The Green Organic Dutchman (OTCQX: TGODF)saw its shares plunge by over 9% to lately trade at 63 cents after the company reported its third-quarter earnings following the market close on Thursday. The company delivered revenue of C$2.53 million, which missed estimates by C$1.77M. TGOD also delivered a net loss of $20.1 million for the quarter, of which $4.3 million was related to non-cash stock-based compensation, depreciation and amortization.
The company said it has “reorganized to reduce general and administrative expenses by approximately $3 million per quarter starting in Q1-2020 on a path towards positive operating cash flow by the end of Q2 2020.”
“Q3 marked TGOD’s entry into the recreational cannabis market with a small pilot in Ontario. We were thrilled to witness such positive feedback on product quality and packaging from retailers and consumers across the province. Based on the initial response, demand for high-quality flower is strong and TGOD is well-positioned to capture the premium organic segment which is significantly underserved,” commented Brian Athaide, CEO of TGOD. “Despite the challenging market conditions in Canada, TGOD has an opportunity to be one of the first cash flow positive cannabis companies as early as Q2 2020. We rightsized our production and our first hybrid greenhouse is being commissioned, allowing us to produce at optimal levels while avoiding excess inventory or incurring unnecessarily high operating expenses. Our first harvest from the Ancaster hybrid greenhouse is expected in December, which will enhance our current product line and enable TGOD’s first material revenues in Canada in Q1 2020 which is very exciting,” continued Athaide.
HemPoland, the company’s wholly-owned subsidiary, saw a decrease in revenues in the third quarter to $2 million from $2.9 million in the second quarter due to fewer low margin bulk CBD extract sales. However, TGOD did see an increase in the number of sales of its high margin branded CannabiGold and private label products, resulting in gross margin of 80%, up from 69%.
TGOD said that it signed arrangements for up to $103 million in funding to be used mainly as bridge financing until TGOD becomes cash flow positive which is expected by the end of Q2 2020. According to the filing, “As of September 30, 2019, the company had working capital of $24 million and an accumulated deficit of $109 million.” The company came under fire for saying it needed more money to complete its facility projects after having said in investment presentations that all projects were fully funded.
The company has a conference call scheduled for Friday morning.