Golden Leaf Reports Fiscal Year 2018 Results

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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