CLS Holdings USA, Inc. (CLSH) is Delivering Record Revenues from Legal Cannabis via Production, Distribution and Retail Sales

New Dispensary in Eastern Massachusetts Reaching Under-Served Market Area for Medicinal and High Growth Recreational Sales

CLS Holdings USA, Inc.  is a publicly traded company on the OTC exchange under the trading symbol CLSH. CLS stands for ”Cannabis Life Sciences,” in recognition of the Company’s patented proprietary method of extracting various cannabinoids from the marijuana plant and converting them into products with a higher level of quality and consistency. The company business model includes licensing operations, processing operations, processing facilities, sale of products, brand creation and consulting services.

CLSH is particularly interesting as this is a diversified cannabis company that acts as an integrated producer and retailer through its Oasis Cannabis subsidiaries in Nevada with expansion plans into other states, commencing with Massachusetts.  CLS Holdings has a definitive agreement to enter Massachusetts by the end of 2019, a state with relatively few cannabis medicinal dispensaries and only about half a dozen meaningful recreational cannabis retail locations.

Revenues Reaching Record Levels

In the CLSH fiscal year ending on May 31st annual revenue was reported at $8.5 million. For the month of August, the company reported record unaudited consolidated revenue of $1.16 million compared to $0.66 million in August 2018, an increase of over 77%.  These results included the following:

  • Record revenue from the CLSH Oasis Cannabis dispensary of $746,174, an 84.1% increase over August 2018 dispensary revenue of $405,357.
  • A 109.9% increase in dispensary customers, from 9,165 (average of 296 per day) in August 2018 to a record 19,235 (average of 620 per day) in August 2019.
  • Revenue from City Trees, the Company’s branded products and bulk flower division, of $417,908, a 65.8% increase over August 2018 City Trees revenue of $252,134.
  • August 2019 consolidated gross margin of 50.61%, up from August 2018 consolidated gross margin of 34.25%.

Acquisition Target “In Good Health” Receives Massachusetts State Approval for Final Recreational License

In Good Health, a licensed medical dispensary, which CLSH has the exclusive right to acquire in January 2020, was granted on September 13, 2019, a final license for recreational cannabis use at its current location in Brockton, MA.  Recreational use sales are projected to grow dramatically in the next several years, making this development highly significant for the company.  Started in September 2015, In Good Health operates a large medical cannabis dispensary business consisting of over 25,000 registered patients, delivery to 2,800 patients per month and maintains an 18,000 square foot grow with capacity to produce 9,000 pounds of finished flower per year. At today’s retail price of $7,000 per pound this fully built-out operation is capable of generating $60 million in annual revenue with a gross profit of $35 million. In Good Health has developed high-quality branded products from its headquarters in Brockton, Massachusetts located roughly 25 miles south of Boston. As a result of this approval, In Good Health becomes one of the first 30 dispensaries in the state of Massachusetts to offer both THC and CBD based cannabis products for recreational use.

CLS anticipates that it will complete the acquisition of In Good Health in January 2020, subject to satisfaction of applicable closing conditions. The purchase of In Good Health fits with the Company’s stated goal of becoming a multi-state-operator (MSO) adding the vertically integrated business of In Good Health to the Company’s Nevada operations, consisting of the Company’s 100% owned Oasis dispensary just off the Las Vegas strip, its City Trees line of THC/CBD and bulk flower products, its exclusive distribution license of CENTR brands CBD infused beverages for the state of Nevada and its patented proprietary process for extracting delta-9 THC from raw cannabis flower.

Strategic Advantages Over Competitors

The CLS efforts to open its newest medicinal and recreational cannabis dispensary in Brockton, MA is turning out to be an exceptionally good move for multiple reasons. Brockton is the 5th largest city in MA with a population within a 10-mile radius of over 235,000 and a population within a 20-mile radius of over 425,000.  Opportunistically, however, Brockton offers only weak representation by competitors.  The closest competition is from New England Treatment Access (NETA) a company recently purchased by Surterra Wellness for $250 million, but this is 22.8 miles away. Garden Remedies in Newton is at 27.9 miles, Verilife in Wareham 31.6 miles out and Northeast Alternatives in Fall River is 32.5 Miles distant.

The Brockton CLS Holdings dispensary will be the second largest in MA and the company projects it will do $15million in revenue for 2020.  Among the advantages this facility will have will be over 100 parking spaces for customers. In contrast, NETA has only 6 spaces, Garden Remedies 10, Verilife 10 and Northeast Alternatives 20. Having large capacity parking is a rare commodity in the Brockton area and the new CLS dispensary will have the most, by far.

Additionally, CLS has begun the process of applying for increased hours of operation in Brockton.  The company is currently zoned to operate 8am-8pm but has requested 8am-10pm hours.  Management believes within 90 days this will be granted. On a side note, due to NETA having few parking spaces and being very busy, local residents have signed a petition to reduce their hours to close at 6 or 7pm.  Also, at Garden Remedies in Newton, due to limited parking issues, they have been forced to operate by appointment only.  The opportunity for increased hours at the CLS facility should translate to a great competitive advantage in staying open later than all of the local competition.

Exclusive Distribution Agreement with CENTER Brands Corp to Distribute CBD Beverages

In August CLS holdings announced an exclusive distribution agreement with CENTR Brands Corp. (through its Alternative Solutions LLC subsidiary) to distribute CENTR’s 15mg and 30mg sparkling CBD beverages to cannabis dispensaries throughout Nevada. CLS is making the product available through its current distribution network to cannabis dispensaries in Nevada.

Well Positioned and Winning in the Emerging Legal Cannabis Market

Overall, CLSH is succeeding on all fronts to optimize the company’s well-positioned and expanding operations in the emerging legal cannabis marketplace for both medicinal and recreational use.  Breakout revenue results should be seen in 2020 as a result of the company’s operations, especially the new dispensary location in the high growth potential region of Brockton, MA.  For additional information visit the company’s website at: https://www.clsholdingsinc.com/