TORONTO, May 25, 2022 /CNW/ --PRESS RELEASE-- The Green Organic Dutchman Holdings Ltd. (CSE: TGOD) (OTC: TGODF), a sustainable global cannabis company, reports its financial results for the quarter ended March 31, 2022. These filings are available for review on the company's SEDAR profile at www.sedar.com. All financial information is provided in Canadian dollars except where otherwise indicated.
Management Commentary:
"We continued our momentum from Q4 2021 with strong Q1 2022 results, including another record month in March. These results can be attributed to the launch of new products and our existing products gaining further traction, affirming the strategic approach we have taken," commented Sean Bovingdon, CEO of TGOD. "In addition to continuing to increase our retail distribution by investing in building relationships with the retail cannabis chains to expand distribution, we are preparing for future growth. We remain on track to achieve breakeven EBITDA on a monthly basis in Q2 and are pursuing opportunities for additional cultivation for 2023 to meet the strong demand for our products, specifically our premium flower. We continue to have strong conviction in our potential to achieve significant growth quarter over quarter, as we remain focused on quality and consistency, as well as continued cost discipline and execution to build a strong and sustainable organization and brands that consumers love."
First Quarter 2022 Financial Highlights:
| Three months ended | Three months ended | |||||||
| March 31, 2022 | March 31, 2021 | Variance to Q1-2021 ($) | Variance to Q1-2021 (%) | December 31, 2021 | Variance to Q4- 2021 ($) | Variance to Q4- 2021 (%) | ||
| Net Revenue | 10,575 | 5,389 | 5,186 | 96% | 9,466 | 1,109 | 12% | |
| Cost of sales | 6,868 | 5,348 | 1,520 | 28% | 6,432 | 436 | 7% | |
| Gross profit (loss) before changes in fair value of biological assets | 3,707 | 41 | 3,666 | 8941% | 3,034 | 673 | 22% | |
| Gross profit (loss) % before changes in fair value of biological assets | 35.05% | 0.76% | 32.05% | |||||
| Realized fair value adjustment on sale of inventory | (2,435) | (1,530) | (905) | 59% | (2,535) | 100 | (4%) | |
| Unrealized gain on changes in fair value of biological assets | 4,305 | 3,321 | 984 | 30% | 4,368 | (63) | (1%) | |
| Gross profit (loss) | 5,577 | 1,832 | 3,745 | 204% | 4,867 | 710 | 15% | |
| Gross profit (loss) % | 52.74% | 34.00% | 51.42% | |||||
The company:
Achieved record quarterly net revenues of $10.58 million, a 96% increase from Q1 2021, and a 12% increase from Q4 2021. The quarter-over-quarter increase in revenue is in line with the company's forecast and can be mainly attributed to the launch of premium flowers (Cherry Mints & Maple Kush), launch of Pre-rolls, and Highly Dutch Organic™ flower gaining traction in 2022. With Acosta Canada Corp, providing direct store support as well as budtender and consumer education, in addition to the new listings accepted in key markets for January 2022, the company achieved significant increased revenues in key markets. The company has also invested in building relationships with the retail cannabis chains to expand distribution in the past six months.Improved gross margin (before changes in fair value) to 35% from 32% in Q4 2021, reflecting higher net revenues due to sales mix of products moving towards premium flower. The company believes gross margin and net revenue in Canada will continue to increase as it sells proportionately more premium flower, which should result in achieving breakeven adjusted earnings before interest, taxes, depreciation, and amortization.(1)General and administrative expenses decreased to $3.92 million for the three months ended March 31, 2022, a 14% decrease in comparison to $4.57 million for Q4 2021. In comparison to Q4 2021, G&A expenses decreased by $0.65 million which is primarily a result of the reduction in overall office expenses and the reduction of termination benefits that were incurred in the prior quarter. Adjusted EBITDA loss was $2.24 million for Q1 2022, representing a 57% improvement of $2.93 million compared to Q1 2021 as a result of the company's increase in revenue and continued cost cutting initiatives as well as a sales mix with premium flower accounting for 27% of overall sales versus 19% in the previous quarter.As of March 31, 2022, the company had positive working capital of $19.01 million (including non-cash contingent consideration liability of $4.78 million).Key Initiatives:
The company expanded its production base to meet increasing consumer demand by adding cultivation at the facility in Valleyfield, Quebec. The company expects Valleyfield to add 2,500 to 3,000 kgs of flower annually while remaining the production facility for hash products. On March 10, 2022, the company announced that it had agreed with its Canadian lender for the Revolver Loan to: (i) increase the overall Revolver Loan limit by $5 million to $30 million; (ii) allow certain eligible inventory to be included as collateral; and (iii) relax certain non-financial covenants; subject to the satisfaction of various conditions set out therein. In exchange, the company issued 500,000 common shares of the company to the lender at a price of $0.10 per Common Share. All other terms under the Revolver Loan remained the same. Since October 2021, the company has been engaged with advisors for the sale of company's entity in Poland, HemPoland S.p.a. Z.o.o., which was deemed non-core to future operations and the company strategy. The company received a non-binding competitive offer subsequent to Q1 2022. The company anticipates completing the sale of HemPoland within the coming months.Key Updates Subsequent to the Quarter:
On April 29, 2022, the company announced that the Revolver Loan was amended and restated, whereby the lender agreed to: (i) increase the overall Revolver Loan limit from $30 million to $34 million, through providing an additional advance of $4 million (ii) increase the term portion of the Revolver Loan from $20 million to $24 million (iii) amend the EBITDA financial covenant (as defined in the Revolver Loan agreement) to take effect on June 30, 2022, (iv) remove the covenant requiring a $4 million prepayment through funds raised by the sale of HemPoland and (v) introduce certain prepayment fees in the combined amount of 2% of any prepayments, subject to the satisfaction of various conditions set out therein.On May 17, 2022, the company announced it raised additional working capital through asset sale of its leasehold improvements at the Puslinch facility with the landlord for $3 million. $2 million of the Consideration will be paid to the company in cash, and $1 million of the consideration will settle previous loans advanced to the company by the landlord, including all accrued interest and transaction costs thereon. In connection with the transaction, the company has also agreed to an increase in rent of $25,000 a month for the remainder of the lease term on the Puslinch facility of approximately 19 years.]]>