Mr. Cam Battley reports

BEDROCAN ANNOUNCES Q4 AND FISCAL 2015 YEAR-END RESULTS

Bedrocan Cannabis Corp. has released its financial and operational results for the three- and 13-month periods ended Jan. 31, 2015. Bedrocan Cannabis's wholly owned subsidiary Bedrocan Canada Inc. is a licensed producer under the marihuana for medical purposes regulations.

Fourth quarter and year-end financial and operational highlights:

• Revenues of medicinal cannabis to authorized patients in Canada were $487,430 for the three-month period ended Jan. 31, 2015, and $1,574,174 for the 13-month period ended Jan. 31, 2015.
• Gross profit was $182,897 for fourth quarter 2015, and $587,457 for the 13-month period ended Jan. 31, 2015, and in line with management's forecast.
• The company announced renewal of its first licence from Health Canada, effective Dec. 2, 2014, and valid for one year, for the sale of up to an additional 240 kilograms of imported dried medicinal cannabis.
• It expanded its exclusive licence agreement with Bedrocan BV in December, 2014, to include rights in South America.
• The company established a medical advisory board, providing expert counsel regarding continuing research programs and clinically appropriate uses of medicinal cannabis by patients.
• It established a patient advisory board to provide insights on the experience of patients and how Bedrocan can best meet the needs of current and future patients.
• The company amended lease agreement with its landlord to extend the initial term from five to 10 years, ending on Aug. 31, 2024, and also agreed to a $2-million secured loan facility to complete construction of its domestic production facility.
• The company completed its qualifying transaction with POCML2, a capital pool company listed on the TSX Venture Exchange in a going-public transaction on Aug. 20, 2014.

Subsequent to year-end:

• Completed construction, on schedule, of its 52,000-square-foot domestic production facility in the Greater Toronto Area;
• Received its second licence from Health Canada to allow for the production of medicinal cannabis in the first six grow rooms of its new production facility, since expanded to 18 grow rooms, as well as the trimming and drying rooms;
• Was issued an import licence from Health Canada to allow for the transfer and import of live plant material consisting of genetic clones of Bedrocan BV's proprietary strains of medicinal cannabis;
• Launched domestic production operations, transitioning to the second phase of the company's growth strategy;
• Received a $1.5-million lease inducement and was advanced $2-million of the related loan for completion of leasehold improvements on the new production facility;
• A total of 1,237,500 warrants was exercised for total gross proceeds to the company of $742,500.

"Our results reflect the continued growth of our revenues and execution of key initiatives to drive growth. Subsequent to year-end, we were able to initiate our domestic production activities at our new state-of-the-art production facility, marking the important transition to the second phase our growth strategy. With the successful import and transplant of live genetic clones from Bedrocan BV, we are on track to harvest our first domestic crops for shipment to patients in Canada in our quarter ending July 31, 2015," said Marc Wayne, chief executive officer. "We are well positioned to gain additional patients and, moving forward, become the producer of choice for pharmaceutical-grade medicinal cannabis in Canada."

Financial highlights

Bedrocan Canada was incorporated on Feb. 24, 2012, and had limited business operations during fiscal 2012 and 2013. Furthermore and pursuant to the qualifying transaction, Bedrocan Canada changed its year-end to Jan. 31 to correspond with POCML2's year-end resulting in the noted Dec. 31, 2013, comparative period.

The following compares the company's audited consolidated operating results for the 13-month period ended Jan. 31, 2015, and the year ended Dec. 31, 2013.

Revenue

For the three- and 13-month periods ended Jan. 31, 2015, the company generated revenues of $487,430 and $1,574,174, respectively, compared with nil for the comparative periods ended Dec. 31, 2013. All revenues were related to the import and sale of medicinal cannabis pursuant to a licence issued from Health Canada on Dec. 16, 2013. The company's licence was further renewed by Health Canada for one additional year, effective Dec. 2, 2014.

Gross profit

For the three- and 13-month periods ended Jan. 31, 2015, the company's gross profit amounted to $182,897 and $587,457, respectively, compared with nil for the comparative periods ended Dec. 31, 2013. Gross margins for the three- and 13-month periods ended Jan. 31, 2015, were 37 per cent, respectively. The company's cost of goods sold and, as a consequence, its gross profit margins are based on a contractual obligation with Bedrocan BV for the duration of the company's initial import strategy phase, after which the Bedrocan BV licence terms, as more fully described in the business overview section of management's discussion and analysis and in the company's filing statement on SEDAR, will then become effective.

Net loss

For the three- and 13-month periods ended Jan. 31, 2015, the company recorded a net loss and comprehensive loss of $1,624,196 (or approximately two cents per share) and $5,745,673 (or approximately 10 cents per share), respectively, compared with a net loss and comprehensive loss for the comparative period ended Dec. 31, 2013, of $129,490 (or 0.3-cent loss per share) and $190,282 (or one-cent loss per share), respectively.

Cash and liquidity

As at Jan. 31, 2015, the company's cash and short-term investments amounted to $4,120,205. Harmonized sales tax receivable from Canada Revenue Agency amounted to $1,296,712, and consequently, the company's available liquidity amounted to $5,416,917 as at Jan. 31, 2015, compared with $64,790 as at Dec. 31, 2013. Consequently, the company had working capital of $503,891 as at Jan. 31, 2015, compared with a working capital deficiency of $105,970 as at Dec. 31, 2013, resulting in increase in working capital of $609,861 during the year. This increase in liquidity is primarily due to completion of the $4.4-million private placement on April 4, 2014, and the release of $11,475,000 in restricted cash in August, 2014, related to the company's May, 2014, subscription receipt financing, offset by activities related to the company's 13 months of operations and net additions to leasehold improvements during the year.

Outstanding share data

As at May 21, 2015, 72.83 million common shares were issued and outstanding, in addition to 3,711,000 stock options to purchase common shares and 13,745,000 warrants to purchase common shares were reserved for future issuance.

Going concern assumption

The company's anticipated level of gross expenditures and of remaining commitments, including additions to property and equipment for the next 12 months, is expected to exceed the company's cash and short-term investments on hand as of Jan. 31, 2015, and as such, management's view is that the success of Bedrocan is dependent upon obtaining additional financing for its capital additions, obtaining further approval from Health Canada to expand its current capacity to produce, sell and distribute medicinal cannabis in Canada and achieving profitable operations, all of which are outside of management's control.

Outlook

Bedrocan's business strategy is to penetrate the Canadian market in two phases. The company recently transitioned to the second stage of its strategy with completion of its domestic production facility and receipt of its second licence with Health Canada to begin domestic production of standardized pharmaceutical-grade cannabis for sale to authorized patients in Canada.

The full version of the financial statements and management's discussion and analysis can be viewed on the company's website and on SEDAR.

Investor relations

Effective May 6, 2015, the company's contract with Equicom Group Inc. to provide investor relations services has been terminated, and consequently, the company will be managing investor relations through internal resources. The value of the contract for the core services provided is approximately $80,000 for the duration of the contract, including the required notice period.

We seek Safe Harbor.