (three months ended September 30,
2014 - $486,330). These costs are strategic investments
designed to educate the healthcare community, including over 10,000
doctor visits to date, build brand awareness and attract and retain
customers through diverse acquisition and retention strategies.
Management considers these costs to be key differentiators in an
industry consisting of many companies producing similar
products.
Research and Development (R&D) costs were $210,332 for
Q2 (three months ended September 30,
2014 - $58,054). General and Administrative expenses
were $2,239,055 for Q2 compared to $888,439 in the
same quarter last year. Included in the Q2 G&A is
an amount of $600,000 related to an
out of court settlement for a previously disclosed litigation for
which neither party admitted any liability with a full mutual
release of any further claims, thereby avoiding potentially costly
court proceedings. The remaining increase in G&A reflects
the Company's growth from the early start-up of last year, building
commercial capacity and capability as a public company and meeting
all compliance requirements with Health Canada.
As a result of the Bedrocan acquisition, the Company incurred
acquisition costs of $1,139,154 in
Q2, principally due to advisory and professional fees associated
with the transaction.
The Company reported net income of $3,929,514,
or $0.05 per share on a diluted basis, for the three months
ended September 30, 2015, up from a net loss
of $2,376,592 and a net loss of $0.06 per share on a
diluted basis in the corresponding quarter of Fiscal 2015.
Year to date, the net income was $4,941,297, or $0.07 per share on a diluted basis, as compared
to a net loss of $3,536,909, or
$0.09 per share on a diluted
basis. The net income was inclusive of the non-cash
unrealized gain on changes in fair value of biological assets
described above.
CGC had cash and cash equivalents of $7,726,240 as
at September 30, 2015, prior to the bought deal and exercise
of warrants described in Subsequent Events further in this press
release. Subsequent to quarter end, the Company raised net cash of
$13,297,418 from the bought deal
closed on November 18, 2015 and
$6,790,654 from the exercise of
warrants exercised such that as of today CGC had cash and cash
equivalents of approximately $24
million.
The Unaudited Condensed Interim Consolidated Financial
Statements and Management's Discussion and Analysis documents have
been filed with SEDAR and are available on www.sedar.com.
Strategic Highlights
Cannabis Extractions
On August 19, 2015, the Company announced that Tweed has received authorization from Health
Canada to begin the production of cannabis extracts in the
Company's state-of-the-art facility in Smiths
Falls, Ontario. Late in Q2 plans were put in place to procure
and install CO2 supercritical extraction equipment. On November 11, 2015, Tweed invited Health Canada to inspect its
facilities and processes to seek final approval for oil sales. Once
approved, oil extraction infrastructure at the Smiths Falls location will support production
of Tweed and Bedrocan product
lines.
Licensing and Facility Enhancements
Health Canada inspected the Tweed Farms build out in
Niagara-on-the-Lake on
August 19, 2015. Approved production
space increased by 90% to a total of 350,000 sq. ft. A storage
vault, tissue culture propagation lab and processing facilities are
in final stages of security testing and when Health Canada is
invited yet this year the facility will allow Tweed Farms to manage
crops through the product lifecycle.
During Q2, updates at Tweed's
Smiths Falls facility were
inspected and seven new precision climate-controlled drying rooms,
a dedicated trimming room, oil extraction room and oil processing
room were all approved for use by Health Canada. These additions
made an immediate impact on customer satisfaction, with the
dedicated climate-controlled areas for each stage of cannabis
production resulting in increased product quality and product
consistency.
Bedrocan Acquisition Closed
The Company announced it had entered into a definitive arrangement
agreement for an all-stock transaction to acquire Bedrocan Cannabis
Corp. on June 24, 2015, subject to approval by Bedrocan
shareholders, regulatory approvals, and certain other
conditions. On August 24, 2015, Bedrocan shareholders
voted in favour of the transaction. Regulatory and legal
requirements were satisfied on August 28, 2015 and the
transaction became effective on that date. In connection with the
acquisition the Company issued 35,202,818 common shares in exchange
for all of the outstanding Bedrocan shares in connection with the
acquisition.
EQUAL Study
Bedrocan and Tweed launched one of
the largest clinical cannabis studies of its kind on September 17, 2015. The company-sponsored study
will evaluate patients who use Bedrocan and Tweed strains of cannabis to help manage
symptoms of a range of chronic health conditions, and the resulting
data will be submitted for publication by a peer-reviewed medical
journal. The primary objective of the three-year study is to
evaluate the quality of life of patients before and after treatment
with medical cannabis. Up to 50 intake sites will aim to enrol
6,000 patients in the study.
DNA Genetics
On September 30, 2015, Tweed officially entered into a partnership
with DNA Genetics, one of the most decorated cannabis breeding
companies in the world. DNA Genetics will provide ongoing
consulting services to Tweed,
while assisting in phenotyping and grow method developments.
Through a new Tweed-DNA breeding program, the only place where
Canadian patients will be able to acquire true, certified DNA
strains grown to DNA standards will be Tweed. This partnership is an excellent
starting point for expanded Canadian and global markets, as the DNA
name is synonymous with cannabis throughout the world.
Subsequent Events:
MedCannAccess (MCA) Acquisition and Better by Tweed Launch
Subsequent to Q2, the Company announced it had closed an all-stock
acquisition of LP applicant, MedCannAccess, including its client
list, physical locations in Guelph, Etobicoke and Hamilton, and its 33% stake in CannScience, a
biopharmaceutical company researching innovative applications of
cannabis for medical use. The acquisition was completed by way of
an amalgamation with a wholly-owned subsidiary of the Company in an
all share deal with 3,316,902 common shares in the capital of the
Company issued to former shareholders of MCA, of which 2,449,887
are being held in escrow until specific milestones are met.
In mid-October the physical locations were launched as "Better
by Tweed." They operate as
community engagement centres offering face-to-face service to
compliment Tweed and Bedrocan's
extensive product lines.
Bought Deal Financing
On November 18, 2015, the Company
announced it had closed a previously announced short form
prospectus offering, on a bought deal basis, including the exercise
in full of the underwriters' over-allotment option. A total of
7,012,700 common shares in the capital of the Company were sold at
a price of $2.05 per share, for
aggregate gross proceeds of $14,376,035, before expenses of $1,078,617, and net proceeds of $13,297,418 after expenses associated with the
transaction. A syndicate of underwriters led by Dundee Securities
Ltd. and including GMP Securities L.P., INFOR Financial Inc., and M
Partners Inc. underwrote the Offering.
Warrants Exercised
Since the end of Q2 and to date, all of the broker options at a
price of $1.83 per share and
1,724,523 warrants at $2.58 per share
were exercised. In addition, 1,191,559 warrants at
$1.29 per share were exercised.
The total proceeds realized as a result of these exercises amounted
to $6,790,654. On November 15, 2015, the remaining 1,633,855
warrants at $2.58 expired and were
cancelled. All of these warrants and broker options were
formerly issued by Bedrocan and assumed by the Company on the same
economic basis as the shares issued with the transaction.
Note 1: The Adjusted Product Contribution 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. The Adjusted Product
Contribution is reconciled and explained in Management's Discussion
& Analysis under "Adjusted Product Contribution (Non-GAAP
Measure)", a copy of which has been filed today
on www.sedar.com.
Conference Call Details:
Bruce Linton, Chairman and CEO
and Tim Saunders, CFO will host a conference call to discuss
these results.
Time and Date: 8:30 a.m. ET, Thursday November 26, 2015.
Toll Free Dial-In Number: 888-231-8191
Participant International Dial-In Number (647) 427-7450
Conference ID: 82631795
Replay Toll Free Dial-in Number: 1-855-859-2056
Replay Password: 82631795
Replay Dates: 26/11/2015 11:15 ET - 10/12/2015 23:59
ET
About Canopy Growth Corporation
Canopy Growth
is Canada's first publicly traded medical marijuana
company and the first geographically diversified producer with dual
licenses under the Marihuana for Medical Purposes Regulations.
Through its wholly owned subsidiaries, Tweed, Tweed Farms, and Bedrocan, the Company
operates three state-of-the-art production facilities
in Ontario and distributes marijuana across the country
to Canadian patients managing a host of medical conditions.
The Company is dedicated to educating healthcare practitioners,
providing consistent access to high quality medication, conducting
robust clinical research, and furthering the public's understanding
of how marijuana is used for medical
purposes. www.canopygrowth.com
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 Canopy Growth Corporation, Tweed
Inc., Tweed Farms Inc. or Bedrocan Canada 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 future operational and production capacity,
the impact of enhanced infrastructure and production capabilities,
and forecasted available product selection. The
forward-looking statements included in this news release are made
as of the date of this news release and Canopy Growth Corp. 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.
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.
SCHEDULE
|
|
|
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|
Non-GAAP
Measure
|
Three Months
Ended
|
|
Three Months
Ended
|
|
Six Months
Ended
|
Adjusted Product
Contribution1
|
June 30,
2015
|
|
September 30,
2015
|
|
September 30,
2015
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
1,710,157
|
|
$
|
2,466,121
|
|
$
|
4,176,278
|
Gross margin,
including the unrealized gain on changes in fair value of
biological assets as reported on the Statements of Comprehensive
Loss
|
|
4,094,607
|
|
|
9,447,608
|
|
|
13,542,215
|
Gross margin
percentage of sales, including the unrealized gain on changes in
fair value of biological assets as reported on the Statement of
Comprehensive Loss
|
|
239.4%
|
|
|
383.1%
|
|
|
324.27%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remove the effects of
fair value related amounts as reported on the Statements of
Comprehensive Loss2:
|
|
|
|
|
|
|
|
|
|
Unrealized gain on
changes in fair value of biological assets
|
|
(5,275,001)
|
|
|
(12,479,853)
|
|
|
(17,754,854)
|
|
Inventory expensed to
cost of sales
|
|
1,492,310
|
|
|
2,678,248
|
|
|
4,170,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Remove the effects
of total production costs related to biological assets and
inventory on the balance sheet and inventory sold in the period as
reported on the Statements of Comprehensive
Loss3:
|
|
|
|
|
|
|
|
|
|
Production
costs
|
|
1,398,241
|
|
|
2,820,118
|
|
|
4,218,359
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Cost of inventory
sold4
|
|
(682,336)
|
|
|
(930,995)
|
|
|
(1,613,331)
|
|
|
|
|
|
|
|
|
|
Adjusted Product
Contribution
|
$
|
1,027,821
|
|
$
|
1,535,126
|
|
$
|
2,562,947
|
Adjusted Product
Contribution percentage of sales
|
|
60.1%
|
|
|
62.2%
|
|
|
61.4%
|
Notes:
|
1
|
The Adjusted Product
Contribution removes the fair value measurements required under
IFRS and recognizes the cost of sales based on the weighted average
cost per gram to produce and sell product in the period.
|
2
|
Includes all fair
value adjustments relative to selling price for measuring
biological assets on the balance sheet and transferred to inventory
and inventory measured at fair value relative to selling price less
shipping and other costs.
|
3
|
Represents all
production costs, inclusive of those costs related to biological
assets and inventory on the balance sheet as well as sold in the
period.
|
4
|
Based on the weighted
average of cost per gram from seed to sale of $2.92 per gram in the
second quarter and $3.02 per gram for the year to date and applied
to the number of grams sold in the period.
|
SOURCE Canopy Growth Corporation