GLDFF - Golden Leaf Holdings Announces First Cashflow-Positive Quarter and Record Quarterly Revenues
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 2 nd 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.
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 reg istration.
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 |