HEXO CORP. ANNOUNCES DELAY IN FILING OF INTERIM FINANCIAL STATEMENTS AND PROVIDES CERTAIN FINANCIAL RESULTS FOR Q2 2020
March 17 2020 - 6:30AM
HEXO Corp. (“HEXO” or the “Company”) (TSX: HEXO; NYSE: HEXO) today
announced that it has not filed its interim financial statements
and related management's discussion and analysis (“MD&A”) and
certifications for the three and six month periods ended January
31, 2020 (the “Q2 2020 Filings”) by the filing deadline of March
16, 2020.
The delay in the filing of the Q2 2020 Filings
has arisen due to certain exceptional circumstances, including that
for the quarter ended January 31, 2020 (“Q2 2020”), the Company
will be recording a significant impairment loss in the Q2 2020
Filings. The calculation of this impairment is complex and, while a
value range for the impairment is known, the final amount remains
to be determined. This impairment and certain other financial
results for Q2 2020 are discussed below.
In addition, over the course of the past few
weeks, the Company has been working on amending its MD&A for
the fiscal year ended July 31, 2019 and the three months ended
October 31, 2019 (the “Amended MD&A”) in connection with a
continuous disclosure review by the Ontario Securities Commission
(“OSC”). The amendments are being made to address comments received
from OSC Staff and to strengthen the Company’s continuous
disclosure record. The Company expects to file the amended MD&A
on or about March 17, 2020. The Company has also required
additional time to finalize the Q2 2020 Filings in order to
incorporate certain disclosure being made in the Amended
MD&A.
The Company has informed Staff of the OSC about its delay in
the filing of the Q2 2020 Filings, and is in discussions with Staff
about a potential application pursuant to Part 4 of National Policy
12-203 - Management Cease Trade Orders for a Management Cease Trade
Order pending the filing of the Q2 2020 Filings depending upon the
circumstances.
The Company has established a blackout on
trading by directors, officers and other insiders of the Company,
and the blackout will continue until the Q2 2020 Filings have been
filed.
Pending the filing of the Q2 2020 Filings, the
Company wishes to announce certain financial results for Q2 2020,
as follows:
- Gross revenue was $23.8 million, a 23% increase from $19.3
million during the three months ended October 31, 2019 (“Q1
2020”).
- Net revenue was $17.0 million, a 17% increase from $14.5
million in Q1 2020.
- On March 2, 2020, the Company completed a strategic review of
its cultivation assets. Due to an excess of cultivation capacity in
the market and estimated forecast demand for cannabis products, as
result of slower than expected market development, the Company no
longer expects to re-commence operations at the Niagara Facility
and has decided to market the facility for sale. The Niagara
Facility consists of land and greenhouse facilities, as well as
cultivation and production licenses and related equipment,
- At the end of Q2 2020, the carrying amount of the Company’s
total net assets significantly exceeded the Company’s market
capitalization as at January 31, 2020. In addition, the industry
has experienced slower than expected retail store roll-outs in
Canada and delays in government approval for cannabis derivative
products which has constrained distribution channels and adversely
affected overall market sales and profitability. These factors are
indicators of impairment in relation to the Company’s inventory,
property, plant and equipment, intangible assets and goodwill. The
Company is in the process of completing its impairment assessment
and has not reach its final conclusions. However, it is expected
that the impairment loss will be in the range of $265 million to
$280 million.
- The Company’s financial statements for Q2 2020 have been
prepared on a going concern basis, which assumes that the Company
will be able to continue its operations and will be able to realize
its assets and settle its liabilities in the normal course of
business as they become due in the foreseeable future. The Company
has historically financed its working capital requirements
primarily through equity and debt financings. The Company’s ability
to continue as a going concern is dependent upon its ability to
generate funds from profitable operations and raise additional
financing in order to meet current and future obligations. While
the Company has been successful in raising financing in the past,
there is no assurance that it will be able to obtain additional
financing or that such financing will be available on reasonable
terms. These conditions combined with the accumulated losses to
date indicate the existence of a material uncertainty that may cast
doubt on the Company’s ability to continue as a going concern. The
financial statements will not include any adjustments to the
amounts and classification of assets and liabilities that might be
necessary should the Company be unable to continue as a going
concern.
About HEXO
HEXO Corp. is an award-winning consumer packaged
goods cannabis company that creates and distributes innovative
products to serve the Canadian cannabis market. The Company serves
the Canadian adult-use markets under its HEXO Cannabis, Up
Cannabis and Original Stash brands, and the medical market under
HEXO medical cannabis. For more information please visit
hexocorp.com.
Forward-Looking Statements
This press release contains forward-looking
information and forward-looking statements within the meaning of
applicable Canadian and United States securities laws. Such
statements are based upon the Company’s current internal
expectations, estimates, projections, assumptions and beliefs and
views of future events. Forward-looking information and
forward-looking statements can be identified by the use of
forward-looking terminology such as "believes", "expect", "likely",
"may", "will", "should", "intend", "anticipate", "potential",
"proposed", "estimate" and other similar words, including negative
and grammatical variations thereof, or statements that certain
events or conditions "may", "would" or "will" happen.
The forward-looking information and statements
in this news release include statements relating to the anticipated
timing for filing of the Q2 2020 Filings, the Company’s financial
results for Q2 2020 and the anticipated timing for filing of the
Company’s amended MD&A for the fiscal year ended July 31, 2019
and the three months ended October 31, 2019. Forward-looking
information and statements are necessarily based upon a number of
estimates and assumptions that, while considered reasonable, are
subject to known and unknown risks, uncertainties, and other
factors which may cause the actual results and future events to
differ materially from those expressed or implied by such
forward-looking information and statements. Such factors include,
but are not limited to: management's perceptions of the anticipated
timeline in which the Q2 2020 Filings and the amended MD&A for
the fiscal year ended July 31, 2019 and the three months ended
October 31, 2019 can be completed and filed, results of operations,
operational matters, historical trends, current conditions and
expected future developments, as well as other considerations that
are believed to be appropriate in the circumstances. There can be
no assurance that such information and statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such information and
statements. Accordingly, readers should not place undue reliance on
forward-looking information and statements. The Company disclaims
any intention or obligation to update or revise any forward-looking
information and statements, whether as a result of new information,
future events or otherwise, except as required by law.
Investor Relations:Jennifer
Smith1-866-438-8429invest@hexo.com www.hexocorp.com
Media Relations:(819) 317-0526media@hexo.com
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