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

Operational Excellence a key driver of financial results

/EIN News/ -- 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 2020, statements 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, 2020 December 31, 2019  
         
         
ASSETS        
CURRENT        
Cash   $ 1,300,954     $ 3,531,202  
Accounts receivable Note 5   219,004       167,178  
Other receivables Note 5   1,385,246       447,901  
Income tax recoverable     -       74,034  
Sales tax recoverable     128,074       271,866  
Biological assets Note 7   217,385       88,078  
Inventory Note 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 equipment Note 8   2,597,773       3,723,489  
Notes receivable Note 6   919,488       919,488  
Right-of-use assets, net Note 9   4,093,035       4,333,064  
Intangible assets Note 10   10,737,423       10,737,423  
Goodwill Note 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 debt Note 12   108,939       82,404  
Notes payable Note 11   186,910       -  
Lease liability Note 12   852,769       843,238  
Total current liabilities     6,983,278       3,052,896  
         
Long term debt Note 12   56,824       29,952  
Long term lease liability Note 12   4,132,024       4,090,806  
Convertible debentures carried at fair value Note 11   5,218,464       4,706,141  
Consideration payable - cash portion Note 12   4,429,880       4,218,866  
Consideration payable - equity portion Note 12   4,838,780       4,940,667  
Total liabilities     25,659,250       21,039,328  
         
SHAREHOLDERS' EQUITY        
         
Share capital Note 13   148,222,848       147,763,499  
Warrant reserve Note 14   1,554,929       1,980,217  
Share option reserve Note 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 sales Note 20 $ 5,765,970     $ 4,342,000     $ 15,318,207     $ 12,002,495  
Royalty and other revenue Note 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 sales Note 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 sold Note 7, 20   (14,125 )     -       (48,483 )     -  
Loss on changes in fair value of biological assets Note 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 compensation Note 15   41,517       155,936       264,793       485,646  
Sales and marketing     478,724       446,042       1,552,778       1,452,153  
Depreciation and amortization Note 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 assets Note 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 debentures Note 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 ended For 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
               

 


 

 


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