GABY Announces Second Quarter 2019 Financial Results

SANTA ROSA, CALIFORNIA and CALGARY, ALBERTA / ACCESSWIRE / August 29, 2019 / Gabriella's Kitchen Inc. ("GABY" or the "Company") (CSE:GABY) (OTCQB:GABLF), a U.S.-focused CPG company operating in the regulated cannabis sector in California and the national mainstream grocery channel, today announced financial results for the three-month period ended June 30, 2019. GABY’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). All financial information presented in this release is in Canadian dollars ($), unless otherwise noted.

“When we announced our target on May 7, 2019 of $35 million in pro-forma revenue for the fiscal year, we took into account that Q2 would be a slower quarter due to the delayed closing of our $20 million raise, the company’s short-term decision to allocate available capital to maintain relationships and shelf space with dispensaries, and the transitioning from a shared distribution model in Southern California to a sole distribution model, staffed with our internal salespeople,” said Margot Micallef, Founder, and CEO of GABY. “On the back of our transition to a sole distributor model, we increased the number of California dispensaries we distribute to from 80 to 170 in the quarter. Backed by $20 million in additional capital received in June, we acquired a 25,000 sq. ft. state of the art production facility in Sonoma, and we successfully completed the integration of Sonoma Pacific into GABY, aligning its platform with CPG best practices from inventory management to brand development, grassroots marketing, analytics-based decision making and relationship management at the retail level. We believe that the with our statewide distribution network, our newly expanded procurement team, our third-party brands currently being distributed and our state-of-the-art production capabilities, GABY is well positioned to rapidly scale revenue in the 2^nd half of 2019 and into 2020.”

Ms. Micallef continued, “Our team has a proven track record of building and scaling national CPG brands and I am particularly excited by the addition of Lulu’s Chocolates to our brand portfolio. Edibles are one of the fastest growing subsegments of the cannabis market in California and Lulu’s fulfils a specific customer need that is currently underserved. Lulu’s Chocolates shares GABY’s commitment to natural products, health and wellness, and diverse THC & CBD as well as uninfused products offerings. Lulu’s space in the market dovetails perfectly with GABY’s approach to growing brands in both the California regulated and national mainstream channels.”

Financial Highlights for the Second Quarter Ended June 30, 2019

The following are financial highlights of Gaby’s operating results for the three months ended June 30, 2019 compared to the three months ended June 30, 2018:

• Revenue was $2.5 million as compared to $319,737
• Gross loss was $49,712 as compared to $264,607
• Operating expenses were $4.5 million as compared to $1.1 million

The following is a summary of key balance sheet items at June 30, 2019, compared to December 31, 2018:

• Cash was $11.5 million as compared to $53,658
• Total assets of $37.3 million as compared to $4.6 million
• Total working capital[1] of $10.5 million as compared to ($319,112)
• Total debt excluding lease obligations of $1.9 million as compared to nil.

Corporate Highlights

• On April 1, 2019, GABY closed the acquisition of Sonoma Pacific Distribution
• On June 12, 2019, GABY closed a $20 Million Private Placement
• On July 25, 2019, GABY closed the acquisition of Lulu’s Chocolates, a California-Based Manufacturer of CBD and THC Infused Chocolates
• On July 26, 2019, GABY Acquired a 25,000 sq. ft. State-of-the-Art Production Facility enabling it to consolidate in due course all its current operating segments (manufacturing and distribution) and move into cultivation
• As of August 20, 2019, Lulu’s CBD infused chocolates are now sold in over 300 mainstream retail locations in California

About Gabriella's Kitchen Inc.

GABY is a U.S.-focused, consumer packaged goods company operating a family of brands in the cannabis industry and in the mainstream grocery channel. Through its subsidiaries GABY indirectly holds a number of licenses and permits issued by the California Department of Health, the California Bureau of Cannabis Control and the County of Sonoma respectively, including manufacturing, distribution, cultivation and nursery licenses. With these licenses and permits to operate in the cannabis channel, and its existing infrastructure of major retailers and an extensive broker and distribution network in the mainstream channel, GABY has successfully brought a number of its proprietary, acquired and third-party brands to market in both the licensed and mainstream market.

Margot and her sister Gabriella co-founded GABY after Gabriella received a dire cancer diagnosis which spurred the sisters to prolong Gabriella's life through a holistic approach to health. Today, GABY is a wellness company with a diverse range of products that use cannabis, hemp and hemp derived cannabinoids to address a variety of dietary and health concerns. Although Gabriella ultimately passed away from her illness, she lived exponentially longer than doctors predicted. Her memory and passion live on through GABY's mission: to empower people to live healthy lives without compromise.

GABY’s shares trade on the CSE under the symbol “GABY” and on the OTCQB under the symbol “GABLF”. For more information, visit www.GABYInc.com

For further inquiries, please contact:

General
Margot Micallef, Founder & CEO or Investor Relations at IR@gabriellas-kitchen.com or 800-674-2239.

Investors
Mark Kuindersma, CFA
LodeRock Advisors Inc.
mark.kuindersma@loderockadvisors.com
416-465-6931

Media
Colin Trethewey, APR
colin@prmedianow.com
813-480-1354.

Disclaimer and Forward-Looking Information

The CSE does not accept responsibility for the adequacy or accuracy of this release. Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond the control of the Company. Forward-looking statements are frequently characterized by words such as "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Forward looking statements include, but are not limited to, the anticipated closing of additional acquisitions by the Company, the continued growth and expansion of the Company's operations, and the receipt of regulatory approvals, including the approval of the CSE. The Company assumes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Each of KJM Data and Research Inc., TOP and Sonoma Pacific are subsidiaries of GABY. Each of these subsidiaries hold cannabis licenses in the State of California. Unlike in Canada which has Federal legislation uniformly governing the cultivation, distribution, sale and possession of medical cannabis under the Cannabis Act (Federal), readers are cautioned that in the United States ("U.S."), cannabis is largely regulated at the State level. Cannabis is legal in the State of California however cannabis remains illegal under U.S. federal laws. Notwithstanding the permissive regulatory environment of cannabis at the State level, cannabis continues to be categorized as a controlled substance under the Controlled Substances Act in the U.S. and as such, cannabis-related practices or activities, including without limitation, the manufacture, importation, possession, use or distribution of cannabis are illegal under U.S. federal law. To the knowledge of the Company, the businesses operated by each of GABY’s subsidiaries are conducted in a manner consistent with the State law of California and are in compliance with regulatory and licensing requirements applicable in the State of California. However, readers should be aware that strict compliance with State laws with respect to cannabis will neither absolve GABY, or its subsidiaries of liability under U.S. federal law, nor will it provide a defense to any federal proceeding in the U.S. which could be brought against any of GABY, or its subsidiaries. Any such proceedings brought against GABY, or its subsidiaries may materially adversely affect the Company's operations and financial performance generally in the U.S. market specifically.

Neither the Canadian Securities Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

Condensed Interim Consolidated Statement of Loss and Comprehensive Loss

Condensed Interim Consolidated Statements of Financial Position