John SchroyerSeveral big-name publicly traded cannabis companies in California are in obvious distress, which begs the question, how long until more of them join the conga line into receivership and bankruptcy?
Last week alone, Lowell Farms (CSE: LOWL) (OTCQX: LOWLF) reported that it lost another $3.6 million in its latest quarter, and then told shareholders during its earnings call that the company let go 45% of staff between July and October, a move that is anticipated to save the business $546,000 in the fourth quarter.
In addition to the the headcount slashing announcement, CEO Mark Ainsworth noted during the call, “On a nine-month year-to-date basis, operating expenses decreased by $1.8 million to $5.5 million, reflecting the implementation of cost reduction initiatives.”
Gold Flora Corp. (CBOE: GRAM) (OTCQB: GRAM) is also obviously floundering, with $18.8 million in losses for the most recent quarter, and a lawsuit from one of its vendors was filed on Nov. 1 alleging that the business has not paid its debts to partners in the California cannabis supply chain.
Gold Flora’s CFO, Marshall Minor, also revealed during the company’s earnings call last week that the business had initiated a 10% payroll reduction to help cut costs.
Despite all of those headwinds, CEO Laurie Holcomb insisted in last week’s earnings call that it’s planning more expansion, particularly with its new branded line of cannabis products, dubbed Gramlin.
“Thanks to our scale and infrastructure, we’re able to offer its premium indoor grown products at a price point that few competitors can match, meeting the demand for quality, consistency and safety while maintaining strong value,” Holcomb said. “Our vertical integration makes this all possible and to support this growth further and also the expansion of Gramlin.”
Holcomb’s optimism may partially stem from the fact that the company is also among the publicly traded cannabis businesses that filed amended federal tax returns with the Internal Revenue Service to claim exemption from the 280E tax provision, which has in the past barred cannabis companies from claiming standard business tax deductions.
The strategy, which has adopted by several other multistate operators such as Trulieve Cannabis Corp. and Glass House Brands, is expected to net Gold Flora “somewhere between $10 million to $14 million of potential refunds” in the near future from the IRS, Holcomb said on the earnings call.
With the company’s bottom line full of red ink, that cash injection will probably be a godsend. But whether it’ll be enough to course-correct back into profitability remains to be seen.
