UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of January 2022
Commission File Number: 001-38781
HEXO Corp.
(Translation of registrant's name into English)
3000 Solandt Road
Ottawa, Ontario, Canada K2K 2X2
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ ] Form 40-F [ X ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
On January 19, 2022, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
(c) Exhibit 99.1. Press release dated January 19, 2022
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HEXO Corp. | ||
(Registrant) | ||
Date: January 19, 2022 | /s/ ROCH VAILLANCOURT | |
Roch Vaillancourt | ||
General Counsel | ||
EXHIBIT 99.1
HEXO Provides Update on "The Path Forward"; Announces Cost Savings Initiatives
This news release constitutes a “designated news release” for the purposes of the Company’s prospectus supplement dated May 11, 2021 to its short form base shelf prospectus dated May 7, 2021 and amended and restated on May 25, 2021.
GATINEAU, Quebec, Jan. 19, 2022 (GLOBE NEWSWIRE) -- HEXO Corp. (TSX: HEXO; NASDAQ: HEXO) ("HEXO" or the “Company"), a leading producer of high-quality cannabis products, today provided an update on its previously announced strategic plan, "The Path Forward", designed to solidify HEXO’s position as the number one cannabis company in Canada by recreational market share, with the goal of becoming the first amongst its peers to be cash flow positive from operations.
The plan is expected to generate incremental cash flow of approximately $37.5 million in fiscal 2022 and an additional anticipated and approximate $135 million in fiscal 2023 for a total of $175 million over the two years, from a combination of cost reductions and anticipated organic revenue growth.
“It is a strategic imperative for HEXO to strengthen its capital position and restructure the Company’s operations to ensure a path to achieving positive cash flow from operations within the next three quarters,” said Scott Cooper, President and CEO of HEXO. “As an organization we are making strategic decisions quickly to ensure we have the optimal operating footprint we need for the next phase in HEXO’s strategic evolution, while remaining focused on the needs of customers and in our continued efforts in product innovation.”
HEXO is committed to providing its shareholders with updates as the Company executes the strategic plan. Today’s announcement provides updates on two of the five strategic pillars: (i) Streamline and Simplify the Organizational Structure, and (ii) Reduce Manufacturing and Production Costs.
Streamline and Simplify the Organizational Structure
To more closely align the Company’s operating costs with its size, HEXO announced significant cost-saving initiatives to reduce SG&A expenses. These initiatives are expected to represent a 30% reduction in the Company’s SG&A by Fiscal Year End 2023. These cost reductions will be achieved through a combination of reduced reliance on outside consultants, streamlining the organization as a new IT platform is implemented, right-sizing the organization, and realizing the synergistic benefits of the recent acquisitions.
Reduce Manufacturing and Production Costs
In addition to the SG&A savings, the Company has also identified approximately $30 million in additional savings from optimizing HEXO’s production network and leveraging the capacities of its recent acquisitions. Specifically, this includes:
Sale of Non-Core Assets and Debt Reduction
Under the strategic plan, the Company has also identified certain non-core assets which may be divested. The Company intends to apply the proceeds from any such sales principally to debt reduction.
As such, HEXO sold its 25% interest in the Belleville Complex Inc. (“BCI”) to Olegna Holdings Inc. (“Olegna”), for approximately $10.1 million. Olegna is the owner of the other 75% of the facility and HEXO will continue to lease the facility for processing, manufacturing and distribution with no changes to the existing lease arrangements. The proceeds will be used to amortize the High Trail Note, as required under the terms of the Note.
The sale of the Company’s interest in BCI to Olegna is a “related party transaction” within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”) because Olegna is majority owned and controlled by Mr. Vincent Chiara, a director of HEXO. HEXO is relying on applicable exemptions from the minority approval and valuation requirements of MI 61-101 on the basis that neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction exceeds 25% of HEXO’s market capitalization.
The sale price for the Company’s interest in BCI was determined by an arm’s length third party appraisal.
The Company will continue to provide updates on the progress of The Path Forward as they develop.
Forward-Looking Statements
This press release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws ("Forward-Looking Statements"). Forward-Looking Statements are based on certain expectations and assumptions and are subject to known and unknown risks and uncertainties and other factors that could cause actual events, results, performance and achievements to differ materially from those anticipated in these Forward-Looking Statements. Forward-Looking Statements should not be read as guarantees of future performance or results. Readers are cautioned not to place undue reliance on these Forward-Looking Statements, which speak only as of the date of this press release. The Company disclaims any intention or obligation, except to the extent required by law, to update or revise any Forward-Looking Statements as a result of new information or future events, or for any other reason.
This press release should be read in conjunction with the management's discussion and analysis ("MD&A") and unaudited condensed consolidated interim financial statements and notes thereto as at and for the three months ended October 31, 2021. Additional information about HEXO is available on the Company's profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov, including the Company's Annual Information Form for the year ended July 31, 2021 dated October 29, 2021.
About HEXO
HEXO is an award-winning licensed producer of innovative products for the global cannabis market. HEXO serves the Canadian recreational market with a brand portfolio including HEXO, Redecan, UP Cannabis, Namaste Original Stash, 48North, Trail Mix, Bake Sale, REUP and Latitude brands, and the medical market in Canada, Israel and Malta. The Company also serves the Colorado market through its Powered by HEXO® strategy and Truss CBD USA, a joint venture with Molson-Coors. With the completion of HEXO's recent acquisitions of Redecan and 48North, HEXO is a leading cannabis products company in Canada by recreational market share. For more information, please visit hexocorp.com.
For further information, please contact:
Investor Relations:
invest@hexo.com
www.hexocorp.com
Media Relations:
(819) 317-0526
media@hexo.com