TORONTO, March 1, 2019 /CNW/ - Hill Street Beverage
Company Inc. ("Hill Street" or "the Company") (TSX-V: BEER)
reported its fiscal Q2 2019 financial results for the three-month
period ended December 31, 2018. A
complete set of financial statements and Management's Discussion
& Analysis has been filed at www.sedar.com. All dollar figures
are quoted in Canadian dollars.
FQ2 2019 Financial Highlights
- Quarterly gross revenue of $527,652, down 12% y/y;
- Net loss of $1.4 million for the
quarter, compared to a net loss of $0.4
million y/y;
- Working capital of $2.2 million,
compared with $1.5 million for same
period last year;
- End of quarter cash position of $1.1
million, with no debt.
"Gross revenue declined in fiscal Q2 2019 because an order from
an existing retail customer was delayed but received subsequent to
quarter end," said Terry Donnelly,
CEO. "Despite this delay, gross revenue for the first half of our
fiscal year grew 36% over last year, and we expect materially
increasing revenues through the back half of our fiscal year. We
invested heavily in marketing and promotional activities during the
quarter ended December 31, and
investors will begin to see the results from that spend in brand
and volume gains. In the short-term, investors will see evidence of
our marketing activities in the soon-to-be-released results from
our Hill Street Challenge."
Results of Operations
Results for the
Period Ended
|
Quarter
Ended
|
Quarter
Ended
|
Six Months
Ended
|
Six Months
Ended
|
|
|
December 31,
2018
|
December 31,
2017
|
December 31,
2018
|
December 31,
2017
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
Gross
Revenue
|
|
527,652
|
|
599,048
|
|
1,321,591
|
|
972,088
|
Chargebacks and
Listing Fees
|
|
(132,296)
|
|
(473,563)
|
|
(414,574)
|
|
(643,849)
|
Net
Revenue
|
|
395,356
|
|
125,485
|
|
906,945
|
|
328,239
|
Direct
Costs
|
|
(169,569)
|
|
(244,532)
|
|
(464,444)
|
|
(364,909)
|
Gross
Profit
|
|
225,787
|
|
(119,047)
|
|
442,501
|
|
(36,670)
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
$
|
1,145,038
|
$
|
320,037
|
$
|
2,031,588
|
$
|
573,958
|
Other One- time
Expenses
|
$
|
230,867
|
$
|
-
|
$
|
535,542
|
$
|
-
|
Non-cash
Expenses
|
$
|
262,493
|
$
|
481
|
$
|
483,779
|
$
|
962
|
|
|
|
|
|
|
|
|
|
|
Loss before other
Income (Expenses)
|
|
(1,412,611)
|
|
(439,565)
|
|
(2,608,408)
|
|
(611,590)
|
|
|
|
|
|
|
|
|
|
|
Other Income
(Expenses)
|
|
|
|
|
|
|
|
|
|
Charges related to
RTO
|
|
-
|
|
-
|
|
(8,921,869)
|
|
-
|
|
Foreign exchange gain
(loss)
|
|
(1,168)
|
|
160
|
|
(16,055)
|
|
5,658
|
|
Write-off
inventory
|
|
(59,449)
|
|
-
|
|
(67,456)
|
|
-
|
|
Other
income
|
|
30,208
|
|
-
|
|
32,848
|
|
-
|
Loss and
comprehensive loss for the period
|
|
1,443,020
|
|
439,405
|
|
11,580,940
|
|
605,932
|
Basic and diluted
loss per common share
|
|
0
|
|
1
|
|
0
|
|
1
|
Weighted average
number of common shares
|
|
87,112,165
|
|
503,718
|
|
76,224,512
|
|
502,298
|
DESCRIPTION OF THE BUSINESS
The Corporation presently
has one business segment, the marketing and distribution of
alcohol-free beer and wine in Canada and, to a much lesser extent,
the United States. Hill Street
sells its products online and in approximately 4,000 recognized
retail chain stores through licensed distributors in Canada. In the quarter ended December 31 2018, the Company also announced
significant new distribution and retail listings, giving it an
addressable retail market of nearly 7,000 stores, with significant
new coverage of the independent retail channel across Canada via National Importers, and the
depanneur retail segment in Quebec
via Clark, Drouin, Lefebvre (CDL). It also provides a direct
consumer subscription service at www.hillstreetbevco.com. In
addition, the Corporation is focusing on expanding its business
segments to include Cannabis infused beverages later in 2019 or
2020 when Cannabis edibles become legal.
Non-Alcoholic Adult Beverages
The Non–Alcoholic retail segment remains one of the fastest
growing segments in the beverage category according to Nielsen, the
leading retail analytics company. This growth has created an
interesting inflection point in how retailers manage the category.
Retailers are now evolving from a "transactional" approach to a
"strategic" one. Most large box retailers have implemented or are
about to implement new designs to optimize sales and profit. They
look for relevant and interesting product portfolios and the
vendors who can support and grow the category.
Hill Street's launch of four new Vin(Zero) wines and two Hill
Street craft beers in the first quarter were met with strong
interest in the retail channel. The portfolio of products saw an
increase in distribution in the quarter ended December 31, 2018 with the expansion into the
Sobeys and Safeway chains in western Canada as well as a commitment to expand
multiple new listings nationally in the upcoming fiscal third
quarter. Loblaws Limited (LCL) also remains a strong partner, with
a commitment to expand the Company's branded portfolio of listings
in their Loblaws, Zehrs and Fortino's chains and to expand their
private label listings that Hill Street produces (expected in Fall
2019).
According to Nielsen, Quebec is
the largest market in Canada for
Non-Alcoholic wine and beer beverages and has over 3,000 points of
retail distribution actively selling them. In the quarter ended
December 31, 2018, Hill Street signed
an exclusive sales and distribution agreement with Clark Drouin Lefebvre to begin the brand's
market penetration.
Cannabis-infused Adult Beverages
In addition to building an alcohol-free beverage business, Hill
Street recognized early that the regulations permitting the use of
recreational cannabis, prohibited the mixing of alcohol and
cannabis in commercial products. Therefore, if a beer or wine
company wanted to make cannabis-infused versions of their
beverages, they would first have to produce great tasting
alcohol-free versions before they could add cannabis. Hill Street
is an award-winning producer of alcohol-free adult beverages with
over a decade of experience in producing these products.
Hill Street filed its application for a standard processor
license under the Access to Cannabis for Medical Purposes
Regulations Act in October 2018. Hill Street has updated and
amended its application under the new Cannabis Act, Bill C-45, to
become a legal producer of cannabis-infused beverages when edible
forms of cannabis become legal in late 2019 or early 2020.
This legalization is dependant on the issuance of the final
regulations for these products from Health Canada. Hill Street's
partnership with Lexaria Bioscience Corp. ("Lexaria") has resulted
in the Company procuring the equipment necessary to produce the
material for infusing its beverages with cannabis extracts.
In the quarter, the Corporation and Lexaria focused on the training
and development work as well as production planning for Hill
Street's cannabis beverage production facility. Lexaria's
technology was given a significant boost in the form of an
investment from global tobacco giant, Altria, providing further
credence that Hill Street's choice of their technology was a
prudent decision.
Management continues discussions with a number of licensed
producers to provide cannabis extracts for use in Hill Street's
proposed beverages, as well as engaging with a wide array of
companies who wish to use Hill Street's proposed facilities for
co-packing purposes. Once Hill Street's manufacturing facility is
functioning, management anticipates generating a portion of its
revenues from co-packing for other cannabis companies.
About Hill Street Beverage Company Inc. (TSXV:BEER)
Founded in 2008, Hill Street Beverage Company is the world's
most award-winning company exclusively focused on alcohol-free
beer, wine, and adult format beverages. Hill Street products
include: Hill Street Craft Brewed Lager, Designated Draft
alcohol-free beer, Vin(Zero) wines, and Vintense wines. Hill
Street's award-winning products have won the Retail Council of
Canada's Grand Prix, and numerous
medals and accolades including three Gold, two Silver, and two
Bronze Medals at the U.S. Open Beer Championships, and a
prestigious Double Gold Medal at the San Francisco International
Wine Challenge. As a result of the Royal Assent of Canada's Bill C-45, legislation to allow the
sale of cannabis-infused beverages is expected to occur by
October 17, 2019. Hill Street is
currently applying for appropriate licenses to permit the
production and sale of cannabis infused beverages in Canada, with the view of having infused
products available for sale once the regulations permit.
www.hillstreetbeverages.com
Follow Hill Street on
Twitter https://twitter.com/hillstreetbevco
and on Facebook http://facebook.com/hillstreetbevco
FORWARD-LOOKING STATEMENTS
Statements in this press release may contain forward-looking
information. Any statements in this press release that are
not statements of historical fact may be deemed to be
forward-looking statements. Forward-looking statements are often
identified by terms such as "may", "should", "anticipate",
"expects", and similar expressions. The reader is cautioned
that assumptions used in the preparation of any forward-looking
information may prove to be incorrect. Events or circumstances,
such as future availability of capital on favourable terms, may
cause actual results to differ materially from those predicted, as
a result of numerous known and unknown risks, uncertainties, and
other factors, many of which are beyond the control of the
Company. The reader is cautioned not to place undue reliance
on any forward-looking information. Such information,
although considered reasonable by management at the time of
preparation, may prove to be incorrect and actual results may
differ materially from those anticipated. Forward-looking
statements contained in this press release are expressly qualified
by this cautionary statement. The forward-looking statements
contained in this press release are made as of the date of this
press release. The Company does not undertake any obligation to
update publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by securities law.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
SOURCE Hill Street Beverage Company Inc.