TORONTO, Aug. 26, 2019 (GLOBE NEWSWIRE) -- Golden Leaf Holdings Ltd. (“Golden Leaf” or the “Company”) (CSE:GLH) (OTCQB:GLDFF), a pioneer cannabis oil solutions company and dispensary operator built around recognized brands, today announced financial results for the fiscal second quarter ended June 30, 2019, and a general business update.
Recent Business and Financial Highlights
- Sales increased 17% over the second quarter in prior year.
- Material improvement in Gross profit to 40% in Q2 2019, compared with 26% in Q2 2018, while experiencing growth in revenue.
- Adjusted EBITDA loss decreased dramatically to US$1.5M in Q2 2019 compared with US$3.2M in Q2 2018.
- Acquired the Standard Processing and Medical Sales Licenses from Health Canada.
- Retained a recruiting firm to lead search for new CEO and CFO.
Subsequent Events
An agreement to manufacture Chalice fruit chews in California
In July 2019, the Company entered into a License Agreement with The Micro Buddery, Inc. to manufacture Chalice Farms branded cannabis fruit chews in the state of California. The License Agreement is subject to regulatory approval from the California Bureau of Cannabis Control. This is the Company’s first foray into the California cannabis market.
Debt Restructuring Contingent Agreement and Debenture Holders Meeting
In July 2019, the Company reached an agreement in principle to extend the due date for the $9,527,350 earn-out payment due to Chalice LLC and its members, related to the acquisition of certain assets and a subsidiary of Chalice on July 7, 2017. The agreement provides for the consideration payable due date to be extended to May 2, 2022, but is not effective until the holders of the debentures that mature on November 2, 2019 vote to approve certain extraordinary resolutions, including the early conversion of the debentures.
The Company reached an agreement to extend the due date for the $9,527,350 earn-out payment due to Chalice LLC and its members to May 2, 2022. On August 21, 2019, the debenture holders approved the repayment of the principal amount of the debentures of C$12,961,000 and accrued interest of $190,815 via an early conversion on August 23, 2019 at C$0.06. The original maturity of these debentures and Chalice earn-out due date was November 2, 2019. Following such debt restructuring and early conversion of the debentures, the Company has sufficient liquidity to meet its current obligations when due and to execute its strategic initiatives.
Fiscal Second Quarter Ended June 30, 2019 Financial Results
For the second quarter ended June 30, 2019 (“Q2 2019”), total revenue was US$4.3 million as compared to US$3.7 million for the same three-month period in 2018 (“Q2 2018”). The 17% quarter-over-quarter increase is largely attributable to strong wholesale revenue streams in Oregon and flower sales from our Canadian operations.
Gross profit was US$1.7 million or 40% of total revenue for Q2 2019, compared with US$0.9 million or 26% of total revenue in Q2 2018. Gross profit improvement in Q2 2019 over prior year period is consistent with the gross profit of 41% of quarterly revenues in Q1 2019.
“The strong gross margin run-rate in the first six months of 2019 is primarily due to significant cost reductions and utilization of improved inventory controls and processes,” said John Varghese, Interim CEO, Golden Leaf Holdings. “Our increased focus on operational excellence and building out our executive team is starting to show results that we believe are sustainable for growth in the coming quarters.”
Operating expenses were US$4.0 million for Q2 2019 compared with US$4.6 million for Q2 2018. Q2 2019 operating expenses included $0.3M in wages and benefits related to headcount reductions and severance.
Adjusted EBITDA loss dramatically decreased to US$1.5 million for Q2 2019, compared with a loss of US$3.5 million for Q2 2018. 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 the three and six months ended June 30, 2019 (the “MD&A”).
Net loss for Q2 2019 was US$3.4 million or US$0.01 per share, compared with a net gain of US$3.2 million or US$0.01 per share for Q2 2018. Net income for Q1 2018 benefited from favorable changes in the fair value of warrant and debt liabilities of US$7.3 million, compared with an unfavorable change of $0.1M for Q2 2019. Changes in the fair value of warrant and debt liabilities and other non-cash items are excluded in the Adjusted EBITDA non-GAAP measurement.
As of June 30, 2019, the Company had approximately US$5.2 million in cash, compared with US$12.3 million at December 31, 2018.
The Company’s interim condensed consolidated financial statements for the three and six months ended June 30, 2019, the related notes and MD&A for the three and six months ended June 30, 2019 will be filed on SEDAR and available for review later today.
The Company’s recent investment presentation was filed on SEDAR on August 13, 2019.
About Golden Leaf Holdings
Golden Leaf Holdings Ltd., a Canadian company with operations in multiple jurisdictions including Oregon, Nevada and Canada, is one of the largest cannabis oil and solution providers in North America, and a leading cannabis products company built around recognized brands. Golden Leaf cultivates, extracts, manufactures and distributes its products through its branded Chalice Farm retail dispensaries, as well as through third party dispensaries. Golden Leaf leverages a strong management team with cannabis and food industry experience to complement its expertise in extracting, refining and selling cannabis oil. Visit goldenleafholdings.com to learn more.
Company:
Kate Koustareva
Director of Financial Reporting and Treasury
Golden Leaf Holdings Ltd.
ir@goldenxtrx.com
Investor Relations:
Steve Hosein
Renmark Financial Communications
416-644-2020
Media Relations:
Anne Donohoe / Nick Opich
KCSA Strategic Communications
adonohoe@kcsa.com / nopich@kcsa.com
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.
| GOLDEN LEAF HOLDINGS LTD. | ||||||
| Interim Condensed Consolidated Statement of Financial Position (Unaudited) | ||||||
| As at June 30, 2019 and December 31, 2018 | ||||||
| (Expressed in U.S. dollars) | ||||||
| June 30, 2019 | December 31, 2018 | |||||
| ASSETS | ||||||
| CURRENT | ||||||
| Cash | $ | 5,249,820 | $ | 12,275,372 | ||
| Accounts receivable | 476,468 | 624,453 | ||||
| Other receivables | 484,961 | 297,737 | ||||
| Income tax recoverable | 686,600 | 686,600 | ||||
| Sales tax recoverable | 562,833 | 661,319 | ||||
| Biological assets | 187,503 | 74,148 | ||||
| Inventory | 3,570,523 | 3,416,906 | ||||
| Prepaid expenses and deposits | 1,311,512 | 1,962,033 | ||||
| Assets held for sale | - | 35,274 | ||||
| Total current assets | $ | 12,530,220 | $ | 20,033,842 | ||
| Property, plant and equipment | 11,067,700 | 6,188,835 | ||||
| Intangible assets | 21,626,213 | 21,782,949 | ||||
| Goodwill | 25,471,399 | 25,471,399 | ||||
| Total assets | $ | 70,695,532 | $ | 73,477,025 | ||
| LIABILITIES | ||||||
| CURRENT | ||||||
| Accounts payable and accrued liabilities | $ | 790,342 | $ | 2,624,967 | ||
| Interest payable | 752,660 | 92,554 | ||||
| Income taxes payable | 69,534 | 106,808 | ||||
| Sales tax payable | 109,600 | 231,675 | ||||
| Current portion of long-term debt | 1,235,033 | 25,492 | ||||
| Current portion of convertible debentures carried at fair value | 9,059,430 | 8,888,946 | ||||
| Warrant liability | 7,115 | 369,343 | ||||
| Total current liabilities | $ | 12,023,714 | $ | 12,339,785 | ||
| Long term debt | 4,262,902 | 46,229 | ||||
| Note payable | 312,118 | 312,118 | ||||
| Convertible debentures carried at fair value | 5,155,515 | 4,996,811 | ||||
| Consideration payable | 9,295,374 | 8,956,809 | ||||
| Warrant liability | 16,603 | 236,138 | ||||
| Total liabilities | $ | 31,066,226 | $ | 26,887,890 | ||
| SHAREHOLDERS' EQUITY | ||||||
| Share capital | $ | 138,689,168 | $ | 138,511,038 | ||
| Warrant reserve | 3,771,816 | 4,052,164 | ||||
| Share option reserve | 4,638,151 | 4,777,929 | ||||
| Contributed surplus | 59,940 | 59,940 | ||||
| Accumulated other comprehensive loss | (1,107,975 | ) | (125,930 | ) | ||
| Deficit | (106,421,794 | ) | (100,686,006 | ) | ||
| Total shareholders' equity | 39,629,306 | 46,589,135 | ||||
| Total liabilities and shareholders' equity | $ | 70,695,532 | $ | 73,477,025 | ||
| GOLDEN LEAF HOLDINGS LTD. | |||||||||||||
| Interim Condensed Consolidated Statements of Operations and Comprehensive Gain (Loss) (Unaudited) | |||||||||||||
| For the three and six months ended June 30, 2019 and 2018 | |||||||||||||
| (Expressed in U.S. dollars) | |||||||||||||
| For the three months ended June 30, | For the six months ended June 30, | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| Revenues | |||||||||||||
| Product sales | $ | 4,296,971 | $ | 3,671,738 | $ | 8,373,578 | $ | 6,854,727 | |||||
| Consulting revenue | 12,393 | 9,898 | 218,634 | 27,176 | |||||||||
| Total Revenue | $ | 4,309,364 | $ | 3,681,636 | $ | 8,592,212 | $ | 6,881,903 | |||||
| Inventory expensed to cost of sales | 2,364,479 | 3,029,795 | 4,882,634 | 5,754,508 | |||||||||
| Production costs | 108,451 | 113,753 | 247,187 | 411,227 | |||||||||
| Gross margin, excluding fair value items | 1,836,434 | 538,088 | 3,462,391 | 716,168 | |||||||||
| Fair value changes in biological assets included in inventory sold | 235,833 | 10,518 | 397,356 | 129,648 | |||||||||
| (Gain) Loss on changes in fair value of biological assets | (104,242 | ) | (412,360 | ) | (407,681 | ) | (706,257 | ) | |||||
| Gross profit | $ | 1,704,843 | $ | 939,930 | $ | 3,472,716 | $ | 1,292,777 | |||||
| Expenses | |||||||||||||
| General and administration | 2,926,629 | 3,270,258 | 5,926,090 | 6,066,052 | |||||||||
| Share based compensation | (82,216 | ) | 567,969 | 329,710 | 1,643,421 | ||||||||
| Sales and marketing | 377,933 | 440,751 | 1,008,895 | 824,052 | |||||||||
| Depreciation and amortization | 735,883 | 358,516 | 1,442,029 | 703,795 | |||||||||
| Total expenses | $ | 3,958,229 | $ | 4,637,494 | $ | 8,706,724 | $ | 9,237,320 | |||||
| Loss before items noted below | $ | (2,253,386 | ) | $ | (3,697,564 | ) | $ | (5,234,008 | ) | $ | (7,944,543 | ) | |
| Interest expense | 761,819 | 266,317 | 1,503,481 | 915,575 | |||||||||
| Transaction costs | 2,114 | - | 8,222 | 471,900 | |||||||||
| Loss on disposal of assets | 109,856 | 5,000 | 92,911 | 5,000 | |||||||||
| Other income (loss) | 234,762 | 36,723 | 93,565 | (122,403 | ) | ||||||||
| Gain on change in fair value of warrant liabilities | (82,101 | ) | (4,415,480 | ) | (581,763 | ) | (10,627,702 | ) | |||||
| (Gain) loss on change in fair value of convertible debentures | 155,446 | (2,841,987 | ) | 119,277 | (9,970,603 | ) | |||||||
| Gain (loss) before income taxes | (3,435,282 | ) | 3,251,863 | (6,469,701 | ) | 11,383,690 | |||||||
| Current income tax expense | 4,300 | 8,434 | 15,924 | 8,434 | |||||||||
| Net gain (loss) | $ | (3,439,582 | ) | $ | 3,243,429 | $ | (6,485,625 | ) | $ | 11,375,256 | |||
| Other comprehensive loss | |||||||||||||
| Items that will be reclassified subsequently to profit or loss: | |||||||||||||
| Cumulative translation adjustment | 89,831 | 34,146 | 982,045 | 53,263 | |||||||||
| Comprehensive gain (loss) | $ | (3,529,413 | ) | $ | 3,209,283 | $ | (7,467,670 | ) | $ | 11,321,993 | |||
| Basic and diluted gain (loss) per share | $ | (0.01 | ) | $ | 0.01 | $ | (0.01 | ) | $ | 0.02 | |||
| Weighted average number of common shares outstanding | 589,243,324 | 575,776,971 | 589,191,834 | 555,451,438 | |||||||||