Mr. Adam Bierman reports

MEDMEN ANNOUNCES PRELIMINARY FOURTH QUARTER 2019 SYSTEMWIDE REVENUE RESULTS AND PROVIDES ADDITIONAL CORPORATE UPDATES

Medmen Enterprises Inc. has released unaudited system-wide revenue figures for the fiscal fourth quarter 2019, which ended on June 29, 2019. The company also provided an update on several corporate initiatives, including efforts to optimize SG&A (selling, general and administrative expenses) and raise capital, the status of the pending PharmaCann transaction and retail store expansion. The company plans to announce financial results for fiscal 2019 after market close on Oct. 28, 2019.

"The fourth quarter of 2019 was another quarter of solid execution for Medmen and a very strong end to our fiscal year," said Adam Bierman, Medmen co-founder and chief executive officer. "Throughout 2019, we broadened our geographic footprint through strategic acquisitions, which leverage our existing corporate infrastructure as we enter new markets. Following the closing of pending acquisitions, we will be licensed for up to 92 retail locations across 12 states, and there is tremendous opportunity ahead to turn the balance of our retail licences into revenue-generating storefronts."

Unaudited system-wide revenue

For the fiscal fourth quarter 2019, system-wide revenue across Medmen's operations in California, Nevada, New York, Arizona and Illinois, excluding pending acquisitions, totalled $42.0-million (U.S.) ($55.5-million), up 15 per cent sequentially. This growth represents the company's third consecutive double-digit sequential revenue increase since going public in May, 2018. For the fourth quarter, gross margins across retail operations were 50 per cent, compared with 51 per cent in the previous quarter. Pro forma system-wide revenue, which includes pending acquisitions that have not yet closed, totalled $61.3-million (U.S.) ($81.0-million) for the quarter. This pro forma revenue figure is based on 37 retail stores that were operational at the end of the quarter and includes the recently announced pending acquisitions of operational retailers in Long Beach, Calif., and Vallejo, Calif.

Medmen's stores in California's recreational market continue to perform well quarter over quarter. The company's 11 operational retail locations in California reported a combined $27.4-million (U.S.) ($36.2-million) in revenue for the fourth quarter, an increase of 10 per cent sequentially. Revenue by quarter for fiscal 2019 is summarized in the associated table.

                                FY 2019 REVENUE SUMMARY    

Currency in U.S. dollars                  Q1       Q2       Q3       Q4    Total

System-wide revenue                    $21.5    $29.9    $36.6    $42.0   $130.0
Revenue of pending acquisitions
PharmaCann                               7.3      9.8     15.5     17.5     50.1
Other                                   10.7      9.9      2.8      1.8     25.2
Total pro forma revenue (non-IFRS)      39.5     49.6     54.9     61.3    205.3
Operational stores (pro forma)            17       31       32       37       37

Corporate SG&A optimization

Based on preliminary figures for the fourth quarter of 2019 and subsequent initiatives in fiscal first quarter of 2020, Medmen expects to significantly surpass the targeted 20-per-cent reduction in its corporate SG&A expenses from its quarter ending December, 2018, which totalled $164-million (U.S.) on an annualized basis. The company is now on track to reduce its run rate corporate SG&A expenses by 30 per cent by the end of the September, 2019, quarter, or to approximately $115-million (U.S.) on an annualized basis going forward. Key drivers of this continued decrease in corporate SG&A expenses include: general corporate cost savings, strategic headcount reductions across various departments, and elimination of non-core functions and overhead in various departments.

Financing and balance sheet developments

Medmen has completed the previously announced amendments to its $250-million (U.S.) senior secured credit facility arranged by Gotham Green Partners. These amendments offer the company greater access to capital by providing Medmen the ability to draw down the full remaining balance of the facility without any trading price hurdles. The amendments also make changes to certain financial covenants under the facility, providing Medmen further flexibility in managing its balance sheet and growth initiatives.

As a result of the amendments to the facility, the conversion price per share of the senior secured convertible notes issued in both tranche 1 -- which has an aggregate principal amount of $100-million (U.S.) -- and the initial portion of tranche 2 -- which has an aggregate principal amount of $25-million (U.S.) have been updated. For tranche 1, the conversion price per share of the notes is now $2.55 (U.S.). For the initial portion of tranche 2, the conversion price per share of the notes is now $2.17 (U.S.). No amendments were made to the warrants issued by the company in connection with either tranche. Additionally, the previously disclosed facility amendment fee will be given effect within the documentation for the second portion of tranche 2, such portion of tranche 2 contemplated to be in the aggregate principal amount of $50-million (U.S.).

Medmen has also executed definitive subscription documentation for its non-brokered offering of subordinate voting shares for aggregate gross proceeds of $30-million (U.S.) at a price per share of $2.05 (U.S.) with the subscribers, Wicklow Capital and Gotham Green Partners. Closing of the equity placement is expected in the coming days. Shares issued pursuant to the equity placement will be subject to a hold period of four months from the closing date thereof. The gross proceeds from the equity placement together with the remaining financing commitment under the facility total $155-million (U.S.). These proceeds may be used when available to finance working capital requirements and to execute on the company's retail footprint expansion plans.

PharmaCann transaction

On Dec. 24, 2018, Medmen announced that the company entered into a definitive business combination agreement to acquire PharmaCann LLC, one of the largest vertically integrated multistate cannabis operators in the United States. The transaction is subject to the requirements of the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which provides that the business combination may not be completed until the applicable waiting period is terminated or expires. On Jan. 11, 2019, Medmen and PharmaCann filed the requisite notification and report forms under the HSR Act with the anti-trust division of the Department of Justice and the Federal Trade Commission.

On March 15, 2019, Medmen and PharmaCann received requests for additional information and documentary material from the DOJ regarding the transaction. The HSR waiting period will expire, and the parties may complete the transaction, 30 days after Medmen and PharmaCann substantially comply with the second request, unless early termination of the HSR waiting period is granted or the DOJ has taken any action that extends the waiting period or that results in a court order requiring remedies or stopping the transaction.

As of Aug. 9, 2019, Medmen and PharmaCann each declared substantial compliance with the second request. Completion of the transaction remains subject to the expiration or termination of the HSR waiting period and other customary closing conditions. Assuming that the conditions to close are satisfied or waived, the transaction is expected to be complete by the end of calendar year 2019.

As consideration for the transaction, PharmaCann equityholders are expected to receive approximately 168.4 million subordinate voting shares in the combined company, based on Medmen's fully diluted shares outstanding as of June 29, 2019. The total share consideration is subject to change based on the company's fully diluted subordinate voting shares outstanding as of the closing date of the transaction.

Please refer to the company's filings available on the company's profile at SEDAR for additional details regarding the transaction.

Growing retail footprint

Medmen is currently licensed for up to 92 locations across 12 states, including locations to be acquired through pending acquisitions. This geographic footprint includes the company's industry-leading California retail network of 17 stores:

• California: Medmen increased its total retail licence count in California to 17, with the recent acquisitions of two retailers in Long Beach and one retailer in Vallejo. The Long Beach transactions include the previously announced acquisition of One Love Beach Club and a recent acquisition of a non-operational retail licence. Of these 17 retail licences, 13 are operational as Medmen stores, including the recently opened Medmen Sorrento Valley location. The company was also recently awarded commercial retail licences in the cities of Pasadena and Turlock. Medmen expects to have a total of 30 retail locations in California within the next 24 months.
• Illinois: On June 25, 2019, Illinois Governor J.B. Pritzker signed a landmark bill legalizing adult cannabis use in the state beginning Jan. 1, 2020. This legalization is projected to generate approximately $2-billion (U.S.) in annual sales, as well as 23,000 new jobs for Illinois a few years after the program launches. Through the proposed acquisition of PharmaCann, Medmen expects to become a prominent retailer in Illinois with a total of 10 store locations, the maximum number of retail stores a single company can operate based on state regulations.
• Florida: On June 14, 2019, Medmen announced its expansion into Florida with the opening of its first retail location in West Palm Beach. Medmen is licensed to open up to 35 retail locations in Florida and has over 20 leases already secured in the state. The company is slated to open an additional 11 stores in the state during the second half of calendar 2019, including retail stores in Key West, Orlando, Miami Beach, St. Petersburg and Pensacola. The company's own suite of brands -- [statemade], LuxLyte and Medmen -- are already being sold at the West Palm Beach location.

Investor relations notice

As Medmen continues to expand and enhance its efforts to engage with the investment community, the company announced today that it will be relaunching its investor website. The investor site will continue to serve as a valuable resource for investors to stay informed on the latest company news and financials. An updated version of the corporate presentation, which features details on the company's business strategy, geographic footprint and path to profitability, has also been posted today on the investor site. Further, the company has retained strategic investor relations firm ADDO Investor Relations, comprising professionals with deep investor relations experience with top-tier consumer retail companies, to support the company's internal investor relations efforts.

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 safer, healthier and happier.

We seek Safe Harbor.