CLS Holdings (CLSH.C) is now a multi-state “adult use” cannabis operator

On November 05, 2019 CLS Holdings (CLSH.C) announced that “In Good Health”, a licensed medical dispensary, will begin the sale of recreational cannabis from its retail location in Brockton, Massachusetts.

CLS Holdings is executing a “seed to sale” growth strategy that involves buying cannabis dispensaries, cultivators and producers.

Brockton, MA Brockton has been named one of the 100 Best Communities for Young People for its efforts to reduce dropout rates.

Five weeks ago, CLS announced that “In Good Health” – had received final approvals from the state of Massachusetts to begin processing and dispensing recreational cannabis, so the transition from rec approval – to rec sales – was fast.

“To be among the first medical dispensaries in the state to navigate the rigorous gauntlet of regulatory oversight to obtain recreational or “adult use” status is a major accomplishment,” stated Jeff Binder, chairman and CEO of CLS.

To date, only 27 recreational cannabis retail licenses have been granted by the Massachusetts’ Cannabis Control Commission (CCC).

Selling rec weed in Massachusetts is likely to add to CLS’s Q2, 2020 bottom line.

The Q1, 2020 financials, announced on October 15, 2019 weren’t too shabby.

“The financial results continue to support and validate our strategy in Nevada,” stated Andrew Glashow, President and COO of CLS Holdings, “including at our Oasis Cannabis dispensary and within our City Trees line of branded products.”

Q1 2020 Highlights vs. a year earlier:

Consolidated revenue of $2.9 million – up 72.7%.
Gross profit of $1.4 million – up 147.7%
Profit margin of 50.6% – up 35.3%

CLS also reported “cash and cash equivalents” of $5.9 million as of August 31, 2019. The company’s Oasis Cannabis dispensary recorded revenue of of $2.1 million, a 96.6% increase from a year earlier – averaging 583 customers a day.

Oasis Cannabis generated revenue of $397/sq. foot – an increase of 93.6% for a year earlier.

That extrapolates to about $1,580/sq. foot/year.

By way of contrast, Home Depot (HD.NYSE) generates $500 sq. foot/year. Leading apparel retailer Lululemon Athletica (LULU.Q) pulls $1,560 per square foot. Apple (AAPL.NASDAQ) is the top retailer in terms of sales per square foot, coming in at about $6,000 sq. foot/year.

In Q1, 2020, CLS recorded a net loss of $1.4 million – down 82% from a year earlier.

“Our Oasis Cannabis and City Trees subsidiaries are profitable on a stand-alone basis,” stated Jeffrey Binder, Chairman and CEO, “Our consolidated net loss stems primarily from those costs associated with being a publicly traded company and costs associated with the parent holding company.”

Located 25 miles south of Boston, “In Good Health’s” closest competitor is 23 miles away.

Recreational Dispensary Highlights:

Serves a population of 425,000 people (within 20 miles)
80 dedicated customer parking spaces
Operates 147 hours a week (from 8AM to 8PM)
25,000 registered patients
20,000 square foot cultivation operation
High-quality branded products division
The November 5, 2019 press release states that the “fully complete and operational 52,000 square foot facility” can generate $70 million of revenue and gross profit margins of 60%”.

“A lot of hard work and long hours went into garnering this highly sought-after adult use cannabis license,” stated Binder, “In Good Health feels immense pride being one of only 30 dispensaries in the entire State to achieve this status.”

“We see many similarities in the Massachusetts and Nevada market, and are eager to apply our operational learnings to this already well oiled machine at In Good Health,” stated Glashow.

“We can comfortably service as many as 2,000 customers per day,” stated David Noble, President of In Good Health, “after adding 35 full time employees to our team. Most importantly, our recently added cultivation space allows us to produce up to 10,000 pounds of finished cannabis flower annually, ensuring that no matter how busy we get, we will be able to keep our shelves fully stocked with one of the best selections of products in the state.”

CLSH has developed a proprietary method of extracting cannabinoids from cannabis plants and converting the resulting cannabinoid extracts into concentrates such as oils, waxes, edibles and shatter.

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