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MedMen Reports Q4 and Fiscal Year 2019 Results

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LOS ANGELES — MedMen Enterprises Inc. today released its consolidated financial results for fourth quarter and fiscal year ended June 29, 2019.

The company addressed the relationship with the City of West Hollywood, stating that the “City Council of West Hollywood passed an ordinance to extend the Company’s temporary recreational retail license until January 1, 2021, unless otherwise determined. MedMen continues to work with West Hollywood City Council and various community groups on a long-term resolution.”

Systemwide revenue across MedMen’s operations in California, Nevada, New York, Illinois and Arizona increased to $42.0 million for the fourth quarter, up 15% sequentially and 104% year-over-year. Gross margins across retail operations were 50% in the fourth quarter compared to 53% in the prior quarter. The decline in gross margins was related to new store openings, which initially have lower gross margins.

Company reported an Adjusted EBITDA loss of $39.4 million for the fourth quarter, representing an 7% improvement from the previous quarter.

“Fiscal 2019 was a transformative year for MedMen, with over two million completed retail transactions to date and revenues increasing 227% year-over-year,” said Adam Bierman, MedMen co-founder and chief executive officer. “Our success was due, largely in part, to our loyal customer base. Throughout the year, we served over one million customers from all 50 states and more than 100 countries. In California, the largest cannabis market in the world, MedMen surpassed a record $110 million in annualized run-rate retail revenue.”

Mr. Bierman continued, “While industry tailwinds propelled us forward over the past twelve months, changing macroeconomic conditions have led us to refocus our strategy, to reevaluate our assets and to determine where it makes most sense to allocate capital going forward. As we progress into the next fiscal year, our go-forward strategy will therefore focus on three key objectives: optimizing our current retail assets, unlocking the further potential of our factories, and leveraging our omnichannel strategy. As we bring all of our factories online and up to full capacity, and simultaneously optimize our current retail assets across our core geographic markets, we continue on our path toward profitability.”

California retail revenue totaled $27.5 million for the fourth quarter. MedMen increased its total California retail license count to 17. Of these 17 retail licenses, 13 are operational as MedMen stores. The Company was also recently awarded a commercial retail license in Pasadena, California. MedMen expects to have a total of 30 operating retail locations in California by the end of calendar year 2020.

In Southern California, following the close of a previously announced acquisition, MedMen added a flagship retail location in Long Beach situated strategically between its Santa Ana and LAX stores. The Company also opened a second San Diego retail location.

MedMen continued to expand its Northern California retail footprint announcing plans to open a retail store in the city of Vallejo upon completion of a pending acquisition of a retail and distribution license.

For the 2019 fiscal year, systemwide revenue increased to $130 million, up 227% from 2018. Gross profit for fiscal 2019, before biological asset adjustment, was $56.5 million, as compared to $13.1 million in the previous year. Gross profit margin after biological asset adjustment was 47%, compared to 35% in the previous fiscal year.

MedMen reported an Adjusted EBITDA loss of $172.0 million for fiscal 2019, compared to an Adjusted EBITDA loss of $50.7 million in the previous year. Net loss was $277.0 million, with net loss attributable to shareholders of MedMen Enterprises $79.1 million or loss of $0.75 per basic and diluted share attributable to MedMen Enterprises shareholders for fiscal 2019, compared to a net loss of $113.9 million, with net loss attribute to shareholders of MedMen Enterprises $68.3 million or loss of $1.69 per basic and diluted share, for fiscal 2018.

On October 8, 2019, the MedMen announced the termination of its merger with PharmaCann. The cannabis sector evolved significantly from the initial announcement of the transaction and, with the current macro-environment and future strategic opportunities which exist for the Company, it became clear it was in the best interest of shareholders to terminate the deal. As part of the agreement to terminate, MedMen will forgive $21.0 million owed by PharmaCann under an existing line of credit, and PharmaCann agreed to pay a termination fee to MedMen through a transfer of the membership interest in three entities holding the following four assets: 1) an operational cultivation and production facility in Hillcrest, Illinois, 2) a retail location in Evanston, Illinois, 3) a retail license for Greater Chicago, Illinois, and 4) a license for a vertically integrated facility in Virginia.

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