Me­dreleaf loses $2.12-mil­lion in fis­cal Q2 2018

Stockwatch Daily - - FRONT PAGE - Mr. Neil Clos­ner re­ports

ME­DRELEAF CORP. has re­leased fi­nan­cial and op­er­at­ing re­sults for the sec­ond quar­ter fis­cal 2018, end­ing Sept. 30, 2017.

For the sec­ond quar­ter of fis­cal 2018, Me­dreleaf in­creased pro­duc­tion and sales of cannabis-based ex­tracts and in­creased ad­justed con­tri­bu­tion per gram sold when com­pared with the first quar­ter of fis­cal 2018, while con­tin­u­ing to in­vest to­ward fu­ture growth in recre­ational and in­ter­na­tional med­i­cal mar­kets.

“In the sec­ond quar­ter, we in­creased av­er­age sell­ing price and low­ered cash costs per gram sold, and this drove im­prove­ment from the first quar­ter to ad­justed prod­uct con­tri­bu­tion mar­gin per gram,” said Neil Clos­ner, chief ex­ec­u­tive of­fi­cer. “This mar­gin pro­vides us with greater flex­i­bil­ity in our busi­ness model to adapt to changes and op­er­ate prof­itably as the in­dus­try evolves, and we are ide­ally po­si­tioned for growth now that the full im­pact of the Veter­ans Af­fairs Pol­icy (VAC) changes on cap­ping price and vol­ume are be­hind us.”

(See LEAF Ta­ble 1 on page 37)

Sec­ond quar­ter highlights

• Sales of $9.8-mil­lion, a de­crease of 9 per cent year over year;

• Sales of cannabis-based ex­tract prod­ucts were $1.8-mil­lion, or 18 per cent of to­tal rev­enue, com­pared with 14 per cent of to­tal rev­enue for the first quar­ter of fis­cal 2018; sales of cannabis-based ex­tracts be­gan in the third quar­ter of fis­cal 2017;

• Ad­justed earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion of $700,000, a de­crease of $4.0-mil­lion from the prior year pe­riod;

• Sold 1,051 kilo­grams of cannabis prod­ucts, an in­crease of 23 per cent year over year;

• Av­er­age sell­ing price per gram of $9.34, an in­crease from $9.04 for the first quar­ter of fis­cal 2018 and a de­crease from $12.61 for the prior year pe­riod;

• Ad­justed prod­uct con­tri­bu­tion mar­gin per gram sold of $6.75, an in­crease from $6.53 for the first quar­ter of fis­cal 2018 and a de­crease from $9.82 for the prior year pe­riod;

• Cash cost per gram sold of $1.46, down from $1.49 for the first quar­ter of fis­cal 2018 and the prior year pe­riod, rep­re­sent­ing the low­est cash cost per gram in the com­pany’s op­er­at­ing his­tory;

• To­tal yield pro­duced across the Markham fa­cil­ity and first har­vest at the Brad­ford fa­cil­ity for the quar­ter was ap­prox­i­mately 2,500 kilo­grams, equiv­a­lent to ap­prox­i­mately 300 grams per square foot per year.

Highlights sub­se­quent to the quar­ter-end:

• On Oct. 4, 2017, Me­dreleaf be­came the first li­censed pro­ducer in Canada to launch a top­i­cal cream.

• On Oct. 20, 2017, Me­dreleaf re­ceived its amended li­cence for two ad­di­tional cul­ti­va­tion rooms, in­creas­ing an­nual pro­duc­tion ca­pac­ity to an es­ti­mated 5,600 kilo­grams at the Brad­ford fa­cil­ity.

• On Nov. 3, 2017, the com­pany re­ceived an ad­di­tional amended li­cence which per­mits the ac­tiv­ity of sale to clients from the Brad­ford fa­cil­ity.

• On Nov. 8, 2017, Me­dreleaf an­nounced the Jan­uary, 2018, launch of Re­leafDx, the first phar­ma­co­ge­net­ics-based cannabis com­pat­i­bil­ity test to be avail­able from a Cana­dian li­censed pro­ducer.

Bal­ance sheet

At the end of Sept. 30, 2017, the com­pany had cash and cash equiv­alen ts of $74.0-mil­lion and work­ing cap­i­tal of $89.3-mil­lion.

In­ven­to­ries as at Sept. 30, 2017, were $21.6-mil­lion, an in­crease of $12.1-mil­lion from March 31, 2017.

Bi­o­log­i­cal as­sets as at Sept. 30, 2017, were $2.9-mil­lion, an in­crease of $100,000 com­pared with March 31, 2017, of $2.8-mil­lion.

Cash flow used in op­er­at­ing ac­tiv­i­ties for the six months ended Sept. 30, 2017, was $5.3-mil­lion, com­pared with cash flow pro­vided by op­er­at­ing ac­tiv­i­ties of $6.4-mil­lion for the prior year pe­riod.

Cap­i­tal ex­pen­di­tures for the six months ended Sept. 30, 2017, were $13.0-mil­lion.

Me­dreleaf is fully fi­nanced to in­crease ca­pac­ity to 35,000 kilo­grams in pro­duc­tion an­nu­ally with $40-mil­lion bud­geted for the com­ple­tion of the Brad­ford fa­cil­ity and an ad­di­tional $15-mil­lion bud­geted for the ex­pan­sion of phar­ma­ceu­ti­cal man­u­fac­tur­ing ca­pa­bil­i­ties.

We seek Safe Har­bor.

Karen Bax­ter con­densed this news re­lease (karenb@stock­watch.com).

Norma Beauchamp, Neil Clos­ner, Ron­ald F Funk, Deb­o­rah E Rosati, Lloyd Mitchell Se­gal

(LEAF) Shares: 90,515,418

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