Gage Growth Corp. (“Gage” or the “Company”) (CSE: GAGE) (OTCQX: GAEGF), a leading high-quality cannabis premium brand and operator in Michigan, today reported its record financial results for the three and nine months ended September 30, 2021. All currency references used in this press release are in U.S. dollars unless otherwise noted.

Financial Highlights for the quarter ended September 30, 2021

(in millions of US Dollars)

Q3-2021

Q2-2021

Revenue

$27.2

$26.4

Gross Profit

$9.9

$9.0

Gross Margin %

36.5%

34.2%

Adjusted EBITDA

($1.8)

($2.0)

Net Loss

($3.4)

($9.4)

Cash, End of Period

$17.7

$32.8

Pro Forma Cash1

$72.3

N/A

See “Non-IFRS Financial Measures” below for more information regarding Gage’s use of Non-IFRS financial measures and other reconciliations.

1. Represents cash and cash equivalents at the end of Q3 2021, including the gross proceeds from the recently closed $55 million senior secured debt financing.

Revenue increased to a record of $27.2 million in the third quarter of 2021, as compared to $26.4 million in the second quarter of 2021, a 3.2% increase. Gross margin, before impact of biological asset adjustments, was 36.5% in the third quarter of 2021 compared to 34.2% in the second quarter of 2021. The 230 basis point improvement quarter over quarter in gross margin to 36.5% is due to a greater mix of higher margin sales from retail locations and cultivation capacity expansion via Gage operated cultivation assets, contract grow partners and lower input costs from dedicated wholesale partners. The Company anticipates continuing its quarter over quarter margin expansion in Q4 2021 as in-house branded vape cart sales have recently accounted for over 80% of the category month-to-date in November.

Management Commentary

“In the third quarter of 2021, Gage had a record performance across all financial and operating metrics,” said Fabian Monaco, CEO of Gage. “We will continue to invest while improving our margins. Moreover, as we further introduce our in-house branded concentrate products, we expect our gross margin to further improve over the next two quarters.”

Mr. Monaco continued, “We are very pleased with the announcement of the proposed acquisition of Gage by TerrAscend. Our shared strategic and corporate values make this combination a strong fit, and I am extremely excited and looking forward to executing on our shared strategy of deep vertical integration and scale in our core markets. In addition, I am also very pleased with the closing of our recent debt financing which further strengthens our balance sheet.”

Mr. Monaco concluded, “Overall, we will continue to execute on our growth strategy in the remaining months of 2021 and into 2022. With a strong balance sheet, we are well positioned to execute on our near-term acquisition opportunities that will fuel the overall growth of the Company.”

Operational Updates and Developments

     1. The Company closed on a senior secured term loan (the “Term Loan”) for aggregate
          gross proceeds of US$55 million

  • Gage intends to use the proceeds (i) to finance the Company’s retail acquisition strategy in Michigan, (ii) to support the Company’s future growth, and (iii) for general working capital purposes.
  • The Term Loan bears interest at a per annum rate equal to the greater of 7.00% plus prime rate and 10.25%, payable monthly in arrears, with a maturity date of November 30, 2022.

     2. Gage continues to execute on its retail expansion strategy

  • In addition to 10 retail dispensaries in operation today, the Company is in active discussions with multiple retail operators in Michigan to potentially acquire over 10 retail locations in the coming months.
  • The Company successfully acquired another dispensary located in Detroit. Moreover, Gage expects to close another proposed acquisition of a dispensary in Sturgis by the end of November. Both dispensaries are expected to be rebranded as Gage and Cookies stores, respectively. The Company now has 17 dispensaries in its portfolio with the inclusion of the Sturgis acquisition.
  • The Company’s second Kalamazoo dispensary is now fully built and expected to open in December.

3. Introduction of Gage branded concentrate products

  • During the fourth quarter, the Company introduced in-house branded vape carts, which on average, are expected to more than double the Company’s gross margin in this product category.
  • Gage branded vape carts in the month of November thus far account for almost 80% of the category compared to a low single digit percentage in the same period a year ago.
  • In the month of November, the Company has been averaging approximately 18,000 Gage vape carts sold per week.

     4. Acquisition of Gage by TerrAscend on track to close in early 2022

  • On November 12, 2021, the Company announced that shareholders voted in favor of the special resolution, approving the previously announced plan of arrangement under Section 192 of the Canada Business Corporations Act pursuant to which TerrAscend Corp. (“TerrAscend”) will acquire all of the issued and outstanding securities of Gage (the “Arrangement”).
  • On November 15, 2021, the Company announced that the Ontario Superior Court of Justice (Commercial List) has issued a final order approving the Arrangement.

Conference Call

The Company will host a conference call on Monday, November 29, 2021 at 8:30 a.m. ET to review its operational and financial results, and provide an update on current business trends.

To join the call, dial 1-833-366-1123 toll free from the United States or Canada or 1-412-317-5786 if dialing from outside those countries.

The call will be available for replay until Monday, December 13, 2021. To access the telephone replay, dial 1-877-344-7529 toll free from the United States, 1-855-669-9658 from Canada or 1-412-317-0088 if dialing from outside those countries, and use the following replay pin number: 2622301.

Please call the conference telephone number 5-10 minutes prior to the start time.

A live audio webcast of the call will also be available at https://services.choruscall.com/mediaframe/webcast.html?webcastid=PMJIguj7.