Organigram Q2 Sales Decline Following Recall

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Organigram Reports Financial Results and Progress on Capacity Expansion in Advance of Legalization

MONCTON, NEW BRUNSWICK–(Marketwired – April 28, 2017) – Organigram Holdings Inc. (TSXV: OGI) (OTC : OGRMF) (“Organigram” or the “Company”) announces the financial results for the quarter ending February 28, 2017. The Company made significant progress in the quarter toward increasing production capacity of medical marijuana, cannabis oil and related products in its preparation for the legalization of recreational use of marijuana in Canada. The Company is also providing an update regarding its voluntary recall of cannabis products, the current quantified impact to the financial statements, and some of the immediate and voluntary corrective actions and operating policies that Organigram has successfully implemented in response.

Selected highlights from the quarter include the following:

Organigram FY17-Q2 Financials

  1. Gross Margin% (excluding FV adjustment) is defined as net sales less costs of goods sold and indirect production costs, divided by net sales.
  2. Adjusted EBITDA is a non-GAAP financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. It is defined as net profit before interest, income tax, depreciation and amortization, and FV adjustment to bio-assets and inventory.
  3. Cash flow is calculated net profit before income tax, depreciation and amortization, share-based compensation, and FV adjustment to biological assets and inventory.

While the product recall was obviously an unfortunate event for the Company and the patients who rely on Organigram for access to their medicine, I am pleased with the way our team has dealt with this challenge. It forced us to re-examine our quality assurance practices and implement new procedures that will help us achieve our goal of producing Canada’s Safest Cannabis. I anticipate a return to growth in coming quarters and believe the outlook for our company has never been brighter.

Greg Engel Organigram CEOGreg Engel, Chief Executive Officer of Organigram

In connection with the product recalls announced in December 2016 and January 2017, Organigram recognized a $2.0 million sales credit to uninsured customers for credits issued through a client credit program, indirect production expenses of $1.3 million related to inventory destruction, and a loss of $1.7 million in the change in fair value of biological assets. The Company incurred an increase in cost per gram sold during the quarter as 59% of the dried flower grams sold were from outsourced production. As a result, the Company generated adjusted EBITDA of ($4.7) million and cash flow of ($4.3) million.

During the quarter, Organigram made significant progress with its onsite expansion initiatives. Key developments include the closing of a $40 million dollar bought deal financing which provides sufficient capital to complete the designed onsite expansion to approximately 26,000 kg per year prior to the expected launch of recreational cannabis in Canada during the summer of 2018. The company has continued with progress towards the construction and implementation of the planned 15,000 square foot commercial scale oils and extracts manufacturing facility that will be engineered and designed in collaboration with TGS International LLC (“TGS”).

Finally, on April 10, 2017, Organigram signed a letter of intent to acquire all of the issued and outstanding shares of Trauma Healing Centers Incorporated (“THC”). THC specializes in medical cannabis assessment and prescribing while offering a multi-disciplinary approach to healing chronic conditions.

“The acquisition of THC will allow Organigram to accelerate its patient onboarding strategy and further vertically integrates our goal company’s cannabis value chain,” says Engel.

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About Organigram Holdings Inc.

Organigram Holdings Inc. is a TSX Venture Exchange listed company whose wholly owned subsidiary, Organigram Inc., is a licensed producer of medical marijuana in Canada. Organigram is focused on producing the highest quality, condition specific medical marijuana for patients in Canada. Organigram’s facility is located in Moncton, New Brunswick and the Company is regulated by the Access to Cannabis for Medical Purposes Regulations (“ACMPR”).

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