Mr. Brian Athaide reports
THE GREEN ORGANIC DUTCHMAN UNVEILS NEW STRATEGIC PLAN TO REDUCE FINANCING REQUIREMENTS WHILE MAINTAINING NEAR TERM PATH TO PROFITABILITY
The Green Organic Dutchman Holdings Ltd. has unveiled a new strategic plan, including a series of actions to reduce the company's financing requirements, while maintaining its path to profitability. These actions will result in increased agility, lower capital requirements and an optimal production capacity to serve the organic segment.
"These actions are logical next steps in TGOD's road to profitability. While we are committed to -- and our strategy continues to leverage -- our unparalleled scale as an organic producer as well as our international assets, we have identified areas where our scale would not provide for meaningful returns in the near term, given the slower pace of legal market conversion. We will optimize our operating efficiency by deferring excess capacity and expenses, whether they centre on production facilities, international expansion projects or technology," commented Brian Athaide, chief executive officer of Green Organic Dutchman Holdings.
Given current market conditions, the company is adopting a new construction and operating plan to reduce its cash needs, with a prudent production ramp leading to expected positive operating cash flow in the second quarter of 2020. The Ancaster greenhouse is complete, and the Ancaster processing facility is approximately five weeks from material completion. Green Organic Dutchman Holdings' large-scale project in Valleyfield, Que., will be demarcated into smaller phases, with more to be completed once the market further develops. The combined facilities will enable Green Organic Dutchman Holdings to produce 20,000 kilograms to 22,000 kilograms in 2020.
The company estimates that it will need approximately $70-million to $80-million between now and the end of Q2 2020 to undertake the plan and reach positive operational cash flow by Q2 2020; it has engaged with an adviser and is currently evaluating a variety of options to secure the required financing. This plan maintains the optionality to recommence completion of Valleyfield phase 1a to full 65,000-kilogram capacity and phase 1b for a further 65,000 kilograms once there is a clear path to Canadian retail store expansions and legal revenue growth. Financing is expected to come from operating cash flow or with lower-cost financing given proven production and revenue from Ancaster and the smaller first phase of Valleyfield.
"With the current Canadian legal market being smaller than initially anticipated, mainly due to a slow rollout of retail locations in key provinces, we believe that our revised plan will allow TGOD to right-size its production to capture the organic segment, while maintaining optionality, to quickly accelerate and expand as more retail locations begin to open," added Mr. Athaide.
Some of the actions included in Green Organic Dutchman Holdings' new strategic plan are disclosed herein.
Green Organic Dutchman Holdings is ready to commercialize its portfolio of new products, including organic teas, infusers and vapes, by mid-December.
- The company already has formulations and is working with several co-packers to launch liquid beverages and topicals during 2020 as Health Canada licenses these facilities.
The portfolio is consumer inspired and concept tested to ensure clear differentiation and product superiority, including preliminary pharmacokinetic study data.
Green Organic Dutchman Holdings is scaling back selling, general and administrative expenses (SG&A) to focus on operational readiness in production, sales and cannabis 2.0.
The Ancaster site will be fully completed by the end of the fourth quarter, including the processing facility.
Ancaster has a planned annual production of approximately 12,000 kilograms in 2020, which is on path to mature scale capacity of 17,500 kilograms.
Finalize six rooms in Valleyfield hybrid greenhouse, one to be used for mothers and another for initial processing, that are currently nearing completion, with majority of capital for these covered by restricted cash on hand as at Sept. 30;
- Planned annual production from the four grow rooms of 10,000 kilograms in 2020;
Production from Valleyfield will complete processing and packaging in Ancaster, generating significant gross margin;
- Fully enclose the facility for protection during winter months;
The other elements of Green Organic Dutchman Holdings' Valleyfield site phase 1a, including another 18 grow rooms and the processing centre, will recommence completion once market conditions justify the expansion toward the full 65,000-kilogram capacity from that phase, with the ability to scale to 130,000 kilograms should the legal market conversion significantly accelerate.
About The Green Organic Dutchman Holdings Ltd.
Green Organic Dutchman Holdings is a publicly traded, premium, global, organic cannabis company, with operations focused on medical cannabis markets in Canada, Europe, the Caribbean and Latin America, as well as the Canadian adult-use market. The company also has organic hemp cannabidiol oil operations in Canada and, through its wholly owned subsidiary, HemPoland, distributes premium hemp cannabidiol oil in the European Union. Green Organic Dutchman's products are laboratory tested to ensure patients have access to a standardized, safe and consistent product.
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