Aleafia Health Reports 2020 Year End Results, Record Quarterly Revenue

• 233% increase in Q/Q cannabis net revenue
• $4.3 million positive adjusted EBITDA in Q4 2020
• 42% and 501% increase in Q/Q medical cannabis and adult-use net revenue, respectively
• Significant product portfolio expansion with 31 new SKUs launched since October

TORONTO, March 25, 2021 (GLOBE NEWSWIRE) — Aleafia Health Inc. (TSX: AH, OTC: ALEAF) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the 2020 fourth quarter (“Q4 2020”) and fiscal year (“FY 2020”).

“Following the successful licensing of all three of our production facilities in 2020, we’ve now introduced innovative new cannabis derivative and dried flower formats under a distinct and compelling brand family,” said Aleafia Health CEO Geoffrey Benic. “Our expanded product portfolio is having an immediate impact, with record quarterly revenue and strong sequential growth in our priority adult-use, medical and international cannabis sales.”

“Notwithstanding certain non-cash, one-time expenses, our focus on disciplined, profitable growth has paid dividends with our first year of positive adjusted EBTIDA. The commercialization of our business is rapidly accelerating with the shift in revenue mix towards the sale of highly profitable packaged cannabis products providing a sustainable source of continued growth.”

CONDENSED INCOME (LOSS) STATEMENT

ADJUSTED EBITDA & NET INCOME

CANNABIS OPERATIONAL RESULTS

• Medical cannabis net revenue for Q4 and FY 2020 was $2.7 million and $8.0 million, an increase of 57% and 82%, respectively, over the same periods in the prior year. The increase was primarily due to improved product offerings and a continued increase in the Company’s total number of active, registered patients. Management believes that the Company’s broad medical cannabis ecosystem, which includes clinics and scheduled same day delivery, in addition to cannabis products, provides the company with a core competitive advantage.
• Net adult-use cannabis revenue for Q4 and FY 2020 was $1.4 million and $3.2 million, respectively, compared to $0.6 million and $4.1 million for the same periods in the prior year, and $0.2 million during the three months ended September 30, 2020 (“Q3 2020”). The sequential increase was primarily due to greater product availability, including the launch of new product formats and SKUs.
• Net bulk wholesale revenue received from sales to cannabis licensed producers (each an “LP”) for Q4 and FY 2020 was $10.0 million and $29.9 million, an increase of 256% and 783% respectively, over the same periods in the prior year. The increase was primarily due to the sale of flower harvested at the Port Perry Facility’s outdoor cultivation site to other LPs, and a larger harvest in 2020 relative to the prior year, yielding 31,200 kgs of dried flower.

Adjusted EBITDA for Q4 and FY 2020 was $4.3 million and $9.0 million compared to losses of $0.8 million and $19.6 million, respectively, in the same periods in 2019, and a sequential improvement of $9.4 million over the previous quarter. The substantial difference in quarterly adjusted EBITDA reported over the course of 2020 is primarily due to the seasonality of outdoor cultivation associated sales, which provide a substantial contribution margin. Bulk wholesale revenue fluctuated significantly over the course year, which significantly effects adjusted EBITDA and net income or loss.

Net loss for Q4 and FY 2020 was $217.3 million and $247.2 million, compared to losses of $9.8 million and $39.6 million in the same periods in 2019. In both Q4 and FY 2020, the net loss was primarily due to non-cash items including a fair value changes in biological assets and changes in inventory sold expense of $11.1 million for the quarter and $29.1 million for the full year. Included in the full year amount is a $17 million write-down to net realizable value of saleable inventory to reflect declining wholesale prices.

During Q4 2020, the Company incurred a $22.1 million write-down of intangible assets expense. This includes a $10.6 million write-off associated with the Company’s 51% interest in the Flying High Brands joint-venture, as the Company is now primarily developing its brands and products in-house, rather than licensing them from other cannabis companies.

The Company also wrote-down $176.0 million of goodwill associated with the acquisition of Emblem Corp., and $1.4 million of goodwill associated with the acquisition of Canabo Medical Corp.

PRODUCT PORTFOLIO & SALES GROWTH

With the receipt of necessary Health Canada licences received earlier in 2020, the Company began the development and production of a number of new product formats and existing line extensions, with launches commencing in Q4 2020. The launches have resulted in an increase of 31 cannabis products SKUs since October, directly impacting the increased sales in both markets.

• Sublingual Strips: Kin Slips, the cannabis-infused sublingual strips, launched in Q4 2020 in the medical and adult-use markets. Kin Slips offers a fast onset time relative to other non-combustible cannabis products. Placed under the tongue, the active ingredients enter the bloodstream through the sublingual gland, delivering a typical onset time of 10 to 15 minutes (though individual experience may vary).
• 510 Vape Cartridges: The vapes are inspired by Aleafia Health’s signature cultivars and contain custom-made, unique terpene blends deliver robust flavours and consistent effects. They contain CO2-extracted distillate mixed with a custom blend of botanically sourced terpenes. No fillers or artificial flavours are used in the vapes, which were launched in Q4 2020.
• Confectionary Edibles: Subsequent to the reporting period, the Company released THC soft chews, its first cannabis edible product. Soft chews are currently the largest edibles category in Canada, as they are in other international jurisdictions with a more established legal adult-use cannabis market. The initial launch features two SKUs, each with two five milligram chews per package. The Company is currently considering a soft chews line extension to include additional flavours, and a CBD dominant offering.
• High Potency CBD Oil: In December, the Company launched a high potency cannabis oil, CBD 50, with 50 mg per millilitre of CBD oil, provides greater consumer and patient convenience and has more than twice the potency of traditional high CBD oils.
• Exclusive Cultivars: The Company’s medical cannabis patients now benefit from access to highly sought-after strains through its supply agreement with cannabis brands house Robes Cannabis Inc. (dba as BLLRDR). As part of this agreement, subsequent to the reporting period, the Company launched the Afghani Bullrider and Wedding Cake strains each in 3.5 gram containers.
• Dried Flower at Scale: Leveraging the greater scale of cultivation capacity, the Company has also expanded upon its signature strains with greater product availability, and new larger format SKUs, including a pre-roll line extension with 12 pre-rolls each of 0.35 grams. Initial purchase orders for this and other new dried flower SKUs have commenced shipping to adult-use provincial wholesalers beginning in March.

CONFERENCE CALL & WEBCAST

Date: March 25, 2021
Time: 8:30 a.m. EST
USA/Canada Toll-Free Participant Call-in: (866) 679-9046; Passcode: 3497836
International Toll-Free Participant Call-in: (409) 217-8323; Passcode: 3497836

WEBCAST LINK

This conference call will be webcast live over the internet and can be accessed through the link provided. Audio of the call will be available to participants through both the conference call line and webcast; however, the presentation may only be viewed via the webcast. Participants who miss the live call can view a replay at any time via the link provided.

For Investor & Media Relations:

Nicholas Bergamini, VP Investor Relations
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com

About Aleafia Health:

Aleafia Health is a vertically integrated and federally licensed Canadian cannabis company offering cannabis health and wellness services and products in Canada and in international markets. The Company operates medical clinics, education centres and production facilities for the production and sale of cannabis.

Aleafia Health owns four significant licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history. The Company produces a diverse portfolio of commercially proven, high-margin derivative products including oils, capsules, edibles, sublingual strips and vapes. Aleafia Health operates the largest national network of medical cannabis clinics and education centres staffed by MDs, nurse practitioners and educators and operates internationally in three continents.

Forward Looking Information

This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, 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 involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.