Chalice Brands Ltd. reports record first quarter 2021 revenues of $5.5 million and consecutive positive Adjusted EBITDA(1)

PORTLAND, Ore., May 25, 2021 -- Chalice Brands Ltd., formerly Golden Leaf Holdings Ltd. (CSE:CHAL) (OTCQB:GLDFF) (“Chalice” or the “Company”), a premier consumer-driven cannabis company specializing in retail, production, processing, wholesale, and distribution, today announces its financial and operating results for the first quarter 2021. All amounts stated are in US Dollars unless otherwise noted.

Q1 2021 Financial Highlights:

  • Record quarterly revenues from continuing operations of $5.5 million, a 18% year-over-year increase compared to $4.7 million for the same period in 2020.
  • Gross profit for Q1 2021 of $2.5M or 45% gross margin compared to $1.7M or 37% gross margin in 2020. Gross margin improvements are due to increased sales of vertical products manufactured by Chalice, including 6.5% of retail sales of our own Bald Peak flower.
  • Adjusted EBITDA1 of approximately 7% or $370,000, continues the trend from Q4 2020, demonstrating that Oregon covers corporate overhead costs.

Q1 2021 Accomplishments:

  • Entered a letter of intent which recently closed May 19, 2021 for a transformational acquisition of Homegrown Oregon, a chain of five retail stores in Oregon. Homegrown will add $11 million in annual revenues and over $2 million in Adjusted EBITDA1 after optimization and vertical integration, representing a 50% growth from fiscal 2020 revenues of $21.9 million.
  • On a pro-forma basis, had Homegrown been included, first quarter 2021 revenues for GLH would have been US$8.2 million with a 47% gross margin and Adjusted EBITDA1 of approximately US$722,000.
  • Strengthened the Company’s balance sheet by restructuring 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.
  • Financed the Company’s focus on footprint growth in the Oregon market by completing two private placement transactions for total gross proceeds of $10.5 million.
  • Continued optimization of the Bald Peak grow facility resulting in consistent monthly output of 250lbs of finished flower and biomass.

Subsequent Events:

  • A record 412 million shareholders voted at the Company’s annual general meeting held on May 10th, 2021, with over 95% approving the Company’s name change to Chalice Brands Ltd. along with the share consolidation effective as of May 25, 2021.
  • 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 with a national presence in over 400 retail outlets across the United States.

Jeff Yapp, Chief Executive Officer of Chalice Brands, commented, “Continued profitable operations and accretive acquisitions should set us up for a record breaking second half of 2021. We continue to look forward to favorable federal regulation changes while we grow Fifth & Root to showcase our brand portfolio nationally. Our team is energized and focused on growth as we remain disciplined in our allocation of capital.”

Fiscal First Quarter Ended March 31, 2021 Financial Results

For the three months ended March 31, 2021 (“Q1 2021”), total revenue from continuing operations was $5.5 million, as compared to $4.7 million for the same period in 2020 (“Q1 2020”). The 18% year-over-year increase largely reflects overall improvements in the Oregon retail and wholesale businesses.

Gross profit was $2.5 million, or 45% of total revenue for Q1 2021, compared with $1.7 million, or 37% of total revenue, in Q1 2020. Operating expenses were $2.7 million for Q1 2021, compared with $3.3 million in Q1 2020, an improvement of $534,000, or 18%. Operating expenses of $2.7 million in Q1 2021 were 49% of total revenue, compared with $3.3 million in Q1 2020, or 70% of total revenue. The reduction in operating expenses was 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 EBITDA1 was approximately $370,000 for Q1 2021, compared with a loss of $700,000 for Q1 2020, continuing the positive EBITDA trend since Q4 2020 demonstrating that Oregon covers corporate overhead costs. 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 and look to grow this important measure as the business scales.

The Company’s interim financial statements for the first quarter 2021 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.

         
CHALICE BRANDS LTD.        
Interim Condensed Consolidated Statements of Financial Position (Unaudited)  
As at March 31, 2021 and December 31, 2020        
(Expressed in U.S. dollars)        
         
      March 31, 2021       December 31, 2020  
         
CURRENT        
Cash   $ 10,475,394     $ 905,149  
Accounts receivable Note 5   272,288       108,308  
Other receivables Note 5   593,133       737,185  
Notes receivable     919,488       919,488  
Sales tax recoverable     35,673       89,033  
Biological assets Note 6   511,277       455,045  
Inventory Note 6   2,818,333       2,304,501  
Prepaid expenses and deposits     573,137       555,597  
Total current assets     16,198,723       6,074,306  
         
Property, plant and equipment Note 7   2,220,922       2,361,357  
Other receivables Note 5   656,718       656,718  
Right-of-use assets, net Note 8   4,002,018       4,132,035  
Intangible assets Note 9   10,737,423       10,737,423  
Goodwill Note 9   4,056,172       4,056,172  
  Note 31   DTA      
Total assets   $ 37,871,976     $ 28,018,011  
         
LIABILITIES        
CURRENT        
Accounts payable and accrued liabilities   $ 3,652,595     $ 3,404,425  
Interest payable     48,138       28,100  
Income taxes payable     1,263,604       1,003,604  
Deferred income tax payable     55,039       55,039  
Sales tax payable     213,856       217,789  
Current portion of long-term debt Note 11   18,189       22,171  
Notes payable Note 10   48,414       119,533  
Convertible debentures carried at fair value Note 10   -       5,575,273  
Lease liability Note 11   993,053       949,496  
Total current liabilities     6,292,888       11,375,430  
         
Long-term debt Note 11   53,501       134,675  
Long-term lease liability Note 11   4,054,491       4,372,395  
Warrant liability Note 12   5,154,149       -  
Convertible debentures carried at fair value Note 10   2,805,895       -  
Consideration payable - cash portion Note 11   1,872,654       1,824,533  
Consideration payable - equity portion Note 11   4,838,780       4,838,780  
Total liabilities     25,072,358       22,545,813  
         
SHAREHOLDERS' EQUITY        
         
Share capital Note 13   161,085,272       149,754,502  
Warrant reserve Note 14   204,484       1,079  
Convertible debenture equity component Note 12   374,437      
Share option reserve Note 15   3,763,065       4,070,474  
Contributed surplus     2,329,997       2,329,997  
Deficit     (154,957,637 )     (150,683,854 )
Total shareholders' equity     12,799,618       5,472,198  
Total liabilities and shareholders' equity   $ 37,871,976     $ 28,018,011  
         

 

CHALICE BRANDS LTD.        
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
For the three months ended March 31, 2021 and 2020      
(Expressed in U.S. dollars)        
         
    For the three months ended March 31,
      2021       2020  
Revenues        
  Product sales Note 20 $ 5,033,314     $ 4,239,582  
  Royalty and other revenue Note 20   462,141       430,722  
Total Revenue     5,495,455       4,670,304  
  Inventory expensed to cost of sales Notes 6, 20   3,180,925       2,964,192  
Gross margin, excluding fair value items     2,314,530       1,706,112  
  Fair value changes in biological assets included     (84,329 )     -  
      in inventory sold        
  Gain on changes in fair value of biological assets Notes 6, 20   (81,763 )     (20,714 )
Gross profit     2,480,622       1,726,826  
         
Expenses        
 General and administration     2,134,017       2,045,274  
 Share based compensation Note 15   69,050       129,579  
 Sales and marketing     316,123       535,026  
 Depreciation and amortization Note 7   224,931       568,345  
Total expenses     2,744,121       3,278,224  
         
Loss before items noted below     (263,499 )     (1,551,398 )
         
Interest expense Notes 10, 11   429,221       551,101  
Transaction costs     34,620       -  
Other loss (income)     84,466       (20,617 )
Loss on change in fair value of warrant liabilities Note 12   2,974,493       -  
Gain on change in fair value of convertible debentures Note 12   172,956       -  
Loss on debt extinguishment Note 10   88,079       -  
Loss before income taxes     (4,047,334 )     (2,081,882 )
Current income tax expense     275,000       358,284  
Net loss   $ (4,322,334 )   $ (2,440,166 )
Comprehensive loss   $ (4,322,334 )   $ (2,440,166 )
Basic and diluted loss per share from continuing operations $ (0.00 )   $ (0.00 )
Weighted average number of common shares outstanding   1,117,610,381       873,783,951  
         

 

CHALICE BRANDS LTD.      
Interim Condensed Consolidated Statements of Cash Flows (Unaudited)
For the three months ended March 31, 2021 and 2020 
(Expressed in U.S. dollars)
           
           
      For the three months ended March 31,
        2021       2020  
Cash (used in) provided by:        
OPERATING ACTIVITIES:        
  Net loss   $ (4,322,334 )   $ (2,440,166 )
  Depreciation of property, plant and equipment Note 7   257,240       369,360  
  Lease amortization     204,385       198,985  
  Interest expense     429,221       416,146  
  Income tax expense     275,000       382,326  
  Share based compensation Note 15   69,050       129,579  
  Transaction costs     34,620       -  
  Loss on debt extinguishment Note 10   88,079       -  
  Loss on fair value adjustment to warrant liabilities Note 10   2,974,493       -  
  Loss on fair value adjustment to debt     172,956       -  
  Gain on fair value of biological assets Note 6   (166,092 )     (20,714 )
  Other non-cash transactions     (214,346 )     41,338  
           
Changes in working capital items        
  Accounts receivable Note 5   (53,452 )     (92,246 )
  Other receivables Note 5   33,524       (4,372 )
  Sales tax recoverable     53,360       (11,465 )
  Accounts payable and accrued liabilities     154,256       570,573  
  Sales tax payable     (3,933 )     (176,238 )
  Biological assets Note 6   109,860       (75,136 )
  Inventory Note 6   (349,486 )     (740,465 )
  Prepaid expenses and deposits     (17,540 )     (233,140 )
Cash used in operating activities     (271,139 )     (1,685,635 )
           
INVESTING ACTIVITIES        
  Purchase of property, plant and equipment Note 7   (131,824 )     (66,364 )
Cash used in investment activities     (131,824 )     (66,364 )
           
FINANCING ACTIVITIES        
  Issuance of common shares Note 13   10,700,119       -  
  Payment of share issuance costs     (200,063 )     -  
  Payment of lease liabilities     (310,573 )     (149,822 )
  Repayment of long-term debt Note 11   (156,275 )     (6,231 )
  Interest paid Note 11   (60,000 )     (80,048 )
  Other non-cash transactions     0       -  
Cash provided (used) in financing activities     9,973,208       (236,101 )
           
Decrease in cash during the period     9,570,245       (1,988,100 )
Cash, beginning of period     905,149       3,531,202  
Cash, end of period   $ 10,475,394     $ 1,543,102  
           
See accompanying notes to these interim condensed consolidated financial statements    
           

 

 
Adjusted EBITDA      
  For the three months ended
       
  March 31, 2021   March 31, 2020
       
Loss before income taxes $ (4,047,334 )   $ (2,081,882 )
Adjustments:      
    Net impact, fair value of biological assets   (81,763 )     (20,714 )
    Depreciation and amortization   461,625       831,230  
    Fair value changes on debt and equity instruments   3,235,528       -  
    Share based compensation   69,050       129,579  
    Interest expense, net   429,221       551,101  
    Transaction costs   34,620       -  
    Nevada curtailment expenses and other (1)   73,252       -  
    Start-up costs (2)   110,528       -  
    Impairments and other   84,466       (20,617 )
         Adjusted EBITDA income (loss) $ 369,193   $ - $ (611,303 )
(1) Losses experienced in Nevada due to unexpected shut down and facility abandonment due to COVID-19
(2) Write-off of significant start up costs related to the Company's California business
       

Investor Conference Call

Chalice Brands management, led by Mr. John Varghese, Executive Chairman, and Mr. Jeff Yapp, Chief Executive Officer, will hold a conference call on Tuesday, May 25th at 4:30 PM EDT to report its financial results for first quarter 2021.

REGISTRATION: Please visit click here to register and stream the conference call, or use the following dial-in information as follows:

Program Title: Chalice Brands – First Quarter 2021 Earnings Call
Canada & US: 1-877-407-0784
International: 1-201-689-8560

Once dialed in, participants must request the “Chalice Brands - First Quarter 2021 Earnings Call”.

Replay

A replay of the audio webcast will be available online on the Company’s website at investors.chalicebrandsltd.com where it will be archived for one year. A replay of the conference call will also be available at 7:30 PM EDT on May 25, 2021 and will be accessible until June 8th, 2021. For access to replay:

Canada/US: 1-844-512-2921
International: 1-412-317-6671
Conference PIN: 13719831

About Chalice Brands Ltd, Formerly Golden Leaf Holdings Ltd.

Chalice Brands 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. Chalice operates nationally through Fifth and Root and has operations in Oregon and California. Visit investors.chalicebrandsltd.com for regular updates. 

 

View Full Story on GlobeNewsWire.com

Subscribe to Our News