CALGARY, Aug. 29, 2019 /CNW/ - Westleaf Inc. (the
"Company" or "Westleaf") (TSX-V:WL) (OTCQB:WSLFF),
released today its second quarter financial results for the fiscal
year 2019, ending June 30, 2019 and
provided an update on operations.
Key Highlights:
- Westleaf completed construction on Phase I of The Plant,
the Company's large-scale extraction, processing and product
formulation facility in Calgary
(built to EU GMP specifications), which is now awaiting approval
for a standard processing licence from Health Canada;
- The Company completed two key strategic acquisitions – (i)
Canndara, a cannabis retail company with prospective retail
locations across Canada and (ii)
acquiring its partner's 50% interest in Westleaf Labs Inc.,
providing the Company with full control of The Plant
extraction, processing and product formulation facility;
- The Company acquired two retail locations in Saskatoon, Saskatchewan in two separate
transactions and opened three Prairie Records retail
locations in that province, as well as e-commerce, and is expecting
to open a fourth store in Calgary
on August 31, 2019;
- The Company reported total revenue for the second quarter of
$913,000, which represents revenue
from three stores in the Saskatoon
region open for partial portions of the reporting period;
- On May 10, 2019, the Company
completed a bought deal financing with a syndicate of underwriters
for 12,000 convertible debenture units at a price of $1,000 for gross proceeds of $12 million;
- Westleaf continued to strengthen its leadership team –
Adam Coates, was promoted to Chief
Commercial Officer; John Radostits
of Edmonton and Cody Church of Calgary were appointed to the Board of
Directors;
- The Company is committed to a focus on overall cost reductions
and financial prudence in all its business lines as it enters the
second half of 2019.
"Overall, despite the headwinds in the public markets, we
maintained our progress through the first half of the year to build
and operationalize all three of our business lines with a focus on
customer engagement and supplying high quality, consistent products
to the market, in conjunction with preparing for the next phase of
legalized cannabis products in Canada" said Scott
Hurd, President and CEO of Westleaf Inc. "We are thrilled
that we have fully completed construction of our extraction,
processing, and product formulation facility, The Plant by
Westleaf Labs, and we anticipate receiving our standard
processing licence from Health Canada in time to manufacture a wide
array of new derivative products for the start of Cannabis 2.0 in
Canada. We anticipate that the
introduction of a more diversified cannabis product offering across
Canada will lead to a significant
increase in the consumer base and related sales across our retail
portfolio".
Operating Highlights
The Plant – Preparing for Cannabis
2.0:
- Construction on Phase I of The Plant, the Company's
wholly owned large-scale extraction, processing and product
formulation facility (built to EU GMP specifications), was
completed and is awaiting licensing from Health Canada;
- Phase I of the facility is designed to process approximately
65,000 kgs of dried cannabis per annum into high quality oils,
concentrates, tinctures, vape products and gel caps, including
Westleaf's first in-house product, a line of vape pens under the
brand General Admission;
- The Plant is a highly strategic asset for the
Company. With the pending legalization of derivative products,
Westleaf anticipates strong industry wide demand for efficient
extraction, processing and formulation capacity. The scalability of
The Plant ensures Westleaf is well positioned to capitalize
on the expected demand growth for contract manufacturing, tolling
arrangements, white labeling, and in-house product
formulation;
- Westleaf signed its first extraction contract with Delta 9 for
white label derivative cannabis products worth at minimum
approximately $4 million per annum
with an option to increase up to $16
million per annum.
"The Delta 9 contract is the first of what we hope to be a
number of similar arrangements between licensed producers, product
developers and others who are preparing for the coming legalization
of derivative cannabis products such as vapes, edibles, topicals
and beverages, or what is called Cannabis 2.0," noted Hurd. "We are
preparing Westleaf to be in a strong position to capitalize on the
expected spike in consumer demand for these products later this
year and into 2020 and beyond."
The Plant has an additional 45,000 square feet of space
to expand extraction capacity as well as add additional product
lines based on consumer preferences once the additional products
are licensed post October 17, 2019.
Westleaf will also produce products under its own in-house
recreational brands General Admission and Backstage,
as well as its wellness brand Loon. The Company expects to
launch its line of vape products in Q4 2019.
Prairie Records – A Unique Retail
Experience:
- The Company's experiential retail concept Prairie
Records, which combines music and cannabis into a unique retail
environment, launched with three stores in the Saskatoon region;
- The two most recent Saskatoon
stores recorded net revenue of approximately $491,000 for the last 30 days of operations and
approximately $188,000 of gross
profits equating to a top tier gross margin of 38%;
- Westleaf received a retail licence for a fourth store to be
opened in Calgary's Forest Lawn
district, with the store expected to be fully operational on
August 31, 2019;
- Westleaf maintains a portfolio of over 20 premium retail
locations with development permits. The retail portfolio is being
developed prudently with planned locations across Alberta including a flagship store in
Banff, several in British Columbia and one in Manitoba. The Company is also exploring the
potential of brand licensing agreements to bring the Prairie
Records experience to Ontario;
- The Company is currently in various stages of development on
its retail portfolio, with a renewed focus on its many Alberta locations post the Alberta moratorium being recently lifted.
"We are thrilled to see that the response from consumers at our
Prairie Records stores has been overwhelmingly positive.
Month over month sales and transaction growth from all the
locations has continued since opening. Unfortunately, the
Alberta moratorium on issuing
cannabis retail licences has delayed our buildouts and financial
benefit to our shareholders" noted Adam
Coates, Westleaf's Chief Commercial Officer. "Now that the
moratorium has been lifted and the backlog addressed, we look
forward to opening more Prairie Records retail stores
including our first in Calgary,
which we expect to open on August 31,
2019."
Thunderchild Cultivation:
Construction of Westleaf's purpose-built, GMP compliant, indoor
cultivation facility near Battleford,
Saskatchewan has progressed significantly in the second
quarter. Phase I of the indoor grow operation will be a total of
80,000 square feet with 20 grow rooms and approximately 21,000
square feet of flower bench. Phase II will add an additional 50,000
square feet and bring total production capacity up to approximately
14,600 kgs per annum, based on an anticipated 60 grams yield per
square foot per harvest and 5.8 harvests per year. Principle
construction is expected to be complete before the end of 2019. The
remainder of the facility construction is fully financed with
low-cost, non-dilutive bank debt from ATB Financial and Westleaf
believes it is uniquely positioned to provide high demand
ultra-premium indoor flower to the market once
operational.
Outlook and Additional Information:
The Company is well positioned as the market enters an important
next phase with the legalization of new cannabis products. Referred
to as Cannabis 2.0, Westleaf expects that its strong position in
extraction, processing, product formulation and retail will provide
a stable platform to develop and market new products. In all other
jurisdictions where recreational cannabis has been legalized,
cannabis derivative products, such as vapes, edibles, topicals and
other forms have become the preferred products and have brought a
significant number of new consumers into the
market.
As of June 30, 2019, the Company
had 142.7 million common shares outstanding, 23.5 million warrants
outstanding, 7.9 million RSUs outstanding, and 3.0 million stock
options outstanding. Subsequent to quarter end, the Company granted
an aggregate of 600,000 Restricted Share Units (RSUs) to officers
of the Company. All RSUs were granted in accordance with the
Company's compensation plan.
About Westleaf Inc.
Westleaf is a Canadian cannabis company focused on cannabis
brands, extraction and production of cannabis derivative products,
wholly owned retail, as well as cannabis cultivation. The Company's
extraction and processing facility, The Plant, will produce
high quality and consistent cannabis derivatives and consumables,
both for Westleaf's in-house brands as well as white label
products. Westleaf's retail concept, Prairie Records,
leverages the instinctual tie between recreational cannabis and
music with stores operating or in development across Western
Canada. The Company's Thunderchild cultivation facility
is scheduled for completion at the end of this
year.
Neither TSXV nor its Regulation Services Provider (as that
term is defined in the policies of the TSXV) accepts responsibility
for the adequacy or accuracy of this release
Cautionary Statements
This news release contains "forward-looking information" and
"forward-looking statements" (collectively, "forward-looking
statements") within the meaning of the applicable Canadian
securities legislation. All statements, other than statements of
historical fact, are forward-looking statements and are based on
expectations, estimates and projections as at the date of this news
release. Any statement that involves discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions, future events or performance (often but not always
using phrases such as "expects", or "does not expect", "is
expected", "anticipates" or "does not anticipate", "plans",
"budget", "scheduled", "forecasts", "estimates", "believes" or
"intends" or variations of such words and phrases or stating that
certain actions, events or results "may" or "could", "would",
"might" or "will" be taken to occur or be achieved) are not
statements of historical fact and may be forward-looking
statements. In this news release, forward-looking statements relate
to, among other things, (i) retail cannabis stores that Westleaf
plans to open; (ii) the construction of the Thunderchild
cultivation facility and the timing for completion of same; (iii)
commencement of production at The Plant and anticipated timing of
licensing from Health Canada; (iv) the Plant providing a
competitive advantage by being adaptive to consumer needs; (v)
products and brands to be produced from Westleaf's production
facilities and the products and services that Westleaf plans to
offer; (iv) timing of provincial and federal regulatory approvals;
(vii) timing of legalization of certain derivative products; (viii)
changes in cannabis consumption habits among Canadians; (ix) the
processing and production capabilities of Westleaf's extracting and
cultivation facilities; and * anticipated amounts of revenue
expected to be received under Westleaf's extraction contract.
Forward-looking statements are necessarily based upon a number of
estimates and assumptions that, while considered reasonable, are
subject to known and unknown risks, uncertainties, and other
factors which may cause the actual results and future events to
differ materially from those expressed or implied by such
forward-looking statements. Such factors include, but are
not limited to: risks relating to the ability to obtain or maintain
licences to retail cannabis products; review of Westleaf's
production facilities by Health Canada and receipt of licences from
Health Canada in respect thereof; future legislative and regulatory
developments involving cannabis, including the passing of
regulations regarding derivative cannabis products; inability to
access sufficient capital from internal and external sources,
and/or inability to access sufficient capital on favourable terms;
the labour market generally and the ability to access, hire and
retain employees; the ability of Westleaf's production facilities
to operate and perform at peak production; general business,
economic, competitive, political and social uncertainties; the
satisfaction of conditions precedent under Westleaf's credit
facilities; timing and completion of construction of Westleaf's
production facilities and retail locations; and the delay or
failure to receive board, ATB Financial or regulatory approvals,
including any approvals of the TSX Venture Exchange, as applicable.
There can be no assurance that such statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on the forward-looking
statements and information contained in this news release. Except
as required by law, Westleaf assume no obligation to update the
forward-looking statements of beliefs, opinions, projections, or
other factors, should they change, except as required by
law.
SOURCE Westleaf Inc.