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Golden Leaf Holdings Reports Fiscal First Quarter 2020 Results

GlobeNewswire - Thu May 21, 4:00PM CDT

Golden Leaf Holdings Ltd. (CNSX:GLH.CN) (OTCQB:GLDFF) ("Golden Leaf" or the "Company"), a premiere consumer-driven cannabis company specializing in production, processing, wholesale, distribution and retail, today announced financial results for the first quarter ended March 31, 2020. All financial results are stated in US dollars, unless otherwise noted.

"The health crisis caused by COVID-19 that began during the first quarter of 2020 was one of many challenges the Company overcame this quarter," stated Jeff Yapp, Chief Executive Officer of Golden Leaf. "I am proud of the team's ability to pivot our operations, retail model, and product line, to help re-establish Golden Leaf as a market leader in Oregon and generate record revenues."

Q1 Financial Highlights:

"The Company continues to take a more disciplined approach to growth and working capital utilization, resulting in better supply chain control in purchasing, inventory management and production," continued Yapp. "We have extended terms with vendors, dramatically improved warehouse efficiencies and collections, reduced receivables, and cut operating expenses."

Q1 Business Highlights:

Fiscal First Quarter Ended March 30, 2020 Financial Results

For the three months ended March 31, 2020 ("Q1 2020"), total revenue from continuing operations was $4.7 million, as compared to $3.9 million for the same period in 2019 ("Q1 2019"). The 19% year-over-year increase largely reflects improvements in the Oregon retail and wholesale businesses. Gross profit was $1.7 million, or 37% of total revenue for Q1 2020, compared with $1.4 million, or 37% of total revenue, in Q1 2019.

Operating expenses were $3.3 million for Q1 2020, compared with $4.4 million in Q1 2019, an improvement of $1.1 million, or 26%. Cash-based operating expenses of $2.6 million in Q1 2020 were 53% of total revenue, compared with $3.4 million in Q1 2019, or 87% of total revenue. The reduction in operating expenses was due primarily to decreased salaries, wages, and share-based compensation and more significant than the cost reduction measures that were taken in Q1 2019.

Adjusted EBITDA loss was $0.9 million for Q1 2020, compared with a loss of $2.0 million for Q1 2019, a 55% improvement. This measure is primarily driven by the increase in gross profit and the reduction in cash-based operating expenses for the period. The Company considers Adjusted EBITDA an important operational measure for the business. Net loss from continuing operations for Q1 2020 was $2.5 million, compared to $3.1 million for Q1 2019, driven primarily by increased gross profit. See the management discussion and analysis for Q1 2020 as filed on SEDAR for a description of Adjusted EBITDA.

As of March 31, 2020, the Company offers, directly and through its partners, over 100 SKUs across 13 product lines in three jurisdictions: Oregon, California, and Nevada.

Investor Conference Call

Golden Leaf Holdings - 2020 First Quarter Earnings Call

Golden Leaf management, led by Mr. John Varghese, Executive Chairman and Mr. Jeff Yapp, Chief Executive Officer, will hold a conference call on Thursday, May 21, 2020 at 5:30pm ET, to report its financial results for Q1 ended March 31, 2020. Please click here to register and stream the call, or use the following phone numbers:

Toll Free: 1-800-458-4148

Toll/International: 1-323-794-2093

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, June 4, 2020 by dialing 1-844-512-2921 from the US or Canada, or 1-412-317-6671 from international locations. The conference ID: 5528535.

About Golden Leaf Holdings

Golden Leaf Holdings is a premiere 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

Golden Leaf Holdings Ltd.

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 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 Statement of Financial Position (Unaudited)
As at March 31, 2020 and December 31, 2019
(Expressed in U.S. dollars)
                                                      March 31, 2020           December 31, 2019
CURRENT
Cash                                                  $        1,543,102       $        3,531,202
Accounts receivable                          Note 6            259,424                  167,178
Other receivables                            Note 6            452,273                  447,901
Income tax recoverable                                         6,497                    74,034
Sales tax recoverable                                          283,331                  271,866
Biological assets                            Note 8            183,928                  88,078
Inventory                                    Note 8            3,705,769                2,965,304
Prepaid expenses and deposits                                  558,469                  325,329
Total current assets                                           6,992,793                7,870,892
Property, plant and equipment                Note 9            3,412,671                3,723,489
Notes receivable                             Note 7            919,488                  919,488
Right-of-use assets, net                     Note 10           4,400,294                4,333,064
Intangible assets                            Note 11           10,737,423               10,737,423
Goodwill                                     Note 11           4,056,172                4,056,172
Total assets                                                   30,518,841               31,640,528
LIABILITIES
CURRENT
Accounts payable and accrued liabilities                       2,135,555                1,564,982
Interest payable                                               304,699                  125,900
Income taxes payable                                           314,789                  -
Deferred income tax payable                                    248,852                  248,852
Sales tax payable                                              11,282                   187,520
Current portion of long-term debt            Note 13           76,173                   82,404
Lease liability                              Note 13           920,877                  843,238
Total current liabilities                                      4,012,227                3,052,896
Long term debt                               Note 13           29,952                   29,952
Long term lease liability                    Note 13           4,185,920                4,090,806
Convertible debentures carried at fair value Note 12           4,706,141                4,706,141
Consideration payable - cash portion         Note 13           4,286,978                4,218,866
Consideration payable - equity portion       Note 13           4,897,507                4,940,667
Total liabilities                                              22,118,725               21,039,328
SHAREHOLDERS' EQUITY
Share capital                                Note 14           147,873,002              147,763,499
Warrant reserve                              Note 15           1,553,850                1,980,217
Share option reserve                         Note 16           4,082,010                4,181,350
Contributed surplus                                            59,940                   59,940
Deficit                                                        (145,168,686 )           (143,383,806 )
Total shareholders' equity                                     8,400,116                10,601,200
Total liabilities and shareholders' equity            $        30,518,841      $        31,640,528
GOLDEN LEAF HOLDINGS LTD.
Interim Condensed Consolidated Statements of Operations and Comprehensive Gain (Loss) (Unaudited)
For the three months ended March 31, 2020 and 2019
(Expressed in U.S. dollars)
                                                                           For the three months ended March 31,
                                                                           2020                      2019
Revenues
Product sales                                                   Note 21    $          4,239,582      $          3,728,959
Consulting revenue                                              Note 21               430,722                   202,070
Total Revenue                                                                         4,670,304                 3,931,029
Inventory expensed to cost of sales                             Note 8, 21            2,964,192                 2,364,969
Production costs                                                Note 21               0                         128,577
Gross margin, excluding fair value items                                              1,706,112                 1,437,484
(Gain) loss on changes in fair value of biological assets       Note 8, 21            (20,714     )             -
Gross profit                                                                          1,726,826                 1,437,484
Expenses
General and administration                                                            2,045,274                 2,774,831
Share based compensation                                        Note 16               129,579                   411,926
Sales and marketing                                                                   535,026                   628,685
Depreciation and amortization                                   Note 9                568,345                   630,849
Total expenses                                                                        3,278,224                 4,446,291
Loss before items noted below                                                         (1,551,398  )             (3,008,807  )
Interest expense                                                                      551,101                   731,001
Transaction costs                                                                     -                         6,108
Loss (gain) on disposal of assets                               Note 9                7,822                     (16,945     )
Other income                                                                          (28,438     )             (141,197    )
Gain on change in fair value of warrant liabilities                                   -                         (499,662    )
Gain on change in fair value of convertible debentures          Note 12               -                         (36,169     )
Loss before income taxes                                                              (2,081,883  )             (3,051,943  )
Current income tax expense                                                            358,283                   11,624
Net loss from continuing operations                                        $          (2,440,166  )  $          (3,063,567  )
Income from discontinued operations                             Note 7                -                         17,524
Net loss                                                                   $          (2,440,166  )  $          (3,046,043  )
Other comprehensive loss
Items that will be reclassified subsequently to profit or loss:
Cumulative translation adjustment                                                     -                         892,214
Comprehensive loss                                                         $          (2,440,166  )  $          (3,938,257  )
Basic and diluted loss per share from continuing operations                $          (0.00       )  $          (0.01       )
Basic and diluted loss per share from discontinued operations              $          -              $          0.00
Weighted average number of common shares outstanding                                  859,890,063               534,900,058
Adjusted EBITDA
                                                  For the three months ended
                                                  March 31, 2020      March 31, 2019
Loss before income taxes                              (2,081,883 )         (3,051,943 )
Adjustments:
Net impact, fair value of biological assets           (20,714    )         -
Depreciation and amortization                         568,345              630,849
Fair value changes on debt and equity instruments     -                    (535,831   )
Share based compensation                              129,579              411,926
Interest expense, net                                 551,101              731,001
Transaction costs                                     -                    6,108
Impairments and other                                 (28,438    )         (141,197   )
Loss on disposal                                      7,822                (16,945    )
Adjusted EBITDA loss                              $   (874,188   )    $    (1,966,032 )

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