Outperforming in Nevada; Expanding Nationally
CLS Holdings is a vertically integrated cannabis company with core operations in Nevada. Nevada is the 32nd most populous state with 3.14 million residents. The state had 40.8 million visitors in 2023, ranking it fifth worldwide in tourism. Nevada ranks second in cannabis sales per capita, driven by the large number of tourists. The company owns and operates Oasis Cannabis Dispensary, a popular retail cannabis store for locals and visitors. It is a ~2,500-square-foot recreational and medical dispensary located in downtown Las Vegas. Oasis obtained a conditional cannabis consumption lounge license and plans to open the lounge later in 2024. City Trees is CLS’ extraction and manufacturing business. It began in 2017 and received its certificate of occupancy for its 22,500-square-foot state-of-the-art extraction facility in 2019. City Trees manufactures a variety of extracts, oils, tinctures, capsules, cartridges, and pre-rolls. The company has strong brands. According to BDSA, City Trees is Nevada’s top-selling vape brand and number two by total units sold in the inhalables, concentrates, extracts, and vape only category. PUF and Naked City are newer brands targeting specific audiences with value pricing. CLS is using an asset-light approach to expand into new markets. It recently entered New Mexico where it is licensing and manufacturing vapor cartridges and tinctures. We expect the company to use a similar approach to expand its footprint in 2024. City Trees CBD is a revenue diversifier and enhancer. The new line is currently focused on CBD and sleep formulations enhanced with CBN and has the potential to expand into other rare cannabinoids. As these products do not include THC, they can be distributed nationally. The balance sheet is improving. On February 26, 2024, the company retired a total of $1,526,250 in principal and interest repayment obligations owed. CLS also reduced the number of shares by acquiring 13,274,780 shares previously held by the debenture holder. The transaction reduced borrowing costs by 8.50% and eliminated 9.50% of the issued and outstanding shares. CLS has a strong and passionate management team. Led by CEO Andrew Glashow, CLS blends science, business, and community involvement to build a lasting and constructive culture.
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