Trees Corporation, a publicly traded vertically-integrated cannabis company, is looking for new investors or buyers to help it overcome its financial challenges and continue its expansion plans. The company, which operates in Colorado and Oregon, has been struggling with debt and cash flow issues for the past few years.
The History of Trees Corporation
Trees Corporation was founded in 2010 as a medical marijuana dispensary in Colorado. It later expanded to Oregon and became one of the first public companies to receive suitability approval from the Colorado Marijuana Enforcement Division. The company also acquired several other cannabis brands and businesses, such as SevenFive Farm, Green Tree, and Green Man Cannabis, to diversify its portfolio and increase its market share.
The Challenges of Trees Corporation
Despite its ambitious growth strategy, Trees Corporation has faced several obstacles that have hampered its performance and profitability. Some of these challenges include:
- High debt and interest payments: The company has accumulated a significant amount of debt, mainly from its acquisitions and capital expenditures. As of September 30, 2023, the company had a total debt of $18.7 million, with an annual interest expense of $2.4 million. The company has been unable to generate enough cash flow to service its debt obligations, resulting in defaults and restructuring agreements with its lenders.
- Low revenue and margins: The company has also experienced a decline in its revenue and margins, due to increased competition, regulatory changes, and operational inefficiencies. The company’s revenue decreased by 9% from $14.8 million in 2021 to $13.5 million in 2022. The company’s gross margin also dropped from 36% in 2021 to 29% in 2022, indicating a lower profitability and higher cost of goods sold.
- Lack of liquidity and working capital: The company has also faced a shortage of liquidity and working capital, which has limited its ability to fund its daily operations and invest in new opportunities. The company’s current ratio, which measures its ability to pay its short-term liabilities, was 0.28 as of September 30, 2023, well below the industry average of 1.5. The company’s working capital deficit, which measures the difference between its current assets and current liabilities, was $13.9 million as of September 30, 2023, indicating a severe cash crunch.
The Future of Trees Corporation
In order to address its financial difficulties and secure its future, Trees Corporation has announced that it is seeking new investors or buyers who can provide it with the necessary capital and expertise to turn around its business and achieve its growth potential. The company has hired an investment banking firm, Canaccord Genuity, to assist it with the process of finding suitable partners or purchasers.
The company has stated that it is open to various options, such as equity financing, debt restructuring, asset sales, joint ventures, mergers, or acquisitions. The company has also expressed its confidence in its underlying assets and operations, which it believes have a strong value proposition and competitive advantage in the cannabis industry.
The company has also highlighted some of its strengths and opportunities, such as:
- A diversified and loyal customer base: The company has a loyal and diverse customer base, ranging from medical patients to recreational users, across different demographics and preferences. The company has also established a strong brand recognition and reputation in the markets it operates in, as well as a high level of customer satisfaction and retention.
- A robust and scalable retail network: The company has a robust and scalable retail network, consisting of 13 dispensaries in Colorado and Oregon, with plans to open more stores in the near future. The company has also invested in enhancing its retail experience, by offering a wide selection of products, online ordering, delivery, loyalty programs, and educational content.
- A quality and innovative product portfolio: The company has a quality and innovative product portfolio, which includes flower, pre-rolls, concentrates, edibles, topicals, and beverages. The company has also developed its own proprietary strains and formulations, as well as partnered with leading brands and manufacturers, to offer a differentiated and premium product offering to its customers.
- A strategic and efficient cultivation facility: The company has a strategic and efficient cultivation facility, located in Boulder, Colorado. The facility is a 17,000 square foot light-deprivation greenhouse, which uses advanced technology and automation to produce high-quality and consistent cannabis at a low cost. The facility also has the capacity to produce up to 3,600 pounds of cannabis per year, which can supply the company’s own retail network and wholesale customers.
The company has stated that it is optimistic about the future of the cannabis industry, which is expected to grow rapidly in the coming years, driven by increasing legalization, social acceptance, and consumer demand. The company has also stated that it is committed to delivering value to its shareholders, customers, employees, and communities, and that it is hopeful that it will find a suitable partner or buyer who can help it achieve its vision and goals.