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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 March 31, 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

 

img6205653_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 May 5, 2022, the registrant had 135,001,544 Subordinate Voting Shares and 49,217,899 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 March 31, 2022 and December 31, 2021

1

 

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2022 and 2021

2

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2022 and 2021

3

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

4

 

Notes to Condensed Consolidated Financial Statements

5

Item 2.

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

35

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

44

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

 

Signatures

49

 

 

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)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

(audited)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

267,226

 

 

$

230,646

 

Restricted cash

 

 

 

 

 

3,013

 

Accounts receivable, net

 

 

12,782

 

 

 

8,854

 

Inventories, net

 

 

236,427

 

 

 

212,188

 

Notes receivable - current portion

 

 

634

 

 

 

1,530

 

Prepaid expenses and other current assets

 

 

76,182

 

 

 

68,189

 

Total current assets

 

 

593,251

 

 

 

524,420

 

Property and equipment, net

 

 

805,999

 

 

 

779,916

 

Right of use assets - operating, net

 

 

121,972

 

 

 

125,973

 

Right of use assets - finance, net

 

 

70,225

 

 

 

66,764

 

Intangible assets, net

 

 

1,098,278

 

 

 

1,117,982

 

Goodwill

 

 

789,900

 

 

 

765,358

 

Notes receivable, net

 

 

12,188

 

 

 

12,147

 

Other assets

 

 

34,041

 

 

 

18,312

 

TOTAL ASSETS

 

$

3,525,854

 

 

$

3,410,872

 

LIABILITIES

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

109,810

 

 

 

94,073

 

Income tax payable

 

 

77,687

 

 

 

27,610

 

Deferred revenue

 

 

6,514

 

 

 

7,168

 

Notes payable - current portion, net

 

 

9,481

 

 

 

10,052

 

Private placement notes - current portion

 

 

1,874

 

 

 

 

Operating lease liabilities - current portion

 

 

10,553

 

 

 

9,840

 

Finance lease liabilities - current portion

 

 

6,905

 

 

 

6,185

 

Construction finance liabilities - current portion

 

 

1,154

 

 

 

991

 

Contingencies

 

 

13,826

 

 

 

13,017

 

Total current liabilities

 

 

237,804

 

 

 

168,936

 

Long-term liabilities:

 

 

 

 

 

 

Notes payable

 

 

3,476

 

 

 

6,456

 

Private placement notes, net

 

 

537,703

 

 

 

462,929

 

Warrant liabilities

 

 

2,075

 

 

 

2,895

 

Operating lease liabilities

 

 

128,575

 

 

 

122,130

 

Finance lease liabilities

 

 

69,167

 

 

 

65,244

 

Construction finance liabilities

 

 

175,032

 

 

 

175,198

 

Deferred tax liabilities

 

 

243,395

 

 

 

251,311

 

Other long-term liabilities

 

 

9,433

 

 

 

8,400

 

TOTAL LIABILITIES

 

 

1,406,660

 

 

 

1,263,499

 

Commitments and contingencies (see Note 21)

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Common stock, no par value; unlimited shares authorized. 184,184,142 issued and outstanding as of March 31, 2022 and 180,504,172 issued and outstanding as of December 31, 2021.

 

 

 

 

 

 

Additional paid-in-capital

 

 

2,012,564

 

 

 

2,008,100

 

Accumulated earnings

 

 

105,746

 

 

 

137,721

 

Non-controlling interest

 

 

884

 

 

 

1,552

 

TOTAL SHAREHOLDERS' EQUITY

 

 

2,119,194

 

 

 

2,147,373

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

3,525,854

 

 

$

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

 

 

 

March 31, 2022

 

 

March 31, 2021

 

 

 

(unaudited)

 

Revenues, net of discounts

 

$

318,348

 

 

$

193,823

 

Cost of goods sold

 

 

140,198

 

 

 

58,559

 

   Gross profit

 

 

178,150

 

 

 

135,264

 

Expenses:

 

 

 

 

 

 

Sales and marketing

 

 

72,862

 

 

 

44,558

 

General and administrative

 

 

33,546

 

 

 

12,709

 

Depreciation and amortization

 

 

29,305

 

 

 

5,434

 

Impairment and disposal of long-lived assets

 

 

13,780

 

 

 

 

Total expenses

 

 

149,493

 

 

 

62,701

 

  Income from operations

 

 

28,657

 

 

 

72,563

 

Other income (expense):

 

 

 

 

 

 

Interest expense, net

 

 

(17,877

)

 

 

(7,899

)

Change in fair value of derivative liabilities - warrants

 

 

820

 

 

 

 

Loss on divestment and sale of non-operating assets

 

 

(2,681

)

 

 

 

Other income (expense), net

 

 

915

 

 

 

(37

)

Total other expense

 

 

(18,823

)

 

 

(7,936

)

  Income before provision for income taxes

 

 

9,834

 

 

 

64,627

 

Provision for income taxes

 

 

42,316

 

 

 

34,549

 

   Net (loss) income and comprehensive (loss) income

 

 

(32,482

)

 

 

30,078

 

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

 

 

(507

)

 

 

 

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

 

$

(31,975

)

 

$

30,078

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

Basic

 

$

(0.17

)

 

$

0.25

 

Diluted

 

$

(0.17

)

 

$

0.24

 

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

 

 

 

 

 

 

Basic

 

 

187,054,916

 

 

 

119,892,507

 

Diluted

 

 

187,054,916

 

 

 

127,589,096

 

 

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, 2021 (audited)

 

 

58,182,500

 

 

 

1,439,037

 

 

 

59,952,461

 

 

 

119,573,998

 

 

$

328,214

 

 

$

119,689

 

 

$

 

 

$

447,903

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

741

 

 

 

 

 

 

 

 

 

741

 

Shares issued for cash - warrant exercise

 

 

 

 

 

 

 

 

469,133

 

 

 

469,133

 

 

 

6,861

 

 

 

 

 

 

 

 

 

6,861

 

Conversion of warrants to Subordinate Voting Shares

 

 

 

 

 

 

 

 

133,408

 

 

 

133,408

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Multiple Voting to Subordinate Voting Shares

 

 

 

 

 

(117,668

)

 

 

117,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Super Voting to Subordinate Voting Shares

 

 

(3,021,100

)

 

 

 

 

 

3,021,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Super Voting to Multiple Voting Shares

 

 

(55,161,400

)

 

 

55,161,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income and comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,078

 

 

 

 

 

 

30,078

 

Balance, March 31, 2021 (unaudited)

 

 

 

 

 

56,482,769

 

 

 

63,693,770

 

 

 

120,176,539

 

 

$

335,816

 

 

$

149,767

 

 

$

 

 

$

485,583

 

 

 

 

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 earnout

 

 

 

 

 

 

 

 

3,626,295

 

 

 

3,626,295

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

(50

)

Divestment of variable interest entity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(111

)

 

 

(111

)

Net (loss) income 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

 

 

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

 

3


Trulieve Cannabis Corp.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended
March 31, 2022

 

 

Three Months Ended
March 31, 2021

 

 

 

(unaudited)

 

Cash flow from operating activities

 

 

 

 

 

 

Net (loss) income and comprehensive (loss) income

 

$

(32,482

)

 

$

30,078

 

Adjustments to reconcile net (loss) income and comprehensive (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

29,305

 

 

 

5,434

 

Depreciation included in cost of goods sold

 

 

10,692

 

 

 

3,667

 

Non-cash interest expense

 

 

1,232

 

 

 

(41

)

Non-cash interest income

 

 

(163

)

 

 

 

Loss on impairment and disposal of long-lived assets

 

 

13,780

 

 

 

 

Loss on settlement of held for sale assets, net

 

 

1,862

 

 

 

 

Loss on lease terminations

 

 

819

 

 

 

 

Amortization of operating lease right of use assets

 

 

2,892

 

 

 

1,573

 

Share-based compensation

 

 

4,564

 

 

 

741

 

Accretion of construction finance liabilities

 

 

293

 

 

 

711

 

Change in fair value of derivative liabilities - warrants

 

 

(820

)

 

 

 

Change in legal contingencies

 

 

(1,248

)

 

 

 

Allowance for credit losses

 

 

42

 

 

 

 

Deferred income tax expense

 

 

 

 

 

(1,487

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Inventories

 

 

(21,957

)

 

 

(5,598

)

Accounts receivable

 

 

(3,970

)

 

 

(2,309

)

Prepaid expenses and other current assets

 

 

(8,094

)

 

 

(1,673

)

Other assets

 

 

(16,216

)

 

 

(7,298

)

Accounts payable and accrued liabilities

 

 

22,093

 

 

 

595

 

Income tax payable

 

 

42,210

 

 

 

36,540

 

Operating lease liabilities

 

 

(2,106

)

 

 

(943

)

Deferred revenue

 

 

(654

)

 

 

(399

)

Other current liabilities