Mr. William Simpson reports

GOLDEN LEAF REPORTS THIRD QUARTER 2017 RESULTS

Golden Leaf Holdings Ltd. has released its unaudited financial results for the third quarter ended Sept. 30, 2017, and a general business update.

Recent business highlights

• Received city licence to sell cannabis in Las Vegas and other key Nevada jurisdictions;
• Secured $10.8-million (U.S.) in a debenture financing to pay off outstanding accounts payable and provide working capital;
• Completed the acquisition of Medical Marijuana Group;
• MMGC received a cultivation licence from Health Canada for Ontario grow facility.

William Simpson, chief executive officer of Golden Leaf Holdings, commented: "Since joining the company midyear, the new senior leadership team at Golden Leaf has been executing on its strategy to build an efficient, sustainable business and to build value for its shareholders. Although it has been just a few months, we have made rapid progress, laying the foundation for several exciting accomplishments which the company announced subsequent to quarter-end.

"Our vision is to drive top-line growth by developing our retail brand across our target markets, starting with Portland, Ore. To this end, we are constructing three new Chalice Farm retail dispensaries. Construction efforts have progressed faster than expected and we anticipate one new location to be operational before the end of 2017, with a second expected to be up and running in Q1 2018. We are also expanding our product lines, maintaining a focus on innovation, as evidenced by Chalice Farms' recent launch of a new line of seasonal cannabis edibles, including the Pumpkin Spice Truffle, which was named runner-up for Best Sweet Edible at the third annual Oregon DOPE Cup. Our existing brands also gained traction, with our private stash in Mango Super Silver Haze by Golden named Best Distillate at DOPE Cup. We strive to continually enhance Golden Leaf's high-quality product portfolio as a core part of our future growth initiatives.

"To expand beyond our home market of Oregon, we secured key city licences that have enabled us to commence selling our proprietary brands wholesale to the adult-use market in Nevada. Although at a very early commercial stage, we generated revenues of approximately $100,000 (U.S.) in the third quarter of 2017 from Nevada, and are pleased with this early stage traction. Nevada is one of the leading markets for the cannabis industry, due to its more than 40 million yearly visitors and its sizable domestic market, and we are excited about this opportunity. We also expanded into Canada, by completing the acquisition of MMGC in early November. Following the acquisition, MMGC was granted a cultivation licence from Health Canada for its Ontario grow facility, which is expected to allow us to generate sales to the Canada market starting in 2018.

"Finally, our strategy to reduce costs has led to material changes to Golden Leaf's corporate overhead. We significantly reduced our monthly payroll and G&A overhead in the third quarter of 2017 and have identified areas for further overhead reduction in the near-term. By transitioning into a more lean and efficient business, we believe we will be better positioned to focus on our initiatives to support stable and sustainable growth. Subsequent to quarter-end, we completed a financing that yielded proceeds of approximately $10.8-million (U.S.), which enabled us to retire accounts payable, and to deploy working capital to rebuild inventory that we expect will drive top-line revenue growth. Looking ahead, we believe we now have a solid financial platform to drive growth in the business and leverage the significant growth opportunity ahead of us."

Business overview

• Following the previously announced comprehensive review of business operations, management continued to implement initiatives to streamline the company's cost structure and improve efficiencies, while preserving the company's capacity to drive its key expansion initiatives forward. This has resulted in reduced overhead costs.
• Oregon: The company is consolidating its operations to the Chalice Farms campus in the Portland, Ore., area. The company has made progress toward securing the required licencing for its production facility in Portland, Ore., and the construction of a processing facility which is expected to be completed by the end of the year. As a result of the acquisition of Chalice Farms and its four retail dispensaries in July, 2017, the company now has five retail dispensaries in operation, with an additional three under construction, one of which Golden Leaf expects to have opened by the end of 2017, and a second expected to open in the first quarter of 2018.
• Nevada: Following the previously announced securing of state cultivation and production/extraction licences in Nevada, the company was granted business licences by the City of Henderson and Washoe County, Sparks and Las Vegas, all in the state of Nevada, to sell cannabis to the adult-use markets in these locations. The company has commenced sales of its high-quality, proprietary cannabis brands to dispensaries throughout the state. The company also signed an agreement with a distributor in Reno, Nev., to generate sales.
• Canada: The company closed the acquisition of MMGC in early November, which is expected to enable the company to expand sales of its branded oils and flowers into the Canadian marketplace. Subsequently, MMGC was granted a cultivation licence by Health Canada for its Ontario cannabis grow facility. GLH expects to begin grow facility operations shortly in preparation for the launch of retail operations in Canada in the third quarter of 2018.

Financial results -- third quarter ended Sept. 30, 2017

For the third quarter ended Sept. 30, 2017, net revenue was $3.1-million (U.S.) as compared with $2.4-million (U.S.) for the same three-month period in 2016. Q3 2016 included $240,000 (U.S.) in non-recurring royalty revenue. The 29-per-cent year-over-year increase largely reflects the contribution from product sales as a result of the acquisition of Chalice Farms in July, 2017, more than offsetting supply constraints of key products across the portfolio. Gross profit was $731,000 (U.S.), or 23.7 per cent of net revenue, for Q3 2017, compared with 21.3 per cent of net revenue in Q3 2016, and 19.2 per cent of net revenue in the second quarter of 2017. Year-over year, gross margin benefited from better utilization of production staff and consistent margins across product categories. Improvement in gross margin on a sequential basis was attributable to the higher margin associated with retail products sold at acquired dispensaries. Operating expenses for Q3 2017 were $4.7-million (U.S.) compared with $2.3-million (U.S.) in Q3 2016. The increase was largely attributable to higher wages, consulting costs, legal costs, rents and share-based compensation. The company identified opportunities to streamline the business and reduce its corporate overhead, which is expected to positively impact future payroll expense.

Adjusted earnings before interest, taxes, depreciation and amortization loss was $3.1-million (U.S.) for Q3 2017, as compared with an adjusted EBITDA loss of $1.7-million (U.S.) during Q3 2016. This was primarily driven by increases in legal costs, salaries, wages and rents, which offset higher margins that resulted from sales of inventory produced in prior periods, and an enhanced product mix.

Net loss for Q3 2017 was $3.2-million (U.S.), or one U.S. cent a share, compared with $2.3 million (U.S.), also a one U.S. cent a share loss, for Q3 2016. As a result of the recent acquisitions and financing transactions, the current number of common shares of the company is 726 million on a fully diluted basis.

As of Sept. 30, 2017, the company had approximately $634,000 (U.S.) in cash, compared with $3.9-million (U.S.) at Dec. 31, 2016. Subsequent to the end of Q3 2017, Golden Leaf received approximately $10.8-million (U.S.) in net proceeds from a private placement transaction. The company is using these proceeds for the payment of outstanding accounts payable, inventory purchasing and general corporate purposes.

Investor conference call

GLH's management, led by William Simpson, chief executive officer, will hold a conference call at 4:30 p.m. ET on Wednesday, Nov. 29, 2017, to report its financial results for the quarter ended Sept. 30, 2017.

The dial-in information for the conference call is as follows:

Program title:  Golden Leaf Holdings third quarter 2017 earnings call

Canada and U.S.:  1-877-423-9813

International:  1-201-689-8573

Participants must request the Golden Leaf call.

Mr. Simpson will be answering shareholder questions at the end of the call. Should you have questions during or prior to the conference call please send an email to GLH@kcsa.com with Golden Leaf question in the subject line. Mr. Simpson will answer as many questions as time will allow.

A live audio webcast will be available online on the company's website, where it will be archived for one year. An audio replay of the conference call will be available through midnight Dec. 13, 2017, by dialling 1-844-512-2921 from the U.S. or Canada, or 1-412-317-6671 from international locations, conference ID: 13673816.

About Golden Leaf Holdings Ltd.

Golden Leaf Holdings, a Canadian company with operations in Portland, Ore., is one of the largest cannabis oil and solution providers in North America, and a leading cannabis products company built around recognized brands. Golden Leaf cultivates, extracts, and manufactures and distributes its products through its branded Chalice Farm retail dispensaries, as well as through third party dispensaries. Golden Leaf leverages a strong management team with cannabis and food industry experience to complement its expertise in extracting, refining and selling cannabis oil.

                 
    INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)    

                                       For the three months ended            For the nine months ended 
                                   Sept. 30, 2017  Sept. 30, 2016      Sept. 30, 2017   Sept. 30, 2016 
Revenues
Product sales                          $3,078,891      $2,191,596          $7,427,378       $6,806,587
Royalties                                  50,000         240,000              50,000          400,000
Total revenue                           3,128,891       2,431,596           7,477,378        7,206,587
Inventory expensed to cost
of sales                                2,315,490       1,722,668           5,684,389        5,520,972
Production costs                          181,213         192,255             520,278          723,410
Gain on changes in fair value
of biological assets                      (99,000)              -             (99,000)        (274,220)
Cost of sales expense                   2,397,703       1,914,923           6,105,667        5,970,162
Gross profit                              731,188         516,673           1,371,711        1,236,425
Expenses
General and administration              3,313,869       1,646,909           6,970,399        5,347,643
Share-based compensation                  676,018         213,930           1,052,587          629,319
Professional fees paid with
equity instruments                        116,588          69,499             284,079          668,615
Sales and marketing                       319,665         266,417             885,877          718,360
Research and development                        -          21,372                   -          164,628
Depreciation and amortization             225,922          62,584             359,225          155,197
Loss on disposal of assets                 25,500               -             319,700                -
Total expenses                          4,677,562       2,280,711           9,871,867        7,683,762
Loss before undernoted items           (3,946,374)     (1,764,038)         (8,500,156)      (6,447,337)
Interest expense                          556,427         602,288           1,413,859        1,450,656
Transaction costs                       2,365,821               -           2,365,821          753,472
Impairment of financing lease
receivable                                 27,422          81,060              82,266          162,120
Other income (loss)                        37,296         113,591             200,124          127,502
Gain on change in fair value
of warrant liability                   (2,841,983)       (307,665)         (3,080,362)      (5,136,830)
Gain on change in fair value 
of liabilities                         (1,148,020)              -          (2,733,810)               -
(Loss) before income taxes             (2,943,337)     (2,253,312)         (6,748,054)      (3,804,257)
Current income tax expense                219,587               -             419,587           27,357
Net (loss)                             (3,162,924)     (2,253,312)         (7,167,641)      (3,831,614)
Comprehensive (loss)                   (3,162,924)     (2,253,312)         (7,167,641)      (3,831,614)
Basic and diluted (loss) per share          (0.01)          (0.01)              (0.04)           (0.01)
Weighted average number
of common shares outstanding          345,710,474      95,248,704         203,386,663       82,112,479

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