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The Hydropothecary Corporation Announces Q3 2017 Results

20:00 EDT 28 Jun 2017 | Marketwired

GATINEAU, QC--(Marketwired - June 29, 2017) - The Hydropothecary Corporation (TSX VENTURE: THCX) ("THCX" or the "Company") today reported its third quarter results, for the three and nine months ended April 30, 2017. The Company's financial statements and related management's 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.

"So much of the business of marijuana relies on execution. THCX has continued to refine processes and control costs, while increasing yields and quality. We are very proud to be able to share with our shareholders not only an improvement on our best in class cost per gram but to now cement our position as one of Canada's cost leaders in the dried marijuana flower."
said Sebastien St-Louis, CEO
.

Operating Highlights

Operating highlights for the third quarter ended April 30, 2017 include:

Subsequent Events

Revenue

Revenue increased over 92% from $617K in the third quarter of 2016 to $1.2M in the third quarter of 2017 and increased 395% to $3.2M for the nine months ended April 30, 2017 from $818k for the nine months ended April 30, 2016. The Company also realized a 51% increase in quarter over quarter shipments in the quarter ended April 30, 2017, with 137,123 grams shipped compared with 90,518 grams shipped in the quarter ended January 31, 2017. Revenue per gram decreased in the third quarter of 2017 to $8.62 from $10.10 in the second quarter of 2017. This decrease is attributable to the increase in sales of the Company's H2 line, a mid market offering, and the continued effect of Veterans Affairs Canada placing a cap on patient reimbursements to $8.50 per gram in November 2016.

Cost of Sales

With the completion of Building 5 in the second quarter of 2017, the Company continued to increase production capacity in the new facility to meet anticipated demand related to the Company's newly launched H2 and Decarb product lines and consequently saw an increase in production expenses as well as a significant increase in the revaluation of biological assets. The Company also realized a decrease in the cash cost per gram of inventory from $1.47 at January 31, 2017 to $1.32 at April 30, 2017.

Operating Expenses

Operating expenses increased 14.3% from $2.1M in the quarter ended January 31, 2017 to $2.4M in the quarter ended April 30, 2017. There were increased payroll related costs as the company's continued expansion allowed the number of full time employees to grow from 46 in the second quarter to 69 in the third quarter. There was also an increase in facility expenses as Building 5 commenced full production, along with an increase in costs related to the Company's compliance costs as a public company following the completion of the business combination between BFK and Predecessor THCX.

Outlook

"We are thrilled that our strategic initiative to move into mid market with our H2 line and the introduction of our Decarb CannaCap product has been so warmly welcomed by customers. We have achieved growth of 51% in grams shipped this quarter over last quarter. We anticipate that our innovation strategy will continue to be met with great customer excitement resulting in an increase in market share and revenue. Additional investments in quality assurance and capital expansion have resulted in us pushing back our profitability to Q4 2018. We are confident this is the right investment the company and industry need at this time."

"Spearheaded by Dr. Shane Morris, THCX undertook an in-depth investigation to determine the source of contamination at our facility. We tested 281 samples, identified the problem, rectified it and conclusively proved to our customers that our product is safe. As part of our ongoing focus on quality we have increased our personnel in quality assurance bringing on new technologists and scientists. We are focused on not only meeting the strict regulatory standards, but on meeting the even stricter demands of our customers."

"Last quarter we promised we would achieve production capacity of 250 kgs a month by May 2017 and we have. We are now committing that focus to completing Building 6, a 250,000 sq. ft. production facility in 2018. The Building 6 expansion is our most ambitious expansion plan to date. We will leverage the knowledge we learned from our Building 5 expansion, and move one step closer to our goal of $1 cost per gram of dried marijuana flower."

"Our focus remains on the medical and upcoming recreational market in Canada and on our core business which is making great products for our customers."

"The market has responded incredibly well to the new products we have launched so far this year. We are very pleased to note that doctors have started specifically prescribing our Decarb products. They see this line as a safer alternative to smoking/inhaling and better patient experience than the currently available ingestible oil products. We are continuing to explore new research and development opportunities, and in fact our regulatory team is in the final stages of approval with Health Canada on an innovative new oil product that we expect to share with the public this summer."

"It's exciting to see movement at the Federal, Provincial, and municipal levels of government as we get ever closer to the July 1, 2018 conclusion date of legalized recreational cannabis in Canada. As we move towards the future recreational market the ability to deliver a quality product while achieving a profitable bottom line will become more important than ever. The strides we have made in the last 18 months have allowed us to increase production and lower our costs, placing us in a position to compete with many of our larger competitors." concluded Mr. St-Louis.

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.

Forward-Looking Information

This press release contains forward-looking information based on current expectations. Examples of such forward-looking information include statements about future operational and production capacity, including expected resulting production cash costs, the impact of enhanced facilities and production capabilities, and expected available product selection. These statements should not be read as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. The Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law.

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.

For further information, please contact:Sebastien St-Louis Chief Executive Officer The Hydropothecary Corporation 1-866-438-THCX (8429) NEXT ARTICLE

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