Executive Editor

Debra BorchardtMay 17, 2022
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5min4680

Greenlane Holdings, Inc. (NASDAQ: GNLN) reported financial results for the first quarter ending March 31, 2022 as revenue increased 37% to $46.5 million versus last year’s $34.0 million for the same quarter. However, it was a dramatic fall from the fourth quarter’s revenue of $56 million and it missed the Yahoo Finance average analyst estimate for sales of $51 million.

Net losses at Greenlane grew to $18 million from last year’s net loss of $7 million and the earnings per share were ($0.17). This also missed the estimates for earnings of ($0.07). The stock was falling over 5% in early trading to lately sell at 35 cents.

Greenlane reported that the year-over-year increase in net sales was primarily driven by the KushCo merger. Excluding KushCo’s post-merger sales, revenue declined 47% to $18.1 million, compared to $34.0 million for the same period in 2021. Third-party brand sales decreased 49% due to its strategy to focus on our proprietary, higher-margin Greenlane Brands. Greenlane Brand sales decreased 34% to $6.0 million, or 12.8% of total revenue, in the first quarter 2022 compared to $9.0 million, or 26.6% of total revenue in 2021. The decrease was mainly due to interruptions related to the ERP implementation.

“Building on a record and transformational 2021, we made meaningful progress executing on our strategic 2022 plan in Q1 2022, from reducing our corporate headcount to focusing more on our higher-margin Greenlane Brands,” said Nick Kovacevich, CEO of Greenlane. “Total revenue increased 37% to $46.5 million, driven primarily by the KushCo merger. If you exclude KushCo’s post-merger sales, revenue declined 47% year-over-year to $18.1 million, driven in large part by our strategic shift away from non-core third-party brands, sales of which decreased 49% from the same period in 2021. As part of our strategy to focus more on our higher-margin, proprietary Greenlane Brands, we expect a decline in total revenue from discontinuing some of these third-party brand relationships, but we believe the overall quality and margins of the revenue that we will generate going forward will be far more favorable and sustainable.

Costs Up, Sales Down

Greenlane reported that its cost of sales increased by $15.1 million, or 59%, as compared to the same period in 2021. The company attributed the increase to the impact of the KushCo merger of $26.2 million, offset by a decrease in revenue of 47% excluding the impact of the KushCo merger.

Salaries, benefits, and payroll taxes expenses increased by 58% to $10.1 million versus $6.4 million for the same period in 2021, primarily due to an increase related to the KushCo merger, an increase in severance of $0.6 million and an increase in stock compensation expense of $0.4 million. The increase was offset by salaries and payroll taxes decrease related to a reduction in force we completed in March 2022, which we expect to result in approximately $8.0 million in annualized cash compensation cost savings. This reduction in force is a part of its 2022 plan to reduce the cost structure, increase liquidity and accelerate our path to profitability.

Kovacevich added, “Sales of our Greenlane Brands was down 34% year-over-year to $6.0 million, largely due to our ERP system implementation, which caused interruptions in our ability to accept and fulfill customer orders. Although we expect to fully transition to this new ERP by the end of 2022, these interruptions materially impacted revenue for the first quarter, with some orders slipping into the second quarter. Growing our proprietary brands remains a key focus of ours, as it helps expand our strategic moat, margins, revenue, and profitability. In fact, we’re excited to have recently announced our partnership with Universal Distribution to distribute our Greenlane Brands in the promising Latin America market. Given that we are not subject to the same global trade restrictions as our plant-touching peers, we can ship our products worldwide in an asset-light manner, enabling us to scale faster and wider, and ultimately build our brands ahead of legalization in these markets.


Debra BorchardtMay 16, 2022
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7min4940

Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) reported financial results for the first quarter ending March 31, 2022 as net revenue fell 17% to $19.4 million versus $23.4 million for the same time period in 2021. Sales also fell sequentially from the fourth quarter’s revenues of $24.8 million and greatly missed the estimates from Yahoo Finance for sales of $27 million. Charlotte’s Web said the decrease was partly due to a temporary closure of its production and shipping terminal in January after a local wildfire in Boulder County.

The net losses were trimmed to $8 million from last year’s net loss of $12 million. The company has also been trying to right-size itself as revenues continue to fall. Total selling, general and administrative of $20.4 million was reduced by 14.4% year-over-year. “The $3.4 reduction versus Q1-2021 was primarily the result of actions taken in late 2021 and early 2022 to bring expenses in line with current revenue levels to support a return to positive cash flow.”

“While our e-commerce traffic was lower compared to prior periods, subscriptions more than doubled since Q1-2021. With e-commerce revenue down $3.0 million year-over-year, rebuilding traffic and conversions remain key priorities for us in e-commerce, which is our largest revenue channel,” said Jacques Tortoroli, Chief Executive Officer. “In our retail business, shipping was disrupted in January due to a two-week closure after a local wildfire in Boulder County. Despite the slow start, the overall business improved through the quarter with March being the largest revenue month of the quarter. The quarter did not benefit from our new retail sales organization which was put in place in April.”

Revenue Breakdown

Charlotte’s Web said the direct-to-consumer (“DTC”) eCommerce revenue was $13.1 million, a decrease of $3.0 million or 18.5% year-over-year. The decrease was attributed to lower traffic to the online store, wildfire shipping delays, and an industry-wide consumer shift to lower-priced CBD products; primarily gummies and topical products, where Charlotte’s Web is the market share leader. New DTC subscriptions increased 107% year-over-year and eCommerce conversion rates were strong at 14.2%. Charlotte’s Web maintains the largest e-commerce business in the CBD industry. DTC sales contributed 67.9% of the Company’s total net revenue in Q1-2022.

Business-to-business (“B2B”) revenue was $6.2 million$1.1 million or 14.6% lower year-over-year with reduced shipments to some of the Company’s largest retail customers after the warehouse closure and some supply chain challenges on top-selling CBD Clinic SKUs. This was partially offset by new retail distribution in grocery, natural, and pet retail, following the passing of Assembly Bill 45 in California.

“Our December/January reorganization reduced complexity and reduced SG&A expenses by more than $20.0 million on an annualized basis,” said Lindsey Jensen, Chief Financial Offer. “This resulted in improved gross margin percentage, lower operating expenses, and improved EBITDA(1) for Q1-2022 compared to the same quarter of 2021. We used $4.7 million in operating cash in the quarter with the majority of this occurring in January. In the quarter we received $0.5 million against our $10.8 million IRS receivable that we started the year with, and an additional $2.7 million has been collected since March 31 through the date of this press release. We continue to steward the use of cash while furthering our product rationalization to lower complexity and costs across our operations.”

International Update

Progress continued in key international markets. In the U.K., the Company achieved a milestone becoming one of the first companies to receive validation of its Novel Food applications from the UK Food Standards Agency (“FSA”) for full-spectrum hemp extracts in the United Kingdom. The milestone adds Charlotte’s Web to the FSA’s list of products allowed to be sold in the UK. The Company’s Novel Foods applications for the European Union were also validated during the quarter and are now proceeding through the safety evaluation process. In Canada, the Company is in discussions for extraction and distribution to bring to market Charlotte’s Web’s first international hemp harvest, which is anticipated for later this year. In Israel, the Company believes the regulatory environment for CBD sales in retail outlets continues to move forward. Charlotte’s Web expects to begin filing product registrations in the coming months through its Israeli partner, Intercure, with the Company’s first bulk product shipment anticipated in the second half of the year.

Debra BorchardtMay 16, 2022
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5min4620

TILT Holdings Inc.  (NEO: TILT) (OTCQX: TLLTF) reported its financial and operating results for the three months ended March 31, 2022. Tilt’s revenue was $42.4 million compared to $46.8 million in the year-ago period. However, revenue fell dramatically from the fourth quarter which was $54 million. Tilt said the decrease was primarily driven by lower sales volume in its inhalation business related to the timing of purchases by certain large customers, as well as price compression for the company’s bulk and house-branded wholesale cannabis products.

The net losses for the quarter were trimmed to $9 million from the fourth quarter’s net loss of $29 million.

“As discussed on our March 30th earnings call, during the first quarter we experienced the effects of inflationary pressure on consumers exacerbated by legacy product mix in our key plant-touching markets, coupled with both customer ordering and regulatory timing delays that affected Jupiter’s performance,” said Gary Santo, CEO of TILT. “Exiting the quarter, the broader market appears to be gaining momentum, with our inhalation business experiencing the second strongest sales order month in its history in April. Furthermore, opportunistic improvements made to our cultivation and processing operations over the past two quarters would appear to be well-timed to these changing market conditions, positioning the Company for a strong second half of 2022.”

Sales/Leaseback

Santo added, “Today we are also announcing two sale leaseback transactions totaling $55 million, the first of which closed earlier today with the second scheduled to close before quarter-end. Delivering on our promise to seek non-dilutive sources of capital, we plan to use the net proceeds to pay down outstanding debt by up to 50%, representing the first two legs of a stool designed to improve TILT’s overall capital structure.”

In addition to the earnings release, TILT’s subsidiary, Commonwealth Alternative Care, Inc. (“CAC”), completed the previously announced acquisition of its facility located in Taunton, MA. Concurrently, CAC closed on the sale of the Taunton Facility to Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR). The purchase price for the property in the Massachusetts Sale was $40 million. The all-cash net proceeds of the Massachusetts Transaction of approximately $27 million will be used by TILT to pay down its outstanding corporate debt. IIP entered into a long-term, triple-net lease agreement for the Taunton Facility with CAC.

Tilt also announced that its subsidiary White Haven RE, LLC, sold the cultivation and production facility in White Haven, PA for $15 million cash to IIP.  TILT’s subsidiary, Standard Farms, LLC, will also execute a long-term, triple-net lease agreement with substantially the same terms as the lease pertaining to the Taunton Facility.

Looking Ahead

“Entering the second year of our B2B strategy, demand from potential brand partners remains strong, with the addition of Timeless Refinery and Toast during the quarter, along with our recently announced partnership with Black Buddha Cannabis, another exceptional brand driven by social impact. With initial revenue attributable to brand partnerships already representing nearly one-third of our wholesale sales, as we continue to activate new partnerships and expand the product offerings for those brands previously launched, we believe the path we have chosen is the right one as we seek to become the partner of choice for independent brands seeking to scale.”

TILT said it continues to expect 2022 annual revenue to range between $255 – $265 million, and adjusted EBITDA to range between $27 – $32 million. At the midpoint, this reflects approximately 28% revenue growth and approximately 31% adjusted EBITDA growth over 2021.


Debra BorchardtMay 16, 2022
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4min4090

Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF) released its financial results for the three months ended March 31, 2022. Auxly reported net revenues rose 147% to $22.6 million versus $9.2 million during the same period in 2021. Revenues fell sequentially from the fourth quarter’s revenue of $29 million. Auxly admitted it had lower winter yields at Auxly Leamington and hardware and packaging shortages due to supply chain disruptions. The company said believes that those challenges are largely behind it, and is very encouraged by yield and overall product quality improvements that it has seen at Auxly Leamington, which it believes will better equip Auxly to meet the demand for its flower and pre-roll products.

Net losses rose to $39 million for the quarter versus last year’s net loss of $10 million for the same time period. The earnings per share were ($0.05) versus last year’s ($0.01).

Revenue in the first quarter of 2022 was approximately 61% in Cannabis 2.0 Product sales, with the remainder from Cannabis 1.0 Product sales. Auxly said that revenues improved as a result of its expansion into Cannabis 1.0 Products and continued leadership in Cannabis 2.0 Products. Consistent with prior periods, as the Company does not participate in the Quebec market, approximately 85% of cannabis sales during the first quarter of 2022originated from sales to British ColumbiaAlberta and Ontario.

Hugo Alves, CEO of Auxly, said, “Amid intense and growing competition and seasonal buying trends in the Canadian cannabis market, Auxly continued to see strength in sales, increasing revenues 147% year-over-year. Though this quarter presented some ongoing supply chain and operational challenges preventing us from meeting consumer demands for our branded cannabis products, we believe we have taken the necessary steps to correct these issues for the coming quarters, allowing us to increase fill rates and continue with our exciting new product launches throughout the year. We continue to lead the market in cannabis 2.0 products and remain focused on building to leadership in dried flower and pre-rolls and improving our business to achieve our goal of reaching adjusted EBITDA profitability.”

Losses Increase

The company addressed the increase in losses saying that there was an impairment of long-term assets of $12.9 million and intangible assets and goodwill of $10.8 million respectively in the first quarter of 2022 related to the closure of the Auxly Annapolis and Auxly Annapolis OG facilities where the carrying value exceeds the fair value less cost to sell. Gains and losses on settlement of assets and liabilities and other expenses in the prior-year quarter were primarily associated with a gain on the settlement of a $5.8 million liability associated with a non-monetary product exchange with another licensed producer. The share of loss on investment in joint venture of $0.5 million represents the company’s proportionate share of Auxly Leamington’s earnings prior to its acquisition in November 2021, which results are presently consolidated into the Company’s financial statements.

Outlook

Auxly said it is confident in its second-quarter sales outlook and in its ability to achieve Adjusted EBITDA profitability in 2022. The company, however, provided no numbers for its sales expectations.


Debra BorchardtMay 16, 2022
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5min4770

Columbia Care Inc. (NEO: CCHW) (CSE: CCHW) (OTCQX: CCHWF)  reported financial results for the first quarter ended March 31, 2022. Revenue for Columbia Care fell sequentially by 11% to $123 million from $139 million in the fourth quarter. It was a 43% increase over last year’s revenue of $86 million for the same time period. It missed the Yahoo Finance average analyst estimates for revenue of $138 million.

The net loss was trimmed slightly to $27 million from last year’s $29 million for the same time period. The earnings per share were ($0.07) versus last year’s ($0.10). This was in line with analyst expectations.

“The results of the first quarter of 2022 demonstrate how Columbia Care overcame a number of macro-economic headwinds by exercising strong operational discipline. We materially increased our gross and EBITDA margins, as we continued leveraging the scale we have built across our strategic national platform. During the first quarter, we drove a revenue increase of 43% over the prior year, achieved nearly 700 basis points of improvement in Adjusted Gross Margin and more than 930 basis points in Adjusted EBITDA Margin. As our recent capital investments yield enhanced efficiencies throughout the value chain, this will not only allow us to capitalize on our growth opportunities throughout the country, but continue to further improve profitability,” said Nicholas Vita, CEO of Columbia Care. “As 2022 continues to unfold, our priority is on driving profitability. We expect market specific cyclicality to be surpassed by the standout growth in several key markets in our diversified portfolio. Having new, high growth markets come on line, beginning in 2Q, will provide a strong counterbalance as several maturing markets show the impact of inflationary and competitive pressures.”

Top Markets

Col-Care noted that its top five markets by revenue in the quarter were California, Colorado, Massachusetts, Pennsylvania, and Virginia. Virginia is now a top market for both revenue and Adjusted EBITDA with four active retail locations, with significant expansion of the medical program to begin July 1. Col-Care opened 5 additional retail locations in the quarter: four in West Virginia and one in Virginia Beach, VA to bring active total to 84. Additional dispensaries in development include eight in Virginia, one in West Virginia, and one in New Jersey.

Vita continued, “We are excited about recent achievements and progress thus far in 2022, including our fourth dispensary in the rapidly expanding market of Virginia, opening four retail locations and launching the leading wholesale operation in West Virginia, and the launch of adult-use in New Jersey in mid-April. As we look ahead to the remainder of the year, we are leaning into the markets that will propel growth such as New Jersey, Virginia, West Virginia, and New York, making ongoing operational improvements to drive efficiencies in new and maturing markets, and focusing on driving free cash flow to fund our growth strategy. We also remain determined to deliver the best outcome for our stakeholders as we progress towards a successful close of the transaction with Cresco Labs, with the shared vision of creating the definitive market leader in the cannabis industry.”

Outlook

Columbia Care said that it expects revenue in 2022 to range between $625 million and $675 million. At this time, the company said its 2022 outlook does not include any contribution from future acquisitions, nor does it assume any additional changes in the regulatory environment in markets where Columbia Care currently operates or the anticipated impact of the pending Cresco Labs transaction. This also excludes potential future market changes where a conversion from medical-only to adult-use is under consideration by a governor and/or legislature.


Debra BorchardtMay 13, 2022
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5min6800

Despite the ongoing battle with the booted shareholders, iAnthus Capital Holdings, Inc.  (CSE: IAN) (OTCPK: ITHUF) continues to operate and deliver earnings. The company had first-quarter revenue of $42.8 million, a sequential decrease of 10% from the fourth quarter and a decrease of 17% from the same period in the prior year. iAnthus reported a net loss of $10.1 million, or a loss of $0.06 per share, compared to a loss of $26.9 million or a loss of $0.16 per share in Q4 2021, and compared to a loss of $19.5 million, or a loss of $0.11 per share, in the same period in the prior year.

iAnthus said in a statement, “Due to liquidity constraints experienced by the Company, the Company did not make applicable interest payments due on its 13% senior secured convertible debentures (“Secured Notes”) and its 8% convertible unsecured debentures due during 2020. As previously disclosed by the Company, the non-payment of interest in March 2020 triggered an event of default with respect to these components of the Company’s long-term debt, which, as of March 31, 2022, consisted of principal amounts of $97.5 million and $60.0 million, and accrued interest of $34.8 million and $10.8 million, on the Secured Notes and Unsecured Debentures, respectively. In addition, as a result of the default, as of March 31, 2022, the Company has accrued additional fees and interest of $15.8 million (“Exit Fees”) in excess of the aforementioned amounts that are further detailed in the Company’s financial statements.”

As of March 31, 2022, iAnthus had unrestricted cash of $14.1 million (December 31, 2021—$13.2 million), an accumulated deficit of $811.7 million (December 31, 2021—$801.6 million), and a working capital deficit of $255.7 million (December 31, 2021—$231.7 million).

Co-founder Maslow is out

Last week, iAnthus announced the resignation of its Co-Founder and Interim Chief Executive Officer, Randy Maslow from his executive positions with the company, including all positions with the company’s subsidiaries and its affiliates, and from the company’s Board of Directors and committees, effective as of May 6, 2022. Maslow will continue to serve the company in a consulting role for a period of six months following the Resignation Date. Maslow will receive total cash compensation in the amount of $12.2 million, of which $5.1 million was paid out on May 6, 2022.

On May 6, 2022, the company announced the appointment of Robert Galvin as Interim Chief Executive Officer and member of the Board, effective May 6, 2022. Galvin served as the company’s Interim Chief Operating Officer and has held a number of executive positions with iAnthus and previously served as a member of the Board following the completion of the company’s transaction in February 2019 with MPX Bioceutical Corporation, where Mr. Galvin also served as a board member.

Shareholder Lawsuits

While some shareholders continue to file complaints about losing their shares to the lenders, the courts have continued to side with the lenders. It seems that some of the disgruntled common stock shareholders when they get cases dismissed, retool and come back. The shareholders continue to insist that the debt payments could have been made when the company instead chose to default and thus handing the company over to the lenders. The latest move was in March when the company and the lender Gotham Green both as a New York judge to toss the shareholder’s latest claims. they say the case should be in Canada, not New York. The investors say they bought their shares in New York and so the case should be there.


Debra BorchardtMay 12, 2022
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6min5790

Glass House Brands Inc. (OTCQX: GLASF) (OTCQX: GHBWF) has announced it will buy three retail assets: two operating retail dispensaries and one retail dispensary slated to open in the third quarter of 2022. Glass House also said that with these acquisitions and its other moves, it could do over $200 million in revenue in the next year.

The retail dispensaries currently operate under the name Natural Healing Center (NHC), one of the pre-eminent retail dispensary chains in California, located in the Central Coast area.

“This acquisition will advance us further in our goal of becoming one of the largest retailers in the state; provide incremental outlets for flower sales as the SoCal facility comes online; and add further support to our CPG business, including PLUS, our recently acquired and leading cannabis edibles company based in California. It also represents an immediate opportunity to drive significant expansion in our gross margin profile. Glass House-branded products currently represent approximately 5% of NHC revenue, versus an average of about 25% in Glass House-owned or -operated stores,” said Kyle Kazan, Glass House Chairman and CEO.

“In addition, we anticipate that the soon-to-open Turlock dispensary, which is located just off Exit 215 of the heavily trafficked Highway 99, and near the entrance to a Costco, will be one of NHC’s highest-grossing locations. Notably, Turlock is also the home of California State University, Stanislaus. We do not believe the city governments in these three NHC locations will issue more licenses any time soon.”

Glass House said in a statement that the two operating retail dispensaries had revenue of $15.3 million from April 2021 through March 2022 with EBITDA margins above 20%. Glass House is acquiring the two operating retail dispensaries in Lemoore and Morro Bay for approximately $22.6 million, through a combination of approximately $5.7 million in cash and the remainder in Glass House equity shares.

The third retail dispensary, currently under construction and located in Turlock, California, is expected to open in Q3 2022. The company said it expects to complete the acquisition of the Turlock store upon its opening, with Glass House Brands owning 100% of the equity interests. Based on the current performance of NHC’s operating dispensaries and the market fundamentals in Turlock, Glass House believes the Turlock store can eventually achieve ‘steady state’ annual revenues of approximately $10 million with an EBITDA margin of roughly 20%.

Improved Outlook

Kazan said, “Glass House had $21.7 million in retail revenues from its three wholly-owned dispensaries in 2021. With the addition of NHC’s 3 dispensaries to our portfolio, plus The Pottery and our new Farmacy dispensaries in Isla VistaSanta Ynez and Eureka that are all slated to open in late Q3, we will have the potential to nearly triple our annual retail dispensary revenues to more than $60 million. The increased retail footprint will also provide a significant revenue opportunity for our CPG business including PLUS. Furthermore, we expect incremental Wholesale Biomass revenues from Phase I of the SoCal Facility to reach an annualized $50-75 million by early 2023. With our recent addition of PLUS’ $14m in annual revenues on top of that, Glass House now has the potential to reach an annual revenue run rate in excess of $200 million within the next 12 months, versus the company’s 2021 revenue of $69 million. This transaction is expected to be immediately accretive to Glass House on both a sales and EBITDA basis, with all of NHC’s open locations currently generating positive EBITDA.”


Debra BorchardtMay 12, 2022
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5min9320

Trulieve Cannabis Corp. (CSE: TRUL) (OTCQX: TCNNF) announced its results for the first quarter ending March 31, 2022, with revenue increasing 64% year over year to $318.3 million from $193.8 million and 4% sequentially. This beat the Yahoo Finance average analyst estimates for revenues of $307 million. It was also a nice increase sequentially from the fourth quarter’s revenue of $305 million, especially at a time when many cannabis companies have seen sales in the first quarter of 2022 struggle to top the fourth.

Trulieve also delivered a net loss of $32 million, a sequential improvement of 55%, however, it was a big change from last year’s net income of $30 million for the same time period. The earnings per share were ($0.17) versus last year’s $0.24. This missed the average analyst estimates for earnings of $0.03.

The company also noted that it had an adjusted net income of $1.7 million, which excludes $17.2 million of transaction, acquisition, integration, and other non-recurring charges primarily associated with the Harvest acquisition, $13.8 million in asset impairments associated with the closing of redundant cultivation facilities and a loss of $2.7 million due to the divestiture of a duplicative, non-operating location.

“Thanks to the efforts of all of our Trulieve employees, we’re off to a great start in 2022, with strong first-quarter results underpinned by topline growth and cash flow,” said Kim Rivers, Trulieve CEO. “We delivered another record quarter while making substantive progress on our plan to optimize assets while preparing for future growth and catalysts. In 2022 we expect our strong balance sheet, access to capital and financial discipline will uniquely position us to capitalize on market opportunities created by the macroeconomic factors impacting our industry.”

Operating expenses did shoot up 138% to $149 million

Financial Guidance

Trulieve is reiterating its 2022 guidance with expected revenue in the range of $1.3 billion to $1.4 billion and adjusted EBITDA in the range of $450 million to $500 million. Based on the company’s current forecasts, it expects to realize improved performance in the second half of 2022 relative to the first half of 2022.

The company is also sitting comfortably on a mountain of cash at the quarter end of $267 million, bolstered by $45.1 million in cash flow from operations and the closing of $75 million senior secured notes at 8% due October 2026.

Trulieve currently operates 165 retail dispensaries and over 4.0 million square feet of cultivation and processing capacity in the United States.


Debra BorchardtMay 12, 2022
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6min10240

 Talladega wants out of the Parallel cannabis lawsuit. This is the lawsuit that disgruntled Surterra Wellness (now known as Parallel) investors filed against the company’s leader beau Wrigley and Surterra Holdings, along with a family office and Talladega LP and Talladega Inc. The company filed a motion earlier this week to dismiss its involvement and outlined why it should not be a part of the lawsuit. Talladega was not initially named in the case, instead, it was Canadian hedge fund SAF Group, but they were replaced by Talladega. 

At issue is a bridge loan that Talladega extended to Surterra/Parallel. The lender, who owns the Junior Notes says it was a purely selfish move to keep the company operational in order to protect the health of those junior notes. 

Not In New York

First, Talladega says it shouldn’t be included in a New York lawsuit since it isn’t located in the state. The company is based in Canada and says that alone should be grounds for getting itself dismissed from the case. 

Bridge Over Troubled Water

Next Talladega says it only provided a bridge loan that kept Parallel operating and didn’t really classify as debt that would breach the covenants of the other debt instruments. In the motion Talladega says, “Beginning in June 2021, shortly after Talladega and the company entered into the Talladega Credit Agreement, the company began to experience financial stress and defaulted under both the Note Purchase Agreement and the Talladega Credit Agreement. On December 16, 2021, Talladega issued a notice of default to the company listing 11 defaults or events of defaults under the Talladega Credit Agreement. Following issuance of the notice of default, the company, PE Fund, and Talladega entered into discussions to provide financing to the company to allow it to “bridge” the gap until the Company could be sold to one or more third-parties, or recapitalized.”

Talladega says the unhappy investors waited until 10 days after the bridge loan to file the lawsuit. The investors claimed that Talladega completed the bridge loan in order to earn more fees and jump to the head of the capital line. Talladega says it was just trying to protect itself from Parallel going under. The company wanted to give Parallel a chance to find a buyer or get more financing. The fee amounts in the bridge loan documents are redacted. 

The investors also complained that Talladega was an insider, but again the company says that is wrong. The filing stated, “Beyond Talladega’s participation in the Talladega Credit Agreement and the Bridge Credit Agreement, Talladega has no close relationship with the Company that would give it any sort of control over the Company or the Company’s actions.”

The investors believe Talladega knew more than it is saying because it was the Administrative Agent and Collateral Agent for the Junior Note holders for Parallel. The original complaint stated, “The Junior Lien Notice informed the Company that it had failed to (i) maintain the required debt-service-coverage ratio; (ii) maintain specified adjusted consolidated EBITDA as of September 30, 2021; and (iii) “pay Catch-Up [a]mount[s]” due as of September 30, 2021. 99. The Junior Lien Notice also explained that the Company had defaulted on the Junior Note through its “incurrence of Indebtedness pursuant to that certain Negotiable Subordinated Promissory Note dated June 30, 2021”—i.e., the PE Fund Note.” However, Talladega sending out the default notice didn’t make it an insider. 

In Closing

Since Parallel is a private company, there is little information as to the health of the company. Within the state of Florida, where the company mainly operates it is number five on the list of top license holders with 46 licenses according to Cannabiz Media. Trulieve leads with 121 licenses, followed by Curaleaf with 50, then Verano at 48, and Ayr Wellness with 47 licenses. However, none of the companies break out their revenues from Florida, so it’s difficult to determine how much revenue is coming into the company.


Debra BorchardtMay 11, 2022
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4min4330

Ascend Wellness Holdings, Inc. (CSE: AAWH.U) (OTCQX: AAWH) reported its financial results for the first quarter ending March 31, 2022. Total revenue of $101.2 million decreased 0.8% quarter-over-quarter and increased 33.4% year-over-year. Ascend stock jumped over 5% in trading to close at $3.20.

Ascend also reported that it had a net loss of $27.8 million or a loss of $0.16 per basic and diluted common share during the quarter, compared to a net loss of $16.5 million in the fourth quarter of 2021. Ascend attributed the loss to operating costs and a one-time settlement charge related to the settlement of a stockholder dispute regarding one of the company’s convertible note purchase agreements.

“Q1 2022 was a transitionary quarter for Ascend as we made investments to launch the next phase of our growth story,” said Abner Kurtin CEO and Co-Founder. “While preparing for adult-use sales in New Jersey, we significantly increased our total canopy capacity and recently entered into the Pennsylvania market. The early days of adult-use sales in New Jersey indicate that the state will be a key growth driver for the remainder of 2022.”

In addition to reporting earnings, Ascend was also able to tell the market it had settled its lawsuit with MedMen over the purchase of its New York assets. The settlement is expected to close within 30 days.

Breaking down the revenue results, total retail revenue was $63.3 million for the first quarter of 2022, representing a 2.4% decline as compared to the prior quarter. Gross wholesale revenue increased to $37.9 million, a 2.1% sequential increase, driven by growth in intercompany wholesale sales. Net wholesale revenue decreased 7.8% sequentially to $21.8 million, primarily driven by pricing pressure in Illinois and Massachusetts.

After The Quarter Ended

After the quarter ended, Ascend completed an equity transaction to roll up all of the other existing members of Story of PA CR, LLC. The company said it will use the remainder of the year to build a cultivation facility and six dispensaries, with plans to commence operations in Pennsylvania in 2023.

Also after the quarter, Ascend was one of the first in the state of New Jersey to launch adult-use sales at its dispensary in Rochelle Park, marking the start of the highly anticipated adult-use market in the state. On the first day of recreational sales, the company had approximately 1,500 customers and average basket sizes of $135, further substantiating the promising market.


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