• Total revenue for the three and nine months ended September 30, 2018
    increased 62% and 92%, respectively from prior year.


  • Total revenue for Q3 2018 increased 6% compared to Q2 2018.


  • The Company continues to operate profitably; Adjusted EBITDA for the
    nine months ended September 30, 2018 was $7.6 million (all dollars are
    in U.S. dollars, except where noted).


  • In 2018, successfully raised almost $290 million of funds, as follows:
    approximately $50 million in convertible debentures, approximately $20
    million in senior debt, and approximately $218 million in a brokered
    private placement.

PHOENIX--(BUSINESS WIRE)--The Q3 2018 financial and operation results are for the reverse takeover

(“RTO”) acquirer of Harvest Health & Recreation, Inc., which is referred

to as the Harvest Enterprises Group of Companies (the “Company” or

“Harvest”). Harvest is one of the largest multi-state vertically

integrated operators in the cannabis industry. The Harvest team brings

broad operational expertise in real estate, legislation, permitting,

zoning and retail sales. The Company has been successful in winning

licensure in non-competitive and competitive application processes

throughout the country, winning many licenses across the states in which

it operates or is expanding into. Harvest’s ability to navigate complex

regulatory pathways that are different in each state, as well as

extensive research into each market the Company enters, are key tenets

to its success. Harvest has won licenses in every state in which it has

applied, underscoring a high success rate.

Financial Highlights for the Third Quarter Ended September 30, 2018



  • Total revenue was $11.2 million, an increase of 62%, compared to $6.9
    million in Q3 2017.


  • Total revenue increased 6% compared to $10.5 million in Q2 2018.


  • Gross profit, excluding impact of biological assets, was $5.6 million,
    an increase of 61%, up from $3.5 million in Q3 2017.


  • Gross profit margin, excluding the impact of biological assets, was
    50% for Q3 2018 and Q3 2017.


  • Adjusted EBITDA1 gain was $3.2 million, compared to a loss
    of $0.04 million in Q3 2017.


  • Net loss was $0.5 million, including a $3.7 million of RTO and
    expansion related expenses.

Financial Highlights for the Nine Months Ended September 30, 2018



  • Total revenue for the nine months ended September 30, 2018 was $30.0
    million, an increase of 92%, compared to $15.6 million for the same
    period in 2017.


  • Gross profit, excluding the impact of biological assets, was $17.4
    million, an increase of 96% compared to $8.8 million for the nine
    months ended September 30, 2018.


  • Gross profit margin, excluding the impact of biological assets, was
    58% for the nine months ended September 30, 2018, compared to 57% in
    the same period the prior year.


  • Adjusted EBITDA1 gain totaled $7.6 million for the nine
    months ended September 30, 2018, compared to $3.8 million for the same
    period in 2017.


  • Net gain was $3.6 million for the nine months ended September 30,
    2018, including $4.8 million of RTO and expansion related expenses.

Year-to-Date Highlights

Capital Markets, Financing Activities and Growth Strategy



  • On November 13, 2018, Harvest raised $218,149,676 in a brokered
    private placement. The company has raised nearly $290 million this
    year: approximately $50 million of convertible debentures, which
    converted into common stock when Harvest completed its RTO,
    approximately $20 million of senior debt, and approximately $218
    million of equity issuances. The Company plans to use this cash to:



    • Continue to expand its commercial footprint focusing on building
      additional retail, cultivation, and production locations for
      medical and adult use cannabis.


    • Apply for new licenses and successfully receive them in an
      extremely competitive market, further establishing management’s
      credibility through a consistent track record of complying with
      the industry’s stringent regulations.


    • Make selective acquisitions of facilities and brands.




  • On November 14, 2018, the Company completed the RTO and listed on the
    Canadian Securities Exchange. Harvest now trades under the ticker
    symbol “HARV”.

Acquisition Activity



  • In November, acquired San Felasco Nurseries, Inc. (“San Felasco”), a
    holder of a medical marijuana license and authorized to operate as a
    Medical Marijuana Treatment Center in the state of Florida. Each
    Medical Marijuana Treatment Center is allowed to operate up to 25
    dispensaries, as well as a cultivation and production facility in the
    State of Florida.


  • In November, acquired CBx Enterprises LLC, a Colorado intellectual
    property company (“CBx”). CBx has entered into a licensing agreement
    with two Colorado cannabis licensed businesses, THChocolate, LLC and
    Evolutionary Holdings, LLC (collectively, “EvoLab”). EvoLab owns and
    operates a Colorado medical and adult-use cannabis operation with a
    medical and retail processing facility located in Denver, Colorado.

Retail Footprint Expansion



  • As of September 30, 2018, the Company operated nine retail locations
    in two states. Significant expansion of cultivation, manufacturing and
    retails locations will occur in the 4th quarter and
    throughout 2019.

Balance Sheet and Liquidity

As of September 30, 2018, the Company had $28 million of cash and cash

equivalents.

The company has raised nearly $290 million this year: approximately $50

million of convertible debentures, which converted into common stock

when Harvest completed the RTO, approximately $20 million of senior

debt, and over $218 million of equity issuances.

In the third quarter of this year, the Company issued approximately $50

million of convertible debentures. These debentures converted into

common stock upon close of the RTO on November 14, 2018.

On November 14, 2018, the Company received gross proceeds of over $218

million from the completion of its brokered private placement.

In conjunction with the RTO, Harvest has entered into a Letter Credit

Agreement to borrow $20 million for a period of three years at an

interest rate that is equal to Bank of Nova Scotia Prime plus 10.3% per

annum.

Notes:

(1) See "Non-IFRS Financial and Performance Measures" below for more

information regarding Harvest's use of Non-IFRS financial measures.

About Harvest Health & Recreation, Inc.

Harvest Health & Recreation, Inc. is one of the first consistently

profitable, vertically integrated cannabis companies with one of the

largest footprints in the U.S. Harvest’s complete vertical solution

includes industry-leading cultivation, manufacturing, and retail

facilities, construction, real estate, technology and operational

expertise — leveraging in-house legal, HR and marketing teams, along

with proven experts in writing and winning state-based applications. The

company has 425 employees with proven experience, expertise and

knowledge of in-house best practices that are drawn upon whenever

Harvest enters new markets. Harvest’s executive team is comprised of

leaders in finance, compliance, real estate and operations. Since its

founding in 2011, Harvest has grown its footprint every year and now has

licenses in 11 states, with planned expansion into additional states by

2020. Harvest shares timely updates and releases as part of its regular

course of business with the media and the interested public. For more

information, visit: https://www.harvestinc.com/.

Non-IFRS Financial and Performance Measures

In this press release, Harvest refers to certain non-IFRS financial

measures such as Adjusted EBITDA, being Earnings Before Interest, Taxes,

Depreciation and Amortization (EBITDA) 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 to similar measures

presented by other issuers.

Adjusted EBITDA gain for the three-month period of $3.2 million is

calculated as the Company's income from operations of $1.8 million, plus

depreciation and amortization of $0.3 million, and RTO of $1.1 million.

For the nine-month period, adjusted EBITDA gain of $7.6 million is

calculated as the Company's income from operations of $5.1 million, plus

depreciation and amortization of $1.1 million, and RTO of $1.4 million.

Forward Looking Information

Certain statements in this press release are forward-looking statements

and are prospective in nature. Forward-looking statements are not based

on historical facts, but rather on current expectations and projections

about future events, many of which, by their nature, are inherently

uncertain and outside of the Company's control and are therefore subject

to risks and uncertainties which could cause actual results to differ

materially from the future results expressed or implied by the

forward-looking statements. These statements generally can be identified

by the use of forward-looking words such as "may", "should", "will",

"could", "intend", "estimate", "plan", "anticipate", "expect", "believe"

or "continue", or the negative thereof or similar variations.

Forward-looking statements in this news release include, but are not

limited to, information concerning the ability of the Company to

successfully achieve business objectives, and expectations for other

economic, business, and/or competitive factors. Those assumptions and

factors are based on information currently available to the Company.

Although management of the Company has attempted to identify important

factors that could cause actual results to differ materially from those

contained in forward-looking statements or forward-looking information,

there may be other factors that cause results not to be as anticipated,

estimated or intended. Among the key factors that could cause actual

results to differ materially from those projected in the forward-looking

information and statements are the following: the ability of the Company

to develop the Company's brand and meet its growth objectives, the

ability of the Company to complete acquisitions that are accretive to

the Company's revenue, the ability of the Company to obtain and/or

maintain licenses to operate in the jurisdictions in which it operates

or in which it expects or plans to operate. Should one or more of these

risks, uncertainties or other factors materialize, or should assumptions

underlying the forward-looking information or statements prove

incorrect, actual results may vary materially from those described

herein as intended, planned, anticipated, believed, estimated or

expected. There can be no assurance that such statements will prove to

be accurate, as actual results and future events could differ materially

from those anticipated in such statements. Readers should not place

undue reliance on forward-looking statements and forward-looking

information. The forward-looking information contained in this release

is made as of the date hereof and the Company assumes no obligation to

update or revise any forward-looking statements or forward-looking

information that are incorporated by reference herein, whether as a

result of new information, future events or otherwise, except as

required by applicable securities laws. The foregoing statements

expressly qualify any forward-looking information contained herein. All

subsequent written and oral forward-looking information and statements

attributable to the Company or persons acting on its behalf is expressly

qualified in its entirety by this notice.


 


Harvest Enterprises Group of Companies (RTO Acquirer of Harvest
Health & Recreation, Inc.)



Unaudited Interim Condensed Combined Statements of Financial Position

(Expressed in United States Dollars)

 


 

 

 


September 30, 2018



 

 

 


December 31, 2017




ASSETS












Current Assets:












Cash and Cash Equivalents







$




28,174,806







$




1,098,763




Accounts Receivable








1,159,165








497,379




Biological Assets








6,504,822








4,441,785




Inventory








4,921,422








1,340,694




Notes Receivable, Current Portion








300,860








--




Other Current Assets






 


545,274






 


312,746




Total Current Assets








41,606,349








7,691,367




Notes Receivable, Net of Current Portion








1,131,770








--




Property, Plant and Equipment, Net








22,640,322








21,397,450




Intangibles Assets, Net








40,417,110








30,869,714




Corporate Investments








5,000,000








--




Acquisition Deposits








3,488,000








--




Goodwill








4,675,619








4,675,619




Other Assets






 


765,037






 


430,116




TOTAL ASSETS







$




119,724,207







$




65,064,266











 


LIABILITIES AND MEMBERS' EQUITY







 








LIABILITIES







 








Current Liabilities:







 








Accounts Payable







$




3,271,974







$




1,344,745




Other Current Liabilities








1,005,561








497,496




Income Tax Payable








5,423,794








3,796,367




Notes Payable, Current Portion






 


3,104,544






 


2,909,837




Total Current Liabilities








12,805,873








8,548,445




Notes Payable, Net of Current Portion








56,335,544








13,795,275




Deferred Tax Liability








552,200








552,200




Deferred Compensation








859,625








859,625




Other Long-Term Liabilities






 


305,263






 


336,842




TOTAL LIABILITIES








70,858,505








24,092,387




MEMBERS' EQUITY








44,071,135








40,447,946




NON-CONTROLLING INTEREST






 


4,794,567






 


523,933




TOTAL MEMBERS' EQUITY






 


48,865,702






 


40,971,879




TOTAL LIABILITIES AND MEMBERS' EQUITY







$




119,724,207







$




65,064,266













 



 

 

 


 

 

 


 

 

 


 

 

 



Harvest Enterprises Group of Companies




Unaudited Interim Condensed Combined Statements of Operations




(Expressed in United States Dollars)



















 






Three Months Ended







Nine Months Ended








September 30,







September 30,








2018







2017







2018







2017







 

Revenue




$

11,153,726





$

6,881,604





$

30,012,392





$

15,615,722


Cost of Goods Sold




 

(5,565,725

)




 

(3,420,651

)




 

(12,642,080

)




 

(6,774,484

)

Gross Profit Before Biological Asset Adjustments




 

5,588,001

 




 

3,460,953

 




 

17,370,312

 




 

8,841,238

 

Unrealized Gain on Changes in Fair Value of Biological Asset





5,690,989






885,082






5,690,989






885,082


Cost of Goods Sold on Biological Asset Transformation




 

(2,132,896

)




 

(1,190,162

)




 

(3,558,987

)




 

(111,242

)

Gross Profit




 

9,146,094

 




 

3,155,873

 




 

19,502,314

 




 

9,615,078

 





 


Expenses



















General and Administrative





6,571,065






3,006,126






12,357,167






5,447,133


Sales and Marketing





485,915






189,415






922,972






410,693


Depreciation and Amortization




 

341,773

 




 

143,910

 




 

1,077,855

 




 

226,730

 


Total Expenses






 

7,398,753

 




 

3,339,451

 




 

14,357,994

 




 

6,084,556

 





 


Operating Income







1,747,342






(183,578

)





5,144,320






3,530,522






 


Other Income / (Expenses)



















Gain on Sale of Asset





34,684






--






1,560,953






--


Interest Expense




 

(486,645

)




 

16,113

 




 

(791,888

)




 

(96,372

)





 


Income Before Taxes and Non-Controlling Interest







1,295,380






(167,465

)





5,913,385






3,434,150






 

Income Taxes




 

(1,034,247

)




 

(872,047

)




 

(2,453,706

)




 

(1,646,370

)





 


Income Before Non-Controlling Interest







261,133






(1,039,512

)





3,459,679






1,787,780






 


Loss (Income) Attributed to Non-Controlling Interest






 

(714,137

)




 

265,511

 




 

163,510

 




 

534,884

 





 


Net Income (Loss) Attributed to Harvest Enterprises Group of
Companies







$




(453,004




)







$




(774,001




)







$




3,623,189




 







$




2,322,664




 







 

Reconciliation to Adjusted EBITDA

































 

Operating Income (Loss)





1,747,342






(183,578

)





5,144,320






3,530,522


Depreciation and Amortization





341,773






143,910






1,077,855






226,730


RTO Expenses




 

1,085,014

 




 

--

 




 

1,413,617

 




 

--

 


Adjusted EBITDA








3,174,129









(39,668




)








7,635,792









3,757,252




























 

Contacts

Powerplant Global Strategies

Alex Howe, Managing Director

(202)

271-7997