TGOD Generates $2.9 Million In Q1 2020 Revenues, $73.4 Million Net Loss

The Green Organic Dutchman (TSX: TGOD) reported first quarter 2020 financials this evening after market close, and despite the narrative spin put forth by the company, the quarter was a doozie. The company reported net revenues of $2.9 million, of which just $536,000 came from Canadian cannabis sales – the company in its official news release reported gross figures. Net loss for the quarter amounted to a whopping $73.4 million.

Revenues on a gross basis came in at $3.06 million, with $2.40 million being attributed to the firms European hemp operations. After the cost of production, gross margin for the quarter came in at an electrifying $1.0 million before biological adjustments. Operating costs, comparatively, amounted to $17.0 million, of which general and administrative expenses accounted for $9.8 million, followed by share based compensation at $2.47 million and sales and marketing at $2.46 million.

The bright side here, is that the company is on track to having quarterly general and administrative expenses of just $8 million per quarter as per the company – which still is more than double current revenue figures.

Losses grew during the quarter before the final net loss line as a result of significant impairments to the tune of $55.8 million, which TGOD describes as the following:

Due to the ongoing COVID-19 pandemic, the Company was required under IFRS to reduce the book value of its global assets by $55.8 million for impairment as at March 31, 2020. This reflects the uncertainty created by the pandemic, including the evolution of market demand, the temporary cessation of operating activities in Valleyfield, Québec (“Valleyfield Facility”) and the reduction of activity in Jamaica. This non-cash impairment charge is in line with the announcement on May 14, 2020 and does not impact the Company’s operations or liquidity.

Because evidently half a quarter being stymied from a global pandemic warrants writing down assets collected over the last two years, rather than the simple justification that the company had been overvaluing the assets for years on end. Additionally, the company announced in the release that it has sold its stake in Epican for “a nominal amount given its history of operating losses, recent economic developments in Jamaica restricting operations, and the Company’s strategic decision to no longer pursue opportunities in Jamaica to focus on Canadian operations.” The company is believed to have paid $8.3 million for its stake in June 2018.

Moving to the cash position, The Green Organic Dutchman managed to reduce its cash from $27.6 million to that of $4.8 million over the course of three months, with net cash used in operating activities hitting $13.1 million, and investing activities costing $17.1 million. The expenditures were offset slightly by $6.5 million received from financing activities.

Inventory grew during the quarter, from $8.3 million to $11.2 million, largely a result of the company selling little product, and providing justification for the new brand announced this morning focused on the “mainstream consumer.” Total current assets during the quarter fell from $68.2 million to $32.5 million.

In terms of total current liabilities, accounts payable fell from $52.1 million to that of $39.3 million, with the line item valued at more than all the firms total current assets and presenting a major problem for the company. Total current liabilities came in at $40.7 million, giving TGOD a negative working capital of $8.2 million.

It should also be pointed out that subsequent to the quarter end, the company made a mad dash to grab some cash. The company raised a combined $20.75 from shareholders via two separate equity financings, as well as $10 million from a new $30.0 million credit facility, and $5.0 million from an accordion facility, which means the company can now just barely pay its accounts payables tab. The company believes that this funding, along with “positive cash flow generated from anticipated revenues” will be enough to keep the company operational.

Time will tell.

The Green Organic Dutchman last traded at $0.54 on the TSX.

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Information for this briefing was found via Sedar and The Green Organic Dutchman. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.