WeedMD Inc (CVE:WMD) (OTCMKTS:WDDMF) posted financial results Friday that showed a jump in revenue in the first quarter as successful harvests from six additional grow rooms boosted cannabis supply.
For the quarter ended March 2019, the Toronto-based company recorded net sales of C$3.3 million, representing a quarter-over-quarter increase of 23%.
Shares in WeedMD closed 1.5% higher to US$1.37 in the OTC Markets on Thursday.
"We continue to deliver consistent improvement in our results, quarter-over-quarter,” said WeedMD CFO Nichola Thompson. “With the successful harvests from six additional grow rooms licensed at the end of 2018 now coming to market, we expect significant revenue increases throughout the balance of the year.”
Key financial highlights
- The company sold 793 kgs of dried cannabis, representing an increase of 46% from the previous quarter.
- Improved gross profit margin to 15% before changes in fair value
- WeedMD holds $13.9 million of inventory and biological assets as of March 31, 2019, an increase of $5.9 million or 74% from the prior quarter
- The all-in weighted average cost per gram for the first quarter was $2.90, compared to $3.28 for the fourth quarter in 2018 and $3.66 in the first quarter a year ago.
WeedMD owns and operates two facilities in southwestern Ontario to produce and distribute medical-grade cannabis.
The Aylmer, Ontario facility houses 26,000 square feet of grow space on an expandable site across four acres of land, while its 158-acre Strathroy, Ontario facility includes both indoor and outdoor grow capacity. It also has a 610,000 square foot greenhouse facility.
Secures outdoor cannabis cultivation licence
In March 2019, WeedMD announced that it had applied for an amendment to its Strathroy licence to expand beyond its existing cultivation with an initial 27-acre, large-scale, low-cost, outdoor cannabis grow operation.
WeedMD issued a press statement Friday indicating that it has been granted approval from Healh Canada for 27 acres of low-cost, outdoor cultivation on its Strathroy, Ontario property. The company said it will start planting "more than 20,000 clones in early June with plans to harvest in fall 2019, increasing potential production output by an additional 27,000 kgs."
The two locations are expected to yield more than 150,000 kilograms per year of cannabis once peak production is achieved in 2020.
Best is yet to come
“We are pleased with our performance improvements in the first quarter, but the best is yet to come,” said WeedMD CEO Keith Merker. “In Strathroy, we have more than 20,000 clones ready to be planted across our outdoor operation once the licence is secured. Our next stage of licensing will be the 110,000 square feet of hybrid greenhouse that is already fully built out, which will lead to rapid production growth, quarter-over-quarter in 2019 and beyond.”
WeedMD secured additional provincial distribution agreements with Manitoba and Saskatchewan. Shipping to a total of six provinces across the country, the company is now able to reach about 70% of Canada’s projected adult-use market.
The company also kicked off a retail initiative by partnering with Pioneer Cannabis and Pita Pit. A cannabis retail and licensing agreement was signed with an Ontario cannabis retail lottery winner who will own and operate the first Pioneer Cannabis store in Burlington, Ontario.
--(Updates with outdoor cannabis cultivation licence)--
Contact Uttara Choudhury at [email protected]