TORONTO, Nov. 10, 2020 /CNW/ - PRESS RELEASE - The Green Organic Dutchman Holdings Ltd. has announced its financial results for the third quarter of 2020 ended Sept. 30, 2020, and leadership changes. These filings are available for review on the company's SEDAR profile at www.sedar.com.
Leadership Changes
The company announced that Brian Athaide has left his positions as Chief Executive Officer (CEO) and board director effective immediately. TGOD Chief Financial Officer Sean Bovingdon has been appointed Interim CEO. In addition, Michel Gagné, Vice President of Operations, has been appointed Chief Operating Officer (COO), overseeing the company's cultivation and processing operations, supply chain and product development. In his new role as COO, he will work closely with the CEO on the company's overall strategy and execution.
The board of directors decided that a change in leadership was necessary to drive the company forward as it enters its next phase of growth and continues to work towards achieving positive EBITDA and cash flow as rapidly as possible. Under the company's new leadership, TGOD will operate with a renewed commitment to executional excellence and cost discipline as the company drives revenue growth and operational stability.
"On behalf of the board of directors, we thank Brian Athaide for his contribution to TGOD and I am pleased that Sean has agreed to lead the company at this critical juncture," commented Jeff Scott, chairman of the board. "He recognizes the challenges we must confront, and I look forward to working with him and the rest of the TGOD team to pave a new way forward for the company."
"During the third quarter, despite certain production challenges that have now been addressed, we continued to deliver growth following the launch of our mainstream brand, Highly Dutch, in Quebec, as well as teas and RIPPLE dissolvable powders. Our focus will continue to be on improving the execution of our existing production while developing innovative and distinctive products to introduce into more stores across the country," commented Bovingdon.
"We saw encouraging numbers in October as we sold more flower, additional RIPPLE and tea variants, and launched hash in Quebec. We are looking to build on this growth while focusing on financial discipline throughout the company," added Bovingdon.
Q3 Financial Highlights
Quarterly revenue of $5.71 million consisting of sales from cannabis products in Canada of $3.84 million and hemp-derived product sales in Europe of $1.87 million. The 41% increase in revenue from Canada from Q2 to Q3 can be attributed to the entry into the Quebec market with the launch of the company's mainstream brand, Highly Dutch, which was introduced at the end of May 2020 and ramped up in Q3, along with the introduction of TGOD's premium tea lineup.Loss from operations decreased by 68% in Q3 2020 compared to Q3 2019 to $6.34 million, primarily driven by increased gross profit and decreased operating expenses.Net loss of $76.24 million consisting primarily of a non-cash impairment charge of $67.84 million realized during the quarter to reflect changes in the timing of accessing market demand, sales price compression across the industry, and the resulting slower revenue ramp up and growth. This non-cash charge has no direct impact on the company's operations or liquidity. General and administrative expenses of $5 million for the quarter decreased in comparison to expenses of $13.34 million during the prior-year period and represent a decrease of $0.71 million from Q2-2020. The reductions from the prior quarter reflect the company's continuing plan to significantly reduce spending on third-party vendors, and was partially offset by increased severance costs of $0.6 million and the fact that the company received $0.34 million in CEWS payments in Q2-2020. Excluding these severances and one-time CEWS benefit, underlying G&A reduced by $1.6 million or almost 30% versus the prior quarter.Q3 Business Highlights
The company obtained a European Union Good Manufacturing Practice (EU-GMP) certificate for its Ancaster facility, enabling it to commence exporting its premium certified organic products to Germany for validation in preparation for commercialization in 2021. The company anticipates validation will be completed by the end of 2020, subsequently enabling export of medical cannabis products for commercialization to Europe and other jurisdictions.The company launched vapes in Alberta and British Columbia, listed Highly Dutch mainstream flower in Manitoba, Newfoundland, Ontario, and Saskatchewan, and added Zen Green Sencha tea to its product assortment in Quebec.The company completed the necessary equipment transfers to transform its Valleyfield facility into a production and processing hub for its 2.0 products following challenges with third-party processing. Production at the Quebec Facility of dissolvable powders, premium teas and concentrates has commenced, along with co-packing of third-party cannabis brands in October, which is helping absorb costs and better leverage the company's assets and licenses in Quebec. The company launched Organic Afghan Black hash under the Highly Dutch brand in Quebec with initial sales exceeding expectations.The company continues to monitor and adapt to changing market conditions including but not limited to the ongoing impact of the COVID-19 pandemic and has implemented precautionary protocols which have enabled all operations to continue uninterrupted.Subsequent to the Quarter
On Oct. 1, 2020, the company agreed with its lender to extend the maturity date for its revolving credit facility to Dec. 31, 2021, in exchange for common share purchase warrants to purchase 500,000 Common Shares at a price of $0.30 per share expiring Nov. 2, 2025. On Oct. 2, 2020, the company agreed with its senior lender to extend the maturity date for its senior secured credit facility to Dec. 15, 2021, in exchange for payment of a financing fee of $0.4 million and repricing of common share purchase warrants to purchase 7,000,000 Common Shares expiring Dec. 20, 2022 from an exercise price of $1.00 per share to an exercise price of $0.30 per share, and extension of the expiry date to Nov. 2, 2025, and issuance of additional common share purchase warrants to purchase 1,000,000 Common Shares at an exercise price of $0.30 expiring Nov. 2, 2025.On Oct. 23, 2020, the company secured additional financing by closing a transaction with gross proceeds of $12.78 million for new equity. The underwriter purchased, on a bought deal basis, an aggregate of 53,263,400 units at a price of $0.24. Each unit is comprised of one Common Share and three-quarters of one common share purchase warrant of the company. Each warrant entitles the holder to acquire one Common Share of the company until Oct. 23, 2025 at an exercise price of $0.30 per warrant.