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$GGBXF Significant Revenue Growth Driven by CBD Retail Expansion

Total first quarter fiscal 2020 revenues increased 77% quarter-over-quarter to $12.7 million

Well-positioned for upcoming holiday season with network of 193 CBD shops

COLUMBUS, OH, Nov. 25, 2019 – Green Growth Brands Inc. (GGB or the Company) (CSE: GGB) (OTCQB: GGBXF) today reported its results for the thirteen-week period ended September 28, 2019. Revenues for the period totaled $12.7M.

“As we approach the holiday shopping season, we are confident in our growth trajectory,” said Peter Horvath, CEO of Green Growth Brands. “We are proud of the topline growth we accomplished in Q1 and are extremely pleased with our current results, which are an indication of future growth. In fact, the four weeks of fiscal November, retail CBD sales were two-thirds of our total CBD sales reported in all of the thirteen weeks of first quarter fiscal 2020, which we are reporting today. This topline growth is reflective of our shift from investing in the foundation of our CBD business to focusing on its execution.

“In a very short-time we have grown a meaningful CBD footprint. We believe our products, network of shops, rapidly growing web business and wholesale relationships position us as a leader in the industry. In the coming quarters we look-forward to reporting similar trends and results for our MSO segment of the business. As we begin to reach scale our consumer and operations expertise will be clearly reflected, not only in the customer experiences we create and the loyalty we drive, but also in our financials as we work towards profitability.”

View Seventh Sense’s holiday campaign and holiday gifting assortment here.

GGB will host a conference call and audio webcast with Chief Executive Officer, Peter Horvath, Chief Operating Officer, Randy Whitaker, and Chief Financial Officer, Brian Logan, at 8:30 AM EST on Tuesday, November 26, 2019.

First Quarter Fiscal 2020 Highlights

  • Total revenue for the period was $12.7 million, a sequential increase of 77% over the prior quarter.
  • Pro forma revenues for the quarter were $15.3 million, reflecting a full quarter of revenue from The+Source Henderson, which was acquired on August 28, 2019.
  • MSO revenues for the quarter were $7.6M, a sequential increase of 38% over the prior quarter, primarily driven by the acquisition of The+Source Henderson.
  • The two Nevada-based The+Source dispensaries continue to generate annualized revenue of nearly $15,000 per selling square foot. A best-in-class figure in the cannabis industry and in retail overall.
  • CBD revenue for the quarter was $5.1 million, a sequential increase of 201% over the prior quarter. Growth was primarily driven by additional mall-based shop openings, growth in wholesale, and increased overall brand awareness. The Company expects to achieve over $10 million in CBD revenues in second quarter fiscal 2020.
  • The Company opened 81 mall-based CBD shops during the quarter, bringing the total number of shops open at quarter’s end to 139 in 34 states. The Company currently operates 193 shops.
  • The Company began filling American Eagle Outfitter’s white label order for ‘Mood’ during the quarter. Performance indications are strong, and the Company expects to continue partnering with American Eagle.
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1 eMarketer Retail, “Ecommerce trends and store sales for top retailers”

 

First Quarter Fiscal 2020 Financial Statements

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. All financial information is provided in United States dollars, unless otherwise indicated. “Adjusted EBITDA” is equal to net income (loss) before interest, taxes and depreciation and amortization, plus fair value adjustments on sale of inventory and on growth of biological assets, share-based compensation and payments, loss (gain) on equity investments, loss (gain) on foreign exchange, loss (gain) on short-term investments, transaction costs, listing fees and certain one-time non-operating expenses, as determined by management. Management believes this measure provides useful information as it is a commonly used measure in the capital markets and as it is a close proxy for repeatable cash generated by (used for) operations.

Unaudited Condensed Interim Consolidated Statements of Financial Position
As at September 28, 2019 and June 30, 2019
(Expressed in United States dollars)
September 28, 2019 June 30, 2019
Assets
Current Assets
Cash and cash equivalents $ 6,811,539 $ 10,256,008
Receivables 2,240,238 580,529
Prepaid expenses 3,452,367 5,142,618
Inventories 11,282,915 10,244,804
Biological assets 1,321,379 1,352,097
Notes receivable 48,103 47,739
Other receivables 2,969,527 3,006,760
Deferred lease charges – 727,518
28,126,068 31,358,073
Non-current assets
Deposits and other assets 604,414 2,880,186
Deferred lease charges – 2,606,940
Notes receivable 166,724 17,999,224
Property and equipment, net 29,052,104 18,761,723
Right-of-use assets 69,114,716 –
Intangible assets 101,991,179 39,925,984
Goodwill 58,398,385 36,253,417
 Total assets $ 287,453,590 $ 149,785,547
Liabilities
Current Liabilities
Accounts payable and accrued liabilities 27,370,962 16,028,807
Taxes payable 514,535 282,593
Due to related parties 8,464,855 317,535
Notes payable 34,878,986 45,762,540
Lease liabilities 10,512,065 –
Embedded derivative liabilities 618,774 1,496,214
Convertible debentures 46,922,616 41,623,041
129,282,793 105,510,730
Non-current liabilities
Long term accrued liabilities 1,205,010 299,977
Lease liabilities 57,012,239 –
Embedded derivative liabilities 1,188,467 –
Convertible debentures 8,758,271 –
Deferred tax liability 6,985,048 1,437,324
75,149,035 1,737,301
Shareholders’ Equity
Share capital 182,371,023 119,881,374
Reserve for warrants 16,538,786 9,054,624
Reserve for share-based compensation 3,813,158 3,147,110
Accumulated deficit (122,566,395) (92,453,943)
Accumulated other comprehensive income 148,286 148,286
Total equity attributable to shareholders of Green Growth Brands Inc 80,304,858 39,777,451
Non-controlling interest 2,716,904 2,760,065
Total equity 83,021,762 42,537,516
 Total liabilities and equity $ 287,453,590 $ 149,785,547

 

Adjusted EBITDA
(Expressed in United States dollars)
September 28, September 30,
2019 2018
Net loss after listing fees before income taxes $ (29,886,676) $   (2,846,537)
Fair value adjustment on sale of inventory 906,919 –
Fair value adjustment on biological assets (507,284) –
Stock based compensation 1,632,922 –
Depreciation and amortization 3,626,529 –
Pre-opening expenses 1,547,468 –
Non-operating expenses 6,264,165 156,102
Termination and severance 421,396 –
Writedown of developed technology 573,662 –
Other non-operating expenses 197,204 –
14,662,981 156,102
Adjusted EBITDA $ (15,223,695) $   (2,690,435)

 

Unaudited Condenseed Interim Consolidated Statements of Loss
For the 13 weeks ended September 28 2019 and for the three months ended September 30, 2018
(Expressed in United States dollars)
September 28,
2019		 September 30,
2018
Sales
Revenue $ 12,701,958 $ –
Cost of goods sold 10,911,000 –
Gross profit before fair value adjustments 1,790,958 –
Fair value change in biological assets
included in inventory sold and other charges		 906,919 –
Unrealized gain on changes in fair value of
biological assets		 (507,284) –
Gross profit 1,391,323 –
Operating Expenses
General and administrative 9,683,667 2,450,960
Sales and marketing 10,070,716 –
Share-based compensation 1,632,922 –
Depreciation and amortization 3,626,529 –
25,013,834 2,450,960
(23,622,511) (2,450,960)
Other expenses (income)
Gain in fair value of derivative liabilities (4,240,710) –
Interest expense, net 3,761,477 217
Accretion on convertible debentures 1,409,583 –
Foreign exchange (gain) loss (488,387) 155,885
Transaction costs 5,822,202 –
Net loss before listing fees and income taxes (29,886,676) (2,607,062)
Listing fees – 239,475
Net loss after listing fees (29,886,676) (2,846,537)
 Income taxes 356,609 –
Net loss after income taxes $ (30,243,285) $ (2,846,537)
Less:Non-controlling interest 43,161 –
Net Loss attributable to owners of the parent $ (30,200,124) $ (2,846,537)
Net loss per Common Share attributable to the parent
Basic and Diluted $ (0.15) $ (0.03)
Weighted average common shares 198,246,478 84,428,676

 

Unaudited Condensed Interim Consolidated Statement of Cashflow
For the 13 weeks ended September 28, 2019, and for the three months ended September 30, 2018
(Expressed in United States dollars)
September 28,
2019		 September 30,
2018
Cashflow from Operating Activities
Net loss after income taxes for the period $ (30,243,285) $ (2,846,537)
Adjustments for:
Stock based compensation 1,632,922 –
Shares and warrants issued for services and fees 4,115,733 567,884
Depreciation and amortization 3,578,965 –
Writedown of developed software 409,022 –
Deferred tax expense (225,333) –
Accretion expense 1,409,583 –
Gain in fair value of embedded derivative liabilities (4,240,710) –
Net fair value adjustment on biological assets 399,635 –
Foreign exchange on translation (488,387) –
Changes in working capital balances
Receivables (1,646,660) –
Prepaid expenses 1,690,251 –
Other receivables 1,994,059 (185,874)
Inventories (27,538) –
Biological assets (368,917) –
Accounts payable and accrued liabilities 8,815,006 (787,634)
Taxes payable 231,942 –
(12,963,712) (3,252,161)
Cashflow from Investing Activities
Purchase of property and equipment (9,723,474) –
Purchase of software (723,738) –
Acquisition of business and assets, net of cash acquired (12,703,263) –
Proceeds from sale of equity investment 11,792 –
Advances on acquisitions – (32,347,500)
(23,138,683) (32,347,500)
Cashflow from Financing Activities
Cash received on warrants exercised 298,420 –
Proceeds from bought deal financing 36,513,665 –
Repayment of notes (15,485,000) –
Principal payments of lease liabilities (1,589,689) –
Proceeds from promissory notes 12,794,844 –
Proceeds from convertible debentures, net of issuance costs – 66,061,829
32,532,240 66,061,829
Effect of exchange rates on cash 125,686 –
Increase in cash (3,444,469) 30,462,168
Cash, beginning of period 10,256,008 4,688,311
Cash, end of period $ 6,811,539 $ 35,150,479
Supplemental disclosure of cash flow information
Interest paid 445,232 –
Income taxes paid 350,000 –
Other non-cash investing and financing activities
Change in accrual for construction in progress 861,479 –
Acquisition of business for non-cash 47,107,913 –
Issuance of shares for underwriter fees on bought deal financing 2,080,494 –

 

Segmented statement of operations for the 14 weeks ended September 28, 2019 and three months ended September 30, 2018
(Expressed in United States dollars)
MSO CBD Head office Allocations Total
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Sales
Revenue $ 7,555,102 $ – $ 5,146,856 $ – $ – $ – $ – $ – $ 12,701,958 $ –
Cost of goods sold 4,575,274 – 4,576,384 – – – 1,759,342 – 10,911,000 –
Gross profit before fair value adjustments 2,979,828 – 570,472 – – – (1,759,342) – 1,790,958 –
Fair value change in biological assets included in
inventory sold and other charges		 906,919 – – – – – – – 906,919 –
Unrealized gain on changes in fair value of biological
assets		 (507,284) – – – – – – – (507,284) –
Gross profit 2,580,193 – 570,472 – – – (1,759,342) – 1,391,323 –
Operating Expenses
General and administration – – – – 11,433,502 2,450,960 (1,749,835) – 9,683,667 2,450,960
Sales and marketing 1,710,707 – 8,360,009 – – – – – 10,070,716 –
Stock based compensation – – – – 1,632,922 – – – 1,632,922 –
Depreciation and amortization 142,564 – 2,865,550 – 627,922 – (9,507) – 3,626,529 –
1,853,271 – 11,225,559 – 13,694,346 2,450,960 (1,759,342) – 25,013,834 2,450,960
726,922 – (10,655,087) – (13,694,346) (2,450,960) – – (23,622,511) (2,450,960)
Non-operating expenses
Gain in fair value of derivative liabilities – – – – (4,240,710) – – – (4,240,710) –
Interest expense, net 21,712 – 1,117,964 – 2,621,801 217 – – 3,761,477 217
Accretion expense – – – – 1,409,583 – – – 1,409,583 –
Foreign exchange (gain) loss – – – – (488,387) 155,885 – – (488,387) 155,885
Transaction costs – – – – 5,822,202 – – – 5,822,202 –
Net income (loss) before listing fees and income taxes 705,210 – (11,773,051) – (18,818,835) (2,607,062) – – (29,886,676) (2,607,062)
Listing fees – – – – – 239,475 – – – 239,475
Net income (loss) after listing fees 705,210 – (11,773,051) – (18,818,835) (2,846,537) – – (29,886,676) (2,846,537)
 Income taxes 356,609 – – – – – – – 356,609 –
Net income (loss) after income taxes $ 348,601 $ – $ (11,773,051) $ – $ (18,818,835) $ (2,846,537) $ – $ – $ (30,243,285) $ (2,846,537)
Net income (loss) and comprehensive loss attributable to:
Owners of the parent 391,762 – (11,773,051) – (18,818,835) (2,846,537) – – (30,200,124) (2,846,537)
Non-controlling interest 43,161 – – – – – – – 43,161 –
348,601 – (11,773,051) – (18,818,835) (2,846,537) – – (30,243,285) (2,846,537)
Supplemental segemented information
Assets 173,818,672 – 101,694,365 – 11,940,553 67,702,122 – – 287,453,590 67,702,122
Liabilities 32,201,594 – 79,177,273 – 93,052,961 66,925,655 – – 204,431,828 66,925,655

 

Conference Call Information:

Conference ID: 54236169

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, and 8 Fold. The Company also has a licensing agreement with the Greg Norman™ Brand to develop a line of CBD-infused personal care products designed for active wellness. GGB is expanding its cannabis operations throughout the U.S., via dispensaries in Nevada, Massachusetts and Florida and the largest network of CBD shops in malls across the country and ShopSeventhSense.com. Learn more about the 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.

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