Golden Leaf Holdings Reports Fiscal First Quarter 2020 Results
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
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.
Golden Leaf Holdings Ltd.
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 )