A medical marijuana company that recently opened a new clinic in Nova Scotia has posted over a $1 million loss in its last quarter, according to financial documents. The loss came after a rapid increase in spending over the same time last year.
Canabo Medical Inc.’s expenses rose by over 300 per cent from the end of January to the end of April 2017, compared to those months in 2016.
Julia Sawicki, an accounting professor at Dalhousie University, said this is likely because the company is only just starting to get up and running. It has yet to post a profit.
Canabo Medical Inc. by mckied on TradingView.com
Julia Sawicki, an accounting professor at Dalhousie University, says it’s normal for companies like Canabo Medical Inc. to lose money when they’re starting out.
“In 2016 they really weren’t spending that much money… now it seems like they’re online and paying salaries… expanding facilities,” she said.
Sawicki said it is normal for a new company to lose money in its first few years as it starts business, but it is hard to determine where it is going in the future. Canabo Medical Inc. did not respond to a request for comment on its financials despite several attempted contacts.
The company makes money in three ways: medical marijuana consultations, collecting data for research, and selling cannabis related products, according to the recent quarterly report. Most of its revenue is generated by medical consultation fees.
The company operates 22 clinics around Canada under the name Cannabinoid Medical Clinic. It operates two clinics in Nova Scotia, one in Halifax on Spring Garden Road and a new one in Wolfville. Others clinics are in Toronto, Ottawa, St. John’s, and Vancouver. It serves 20,000 patients across the country, according to the company’s website.
Canabo Medical also started selling shares to the public, which allowed it to raise around $8 million. The company lists this as a cash asset in its financials, while last year it had only around $2.5 million in cash.
In the six months before April 30, 2017 the company reported spending over $5 million in expenses. Around $2.4 million went towards the cost of starting to sell shares to the public, which is a “one-off” expense, according to Sawicki, and is not representative of its long-term financials.
One of the most dramatic spending increases for the company in its last quarter was on marketing and advertising, which was $275,848, compared to $805 during the same time in 2016. Travel costs also rose to $54,848 from $16,465, according to the quarterly report.
Sawicki said this type of spending is not uncommon for a new company that is getting on its feet.
“They seem pretty normal for a firm that really wasn’t doing that much for the first six months to a firm that’s really cranking up now,” she said.
In the management discussion and analysis, the company states that the reason for the dramatic increase in expenses is due to its clinic expansion and new salaries and benefits. In April 2017 Canabo Medical paid around $355,000 in salaries and benefits, but no amount is stated for April 2016.
The document says the company employs 28 people in total at it clinics and seven corporate staff. Canabo expects this number, and the salary expenses associated with it, to increase over the next year as it expands, according to the documents.
While the federal government has said it will legalize recreational marijuana by 2018, Canabo Medical Inc. does not anticipate this will have a significant impact on its business, according to the discussion of the quarterly report.
The next report the company is scheduled to release is for the period ending July 30, 2017.