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Green Growth Brands Significant Revenue Growth Driven by CBD Retail Expansion

Total first quarter fiscal 2020 revenues increased 77% quarter-over-quarter to $12.7 million

Well-positioned for upcoming holiday season with network of 193 CBD shops

COLUMBUS, OH , Nov. 25, 2019 /CNW/ - Green Growth Brands Inc. (GGB or the Company) (GGB.CN) (GGBXF) today reported its results for the thirteen-week period ended September 28, 2019 . Revenues for the period totaled $12.7M .

Green Growth Brands (CNW Group/Green Growth Brands)

"As we approach the holiday shopping season, we are confident in our growth trajectory," said Peter Horvath , CEO of Green Growth Brands. "We are proud of the topline growth we accomplished in Q1 and are extremely pleased with our current results, which are an indication of future growth. In fact, the four weeks of fiscal November, retail CBD sales were two-thirds of our total CBD sales reported in all of the thirteen weeks of first quarter fiscal 2020, which we are reporting today. This topline growth is reflective of our shift from investing in the foundation of our CBD business to focusing on its execution.

"In a very short-time we have grown a meaningful CBD footprint. We believe our products, network of shops, rapidly growing web business and wholesale relationships position us as a leader in the industry. In the coming quarters we look-forward to reporting similar trends and results for our MSO segment of the business. As we begin to reach scale our consumer and operations expertise will be clearly reflected, not only in the customer experiences we create and the loyalty we drive, but also in our financials as we work towards profitability."

View Seventh Sense's holiday campaign and holiday gifting assortment here.  

GGB will host a conference call and audio webcast with Chief Executive Officer, Peter Horvath , Chief Operating Officer, Randy Whitaker , and Chief Financial Officer, Brian Logan , at 8:30 AM EST on Tuesday, November 26, 2019 .

First Quarter Fiscal 2020 Highlights

  • Total revenue for the period was $12.7 million , a sequential increase of 77% over the prior quarter.

  • Pro forma revenues for the quarter were $15.3 million , reflecting a full quarter of revenue from The+Source Henderson, which was acquired on August 28, 2019 .

  • MSO revenues for the quarter were $7.6M , a sequential increase of 38% over the prior quarter, primarily driven by the acquisition of The+Source Henderson.

  • The two Nevada -based The+Source dispensaries continue to generate annualized revenue of nearly $15,000 per selling square foot. A best-in-class figure in the cannabis industry and in retail overall.

  • CBD revenue for the quarter was $5.1 million , a sequential increase of 201% over the prior quarter. Growth was primarily driven by additional mall-based shop openings, growth in wholesale, and increased overall brand awareness. The Company expects to achieve over $10 million in CBD revenues in second quarter fiscal 2020.

  • The Company opened 81 mall-based CBD shops during the quarter, bringing the total number of shops open at quarter's end to 139 in 34 states. The Company currently operates 193 shops.

  • The Company began filling American Eagle Outfitter's white label order for 'Mood' during the quarter. Performance indications are strong, and the Company expects to continue partnering with American Eagle.


__________________________

1 eMarketer Retail, "Ecommerce trends and store sales for top retailers"

 

First Quarter Fiscal 2020 Financial Statements

The following tables contain financial information for the periods indicated. For full financial information, notes, and management commentary please refer to the MD&A and Financial Statements posted on Green Growth Brands' Investor Relations site and SEDAR. All financial information is provided in United States dollars, unless otherwise indicated. "Adjusted EBITDA" is equal to net income (loss) before interest, taxes and depreciation and amortization, plus fair value adjustments on sale of inventory and on growth of biological assets, share-based compensation and payments, loss (gain) on equity investments, loss (gain) on foreign exchange, loss (gain) on short-term investments, transaction costs, listing fees and certain one-time non-operating expenses, as determined by management. Management believes this measure provides useful information as it is a commonly used measure in the capital markets and as it is a close proxy for repeatable cash generated by (used for) operations.

Unaudited Condensed Interim Consolidated Statements of Financial Position

As at September 28, 2019 and June 30, 2019

(Expressed in United States dollars)





September 28, 2019

June 30, 2019





Assets



Current Assets




Cash and cash equivalents

$

6,811,539

$

10,256,008


Receivables

2,240,238

580,529


Prepaid expenses

3,452,367

5,142,618


Inventories

11,282,915

10,244,804


Biological assets

1,321,379

1,352,097


Notes receivable

48,103

47,739


Other receivables

2,969,527

3,006,760


Deferred lease charges

-

727,518



28,126,068

31,358,073

Non-current assets




Deposits and other assets

604,414

2,880,186


Deferred lease charges

-

2,606,940


Notes receivable

166,724

17,999,224


Property and equipment, net

29,052,104

18,761,723


Right-of-use assets

69,114,716

-


Intangible assets

101,991,179

39,925,984


Goodwill

58,398,385

36,253,417

 Total assets

$

287,453,590

$

149,785,547





Liabilities



Current Liabilities




Accounts payable and accrued liabilities

27,370,962

16,028,807


Taxes payable

514,535

282,593


Due to related parties

8,464,855

317,535


Notes payable

34,878,986

45,762,540


Lease liabilities

10,512,065

-


Embedded derivative liabilities

618,774

1,496,214


Convertible debentures

46,922,616

41,623,041



129,282,793

105,510,730

Non-current liabilities




Long term accrued liabilities

1,205,010

299,977


Lease liabilities

57,012,239

-


Embedded derivative liabilities

1,188,467

-


Convertible debentures

8,758,271

-


Deferred tax liability

6,985,048

1,437,324



75,149,035

1,737,301

Shareholders' Equity




Share capital

182,371,023

119,881,374


Reserve for warrants

16,538,786

9,054,624


Reserve for share-based compensation

3,813,158

3,147,110


Accumulated deficit

(122,566,395)

(92,453,943)


Accumulated other comprehensive income

148,286

148,286

Total equity attributable to shareholders of Green Growth Brands Inc

80,304,858

39,777,451

Non-controlling interest

2,716,904

2,760,065

Total equity

83,021,762

42,537,516

 Total liabilities and equity

$

287,453,590

$

149,785,547

 

Adjusted EBITDA



(Expressed in United States dollars)





September 28,

September 30,



2019

2018






Net loss after listing fees before income taxes

$ (29,886,676)

$   (2,846,537)






Fair value adjustment on sale of inventory

906,919

-


Fair value adjustment on biological assets

(507,284)

-


Stock based compensation

1,632,922

-


Depreciation and amortization

3,626,529

-


Pre-opening expenses

1,547,468

-


Non-operating expenses

6,264,165

156,102


Termination and severance

421,396

-


Writedown of developed technology

573,662

-


Other non-operating expenses

197,204

-



14,662,981

156,102


Adjusted EBITDA

$ (15,223,695)

$   (2,690,435)

 

Unaudited Condenseed Interim Consolidated Statements of Loss

For the 13 weeks ended September 28 2019 and for the three months ended September 30, 2018




(Expressed in United States dollars)







September 28,
2019

September 30,
2018




Sales




Revenue

$

12,701,958

$

-

Cost of goods sold

10,911,000

-

Gross profit before fair value adjustments

1,790,958

-


Fair value change in biological assets
included in inventory sold and other charges

906,919

-

Unrealized gain on changes in fair value of
biological assets

(507,284)

-

Gross profit

1,391,323

-




Operating Expenses




General and administrative

9,683,667

2,450,960


Sales and marketing

10,070,716

-


Share-based compensation

1,632,922

-


Depreciation and amortization

3,626,529

-


25,013,834

2,450,960


(23,622,511)

(2,450,960)

Other expenses (income)




Gain in fair value of derivative liabilities

(4,240,710)

-


Interest expense, net

3,761,477

217


Accretion on convertible debentures

1,409,583

-


Foreign exchange (gain) loss

(488,387)

155,885


Transaction costs

5,822,202

-

Net loss before listing fees and income taxes

(29,886,676)

(2,607,062)


Listing fees

-

239,475

Net loss after listing fees

(29,886,676)

(2,846,537)


 Income taxes

356,609

-

Net loss after income taxes

$

(30,243,285)

$

(2,846,537)

Less: Non-controlling interest

43,161

-

Net Loss attributable to owners of the parent

$

(30,200,124)

$

(2,846,537)




Net loss per Common Share attributable to the parent



Basic and Diluted

$

(0.15)

$

(0.03)




Weighted average common shares

198,246,478

84,428,676

 

Unaudited Condensed Interim Consolidated Statement of Cashflow

For the 13 weeks ended September 28, 2019, and for the three months ended September 30, 2018

(Expressed in United States dollars)





September 28,
2019

September 30,
2018

Cashflow from Operating Activities




Net loss after income taxes for the period

$

(30,243,285)

$

(2,846,537)

Adjustments for:




Stock based compensation

1,632,922

-


Shares and warrants issued for services and fees

4,115,733

567,884


Depreciation and amortization

3,578,965

-


Writedown of developed software

409,022

-


Deferred tax expense

(225,333)

-


Accretion expense

1,409,583

-


Gain in fair value of embedded derivative liabilities

(4,240,710)

-


Net fair value adjustment on biological assets

399,635

-


Foreign exchange on translation

(488,387)

-

Changes in working capital balances




Receivables

(1,646,660)

-


Prepaid expenses

1,690,251

-


Other receivables

1,994,059

(185,874)


Inventories

(27,538)

-


Biological assets

(368,917)

-


Accounts payable and accrued liabilities

8,815,006

(787,634)


Taxes payable

231,942

-



(12,963,712)

(3,252,161)

Cashflow from Investing Activities




Purchase of property and equipment

(9,723,474)

-


Purchase of software

(723,738)

-


Acquisition of business and assets, net of cash acquired

(12,703,263)

-


Proceeds from sale of equity investment

11,792

-


Advances on acquisitions

-

(32,347,500)



(23,138,683)

(32,347,500)

Cashflow from Financing Activities




Cash received on warrants exercised

298,420

-


Proceeds from bought deal financing

36,513,665

-


Repayment of notes

(15,485,000)

-


Principal payments of lease liabilities

(1,589,689)

-


Proceeds from promissory notes

12,794,844

-


Proceeds from convertible debentures, net of issuance costs

-

66,061,829



32,532,240

66,061,829

Effect of exchange rates on cash

125,686

-

Increase in cash

(3,444,469)

30,462,168





Cash, beginning of period

10,256,008

4,688,311





Cash, end of period

$

6,811,539

$

35,150,479





Supplemental disclosure of cash flow information




Interest paid

445,232

-


Income taxes paid

350,000

-

Other non-cash investing and financing activities




Change in accrual for construction in progress

861,479

-


Acquisition of business for non-cash

47,107,913

-


Issuance of shares for underwriter fees on bought deal financing

2,080,494

-

 

Segmented statement of operations for the 14 weeks ended September 28, 2019 and three months ended September 30, 2018


(Expressed in United States dollars)



MSO

CBD

Head office

Allocations

Total



2019

2018

2019

2018

2019

2018

2019

2018

2019

2018













Sales












Revenue

$

7,555,102

$

-

$

5,146,856

$

-

$

-

$

-

$

-

$

-

$

12,701,958

$

-


Cost of goods sold

4,575,274

-

4,576,384

-

-

-

1,759,342

-

10,911,000

-

Gross profit before fair value adjustments

2,979,828

-

570,472

-

-

-

(1,759,342)

-

1,790,958

-


Fair value change in biological assets included in
inventory sold and other charges

906,919

-

-

-

-

-

-

-

906,919

-


Unrealized gain on changes in fair value of biological
assets

(507,284)

-

-

-

-

-

-

-

(507,284)

-

Gross profit

2,580,193

-

570,472

-

-

-

(1,759,342)

-

1,391,323

-













Operating Expenses












General and administration

-

-

-

-

11,433,502

2,450,960

(1,749,835)

-

9,683,667

2,450,960


Sales and marketing

1,710,707

-

8,360,009

-

-

-

-

-

10,070,716

-


Stock based compensation

-

-

-

-

1,632,922

-

-

-

1,632,922

-


Depreciation and amortization

142,564

-

2,865,550

-

627,922

-

(9,507)

-

3,626,529

-



1,853,271

-

11,225,559

-

13,694,346

2,450,960

(1,759,342)

-

25,013,834

2,450,960



726,922

-

(10,655,087)

-

(13,694,346)

(2,450,960)

-

-

(23,622,511)

(2,450,960)

Non-operating expenses












Gain in fair value of derivative liabilities

-

-

-

-

(4,240,710)

-

-

-

(4,240,710)

-


Interest expense, net

21,712

-

1,117,964

-

2,621,801

217

-

-

3,761,477

217


Accretion expense

-

-

-

-

1,409,583

-

-

-

1,409,583

-


Foreign exchange (gain) loss

-

-

-

-

(488,387)

155,885

-

-

(488,387)

155,885


Transaction costs

-

-

-

-

5,822,202

-

-

-

5,822,202

-

Net income (loss) before listing fees and income taxes

705,210

-

(11,773,051)

-

(18,818,835)

(2,607,062)

-

-

(29,886,676)

(2,607,062)


Listing fees

-

-

-

-

-

239,475

-

-

-

239,475

Net income (loss) after listing fees

705,210

-

(11,773,051)

-

(18,818,835)

(2,846,537)

-

-

(29,886,676)

(2,846,537)


 Income taxes

356,609

-

-

-

-

-

-

-

356,609

-

Net income (loss) after income taxes

$

348,601

$

-

$

(11,773,051)

$

-

$

(18,818,835)

$

(2,846,537)

$

-

$

-

$

(30,243,285)

$

(2,846,537)













Net income (loss) and comprehensive loss attributable to:












Owners of the parent

391,762

-

(11,773,051)

-

(18,818,835)

(2,846,537)

-

-

(30,200,124)

(2,846,537)


Non-controlling interest

43,161

-

-

-

-

-

-

-

43,161

-



348,601

-

(11,773,051)

-

(18,818,835)

(2,846,537)

-

-

(30,243,285)

(2,846,537)













Supplemental segemented information












Assets

173,818,672

-

101,694,365

-

11,940,553

67,702,122

-

-

287,453,590

67,702,122


Liabilities

32,201,594

-

79,177,273

-

93,052,961

66,925,655

-

-

204,431,828

66,925,655

 

Conference Call Information:

Conference ID: 54236169

Local Toronto Dial-in Number: (+1) 416 764 8609

Local Vancouver Dial-in Number: (+1) 778 383 7417

North American Toll-Free Number: (+1) 888 390 0605

The call and replay archive will be accessible on Green Growth Brands' Investor Relations website.

About Green Growth Brands Inc.
Green Growth Brands creates remarkable experiences in cannabis and CBD. Led by CEO Peter Horvath and a leadership team of consumer-focused retail experts, the company's brands include CAMP, Seventh Sense Botanical Therapy, The+Source, Green Lily, and 8 Fold. The Company also has a licensing agreement with the Greg Norman™ Brand to develop a line of CBD-infused personal care products designed for active wellness. GGB is expanding its cannabis operations throughout the U.S., via dispensaries in Nevada , Massachusetts and Florida and the largest network of CBD shops in malls across the country and ShopSeventhSense.com. Learn more about the vision at  GreenGrowthBrands.com.

Cautionary Statements:

Certain information in this news release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expect", "intend", "forecast" and similar expressions.   Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; marketing costs; loss of markets; future legislative and regulatory developments involving medical and recreational marijuana; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favorable terms; the marijuana industry in the United States , income tax and regulatory matters; the ability of the Company to implement its business strategies; competition; currency and interest rate fluctuations and other risks, including those factors described under the heading "Risks Factors" in the Company's Annual Information Form dated November 26, 2018 which is available on the Company's issuer profile on SEDAR.

Readers are cautioned that the foregoing list is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. The forward-looking statements contained in this release, including, but not limited to, the Company's ability to execute on its growth strategy, the Company's plan to open new dispensaries in the remainder of the calendar year, the Company's vision to become a multi-state operator with retail stores exceeding certain financial thresholds is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

This announcement does not constitute an offer, invitation or recommendation to subscribe for or purchase any securities and neither this announcement nor anything contained in it shall form the basis of any contract or commitment. In particular, this announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States , or in any other jurisdiction in which such an offer would be illegal.

The securities referred to herein have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States and may not be offered or sold, directly or indirectly, within the United States , unless the securities have been registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available.

Cision

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SOURCE Green Growth Brands


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