Hydropothecary Q2 Sales Decline 20% from Q1 Due to Introduction of Lower-Priced H2 Line


The Hydropothecary Corporation Announces Q2 2017 Results

GATINEAU, QC–(Marketwired – April 04, 2017) – The Hydropothecary Corporation (TSXV: THCX) (OTC: HYYDF) (“THCX” or the “Company”) today reported its second quarter results, for the three and six months ended January 31, 2017. The Company’s financial statements and related management discussion and analysis for the period are available under the Company’s profile on SEDAR at www.sedar.com. All amounts are expressed in Canadian dollars.

“The strong second quarter results are a reflection of our team’s ability to successfully execute our industry-leading innovation strategy,” said Sebastien St-Louis, CEO. “As we embark on constructing a new, fully funded 250,000 sq/ft facility, opening in late 2018, the strength of and demand for our brand is stronger than ever as we await the anticipated announcement of the legalisation of recreational marijuana in Canada.”

Operating Highlights

Operating highlights for the quarter ended January 31, 2017 include:

  • Completion of a new 35,000 square foot four season glass roof greenhouse (“Building 5”). This has increased the Company’s to increase its licensed production facilities from 7,000 square feet to 42,000 square feet. Production capacity has increased from 600 kgs to 3,600 kgs per year. The total cost to construct and fit-up Building 5 was approximately $3.5M or $100 per square foot.
  • Establishment of relationships with two new clinics, further diversifying THCX’s patient base and presence in the marketplace.
  • Unveiling of the Company’s Decarb line and CannaCap product, a novel pre-activated cannabis product for consumption in capsule form. This innovative product allows patients an alternative to smoking, vaping and oils, priced between $8.50 and $15.00 per gram.
  • Launch of the Company’s H2 line, a mid-market offering, that allows consumers access to the Company’s high quality, and premium service at a more affordable cost of $7.25 to $10.00 per gram.
  • The execution of a definitive agreement on December 22, 2016 to complete a reverse take-over with BFK Capital Corp. (“BFK”), after having entered into a letter of intent with BFK on November 17, 2016. BFK was then a Capital Pool Company listed on the TSX Venture Exchange (the “Exchange”). As previously announced, the transaction was completed by the parties subsequent to quarter end on March 15, 2017.
  • Raising approximately $20.0M through issuing 3,633,793 pre-consolidation shares in two private placements and issuing USD$3.3M (CAD$4.4M) of secured convertible debentures.
  • Realized revenue per gram of $10.10 for the quarter ending January 31, 2017.
  • Cash cost per gram of $1.47 per gram for the quarter ending January 31, 2017.
  • Management anticipates it will be able to leverage economies of scale and increase profitability and achieve break-even Adjusted EBITDA¹ within the next four quarters.

Financial Reporting Highlights



Revenue increased over 400% from $180K in the second quarter of 2016 to $913k in the second quarter of fiscal 2017 and increased to $2.1M for the six months ended January 31, 2017, from $201k for the six months ended January 31, 2016. The Company also realized a 12.1% increase in shipments in the quarter ended January 31, 2017 with 90,518 grams shipped compared with 80,782 grams shipped in the quarter ended October 31, 2016. Revenue per gram decreased in the second quarter of 2017 to $10.10 from $14.10 in the first quarter of 2017. This decrease is attributable to the launch of the Company’s H2 line, a mid market offering, and Veteran Affairs Canada placing a cap on patient reimbursements to $8.50 per gram. Though the grams sold in the quarter increased over the prior quarter, there was a 19.7% decrease in overall revenue for the quarter ended January 31, 2017 from the quarter ended October 31, 2016.

Cost of Sales

With the completion of Building 5, the Company started production in the new facility to meet anticipated demand related to its newly launched H2 product line and consequently saw an increase in production expenses. The Company also realized a decrease in the cash cost per gram of inventory from $1.61 at October 31, 2016 to $1.47 at January 31, 2017.

Operating Expenses

Operating expenses increased from $1.5M in the quarter ended October 31, 2016 to $1.9M in the quarter ended January 31, 2017. The Company incurred $229K of financing charges as a result of the financings that occurred in the quarter resulting in a net cash flow from financing activities of $19.0M. There was also an increase in facility expenses resulting from the Building 5 expansion.


“In a very short time, Hydropothecary has demonstrated best in class cost per gram and the highest revenue per gram in the industry demonstrating our customers’ recognition of the methods and techniques we use to achieve Hydropothecary’s premium quality. We’ve also demonstrated that we can build world class facilities for $100/sq.ft.,” said Mr. St-Louis.

“While everyone is discussing recreational legalization, the medical market keeps expanding and needs to be serviced today. That’s why Hydropothecary has committed significant resources to developing another 250,000 sq.ft. of manufacturing and cultivation. This new building will be ready in late 2018 and is fully funded.”

“In addition, Hydropothecary believes that there are significant opportunities internationally. Although the world market is very appealing, we believe a focus on Canada in the short term will allow us to ultimately build the right platform to expand internationally.”

Hydropothecary’s intentions are to be one of the largest producers in the world. Our current facility can support revenue of over $23M, and our proposed new 250,000 sq.ft. facility would support revenue of over $180M at current market prices. We believe in a controlled buildout and demonstrating revenue growth to justify additional expansions while maintaining and improving our quality standards.

sebastien st louis hydropethecarySebastien St-Louis, CEO

We believe that continued focus on quality and efficiency of capital deployment will lead to long term sustainable competitive advantage. While we allow ourselves to dream big, the basics are paramount. The path to building a successful company relies on execution. To underline this focus, Hydropothecary is committing to being profitable by January 2018.

¹Note: Adjusted EBITDA is a non-GAAP financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Adjusted EBITDA is reconciled and explained in the Company’s management discussion and analysis, a copy of which has been filed under the Company’s profile on SEDAR at www.sedar.com.

About The Hydropothecary Corporation

The Hydropothecary Corporation is an authorized licensed producer and distributor of medical marijuana licensed by Health Canada under the Access to Cannabis for Medical Purposes Regulations (Canada). Hydropothecary provides naturally grown and rigorously tested medical marijuana of uncompromising quality. Hydropothecary’s branding, marijuana product offering, patient service standards and product pricing are consistent with THCX’s positioning as a premium brand for a legal source for medical marijuana within this new marketplace. In addition to medical marijuana production and sales, Hydropothecary explores various research and development opportunities for cannabinoid extracts, drugs and combinatory chemistry. In addition, the company is investigating the development and patenting of novel technologies related to medical marijuana, as well as the import and export of medical marijuana.

Original press release: http://www.marketwired.com/press-release/the-hydropothecary-corporation-announces-q2-2017-results-tsx-venture-thcx-2207525.htm

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