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Golden Leaf Holdings Reports Fiscal First Quarter 2019 Results

TORONTO, May 31, 2019 (GLOBE NEWSWIRE) -- Golden Leaf Holdings Ltd. (“Golden Leaf” or the “Company”) (CSE:GLH) (GLDFF), a pioneer cannabis oil solutions company and dispensary operator built around recognized brands, today announced financial results for the fiscal first quarter ended March 31, 2019, and a general business update.

Strategic Direction

We believe that a trusted, internationally-recognized brand targeting customers new to cannabis products services the coming wave of new users. These new users are expected to seek health and wellness benefits as restrictions on cannabis use relax over the next three years.  Building the Chalice Farms brand leverages the Company’s dispensary locations, high-touch customer service approach, and management expertise.  Already an established leader in Oregon, Nevada and Canada, the Company intends to expand to California through an innovative approach to consumer-direct sales as well as wholesale sales.  The Company intends to achieve national sales of CBD and other non-THC products in 2019 and will search for global opportunities in 2020 and beyond.

Recent Business and Financial Highlights

  • Sales increased 34% over the prior year period
  • Operating loss improved 28% to US$3.0 million from US$4.2 million in the prior year period
  • Launched Elysium Fields brand
  • Launched Jackpot brand in Oregon
  • Achieved over 33% increase in Oregon wholesale account base
  • Retained Renmark Financial to support investor relations
  • Reduced headcount by 19% and initiated other efficiency measures
  • Appointed Larry Martin to the Board of Directors
  • Appointed Karyn Barsa as Chief Financial Officer

Subsequent Events:

  • Appointed Karyn Barsa as Chief Executive Officer
  • Appointed Robert Gordon as Director, Human Resources

Ms. Karyn Barsa, Chief Executive Officer of Golden Leaf Holdings, commented, “We saw year-over-year revenue growth of 34% for the first quarter of 2019. We are pleased with the successful launch of two new brands in our Oregon and Nevada markets, Elysium Fields and Jackpot, showing strong customer support and trust.”

“The appointment of Larry Martin to the Board of Directors is another indication of faith in our future.  Larry’s unique background and experience as a successful CEO and entrepreneur, particularly his years of experience in FDA regulatory matters and involvement in the CBD industry, has already led to important contributions to the Board and Company.” 

“During the quarter, we implemented over $3.7 million in annualized cost reductions and operating efficiencies, while launching new brands. Clearly, we believe that Golden Leaf is positioned to succeed in this marketplace. We have refocused our strategic direction to support our customers and expand our product offerings. I look forward to sharing more about our new direction with our shareholders shortly.”

Fiscal First Quarter Ended March 31, 2019 Financial Results

For the first quarter ended March 31, 2019 (“Q1 2019”), total revenue was US$4.3 million as compared to US$3.2 million for the same three-month period in 2018 (“Q1 2018”). The 34% quarter-over-quarter increase is largely attributable to strong revenue streams from the Chalice Farms stores in Oregon and flower sales from our Canadian operations.

Gross profit was US$1.8 million or 41% of total revenue for Q1 2019, compared with US$0.4 million or 11% of total revenue in Q1 2018. The strong Q1 2019 gross margin is primarily due to significant cost reductions and utilization of an improved recording process that better matches revenue and cost of sales.

Operating expenses were US$4.7 million for Q1 2019 compared with US$4.6 million for Q1 2018. Q1 2019 operating expenses included $0.2M in wages and benefits related to headcount reductions and severance.  Operations at three facilities in Oregon were consolidated to one headquarters location.

During Q1 2019, headcount was reduced by 19% throughout the Company, and the reduction in annualized wages and benefits expense is projected at US$3.7 million.

Net loss for Q1 2019 was US$3.0 million or US$0.01 per share, compared with a net gain of US$8.1 million or US$0.02 per share for Q1 2018. Net income for Q1 2018 benefited from favorable changes in the fair value of warrant and debt liabilities of US$13.3 million, compared with $0.5M for Q1 2019. Changes in the fair value of warrant and debt liabilities and other non-cash items are excluded in the Adjusted EBITDA non-GAAP measurement.

Adjusted EBITDA loss was US$2.0 million for Q1 2019, compared with a loss of US$3.1 million for Q1 2018. Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization, non-cash compensation expenses, one-time transaction fees and other non-cash charges that include impairments. The Company considers Adjusted EBITDA an important operational measure for the business. For a reconciliation of Adjusted EBITDA to income (loss) before income taxes, please see the Company’s management discussion and analysis for Q1 2019 (the “MD&A”). 

As of March 31, 2019, the Company had approximately US$8.3 million in cash, compared with US$12.3 million at December 31, 2018.

The Company’s interim condensed consolidated financial statements for Q1 2019, the related notes and Q1 2019 MD&A are filed on SEDAR and are available for review.

About Golden Leaf Holdings
Golden Leaf Holdings Ltd., a Canadian company with operations in multiple jurisdictions including Oregon, Nevada and Canada, is one of the largest cannabis oil and solution providers in North America, and a pioneer cannabis products company built around recognized brands. Golden Leaf cultivates, extracts, manufactures and distributes its products through its branded Chalice Farm retail dispensaries, as well as through third party dispensaries. Golden Leaf leverages a strong management team with cannabis and food industry experience to complement its expertise in extracting, refining and selling cannabis oil.  Visit goldenleafholdings.com to learn more.

Company:
Kate Koustareva
Director of Financial Reporting and Treasury
Golden Leaf Holdings Ltd.
ir@goldenxtrx.com

Investor Relations:
Steve Hosein
Renmark Financial Communications
416-644-2020

Media Relations:
Anne Donohoe / Nick Opich
KCSA Strategic Communications
adonohoe@kcsa.comnopich@kcsa.com
212-896-1265 / 212-896-1206

Disclaimer: This press release contains "forward-looking information" within the meaning of applicable securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the Company’s future business operations, the establishment of, and the future scope and scale of, the Chalice Farms retail system, the level of funding needed to establish the Chalice Farms franchise model, that the Chalice Farms franchise model will be successful and generate positive cash flows, the opinions or beliefs of management and future business goals. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to general business, economic and competitive uncertainties, regulatory risks including risks related to the expected timing of the Company’s participation in the adult use market, market risks, risks inherent in manufacturing operations, difficulties of establishing a successful franchise model and other risks of the cannabis industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. Forward-looking information is provided herein for the purpose of presenting information about management’s current expectations relating to the future and readers are cautioned that such information may not be appropriate for other purpose. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws. This press release does not constitute an offer of securities for sale in the United States, and such securities may not be offered or sold in the United States absent registration or an exemption from registration or an exemption from registration.


     
GOLDEN LEAF HOLDINGS LTD.
Interim Condensed Consolidated Statement of Financial Position (Unaudited)
As at March 31, 2019 and December 31, 2018
(Expressed in U.S. dollars)
       
  March 31, 2019   December 31, 2018
       
ASSETS      
CURRENT      
Cash $   8,288,168     $   12,275,372  
Accounts receivable     749,066         624,453  
Other receivables     212,081         297,737  
Income tax recoverable     686,600         686,600  
Sales tax recoverable     608,519         661,319  
Biological assets     77,113         74,148  
Inventory     3,842,026         3,416,906  
Prepaid expenses and deposits     1,564,758         1,962,033  
Assets held for sale     -          35,274  
Total current assets $   16,028,331     $   20,033,842  
       
Property, plant and equipment     10,244,641         6,188,835  
Intangible assets     21,705,844         21,782,949  
Goodwill     25,471,399         25,471,399  
Deferred tax assets         -   
Total assets $   73,450,215     $   73,477,025  
       
LIABILITIES      
CURRENT      
Accounts payable and accrued liabilities $   2,001,419     $   2,624,967  
Interest payable     520,119         92,554  
Income taxes payable     69,543         106,808  
Sales tax payable     58,980         231,675  
Current portion of long-term debt      735,573         25,492  
Current portion of convertible debentures       
  carried at fair value     8,782,131         8,888,946  
Warrant liability     64,550         369,343  
Total current liabilities $   12,232,315     $   12,339,785  
       
Long term debt     3,501,119         46,229  
Note payable     312,118         312,118  
Convertible debentures carried at fair value     5,176,936         4,996,811  
Consideration payable     9,123,653         8,956,809  
Warrant liability     41,270         236,138  
Total liabilities $   30,387,411     $   26,887,890  
       
SHAREHOLDERS' EQUITY      
Share capital $   138,511,038     $   138,511,038  
Warrant reserve     4,052,164         4,052,164  
Share option reserve     5,132,608         4,777,929  
Contributed surplus     59,940         59,940  
Accumulated other comprehensive loss     (1,018,144 )     (125,930 )
Deficit     (103,674,802 )     (100,686,006 )
Total shareholders' equity   43,062,804       46,589,135  
Total liabilities and shareholders' equity $   73,450,215     $   73,477,025  
       

 

       
GOLDEN LEAF HOLDINGS LTD.
Interim Condensed Consolidated Statements of Operations and Comprehensive Gain (Loss) (Unaudited)
For the three months ended March 31, 2019 and 2018
(Expressed in U.S. dollars)
       
  For the three months ended March 31,
    2019       2018  
Revenues      
Product sales $   4,076,607     $   3,200,267  
Consulting revenue     206,241         -   
Total Revenue $   4,282,848     $   3,200,267  
               
Inventory expensed to cost of sales     2,518,155         2,843,843  
Production costs     138,736         297,474  
Gross margin, excluding fair value items     1,625,957         58,950  
Fair value changes in biological assets included in inventory sold     161,523         -   
(Gain) Loss on changes in fair value of biological assets     (303,439 )     (293,897 )
Gross profit $   1,767,873     $   352,847  
       
Expenses      
General and administration     2,999,461         2,795,794  
Share based compensation     411,926         1,075,452  
Sales and marketing     630,962         383,301  
Depreciation and amortization     706,146         345,279  
Total expenses $   4,748,495     $   4,599,826  
       
Loss before items noted below $   (2,980,622 )   $   (4,246,979 )
Interest expense     741,662         649,258  
Transaction costs     6,108         471,900  
Gain on disposal of assets     (16,945 )       -   
Other income      (141,197 )       (159,126 )
Gain on change in fair value of warrant liabilities     (499,662 )       (6,212,222 )
Gain on change in fair value of convertible debentures     (36,169 )       (7,128,616 )
Gain (loss) before income taxes   (3,034,419 )     8,131,827  
Current income tax expense     11,624         -   
               
Net gain (loss) $   (3,046,043 )   $   8,131,827  
Other comprehensive  loss      
Items that will be reclassified subsequently to profit or loss:      
Cumulative translation adjustment     892,214         19,117  
               
Comprehensive gain (loss) $   (3,938,257 )   $   8,112,710  
               
Basic and diluted gain (loss) per share $   (0.01 )   $   0.02  
               
Weighted average number of common shares outstanding     589,140,903         534,900,058