Executive Summary

Q1 FY2022 marked CLS Holdings USA’s first-ever profitable quarter: Net income of $0.43M, EBITDA of $1.35M, and Adjusted EBITDA of $0.19M, driven by 45% YoY revenue growth and stable 53% gross margin .
Revenue was $5.50M, with Dispensary at $3.75M and Production at $1.76M; Oasis processed 65,092 customer transactions (+19% YoY) and City Trees growth and market share gains supported mix improvement .
A one-time gain related to the IGH settlement ($1.17M) boosted pre-tax income; however, the company accrued taxes under IRC 280E (effective tax rate 43.4%), tempering net income conversion .
Management highlighted ongoing JV initiatives (Fort McDermitt “Quinn River Farms II”) and product expansion as catalysts, while noting no major capex projects planned over the next 12 months and rising working capital needs .

What Went Well and What Went Wrong

What Went Well
- First profitable quarter in company history; “We are beyond proud to have achieved profitability for the first time…” (President & COO Andrew Glashow) .
- Strong top-line and mix: Revenue +45%, Production +152% YoY (City Trees), Dispensary +21% YoY (Oasis), with gross margin maintained at 53% .
- SG&A improved as a percent of revenue to 53% from 64% YoY and interest expense fell 43%, supporting EBITDA of $1.35M and Adjusted EBITDA of $0.19M .
What Went Wrong
- Earnings quality impact: Pre-tax income benefited from a non-recurring $1.17M gain on the IGH settlement, and the company still showed net cash used in operations of $(0.79)M .
- Tax headwind: Accrual under IRC 280E produced a 43.4% effective tax rate despite NOLs, muting net income conversion from EBITDA .
- Working capital pressures and continued need for external capital; management expects increasing working capital needs and may seek additional debt/equity financing .

Segment revenue breakdown:

Segment Revenue ($USD)	Q1 2021	Q1 2022
Dispensary (Oasis)	$3,085,525	$3,745,575
Production (City Trees)	$695,344	$1,755,135

KPIs and operating metrics:

KPI	Q1 2021	Q1 2022
Number of Customers (Dispensary)	54,738	65,092
SG&A ($USD)	$2,404,443	$2,895,794
SG&A (% Revenue)	64%	53%
Interest Expense, Net ($USD)	$732,602	$418,592
Tax Provision ($USD)	$0	$328,340
Net Cash Used in Operating Activities ($USD)	$(703,545)	$(785,275)
Cash & Equivalents, End of Period ($USD)	$2,887,102	$1,961,091

Notes:

Estimate comparison is not provided; S&P Global consensus data was unavailable for CLSH in Q1 FY2022.

Metric	Period	Previous Guidance	Current Guidance	Change
Gross Margin target	Ongoing	Target “over 50%” (implicit)	Maintained >50% and achieved 53%	Maintained
Capital Expenditure	Next 12 months	N/A	No capital projects planned	Maintained discipline
Working Capital	Next 12 months	N/A	Working capital needs likely to increase	Raised caution
Tax Policy	Current quarter	N/A	Accrual under IRC 280E; effective tax rate 43.4%	Headwind reiterated
Strategic JV (Quinn River Farms II)	Multi-year	N/A	Management services agreement signed; CLS entitled to 16.67% of net profit; $3M investment to be repaid over two years	New initiative

(Company did not publish a Q1 FY2022 earnings call transcript; themes reflect filings and subsequent calls for narrative continuity.)

Topic	Q-2 (FY2021 10-K)	Q-1 (Pre-Q1 period)	Current Period (Q1 2022)	Trend
Supply chain & logistics	Emphasis on compliance, distributor licensing; raw material pricing benefits	IGH settlement funds identified, enabling cash inflows	“Improvements in purchasing and timely delivery,” more toll processing customers, stronger systems/controls	Improving execution
Pricing/macro	Target retail gross margin 60–65%; competitive pricing strategy	—	Maintained 53% gross margin; dispensary average sales/day up (to $40,713)	Stable margin, pricing effective
Product performance	City Trees brand expansion and product lines; wholesale growth strategy	City Trees rebrand progress (late FY2021)	City Trees ranked #3 in units in concentrates; #1 in dabbable concentrates in Aug; Oasis transaction growth	Share gains in concentrates
Regulatory/legal	Extensive Nevada regulatory disclosures; 280E risks outlined	—	Accrued taxes under 280E, 43.4% effective rate	Persistent tax headwind
R&D/product innovation	New products and processes; patent for extraction	—	R&D spend minimal ($600); brand and category expansion via JV/partnerships	Platform expansion via JVs

“We are beyond proud to have achieved profitability for the first time in our Company’s history… we foresee continued growth and success in the future.” — Andrew Glashow, President & COO .
“With the announcement of our new joint ventures and other innovative launches on the horizon, we foresee continued growth and success in the future.” — Andrew Glashow .
Press release highlighted City Trees’ market leadership in tinctures, and units sold rank (#3 overall concentrates for the quarter; #1 dabbable in August) .

No Q1 FY2022 earnings call transcript was available; management insights derived from the 8-K press release and 10-Q MD&A .

Wall Street consensus estimates for CLSH Q1 FY2022 (Primary EPS and Revenue) were unavailable via S&P Global; therefore, estimate comparisons and beat/miss analysis cannot be provided.

Profitability inflection: First positive net income driven by revenue growth, stable margins, and operating cost discipline; watch sustainability absent non-recurring gains .
Mix shift and brand strength: City Trees’ outsized growth (+152% YoY) and market share gains should continue to support Production revenue and blended margins .
Tax drag and cash dynamics: 280E accrual and negative operating cash flow remain key constraints; investors should monitor tax strategy, cash conversion, and working capital management .
Leverage and financing: Interest expense declined YoY; however, financing needs remain (working capital, potential acquisitions/JVs); watch debt terms and convertible debenture dynamics .
Execution catalysts: Strategic JV (Quinn River Farms II) and ongoing category innovation provide medium-term growth vectors; track JV milestones and unit economics .
Margin stewardship: Maintaining >50% gross margin in a competitive Nevada market is notable; continued purchasing optimization and toll processing can support margin resilience .
Estimates unavailable: With limited external coverage, price reactions may hinge on internal milestones (profitability persistence, JV progress) and reported operating/KPI momentum.

References: 8-K Q1 FY2022 press release and exhibits ; 10-Q Q1 FY2022 –; JV 8-K (Oct 26, 2021) –; IGH settlement 8-K (Jun 17, 2021) –; FY2021 10-K –.