Green Growth Brands Reports Third Quarter Fiscal 2019 Financial Results

News provided by

Green Growth Brands

May 29, 2019, 18:51 ET

First full quarter of results show active MSO growth through acquisition and rapid CBD footprint expansion

COLUMBUS, May 29, 2019 /PRNewswire/ - Green Growth Brands Inc. (GGB or the Company) (CSE: GGB) (OTCQB: GGBXF) today reported its financial results for the third quarter, which ended March 31, 2019.

"This quarter we executed our strategy with speed and agility. We made great progress towards establishing our leadership in the industry, by setting new standards for consumer experiences and product," said Peter Horvath, CEO of Green Growth Brands. "We launched Seventh Sense, began our unprecedented big-bang expansion into hundreds of prime mall-based CBD shops, and grew performance at our premier dispensary, The+Source Las Vegas, through implementing margin accretive retail practices.

"We completed the Just Healthy transaction allowing us to enter Massachusetts, and we plan to open new dispensaries in Nevada in the remainder of the calendar year," added Horvath. "As an early-stage company, just over a year-in, when most competitors have been operating for 4-8 years, we are proud of the accomplishments we have made. We will continue to drive towards profitability."

GGB will host a conference call and audio webcast with Chief Executive Officer, Peter Horvath, and Chief Financial Officer, Brian Logan, at 8:30 AM EDT on Thursday, May 30, 2019.

Third Quarter 2019 Highlights

  • Revenue for the quarter at our Nevada cannabis operations grew to $5.1 million, driven by the influence of retail best practices

  • Total revenue, including both MSO and CBD operations was $5.6 million

  • The+Source is tracking to annualized revenue of $15,000 per selling square foot, one of the strongest reported metrics in both cannabis and retail1

  • Nevada gross margin was 41%, including the impact of fair value biological assets

  • Expansion into Massachusetts, through completion of a transaction with Just Healthy LLC ("Just Healthy"), allowing for operation of up to three dispensaries and one cultivation and production facility in Massachusetts. Just Healthy holds provisional certificates of registration for a registered marijuana dispensary in Northampton, Massachusetts, as well as a cultivation and processing site, also located in Northampton.

  • Official launch of Seventh Sense with more than 100 SKUs, and growing

  • Opening of Seventh Sense mall-based shops with the first shop in Lexington, Kentucky, 6 shops opened during the period. As of May 28th, 2019, the Company has more than 30 locations.

  • Launch of Seventh Sense website, ShopSeventhSense.com, allowing for consumers to purchase CBD and personal care and beauty products online

  • Launch of Seventh Sense products throughout 98 DSW stores in the U.S.

  • Agreement with Simon Property Group to lease up to 108 mall-based CBD shops in prime locations throughout the U.S.

  • Launch of CBD eCommerce and our first six mall-based shops

  • Licensing agreement with Authentic Brands Group to create Greg Norman branded CBD personal care products

  • Expansion of the Executive team with the addition of Randy Whitaker as Chief Operating Officer. Mr. Whitaker brings significant retail and real estate expertise to the Company.

1

eMarketer Retail, "Ecommerce trends and store sales for top retailers"

Third Quarter 2019 Financial Review

The following tables contain financial information for the periods indicated. For full financial information, notes, and management commentary please refer to the MD&A and Financial Statements posted on Green Growth Brands' Investor Relations site and SEDAR. Please note the use of non-IFRS measures, such as EBITDA and Adjusted EBITDA, which do not have any standardized meaning prescribed by IFRS. These measures are defined within the MD&A. All financial information is provided in U.S. dollars, unless otherwise indicated.

Interim Consolidated Statements of Financial Positions

As at June 30, 2018 and March 31, 2019

(Expressed in United States dollars)





Note

March 31, 2019

June 30, 2018




(unaudited)

(unaudited)

Assets



Current Assets




Cash and cash equivalents

$

5,466,451

$

4,688,311

Short term investments

6

28,108,916

-

Receivables

461,495

-

Prepaid expenses

4,043,829

-

Inventories

7

6,207,027

-

Biological assets

8

500,521

-

Notes receivable

9

46,370

-

Other receivables

1,044,911

18,269

Deferred lease charges

10

727,518

-

Due from related parties

21

30,366

-




46,637,404

4,706,580







Property and equipment, net

11

3,931,168

-

Deposits and other assets

12

3,184,233

-

Deferred lease charges

10

2,788,819

-

Notes receivable

9

21,109,553

-

Intangible assets

14

39,477,074

-

Goodwill

15

26,332,480

-

 Total assets 

$

143,460,731

$

4,706,580






Liabilities



Current Liabilities




Accounts payable and accrued liabilities

16

7,238,703

316,768

Taxes payable

22

287,978

-

Due to related parties

21

-

-

Notes payable

17

15,553,728

-




23,080,409

316,768

Shareholders' Equity 




Share capital

18

137,135,288

7,016,421

Reserve for warrants

19

16,830,281

-

Reserve for share based compensation

20

1,702,983

-

Reserve for changes in equity of subsidiary

(2,837,500)

-

Accumulated deficit

(35,409,880)

(2,626,609)

Accumulated other comprehensive income

148,286

-

Total equity attributable to shareholders of Green Growth Brands Inc.

117,569,458

4,389,812

Non-controlling interest

2,810,864

-

Total equity

120,380,322

4,389,812

 Total liabilities and equity 

$

143,460,731

$

4,706,580

Interim Consolidated Statements of Loss and Comprehensive Loss

For the three and nine months ended March 31, 2019 and for the period from February 14, 2018 to March 31, 2018

(unaudited)

(Expressed in United States dollars)


Three months ended March 31,

Nine months ended March 31,

Note

2019

2018

2019

2018






Sales





Revenue

$

5,554,684

$

-

$

8,555,129

$

-

Cost of goods sold

5,475,201

-

8,495,909

-

Gross profit before fair value adjustments

79,483

-

59,220

-

Fair value change in biological assets included in inventory sold and other charges

932,191

-

1,525,861

-

Unrealized gain on changes in fair value of biological assets


(961,185)

-

(1,718,749)

-

Gross profit

108,477

-

252,108

-






Operating Expenses





General and administrative

8,183,025

218,245

15,215,085

218,245

Legal and professional fees

6,167,722

375,094

10,224,614

375,094

Sales and marketing

1,909,345

-

3,092,399

-

Stock based compensation

20

1,515,343

-

1,702,983

-

Depreciation and amortization

11,14

379,356

-

581,917

-

Other income

9

(1,058,785)

-

(1,067,021)

-


17,096,006

593,339

29,749,977

593,339


(16,987,529)

(593,339)

(29,497,869)

(593,339)

Non-operating expenses





Loss on equity investments

13

-

-

671,578

-

Interest expense

355,230

-

2,242,825

-

Foreign exchange (gain) loss 

(393,077)

-

348,337

-

Unrealized gain on short term investments

6

(10,464,853)

-

(10,964,926)

-

Transaction costs

12

8,651,438

-

9,651,438

-

Net loss before listing fees and income taxes

(15,136,267)

(593,339)

(31,447,121)

(593,339)

Listing fees

4

-

-

699,190

-

Net loss after listing fees

(15,136,267)

(593,339)

(32,146,311)

(593,339)

Income taxes 

22

287,978

-

663,596

-

Net loss after income taxes

$

(15,424,245)

$

(593,339)

$

(32,809,907)

$

(593,339)

Less: Non-controlling interest

(14,194)

-

(26,636)

-

Net Loss attributable to owners of the parent

$

(15,410,051)

$

(593,339)

$

(32,783,271)

$

(593,339)






Net loss per Common Share attributable to the parent





Basic and Diluted

23

$

(0.07)

 n/a 

$

(0.22)

 n/a 






Weighted average common shares

205,498,545

2

147,855,104

2






Other comprehensive loss





Exchange gain on translating foreign operations

-

-

148,286

-

Comprehensive loss

$

(15,410,051)

$

(593,339)

$

(32,634,985)

$

(593,339)

Consolidated Statement of Cashflow

For the nine months ended March 31, 2019, and for the period from February 14, 2018 to March 31, 2018 

(unaudited)

(Expressed in United States dollars)











Note

March 31, 2019

March 31, 2018

Cashflow from Operating Activities




Net loss for the period

$           (32,809,907)

$                (593,339)

Adjustments for:




Stock based compensation

20

1,702,983

-

Shares issued for services

18

4,632,177

-

Depreciation and amortization

(61,720)

-

Deferred lease charges

10

121,253

Loss on equity investment

13

671,578

-

Unrealized gain on short term investment

6

(10,964,926)

-

Transaction costs

12,18

6,617,110

-

Fair value adjustment on growth of biological assets

(192,888)

-

Foreign exchange on translation

331,808

-

Changes in non-cash working capital balances




Receivables

(185,046)

-

Prepaid expenses

(4,043,829)

-

Other receivables

(900,084)

-

Inventories

(4,495,267)

-

Biological assets

(307,633)

-

Accounts payable and accrued liabilities

5,144,299

593,338

Income taxes payable

287,978

-




(34,452,114)

(1)

Cashflow from Investing Activities




Purchase of property and equipment

11

(3,602,815)

-

Acquisition of businesses, net of cash acquired

4

(31,094,988)

-

Purchase of short term investment

6

(16,945,040)

-

Proceeds from sale of equity investment

13

62,671

-

Advance on Henderson Organic Remedies LLC acquisition

9

(15,485,000)

-

Advances on acquisitions

12

(4,134,233)

-

Equity investment

13

(300,000)

-




(71,499,405)

-

Cashflow from Financing Activities




Shares issued on warrants and options exercised

19,20

27,111,532

-

Repayment of notes

5,16

(6,535,030)

Proceeds from convertible debentures, net of issuance costs

18

81,808,945

-

Proceeds from private placement share capital issued

18

25,747,713

1

Purchase of convertible debentures

18

(21,004,500)

-




107,128,660

1

Effect of exchange rates on cash

(399,001)

-

Increase in cash and cash equivalents

778,140

-






Cash and cash equivalents, beginning of period

4,688,311

-






Cash and cash equivalents, end of period

$            5,466,451

$                           -

Segmented statement of operations for the three months ended March 31, 2019

(unaudited)

(Expressed in United States dollars)



Cannabis

CBD

Head office

Allocations

Total


Note

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018













Sales











Revenue

$

5,092,567

$

-

$

462,117

$

-

$

-

$

-

$

-

$

-

$

5,554,684

$

-

Cost of goods sold

3,022,089

-

969,922

-

-

-

1,483,190

-

5,475,201

-

Gross profit before fair value adjustments

2,070,478

-

(507,805)

-

-

-

(1,483,190)

-

79,483

-

Fair value change in biological assets included in inventory sold and other charges

932,191

-

-

-

-

-

-

-

932,191

-

Unrealized gain on changes in fair value of biological assets

(961,185)

-

-

-

-

-

-

-

(961,185)

-

Gross profit

2,099,472

-

(507,805)

-

-

-

(1,483,190)

-

108,477

-













Operating Expenses











General and administration

-

-

-

-

9,184,512

218,245

(1,001,487)

-

8,183,025

218,245

Legal and professional fees

-

-

-

-

6,645,499

375,094

(477,777)

-

6,167,722

375,094

Sales and marketing

887,848

-

628,138

-

394,693

-

(1,334)

-

1,909,345

-

Stock based compensation

18

-

-

-

-

1,515,343

-

-

-

1,515,343

-

Depreciation and amortization

9,12

68,500

-

22,983

-

290,465

-

(2,592)

-

379,356

-

Other income

(14,892)

-

-

-

(1,043,893)

-

-

-

(1,058,785)

-



941,456

-

651,121

-

16,986,619

593,339

(1,483,190)

-

17,096,006

593,339



1,158,016

-

(1,158,926)

-

(16,986,619)

(593,339)

-

-

(16,987,529)

(593,339)

Non-operating expenses











Loss on equity investment in Xanthic Beverages USA, LLC

13

-

-

-

-

-

-

-

-

-

-

Interest expense

-

-

-

-

355,230

-

-

-

355,230

-

Foreign exchange loss (income)

-

-

-

-

(393,077)

-

-

-

(393,077)

-

Unrealized gain on marketable securities

6

-

-

-

-

(10,464,853)

-

-

-

(10,464,853)

-

Transaction costs

12

-

-

-

-

8,651,438

-

-

-

8,651,438

-

Net income (loss) before listing fees and income taxes

1,158,016

-

(1,158,926)

-

(15,135,357)

(593,339)

-

-

(15,136,267)

(593,339)

Listing fees

-

-

-

-

-

-

-

-

-

-

Net income (loss) after listing fees

1,158,016

-

(1,158,926)

-

(15,135,357)

(593,339)

-

-

(15,136,267)

(593,339)

 Income taxes 

20

287,978

-

-

-

-

-

-

-

287,978

-

Net Income (loss) after income taxes

$

870,038

$

-

$

(1,158,926)

$

-

$

(15,135,357)

$

(593,339)

$

-

$

-

$

(15,424,245)

$

(593,339)













Net loss and comprehensive loss attributable to:











Owners of the parent

884,232

-

(1,158,926)

-

(15,135,357)

(593,339)

-

-

(15,410,051)

(593,339)

Non-controlling interest

(14,194)

-

-

-

-

-

-

-

(14,194)

-



870,038

-

(1,158,926)

-

(15,135,357)

(593,339)

-

-

(15,424,245)

(593,339)






Adjusted EBITDA



(Expressed in United States dollars)


Three months ended March 31,

Nine months ended March 31,


2019

2018

2019

2018







Net loss after listing fees before income taxes

$ (15,136,267)

$       (593,339)

$ (32,146,311)

$       (593,339)







Fair value adjustment on sale of inventory

932,191

-

1,525,861

-

Fair value adjustment on biological assets

(961,185)

-

(1,718,749)

-

Stock based compensation

1,515,343

-

1,702,983

-

Depreciation and amortization

378,856

-

581,917

-

Shares issued for services

3,064,293

-

4,632,177

-

Lease termination charges

692,542

-

692,542

-

Non-operating expenses

(1,851,262)

-

1,949,252

-

Listing fees

-

-

699,190

-


3,770,778

-

10,065,173

-

Adjusted EBITDA

$ (11,365,489)

$       (593,339)

$ (22,081,138)

$       (593,339)

Conference Call Information: 

Conference ID: 57219236

Local Toronto Dial-in Number: (+1) 416 764 8609

Local Vancouver Dial-in Number: (+1) 778 383 7417

North American Toll-Free Number:(+1) 888 390 0605

The call and replay archive will be accessible on Green Growth Brands' Investor Relations website.

About Green Growth Brands Inc.
Green Growth Brands creates remarkable experiences in cannabis and CBD. Led by CEO Peter Horvath and a leadership team of consumer-focused retail experts, the Company's brands include CAMP, Seventh Sense Botanical Therapy, The+Source, Green Lily, Meri + Jayne, and has a licensing agreement with the Greg Norman Brand. Already boasting the strongest sales per square feet in the cannabis industry, GGB is expanding its cannabis operations throughout the U.S., its CBD presence at ShopSeventhSense.com, in malls across the U.S. and at DSW shoe stores—and that's just the beginning. Learn more about our vision at GreenGrowthBrands.com.

Cautionary Statements:

Certain information in this news release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expect", "intend", "forecast" and similar expressions.   Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; marketing costs; loss of markets; future legislative and regulatory developments involving medical and recreational marijuana; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favorable terms; the marijuana industry in the United States, income tax and regulatory matters; the ability of the Company to implement its business strategies; competition; currency and interest rate fluctuations and other risks, including those factors described under the heading "Risks Factors" in the Company's Annual Information Form dated November 26, 2018 which is available on the Company's issuer profile on SEDAR.

Readers are cautioned that the foregoing list is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. The forward-looking statements contained in this release, including, but not limited to, the Company's ability to execute on its growth strategy, the Company's plan to open new dispensaries in the remainder of the calendar year, the Company's vision to become a multi-state operator with retail stores exceeding certain financial thresholds is made as of the date hereof and the Company is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

This announcement does not constitute an offer, invitation or recommendation to subscribe for or purchase any securities and neither this announcement nor anything contained in it shall form the basis of any contract or commitment. In particular, this announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States, or in any other jurisdiction in which such an offer would be illegal.

The securities referred to herein have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state or other jurisdiction of the United States and may not be offered or sold, directly or indirectly, within the United States, unless the securities have been registered under the Securities Act or an exemption from the registration requirements of the Securities Act is available.

SOURCE Green Growth Brands

Related Links

https://www.greengrowthbrands.com/

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