Golden Leaf Reports Fiscal Year 2018 Results

GlobeNewswire - Posted 4 years ago

Reported Record Annual Revenue of US$16.5 million

TORONTO, April 30, 2019 (GLOBE NEWSWIRE) -- Golden Leaf Holdings Ltd. (CSE:GLH) (GLDFF) (“Golden Leaf” or the “Company”), a leading cannabis company built around recognized brands for the wellness and recreational markets, today announced financial results for the fiscal year ended December 31, 2018, and a general business update.

Recent Financial Highlights:

  • Total revenue of US$16.5 million for FY 2018, a 43% year-over-year increase compared to $11.5 million for FY 2017.  Total revenue figures include Royalties and Consulting Revenue.
  • Record global product sales of US$16.3 million for FY 2018, a 57% increase over FY 2017
  • Comprehensive loss of US$4.4 million compared with a comprehensive loss of US$55.9 million for FY 2017
  • The Company attracted net investment proceeds of US$25.0 million
  • 105% increase in cash balance to US$12.3 million at year-end

2018 Milestones:

  • Garnered several licenses to expand and solidify the Company’s strategic position:
    • License to open another Oregon dispensary
    • License to operate an extraction facility in Oregon
    • Cultivation license in Oregon
  • Opened the Company’s seventh dispensary in Oregon
  • Successfully introduced several new products:
    • Award-winning, high-quality, vegan chews in Oregon and Nevada, including a CBD-only chew
    • Concentrates in Nevada
  • Garnered first harvest from the Company’s Canadian grow facility
  • New leadership: experienced operator and brand-builder, William Kulczycki, joined the Company as CEO

Subsequent Events:

  • Added management and oversight talent: 
    • Appointed Karyn Barsa as the Company’s CFO in February 2019
    • Larry Martin joined the Company’s board of directors in March 2019
  •  Declined to pursue closing of two previously-disclosed transactions:
    • Terra Tech Corporation 
    • Tahoe Hydroponics Company LLC
  • Initiated significant efficiency measures to improve financial performance, including reducing headcount by 19%
  • Scheduled the Annual General Meeting of shareholders at the offices of Cassels Brock and Blackwell LLP in Toronto, Canada for June 25, 2019

Mr. William Kulczycki, Chief Executive Officer of Golden Leaf Holdings, commented, “We closed out 2018 on a strong note with record global product sales of US$16.3 million. Our results reflect the important steps we took to build long-term value in our business and develop a platform to capitalize on the developing legalization of cannabis in Canada. This included expanding our cultivation capabilities and wholesale brands, while also increasing our retail presence with a new store in Oregon.

“Looking forward, we remain focused on growing revenue by expanding our retail footprint, product array and cultivation presence throughout the U.S. and Canada. At the same time, we are committed to growing responsibly while improving our margin growth and EBITDA. Towards that end, we have taken several measures this year to increase efficiencies throughout our organization to lower costs, increase cash flow and improve our overall financial performance.  With a differentiated brand portfolio and increased scope of operations, we are well positioned to benefit from the rapidly growing North American cannabis market,” said Mr. Kulczycki.

Fiscal Year 2018 Financial Results

For the year ended December 31, 2018 (“FY 2018”), total revenue was US$16.5 million as compared to US$11.5 million for the same twelve-month period in 2017 (“FY 2017”). The 43% year-over-year increase largely reflects initiation of flower sales from our Canadian operations and the addition of Chalice Farms stores in Oregon.

Gross profit was US$2.2 million or 13.3% of total revenue for FY 2018, compared with US$1.7 million or 15% of total revenue in FY 2017. FY 2018 gross margin decreased partially due to a reduction in the period gain from the fair value of biological assets as the Company’s biological assets matured, and due to absorption of additional production overhead as the Company brought new products to market.

Operating expenses were US$23.1 million for FY 2018 compared with US$11.7 million in FY 2017. Cash-based operating expenses of US$21.2 million in 2018 were 128% of total revenue, compared with US$11.1 million in 2017 or 97% of total revenue. The increase in operating expenses was largely due to accounting for share based compensation, increases to sales and marketing expense, and overhead associated with the opening of an additional dispensary.

Adjusted EBITDA loss was US$14.5 million for FY 2018, compared with a loss of US$8.3 million for FY 2017. This non-GAAP measure was predominantly impacted by a negative change of US$27.6 million to the fair value of the Company’s debt and equity instruments in 2018, compared with a positive change of US$20.0 million to the fair value of debt and equity instruments in 2017.  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 FY 2018 (the “MD&A”). 

Net loss for FY 2018 was US$4.6million or US$0.01 per share, compared with a net loss of US$55.9 million or $0.21 per share for FY 2017. Net income for FY 2018 benefited from favorable changes in the fair value of warrant and debt liabilities.

The Company’s annual financial statements for FY 2018 and related MD&A will be filed on SEDAR and available for review later today.

Investor Conference Call

Golden Leaf management, led by Mr. William Kulczycki, Chief Executive Officer, will hold a conference call at 4:30 ET on Wednesday, May 1, 2019, to report its financial results for the year ended December 31, 2018.

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Dial-in information for the conference call is as follows:

Program Title: Golden Leaf Holdings 2018 Audited Financials Conference Call
Canada & US: 1-877-423-9813
International:  1-201-689-8573
Participants must request the 2018 Audited Financials Call.

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

An audio replay of the conference call will be available through midnight May 15, 2019 by dialing 1-844-512-2921 from the US or Canada, or 1-412-317-6671 from international locations.  The conference ID: 13690596.

To be added to the Golden Leaf email distribution list, please email [email protected] with ‘GLH’ in the subject line.

About Golden Leaf Holdings

Golden Leaf Holdings Ltd. is a Canadian company with operations in multiple jurisdictions including Oregon, Nevada, and Canada, with cultivation, production and retail operations built around recognized brands. Golden Leaf distributes its products through its branded Chalice Farms retail dispensaries, as well as through third-party dispensaries. Golden Leaf’s cannabis retail operations and products are designed with the customer in mind, focused on superlative in-store experience and quality products. Visit to learn more.

Investor Relations:
Steve Hosein
Renmark Financial Communications

Karyn Barsa
Chief Financial Officer
Golden Leaf Holdings Ltd.
[email protected]

Media Relations:
Anne Donohoe / Nick Opich
KCSA Strategic Communications
[email protected] / [email protected]
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 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.

Consolidated Statements of Operations and Comprehensive Loss 
For the years ended December 31, 2018 and 2017 
(Expressed in U.S. dollars) 
    2018       2017  
      (Restated, Note 31)
Product sales $   16,347,558     $   10,411,232  
Royalties     -          1,100,066  
Consulting revenue     104,769         -   
Total Revenue $   16,452,327     $   11,511,298  
Inventory expensed to cost of sales     13,326,640         9,535,602  
Production costs     1,008,025         465,658  
Gross margin, excluding fair value items     2,117,662         1,510,038  
Fair value changes in biological assets included in inventory sold     227,731         -   
(Gain) Loss on changes in fair value of biological assets     (301,335 )     (198,000 )
Gross profit $   2,191,266     $   1,708,038  
General and administration     14,430,986         8,610,318  
Share based compensation     4,616,448         1,239,670  
Professional fees paid with equity instruments     -          80,436  
Sales and marketing     2,166,200         1,114,628  
Depreciation and amortization     1,856,814         572,695  
Impairment of long-lived assets     -          50,254  
Total expenses $   23,070,448     $   11,668,001  
Loss before items noted below $   (20,879,182 )   $   (9,959,963 )
Interest expense     2,221,914         1,960,120  
Transaction costs     1,686,425         8,518,490  
Loss on disposal of assets     5,000         470,071  
Impairment of financing lease receivable     -         432,557  
Impairment of purchase option     -         5,200,000  
Other (income) loss     7,332,223         9,787,413  
(Gain) Loss on change in fair value of warrant liabilities     (14,993,991 )       7,714,578  
(Gain) Loss on change in fair value of derivative liabilities     (61,044 )       (334,834 )
(Gain) Loss on change in fair value of convertible debentures     (12,582,178 )       12,631,094  
Loss before income taxes   (4,487,531 )     (56,339,452 )
Current income tax expense     82,811         143,230  
Net loss $   (4,570,342 )   $   (56,482,682 )
Other comprehensive loss      
Reversal of unrealized loss on available for sale purchase option, net of tax for impairment $   -      $   530,000  
Items that will be reclassified subsequently to profit or loss:      
Cumulative translation adjustment     135,759         9,828  
Comprehensive loss $   (4,434,583 )   $   (55,942,854 )
Basic and diluted loss per share $   (0.
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