TORONTO, Dec. 16, 2014 /CNW/ - Bedrocan Cannabis Corp. ("Bedrocan" or "the Company") (TSXV: BED) announced its financial and operational results for the three and nine month period ended October 31, 2014. Bedrocan Cannabis Corp's wholly owned subsidiary Bedrocan Canada Inc. is a Licensed Producer under the Marihuana for Medical Purposes Regulations (MMPR). The following are Bedrocan's key highlights for the third quarter:
- Revenues of medicinal cannabis to authorized patients in Canada were $0.49 million for the three month period ended October 31, 2014 ("Q3'2015"), and $1.09 million for the nine month period ended October 31, 2014.
- Gross profit was $0.17 million for Q3'2015, and $0.41 million for the nine month period ended October 31, 2014 and in line with management's projections.
- Cash and short term investments as at October 31, 2014 were reported at $11.12 million, with working capital of $7.65 million.
- Bedrocan's net operating cash burn was approximately $0.34 million for Q3'2015 or approximately $0.12 million per month. For the nine month period ended October 31, 2014, the net operating cash burn was approximately $1.44 million or approximately $0.16 per month however, operating expenses are expected to increase significantly once Bedrocan obtains its second license from Health Canada.
"Our Q3 results demonstrate that we remain on track to deliver quarter over quarter revenue growth as we near completion of our production facility and transition towards domestic production and increased sales of standardized, medicinal grade cannabis," stated Marc Wayne, CEO of Bedrocan Cannabis Corp. "The recent renewal of our initial license from Health Canada ensures that we continue providing a steady and uninterrupted supply of products to our patients."
For the three and nine month period ended October 31, 2014, the Company generated revenues of $493,363 and $1,086,744 respectively, compared to nil for the comparative periods ending September 30, 2013, all of which related to the import and sale of medicinal cannabis pursuant to a license issued from Health Canada on December 16, 2013 (which subsequent to the quarter, was further renewed by Health Canada for an additional one year term effective December 2, 2014).
For the three and nine month period ended October 31, 2014, the Company's gross profit amounted to $174,482 (or 35% of revenues) and $404,560 (or 37% of revenues) respectively, compared to nil for the comparative periods ending September 30, 2013. The Company's cost of goods sold, and as a consequence, its gross profit margins are based on a contractual obligation with Bedrocan BV for the duration of the Company's phase one import strategy, after which the Bedrocan BV license terms, as more fully described in the "Business Overview" section of the MD&A and in the Company's filing statement on SEDAR, will then become effective.
Sales and marketing expenses for the three and nine month period ended October 31, 2014 amounted to $320,724 and $713,952 respectively, compared to $10,179 and $17,082 respectively for the three and nine month period ended September 30, 2013, reflecting an increase in expenses of $310,545 and $696,870 respectively. These increases in expenses relate primarily to the hiring of employees focused on sales and distribution of medicinal cannabis, costs associated with the distribution of the Company's products, and the ongoing pursuit of specific sales and marketing initiatives, all of which are expected to increase once the Company obtains its second license with Health Canada.
General and administrative expenses for the three and nine month period ended October 31, 2014 amounted to $198,212 (net of $112,408 for certain legal expenses related to the August 20, 2014 Qualifying Transaction which are now included in the reverse takeover listing expense described below) and $1,134,283 respectively, compared to $35,694 and $43,710 respectively for the three and nine month period ended September 30, 2013, reflecting an increase in expenses of $162,518 and $1,090,573 respectively. The increase in expenses for the three and nine month period ended October 31, 2014 relate primarily to the hiring of employees focused on operations and general administration, engaging certain professional expertise necessary to meet the Company's public listing, compliance and reporting requirements, and costs associated with the continued development of the Company's business strategies. Except for the $112,408 adjustment described above, general and administrative expenses are not expected to increase significantly once the Company obtains its second license with Health Canada.
The one-time reverse takeover listing expense for both the three and nine month period ended October 31, 2014 amounted to $2,587,013 compared to nil for the September comparative periods. Refer to the Company's MD&A for additional details regarding the Qualifying Transaction and calculation of the reverse takeover listing expense.
Cash and Liquidity
As at October 31, 2014 the Company's cash and short term investments amounted to $11,117,065. Harmonized sales tax receivable from Canada Revenue Agency amounted to $269,176 and consequently, the Company's available liquidity amounted to $11,386,241 as at October 31, 2014, compared with $64,790 as at December 31, 2013. Consequently, the Company had working capital of $7,645,775 as at October 31, 2014 compared to a working capital deficiency of $105,970 as at December 31, 2013, resulting in an increase in working capital of $7,751,745 during the period.
Until December 2013, Bedrocan had financed its cash requirements primarily through shareholder loans and beginning in February 2014, Bedrocan began to generate revenues from imported licensed products. Furthermore, Bedrocan completed a $4,400,000 private placement on April 4, 2014 and an $11,475,000 subscription receipt financing, initially completed on May 15, 2014, and subsequently released from escrow on August 20, 2014 pursuant to the Transaction. The Company's anticipated level of gross expenditures and remaining commitments including approximately $10,000,000 of additions to property and equipment for the next twelve months exceed the Company's cash and short term investments on hand as of October 31, 2014 and as such, management's view is that the success of Bedrocan is dependent upon receiving its second license with Health Canada in order to expand its capacity to produce, sell and distribute medicinal cannabis in Canada and achieving profitable operations which are outside of management's control.
Outstanding Share Data
As at October 30, 2014, 69,170,500 common shares were issued and outstanding, in addition to 3,161,000 stock options to purchase common shares and 17,104,500 warrants to purchase common shares were reserved for future issuance.
Subsequent to October 31, 2014, a total of 300,000 stock options were exercised for total proceeds of $90,000.
As at December 15, 2014, a total of 69,470,500 common shares were issued and outstanding, in addition to 2,861,000 stock options to purchase common shares and 17,104,500 warrants to purchase common shares were reserved for future issuance.
On December 2, 2014, the Company received notice from Health Canada confirming the renewal of its license allowing for the sale of up to an additional 240 kg of dried medicinal cannabis for an additional one year term, expiring on December 2, 2015.
Bedrocan's business strategy is to penetrate the Canadian market in two phases. Bedrocan is currently operating in the first phase of its strategy, namely importing bulk medical cannabis supplied by Bedrocan BV through the Dutch Ministry of Health and repackaging and selling that product directly via mail order from its existing 3,500 square feet leased packaging and distribution facility ("Facility 1") to authorized patients in Canada. In the second phase of its business strategy, Bedrocan is forecasting to produce the same standardized Bedrocan BV medicinal cannabis products from its second facility currently under development ("Facility 2"), and will sell its domestically produced medicinal cannabis products directly via mail order to its existing and authorized patient base in Canada. Facility 2 is approximately 52,000 square feet, with an estimated capacity to produce up to 4,000 kg of medicinal cannabis annually. Bedrocan is expected to sufficiently complete the development of Facility 2 to allow for the pre-license inspection by Health Canada by approximately January 2015.
About Bedrocan Cannabis Corp.
Bedrocan and Bedrocan BV are focused on medicinal cannabis research and product innovation, and have been producing and supplying government-regulated medicinal cannabis for 13 years. Bedrocan's strains of pharmaceutical-grade cannabis have been used by more than 20,000 patients in seven countries, including Canada. The Company is committed to clinical research with ISO 9001-rated production processes and product development, on an international scale. Bedrocan is one of only two companies currently supplying pharmaceutical-grade medicinal cannabis in Canada. Bedrocan Cannabis Corp. trades on the TSX Venture Exchange under the symbol "BED". www.bedrocan.ca
Forward Looking Statements
This news release contains "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements about strategic plans, including the Company's ability to implement its business development strategy and construct its production facility. 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 uncertainties and contingencies. Forward-looking statements involve known and unknown risks, uncertainties and other factors 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. All forward-looking information contained in this news release is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof. Except as required by law, Bedrocan disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise. Readers are cautioned not to put undue reliance on these forward-looking statements. This news release contains information obtained by the Company from third parties, including but not limited to market data. The Company believes such information to be accurate but has not independently verified such information. To the extent such information was obtained from third party sources, there is a risk that the assumptions made and conclusions drawn by the Company based on such representations are not accurate.
SOURCE: Bedrocan Cannabis Corp.
For further information: Further information: Cam Battley, Bedrocan Cannabis Corp., [email protected], +1.905.864.5525; For investor relations, please contact: Jennifer Wood, TMX Equicom, +1.416.815.0700 ext. 226, [email protected]