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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number: 000-56248

 

img6208535_0.jpg 

TRULIEVE CANNABIS CORP.

(Exact Name of Registrant as Specified in its Charter)

 

 

British Columbia

84-2231905

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

6749 Ben Bostic Road

Quincy, FL

32351

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (850) 480-7955

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

N/A

 

N/A

 

N/A

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of August 3, 2022, the registrant had 149,829,674 Subordinate Voting Shares and 36,050,254 Multiple Voting Shares (on an as converted basis) outstanding.

 

 


Trulieve Cannabis Corp.

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

1

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2022 and 2021

2

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2022 and 2021

3

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

5

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

37

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

50

Item 1A.

Risk Factors

50

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3.

Defaults Upon Senior Securities

51

Item 4.

Controls and Procedures

51

Item 5.

Other Information

51

Item 6.

Exhibits

52

 

Signatures

53

 

 

i


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, results of operations and future growth prospects. The forward-looking statements contained herein are based on certain key expectations and assumptions, including, but not limited to, with respect to expectations and assumptions concerning receipt and/or maintenance of required licenses and third party consents and the success of our operations, are based on estimates prepared by us using data from publicly available governmental sources, as well as from market research and industry analysis, and on assumptions based on data and knowledge of this industry that we believe to be reasonable. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q and in “Part I, Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Quarterly Report on Form 10-Q.

 

ii


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Trulieve Cannabis Corp.

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

(audited)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

181,421

 

 

$

230,646

 

Restricted cash

 

 

 

 

 

3,013

 

Accounts receivable, net

 

 

11,856

 

 

 

8,854

 

Inventories, net

 

 

270,206

 

 

 

212,188

 

Notes receivable - current portion

 

 

644

 

 

 

1,530

 

Prepaid expenses and other current assets

 

 

65,877

 

 

 

68,189

 

Total current assets

 

 

530,004

 

 

 

524,420

 

Property and equipment, net

 

 

829,547

 

 

 

779,916

 

Right of use assets - operating, net

 

 

121,705

 

 

 

125,973

 

Right of use assets - finance, net

 

 

79,459

 

 

 

66,764

 

Intangible assets, net

 

 

1,079,283

 

 

 

1,117,982

 

Goodwill

 

 

789,900

 

 

 

765,358

 

Notes receivable, net

 

 

12,123

 

 

 

12,147

 

Other assets

 

 

22,245

 

 

 

18,312

 

TOTAL ASSETS

 

$

3,464,266

 

 

$

3,410,872

 

LIABILITIES

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

83,858

 

 

 

94,073

 

Income tax payable

 

 

23,888

 

 

 

27,610

 

Deferred revenue

 

 

6,371

 

 

 

7,168

 

Notes payable - current portion, net

 

 

9,502

 

 

 

10,052

 

Operating lease liabilities - current portion

 

 

10,899

 

 

 

9,840

 

Finance lease liabilities - current portion

 

 

7,697

 

 

 

6,185

 

Construction finance liabilities - current portion

 

 

1,087

 

 

 

991

 

Contingencies

 

 

22,070

 

 

 

13,017

 

Total current liabilities

 

 

165,372

 

 

 

168,936

 

Long-term liabilities:

 

 

 

 

 

 

Notes payable

 

 

3,435

 

 

 

6,456

 

Private placement notes, net

 

 

538,977

 

 

 

462,929

 

Warrant liabilities

 

 

633

 

 

 

2,895

 

Operating lease liabilities

 

 

128,385

 

 

 

122,130

 

Finance lease liabilities

 

 

78,459

 

 

 

65,244

 

Construction finance liabilities

 

 

182,113

 

 

 

175,198

 

Deferred tax liabilities

 

 

237,641

 

 

 

251,311

 

Other long-term liabilities

 

 

9,159

 

 

 

8,400

 

TOTAL LIABILITIES

 

 

1,344,174

 

 

 

1,263,499

 

Commitments and contingencies (see Note 21)

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Common stock, no par value; unlimited shares authorized. 185,638,197 issued and outstanding as of June 30, 2022 and 180,504,172 issued and outstanding as of December 31, 2021.

 

 

 

 

 

 

Additional paid-in-capital

 

 

2,037,483

 

 

 

2,008,100

 

Accumulated earnings

 

 

83,255

 

 

 

137,721

 

Non-controlling interest

 

 

(646

)

 

 

1,552

 

TOTAL SHAREHOLDERS' EQUITY

 

 

2,120,092

 

 

 

2,147,373

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

3,464,266

 

 

$

3,410,872

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


Trulieve Cannabis Corp.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2022

 

 

June 30, 2021

 

 

June 30, 2022

 

 

June 30, 2021

 

 

 

(unaudited)

 

Revenues, net of discounts

 

$

320,283

 

 

$

215,122

 

 

$

638,631

 

 

$

408,945

 

Cost of goods sold

 

 

138,129

 

 

 

70,639

 

 

 

278,327

 

 

 

129,198

 

   Gross profit

 

 

182,154

 

 

 

144,483

 

 

 

360,304

 

 

 

279,747

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

75,286

 

 

 

46,576

 

 

 

148,148

 

 

 

91,135

 

General and administrative

 

 

33,653

 

 

 

14,942

 

 

 

67,199

 

 

 

27,650

 

Depreciation and amortization

 

 

30,889

 

 

 

6,667

 

 

 

60,194

 

 

 

12,101

 

Impairment and disposal of long-lived assets, net

 

 

4,336

 

 

 

 

 

 

18,116

 

 

 

 

Total expenses

 

 

144,164

 

 

 

68,185

 

 

 

293,657

 

 

 

130,886

 

  Income from operations

 

 

37,990

 

 

 

76,298

 

 

 

66,647

 

 

 

148,861

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(19,678

)

 

 

(6,649

)

 

 

(37,555

)

 

 

(14,548

)

Change in fair value of derivative liabilities - warrants

 

 

1,442

 

 

 

 

 

 

2,262

 

 

 

 

Loss on disposal of non-operating assets

 

 

(719

)

 

 

 

 

 

(3,400

)

 

 

 

Other income (expense), net

 

 

1,713

 

 

 

333

 

 

 

2,628

 

 

 

295

 

Total other expense

 

 

(17,242

)

 

 

(6,316

)

 

 

(36,065

)

 

 

(14,253

)

  Income before provision for income taxes

 

 

20,748

 

 

 

69,982

 

 

 

30,582

 

 

 

134,608

 

Provision for income taxes

 

 

44,769

 

 

 

29,102

 

 

 

87,085

 

 

 

63,650

 

   Net (loss) income and comprehensive (loss) income

 

 

(24,021

)

 

 

40,880

 

 

 

(56,503

)

 

 

70,958

 

   Less: Net loss and comprehensive loss attributed to non-controlling interest

 

 

(1,530

)

 

 

 

 

 

(2,037

)

 

 

 

   Net (loss) income and comprehensive (loss) income attributed to common shareholders

 

$

(22,491

)

 

$

40,880

 

 

$

(54,466

)

 

$

70,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.12

)

 

$

0.33

 

 

$

(0.29

)

 

$

0.59

 

Diluted

 

$

(0.12

)

 

$

0.31

 

 

$

(0.29

)

 

$

0.55

 

Weighted average number of common shares used in computing net (loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

187,174,176

 

 

 

125,631,725

 

 

 

187,124,886

 

 

 

120,351,366

 

Diluted

 

 

187,174,176

 

 

 

133,002,231

 

 

 

187,124,886

 

 

 

127,884,913

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2


Trulieve Cannabis Corp.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(in thousands, except per share data)

 

 

 

Super Voting Shares

 

 

Multiple Voting Shares

 

 

Subordinate Voting Shares

 

 

Total Common Shares

 

 

Additional Paid-in-Capital

 

 

Accumulated Earnings

 

 

Non-Controlling Interest

 

 

Total

 

Balance, January 1, 2022 (audited)

 

 

 

 

 

51,916,999

 

 

 

128,587,173

 

 

 

180,504,172

 

 

$

2,008,100

 

 

$

137,721

 

 

$

1,552

 

 

$

2,147,373

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,564

 

 

 

 

 

 

 

 

 

4,564

 

Exercise of stock options

 

 

 

 

 

 

 

 

45,775

 

 

 

45,775

 

 

 

108

 

 

 

 

 

 

 

 

 

108

 

Shares issued for cash - warrant exercise

 

 

 

 

 

 

 

 

1,648

 

 

 

1,648

 

 

 

22

 

 

 

 

 

 

 

 

 

22

 

Shares issued under share compensation plans

 

 

 

 

 

 

 

 

16,257

 

 

 

16,257

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax withholding related to net share settlements of equity awards

 

 

 

 

 

 

 

 

(10,005

)

 

 

(10,005

)

 

 

(230

)

 

 

 

 

 

 

 

 

(230

)

Conversion of Multiple Voting to Subordinate Voting Shares

 

 

 

 

 

(2,699,100

)

 

 

2,699,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for PurePenn, Pioneer, and Solevo earnouts

 

 

 

 

 

 

 

 

3,626,295

 

 

 

3,626,295

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

(50

)

Divestment of variable interest entity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(111

)

 

 

(111

)

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,975

)

 

 

(507

)

 

 

(32,482

)

Balance, March 31, 2022 (unaudited)

 

 

 

 

 

49,217,899

 

 

 

134,966,243

 

 

 

184,184,142

 

 

$

2,012,564

 

 

$

105,746

 

 

$

884

 

 

$

2,119,194

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,703

 

 

 

 

 

 

 

 

 

5,703

 

Exercise of Stock options

 

 

 

 

 

 

 

 

2,997

 

 

 

2,997

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for cash - warrant exercise

 

 

 

 

 

 

 

 

1,426,614

 

 

 

1,426,614

 

 

 

19,216

 

 

 

 

 

 

 

 

 

19,216

 

Subordinate Voting Shares issued under share compensation plans

 

 

 

 

 

 

 

 

24,444

 

 

 

24,444

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Multiple Voting to Subordinate Voting Shares

 

 

 

 

 

(13,091,800

)

 

 

13,091,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,491

)

 

 

(1,530

)

 

 

(24,021

)

Balance, June 30, 2022 (unaudited)

 

 

 

 

 

36,126,099

 

 

 

149,512,098

 

 

 

185,638,197

 

 

$

2,037,483

 

 

$

83,255

 

 

$

(