The Green Organic Dutchman Reports Fourth Quarter and Fiscal Year 2021 Financial Results

The Green Organic Dutchman Holdings Ltd., a sustainable global cannabis company, reports its results for the three months ended December 31, 2021 and for the twelve months ended December 31, 2021. 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 closed 2021 with strong momentum as we saw significant growth quarter-over-quarter, reflecting continued execution of our strategic plan as we remain focused on quality, consistency and transparency. We are seeing the early benefit of our enhanced sales strategy which has accelerated sell-through. Our two-prong approach of onboarding key retail chains while having boots on the ground with our dedicated sales force is starting to bear fruit,” said Sean Bovingdon, CEO of TGOD. “We are on track to hit our positive Adjusted EBITDA⁽¹⁾ target in Q2 2022, with continued monthly sales progression from the strong month of December,” added Bovingdon.

Fourth Quarter and Year-End 2021 Financial Highlights

The Company:

• For Fiscal Year 2021 the gross revenue from cannabis products was $39.19 million, an increase of 149% from Fiscal Year 2020. The Company has adapted to the market dynamics and in the prior year, launched its Highly Dutch brand for the price conscious consumer and continues to grow its premium flower and hash offerings, both of which have contributed to the increase in current year revenues.
  
  
• Continued sales improvement in adult-use cannabis products with gross revenues increasing by 27% during Q4 2021 to $11.06 million, in comparison to $8.69 million in Q3 2021.
  
  
• Sales in medical cannabis products increased by 79% during Q4 2021 to $0.99 million, in comparison to $0.55 million in Q3 2021.
  
  
• Net revenue increased to $9.47 million in Q4 2021, an increase of $2.19 million or 30% quarter over quarter.
  
  
• Recorded gross margin (before changes in fair value) in Q4 2021 of 32% (“Gross Margin“) an improvement of 3% quarter over quarter, reflecting production efficiencies and higher net revenues with lower excise duties than the previous quarter due to sales mix of products. 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 EBITDA⁽¹⁾.
  
  
• General and administrative (“G&A“) expenses of $4.57 million for Q4 2021, represent a 28% decrease of $1.80 million compared to Q3 2021. The Company will continue to focus on cost discipline and savings in G&A in 2022.
  
  
• Adjusted EBITDA⁽¹⁾ loss was $3.31 million for Q4 2021, representing a 40% improvement compared to Q3 2021, and was $22.60 million for the Fiscal Year being a 35% improvement of $11.93 million over 2020.
  
  
• Loss from operations in Q4 2021 of $5.67 million, an improvement of $3.48 million from Q3 2021. Losses from operations were $28.74 million for Fiscal Year 2021, compared to $40.96 million for the same period in the prior year primarily due to the improvement in revenues and reduction of G&A expenses.
  
  
• As of December 31, 2021, the Company had a positive working capital of $25.72 million (December 31, 2020 – $22.0 million negative working capital) primarily due to the repayment of its senior secured first lien credit facility, modifying its debt under its secured revolving facility (the “Revolver Loan“) to amend the maturity date to June 2023, and reducing accounts payable with the funds received from the Revolver Loan, ATM equity financings and warrant exercises in 2021. The total consolidated cash position was $4.31 million including $0.22 million of restricted cash (December 31, 2020 – $11.83 million of which $0.62 million was restricted cash). This cash will be used primarily towards covering working capital requirements and operating costs as the Company moves towards achieving positive operating cashflow.

Other Strategic Initiatives

• On November 4, 2021, the Company entered into a definitive agreement with Acosta Canada Corp (“Acosta“) for exclusive and dedicated sales representation of TGOD’s adult recreational cannabis brands in key provinces across Canada. The Company made the strategic decision to move away from a syndicated sales model to enable scaled growth with a dedicated sales force through greater product education, market penetration and distribution for its TGOD™, Highly Dutch Organic™ and Ripple™ brand portfolios in the key markets of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Newfoundland. The Company also added a Regional Manager role for Quebec and Atlantic Canada to its team and named a Regional Manager in Calgary to support its presence in Western Canada.
  
  
• TGOD is now in 1,554 stores across the country, as it continues to increase distribution, including going from zero locations to over 370 locations in key retail chains in 2021. Pricing has remained stable with consumers gravitating towards higher quality, high THC flower with strong terpene profiles.
  
  
• In 2021, the Company has expanded its international footprint as it completed its first commercial shipments for the Australian and South African medical cannabis market. The Company expects to introduce more cannabis products to those markets later in 2022.
  
  
• On November 17, 2021, the Company acquired all the issued and outstanding shares of Galaxie Brands Corporation (“Galaxie“). Galaxie is focused on product innovation, branding and manufacturing 2.0 products. Galaxie creates and produces a range of products including premium cannabis edibles, infused pre-rolls, flavoured vapes, oils and solventless products. It also provides manufacturing and product development services to partners across Canada.
  
  
• The Company continues to work with advisors to facilitate the sale of HemPoland.

Key Updates Subsequent to the Quarter:

• The Company has continued to grow revenues and expects a similar growth trajectory achieved in 2021 to continue into 2022, as it heads towards positive operating cashflow. The decision to move to a dedicated sales force continues to enhance sales velocity with the team achieving more than 5,800 visits since early December. The visibility has driven brand recognition of TGOD™, Highly Dutch Organic™, Ripple™ and Cruuzy™.
  
  
• As a result of the Company’s quality flower products and key retail chain penetration, revenues have continued to ramp up. With recent product launches and over 20 new skus already approved for listing, the Company expects key product launches for its product portfolio to be a key catalyst to grow revenues.
  
  
• Galaxie is the exclusive producer of Wyld edibles in Canada. Currently sitting at 25 listings across the country, Wyld will continue to add additional skus and distribution points through 2022.
  
  
• In February 2022, the Company has hit significant milestones across the product portfolio in Ontario according to sales data from the OCS, specifically:
  • o TGOD’s Organic Cherry Mints is the 3^rd best selling 3.5g flower in the premium flower category while Organic Maple Kush is 6^th and Organic Sugar Bush is the 11^th best seller
  • o Cruuzy is the 2^nd top brand in the Resin and Rosin category, with the Supercharged Duubyz infused pre-rolls
  • o Highly Dutch Amsterdam Sativa is the 6^th top selling 28g flower in the province
• On March 10, 2022, the Company announced that it had amended and restated the credit agreement dated September 29, 2021, as amended by a first amendment dated November 20, 2021, relating to the Revolver Loan (the “Credit Agreement“). The Company and its Canadian lender agreed to, amongst other things: (i) increase the revolving facility limit by $5.0 million to $30.0 million; (ii) allow certain eligible inventory to be included as collateral; and (iii) relax certain covenants set forth in the Credit Agreement; subject to the satisfaction of the various conditions set out therein. All other terms of the Credit Agreement will remain the same as before, including the maturity date of June 30, 2023.
  
  
• Member of the Board of Directors (“Board“) and Chair of the Audit Committee Nicholas Kirton has announced his retirement from the Board effective today. Since joining the Board in 2018, Nick has provided strategic leadership and valuable counsel to the Board and the TGOD team. The Company wishes to thank Nick for his service and dedication to helping grow shareholder value and ensuring good governance. Director Chris Schnarr has been appointed as the new Chair of the Audit Committee.

About The Green Organic Dutchman Holdings Ltd.
The Green Organic Dutchman Holdings Ltd. is a sustainable, global cannabis company with a focus on innovation, quality, consistency, integrity and transparency. By leveraging science and technology, TGOD harnesses the power of nature from seed to sale. The Company is committed to cultivating a better tomorrow by producing its products responsibly, with less waste and impact on the environment. In Canada, TGOD serves the recreational market with a brand portfolio including The Green Organic Dutchman, Highly Dutch Organics, Ripple by TGOD and Cruuzy brands, and the medical markets in Canada, South Africa, Australia, and Germany. For more information on The Green Organic Dutchman Holdings Ltd., please visit www.tgod.ca.