James E. Wagner Cultivation Corporation (“
JWC” or
the “
Company”) (TSX VENTURE: JWCA; OTCQX: JWCAF),
a premium cannabis brand focused on producing clean, consistent
cannabis grown using its advanced and proprietary GrowthSTORM™
aeroponic platform, reported financial results for its fiscal
fourth quarter and year ended September 30, 2019. Dollar amounts
are in Canadian dollars.
Fiscal Q4 2019 Corporate Highlights
- On June 28, 2019, JWC received a licence amendment from Health
Canada that allowed the Company to double its flowering space at
its second facility located at 530 Manitou Drive, Kitchener,
Ontario (“JWC2”) to 22,000 square feet. On October
11, 2019, JWC received an additional licence amendment from Health
Canada to double the flowering space again to 44,500 square feet.
The Company anticipates that this increase will support an
annualized production capacity of more than 9,000 kilos of dried
cannabis.
- The average yield per plant increased to 260 grams in the
fourth quarter of 2019, versus the average yield of 247 grams for
the full fiscal year 2019.
- JWC increased its estimated annual production capacity for JWC2
by 17%. The Company anticipates that when JWC is fully operational,
it will have the potential to produce more than 35,000 kilograms of
cannabis flower per year, primarily due to the increased yield
achieved through further enhancements of the Company’s advanced
cultivation processes.
- On July 5, 2019, JWC received a licence amendment from Health
Canada permitting the sale of formulated cannabis oil. Sales to
medical patients began early in fiscal Q1 2020.
- On August 14, 2019, JWC signed a supply agreement with
TerrAscend Corp. to provide dry cannabis flower and oils to
TerrAscend Corp. JWC’s products are now being sold on Terrascend
Corp.’s online medical marketplace, Solace Health
(solacehealth.com).
Financial Highlights
- Revenues totaled a record $1.0 million in fiscal Q4 2019, up
40% sequentially from $730,000 in fiscal Q3 2019, and compared to
$57,600 in fiscal Q4 2018.
- Revenues for fiscal 2019 totaled $2.8 million, compared to
$57,600 in fiscal 2018.
- Loss and comprehensive loss for fiscal 2019 reduced 10% to $9.2
million or $(0.10) per share.
- Operating expenses in fiscal Q4 2019 were $1.7 million.
Excluding one-time items, Q4 expenses were $2.5 million
representing a 6% decrease from fiscal Q3 2019 and a 5% increase
from fiscal Q4 2018.
Management Commentary
“Q4 was another strong quarter of growth and expansion at JWC,”
commented Nathan Woodworth, JWC president and CEO. “It capped an
exciting year where we demonstrated tremendous success in growing
clean, consistent cannabis on an increasingly larger scale and with
greater efficiency.
“Our yield per plant continues to set industry records. For the
full fiscal year, our average yield per plant was 247 grams — far
above our closest competitors. In the fourth quarter, we did even
better, averaging 260 grams per plant. This reflects how we have
been able to increase our forecasted annual production capacity by
17% as the result of further refinements of our advanced
GrowthSTORM aeroponic system.
“Following a record harvest in September, our revenue growth
continued to accelerate in Q4, up 40% sequentially, as we continued
along a measured path toward profitability and full operational
capacity. We have implemented a systematic plan to grow our
capacity in phases and in accordance with market demand. So, as we
continue to produce and sell more products and scale our
operations, we plan to do so with only incremental increases in
expenses.
“Combined with our industry-leading yields and lower cost of
production due to our unique GrowthSTORM system, we believe we can
achieve and sustain highly favorable margins and drive strong
profitability over the long term like no other company in the
industry. These advantages support our plans to licence our
proprietary, patent pending technology to other producers on a
global scale.
“As we begin our new fiscal year, we will remain focused on
further refining our cultivation process, forging new partnerships,
creating new revenue streams and scaling our business. We believe
this will continue to drive revenue growth and profitability over
the coming quarters, and keep us on track for another year of
record growth in 2020.”
Summary Financial Results
|
Q4 2019 |
Q4 2018 |
% Change |
Q3 2019 |
%Change |
Net Revenues |
$1,024,515 |
57,612 |
1,792% |
730,150 |
40% |
Operating expenses |
1,704,537 |
2,424,844 |
30% |
2,707,679 |
37% |
Loss from operations |
(2,790,773) |
(2,365,571) |
-18% |
(291,525) |
-857% |
Net and comprehensive
loss |
(3,087,790) |
(2,306,551) |
-34% |
(433,908) |
-612% |
Net and comprehensive loss per
share |
(0.03) |
(0.03) |
0% |
(0.01) |
200% |
|
|
|
|
|
|
|
FY2019 |
FY2018 |
% Change |
|
|
Net Revenues |
2,821,267 |
57,612 |
4,797% |
|
|
Operating expenses |
10,077,616 |
9,866,095 |
2% |
|
|
Loss from operations |
(8,956,109) |
(9,005,596) |
1% |
|
|
Net and comprehensive
loss |
(9,252,253) |
(10,313,920) |
10% |
|
|
Net and comprehensive loss per
share |
(0.10) |
(0.14) |
26% |
|
|
|
|
|
|
|
|
|
Sept. 30, 2019 |
Sept. 30, 2018 |
% Change |
|
|
Cash & cash
equivalents |
1,266,611 |
8,504,790 |
-85% |
|
|
Agriculture produce &
biological assets |
6,026,988 |
2,607,433 |
131% |
|
|
Other working capital |
1,668,867 |
604,172 |
176% |
|
|
Non-current assets |
19,057,907 |
5,475,701 |
248% |
|
|
Other liabilities and
long-term debt |
7,172,475 |
3,411,615 |
110% |
|
|
Shareholder's equity |
15,111,888 |
19,639,468 |
-23% |
|
|
|
|
|
|
|
|
For the fourth quarter of fiscal 2019, net revenue from sales
totaled a record $1.0 million, up 40% sequentially from $730,000 in
the previous fiscal quarter, and compared to $57,600 in the same
year-ago quarter.
Revenues for the fiscal full year increased to a record $2.8
million from $57,600 in fiscal 2018.
Net and comprehensive loss was $3.1 million or $(0.03) per share
in fiscal Q4 2019, compared to $434 thousand or $(0.01) per share
in the previous fiscal quarter and $2.3 million or $(0.03) per
share in fiscal Q4 2018.
Net and comprehensive loss totaled $9.2 million or $(0.10) per
share in fiscal 2019, improving from $10.3 million or $(0.14) per
share in fiscal 2018.
Cash and equivalents at September 30, 2019, totaled $1.3 million
compared to $3.8 million at June 30, 2019, and $8.5 million at
September 30, 2018. The decrease in cash is attributable to
purchase of capital assets and cash used in operations.
Subsequent to the end of the fourth quarter, JWC entered into an
amended and restated loan agreement with Trichome Financial Corp.
dated November 6, 2019, pursuant to which Trichome Financial Corp.
agreed to loan JWC $4 million in two tranches. The Company has
received the first tranche in the amount of $2.85 million. The
second tranche in the amount of $1.15 million will be advanced to
the Company upon completion of certain conditions precedent set out
in the loan agreement.
Outlook
Inventories totaled approximately 561 kg of dried cannabis and
149 liters of formulated oil at the end of fiscal Q4 2019. These
products will be sold in the first and second quarter of fiscal
2020.
The Company expects to begin selling cannabis products through
recreational channels in Q2 of fiscal 2020, to further develop
customer demand, as it continues scaling JWC2 towards full
production capacity.
In fiscal Q2 2020, the Company expects to be revenue positive
(cash flow positive), along with positive net and comprehensive
income. By Q3 2020, management expects revenue growth to drive
strong gross margins, positive cash flow, and net and comprehensive
income.
Additional Information
Additional details of the Company’s financial results are
available in the financial statements and the management’s
discussion and analysis as filed under JWC’s profile on SEDAR
(www.sedar.com) and available on the Company’s website
at www.jwc.ca.
Conference Call
On December 10, 2019, the Company will host a conference call to
discuss these results, followed by a question and answer period, as
specified below:
Date: Tuesday, December 10,
2019Time: 5:00 p.m. Eastern time (2:00 p.m.
Pacific time)Toll-free dial-in number:
1-877-407-9208International dial-in number:
1-201-493-6784Conference ID: 13697211
The call will be webcast live and available for replay here, as
well as via a link in the “Investors” section of the Company’s
website at www.jwc.ca/investors.
Please call the conference telephone number five minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact CMA at 1-949-432-7566.
A telephone replay of the call will be available from 8:00 p.m.
Eastern time on December 10, 2019, until December 24, 2019:
Toll-free replay number:
1-844-512-2921International replay number:
1-412-317-6671Replay ID: 13697211
About James E. Wagner Cultivation
Corporation
James E. Wagner Cultivation Corporation’s wholly owned
subsidiary is a Licenced Producer under the Cannabis
Regulations, formerly the Access to Cannabis for Medical
Purposes Regulations (“ACMPR”). JWC is a
premium cannabis brand, focusing on producing clean, consistent
cannabis. JWC uses its advanced and proprietary Dual Droplet™
aeroponic platform named GrowthSTORM™.
JWC was founded as a family company and is based on family
values. JWC began as a collective of patients and growers under the
Marihuana Medical Access Regulations (the precursor to ACMPR).
Since its inception, JWC has remained focused on providing the best
possible patient experience. JWC’s operations are based in
Kitchener, Ontario. Learn more at www.jwc.ca.
Notice Regarding Forward-Looking Statements
This press release contains statements including forward-looking
information for purposes of applicable securities laws
(“forward-looking statements”) about JWC and its
business and operations which include, among other things,
statements regarding increased production capacity at JWC’s
facilities, the financial impact of additional licenced flowering
space at JWC’s facilities, increased yield of cannabis flower, the
availability of debt financing, sales of cannabis in the
recreational market, increasing customer demand, the financial
growth of JWC, management’s expectation of JWC achieving
break-even, turning net and comprehensive income positive and
turning revenue positive and the timing for the achievement of such
milestones. The forward-looking statements can be identified by the
use of such words as “will”, “expected”, “approximately”, “may”,
“could”, “would” or similar words and phrases. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results to differ materially
from those implied in the forward-looking statements. For example,
risks include risks regarding the cannabis industry, economic
factors, the equity markets generally, building permit related
risks and risks associated with growth and competition as well as
the risks identified in JWC’s Annual Information Form dated April
3, 2019, available under the JWC’s profile at www.sedar.com.
Although JWC has attempted to identify important factors that could
result in actual actions, unanticipated events may cause results to
differ materially from those described in forward-looking
statements, and there may be other factors that cause actions,
events or results to differ from those anticipated, estimated or
intended. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release and are based on current assumptions which
management believes to be reasonable. The Company disclaims any
intention or obligation, except to the extent required by law, to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Company Contact Nathan Woodworth President
& CEO Tel: (519) 594-0144 x421 Email: nathan@jwc.ca
Investor Relations Jonathan Leuchs CMA Tel:
(949) 432-7566 Email: jwca@cma.team
James E. Wagner Cultivation Corporation |
Condensed Consolidated Statement of Loss and Comprehensive
Loss |
|
|
|
September 30, 2019 |
|
September 30, 2018 |
|
|
|
|
|
Revenue |
|
|
|
|
Wholesale |
$ |
2,466,320 |
$ |
- |
|
Medical |
|
422,977 |
|
57,612 |
|
Excise tax |
|
(68,030) |
|
- |
|
Net revenue from sales |
|
2,821,267 |
|
57,612 |
|
|
|
|
|
|
|
Cost of sales |
|
2,184,072 |
|
28,873 |
|
Gross margin before fair value adjustments |
|
637,195 |
|
28,739 |
|
|
|
|
|
|
Realized fair value amount on inventory sold |
|
(2,356,183) |
|
(12,979 |
) |
Fair value adjustment to biological assets |
|
3,040,495 |
|
844,739 |
|
Gross margin |
|
1,321,507 |
|
860,499 |
|
|
|
|
|
|
Expenses |
|
|
|
|
General and administrative |
|
9,079,832 |
|
7,266,409 |
|
Advertising and promotion |
|
527,891 |
|
362,454 |
|
Depreciation and amortization |
|
374,493 |
|
243,508 |
|
Stock based compensation |
|
95,400 |
|
198,000 |
|
Public company listing |
|
- |
|
1,795,724 |
|
|
|
10,077,616 |
|
9,866,095 |
|
|
|
|
|
|
Loss from operations |
|
(8,756,109) |
|
(9,005,596) |
|
|
|
|
|
|
Non-cash gain on debt modification |
|
229,945 |
|
- |
|
Interest and other revenue |
|
115,539 |
|
174,013 |
|
Interest and financing costs |
|
(641,628) |
|
- |
|
Fair value change in contingently issuable shares |
|
- |
|
(1,482,337 |
) |
|
|
(296,144) |
|
(1,308,324 |
) |
|
|
|
|
|
Loss and comprehensive loss |
$ |
(9,052,253) |
$ |
10,313,920 |
) |
Loss per share Basic and Diluted |
$ |
(0.09) |
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Interim Statement of Financial
Position |
|
|
September 30, 2019 |
|
September 30, 2018 |
Assets |
|
|
|
Current |
|
|
|
Cash and cash equivalents |
$ |
1,266,611 |
|
$ |
8,504,790 |
|
Short term investments |
- |
|
|
6,017,153 |
|
Funds in trust |
100,000 |
|
|
140,165 |
|
Accounts receivable |
1,244,390 |
|
|
120,255 |
|
Other receivables |
324,477 |
|
|
343,752 |
|
Inventory |
3,371,016 |
|
|
1,532,604 |
|
Biological assets |
2,855,973 |
|
|
1,074,829 |
|
Prepaid expenses and deposits |
946,898 |
|
|
943,299 |
|
|
10,109,365 |
|
|
18,676,847 |
|
|
|
|
|
Property, plant and equipment |
18,946,075 |
|
|
5,331,068 |
|
Intangible assets |
111,832 |
|
|
144,633 |
|
|
19,057,907 |
|
|
5,475,701 |
|
|
|
|
|
|
|
|
|
$ |
29,167,272 |
|
$ |
24,152,548 |
|
|
|
|
|
Liabilities and Shareholders’ Equity
(Deficiency) |
|
|
Current |
|
|
|
Accounts payable and accrued liabilities |
$ |
2,824,479 |
|
$ |
1,098,212 |
|
Current portion of long-term debt |
3,858,430 |
|
|
3,253 |
|
|
6,682,909 |
|
|
1,101,465 |
|
|
|
|
|
Long-term debt |
3,073,819 |
|
|
5,528 |
|
Royalty liability |
2,498,150 |
|
|
2,489,102 |
|
Lease inducement |
1,600,506 |
|
|
916,985 |
|
|
7,172,475 |
|
|
3,411,615 |
|
|
|
|
|
Shareholders’ equity |
|
|
|
Share capital |
36,860,850 |
|
|
30,446,310 |
|
Contributed surplus |
2,510,919 |
|
|
4,200,786 |
|
Retained earnings (deficit) |
(24,059,881 |
) |
|
(15,007,628 |
) |
|
15,311,888 |
|
|
19,639,468 |
|
|
|
|
|
|
$ |
29,167,272 |
|
$ |
24,152,548 |
|
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