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UNITED STATES 

SEURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 19, 2022 (May 13, 2022)

 

THE GREENROSE HOLDING COMPANY INC.

(Exact name of Registrant as specified in its charter)

 

Delaware   001-39217   84-2845696
(State or other jurisdiction of
incorporation or organization)
  (Commission File Number)   (I.R.S. Employer
Identification Number)

 

111 Broadway Amityville, NY   11701
(Address of principal executive offices)   (Zip Code)  

 

Registrant’s telephone number, including area code: (516) 346-5270

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to the Registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Name of Each Exchange on Which Registered
Units, each consisting of one share of common stock and one redeemable warrant   OTC Pink
Common stock, par value $0.0001 per share   OTCQX
Redeemable warrants, exercisable for shares of common stock at an exercise price of $11.50 per share   OTCQB

 

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition

 

The information in Item 2.02 of this Current Report, including the accompanying Exhibits 99.1, 99.2 and 99.3, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of Section 18. The information in Item 2.02 of this Current Report shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language contained in such filing.

 

On May 13, 2022, The Greenrose Holding Company Inc. (“Greenrose” or the “Company”) issued a press release announcing the Company would host a conference call to discuss its financial results for the quarter ended March 31, 2022. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated by reference herein.

 

On May 16, 2022, the Company issued a press release announcing its financial results for the quarter ended March 31, 2022. A copy of the press release is furnished as Exhibit 99.2 hereto and is incorporated by reference herein.

 

On May 16, 2022, the Company hosted a conference call to discuss its financial results for the quarter ended March 31, 2022. A copy of the transcript of the conference call is furnished as Exhibit 99.3 hereto and is incorporated by reference herein.

 

Forward Looking Statements

 

Statements made in this Current Report on Form 8-K (including the Exhibit hereto) that are not historical facts are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to the business combination and any other statements relating to future results, strategy and plans of Greenrose (including certain projections and business trends, and statements which may be identified by the use of the words “plans”, “expects” or “does not expect”, “estimated”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “projects”, “will” or “will be taken”, “occur” or “be achieved”). Such statements are provided for illustrative purposes only and are not to be relied upon as predictions or any assurance or guarantee by any party of actual performance of Greenrose. Forward-looking statements are based on the opinions and estimates of management of Greenrose and/or the estimates of management of the companies Greenrose recently acquired, as the case may be, as of the date such statements are made, and they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the ability to attract and retain key personnel; prevailing industry trends including consumer spending as well as in cannabis markets; legislation or regulatory requirements and developments in the global economy in general and the regulation of cannabis in particular; the public health crisis related to the coronavirus (COVID-19) pandemic and resulting significant negative effects to the global economy; disruption of global supply chains and distribution channels; as well as significant volatility in and possible disruption of financial markets; increased operating costs, decreased ability to profitably develop and operate cultivation and processing facilities as well as retail points of sale; competition in the US cannabis markets; and the impact of government shutdowns or other limitations impacting business activity generally.

 

1

 

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.   Description
     
99.1   Press Release Dated May 13, 2022
99.2   Press Release Dated May 16, 2022
99.3   Transcript of Conference Call Dated May 16, 2022
104   Cover Page InteractiveData File (embedded within the Inline XBRL document)

 

2

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: May 19, 2022 The Greenrose Holding Company Inc.
     
  By: /s/ William F. Harley III
  Name:  William F. Harley III
  Title: Chief Executive Officer

 

 

3

 

 

 

Exhibit 99.1

 

 

The Greenrose Holding Company to Hold First Quarter 2022 Conference Call on May 16, 2022 at 5:30 p.m. ET

 

May 13, 2022 4:47 PM EDT

 

AMITYVILLE, N.Y., May 13, 2022 (GLOBE NEWSWIRE) -- The Greenrose Holding Company Inc. (OTC: GNRS, GNRSW) (“Greenrose” or the “Company”), a multi-state grower and producer of cannabis brands and products, will hold a conference call on Monday, May 16, 2022 at 5:30 p.m. Eastern time to discuss its results for the first quarter ended March 31, 2022. The Company will provide its financial results in a press release prior to the conference call.

 

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

 

Conference Call Date: May 16, 2022

Time: 5:30 p.m. Eastern time

Toll-free dial-in number: 1-855-716-0858

International dial-in number: 1-516-575-8860

Conference 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 www.greenroseholdings.com.

 

Investor Relations Contact:

Gateway Group, Inc.

Cody Slach or Jackie Keshner

(949) 574-3860 GNRS@gatewayir.com

 

Greenrose Contact:

Daniel Harley

Executive Vice President, Investor Relations

(516) 307-0383 ir@greenroseholdings.com

Exhibit 99.2

 

 

The Greenrose Holding Company Reports First Quarter 2022 Results

 

May 16, 2022 8:30 PM EDT

 

Focus on Optimizing Inventory in Connecticut and Production Capacity in Arizona

 

Improving Positioning for Early-Stage Recreational Market Opportunities

 

Provides Revised Guidance for the Full Year Ended December 31, 2022

 

AMITYVILLE, N.Y., May 16, 2022 (GLOBE NEWSWIRE) – 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.”

 

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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, 2022

Time: 5:30 p.m. Eastern time

Toll-free dial-in number: 1-855-716-0858

International dial-in number: 1-516-575-8860

Conference ID: 8656495

 

3

 

 

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 Statements

 

Certain 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;

 

4

 

 

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) 574-3860

GNRS@gatewayir.com

 

Greenrose Contact:

Daniel Harley

Executive Vice President, Investor Relations

(516) 307-0383

ir@greenroseholdings.com

 

5

 

 

The Greenrose Holding Company Inc.
Condensed Consolidated Balance Sheets
March 31, 2022 and December 31, 2021
(in thousands, except share and per share amounts)

 

   March 31,
2022
   December 31,
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 

 

6

 

 

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 the
Three Months
Ended
March 31,
   For the
Three Months
Ended
March 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 

 

7

 

 

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 
           Additional       Total 
   Common       Paid In   Accumulated   Stockholder’s 
(in thousands except share and per share amount)  Stock   Amount    Capital   (Deficit)   Equity 
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)  Total
Members’
Equity
 
Balance, December 31, 2020  $12,245 
Distributions to Members   - 
Net Income   2,792 
Balance, March 31, 2021  $15,037 

 

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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,
2022
   March 31,
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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Exhibit 99.3

 

 

Transcripts

 

The Greenrose Holding Company Inc. CEO Mickey Harley on Q1 2022 Results - Earnings Call Transcript

 

May 16, 2022 7:54 PM ET | Greenrose Holding Company Inc. (GNRS), GNRSU 

 

SA Transcripts
127.02K Followers

 

 

The Greenrose Holding Company Inc. (OTC:GNRS) Q1 2022 Earnings Conference Call May 16, 2022 5:30 PM ET

 

Company Participants

 

Mickey Harley – Chairman and Chief Executive Officer

 

Scott Cohen – Chief Financial Officer

 

Paul Wimer – President

 

Conference Call Participants

 

Operator

 

Good afternoon, everyone and thank you for participating in today’s conference call to discuss the Greenrose Holding Company’s financial results for the First Quarter ended March 31, 2022. Joining us today are Greenrose ’s CEO, Mickey Harley, the company’s CFO, Scott Cowen, and the company’s President, Paul Wark. Before I introduced Mickey, I’d like to remind you that’s during today’s call, including the question-and-answer session, statements that are not historical facts, including any projections or guidance, statements regarding future events or future financial performance or statements of intent or belief are forward-looking statements and are covered by the safe harbor disclaimers contained in today’s press release and the company’s public filings with the SEC.

 

Actual outcomes and results may differ materially from what is expressed in or implied by these forward-looking statements. Specifically, please refer to the company’s Form 10-Q for the quarter ended March 31st, 2022, which was filed prior to this call, as well as other filings made by Greenrose with the SEC from time-to-time. These filings identify factors that could cause results to differ materially from those forward-looking statements. Please also note that during this call, management will be disclosing adjusted EBITDA.

 

 

 

 

This is a non-GAAP financial measure as defined by SEC Regulation G. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure and a statement disclosing the reasons why company management believes that adjusted EBITDA provides useful information to investors regarding the company’s financial condition, and results of operations is included in today’s press release, that is posted on the company’s website. With that I will turn the call over to Mickey.

 

Mickey Harley

 

Thank you, Operator. And good afternoon, everyone. It is a pleasure to speak with all of you today on our first earnings call as a de-SPAC public operating company. We are proud to have entered 2022 with our completed acquisitions of two high-quality cultivation operations: Theraplant in Connecticut, and True Harvest in Arizona. Even in the early days for our company, we are already making progress with strengthening our position in these two emerging recreational state markets.

 

We have worked diligently to build our inventory levels in Connecticut and optimize our production capacity at our operations in both states. But before we discuss our progress in greater detail, I’d like to provide a brief overview of our story and how we got to where we are today for the benefit of new listeners on the call. The Greenrose Holding Company is an early-stage cannabis multi-state operator, with our cultivation operations in Connecticut and Arizona, forming a foundation to grow our platform.

 

Our strategy is cultivation-lead as we work to deliver top quality flower at every price point in each market we serve, and ultimately to become synonymous with extraordinary cannabis products and services. Across our existing production footprint, we are working to optimize our growth capacity and processes to further support our existing wholesale relationships. In each of our markets, we are also working to achieve vertical integration through pursuing opportunities to establish a retail presence.

 

In Connecticut, we closed our acquisition of Theraplant on November 26th, 2021, marking the completion of our Business Combination and the establishment of our cultivation centered operations. We are leveraging Theraplant, strong wholesale presence, and Connecticut ’s limited license structure to strengthen our positioning for the oncoming recreational market. Theraplant is currently the largest of the states for licensed cultivators with a recently expanded 90,000 square foot cultivation and processing facility.

 

Theraplant products are sold, currently sold at all of 18 of the Connecticut existing licensed medical dispensaries with over 35 high-quality flower strains and new products introduced on a weekly basis. From a financial perspective, our Theraplant operations generate solid cash flow and benefits from a stable market-wide pricing environment. In addition, we believe will continue to realize economies of scale as we ramp towards utilizing our full production capacity during the second quarter.

 

However, within the states, current medical market, we experienced headwinds from lower patient demand during the second-half of 2021, and into the first quarter of this year, as well as increased competition stemming from the state illicit market. These headwinds impacted our revenue performance during the quarter, which came in softer than expected. While we do not have a strong visibility on how medical demand may evolve going forward, we have focused on maintaining our strong wholesale relationships with our dispensary partners throughout connected and preparing to serve the States recreational market.

 

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Once it fully comes online. Recreational Cannabis sales in Connecticut are expected to begin later this year after they officially received state legislative approval on July 1st, 2021. Though we currently expect recreational sales to begin in the fourth quarter of this year, we’re closely monitoring the State’s regulatory approach towards activating the sales and working to strengthening our position for this expanded market.

 

To this end, we have already completed a 30,000 square foot expansion at our current cultivation and processing facility, which increased our total available cannabis by over 80%, and gave us additional flexibility to address future growth in our customer base. In fact, we have already completed a population of all the rooms and we expect our last two rooms to complete their first harvest in early June to strengthen our inventory levels.

 

While the new regulatory standards around recreational sales allow the state to grant additional non-vertical cultivation licenses in the near future, we anticipate that the current limited number of licensed cultivators will create supply constraints around high-quality flower once recreational sales commence. We believe Theraplant ’s mature cultivation operations, strong wholesale presence, and recently expanded grow capacity will place us in a prime position to address this need in the market and continue increasing our overall Connecticut market share.

 

In Arizona, we completed our asset acquisition of True Harvest on December 31st, 2021, establishing our strong cultivation presence in the state and marking our entrance into a robust early-stage recreational market. True Harvest is one of the largest indoor cultivators in the state, with a 76,000 square foot cultivation and processing facility run by the Shango cultivation team, producing, among other things, Shango -branded products.

 

Further, as one of the first wholesale operations in Arizona, True Harvest has developed longstanding relationships with dispensaries throughout the state. We currently sell Shango -branded products to approximately 60% of Arizona’s existing retail stores and medical dispensaries and aim to continue growing our wholesale presence even further. We sell Shango -branded products under license in Arizona, and these award-winning products have a strong following among Arizona consumers.

 

Having secured the Number 1 and Number 2 place in the 2021 Arizona Cannabis Cup in the concentrate and flower categories, respectively. Our high-quality products compete at the top shelf in the state market, which has helped us negate potential impacts from the ample competition and pricing softness that have emerged in other product quality categories below that point. While we do not have perfect visibility on how potential pricing pressures may evolve over time, especially mid broader industry volatility, we believe our commitment to and reputation for quality in this market positions us to effectively whether any potential impacts in the long term.

 

Following a statewide commencement of recreational cannabis sales in January of last year, Arizona recorded approximately 1.4 billion in combined medical and recreation sales in 2021. Highlighting the growing market opportunity for True Harbors as we work to optimize our own cannabi. We have already activated two out of our four planned additional grooms with the third, fourth, incremental growth is expected to be operational by the second half of 2022. This will total eight operational grow rooms by the second half of this year. And we are already in the planning stages for our ninth and tenth rooms to increase our capacity even further.

 

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I will note that construction on our most recent grow rooms temporarily impacted our production processes and inventory levels at True Harvest during the first quarter. As we experienced some interruptions to our usual production cycle. These resulted in a softer than expected revenue performance during the first quarter. Further, we expect to resume our operational efficiency and commence restoring our product inventory levels during Q2, as we complete construction on our eight growths.

 

Within the Arizona market overall, the supply high-end flower products have been constrained amid the rapid growth of the recreational market. Similar to what we are anticipating later this year in Connecticut. We believe our expanded capacity and production efficiency in conjunction with the showing customer following for True Harvest Shango brand and products will allow us to meet this demand and continued growing our presence in the state. Our President Paul Wimer will be on later in the call to describe our growth and expansion opportunities in greater detail from the retail opportunities we’re seeing in Connecticut and Arizona to the additional regions we are targeting for growth.

 

At present, I’d like to reiterate that we’re building the foundation of our multi-state operations around two robust, efficient cultivation operations that are positioned to benefit from the implementation of our recreational market and conti -- and continued growth and a nascent recreational market in Arizona. While continuing to deliver top-quality products towards there are plant into harvest unknown. Leading with cultivation allows us to focus on enhancing our capacity and operational efficiencies to serve our rapidly expanding addressable market in each state.

 

While we are still in the early stages of ramping our operations and solidifying our multi-state platform, I’m proud to be collaborating which such talented leadership and cultivation teams at True Harvest and Theraplant. In the year ahead, we are working to build upon these brands interesting advantages, and ultimately deepen their presence within their respective markets. We believe there are plenty of growth opportunities to capture in these margins in the near-term, and that we are building a strong foundation from which to pursue additional expansion opportunities as they arise in contiguous markets. We will have more to stay on these strategic objectives later in the call, but first I’d like to turn the call over to our Chief Financial Officer, Scott Cohen to review our first-quarter financial results. Scott, over to you.

 

Scott Cohen

 

Thank you, Mickey. Change to our financial results, revenue in the first quarter of 2022 increased 15% to $8.2 million compared to $7.2 million in the year-ago quarter. The increase primarily reflects incremental revenue contributions from True Harvest compared to the prior-year the prior period which only included contributions from Theraplant. As Mickey mentioned, our True Harvest revenues were impacted by construction-related production interruptions during the facilities recent grow room expansions.

 

While Theraplant revenues reflect headwinds from the slowing demand trends among licensed patients in Connecticut medical market during the second half of the year, as well as increased competition from the illicit market in particular. Cost of goods sold net for the first quarter of 2022 was 6.4 million compared to 2.7 million in last year’s quarter. This increased primarily reflected significant adjusted for purchase accounting considerations in the fair value step-up of inventory of 2.1 million and costs associated with ramping up our expanded production capacity at both Theraplant and True Harvest.

 

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We also encouraged additional startup costs release to initial planting and production processes, and Theraplant steel production facility. While broader supply chain interruptions in inflation impact have affected our industry as they have in many other industries globally, we’ve taken proactive steps to mitigate into both True Harvest and Theraplant by increasing our inventory stock to the extent possible amid our internal production [Indiscernible] Arizona.

 

We continue to closely monitor any potentially near and long-term impacts related to these macroeconomic concerns. Gross profit in the first quarter of 2022 was $1.8 million compared to $4.5 million in the year-ago quarter, reflecting a gross margin of 22.4% compared to 62.3% in Q1 2021. This decrease primarily reflects the aforementioned purchase accounting considerations in the fair value step-up of inventory, which negatively impacted gross profit by $2.1 million and gross margin negatively by 26%.

 

The decrease also reflects increased costs associated with ramping our production capacity, as well as softer expected revenue performance during the quarter. General administrative expenses of the first quarter of 2022 were $5 million compared to $1.4 million in the prior-year quarter. This increase was primarily due to incremental costs contributions from True Harvest and additional corporate expenses of being a public operating company relative to the prior period, which again, only included expenses from Theraplant.

 

Net loss in the first quarter of 2022 is $14.6 million compared to a net income of $2.8 million in the year-ago quarter. This is primarily attributable to revenue impacting the production interruptions of True Harvest and the demand hindrance of the Connecticut market I mentioned earlier, as well as increased interest expense of $6.6 million, purchase accounting fair value inventory step-up of 2.1 and intangible amortization of $4 million.

 

Adjusted EBITDA for the first quarter of 2022, $0.1 million compared to $4.1 million in the year-ago quarter. The decrease was primarily driven by the lower level of gross profit we generated during the quarter, as well as expenses related to ramping up our expanded production capacity, it’s Theraplant through partners, capital expenditures for the first quarter of 2022, $4 million compared to $1.4 million in the year-ago, quarter.

 

The decrease primarily represents the completion of construction on Theraplant filter-based expansion, which concluded at the end of 2021, while we expect some incremental CapEx relating to completing this next phase of our grown build-out at True Harvest, as well as purchasing some additional processing equipment at True Harvest, we expect to operate at a more maintenance level quarterly run right after we complete our grow rooms at True harvest and begin restoring more normalized operations thereafter.

 

At March 31st, 2022, cash and equivalent -- cash equivalents, mines restricted cash totaled $3.5 million compared to $9.1 million at December 31st, 2021. This decrease was primarily attributable to acquisition late expenses, and debt service. Finally, we have revised our full-year 2022 financial outlook due to ongoing demand headwinds within Connecticut’s medical market, and the impact of construction-related production interruptions at True Harvest.

 

We now expect revenue to range between $100 million to $120-million, with net income expected to range between a net loss of approximately $5 million to a net income of approximately $1 million, excluding any fair value adjustments to financial instruments and transactionally the expenses. In addition, adjusted EBITDA on 2022 is expected to range between $65 and $75 million. As a reminder, these projections assume an expected Q4 2020 to start for recreational Canada sales in Connecticut.

 

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We will continue to focus on growing the business through enhancing our operations, building and maintaining strong wholesale relationships, checking vertical integration opportunities, and providing high-quality products and communities we serve the book Connecticut and Arizona, supported by the operational foundation, we’ve established us far we believe we are well-positioned to address the growing market opportunities in our existing States, and pursue additional opportunities for growth in and around these markets. This concludes my prepared remarks. I’ll turn the call over to Paul.

 

Paul Wimer

 

Thank you, Scott. As we progress further into 2022, we’ll continue to build upon the platform with established with Theraplant True Harvest by deepening our presence in our current state markets and seeking additional expansion opportunities, both within our existing states and across other contiguous states, as the crack of opportunities arise. And our existing state markets we’re comfortable with our current cultivation footprint as our growth capacity provides robust supply to our wholesale markets and has plenty of room for continued expansion.

 

As Mickey mentioned earlier, our next step is to achieve vertical integration through building a retail presence in our multiple avenues we are evaluating to accomplish this. In addition to any available dispensary and license acquisition opportunities that arise in these states, both Connecticut and Arizona’s regulatory structures allow operators to secure dispensary licenses through social equity partnership programs. These programs enable communities that have been disproportionately impacted by the war on drugs to pursue equitable ownership and employment opportunities within their respective States ’ cannabis Industries.

 

As we ramp our presence and operations in our existing states, we’re actively seeking opportunities to partner with these applicants to support their communities and address the harm done by overly harsh drug laws. In Connecticut, current cultivators will have the opportunity to open an unlimited number of recreational stores as a minority partner in a social equity licensed partnership. In addition to the 12 general recreational dispensary licenses that are expected to be rewarded this year.

 

We are currently working to participate in social equity license opportunities, and we will provide further updates as we advanced this process and track how the state’s broader regulatory framework around recreational sales and licensing evolves over the coming months. I will also note that current medical dispensary operators in Connecticut had beginning has been given a licensed open one additional dispensary under the new regulatory structure.

 

As these operators pursue this opportunity and filed a flip to recreational, we’re benefiting from Theraplant strong wholesale relationships as our network of addressable dispensaries is poised to expand once recreational sales commenced. In Arizona, we’re seeking potential dispensary acquisitions and social equity partnerships a like as we begin the early-stages planning our retail expansion states with Arizona’s totaled in number of dispensaries capped at a 169 the state Department of Health Services issued its final 26 social equity Cannabis licenses on April 8th.

 

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We will continue to monitor any further updates on the State’s social equity structure and evaluate potential partnership opportunities as they arise. As we seek to further enhance our current footprint, we intend to target and evaluate opportunities in the West and North Eastern U.S., particularly in contiguous states surrounding Connecticut and Arizona. Ideal targets include sizable vertically integrated operations in these incremental states. Having a vertically integrated foundation placed in Arizona and Connecticut will allow us to compete for new licenses and pursue additional opportunities to acquire branded product leaders with a multi-state presence.

 

Over time, we aim to build a portfolio of high-quality brands across our growing platform, supplementing our current work to enhance the visibility and market share of the Theraplant and Shango brands in Connecticut and Arizona, respectively. While we’ve only just begun to ramp our operations and execute on our growth strategy, our solid cultivation-focused foundation and positioning within rapidly expanding early-stage recreational markets provides us the necessary flexibility to build a robust, multi-state platform. We’re grateful for the support of our shareholders and the dedication of our team as we strive to establish Greenrose as high-quality, multi-state cannabis operator at scale. We’ll now open up the call for Q&A. I’ll hand back to the Operator.

 

Question-and-Answer Session

 

Operator

 

Mickey Harley

 

Thank you, sir. I’d like to thank everyone that attended the call today, and we look forward to speaking with our investors and analysts when we report our second-quarter results in August. Thank you.

 

Operator

 

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

 

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