The Greenrose Holding Company Inc. (OTC: GNRS, GNRSW) (“Greenrose” or the “Company”), a multi-state grower and producer of cannabis brands and products, is reporting financial and operating results for the first quarter ended March 31, 2022.

First Quarter 2022 Financial Summary (Non-GAAP)

    For the three months ended  
    March 31,  
    Successor     Predecessor  
(in thousands)   2022     2021  
Net Income (Loss)   $ (14,568 )   $ 2,792  
Provision for income taxes     481       251  
Interest expense, net     6,619       33  
Depreciation & amortization     4,526       202  
EBITDA (non-GAAP)     (2,942 )     3,278  
Adjusting items:                
Transaction related fees(a)     588       294  
Change in Fair Value of Financial Instruments(b)     (470 )     -  
Fair Value Step-up of Inventory(c)     2,134       -  
Infrequent events(d)     811       87  
Management fees(e)     -       400  
Adjusted EBITDA (non-GAAP)   $ 121     $ 4,059  
(a)   For the three months ended March 31, 2022, transaction fees relate to the consulting legal and accounting fees related to the acquisitions of Theraplant and True Harvest and their corresponding contractual filing requirements of an S-1 to register shares. For the three months ended March 31, 2021, transaction fees relate to consulting, legal, and accounting fees in preparation for the Theraplant Business Combination.
(b)   Change in Fair Value of Financial Instruments represent the (gain)/loss recognized on the Consolidated Statement of Operations. For the three months ended March 31, 2022, the Company recognized a gain of $470 thousand on its financial instruments which resulted from fluctuations in the Company’s stock price.
(c)   Represents the impact to the cost of goods sold due to the fair value step up of inventory from purchase accounting.
(d)   For the three months ended March 31, 2022, infrequent events relates to $811 thousand loss on note settlement. For the three months ended March 31, 2021, the $87 thousand is consisted of $28 thousand related to costs related to a fire in a grow room causing repair expenses that had not yet been recovered by insurance, as well as $58 thousand related to lobbyist fees related to Connecticut cannabis regulation proposals.
(e)   Represents management fees associated with management consulting services that were not required to be paid after the closing of the Theraplant Business Combination.
  Successor     Predecessor
(in thousands) March 31, 2022     March 31, 2021
Revenues $ 8,189       $ 7,150  
Cost of Goods Sold*   6,353         2,698  
Gross Profit*   1,836         4,452  
Gross Margin*   22.4 %       62.3 %
Adjusted EBITDA   121         4,059  
Net income $ (14,568 )     $ 2,792  
Basic Earnings per Share   (0.92 )       **  

* Cost of Good Sold includes $2,134 of additional expense, due to the due to the fair value step up of inventory from purchase accounting, which negatively impacts gross profit by $2,134 and gross margin by 26%. **Predecessor earnings per shares attributable to Angel Founder Units, Series A units, and Series R units, were $13.50 per share, respectively; however, presentation of predecessor results not deemed comparable to results of successor given changes in capitalization and holding company results of operation.

Management Commentary

“During the first quarter, we began building the foundation of our multi-state, cultivation-focused cannabis business,” said Mickey Harley, CEO of Greenrose. “Since acquiring Connecticut-based Theraplant and Arizona-based True Harvest in the fourth quarter of 2021, we have worked closely with the management and cultivation teams at each of our operating subsidiaries to streamline operations and optimize production capacity. Over the past few months, we have worked to expand the production at each subsidiary and enhance our positioning for the early-stage recreational market opportunities in Connecticut and Arizona. While our first quarter financial performance reflects certain costs and operational interruptions associated with ramping this additional production capacity, we believe our work to strengthen our infrastructure will help position our brands as high-quality flower brands in Connecticut and Arizona’s emerging recreational markets.

“In Connecticut, we are closely monitoring the state’s regulatory approach and timeline regarding activating the recreational market, and we are taking steps that should strengthen our position for the expected commencement of recreational cannabis sales statewide during the fourth quarter of 2022. In the first quarter, we completed our expansion of our cultivation facility at Theraplant by 30,000 sq. ft., bringing our footprint up to 98,000 sq. ft. and increasing our total available canopy by over 80%. While slower patient growth and illicit in-market sales impacted our revenue, we believe Theraplant, with its strong brand and wholesale presence with all 18 of the state’s existing dispensaries, is well-positioned to benefit from the upcoming recreational market. In fact, we have already completed a population of all the rooms, and we expect our last two rooms to complete their first harvests in early June to strengthen our inventory levels. Further, we are actively pursuing opportunities for social equity partnerships in Connecticut, and if successful, Theraplant will be in a position to invest in retail licenses and dispensaries while supporting applicants from state communities disproportionately affected by the war on drugs. We will continue to explore the market for opportunities to develop a retail footprint in the state to achieve vertical integration.

“Since acquiring True Harvest at the end of 2021, we have focused on optimizing our canopy and seeking opportunities to establish a retail presence in Arizona. Within our 76,000 sq. ft. facility, we have activated two out of four planned additional grow rooms, with the third and fourth room expected to be operational in the second half of 2022. Though the grow room construction process caused some delays and interruptions in our production cycle and inventory levels, we expect operational efficiency and product levels to rebound during the second quarter as this phase of expansion is completed. From a retail perspective, we are evaluating both social equity opportunities and potential acquisitions to secure dispensary licenses. With our focus on high-quality cultivation and superior products, we are well-positioned in Arizona’s early-stage recreational market, where the supply of high-end flower products remains constrained. We believe the Shango brand secured by True Harvest under license, together with our improved cultivation processes, will help True Harvest deliver top-quality flower at every price point in this market.”  

Paul “Otto” Wimer, President of Greenrose, added: “As we move further into 2022, we remain focused on growing our existing platform and seeking additional expansion opportunities. From a production standpoint, we will continue working to ramp our additional capacity at Theraplant and complete construction on the additional grow rooms and improving post-harvest processes at True Harvest. We also aim to deepen our footprint within the Connecticut and Arizona markets by working to build a retail presence, enabling us to achieve vertical integration. While early in the Company’s lifecycle, we look forward to making additional progress on our strategy and working to establish Greenrose as a vertically integrated, cultivation-led multi-state operator.”

First Quarter 2022 Financial Results

For the first quarter ended March 31, 2022, the Company’s revenue, net of discounts, increased 15% to $8.2 million compared to $7.2 million in the prior year quarter. The increase reflects incremental revenue contributions from True Harvest compared to the prior year period, which only included contributions from Theraplant. True Harvest’s first quarter revenue performance reflects the impact of construction-related production interruptions during the facility’s recent expansion, while Theraplant’s revenue decreased period over the period, reflecting demand headwinds in Connecticut’s medical market, as well as increased competition, particularly from the illicit market.

Cost of goods sold, net, for the first quarter ended March 31, 2022 was $6.4 million compared to $2.7 million in the prior year quarter. The increase primarily reflects a significant adjustment from purchase accounting considerations in the fair value step-up of inventory of $2.1 million and costs associated with ramping the Company’s recently expanded production capacity at both Theraplant and True Harvest. The Company also incurred additional start-up costs related to initial planting and production processes in Theraplant’s new production facility.

Gross profit for the first quarter ended March 31, 2022 was $1.8 million compared to $4.5 million in the prior year, reflecting a gross margin of 22.4% compared to 62.3% in the prior year quarter. The decrease primarily reflects the aforementioned purchase accounting considerations in the fair value step-up of inventory and the increased costs associated with ramping the Company’s production capacity, as well as the softer than expected revenue performance during the quarter.

General and administrative expenses the first quarter ended March 31, 2022 were $5.0 million compared to $1.4 million in the prior year quarter. This increase was primarily due to incremental cost contributions from True Harvest and additional corporate expenses of being a public operating company relative to the prior year period, which only includes expenses from Theraplant.

Net income (loss) for the first quarter ended March 31, 2022 was $(14.6) million compared to $2.8 million in the prior year. This was primarily attributable to the revenue impacts of the production interruptions at True Harvest and the aforementioned demand headwinds in the Connecticut market, as well as increased interest expense of $6.6 million, purchase accounting fair value inventory step-up of $2.1 million, and intangible amortization expense of $4.0 million.

Adjusted EBITDA for the first quarter ended March 31, 2022 was $0.1 million compared to $4.1 million in the prior year quarter. The decrease was primarily driven by the aforementioned lower level of gross profit generated during the quarter, higher corporate general and administrative expenses, as well as expenses related to ramping the Company’s expanded production capacity at Theraplant and True Harvest.

Cash and cash equivalents combined with restricted cash was $3.5 million at March 31, 2022 compared to $9.1 million at December 31, 2021. The decrease was primarily attributable to acquisition-related expenses and debt obligations.

Revised 2022 Outlook Due to ongoing demand headwinds within Connecticut’s medical market and the impacts of construction-related production interruptions at True Harvest, Greenrose has revised its 2022 outlook, and the Company is expected to generate between $100 million and $120 million in full year 2022 revenue, 2022 net income of between approximately $(5) million and $1 million, and 2022 adjusted EBITDA between the range of $65 million and $75 million, excluding fair value adjustments to financial instruments and transaction related expenses. These projections assume an expected fourth quarter 2022 start for recreational cannabis sales in Connecticut.

Conference Call

Greenrose will conduct a conference call today at 5:30 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2022.

Greenrose management will host the conference call, followed by a question and answer session.

Conference Call Date: May 16, 2022Time: 5:30 p.m. Eastern timeToll-free dial-in number: 1-855-716-0858International dial-in number: 1-516-575-8860Conference ID: 8656495

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Group at (949) 574-3860.

The conference call will be broadcast live here and available for replay via the webcast link on the same day through May 16, 2023.

About The Greenrose Holding Company Inc.The Greenrose Holding Company Inc. is a multi-state cultivator and producer of cannabis brands and products. Greenrose is driven by cultivation. It is understood that being a leader in the cannabis industry starts with outstanding flower derived from sophisticated genetics and scalable grow methods. Greenrose aims to be a vertically integrated company that looks for scale and horizontal consolidation. For more information, please visit greenroseholdings.com.

Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP financial measures that represents earnings before interest expense, income taxes, depreciations, and amortization, or EBITDA, and further adjustments to EBITDA to exclude certain non-cash items and other non-recurring items that management believes are not indicative of ongoing operations. We disclose EBITDA and Adjusted EBITDA because these non-GAAP measures are key measures used by our management to evaluate our business, measure its operating performance, and make strategic decisions. We believe EBITDA and Adjusted EBITDA may be useful for investors and others in understanding and evaluating our operations results in the same manner as its management. However, EBITDA and Adjusted EBITDA are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income, income before income taxes, or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business would have material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in our industry may report measures titled EBITDA and Adjusted EBITDA or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.

Forward-Looking StatementsCertain statements made in this release are "forward looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words "estimates," "projected," "expects," "anticipates," "forecasts," "plans," "intends," "believes," "seeks," "may," "will," "should," "future," "propose" and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Greenrose's control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include:

  • liquidity of Greenrose's stock;
  • Greenrose's ability to manage growth; Greenrose's ability to identify and integrate other future acquisitions;
  • servicing Greernose debt will require a significant amount of cash;
  • lacking sufficient capital or the inability to raise additional capital, whether equity or debt;
  • rising costs adversely affecting Greenrose's profitability;
  • competition in the legal cannabis industry;
  • adverse changes to the legal environment for the cannabis industry; and general economic and market conditions impacting demand for Greenrose's products and services;
  • failure to realize the anticipated benefits of recently completed and future acquisitions, including delays in consummating any future acquisitions or difficulty in, or costs associated with, integrating the businesses of Greenrose, Theraplant and True Harvest;
  • prevailing prices for cannabis products in the markets in which Greenrose operates;
  • new regulations or pending changes (and the timing of any such changes) in the current regulations in the states of Connecticut and Arizona where the businesses of Theraplant and True Harvest operate, respectively;
  • the effects of competition on Greenrose’s business;
  • costs related to potential acquisitions; and
  • those factors discussed in Greenrose’s Form 10-K filed April 15, 2022 under the heading “Risk Factors,” and other documents of Greenrose filed, or to be filed, with the SEC.

If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Greenrose does not presently know or that Greenrose currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements.

In addition, forward-looking statements reflect Greenrose’s expectations, plans or forecasts of future events and views as of the date hereof. Greenrose anticipates that subsequent events and developments will cause its assessments to change. However, while Greenrose may elect to update these forward-looking statements at some point in the future, Greenrose specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Greenrose’s assessments as of any date subsequent to the date hereof. Accordingly, readers should not unduly rely on any projections or other forward-looking statements or data contained herein.

Investor Relations Contact:Gateway Group, Inc. Cody Slach or Jackie Keshner(949) 574-3860GNRS@gatewayir.com

Greenrose Contact:Daniel HarleyExecutive Vice President, Investor Relations(516) 307-0383ir@greenroseholdings.com

 
The Greenrose Holding Company Inc.Condensed Consolidated Balance SheetsMarch 31, 2022 and December 31, 2021(in thousands, except share and per share amounts)
             
    March 31,     December 31,  
    2022     2021  
    (Unaudited)        
Assets            
Current assets:                
Cash and cash equivalents   $ 1,864     $ 7,240  
Restricted Cash     1,678       1,817  
Marketable Security     1,475       1,694  
Accounts Receivable, net     1,866       1,197  
Inventories     11,732       12,513  
Prepaid expenses and other current assets     1,783       3,031  
Total current assets     20,398       27,492  
Intangible assets, net     109,734       113,684  
Property and equipment, net     25,053       25,209  
Goodwill     66,038       71,658  
Other assets     1,201       1,050  
Total assets   $ 222,424     $ 239,093  
Liabilities and Stockholders’ Equity                
Current liabilities:                
Accounts payable and accrued expenses   $ 18,670     $ 18,916  
Current Tax Payable     519       38  
Current Portion of Note Payable     107,205       106,015  
Convertible Promissory Note - Related Parties     -       2,000  
Promissory Notes - Related Parties     -       641  
Due to Related Parties     846       846  
Due to Prior Members     1,021       1,130  
Other Current Liabilities     674       1,340  
Total current liabilities     128,935       130,926  
Contingent Consideration     15,260       20,880  
Private Warrants Liabilities     968       436  
Warrant Liabilities     16,830       16,601  
Derivative Liability     -       1,167  
Total liabilities     161,993       170,010  
Commitments and contingencies                
                 
Stockholders’ Equity                
Common stock, $0.0001 par value; 150,000,000 shares authorized; 17,585,249 and 16,061,190 shares issued and outstanding at March 31, 2022 December 31, 2021, respectively.     2       2  
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding     -       -  
Additional paid-in capital     76,775       70,859  
Accumulated deficit     (16,346 )     (1,778 )
Total Stockholders’ Equity     60,431       69,083  
Total liabilities and Stockholders’ Equity   $ 222,424     $ 239,093  
                 

 
The Greenrose Holding Company Inc.Condensed Consolidated Statements of Operations (Unaudited)For the three months ended March 31, 2022 and 2021(in thousands, except share and per share amounts)
             
    Successor     Predecessor  
    For theThree MonthsEndedMarch 31,     For theThree MonthsEndedMarch 31,  
    2022     2021  
Revenue   $ 8,189     $ 7,150  
Cost of Goods Sold     6,353       2,698  
Gross Profit     1,836       4,452  
Expenses from Operations                
Selling and Marketing     26       4  
General, and Administrative     4,976       1,361  
Depreciation and Amortization     3,961       11  
Total Expenses from Operations     8,963       1,376  
Income (Loss) From Operation     (7,127 )     3,076  
Other income (expense):                
Other income (expense), net     (811 )     -  
Interest Expense, net     (6,619 )     (33 )
Change in Fair Value in Financial Instruments     470       -  
Total other income (expense), net     (6,960 )     (33 )
                 
Income (Loss) Before Provision for Income Taxes     (14,087 )     3,043  
                 
Provision for Income Taxes     (481 )     (251 )
Net Income (Loss)   $ (14,568 )   $ 2,792  
                 
Successor earnings per share                
Earnings (Loss) per common share                
Basic and diluted   $ (0.92 )        
                 
Weighted average shares outstanding                
Basic and diluted     15,897,861          
                 
Predecessor earnings per share                
Net Income per share – basic and diluted – attributable to:                
Angel Founder Units           $ 13.50  
Series A Units           $ 13.50  
Series R Units           $ 13.50  
                 
Weighted average shares – basic and diluted – attributable to:                
Angel Founder Units             110,000  
Series A Units             42,761  
Series R Units             54,000  
                 

 
The Greenrose Holding Company Inc.Condensed Consolidated Statements of Changes in Stockholders’ Equity/Members’ Equity (Unaudited)For the three months ended March 31, 2022 and 2021
       
    Successor  
(in thousands except share and per share amount)   CommonStock     Amount     AdditionalPaid InCapital     Accumulated(Deficit)     TotalStockholder’sEquity  
Balance at December 31, 2021     16,061,190     $ 2     $ 70,859     $ (1,778 )   $ 69,083  
Issuance of stock options     -       -       225       -       225  
Settlement of Investor Shares released from lockup     -       -       1,390       -       1,390  
Issuance of shares in settlement of promissory note     685,289       -       2,864       -       2,864  
Issuance of shares to board members     73,700       -       387       -       387  
Issuance of shares to Investor     753,165       -       1,000       -       1,000  
Issuance of shares to vender     11,905       -       50       -       50  
Net Loss     -       -       -       (14,568 )     (14,568 )
Balance at March 31, 2022     17,585,249     $ 2     $ 76,775     $ (16,346 )   $ 60,431  
    Predecessor  
(in thousands except share and per share amount)   TotalMembers’Equity  
Balance, December 31, 2020   $ 12,245  
Distributions to Members     -  
Net Income     2,792  
Balance, March 31, 2021   $ 15,037  
         

 
The Greenrose Holding Company Inc.Condensed Consolidated Statement of Cash Flows (Unaudited)For the three months ended March 31, 2022 and 2021(in thousands, except share and per share amounts)
             
    Successor     Predecessor  
    March 31,     March 31,  
    2022     2021  
Cash flows from operating activities:                
Net income (loss)   $ (14,568 )   $ 2,792  
Adjustments to reconcile net income (loss) to net cash used in operating activities:                
Depreciation and amortization     4,526       11  
Change in Fair Value in Financial Instruments     340       -  
Share Based Compensation     662       -  
Amortization of debt discount & issuance fees     1,356       -  
Interest Expense - PIK     2,247       -  
                 
Change in operating assets and liabilities:                
Accounts receivable     (669 )     22  
Prepaid expenses and other assets     1,096       (173 )
Inventories     782       (113 )
Accounts payable and accrued liabilities     85       529  
Deferred Tax Liabilities     481       1  
Net Cash Provided by (Used in) Operating Activities     (3,662 )     3,069  
                 
Cash flows from investing activities:                
Purchases of property and equipment     (419 )     (1,389 )
Net cash used in investing activities     (419 )     (1,389 )
                 
Cash flows from financing activities:                
Proceeds from notes payable     -       408  
Principal repayments of notes payable     (1,434 )     (17 )
Distributions to members     -       (170 )
Net Cash Provided by (Used in) Financing Activities     (1,434 )     221  
                 
Net increase (decrease) in cash, cash equivalents and restricted cash     (5,515 )     1,901  
Cash, cash equivalents and restricted cash, beginning of period     9,057       2,263  
Cash, cash equivalents and restricted cash, end of period     3,542       4,164  
                 
Reconciliation of cash, cash equivalents and restricted cash                
Cash and cash equivalents     1,864       4,164  
Restricted cash     1,678       -  
Total cash, cash equivalents and restricted cash, end of period   $ 3,542     $ 4,164  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest (net of interest capitalized)   $ 2,870          
                 
Supplemental disclosure of non-cash investing and financing activities                
Investor shares released from lockup   $ 1,390          
Investor share settled liabilities     1,000          
Settlement of Sponsor Notes     2,641          
Goodwill measurement period adjustment     5,620          
Capital expenditures payable     253          
                 
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