Mr. Adam Bierman reports

MEDMEN REPORTS SECOND QUARTER FISCAL YEAR 2019 FINANCIAL RESULTS

Medmen Enterprises Inc. has released its consolidated financial results for the second quarter of fiscal 2019. All financial information for the 13-week period ended Dec. 29, 2018, is reported in U.S. dollars, unless otherwise indicated.

Management commentary

"Our strong second quarter results support Medmen's commitment to drive strong retail and sales performance, while efficiently scaling the company and executing on our growth strategy," said Adam Bierman, Medmen chief executive officer and co-founder. "As we emphasized last quarter, we are in a new phase of growth, one focused on continuing to operationalize our industry-leading retail footprint and increasing our profitability. We are confident in the team we've built to drive our success."

After going public almost one year ago, Medmen has established a record of growth and success. With approximately 7-per-cent market share in California, the largest cannabis market in the United States, the company is planning to open 16 new locations across the U.S. in calendar 2019. Of the 16 new locations, 12 will be based in Florida, where Medmen is licensed for up to 30 locations. Additionally, four retail sites in Florida are expected to open in the next 90 days in the following locations: Key West, Orlando, West Palm Beach and St. Petersburg.

Second quarter 2019 overview

Financial results:

• Systemwide sales revenue of $29.9-million, which represents a 39.1-per-cent quarter-over-quarter increase over first quarter fiscal 2019 ended Sept. 30, 2018;
• Gross profit margin improved to 53 per cent from 45 per cent in the prior quarter due to unrealized gain on changes in fair value of biological assets;
• Company's eight retail locations in California reported a combined $23.7-million in revenue, a 28-per-cent quarter-over-quarter increase.

Corporate developments:

• Signed definitive agreement in December to acquire PharmaCann in an all-stock transaction; the transaction will double Medmen's geographic footprint to 12 states, which account for over 50 per cent of the U.S. population;
• Expanded California footprint into northern California through the signing of definitive agreements for the acquisitions of a retail licence in Emeryville and a microbusiness licence for retail, distribution, cultivation and manufacturing cannabis on site in San Jose; the first transaction closed in second quarter 2019, and the second transaction closed in third quarter 2019;
• Signed definitive agreement to acquire the retail operations and licence for a store in Santa Ana, Calif., through an all-stock transaction with Captor Capital Corp.; this location was already operating under the Medmen brand through a management contract; transaction closed in third quarter 2019;
• Closed on acquisition of Omaha Management Services LLC, which owns Monarch, an Arizona-based vertically integrated medical licence holder with a flagship retail location in Scottsdale, plus cultivation and processing operations.

Brand strategy:

• Launched a comprehensive suite of new cannabis products, which are currently being sold in Medmen's Nevada stores;
• Announced the completion of investment in California-based flower brand Old Pal, which provides everyday high-quality cannabis flower for customers.

People:

• Appointed Michael Kramer as chief financial officer; Mr. Kramer offers three decades of retail experience and has excelled in both operational and financial roles, including as chief financial officer of high-profile retailers, such as Apple Retail Inc., Forever 21 and Abercrombie & Fitch;
• Appointed Ben Cook as chief operating officer; Mr. Cook has extensive experience leading omnichannel distribution, global market expansion and supply chain optimization; his experience executing complex strategies for global, high-growth companies, including Apple, Sam's Club and Target, is invaluable to Medmen's growing multistate operations and expansion plans.

Capital market and financing activities:

• Announced relationship with newly formed Treehouse Real Estate Investment Trust, a cannabis-focused REIT that has now raised $133-million to acquire properties from Medmen and other cannabis real estate;
• Closed a $77-million senior secured term loan with funds managed by Hankey Capital and with an affiliate of Stable Road Capital;
• Closed, on Dec. 5, a $56-million bought deal equity financing, issuing 13.64 million units at a price per unit of $4.11, with each unit being composed of one Class B subordinate voting share and one Class B subordinate voting share purchase warrant; the exercise price of such warrants is $5.16 (U.S.) per share; they are exercisable for a term expiring on Sept. 27, 2021.
• Uplisted to the OTCQX Best Market by OTC Markets Group under the ticker symbol MMNFF on Oct. 24.

Subsequent events

Corporate developments:

• Closed acquisition of Seven Point, a licensed medical cannabis dispensary located in Oak Park, Ill.;
• Closed acquisition of Kannaboost Technology Inc. and CSI Solutions LLC, collectively referred to as Level Up, in a cash and stock transaction valued at $33-million on Feb. 12, 2019; Level Up holds licences for two vertically integrated operations in Arizona, including retail locations in Scottsdale and Tempe, and 25,000 square feet of cultivation and production capacity in Tempe and Phoenix; the company also received a 40-per-cent stake in top-selling brand KIND Concentrates, which is currently distributed in over 90 per cent of the dispensaries in Arizona.

Capital market and financing activities:

• Completed the sale of three properties to Treehouse for net proceeds of approximately $18.4-million, after repayment of debt.

Second quarter fiscal year 2019 review

In an effort to increase transparency, provide a better understanding of Medmen's business and ensure sales comparability between years, the company is basing accounting on the four-five-four calendar structure. Additionally, the company is now breaking out performance by retail, cultivation and manufacturing, corporate selling, general and administrative, and preopening expenses.

For the second quarter of fiscal 2019, systemwide revenue was $29.9-million. This represents a 39.1-per-cent quarter-over-quarter increase over the first quarter of fiscal 2019 ended Sept. 30, 2018. Systemwide revenue, pro forma to include pending acquisitions that have not yet closed, would have been $49.5-million for the quarter.

Retail: Systemwide retail revenue for the quarter is based on 16 retail stores that were operational at the end of the quarter. This includes the Medmen Paradise location near McCarran International Airport in Las Vegas, which opened in October, and the Medmen Scottsdale location in Arizona, which began to be included in Medmen's results in December following the closing of the Monarch acquisition.

Strong systemwide retail revenue for the quarter is primarily attributable to Medmen's stores in Southern California's recreational market. In California, the company's eight retail locations reported a combined $23.7-million in revenue, which represents a 28-per-cent quarter-over-quarter increase.

Cultivation and manufacturing: For the second quarter of fiscal 2019, the company reported a $4.9-million EBITDA loss for cultivation and manufacturing, of which approximately $4-million is related to costs associated with the company's first full-scale factory, Project Mustang in Nevada.

Corporate SG&A: During the second quarter, the company continued to make significant investments in building the corporate infrastructure and team required to execute its strategy for long-term growth. Corporate SG&A includes corporate infrastructure and growth initiatives, such as corporate payroll, sales and marketing, and technology, among other things. Of the total $40.9-million corporate SG&A expenses, $14.4-million was corporate payroll, which included the buildout of several teams within the company, including finance and accounting, digital, business intelligence, and marketing. SG&A expenses also included $8.6-million in marketing and branding as compared with $4.8-million in the first quarter of 2019.

Preopening expenses: The company incurred $3.0-million of preopening expenses in the second fiscal quarter of 2019, primarily driven by rent expenses of retail stores, cultivation/manufacturing sites and facilities that are not yet operational.

Gross profit for the second quarter, before biological asset adjustment, was $13.3-million, as compared with $500,000 in the second fiscal quarter of last year. For the second quarter, gross profit margin after biological asset adjustment was 53 per cent, compared with 45 per cent in the previous quarter.

For the second quarter 2019, the company reported a total net loss of $64.6-million compared with a net loss of $66.5-million for the first quarter. Net loss per share attributable to the company in the second quarter was 25 cents versus a net loss of 27 cents for the first quarter.

Additional information

Additional information relating to the company's second quarter 2019 results is available in the company's interim financial statements and related management's discussion and analysis, filed on SEDAR.

Medmen refers to certain non-international financial reporting standard measures, such as annualized sales per square foot, earnings before interest, taxes, depreciation and amortization, four-wall EBITDA, and adjusted EBITDA (earnings defined as earnings before interest, taxes, depreciation, amortization, less certain non-cash equity compensation expense, including one-time transaction fees and all other non-cash items). These measures do not have any standardized meaning prescribed by IFRS and may not be comparable with similar measures presented by other issuers.

Conference call and webcast

Medmen Enterprises will host a conference call and audio webcast with Mr. Bierman and chief financial officer Michael Kramer today at 5 p.m. Eastern Time to discuss the financial results in further detail.

Webcast information

A live audio webcast of the call will be available on the events and presentations section of Medmen's website.

Calling information

Toll-free dial-in number:  844-559-7829

International dial-in number:  647-689-5387

Conference ID:  9283806

About Medmen Enterprises Inc.

Medmen is a cannabis retailer with operations across the United States and flagship stores in Los Angeles, Las Vegas and New York. Medmen's mission is to provide an unparalleled experience that invites the world to discover the remarkable benefits of cannabis because a world where cannabis is legal and regulated is a safer, healthier and happier world.

We seek Safe Harbor.