BusinessCanadaFinanceNews

Another Day, Another Dollar, Another Down-Round for HEXO and TGOD

Some Pubco News from Toronto, Dec. 27, 2019

As the anno horribilis for cannabis companies and investors comes to a close, it’s important to remember that for some, the pain isn’t over.  HEXO’s latest announcement of a US $25.0 million direct placement of 14,970,062 common shares at US$1.67/share with institutional investors, which is expected to close Monday, serves as a reminder.  The offer also includes a half-warrant per share to purchase an additional 7,485,032 common shares. The warrants will have a five year-term and an exercise price of US$2.45 per share.

This latest offer does not appear to be bound by the one-year anti-dilution provisions of the CAD $70 million, 8% convertible debentures issued to the founders and a small associated group just two months earlier.  The conversion price for the debentures is $3.16.

The latest stock offer may also not comfort the participants of the oversubscribed offer of $4.00 shares who each received a warrant to purchase one additional share per issued share at $5.60.

The funds will be used for working capital and other purposes, same as the debentures.

Just two days prior, The Green Organic Dutchman (TSX:TGOD) (US:TGODF), which six weeks ago released its third quarter financials that reflected a quarterly loss of $21.2 million on sales of just $2.5 million (down 12.8% from Q2 sales), announced that it had closed the committed portion of a $42.7 financing.   The first tranche, a $27.7 million senior secured term loan with an 18-month term, bearing an interest rate of 13% per annum and secured by a first charge against all assets of the company and its material subsidiaries. The second tranche, the remaining $15.0 million senior secured term, which remains uncommitted, is to be made available upon the lender’s approval achievement of certain milestones, which are at least four fiscal quarters away.

TGOD, also closed its previously announced short form prospectus offering its bought deal with Cannaccord Genuity Corp. a week ago, providing the company with $27.6 million gross.  A total of 36,800,000 units were issued at $0.75 per unit. Each Unit is comprised of one common share and one-half of one common share, entitling the holder to acquire one common share for a period of 36 months from closing of the transaction at an exercise price of $1.00 per warrant.

Clearly, these are times for bold action and vision with respect to these companies, who both had only a few months cash left, and showing tremendous losses.  In the case of TGOD, combined losses of almost $54 million on sales of under $8 million in just nine months is unsustainable.  Of this staggering number, $30 million is attributable to G &A and $11 million in share-based compensation.   Are these companies in a turnaround (after such brief growth spurts) or in a death spiral?

2020 is coming, so here’s hoping the ‘vision’ matches the year.

 

 

 

 

 

 

 

 

Tags
Show More

Todd Denkin

Todd uses his 10 years experience in the cannabis space and his 25 years of television production experience and is now a cannabis and hemp marketing consultant helping new and struggling companies navigate to success. When Todd joined Digipath, Inc., (OTCQB: DIGP) in 2014 Todd Denkin he transformed the company from a pure digital pathology solution provider into a leader in the medical and recreational cannabis testing market. Digipath Labs’ Las Vegas cannabis testing facility is the number-one testing lab in Nevada, seeing a steady increase in clients and revenues since opening in May of 2015. While maintaining the highest standard for cannabis testing, Todd also focused on managing day to day activities including managing 19 employees, sales and marketing, IR, PR and all aspects of running a public company. While doing all of that, Todd also co-founded The National Marijuana News where he serves as it's president and on-air host. Denkin’s career has been defined by foresight––the ability to spot and take advantage of emerging market trends and navigate new companies into lucrative markets. In 2009, Todd identified a trend in grow-your-own hydroponic systems and co-founded the self-contained hydroponic system leader Phototron Holdings (now GrowLife) (OTCQB: PHOT), helping take the company public and serving as its president. At the time it was one of the very first publicly traded cannabis companies. He also co-founded 10 Mile Farms, a hydroponic vegetable growing company dedicated to sprouting locally grown vertical indoor organic produce farms in communities across the country. Starting in the television and film production business since attending the University of Florida, Denkin became a 25-year show business veteran producing, editing and directing TV shows, commercials, infomercials music videos and films. It was another natural fit for Denkin to shift to the Internet in 2000 with a streaming video dot com startup in Las Vegas, NV. He helped take that company public in 2003 and was instrumental in building it to a $300 million market cap. You can learn more about Todd at: www.todddenkin.com

Related Articles

Leave a Reply

Back to top button
Close
Close