EastWest Comments on 2Q Financial Statements and Expands on Vision, Strategy, and Execution

VANCOUVER, BC / ACCESSWIRE / April 8, 2019 / EastWest Bioscience (the “Company” or “EastWest”) (TSX.V: EAST) expands on its vision, strategy, and outlook for the future and comments on its 2Q financial results for the three months ended January 31, 2019.

“It has been a very busy operational quarter,” explains Rodney Gelineau, CEO of Eastwest BioScience. “The team has been tasked with integration of the Sangster’s purchase, as well as re-positioning five stores as corporate stores. The operational goal for each of those corporate stores is to turn them into Sangster’s SuperCentres, which will be a combination of health food store and pharmacy. We also launched the Chewy Goodness Hemp Snack Bars under our Earth’s Menu food line and the first products shampoo and conditioner under our ChanvreHemp body care line. Overall, the company’s sales increased substantially from the previous quarter.”

“Through the balance of the year we are aggressively pursuing product development for both the non-CBD and CBD product lines being developed for Canada, the USA, and the EU. With the recent news of mainline stores in the US selling CBD in their stores, we strongly anticipate the regulatory approval of our operations entering into the US markets. Overall, we expect our measured, focused, market-oriented operations, product development, and sales efforts to contribute to a steady, focused, healthy growth in our top line and we anticipate 2019 being a very good year.”

Highlights from the quarterly financials include:

  • In November 2018 EastWest acquired the Sangster’s Health Centres and its 28 stores.
  • In December and January, we converted 5 Sangster’s franchises into Corporate Stores with a view to upgrading to SuperCentres, a combination of health food store and pharmacy.
  • In December and January, Orchard Vale Naturals (EastWest’s nutraceutical manufacturing subsidiary) secured two new large clients who are contracting OVN for their ongoing product manufacturing.
  • In January, EastWest made application to the TSX-V to allow it to start selling its existing products with CBD (including products manufactured for Sangster’s) in the USA.
  • In the quarter, EastWest increased Canadian market distribution to 200+ stores by adding both direct and distributor channels. The Company continues to add new stores with the goal of penetrating as many of the 7500+ stores in this network as possible.
  • In the quarter the Company developed and released three lines of the Chewy Goodness granola-style snack bars and ChanvreHemp Shampoo & Conditioner. In 2019, EastWest will continue to aggressively develop and release new products for all four EastWest product lines as well as exploit the 196 Sangster’s product SKUs.

Financial performance

  • Overall Company revenue of $528,199 compared with $22,672 for the three months ended January 31st, 2018, an increase of 2330%;
  • Gross margins were $91,202 or 25.1% for the three months ended. Gross margins were lower than expected due to the fair valuing of Sangster’s inventory, under IFRS, and various promotional programs of EastWest Science.
  • Net Loss of $897,521 compared with $488,876 during the three months ended January 31st, 2018. The increase in net loss was primarily due to stock-based compensation, business development, marketing and product development for EastWest Science, and manufacturing overhead for Orchard Vale Naturals.
  • Current Ratio is 2.3:1 with Current Assets covering Current Liabilities by $1,178,343.
  • Refinancing of 260 Okanagan Ave, the Penticton warehouse and manufacturing building, netted the company over $300,000 cash and lowered the interest rate from 9.95% (with subsequent term rate of 14.95%) down to prime + 4 or 8%.
  • On April 2, 2019, the Company completed a Private Placement which raised $342,475 for working capital.

In the near term, the Company anticipates continued top-line revenue growth as it develops and releases new products and moves forward with expansion into the USA and the EU.

“Our hemp-based products are already unique, and we continue to gain shelf space,” explains Gelineau. “With the infusion of CBD into our existing products, we anticipate a significant competitive advantage. Additionally, EastWest is working on several joint ventures which will allow the Company to fully realize assets and generate additional revenues for the EastWest group of companies.”

The medium goal is to achieve profitability through economies of scale.

Sangster’s acquisition

Sangster’s sells nutraceutical, sports nutrition, food, and body care products to and collects royalties from its franchisees, sells products on-line, and operates corporate retail stores in Saskatchewan and Alberta. The acquisition adds significant components to the vertically integrated health and wellness supply chain model of EastWest. These beneficial components include built-in store shelves to sell product through, in-house customer data with valuable R&D insight into current and future product development, piloting opportunities for marketing and merchandising strategies, and a ready platform for developing the SuperCentre model of natural health and pharmaceutical products. These components give Eastwest a retail foundation to develop and sell products with combinations of hemp, CBD and natural product ingredients.

  • On November 30, 2019, EastWest closed the acquisition of the net assets of Sangster’s for a purchase price of $1.15 million.
  • Net assets acquired included approximately $906,000 current assets, $157,000 long-term assets, $309,000 current liabilities, and $402,000 in goodwill.
  • Consideration given included $300,000 cash paid, $125,000 EastWest shares issued, and approximately $728,000 in deferred payments.

“The Sangster’s acquisition provides EastWest a national retail footprint for the implementation for the sale of EastWest’s CBD product line, currently under development in the USA,” says Gelineau. “Additionally, the existing data from our retail stores is providing valuable insight for the development of our unique health and wellness products.”

The company expects to have significant corporate developments to announce in the near to medium term.

About EastWest BioScience Group

EastWest Bioscience is a vertically integrated wellness company with the infrastructure to become a global giant in the Hemp & CBD consumer health market. Since it was founded in 2016, EastWest continues to grow as a high-quality producer, manufacturer, and distributor of multiple lines of premium hemp products. EastWest is strategically positioned in mainstream consumer markets with wholistic natural products and has developed distribution channels into mainstream stores and markets in Canada. The Company has a Health Canada licensed, GMP (Good Manufacturing Practices) certified manufacturing facility and produces premium brands offering natural products for a preventive care lifestyle. EastWest consumer product lines are divided into four distinct brands: 1) Natural Advancement – natural biopharmaceutical health supplements; 2) Earth’s Menu – all-natural hemp superfoods; 3) Natural Pet Science – pet food and pet supplements; and 4) Chanvre Hemp – all-natural health and beauty products. The organization will continue to focus on the ongoing development of innovative, hemp-based consumer products through advanced science with clean, natural ingredients to complement its current product offerings.

ON BEHALF OF THE BOARD OF DIRECTORS
EASTWEST BIOSCIENCE GROUP

“Rodney Gelineau”
Co-Founder, Chief Executive Officer, and Director

For further information, please visit www.eastwestbioscience.com or contact EastWest Bioscience Investor Relations at 1-647-394-7383 or email us at investors@eastwestscience.com.

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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain ‘forward-looking statements’ under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the terms and conditions of the Acquisition. 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: general business, economic, competitive, political and social uncertainties; and delay or failure to receive board, shareholder or regulatory approvals. 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 forward-looking statements. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

SOURCE: EastWest Bioscience

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