Golden Leaf Holdings Announces First Cashflow-Positive Quarter and Record Quarterly Revenues

Operational Excellence a key driver of financial results

TORONTO, Nov. 19, 2020 (GLOBE NEWSWIRE) — Golden Leaf Holdings Ltd. (CSE:GLH) (OTCQB:GLDFF) (“Golden Leaf” or the “Company”), a premier consumer-driven cannabis company specializing in retail, production, processing, wholesale, and distribution, today announced financial results for the third quarter ended September 30, 2020. All financial results are stated in US dollars, unless otherwise noted.

“Rallying off our strong performance in the second quarter, the third quarter reflects the results of continued revenue growth and cost reductions, exceptional vendor management and operational excellence,” stated Jeff Yapp, Chief Executive Officer of GLH. “In addition to this being our first cashflow-positive quarter, we have surpassed the total revenue generated in all of fiscal 2019 in just three quarters.”

The increase was led by another record quarter of Oregon revenues and heightened contribution from the Company’s out-of-state partnerships, primarily in California.

“Starting in the fall of 2019, GLH faced a slew of challenges including the loss of its primary vape line in 2019 during the vape ban,” said Yapp. “A widespread global pandemic, the ongoing period of social unrest in Portland and unprecedented wildfire activity in Western Oregon resulted in the temporary closure and evacuation of some of the Company’s facilities, as well as the evacuation of a handful of staff members from their homes. This provides even greater context for the performance that the GLH team has achieved throughout the year, now highlighted in this record third quarter performance. Today, I am proud to formally say, we’ve turned the corner.”

Q3 Financial Highlights:

  • For the first time in its history, GLH reports positive cash flow from operations of $0.4M.
  • Record quarterly revenues from continuing operations of $6.2M, an increase of 42% versus the third quarter of 2019 and 11% greater than the second quarter of 2020.
  • Adjusted EBITDA loss of $173,000 for the three months ended September 30, 2020, an improvement of 78% over the prior quarter. Adjusted EBITDA is a non-IFRS measure, which the Company considers important in assessing operations. For a reconciliation of Adjusted EBITDA (non-IFRS) to income (loss) before income taxes, please see below.
  • Record year-to-date revenue of $16.3M, an increase of 34% compared to the nine months ended September 30, 2019, surpassing total revenue for the entirety of 2019 in only three quarters.
  • Adjusted EBITDA loss of $1.7M for the nine months ended September 30, 2020 compared to $5.1M for the nine months ended September 30, 2019, a 68% improvement.
  • Gross profit before biological asset adjustments of $2.2M, an improvement of $0.7M or 47% compared to the prior quarter, and $0.7M or 49% compared to the 3 months ended September 30, 2019.
  • Total operating expenses down 22% compared to the nine months ended September 30, 2019 and 3% compared to the 2nd quarter of 2020, demonstrating continued cost containment while growing revenues. The Company has implemented additional cost savings measures beginning in the fourth quarter of 2020 which should result in incremental cost savings during the fourth quarter with no impact to revenues.
  • Same store sales growth increased 26% compared to the third quarter of 2019 and 8% compared to the second quarter of 2020.
  • Senior management demonstrated its commitment to the business by taking significant pay-cuts through the end of 2020 to help manage the current cash position.
  • Subsequent to the third quarter, the Company announced that it restructured its debt with the founders of Chalice Farms, resulting in a reduction of 50% of the $5M cash obligation due in May of 2022 through a conversion of such amount into shares at US$0.06 per share, a premium to market price, and extension of the payment schedule of the remaining $2.5M over 60 months at a favorable interest rate. This demonstrates the support of our stakeholders and is a vote of confidence in the current management team’s successes and paves the way to addressing our debenture obligations in the coming months.
  • Building on the momentum of the third quarter, the Company was Adjusted EBITDA positive in the month of October, based on unaudited results.

“We remain resilient and focused on continued channel growth and cost containment. Optimistically, we await future legislative outcomes that we hope will favor the cannabis industry,” said Yapp.

Disclaimer Regarding Preliminary Financial Information

The financial information presented in this news release for October 2020 is based on preliminary, unaudited financial statements prepared by management. Accordingly, such financial information may be subject to change. Such financial information is qualified in its entirety with reference to the Company’s audited financial statements for the year ended December 31, 2020, which is expected to be filed on SEDAR (www.sedar.com) on or before April 29, 2021. While the Company does not expect there to be any material changes to the October 2020 financial information presented in this news release, to the extent that it is inconsistent with the information contained in the Company’s audited financial statements for the year ended October 30, 2020, the financial information contained in this news release shall be deemed to be modified or superseded by the Company’s audited financial statements. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws.

Investor Conference Call

Golden Leaf Holdings – 2020 Third Quarter Earnings Call + Virtual Webinar

Golden Leaf management, led by Mr. John Varghese, Executive Chairman and Mr. Jeff Yapp, Chief Executive Officer, will hold a conference call on Thursday, November 19, 2020 at 4:15pm ET, to report its financial results for Q3 ended September 30, 2020 following immediately with a Virtual Webinar for a corporate update and a summary of Q3. Please click here to register and stream the call and the webinar immediately following, or use the following phone numbers:

Toll Free:      1-877-407-0784
Toll/International:  1-201-689-8560
Conference ID: 13711923

A live audio webcast will be available online on the Company’s website at www.goldenleafholdings.com where it will be archived for one year.

An audio replay of the conference call will be available through midnight Thursday, December 3, 2020 by dialing 1-844-512-2921 from the US or Canada, or 1-412-317-6671 from international locations. The conference ID is: 13711923.

About Golden Leaf Holdings:

Golden Leaf Holdings is a premier consumer-driven cannabis company specializing in production, processing, wholesale, distribution and retail, with seven dispensaries in Portland, Oregon. The Company is committed to developing a dynamic portfolio built around the recognized brands of Chalice Farms, with a focus on health and wellness. Markets served include Oregon, California, Nevada and Washington. Visit glhmonthly.com for regular updates.

Investor Relations:
John Varghese
Executive Chairman
971-371-2685
ir@goldenleafholdings.com

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 cost savings in the fourth quarter of 2020statements with respect to the Company’s future business operations, 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. These risks include but are not limited to general business, economic and competitive uncertainties, regulatory risks, market risks, risks inherent in manufacturing and retail operations such as unforeseen costs and production shutdowns, difficulties in maintaining brand loyalty, 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.

Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.

GOLDEN LEAF HOLDINGS LTD.   
Interim Condensed Consolidated Statements of Financial Position (Unaudited)  
As at September 30, 2020 and December 31, 2019   
(Expressed in U.S. dollars)    
     
  September 30, 2020December 31, 2019 
     
     
ASSETS    
CURRENT    
Cash $1,300,954  $3,531,202 
Accounts receivableNote 5 219,004   167,178 
Other receivablesNote 5 1,385,246   447,901 
Income tax recoverable     74,034 
Sales tax recoverable  128,074   271,866 
Biological assetsNote 7 217,385   88,078 
InventoryNote 7 2,838,888   2,965,304 
Prepaid expenses and deposits  376,075   325,329 
Total current assets  6,465,626   7,870,892 
     
Property, plant and equipmentNote 8 2,597,773   3,723,489 
Notes receivableNote 6 919,488   919,488 
Right-of-use assets, netNote 9 4,093,035   4,333,064 
Intangible assetsNote 10 10,737,423   10,737,423 
GoodwillNote 10 4,056,172   4,056,172 
Total assets  28,869,517   31,640,528 
     
LIABILITIES    
CURRENT    
Accounts payable and accrued liabilities  3,129,717   1,564,982 
Interest payable  540,860   125,900 
Income taxes payable  1,465,353    
Deferred income tax payable  248,852   248,852 
Sales tax payable  449,878   187,520 
Current portion of long-term debtNote 12 108,939   82,404 
Notes payableNote 11 186,910    
Lease liabilityNote 12 852,769   843,238 
Total current liabilities  6,983,278   3,052,896 
     
Long term debtNote 12 56,824   29,952 
Long term lease liabilityNote 12 4,132,024   4,090,806 
Convertible debentures carried at fair valueNote 11 5,218,464   4,706,141 
Consideration payable – cash portionNote 12 4,429,880   4,218,866 
Consideration payable – equity portionNote 12 4,838,780   4,940,667 
Total liabilities  25,659,250   21,039,328 
     
SHAREHOLDERS’ EQUITY    
     
Share capitalNote 13 148,222,848   147,763,499 
Warrant reserveNote 14 1,554,929   1,980,217 
Share option reserveNote 15 3,729,441   4,181,350 
Contributed surplus  59,940   59,940 
Deficit  (150,356,891)  (143,383,806)
Total shareholders’ equity  3,210,267   10,601,200 
Total liabilities and shareholders’ equity $28,869,517  $31,640,528 
     
GOLDEN LEAF HOLDINGS LTD.       
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss    
For the three and nine months ended September 30, 2020 and 2019      
(Expressed in U.S. dollars)        
         
  For the three months ended September 30, For the nine months ended September 30,
   2020   2019   2020   2019 
Revenues        
Product salesNote 20$5,765,970  $4,342,000  $15,318,207  $12,002,495 
Royalty and other revenueNote 20 430,086   9,917   1,064,886   220,273 
Total Revenue  6,196,056   4,351,917   16,383,093   12,222,768 
  Inventory expensed to cost of salesNote 7, 20 4,033,002   2,897,220   11,038,401   7,878,386 
Gross margin, excluding fair value items  2,163,054   1,454,697   5,344,692   4,344,382 
Fair value changes in biological assets included        
in inventory soldNote 7, 20 (14,125)     (48,483)   
Loss on changes in fair value of biological assetsNote 7, 20 98,853      295,009    
Gross profit  2,078,326   1,454,697   5,098,166   4,344,382 
         
Expenses:        
General and administration  2,215,291   2,602,470   6,714,321   8,347,065 
Share based compensationNote 15 41,517   155,936   264,793   485,646 
Sales and marketing  478,724   446,042   1,552,778   1,452,153 
Depreciation and amortizationNote 8, 9 239,751   509,525   775,489   1,586,026 
Total expenses  2,975,283   3,713,973   9,307,381   11,870,890 
         
Loss before items noted below  (896,957)  (2,259,276)  (4,209,215)  (7,526,508)
         
Interest expense (income)  350,265   559,366   1,449,109   2,043,675 
Transaction costs  127   125,612   41,178   133,834 
Loss on disposal of assetsNote 8 (10,139)  4,330   307,700   97,241 
Other loss (income)  70,249   (87,856)  32,029   (104,812)
Gain on debt modification     (312,083)     (312,083)
Gain on change in fair value of warrant liabilities     (23,371)     (605,134)
Loss on change in fair value of convertible debenturesNote 11 565,328   351,088   565,328   470,365 
Loss before income taxes  (1,872,787)  (2,876,362)  (6,604,559)  (9,249,594)
Current income tax expense  848,379      1,511,595   15,924 
Net loss from continuing operations  (2,721,166)  (2,876,362)  (8,116,154)  (9,265,518)
Loss from discontinued operations (Note 6)     (213,800)     (310,269)
Net loss  (2,721,166)  (3,090,162)   (8,116,154)  (9,575,787)
Other comprehensive loss        
Items that will be reclassified subsequently to profit or loss:        
Cumulative translation adjustment     210,023      1,192,068 
Comprehensive loss $(2,721,166) $(3,300,185) $(8,116,154) $(10,767,855)
Basic and diluted loss per share $(0.00) $(0.00) $(0.01) $(0.02)
Weighted average number of common shares outstanding  881,420,646   685,518,103   867,567,723   621,050,033 
         
GOLDEN LEAF HOLDINGS LTD. 
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) 
For the nine months ended September 30, 2020 and 2019 (Expressed in U.S. dollars)   
      
      
     For the three months ended
Cash from Operating Activities   September 30, 2020
Cash (used in) provided by:    
Operating activities:    
 Net loss   $(2,721,166)
 Depreciation of property, plant and equipment    290,091 
 Lease amortization    186,640 
 Loss on disposal of assets    (10,139)
 Interest expense    350,265 
 Share-based compensation    41,517 
 Loss on fair value adjustment to debt    565,328 
 Transaction costs    41,178 
 Loss on fair value of biological assets    84,728 
 Reserve for obsolete inventory    52,732 
 Other non-cash transactions    9,252 
      
Changes in working capital items:    
 Accounts receivable    (6,968)
 Other receivables    (472,837)
 Income tax payable    848,378 
 Sales tax recoverable    199,094 
 Accounts payable and accrued liabilities    634,214 
 Sales tax payable    240,351 
 Biological assets    (68,605)
 Inventory    97,412 
 Prepaid expenses and deposits    56,226 
Cash provided by operating activities   $417,691 
      
 
Adjusted EBITDA       
        
  For the three months endedFor the nine months ended
  September 30,
2020
 September 30,
2019
September 30,
2020
 September 30,
2019
        
Loss before income taxes $(1,872,787) $(2,876,362)$(6,604,559) $(9,249,594)
Adjustments:       
Net impact, fair value of biological assets  84,728     246,526    
Depreciation and amortization  476,733   509,525  1,548,121   1,586,026 
 Fair value changes on debt and equity instruments  565,328   327,717  565,328   (134,769)
Share based compensation  41,517   155,936  264,793   485,646 
Interest expense, net  350,265   559,366  1,449,109   2,043,675 
Transaction costs  127   125,612  41,178   133,834 
Start-up costs(1)  59,924     179,120    
Extraordinary losses(2)  60,093     276,883    
Impairments and other  70,249   (87,856) 32,029   (104,812)
Loss on disposal  (10,139)  4,330  307,700   97,241 
Adjusted EBITDA $(173,962) $(1,281,732)$(1,693,772)  $(5,142,753)
(1) Write-off of significant start up costs related to the Company’s California business  
(2) Losses experienced in Nevada due to unexpected shut down and facility abandonment due to COVID-19
        

SOURCE GLOBENEWSWIRE