Golden Leaf Q3 Sales of $3.13 Million Grow 29%

Golden Leaf Reports Third Quarter 2017 Results

TORONTO, Nov. 29, 2017 (GLOBE NEWSWIRE) — Golden Leaf Holdings Ltd. (“GLH” or the “Company”) (CSE:GLH) (OTCQB:GLDFF), a leading cannabis oil solutions company built around recognized brands, today announced its unaudited financial results for the third quarter ended September 30, 2017 (“Q3 2017”) and a general business update.

Recent Business Highlights

  • Received city license to sell cannabis in Las Vegas and other key Nevada jurisdictions;
  • Secured $10.8 million USD in a debenture financing to pay off outstanding accounts payable and provide working capital;
  • Completed the acquisition of Medical Marijuana Group Corporation (“MMGC”); and
  • MMGC received a cultivation license from Health Canada for Ontario grow facility.

Since joining the Company mid-year, the new senior leadership team at Golden Leaf has been executing on its strategy to build an efficient, sustainable business and to build value for its shareholders. Although it has been just a few months, we have made rapid progress, laying the foundation for several exciting accomplishments which the Company announced subsequent to quarter-end.

Mr. William Simpson, Chief Executive Officer of Golden Leaf Holdings

“Our vision is to drive top – line growth by developing our retail brand across our target markets, starting with Portland, Oregon. To this end, we are constructing three new Chalice Farm retail dispensaries. Construction efforts have progressed faster than expected and we anticipate one new location to be operational before the end of 2017, with a second expected to be up and running in Q1 2018. We are also expanding our product lines, maintaining a focus on innovation, as evidenced by Chalice Farms’ recent launch of a new line of seasonal cannabis edibles, including the Pumpkin Spice Truffle, which was named Runner-Up for Best Sweet Edible at the Third Annual Oregon DOPE Cup. Our existing brands also gained traction, with our “Private Stash” in Mango Super Silver Haze by Golden named Best Distillate at DOPE Cup. We strive to continually enhance Golden Leaf’s high quality product portfolio as a core part of our future growth initiatives.

“To expand beyond our home market of Oregon, we secured key city licenses that have enabled us to commence selling our proprietary brands wholesale to the adult use market in Nevada. Although at a very early commercial stage, we generated revenues of approximately $100,000 USD in the third quarter of 2017 from Nevada, and are pleased with this early stage traction. Nevada is one of the leading markets for the cannabis industry, due to its more than 40 million yearly visitors and its sizable domestic market, and we are excited about this opportunity. We also expanded into Canada, by completing the acquisition of MMGC in early November. Following the acquisition, MMGC was granted a cultivation license from Health Canada for its Ontario grow facility, which is expected to allow us to generate sales to the Canada market starting in 2018.

“Finally, our strategy to reduce costs has led to material changes to Golden Leaf’s corporate overhead. We significantly reduced our monthly payroll and G&A overhead in the third quarter of 2017 and have identified areas for further overhead reduction in the near-term. By transitioning into a more lean and efficient business, we believe we will be better positioned to focus on our initiatives to support stable and sustainable growth. Subsequent to quarter-end, we completed a financing that yielded proceeds of approximately $10.8 million USD, which enabled us to retire accounts payable, and to deploy working capital to rebuild inventory that we expect will drive top-line revenue growth. Looking ahead, we believe we now have a solid financial platform to drive growth in the business and leverage the significant growth opportunity ahead of us.”

Business Overview

  • Following the previously announced comprehensive review of business operations, management continued to implement initiatives to streamline the Company’s cost structure and improve efficiencies, while preserving the Company’s capacity to drive its key expansion initiatives forward. This has resulted in reduced overhead costs.
  • Oregon: The Company is consolidating its operations to the Chalice Farms campus in the Portland, Oregon area. The Company has made progress toward securing the required licensing for its production facility in Portland, Oregon and the construction of a processing facility which is expected to be completed by the end of the year. As a result of the acquisition of Chalice Farms and its four retail dispensaries in July 2017, the Company now has five retail dispensaries in operation, with an additional three under construction, one of which Golden Leaf expects to have opened by the end of 2017, and a second expected to open in the first quarter of 2018.
  • Nevada: Following the previously announced securing of state cultivation and production/extraction licenses in Nevada, the Company was granted business licenses by the city of Henderson and Washoe County, Sparks and Las Vegas, all in the State of Nevada, to sell cannabis to the adult-use markets in these locations. The Company has commenced sales of its high-quality, proprietary cannabis brands to dispensaries throughout the state. The Company also signed an agreement with a distributor in Reno, Nevada, to generate sales.
  • Canada: The Company closed the acquisition of MMGC in early November, which is expected to enable the Company to expand sales of its branded oils and flowers into the Canadian marketplace. Subsequently, MMGC was granted a cultivation license by Health Canada for its Ontario cannabis grow facility. GLH expects to begin grow facility operations shortly in preparation for the launch of retail operations in Canada in the third quarter of 2018.

Third Quarter Ended September 30, 2017 Financial Results

For the third quarter ended September 30, 2017 (“Q3 2017”), net revenue was $3.1 million USD as compared to $2.4 million USD for the same three-month period in 2016 (“Q3 2016”). Q3 2016 included $240,000 USD in non-recurring royalty revenue. The 29% year-over-year increase largely reflects the contribution from product sales as a result of the acquisition of Chalice Farms in July 2017, more than offsetting supply constraints of key products across the portfolio.

Gross profit was $731,000 USD, or 23.7% of net revenue, for Q3 2017, compared with 21.3% of net revenue in Q3 2016, and 19.2% of net revenue in the second quarter of 2017. Year-over year, gross margin benefitted from better utilization of production staff and consistent margins across product categories. Improvement in gross margin on a sequential basis was attributable to the higher margin associated with retail products sold at acquired dispensaries.

Operating expenses for Q3 2017 were $4.7 million USD compared with $2.3 million USD in Q3 2016. The increase was largely attributable to higher wages, consulting costs, legal costs, rents and share-based compensation. The Company identified opportunities to streamline the business and reduce its corporate overhead, which is expected to positively impact future payroll expense.

Adjusted EBITDA loss was $3.1 million USD for Q3 2017, as compared an Adjusted EBITDA loss of $1.7 million USD during Q3 2016. This was primarily driven by increases in legal costs, salaries, wages, and rents, which offset higher margins that resulted from sales of inventory produced in prior periods, and an enhanced product mix.

Net loss for Q3 2017 was $3.2 million USD, or $0.01 USD per share, compared with $2.3 million USD, also a $0.01 USD per share loss, for Q3 2016. As a result of the recent acquisitions and financing transactions, the current number of common shares of the company is 726 million on a fully diluted basis.

As of September 30, 2017, the Company had approximately $634,000 USD in cash, compared with $3.9 million USD at December 31, 2016. Subsequent to the end of Q3 2017, Golden Leaf received approximately $10.8 million USD in net proceeds from a private placement transaction. The Company is using these proceeds for the payment of outstanding accounts payable, inventory purchasing and general corporate purposes.

Investor Conference Call

GLH’s management, led by Mr. William Simpson, Chief Executive Officer, will hold a conference call at 4:30 PM ET on Wednesday, November 29, 2017, to report its financial results for the quarter ended September 30, 2017.

The dial-in information for the conference call is as follows:

Program Title: Golden Leaf Holdings Third Quarter 2017 Earnings Call
Canada & U.S.: +1 (877) 423-9813
International: +1 (201) 689-8573
Participants must request the Golden Leaf Call.

Mr. Simpson will be answering shareholder questions at the end of the call. Should you have questions during or prior to the conference call please send an email to GLH@kcsa.com with Golden Leaf Question in the subject line. Mr. Simpson will answer as many questions as time will allow.

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 December 13, 2017 by dialing +1 (844) 512-2921 from the U.S. or Canada, or +1 (412)-317-6671 from international locations, Conference ID: 13673816.

To be added to the Golden Leaf email distribution list, please email GLH@kcsa.com with “Golden Leaf” in the subject line.

About Golden Leaf Holdings:

Golden Leaf Holdings Ltd., a Canadian company with operations in Portland, Oregon, 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 Holdings cultivates, extracts and 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 http://goldenleafholdings.com/ to learn more.

Original press release

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Published by NCV Newswire
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