Phil Carlson - IR William Simpson - CEO Craig Eastwood - CFO

Thanks, Operator. Before we begin today I would like to remind everyone that during this conference call management will be making a statement that contains forward-looking information within the meeting of applicable securities legislation.

Forward-looking information includes but is not limited to statements with respect to the company's future business operations, expectations of gross sales, margin EBITDA, goals and targets and opinions or beliefs of management. Generally forward looking information can be identified by these forward-looking terminologies such as plans, expects or does not expect, is expected, budget scheduled, estimates, forecast, intends, anticipates or does not anticipate or beliefs or variations of such words and phrases restate that certain actions, events or results may, could, would, might or will be taken occur or be achieved.

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, the level of activity, performance or achievements of the company to be material different from those expressed or implied by such forward-looking information including but not limited to general generate business, economic and competitive uncertainties. Regulatory risks including risks related to the expected timing of the company's participation in the adult use market risks, risks inherent in manufacturing operations and other risks of the cannabis industry including regulatory risk.

Although the company has attempted to identify important factors that could cause actual results and outcomes to differ materially from those contained in forward-looking information there may be other factors that cause results not to be as anticipated, estimated or intended. Specific factors that could cause actual results and outcomes to vary materially from those anticipated by such forward-looking information include without limitation those factors discussed or referred to in the MD&A filed with the securities, regulatory authorities and available at www.sedar.com.

There can be no assurances that such information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly listeners should not place undue reliance on this forward-looking information.

Forward-looking information is provided here in for the purpose of presenting information about management's current expectations relating to the future and listeners are cautioned that such information may not be appropriate for other purposes. Forward-looking information is based on current estimates and opinions of management and is prepared as of the dates noted in the MD&A.

Factors and assumptions used to development material forward looking information are set out in the MD&A. The company does not undertake any obligation to update any forward-looking information except in accordance with applicable security laws.

This call does not constitute an offer of securities for sale in the United States and such securities may not be offered or sold in the United States absent registration or exemption from registration. During this call we may also present certain non-IFRS financial measure such as adjusted EBITDA, in our press release and in our own MD&A you will find our definition of adjusted EBITDA, our reconciliation of adjusted EBITDA to net income as well as the discussion about why we think adjusted EBITDA is relevant to investors.

These financial measures are included for the benefit of investors and should not be considered instead of IFRS measures. Please note that all dollar amounts discussed in today's call unless specifically stated otherwise are U.S.

dollars. With that I'd like to turn the call over to William Simpson, Golden Leaf Holdings Chief Executive Officer.

Thanks, Phil. Thanks to everyone who has joined the call today.

With me is Craig Eastwood, our Chief Financial Officer who will review our financial results for the second quarter of 2018. At the conclusion of our prepared remarks we will address a few questions most frequently raised by our investors.

During the second quarter of 2018, Golden Leaf made tremendous progress executing on our sales strategy in Oregon and building out our infrastructure to lay the framework for future growth both in markets where we currently operate as well as in new target markets. Revenues for the quarter reached a record $3.7 million and we also reported our second consecutive quarter of net profitability on a GAAP basis.

Furthermore, our last quarter included a number of operational milestones which I will be discussing in detail below. Including the opening of our Chalice Farm's location in Happy Valley, Oregon, the hiring of Ryan Purdy as Vice President of Operations and the introduction of new product lines into Nevada.

In the weeks after the quarter we continue to execute upon our M&A strategy by signing two definitive agreements, one to acquire Tahoe Hydroponics and the other to acquire Combined Cultivation Production and Retail Licenses in San Jose, California. Tahoe Hydroponics is one of Nevada's most recognized cultivation businesses which also have a 28,800 square foot cultivation facility under development in Sacramento, California.

Upon closing these acquisitions will allow us to expand our operations significantly in Nevada and also allow us an entry into the California market. Before going into further detail about building our infrastructure I would like to quickly touch on the progress we have made expanding our personnel.

We added a new member to our leadership team, Ryan Purdy. Ryan was hired as a Vice President where he now leads the overall supply chain strategy and execution as discussed in our last earnings call.

Since the end of the quarter we have also added Michael Crook and John Varghese to our Board of Directors. Michael holds a PhD in Management from Claremont Graduate University and is a professor in leadership in advance strategy and an independent consultant providing insight to high growth businesses on strategic issues.

This former experience includes President and CEO of Patagonia from 1999 to 2005 during which the company achieved significant growth. Rick Miller who was appointed to the Board in April was appointed Chairman of the Board.

Rick is a serial entrepreneur, philanthropist and is the co-founder of Rogue Venture Partners as well as the Chairman and Founder of Avamere Group, a group of companies focused on enhanced retirement living. In addition Rick serves on the Board of several prominent companies, the unique background skill sets of each new member will provide critical advisory to the company's leadership going forward and supports our commitment to improve corporate governance.

The growth of our Chalice Farm's retail presence remains a core driver of the company's near and long term success. In the second quarter product sales revenue increased 76% year over year due primarily to our acquisition of the Chalice Farm's network of retail stores.

Sales at our stores that opened prior to the quarter including our location in Downtown Portland that has been open since December has seen strong sales revenue. Our most recent Chalice Farm's location which opened in Happy Valley, Oregon in May has quickly become our second highest grossing location and is on track to have a $2.5 million annualized revenue run rate.

We are pleased with the execution and success of our retail expansion strategy in Oregon which is demonstrating strong results even in a saturated market. Moreover since we last spoke to you on our first quarter conference call the Oregon Liquor Control Commission has stopped issuing more licenses and a move to clear a backlog of applications in a crowded industry.

This has strengthened our competitive position and we are expecting the market will now start to stabilize. With our existing footprint as well as our capacity to continue to expand we believe we are well positioned to capitalize on the unique market dynamics at play.

We expect retail sales to remain strong throughout 2018 driven by growing sales in existing stores as well as by new stores that are brought online. The expertise we have developed with Oregon Retail will serve us well as we expand our retail footprint in Nevada and California.

Now moving on to our progress expanding our manufacturing and cultivation capacity in Oregon. On the manufacturing front we secured regulatory approval from the State of Oregon for a license for our new state of the art extraction facility in late July.

This was followed by the regulatory license from the City of Portland earlier this month. Securing the city license was the final regulatory approval in an arduous process and now that we have all the necessary approvals in hand our production team on the ground has immediately began operating extraction equipment.

Our professional estimates for production capacity are strong and we expect to receive production data in-line with those projections. Our Portland oil extraction license and investment class facility enable us to fully capitalize on the market opportunities.

Considering that our margins in the first and second quarter of 2018 were pressured by the necessary utilization of third party processors for oil and distillate production we are confident that the operation of our Portland Extraction facility will improve our profit margins in Oregon going forward and contribute to greater financial stability at the company as we ramp up the use of our own equipment. Finally the commissioning of our Bald Peak cultivation facility is expected before the end of 2018, we will update you on our next earnings call with our progress there.

Near the end of the first quarter we announced a key strategic initiative with the formation of our Chalice Farm's retail franchise model. The company is in final stages of completing, the disclosure documentation that will allow the company to franchise to anyone in the United States and we are looking at several potential partners.

On our last call we mentioned we have signed a Letter of Intent to collaborate with BlackShire Capital to open franchises in both Canada and the U.S. After negotiating with BlackShire with a goal of reaching a definitive agreement we were unable to find mutually agreeable terms that we believe were in the best interests of shareholders and so BlackShire will not be one of the partners that we will be using going forward.

We continue to evaluate the leverage that franchising will bring to extend our Chalice Farm's brand as well as the strength and capability of the potential partners who are interested in working with us. As an integral part of our commercial strategy we continue to develop and market a variety of products considered to be best of breed.

In the first quarter of 2018 we introduced [indiscernible] Oregon, which resulted in strong sales demand in the second quarter. Due to the overwhelming market demand we are going to proactively develop edible products for all our markets.

We are confident in our ability to scale production while ensuring consistency especially considering our expertise in producing high quality [indiscernible] and infusing these ingredients into our products at precise dosages. We are pleased with the success of the fruit chews and plan to launch at Nevada in the third or fourth quarter of this year.

In Nevada we continue to focus on footprint expansion as well as an expanded product offering as the market continues to grow, in addition to Tahoe acquisition we hope to close on in the coming months where one small cultivation of production facility operated by our wholly owned subsidiary Greenpoint Nevada where we focus on cultivating [indiscernible] strains and where we produce our edibles and extracts for the Nevada market. Through Greenpoint Nevada we introduced several new concentrate products in July.

Greenpoint's product launches include Golden Tinchers which are featured in orange, cherry, mint and strawberry flavors and Golden Private Stash distillate vape cartridges. We also introduced Golden CBD product lines using our best in class cold ethanol extraction process and proprietary blends of strain-specific terpenes.

We continue to selectively invest in cultivation and production opportunities that we believe will drive wholesale revenues in our current and target markets. We remain committed to harvesting only highly desirable boutique strains with priority given to our Chalice Farm stores as a sales channel and secondarily through third party stores.

In August we signed a definitive agreement to acquire Tahoe Hydroponics company, one of the first cultivators in the State of Nevada with years of experience. The business is built upon significant cultivation capabilities and an extensive distribution network including the reach within California.

Our acquisition of Tahoe further highlights our continued dedication to strategic acquisitions of value added cannabis companies that provide a highly specific benefit. Tahoe provide us with upstream operations in Nevada and immediate wide region distribution network and immediate exposure to the California market.

Most importantly it is expected to be immediately accretive Tahoe is adjusted EBITDA positive and had a record month in June 2018. Its unaudited annualized run rate revenue was $10.4 million for the month of June 2018 nearly as high as Golden Leaf's total revenues for physical year 2017.

The Tahoe acquisition redefines the company as a significantly larger multi-jurisdictional player. In Nevada Tahoe currently utilizes an almost 22,000 square foot production facility in Carson City that is capable of producing approximately 4000 pounds per annum.

As we have previously been forced to purchase wholesale flower to manufacture oils and edibles in Nevada this now provides us the opportunity to capture the incremental cultivation margin that we have previously been unable to realize. In-line with our strategy of building a vertically integrated company.

Tahoe allows us to now extend our seed to store value chain throughout Nevada. Tahoe has built an extensive distribution network that penetrates 56% of adult use dispensaries in the State of Nevada providing the channel to increase sales of Golden Leaf branded product.

In addition to the opportunity to facilitate production and distribution in Nevada, our acquisition of Tahoe also establishes an immediate presence in California with a roughly 29,000 square foot facility under development in Sacramento. With a total capacity of 9200 pounds per annum production of this facility is anticipated to begin in the first quarter of 2019 further expanding our seed to sale vision within the State of California.

Tahoe has a strong brand following in Nevada and we expect the product will be well received in California as well. We expect to see meaningful revenue growth looking forward and we are very excited of the positive momentum for the business.

Also in California we signed a definitive agreement to acquire a combined cultivation, production and retail license in the City of San Jose Northern California dubbed a sweet 16 license [ph] which is one of only 16 licenses of its kind that allows the holder to operate in a vertically integrated fashion. Adding the single multi-faceted license is expected to rapidly accelerate our entry into California the 5th largest economy in the world.

Once we have closed on this license we plan to lease the seller's facility to produce and distribute our branded products to third party dispensaries and other wholesale channels in the State of California. We are excited to launch our successful proven brands like Golden Private Stash Distillate and Golden Fruit Chews in California on a large scale should once the acquisition is closed.

We will also retrofit this section of the facility that currently operates in the retail outlet into another branded Chalice Farm store. We believe that we have a strong platform to support growth and that by making small incremental investments to these acquisitions such as rebranding the retail location into a Chalice Retail store and producing our wholesale products which have a proven track record, we can rapidly catapult the company to achieve significant growth.

Lastly, in Canada we are preparing for the launch of the adult use market in the second half of 2018. In the first quarter of 2018 we commenced cultivation activities and in early July harvested the first crops from our state of the art grow facility in Ontario.

The harvested crops had yields that were 30% greater than that was originally forecasted bearing yields from some of the most prominent cannabis companies operating in Canada. As we have already secured buyers to take delivery of the finished product we expect the transaction to contribute to our revenue cash flow in the third quarter of 2018.

The buyers will take delivery once we receive the final sales license from Health Canada. Once the adult use market goes live in Canada, the Ontario facility will commence a build-out of processing capabilities for oils and edibles both for the Canadian market as well as export.

The past few weeks have been crucial to our development both in terms of allowing us to pave the way for growth in our wholesale strategy and demonstrating the strength of our retail operations in Portland. We have achieved many of the goals we set out on our last earnings call and are pleased to have made so much progress in such a condensed timeframe.

To recap the proposed acquisition of Tahoe gives us much stronger foothold in Nevada and will enable us to ramp cultivation and production activities to achieve a scale that was previously out of our reach. We have also just entered the California market for the first time through the proposed acquisition of Tahoe.

This is a major milestone that was followed by the signing of a definitive agreement to acquire a sweet 16 license in San Jose which would rapidly catapult us into a major player in California. In Portland we have secured the necessary approvals for our new extraction facility and commence production of our oils and concentrates internally which we believe will drive improved margins.

As a reminder our blended targeted average rate is in the high 30% range. Looking ahead we plan to steadily increase production volumes at this facility over the remainder of 2018.

In Canada we reaped our first harvest with better than expected yields and are progressing towards securing our sales license. Some of our crops are already pre-sold and sold upon securing our sales license we will turn the harvested flower into revenues from this location.

With these remarks now complete I'd like to turn the call over to Craig Eastwood, our CFO to review the quarterly financials.

Thanks, William. For the quarter ended June 30, 2018 revenues totaled $3.7 million, an increase of $1.6 million compared to the second quarter of 2017.

The increase in revenue is primarily attributable to the addition of the Chalice Farm's retail revenue stream, the addition of medical consulting revenues and wholesale operations in Nevada offset by declines in wholesale revenues in Oregon. Gross profit was $940,000 for the quarter ended June 30, 2018 representing a gross margin of approximately 26% up from 19% compared with the second quarter of 2017.

Until recently, margins have been pressured by our utilization of third party processes on the products we produced which we expect to improve now that we have the approval to operate our Portland extraction facility. Operating expenses were $4.6 million for the quarter ended June 30, 2018 compared with approximately $2.7 million in the same period in 2017 which was largely driven by the addition of a Chalice Farm's retail business which incurs proportionally more operating expenses than the wholesale business unit which is operating during the second quarter of 2017.

Adjusted EBITDA loss was $3.2 million compared to the loss of $1.9 million for the same period in the prior year primarily as a result of increased wages expense within G&A. Adjusted EBITDA is defined by the company as earnings before taxes depreciation and amortization less certain non-cash equity compensation expense including impairments, onetime transaction fees and all other non-cash item.

The company considers adjusted EBITDA as an important measure for the company to show the true day to day operational picture of the business. For the quarter ended June 30, 2018 the company posted net income of $3.2 million compared to the loss of $1.7 million for the quarter ended June 30, 2017.

Net income benefited from gains reported related to the changes in fair market value of liabilities related to its warrants and debt liabilities which are driven largely by fluctuations in stock price from period to period and can result in large gains and losses depending on the magnitude of these changes. These numbers are primarily indicators of implied dilutive effects resulting in the opportunity cost of shares exercisable by the holders of these instruments and not of operational performance of the company.

As of June 30, 2018 the company had $15.7 million of cash on hand this includes proceeds from the bought deal [ph] financing completed in the first quarter of 2018 and the exercise of warrants which we believe is adequate to cover near term operating needs. I'd like to turn the call back to William for some additional remarks.

Thank you, Craig. I'd like to express my appreciation for our loyal shareholders for the continued support as we work to achieve our goal of building Golden Leaf into a vertically integrated company that can capitalize on the dynamic and quickly evolving cannabis industry.

We continue to execute upon on our strategic growth plans driving cultivation, processing and production expansion as well the growing our recognized Chalice Farm's Retail footprint. We look forward to the continued growth of Golden Leaf.

I would now like to turn the call over to Phil Carlson, of KCSA Strategic Communications who will moderate the Q&A portion of the call.

Thanks, William. We appreciate those who have taken the time to reach out to us as the new management team has begun to implement the positive changes that we have presented throughout the call.

With that we want to address some of the most frequently asked questions from investors related to the company's strategy and operational progress. First question William, will Golden Leaf open Chalice Farms in Ontario?

So we're currently looking at multiple opportunities in the Ontario market including some franchise interest.

Great. Second question does Golden Leaf own any or are you working on unique atopic dermatitis beneficial processes and/or products?

The unique process of our fruit chews is an owned IP for Golden Leaf as well as the continued research development that we believe very much in as we go forward in producing new products for our markets.

How do you perceive the retail opportunity in California following the recently announced deals?

It's an extremely exciting opportunity for Golden Leaf. California is one of the most exciting marketplaces in cannabis, the United States the 5th largest economy in the world so opening a flagship Chalice Farms in a large marketplace like San Jose is a huge opportunity for the company from a branding perspective and for a foothold into that market.

We are looking at other areas of the California market for expansion as well.

When do you expect the sales license in Canada to come through?

Well we've passed all of the testing requirements from the cultivation perspective so it should be extremely soon you know sales -- the Health Canada sales license is something that we cannot push internally. We're in a holding process and waiting for the update on the website.

Great. And any progress towards securing retail licenses in Nevada?

Yes. So we've been working very hard in Nevada.

We're excited about that market as well. There's a cap on retail licensing so it will make it a very strong retail play for our company.

We currently have identified and have executed leases with options or contingent upon us getting licensing or purchase of sales agreements contingent upon us getting licensor on eight properties in the Nevada market. We plan on applying when the window opens here in September.

So we're very much looking forward to expand the retail experience and brand of Chalice Farms in Nevada to be supported by our recent acquisition of Tahoe Hydroponics to have the best premium flower on that shelf.

Great. Thanks, William that concludes the Q&A session.

I'll now turn the call back over to you for your closing remarks.

Thank you, Phil. We're very encouraged by the progress that we have made this far, executing upon our strategy that we are confident will set Golden Leaf up for successful in the near and long term.

As we continue to achieve impressive milestones we look forward to sharing our updates with you. We really appreciate all of our shareholders support.

Thank you so much.