Heritage Cannabis Holdings Corp. (CSE:CANN) (“Heritage” or the “Company”), today announced its financial results for the three month period ended January 31, 2020 ( “Q1 2020”). All figures are in Canadian dollars unless otherwise noted.
“The first quarter showed continued growth in revenue and the advancement of our business strategy with the expansion of our licensed area at CannaCure progressing well. We completed the installation and commissioning of downstream processing equipment and are in the process of commissioning two previously purchased extraction machines,” stated Clint Sharples, Chief Executive Officer of Heritage. “We are continuing to monitor the threat that COVID-19 poses to our operations at our production facilities. We have a strong balance sheet that we believe will support the Company through this time and we have taken steps to preserve cash balances.”
Q1 2020 Financial Highlights
- Revenue of $4.0 million in Q1 2020 compared to $nil in the three-month period ended January 31, 2019 (“Q1 2019”).
- Gross Margin of $1.5 million in Q1 2020 or 37%, and adjusted Gross Margin, which excludes the impact of excise taxes was 41%.
- Net loss of $2.0 million or $0.01 per common share in Q1 2020 compared to a net loss of $3.8 million or $0.01 per common share in Q1 2019.
- Although the Company is not yet producing positive cash flows from operations, management expects to achieve positive cash flows from operations later this year.
- As at the end of Q1 2020, the Company had a cash position of $9.3 million, including GICs totalling $4.6 million and working capital of $14.8 million compared to $11.5 million in cash at the end of fiscal year 2019 and working capital of $11.7 million.
Q1 2020 Growth, Operational, and Corporate Highlights
- On November 12, 2019, the Company announced that it entered into a supply and manufacturing agreement with James E. Wagner Cultivation Corporation (“JWC”) for the filling and packing of vape pen cartridges for Canadian recreational and medical markets. Under the twelve month supply and manufacturing agreement, JWC will provide the Company with a minimum of 100kg per month of aeroponically-grown premium-grade cannabis biomass for processing into direct-to-vape products which maintain the natural properties of the cannabis strain, and assures no harmful additives or heavy metals are blended into the oil.
- On November 25, 2019, the Company announced that its wholly owned subsidiary CannaCure received amendment licensing approval in accordance with Health Canada’s Cannabis Act and Regulations for the expansion of three additional rooms at its facility in Fort Erie, Ontario. The approved rooms will be used for operating extraction machines, and various downstream equipment related to extraction and the production of formulated cannabis oil. This expanded space enables the installation of two new Vitalis Q90 extraction systems which were delivered in Q3 2019.
- On December 4, 2019, Heritage announced the launch of its EndoDNA Test Kit in Canada powered through its partly owned subsidiary Endocanna. The EndoDNA test analyzes over 500 genes and more than 550,000 Single Nucleotide Polymorphisms in the human body, and provides a personalized EndoDecoded report, identifying how an individual’s specific genetic makeup interacts with cannabinoids and terpenes. The custom report helps customers select cannabis with the right cannabinoid profile and assist with choosing the formulation, dosage, and best delivery method for their needs.
- On December 11, 2019 the Company announced a partnership with Brock University (“Brock”) to further Brock’s research of cannabis tissue culture and contribute to the advanced understanding of the medical benefits of cannabis. The goal of the research is improving the quality and health of medicinal-use cannabis plants through disease diagnostics and testing.
- On February 3, 2020 the Company announced that it had entered into a 24 month term loan agreement with Trichome Financial Corp. for total proceeds of $6,700,000. Trichome advanced the Company $4,875,000 on January 30th, 2020 with an additional $1,825,000 to be advanced upon the earlier of (i) the issuance of a Health Canada sales licence or (ii) the Company achieving consolidated revenues of $7,500,000. The Loan is non-amortizing and payable in full upon maturity, 24 months following the closing date. The loan bears interest at a rate of 9.5% and was subject to a 4.5% original issue discount.
- On March 5, 2020 the Company announced the advancement of its Joint Venture Partnership with Empower Clinics Inc., with the order and installation of extraction and post-production equipment units at Empower’s existing licensed hemp processing facility in Sandy, Oregon. Propriety branded products will be distributed through Empower’s corporately owned physician staffed health clinics in Oregon and Arizona and in upcoming new franchise locations which currently have access to over 165,000 patients.
The interim consolidated financial statements of the Company as at and for the three month period ended January 31, 2020 and accompanying management’s discussion and analysis have been filed with the securities regulators and are available on SEDAR at www.sedar.com under the Company’s issuer profile.
About Heritage Cannabis Holdings Corp.
Heritage Cannabis is a vertically integrated cannabis provider that currently has two Health Canada approved licenced producers, through its subsidiaries Voyage Cannabis Corp. and CannaCure Corp. both regulated under the Cannabis Act Regulations. Working under these two licences, Heritage has two additional subsidiaries, Purefarma Solutions, which provides extraction services, and a Medical Services Division which is focused on cannabis based medical solutions. Heritage as the parent company, is focused on providing the resources for its subsidiaries to advance their products or services to compete both domestically and internationally.
ON BEHALF OF THE BOARD OF DIRECTORS OF HERITAGE CANNABIS HOLDINGS CORP.
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The Canadian Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. The forward-looking information contained herein may include, but is not limited to, assumptions related to cash flow and capital resources, and expectations related to the supply and manufacturing agreement with JWC, the intended expansion of the Cannacure facility, the partnership with Brock and the Joint Venture Partnership with Empower Clinics Inc.
By identifying such information and statements in this manner, the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.
An investment in securities of the Company is speculative and subject to several risks including, without limitation, the risks discussed under the heading “Risks and Uncertainties” Factors” in the Company’s annual management discussion and analysis for the year ended October 31, 2019 and dated February 28, 2020. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking information and forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended.
In connection with the forward-looking information and forward-looking statements contained in this press release, the Company has made certain assumptions. Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this notice.