• First quarterly positive adjusted EBITDA of $0.2M in Q4 2019
• 27% increase in Q4 2019 net cannabis revenue over the previous quarter
• 1,748% increase in FY 2019 net cannabis revenue over the previous year
• Gross margin on cannabis net revenue of 80% in Q4 2019
• Q4 2019 SG&A expenses of $4.3 million, a decrease of 11% over previous quarter
• $41.2M cash and cash equivalents at December 31, 2019
• Fourth consecutive quarter reporting record revenue

TORONTO, March 18, 2020 (GLOBE NEWSWIRE) — Aleafia Health Inc. (TSX: ALEF, OTC: ALEAF, FRA: ARAH) (“Aleafia Health” or the “Company”), is pleased to report its financial results for the 2019 fourth quarter (“Q4 2019”) and fiscal year (“FY 2019”).

Management Commentary

“Our disciplined, sustainable growth has paid dividends in 2019 in a tremendous year for Aleafia Health. Our patient centric approach remains at the core of our business as we build our cannabis health and wellness ecosystem,” said Aleafia Health CEO Geoffrey Benic. “These results again demonstrate the strength of our team in executing on this vision during a period of rapid and dynamic industry change.

“The prudent allocation of capital instituted over the course of 2019 is reflected in streamlined expenses, a fourth consecutive quarter of solid revenue growth, and industry leading gross margin among North American cannabis industry reporting issuers. Looking forward, we expect to make continued progress in 2020 as we bring new, differentiated health and wellness product formats to market and expand our patient ecosystem at home and abroad.”

Condensed Income Statement

Q4 2019 net revenue was $6.0 million, an increase of 22% over the previous quarter. The increase was primarily due to a $1.0 million increase in cannabis revenue. For FY 2019, net revenue was $16.4 million, an increase of 391% over the previous year. The increase was primarily due to a $11.0 million increase in net cannabis revenue, along with an increase of $2.0 million in clinic revenue.

Q4 2019 net loss was $9.8 million, compared to net income of $1.9 million in the previous quarter. This loss was primarily due to non-cash items including a decline of $8.0 million in unrealized gain on fair value of biological assets compared to Q3 2019, and a non-cash $3.6 million deferred income tax expense in the quarter.

SG&A expenses were $4.3 million in Q4 2019, a decrease of 11% over the previous quarter. Q4 2019 total expenses declined by 56% compared to Q1 2019. This increased efficiency is the result of the Company’s focus in FY 2019 on prioritized sustainable growth and cost and expense management. 

Gross Margin & Gross Profit on Net Cannabis Revenue

Gross profit before fair value adjustments for cannabis net revenue was $3.9 million in Q4 2019, an increase of 135% over the previous quarter. Gross margin for Q4 2019 was 80%, compared to 43% in Q3 2019. The increases were primarily due to improved gross margins in the medical cannabis and bulk wholesale cannabis markets. Gross margin by market type in Q4 2019 was:

• Medical cannabis: 68%
• Adult-use cannabis: 39%
• Wholesale bulk cannabis: 97%

Adjusted EBITDA

The Company has reported its first positive quarterly adjusted EBITDA of $0.2 million, compared to a loss of $2.5 million in the previous quarter. A disciplined cost structure coupled with significant revenue growth in each quarter during FY 2019, has yielded substantial, sequential adjusted EBITDA improvements. The increase in adjusted EBITDA was primarily due to significant increases in cannabis gross profit along with concurrent reductions in expenses.

Selected Balance Sheet Information

Key Events During the Reporting Period

• Completion of Paris Facility Phase II Expansion

  On October 4, 2019 the Company secured full site occupancy for its Paris Facility Phase II expansion. The Paris Facility, including the expansion, represents a footprint of 30,000 sq. ft. dedicated to the extraction, production, packaging and distribution of high-margin, value-added cannabis health and wellness products. The Company has submitted to Health Canada the final site evidence package demonstrating the expansion’s operational readiness. The application is currently under review by Health Canada.

• Outdoor Harvest

  On November 11, 2019, the Company completed an inaugural outdoor grow harvest at its Port Perry Facility and Aleafia Health announced that it yielded approximately 10,300 kgs of dried flower, at an all-in cash cost per gram to harvest of $0.10. At the time of the announcement, the Company had used conservative estimates to attain the 10,300 kg yield figure. Following completion of drying and curing, the final weight of the harvest was taken, and the actual outdoor yield was 12,747 kgs of dried cannabis flower.

  The expansion of the Port Perry facility’s outdoor cultivation site seeks to add an additional 60 acres of cultivation area, for a total 86 acres.  The licence amendment application and requisite site evidence package has been submitted to Health Canada and the application is currently under review.

• Paris Facility Approval for Cannabis 2.0 Formats

  On November 14, 2019, Aleafia Health announced that its wholly owned subsidiary, Emblem Cannabis Corporation (“Emblem”), had secured two Health Canada licence amendments that authorize expanded processing capacity, allowing for the sale of new product formats at the Paris Facility. As a result of the licence amendments, the Company is now authorized to produce and sell new product formats including edibles and topicals and has adequate, licensed production space to do so.

• LP-to-LP Transaction

  On November 29, 2019, Emblem entered into a Cannabis Material Purchase Agreement with a certain Canadian Licensed Producer (the “LP”) whereby Emblem will supply 2,840 kgs of cannabis flower to the LP at a price of $2.50 per gram. Shipments of 1,122 kgs were completed during Q4 2019. The remaining shipments were completed subsequent to the reporting period.

• FoliEdge Academy Courses

  On December 10, 2019, the Company announced that FoliEdge Academy had entered into a definitive Educational Products Distribution Agreement with Seneca College to develop and deliver new courses and programs focused on aspects of the cannabis industry in Canada. A range of courses currently underway are publicly available through Seneca College.

Key Events Subsequent to the Reporting Period

• Cannabis-Infused Sublingual Strips

  On January 15, 2020, Emblem entered into a definitive licensing agreement with Kinstate Inc., to bring its award-winning, cannabis-infused sublingual strips brand and underlying technology to the Canadian market. The agreement provides the Company with the exclusive Canadian rights to manufacture, market and sell the Kin Slips brand, along with rights to use the associated proprietary formulations and manufacturing methodology.

• Niagara Facility Licence

  On March 13, 2020, Aleafia Farms secured a Health Canada Cultivation Licence for the Niagara Facility.  The Licence authorizes cannabis cultivation, propagation, harvesting and sales in Building 1, which includes 50,000 sq. ft. of greenhouse area and 20,000 sq. ft. for post-cultivation operations. These include drying, storage and shipping and support for outdoor cultivation.

• Changes to Lead Independent Director Appointments

  The Company previously announced that the role of the Lead Independent Director of Aleafia would rotate among independent Directors every six months as determined by a majority of the Company’s independent Directors. On March 17, 2020, the independent Directors unanimously resolved that in pursuit of leading corporate governance standards, the role will no longer rotate and Ms. Lea M. Ray will continue as the Lead Independent Director. Ms. Ray has served as the Lead Independent Director since October 2, 2019 and is currently also the Chair of the Audit Committee and a member of the Governance Committee.

CONFERENCE CALL & WEBCAST

Date:   March 18, 2020
Time:   8:30 a.m. EST
USA/Canada Toll-Free Participant Call-in: (866) 679-9046; Passcode: 7018919
International Toll-Free Participant Call-in: (409) 217-8323; Passcode: 7018919

WEBCAST LINK

This conference call will be webcast live over the internet and can be accessed through the link provided.  Audio of the call will be available to participants through both the conference call line and webcast; however, the presentation may only be viewed via the webcast. Participants who miss the live call can view a replay at any time via the link provided.

For Investor & Media Relations:

Nicholas Bergamini, VP Investor Relations
1-833-TSX-ALEF (879-2533)
[email protected]
LEARN MORE: www.AleafiaHealth.com

About Aleafia Health:

Aleafia Health is an industry leading, vertically integrated and federally licensed Canadian cannabis company offering cannabis health and wellness services and products in Canada and in international markets. The Company operates medical clinics, education centres and production facilities for the production and sale of cannabis.

Aleafia Health owns three significant licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history. The Company produces a diverse portfolio of commercially proven, high-margin derivative products including oils, capsules and sprays. Aleafia Health operates the largest national network of medical cannabis clinics and education centres staffed by MDs, nurse practitioners and educators and operates internationally in three continents.

Innovation, the heart of Aleafia Health’s competitive advantage, has led to the Company maintaining a medical cannabis dataset with over 10 million data points to inform proprietary illness-specific product development and its highly differentiated education platform FoliEdge Academy. The Company is committed to creating sustainable shareholder value; the TSX Venture Exchange named Aleafia the 2019 top performing company prior to its graduation to the TSX.

Forward Looking Information 

This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “estimates”, “intends”, “anticipates” or “does not anticipate”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/2434f3d9-1f8a-43fb-a235-c239090b8b11

The photo is also available at Newscom, www.newscom.com, and via AP PhotoExpress.

Aleafia Health Year-end Results

2019 year-end results for Aleafia Health.