The Green Organic Dutchman Holdings Ltd. (OTCQX: TGODF) is a research & development company licensed under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) to cultivate medical cannabis. The Company carries out its principal activities producing cannabis from its facilities in Ancaster, Ont., pursuant to the provisions of the ACMPR and the Controlled Drugs and Substances Act (Canada) and its regulations.

The company has achieved significant accomplishments in a very short span of time and is moving forward at a rapid pace on its aggressive, de-risked business plan and continues to expand all aspects of its business significantly. Most recently, on August 21st, the company announced it signed an agreement to acquire 100% of the issued and outstanding shares of privately-held HemPoland for $7.75M cash and 1,968,323 restricted TGODF shares currently worth $7.75M, which will be escrowed for a term of three years from closing.

 

Transaction Highlights:

• Acquisition cost of US$7.75 million in cash and 1,968,323 restricted TGODF shares currently worth US$7.75 million (~CAD$20.4 million combined) with an additional US$10.3 million (CAD$13.5 million) cash investment for rapid European expansion
• Additional performance-based incentives of up to US$12 million (CAD$15.8 million) for delivery of US$32 million (CAD$42.1 millions) of EBITDA in fiscal 2021
• European gateway with distribution channels to over 750 million people and sales in over 700 locations across 13 countries
• Premier selling CBD oil brand “Cannabigold,” a recognized leader in the EU and 32,000 kgs of dried flower production from 1,250 acres of cultivation
• Leading innovative organic brand with diverse, novel product offerings and unique IP

As per management, HemPoland is a key component to a number of strategic acquisitions and planned partnerships focused on expanding its global distribution network. This acquisition will significantly add to the Company’s top and bottom line. Gaining market share with CBD products now, in the EU, with over 700 locations allows TGODF to establish immediate brand awareness across all verticals including infused beverages. This is an accretive acquisition and gateway to Europe’s 750 million people accelerating the company’ plan of becoming the world’s largest organic cannabis brand.

 

Before this on August 15th, the company announced its financial and operational results for the second quarter of fiscal 2018, ended June 30th, 2018. The company reported that the overall construction in Ancaster, Ontario and Valleyfield, Quebec remains on schedule with cultivation expected to commence in the first half of 2019. As per management, Construction is on-going without any time or cost overruns across all jurisdictions and TGODF’ is aggressively building its medical and adult-use brands. The company is investing heavily in consumer research, R&D and simultaneously building both the capability and systems needed to scale as it prepares for the adult-use market rapidly.

 

From a liquidity and financial flexibility perspective, TGODF continues to maintain a strong balance sheet with cash and cash equivalents of $261,816,000 and continues to execute on management’s vision of becoming the largest organic cannabis brand in the world.

 

The company is focussed on making strategic additions across all divisions of the Company to execute on its expansion plans. TGODF’s business plan calls for operations in 12 countries on three continents by the end of 2018 with a focus on Europe and Latin America.

 

The company share price has been on a constant climb in the recent past and has reported an increase in the volumes backed by these announcements laying the strong foundation for revenue visibility and business growth. Considering all these, we remain bullish about the stock.

 

Description & about the Company:

The Company grows high quality, organic cannabis with sustainable, all-natural principles. TGODF’s products are laboratory tested to ensure patients have access to a standardized, safe and consistent product. TGODF has a funded capacity of 170,000 kg and is building 1,382,000 sq. Ft. of cultivation facilities in Ontario, Quebec, and Jamaica.

The Company has developed a strategic partnership with Aurora Cannabis Inc. (TSX: ACB) whereby Aurora has invested approximately C$78.1 million for an approximate 17.5% stake in TGODF. In addition, the Company has raised approximately C$350 million and had over 20,000 shareholders.

 

Synergies between Aurora and TGODF:

Buildout Timeline of various facilities:

 

 

 

Other Key highlights/achievements of 2018:

• Continued to make steady progress on the construction of its facilities in Ancaster, Ontario and Valleyfield, Quebec, spending a total of $20,734,000 on those initiatives
• Received organic certification from ECOCERT Canada.
• Successfully completed the record-breaking Initial Public Offering on the Toronto Stock Exchange, raising gross proceeds of $132,264,000
• Expanded its shareholder base from 4,000 to over 20,000
• Announced a strategic partnership agreement with Epican Medicinals Limited, a vertically integrated Jamaican cannabis company
• Completed a letter of intent with Denmark’s Queen Genetics/Knud Jepsen A/S, which, if completed will increase TGODF’s total organic-funded capacity to 195,000 kgs
• Announced several strategic licensing agreements with top US brands including Stillwater Brands, Evolabs, and CBx Sciences
• Completed a $25,024,000 bought deal financing which closed on June 26th, 2018

 

Other Recent Announcements – On September 4th, the company announced that it has agreed with Aurora Cannabis Inc. (“Aurora”) (TSX: ACB) to extend Aurora’s exercise deadline of its first milestone option (the “Milestone Option”) under the TGODF Aurora Investor Rights Agreement by 6 weeks to October 12, 2018. The first Milestone Option entitles Aurora to acquire an additional 8% of the common shares of the Company.

 

Earnings Review:

 

Liquidity: The Company maintained a strong balance sheet with cash and cash equivalents of $261,816,000. Cash used in operating activities equated to $7,196,000 for the three months ended June 30, 2018. This spends included strategic initiatives in consumer market research, marketing and brand building in anticipation of the Company’s launch into the recreational market.

 

Key Stock Influences: Some key influences that might govern future stock price performance include:

 

• The company operation is still at a pre-commercialisation stage. Therefore, its ability to maintain liquidity and financial flexibility to fund its incremental capital requirements will remain an extremely critical challenge for the company.
• The company’s business is exposed to regulatory risk and its adverse impact on the overall business risk profile.
• The company’ business is exposed to risk related to competitive pressure, and its revenues may suffer from better products sold by competitors.
• Notwithstanding the recent boom, this is still a very nascent stage space and only time would differentiate between real winners and laggards. As far as choosing an option with a relative advantage is concerned, TGODF is the preferred choice with upside potential.

 

Stock Performance

• On Friday, September 7^th, 2018, TGODF shares closed at $4.90 on an average volume of 571K shares exchanging hands. The current RSI is 58.5
• At $4.7117, shares of TGODF are trading above their 50-day moving average (MA) at $4.36
• The present support and resistance levels for the stock are at $4.30 & $5.20 respectively.

 

 

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