Mr. David Posner reports

NUTRITIONAL HIGH ANNOUNCES FINANCIAL RESULTS FOR 2018 FISCAL YEAR

Nutritional High International Inc. has released its financial and business results for the fourth quarter and fiscal year ended July 31, 2018. The company has provided highlights and comments on the results.

                                         HIGHLIGHTS
                                       (in thousands)

                                   Fiscal 2018       Fiscal 2017       Q4 2018       Q3 2018 
        
Revenue                                $ 5,815           $     0       $ 4,140       $ 1,674             
COGS                                     5,051                 0         3,705         1,347           
Gross profit                               763                 0           436           328              
Gross margin (%)                          13.1                 0          10.5          19.6               
Lease and interest revenue                  44               855          (965)          366            
Operating expenses                       9,766             5,809         3,490         2,689      
Other income (loss)                       (931)              (51)          (24)         (277)           
Net and comprehensive (loss)            (9,850)           (4,949)       (3,958)       (2,397)            
(Loss) per share                        (0.036)           (0.022)       (0.015)       (0.009)        

Fiscal 2018 financial highlights:

• Revenue:
  • $5.8-million from the sale of cannabis-related products (edibles, concentrates and flower) in California via the company's wholly owned distributor, Calyx Brands Inc., between March 15, 2018, and the fiscal year ended July 31, 2018;
  • Annualized revenue run rate of $15.5-million;
  • Total revenue (cannabis sales plus lease and interest revenue) of $5.9-million, representing a record increase of 586 per cent over 2017;
• Gross margin of 13.1 per cent, indicating cost of goods sold of $5.1-million, including costs of product purchase, direct labour related to products sales and an allocation of overhead directly attributable to product sales;
• Lease and interest revenue decrease of $800,000 over 2017;
• Total operating expenses of $9.8-million, an increase of $4-million over 2017, driven by acquisition and project evaluation costs, increased advertising and marketing, and Calyx operating costs.

Q4 2018 financial highlights:

• Revenue from cannabis sales of $4.1-million, up 147 per cent when compared with Q3 2018;
• Gross profit of $400,000, up 33 per cent when compared with Q3 2018, indicating cost of goods sold of $3.7-million, including costs of product purchase, direct labour related to products sales and an allocation of overhead directly attributable to product sales;
• Gross margin of 10.5 per cent, a decrease from 19.6 per cent in Q3 2018, mainly due to an increase in personnel and direct labour at Calyx as part of scaling up its distribution infrastructure;
• Lease and interest revenue decrease of $1.3-million over Q3 2018;
• Total operating expenses of $3.5-million, an increase of $800,000 over Q3 2018.

Business highlights -- fiscal 2018 and subsequent:

• In fiscal 2018 and subsequently, Nutritional High International achieved significant milestones in the development and sale of consumer-focused products under its in-house flagship FLI brand, including:
  • Introduced its first consumer-focused concentrates via Palo Verde LLC's launch of FLI vape cartridges and syringes in Colorado;
  • Assisted Palo Verde in commencing the manufacture and sale of FLI chocolate bars in Colorado, extending its portfolio into cannabis-infused edibles;
  • Furthered its innovation with FLI-branded chocolate shot and space joint (infused prerolls);
  • Launched FLI-branded mini mints to target one of the fastest-growing edible segments in California -- with a compact nature and creative flavour profile, it is expected to garner significant market response and a solid consumer experience;
  • Made significant progress on its proprietary Dab Stick technology -- first shipment is due to be received from the company's manufacturing partner for filling and sale in short order;
• In March, 2018, Nutritional High International acquired all of the assets of Calyx Brands, a leading distributor of cannabis and cannabis-derived products in California. Calyx has grown significantly under Nutritional High's leadership, solidifying its position among the largest distributors in the California cannabis market. The company achieved its first revenue milestone from cannabis sales in excess of $1-million (U.S.) in April, 2018, and recognized revenue in excess of $4.5-million (U.S.) for fiscal 2018. Calyx continues to rapidly expand on its California-wide distribution strategy, servicing 450-plus licensed dispensaries with 14-plus of the market-leading brands in edibles, concentrates and flower. Management fully expects the growth trajectory of its revenue and market reach to continue in subsequent quarters, and is heavily focused in Calyx's distribution infrastructure to maximize efficiencies as it scales forward.
• In July, 2018, Nutritional High International acquired Pasa Verde LLC, operator of FLI Labs NorCal, a cannabis extraction and manufacturing facility located in Sacramento, Calif. FLI Labs NorCal commenced operations in late September, 2018, and has been ramping up production as the company undertakes a buildout to expand its production capability. Various FLI-branded edibles and concentrates, along with Bright Green Lights LLC (JMEDS) lozenges and sugar-free mints, are being produced at FLI Labs NorCal and supplied to Calyx. With the acquisition, the company has successfully created a robust vertical integration in manufacturing and distribution in the largest cannabis market in the world, enabling a much higher velocity of innovation, production and market penetration for the company's flagship FLI brand as well as other Nutritional High International partner brands.
• Nutritional High International has further expanded its West Coast manufacturing reach with the commencement of production in its La Pine facility in Oregon, beginning in November, 2018. La Pine is currently producing various in-house FLI-branded SKUs, including vape cartridges and syringes, and is working with a leading distributor in the Oregon market to drive sales and distribution across the state.
• Nutritional High International has an aggressive expansion plan in the Colorado market via its FLI brand licensing agreement with Palo Verde, a licensed operator in Colorado. Palo Verde has recently secured regulatory approval to expand its production line and commence supplying the medical market. Palo Verde is now in the process of expanding its in-house sales and distribution team from the ground up to secure statewide market reach in both the recreational and medical cannabis space.
• In September, 2018, Nutritional High International entered into a formal membership interest purchase agreement (MIPA) to acquire 75 per cent of Nevada-based Green Therapeutics LLC. Green Therapeutics is one of Nevada's premier innovators and established producer/processors. Green Therapeutics owns multiple cultivation and production licences and facilities, and offers a range of products, including ultrapremium flower, extracts, vape cartridges and topical products under its leading brands -- Tsunami, Provisions and GT Flowers. This acquisition will create significant market advantages for Nutritional High International, including, but not limited to:
  • Synergies in brand and intellectual property, enabling proliferation of the FLI brand in Nevada and commercialization of Tsunami and Provisions in California, Colorado, Oregon, Washington and other states;
  • Potential for the company to achieve full vertical integration in the critical Nevada market -- Green Therapeutics has applied for retail licences in multiple locations statewide;
• The company has also taken multiple steps to bolster its cash position through the monetization of non-core assets and securing strategic financing:
  • Sale of a 50-per-cent membership interest in NH Medicinal Dispensaries LLC, operating as The Clinic Effingham (TCE) in Effingham, Ill., to its joint venture partner, ILDISP LLC, for a purchase price of $3.5-million (U.S.) in cash;
  • Sale of its 9,000-square-foot real estate property located in Sacramento, Calif., for gross proceeds of $1.4-million (U.S.);
  • Sale and leaseback of approximately $1.2-million (U.S.) worth of equipment at its FLI Labs NorCal facility and its La Pine facility in Oregon;
• The company entered into an asset purchase and patent licensing agreement with JMEDS in November, 2018, a pioneer of microdosed infused products. The acquisition will enable the company to expand its California product portfolio into lozenges and sugar-free mints with a brand that has already secured its reputation as one of the category leaders, and leverage its pre-existing vertically integrated network to expand the market share of JMEDS statewide. It will also eventually be available in other states where the company operates.
• In May, 2018, Nutritional High International and Xanthic Biopharma Inc. entered into a binding letter of intent for the production and distribution of Xanthic's patent-pending, water-soluble, cannabis-infused powders in California via FLI Labs NorCal and Calyx. This allows future entry for the company into the cannabis beverage market, which has demonstrated a robust growth trend in California, Colorado, Washington and Oregon, and is expected to persist in the future.
• In May, 2018, the company and NeutriSci International Inc., the innovator and pioneer behind Neuenergy, entered into a binding memorandum of understanding to develop, manufacture and distribute tetrahydrocannabinol-infused and cannabidiol-infused sublingual tablets utilizing NeutriSci's patent-pending technology, proprietary ingredients and formulations. The partnership with NeutriSci broadens the company's future product portfolio to include a very innovative and effective cannabis energy product. Today, Neuenergy is a revolutionary energy tablet designed to deliver enhanced focus and mental clarity, without the sugar, calories and crash that are associated with typical energy products.
• Nutritional High International continues to focus on strategic acquisitions and/or partnerships that are synergistic with existing assets. Nutritional High International has aggressive expansion plans in Washington and Canada. The company has also formed an international joint venture with Aura Health Inc., with the goal of taking Nutritional High International's extraction and edibles technology and products to European and Israeli markets.

Jim Frazier, chief executive officer of Nutritional High International, commented: "We have achieved significant milestones this past year -- 2018 has been a year of laying important groundwork and architecture for the future. Having cut our teeth in Colorado in working with Palo Verde, we have secured a significant base of operations in California. With Calyx's distribution reach, along with FLI Labs NorCal's production capabilities, we are working toward an exciting year ahead in the largest cannabis market in the world. With the Green Therapeutics acquisition in Nevada slated for 2019, we will add significant reach in an important tourist market and add strong innovation talent to our team, which we will leverage throughout the U.S."

Adam Szweras, founder and co-chair of the board, commented: "This past year has been transformational for the company. We been successfully executing on a strategic plan carefully put in place to focus on our strengths -- cannabis extraction and infused product manufacturing. To this end, we have added strong distribution capabilities, which we expect to leverage throughout the United States. As we build our team and firm up our base of operations in the Western United States, we will look north to Canada and, ultimately, to the U.S. eastern seaboard. Two thousand nineteen will be an exciting year ahead."

A comprehensive discussion of Nutritional High International's financials and operations are provided in the company's financial statements and management's discussion and analysis, which are filed on SEDAR.

About Nutritional High International Inc.

Nutritional High International is focused on developing, manufacturing and distributing products under recognized brands in the cannabis products industry, with a specific focus on edibles and oil extracts for medical and adult recreational use. Nutritional High International works exclusively through licensed facilities in jurisdictions where such activity is permitted and regulated by state law.

Nutritional High International follows a vertically integrated model with a fully developed strategy for acquisitions in extraction, production, sales and distribution sectors of the cannabis industry. Nutritional High International has brought its flagship FLI edibles and extracts product line from production to market in California through its wholly owned distributor, Calyx Brands, and Colorado, where its products are manufactured by a licensed producer.

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