Golden Leaf Reports Record 2020 Revenues of $21.9 Million and First Adjusted EBITDA1 Positive Quarter
Six months of positive cash flow from operations. Turnaround complete and focused on growth and optimization.
PORTLAND, Ore., April 27, 2021 (GLOBE NEWSWIRE) — Golden Leaf Holdings Ltd. (CSE:GLH) (OTCQB:GLDFF) (“Golden Leaf” or the “Company”), operating as Chalice Brands, a premier, consumer-driven cannabis company specializing in retail, production, processing, wholesale, and distribution, today announces its results for the fourth quarter 2020 and the year ended December 31, 2020.
2020 Financial Highlights:
- Record total revenue of US$21.9 million for FY 2020, a 39% year-over-year increase compared to $15.8 million for FY 2019.
- Record year-over-year revenues for the fourth quarter of 2020 of $5.5 million, a 53% increase compared to the fourth quarter of 2019.
- Fourth quarter of 2020 was the Company’s first ever adjusted EBITDA1 positive quarter of approximately $342,000.
- For the six months ended December 31, 2020 adjusted EBITDA1 was approximately $170,000 and cash flow from operations was approximately $420,000.
- Gross profit for 2020 of $6.8M or 31% gross margin compared to $4.3M at a 27% gross margin in 2019. Gross margin improvements were accomplished as a result of facility consolidations, headcount rationalization, and improved vertical product contribution.
2020 Accomplishments:
- Galvanized a world-class management team to succeed and grow despite a global pandemic, social unrest and once in a generation Oregon wildfire activity.
- Leveraged the Chalice reputation in the Oregon marketplace and cannabis community to earn exceptional purchasing terms for the Company’s retail stores.
- Restructured and optimized the Bald Peak grow facility and hired a six-time award winning Director of Cultivation. Kicked off in-house breeding program focused on creating unique strains to serve both new and seasoned consumers.
- Created an innovative and non-traditional approach to vendor partnerships and collaborative marketing by building out a true omni-channel advertising plan, collaborative discount programs, participation in the Chalice Farms Magazine and more.
- Restructured the balance sheet with the modification of the Chalice Farms earn-out, resulting in a reduction in forward cash obligations of $2.5M and a manageable payment schedule for the remaining cash obligations over 60 months commencing May 2022.
Subsequent Events:
- On January 21, 2021 the Company announced it received unanimous consent from holders of its convertible debentures due November 16, 2021 to extend the term one year to November 16, 2022 and to reprice the conversion features from C$0.30 to US$0.06.
- During the first quarter the Company closed on total gross proceeds of US$13.7 million in non-brokered private placement transactions to be used to fund the acquisition of its previously announced retail store acquisition.
- On February 26, 2021 the Company announced a letter of intent to acquire a retail store chain in the Northwest. Target close expected by end of April.
- C$3.7M of convertible debentures converted to equity during the first quarter of 2021, reducing balance outstanding to C$4.4M.
- On April 8, 2021 the Company announced its 80% acquisition of CBD skincare brand Fifth & Root.
Jeff Yapp, Chief Executive Officer of Golden Leaf Holdings, commented, “2020 was the culmination of the transition we began in 2019. We set a course for positive cash flow and achieved that goal with support from vendors, commitment of our staff, executives, and directors. We achieved positive cash flow in Q3 and Q4 and positive adjusted EBITDA in Q4 and with the inclusion of its recently announced retail acquisition, management expects that the Company can financially support operations moving forward.”
Fiscal Year 2020 Financial Results:
For the year ended December 31, 2020 (“FY 2020”), total revenue was US$21.9 million as compared to US$15.8 million for the same twelve-month period in 2019 (“FY 2019”). The 39% year-over-year increase largely reflects improvements in Oregon operations.
Gross profit was $6.8 million, or 31% of total revenue for FY 2020, compared with $4.3 million or 27% of total revenue in FY 2019. FY 2020 gross margin increased largely due to cost control measures implemented early in the year, including facility consolidation and headcount reduction in operational areas as well as significantly increased contribution from vertically manufactured products in the Company’s retail revenues.
Operating expenses were $12.3 million for FY 2020, compared with $16.6 million in FY 2019, an improvement of US$4.2 million, or 26%, driven largely by decreases in share-based compensation and general and administrative expenses. The reduction in operating expenses was due primarily to decreased salaries, wages and share-based compensation.
Adjusted EBITDA loss was $1.4 million for FY 2020, compared with a loss of $8.8 million for FY 2019. This measure is primarily driven by the increase in gross profit and the reduction in cash-based operating expenses. The Company considers Adjusted EBITDA an important operational measure for the business. For a reconciliation of Adjusted EBITDA to income (loss) before income taxes, please see the Company’s management discussion and analysis for FY 2020 (the “MD&A”).
Net loss from continuing operations for FY 2020 was $10.0 million compared to $32.6 million for FY 2019. This change of $22.6 million is largely due to no impairments to goodwill and intangible assets in FY2020 (FY2019 – $18.7 million) and improvement in operating income of $6.7 million over the prior year.
“For years, we’ve been providing wellness-inspired cannabis products that feed the market’s growing demand for healthy, vegan, gluten-free, organic and locally-sourced oils, extracts and ingredients,” continued Yapp. “While others play catch-up, we are optimizing and improving our commitment to deliver the highest quality cannabis product and experience.”
The Company’s annual audited financial statements for FY 2020 and related MD&A have been filed on SEDAR and are available for review.
1Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization, non-cash compensation expenses, one-time transaction fees and other non-cash charges that include impairments, start-up costs and extraordinary operational curtailment charges and excluding fair value changes related to biological assets.
Investor Conference Call
Golden Leaf management, led by Mr. John Varghese, Executive Chairman and Mr. Jeff Yapp, Chief Executive Officer, will hold a conference call on Tuesday April 27th at 4:30 ET, 2021, to report its financial results for the year ended December 31, 2020.
Dial-in information for the conference call is as follows:
Program Title: Golden Leaf Holdings – 2020 Fourth Quarter Earnings Call
Canada & US: 1-877-407-0784
International: 1-201-689-8560
Participants must request the Golden Leaf Holdings – 2020 Fourth Quarter Earnings Call
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 May 11, 2021 by dialing 1-844-512-2921 from the US or Canada, or 1-412-317-6671 from international locations. The conference ID: 13718945.
About Golden Leaf Holdings
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. GLH operates nationally through Fifth and Root and has operations in Oregon and California. Visit http://www.glhmonthly.com for regular updates.
Investor Relations:
John Varghese
Executive Chairman
Golden Leaf Holdings Ltd.
971-371-2685
ir@goldenxtrx.com
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.
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.
| GOLDEN LEAF HOLDINGS LTD. | ||||||||
| Consolidated Statements of Financial Position | ||||||||
| As at December 31, 2020 and December 31, 2019 | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| December 31, 2020 | December 31, 2019 | |||||||
| ASSETS | ||||||||
| CURRENT | ||||||||
| Cash | $ | 905,149 | $ | 3,531,202 | ||||
| Accounts receivable | Note 8 | 108,308 | 167,178 | |||||
| Other receivables | Note 8 | 737,185 | – | |||||
| Notes receivable | Note 7 | 919,488 | – | |||||
| Income tax recoverable | – | 74,034 | ||||||
| Sales tax recoverable | 89,033 | 271,866 | ||||||
| Biological assets | Note 9 | 455,045 | 88,078 | |||||
| Inventory | Note 9 | 2,304,501 | 2,965,304 | |||||
| Prepaid expenses and deposits | 555,597 | 325,329 | ||||||
| Total current assets | 6,074,306 | 7,422,991 | ||||||
| Property, plant and equipment | Note 10 | 2,361,357 | 3,723,489 | |||||
| Notes receivable | Note 7 | – | 919,488 | |||||
| Other receivables | Note 8 | 656,718 | 447,901 | |||||
| Right-of-use assets, net | Note 11 | 4,132,035 | 4,333,064 | |||||
| Intangible assets | Note 12 | 10,737,423 | 10,737,423 | |||||
| Goodwill | Note 12 | 4,056,172 | 4,056,172 | |||||
| Total assets | $ | 28,018,011 | $ | 31,640,528 | ||||
| LIABILITIES | ||||||||
| CURRENT | ||||||||
| Accounts payable and accrued liabilities | $ | 3,404,425 | $ | 1,564,982 | ||||
| Interest payable | 28,100 | 125,900 | ||||||
| Income taxes payable | Note 24 | 1,003,604 | – | |||||
| Deferred income tax payable | Note 24 | 55,039 | 248,852 | |||||
| Sales tax payable | 217,789 | 187,520 | ||||||
| Current portion of long-term debt | Note 14 | 22,171 | 82,404 | |||||
| Notes payable | Note 13 | 119,533 | – | |||||
| Convertible debentures carried at fair value | Note 13 | 5,575,273 | – | |||||
| Lease liability | Note 14 | 949,496 | 843,238 | |||||
| Total current liabilities | 11,375,430 | 3,052,896 | ||||||
| Long-term debt | Note 14 | 134,675 | 29,952 | |||||
| Long-term lease liability | Note 14 | 4,372,395 | 4,090,806 | |||||
| Convertible debentures carried at fair value | Note 13 | – | 4,706,141 | |||||
| Consideration payable – cash portion | Note 14 | 1,824,533 | 4,218,866 | |||||
| Consideration payable – equity portion | Note 14 | 4,838,780 | 4,940,667 | |||||
| Total liabilities | 22,545,813 | 21,039,328 | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Share capital | Note 15 | 149,754,502 | 147,763,499 | |||||
| Warrant reserve | Note 16 | 1,079 | 1,980,217 | |||||
| Share option reserve | Note 17 | 4,070,474 | 4,181,350 | |||||
| Contributed surplus | 2,329,997 | 59,940 | ||||||
| Deficit | (150,683,854 | ) | (143,383,806 | ) | ||||
| Total shareholders’ equity | 5,472,198 | 10,601,200 | ||||||
| Total liabilities and shareholders’ equity | $ | 28,018,011 | $ | 31,640,528 | ||||
| GOLDEN LEAF HOLDINGS LTD. | ||||||||
| Consolidated Statements of Operations and Comprehensive Loss | ||||||||
| For the years ended December 31, 2020 and 2019 | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| For the years ended December 31, |
||||||||
| 2020 | 2019 | |||||||
| Revenues | ||||||||
| Product sales | Note 23 | $ | 20,611,519 | $ | 15,649,539 | |||
| Royalty and other revenue | Note 23 | 1,297,637 | 105,068 | |||||
| Total Revenue | 21,909,156 | 15,754,607 | ||||||
| Inventory expensed to cost of sales | Note 9, 23 | 14,895,074 | 11,457,854 | |||||
| Gross margin, excluding fair value items | 7,014,082 | 4,296,753 | ||||||
| Fair value changes in biological assets included | ||||||||
| in inventory sold | Note 9, 23 | (96,689 | ) | – | ||||
| Loss (gain) on changes in fair value of biological assets | Note 9, 23 | 353,059 | (20,715 | ) | ||||
| Gross profit | 6,757,712 | 4,317,468 | ||||||
| Expenses: | ||||||||
| General and administration | 8,751,850 | 11,235,148 | ||||||
| Share based compensation | Note 17 | 637,669 | 1,014,915 | |||||
| Sales and marketing | 1,942,066 | 2,039,744 | ||||||
| Depreciation and amortization | Note 10,11 | 1,011,315 | 2,287,023 | |||||
| Total expenses | 12,342,900 | 16,576,830 | ||||||
| Loss before items noted below | (5,585,188 | ) | (12,259,362 | ) | ||||
| Interest expense | Note 13,14 | 2,282,335 | 2,712,092 | |||||
| Transaction costs | 61,164 | 279,402 | ||||||
| Loss on disposal of assets | Note 10 | 293,171 | 73,218 | |||||
| Other (income) loss | (70,784 | ) | 74,246 | |||||
| Impairment loss | Note 12 | – | 18,735,818 | |||||
| Gain on debt modification or extinguishment | Note 13 | – | (2,290,163 | ) | ||||
| Gain on change in fair value of warrant liabilities | – | (605,481 | ) | |||||
| Loss on change in fair value of convertible debentures | Note 13 | 922,137 | 565,580 | |||||
| Loss before income taxes | (9,073,211 | ) | (31,804,074 | ) | ||||
| Current income tax expense | Note 24 | 1,053,502 | 678,953 | |||||
| Deferred income tax expense (income) | Note 24 | (97,903 | ) | 133,508 | ||||
| Net loss from continuing operations | (10,028,810 | ) | (32,616,535 | ) | ||||
| Loss from discontinued operations | Note 7 | – | (13,764,706 | ) | ||||
| Net loss | (10,028,810 | ) | (46,381,241 | ) | ||||
| Other comprehensive loss | ||||||||
| Items that will be reclassified subsequently to profit or loss: | ||||||||
| Cumulative translation adjustment | – | 125,930 | ||||||
| Comprehensive loss | $ | (10,028,810 | ) | $ | (46,255,311 | ) | ||
| Basic and diluted loss per share from continuing operations | $ | (0.01 | ) | $ | (0.05 | ) | ||
| Basic and diluted loss per share from discontinued operations | $ | – | $ | (0.02 | ) | |||
| Weighted average number of common shares outstanding | 873,783,951 | 671,893,137 | ||||||
| Adjusted EBITDA | ||||||||||||||||
| For the three months ended | For the years ended | |||||||||||||||
| December 31, 2020 |
December 31, 2019 |
December 31, 2020 |
December 31, 2019 |
|||||||||||||
| Loss before income taxes | $ | (2,468,652 | ) | $ | (22,554,480 | ) | $ | (9,073,211 | ) | $ | (31,804,074 | ) | ||||
| Adjustments: | ||||||||||||||||
| Net impact, fair value of biological assets | 9,844 | (20,715 | ) | 256,370 | (20,715 | ) | ||||||||||
| Depreciation and amortization | 469,682 | 916,818 | 2,017,803 | 2,502,844 | ||||||||||||
| Fair value changes on debt and equity instruments | 356,809 | (2,195,295 | ) | 922,137 | (2,330,064 | ) | ||||||||||
| Share based compensation | 372,876 | 529,269 | 637,669 | 1,014,915 | ||||||||||||
| Interest expense, net | 833,226 | 668,417 | 2,282,335 | 2,712,092 | ||||||||||||
| Transaction costs | 19,986 | 145,568 | 61,164 | 279,402 | ||||||||||||
| Start-up costs(1) | 165,272 | – | 344,392 | – | ||||||||||||
| Nevada curtailment expenses and other(2) | 700,143 | – | 977,026 | – | ||||||||||||
| Impairments and other | (102,813 | ) | 18,914,876 | (70,784 | ) | 18,810,064 | ||||||||||
| Loss on disposal | (14,529 | ) | (24,023 | ) | 293,171 | 73,218 | ||||||||||
| Adjusted EBITDA | $ | 341,844 | $ | (3,619,565 | ) | $ | (1,351,928 | ) | $ | (8,762,318 | ) | |||||
| (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 and unexpected employment related settlements | ||||||||||||||||
Adjusted EBITDA Disclaimer: Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation, amortization, non‐cash compensation expenses, one-time transaction costs and other non-cash charges that include impairments. Adjusted EBITDA is a non‐GAAP financial measure which does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. The Company considers this Adjusted EBITDA an important figure to show the true day to day operational picture of the business. It should not be considered in isolation as a substitute for measures of performance prepared in accordance with the IFRS.
