Tweed announces fiscal Q2 results and provides update

OTTAWA, Aug. 27, 2014 /CNW/ - Tweed Marijuana Inc. (TSXV: TWD) ("Tweed" or the "Company"), today announced its second quarter (Q2) financial results for the three month period ended June 30, 2014. Tweed's wholly owned subsidiaries Tweed Inc. and Prime 1 Constructions Services Corp., doing business as Park Lane Farms, are Licensed Producers under the Canadian Marihuana for Medical Purposes Regulations ("MMPR"), making Tweed the first publicly traded, multi-licensed producer of medical marijuana in Canada.

Financial and Operational Highlights

During Q2 Tweed attained the following milestones:

  • On April 3 the Company began trading on the TSX-V as TWD;
  • The Company shipped its first product on May 5, 2014;
  • On May 16 the Company concluded a bought deal for gross proceeds of $15,000,000;
  • Established 25 strains, 3 rooms of production and began repeated cycles of production;
  • The Company acquired Park Lane Farms in Niagara-on-the-Lake on June 19;
  • The Company has conducted more than 1,900 educational interactions with healthcare practitioners;
  • Subsequent to the close of the quarter Park Lane Farms received approval from Health Canada to become a Licensed Producer and has commenced production in its facility.

REVENUES

The Company reported initial sales of $188,736, coming from the last two months of the quarter.

OPERATING EXPENSES

Operating expenses for the quarter ended June 30, 2014 was $1,134,427 as compared to $1,194,591 for the quarter ended March 31, 2014. These expenses have been incurred 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 of implementing and expanding the growing operations.

Share-based compensation expenses of $147,797 in Q2 and $306,223 for the six months ended June 30, 2014 relate to the expense associated with the stock options granted to employees and consultants during fiscal 2013 and the two quarters of 2014.

Amortization of intangible assets for the first quarter ending June 30, 2014 amounted to $5,755, and for the six months ended June 20 2014, to $8,222. These relate 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 June 30, 2014 amounted to $43,734. Assets in leasehold construction in progress totaling $5,309,951 have been transferred to property, plant and equipment on June 30, 2014 as construction was complete and the leasehold was available for use. Amortization on these assets will commence July 1, 2014.

NET LOSS

The net loss for the quarter ending June 30, 2014 was $1,160,317 and for the six month period ended June 30, 2014 was $3,778,197.

Liquidity

The table below sets out the cash, short-term investments, and working capital at December 31, 2013 and June 30, 2014.



As at June 30, 2014


As at December 31, 2013

Cash


$12,249,087


$2,089,794

Short term investments


10,000


10,000

Working capital


12,264,190


1,817,024

 

The increase in the working capital of $10,447,166 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 assets that relate to the infrastructure for business production and operations.

The chart below highlights the Company's cash flows year to date ending June 30, 2014.

Net cash provided by (used in):


Six months ended

June 30, 2014

Operating activities


$(6,076,672)

Investing activities


(7,289,048)

Financing activities


23,525,013

Increase in cash


10,159,293

 

As at June 30, 2014, the Company had cash available of $12,249,087. For the three months ended June 30, 2014, the Company consumed $3,506,018 in operating activities; generated cash from equity financing activities in the amount of $13,843,029 and used cash of $5,788,031 for investing activities associated with long-term assets. The Company has incurred losses to date. The Company expects to generate increased revenue commencing in the third quarter of 2014 and will incur losses for the balance of 2014.

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 was not exercised.

On June 18, 2014 the Company purchased 100% of all the issued and outstanding shares of Prime 1 Construction Services Corp. The purchase price was $2,000,000 in cash and stock. This gives the Company 350,000 square feet of greenhouse environment in the Niagara-on-the-Lake area.

Sector Insights and Management Structure Update

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. In response to this legislation Tweed has taken the approach of seeking to establish a platform that is large scale, multi-licensed, and with diverse growing environments. It is Management's view that this approach holds the potential for economies of scale and scope that may enable Tweed to be the leader in the sector. This approach has required Tweed to pursue a range of initiatives that could be considered ground breaking. For example, the acquisition announced June 19, 2014 of the greenhouse in Niagara-on-the-Lake creates a new and potentially dramatic diversification to Tweed's product mix, cost bases and production volume.

The scale of production, reliability of available product, and development of market demand are all aspects of the business that Tweed has placed increased priority and focus upon over the last quarter. Financial note 5 in the financial statements sets out that Tweed had a harvest in-process inventory of $967,863 at the end of June, and continues to build on the volume of product in-production. To this end Tweed is pleased to confirm that the number of operational flowering rooms has doubled to six effective August 28, 2014. The construction program was delivered on schedule and below budget. Management is confident the number of flowering rooms in production at the Smiths Falls site will again double prior to year end. The number of flowering rooms in production by year end would be twelve of the potential total of thirty rooms in Smiths Falls. Production was also commenced at Niagara-on-the-Lake on August 10th.

The build-out program, production process, and active medical education program have provided some insight to the market and potential offering. Tweed believes the facilities constructed and licensed by the end of 2014 will have the production potential of approximately 7,000,000 grams on an annualized basis. The price range for the product is forecast to be an average of $7 per gram in 2015. The target margin at the 2014 run rate of production is estimated to be approximately seventy percent. Tweed is on schedule to have an on-site lab operational by early Q4, which is expected to reduce time to market, lower testing costs, and facilitate further research and development.

The Board recognizes the opportunity for Tweed to continue to accelerate. Tweed is now a multi-license, multi-site company that has established a platform that could produce significant growth. Chuck Rifici has made key contributions to date as the CEO and Co-Founder. Having led Tweed through its startup phase, Chuck is stepping down as CEO to help the company recruit a CEO with the skills and experience to take Tweed to the next level of expected high-volume and rapid growth in this aggressive market segment.

Effective immediately the Chairman and Co-Founder, Bruce Linton will act as the interim CEO. The Board looks forward to Chuck's continued involvement on the Board.

Teleconference Call

Bruce Linton, the Company's Chairman and Co-Founder, and Don Gibbs, the Company's CFO, will host a conference call on August 28, 2014 at 10:00 a.m. ET to discuss the Company's financial results.

Date:


August 28th, 2014

Time:


10:00 a.m. ET

Where:


888-231-8191 (Toll free in North America)
1-647-427-7450 (International)

 

A replay of the call will be available beginning August 29, 2014 at 2:30 p.m. ET through 11:59 p.m. ET on September 11, 2014 and can be accessed by dialing 855-859-2056 (toll free in North America) or 416-849-0833 (International) and using access code 95293348.

About Tweed Marijuana Inc.

Tweed Marijuana Inc. is a TSX Venture Exchange listed company. Its wholly owned subsidiaries Tweed Inc. and Prime1 Construction Services Corp. (Park Lane Farms) are licensed producers of medical marijuana in Canada. The principal activities of Tweed are the production and sale of marijuana out of its facility in Smiths Falls and through its wholly owned subsidiary Prime1 Construction Services Corp (Park Lane Farms) in Niagara-on-the-Lake, 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 June 30, 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.

For further information: Laura Norris, Communications Manager, Tweed Inc., 855-55-TWEED