Hello, everyone. Welcome to today's conference call to discuss Harborside's first quarter 2021 financial results. A press release detailing the financial results was distributed prior to the call and is available on the investor relations section of the Harborside website. On the call today are Matt Hawkins, Chairman of the Board of Directors, Peter Bilodeau, Interim Chief Executive Officer, and Tom DiGiovanni, Chief Financial Officer. Listeners are reminded that certain matters discussed on today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to the risk and uncertainties relating to Harborside's future financial or business performance. Actual results could differ materially from those anticipated in the forward-looking statements. The risk factors that may affect results are detailed in Harborside's annual information form and other periodic filings and registration statements. These documents may be accessed via SEDAR database at www.sedar.com.
Any forward-looking statements made today on this call are based on assumptions as of today, and Harborside assumes no obligation to update these statements as a result of new information or future events. I'd like to remind everyone this call is being recorded today, Tuesday, June 1st, 2021. I would now like to introduce Mr. Matt Hawkins, Chairman of the Board of Directors at Harborside. Please go ahead, Mr. Hawkins.
Thank you. Hello, everyone, and thanks for joining us today. It's been a little while since we've hosted one of these, and I'm excited to update you on our progress. During today's call, I will provide an overview of the business and review our Q1 2021 results before turning the call over to Tom DiGiovanni, our CFO, who will go into more detailed review of our numbers. We will open up the line of questions. First off, I'm very proud to report that for the first quarter of 2021, we achieved positive adjusted EBITDA of approximately $1 million on gross revenues of $13 million. Positive EBITDA is an important company milestone we first reached one year ago, and it's sustained every quarter since. Our continuing solid EBITDA performance speaks to the underlying strength of our business.
We have made great strides toward implementing improvements in operational efficiencies with further enhancements underway. This has laid a strong business foundation that will enable us to scale up our operations as we execute on our California-focused growth strategy. As we announced on our last call, we commenced a strategic review of the business, and together with management, we are evaluating opportunities in the marketplace to maximize shareholder value. These include, but are not limited to, potential merger and acquisition opportunities, possible financings, and the potential purchase of our production facility in Salinas with much more favorable financing terms. I'm excited to report that since then, we've been very active in executing on this plan. On the financing side, to take advantage of the significant opportunities available to us in the California markets, we completed two strategic financings in the first quarter, which has significantly strengthened our balance sheet.
These financings include an oversubscribed private placement where we raised CAD 35.1 million and a $12 million revolving line of credit with a federally regulated commercial bank. The line of credit has an initial interest rate of 5.75%, which gives us one of the most competitive cost of capital in the entire cannabis industry. We exit Q1 with more than $30 million in cash on hand, and we are well-positioned to act on accretive M&A opportunities, which we are actively exploring. We expect to use the line of credit to support the purchase of the company's 47-acre production campus in Salinas, California, and we recently drew down approximately $11.4 million in anticipation of closing on that property.
This transaction will lower our borrowing costs and is expected to improve our overall cash flow and enable us to make further capital investments in the facility to scale up our operations and meet consumer demand. I expect that we will have a further update on this very soon. On the corporate development side, we recently completed a $5 million strategic investment in Loudpack, establishing an important partnership with a premier cultivator, brand operator, and distributor. Since then, we have engaged Loudpack to provide services aimed at identifying production efficiencies and improving harvest yields at our production campus, and Loudpack has started producing the first suite of Harborside-branded products under a contract manufacturing arrangement. We have also increased the availability of Loudpack-branded products, including Smokiez, Kingpen, and Dime Bag, at our retail stores.
Finally, before I turn the call over to Tom, we need to address the big news of the day. We are thrilled to announce our acquisition of Sublime, an award-winning cannabis manufacturing company known for its expansive line of high-potency, high-quality Fuzzies-branded products. Sublime had the California's number one pre-roll brand in 2020, with distribution to over 500 active customers covering almost 70% of the California market. This acquisition is the first transaction with respect to our commitment to grow the company through M&A, and we expect that this deal will provide a number of synergies. It will enable Harborside to utilize Sublime's production capabilities and robust distribution system, and combined with the utilization of high-quality cannabis grown in our 200,000 sq ft greenhouses in Salinas.
We expect to see improved gross margins as well as we expand the overall sales and distribution of our combined suite of branded Harborside, KEY, and Fuzzies products, both on our own store sales and to additional retailers throughout the state of California. We've known the team there for years, and we have been longtime customers with our products broadly available in our retail stores. We are excited to bring them to the Harborside family, excuse me, and expect the acquisition to be immediately accretive to both revenues and EBITDA once it closes. This is a really exciting transaction. I look forward to welcoming the team from Sublime with their exceptional product offerings to Harborside shortly. With that, I'll now turn it over to Tom DiGiovanni, our CFO, to provide our first quarter 2021 financial results. Tom, take it away.
Thank you, Matt, and good morning, everyone. This is an exciting time at Harborside, and I'm thrilled with the progress we've made over the past five quarters, as well as the expectations for what lies ahead. As Matt mentioned, I'm going to take a few minutes to go over our results for the first quarter of this year. As a reminder, before I get started, the results I will be going over today can be found in our quarterly financial statements and MD&A, and all are in U.S. dollars. During the first quarter of 2021, Harborside generated approximately $10 million of retail revenues and $3 million of wholesale revenues, for a total gross revenue capture of $13 million combined. This compares to approximately $10.2 million in retail revenue and $4.5 million in wholesale revenue, for a total of $14.6 million in gross revenue for the first quarter of 2020.
In our retail business, while we maintained a strong average basket size of more than $90, our retail revenue in Q1 was somewhat impacted by decreased in-store foot traffic that was caused by COVID-19 related capacity controls in California, particularly in Alameda County, where our largest store is located. This caused a slight decline in year-over-year retail sales when compared to the first quarter of 2020. It is important to note, however, that in Q1 2020, we saw a surge in our retail revenues during the last two weeks of March. As you may recall, consumers rushed into our retail stores to stock up on cannabis products when the pandemic was first declared, as they thought at the time that our stores might be subject to an emergency shutdown for an extended period.
If we factor out the COVID surge, retail revenues were essentially flat on a year-over-year basis, despite the more recent capacity constraints. Our first quarter 2021 wholesale revenue was negatively impacted by lower than expected flower yields that limited the overall supply of sellable flower. This was caused by several factors, including a COVID-19 related supply chain issue that delayed the planned capital improvements, which were intended to increase cultivation yield, along with a weather event in January that tore off part of the roof at one of our greenhouses and caused an infestation of non-beneficial insects, which management subsequently addressed. Excuse me. Despite the revenue challenges that occurred in the quarter, our gross margins remained strong. Retail gross margins were approximately 55% for the quarter, reflecting a year-over-year improvement of about 3.7%.
This was achieved through more effective supply chain management, the focus on sales of our in-house brands, and the reduction of operating costs across the company. Across Harborside's retail stores in California, our in-house branded products represented five of the top 10 selling SKUs in the first quarter of 2021. The continued focus on selling our own brands has had a positive impact on gross margins, and we expect this trend to continue as we add more products and product categories to our in-house brand portfolio. Wholesale gross margins in Q1 were approximately 13% before adjustments for bio-assets, which was a year-over-year improvement of approximately 18.2% when compared to the first quarter of 2020. We expect to see wholesale margins continue to improve as we continue to work on refining our standard operating procedures and we continue to gain efficiencies of scale in our wholesale operations.
Overall combined gross profits for the first quarter of 2021 were approximately $5.8 million, resulting in a 46.8% overall gross margin. That reflects a 15.6% improvement when compared to the approximately $5 million in gross profits and 36.8% combined margin in the first quarter of 2020. Total operating expenses for the first quarter of 2021 were approximately $7.8 million, which included approximately $1.9 million in one-time non-recurring costs. This compared to approximately $6.2 million in operating expenses in the first quarter of 2020. After adjusting for the one-time costs in Q1 of this year, we saw a 4.3% decrease in OpEx on a year-over-year basis. The one-time items included approximately $1.3 million in costs related to the warrants issued in our private placement, $300,000 in expenses related to our search for a permanent CEO, and $200,000 in consulting fees related to our operational improvement efforts.
Operating loss for the first quarter of 2021 was approximately $3.2 million, as compared to an operating income of approximately $400,000 for the first quarter of 2020. Net loss and comprehensive loss was approximately $2.9 million in the first quarter of 2021, compared to a net loss and comprehensive loss of approximately $2.4 million in the first quarter of 2020. As we mentioned earlier, adjusted EBITDA, which factors out non-cash items and one-time expenses, was approximately $1 million, or 7.7% of net revenues for the quarter, as compared to approximately $300,000 or 2.6% of net revenues for the first quarter of 2020.
The year-over-year increase in EBITDA was driven largely by the improved product margins and operating efficiencies realized across the company. Lastly, as Matt mentioned earlier, during the first quarter of 2021, Harborside closed a private placement with gross proceeds of approximately CAD 35.1 million, and we were able to secure a $12 million revolving line of credit with a large commercial bank. In addition to validating our California-focused thesis and the improvements to the business that we've made to date, at the end of Q1, these moves provided Harborside with approximately $30.6 million of available cash in the bank and another $11.8 million available to draw down against the line of credit, leaving us well-positioned to continue to execute against our business plans. With that, I would now like to ask the operator to open the call for questions. Thank you.
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You'll hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Okay, your first question comes from Russell Stanley from Beacon Securities. Russell, please go ahead.
Hello. Congratulations on the Sublime announcement. First question on the transaction, wondering if you could provide us with additional color on the margin profile the business brings and how much incremental margin capture you expect to achieve from sourcing that biomass internally now?
Tom, you want to handle that one?
Hi, Russell. Thanks for the question. We're expecting to release some additional guidance along those lines concurrent with closing the transaction. I can tell you, we've already taken a look at the production in our Salinas facilities, and we're working through how much of it we can essentially start to consume in-house. We have a fairly significant potential here for additional margin improvement, especially with our non-premium flower, as it's worth much more in the marketplace when it's converted into Fuzzies products than it is when we sell it in bulk into the wholesale market. We're working through those numbers now, and we'll have an update for you in about 30 days.
That's great, just wondering around, I know it's early days, but you mentioned efforts perhaps to license this brand in other adult use markets. Is that a relatively new venture or is that something that Sublime has had irons in the fire on, can you give us a sense as to which markets you would like to see that expand to?
Well, I'll take that. Go ahead, Matt.
Yeah, Tom, why don't I just jump, say initially, and then you can jump in. As we said all along, when we took over the board last fall, our number one mission has become the preeminent single-state operator in California. Everything we do is driven by that goal. At this point, that's what we're going to continue to do. Any development outside the state will be secondary in terms of a strategy point. Tom, you want to chime in?
Yeah, I would just add, Sublime and their Fuzzies brand, it's hugely impactful in California. They have a great following. They've built a very strong brand profile. We know that's replicable in other states. The key here is, if we were to engage with someone outside California, we would have to trust that they can manufacture and produce at the same standard as the Sublime team does today. We will selectively engage in the markets where we think it makes sense. There are a number of adult use markets where these products would be well-received. We'll be looking at that as we go. As Matt says, again, our primary focus is on California. If there are licensing opportunities that we can look at that are compelling, we'll certainly look at those and move forward when we can.
Great. If I could just sneak in one more, and I'll get back in the queue. You highlighted increased sales of house brands as a priority, and you've had success to date taking your retail margins up. Just wondering what share of your retail sales now come from house brands, and with the addition of Sublime, what do your targets become once that's integrated? Thank you.
I'll take that one as well. Today, about one in every eight sales dollars that we process through our own retail shelf is a Harborside-branded product. One of the things that we realized is that our product offering prior to bringing on Sublime was strictly flower, and we want to move across the shelf as well as up and down the shelf to increase the penetration of our own product. We do currently sell Sublime product on our shelves, so those will become in-house to us. As we continue to look for more product offerings, we expect the share of revenue, the overall share of revenue for our products to go up over time.
That's great. Thanks for the color and congratulations again.
Absolutely. Thank you.
Thanks.
Ladies and Gentlemen as a reminder, should you have a question, please press star followed by one. Your next question comes from Mark Clark, a private investor. Mark, please go ahead.
Hey, can you hear me?
Yes, we can.
Great. Okay, thank you. First of all, congratulations on everything you guys have going on. I'm happy to be an investor. I went through the MD&A last night. It's quite extensive. I've gone through it before. It seems as though a number of the legal pursuits that the company has been entangled in the past are clearing themselves up. That's heading in the right direction. The new business, Sublime, are there any entanglements in their business that we need to be knowing about as investors?
Tom, can you-
Tom, do you want to take that, and I'll jump in after.
Yeah, I can take that. We've looked at the potential legal exposure as part of the deal. One of the things that I can share on this call is that we've created escrows in the transaction that we think will provide more than enough coverage so that any of those potential legal issues really don't extend through the deal to Harborside. As of today, we feel like we're more than adequately protected against any potential exposure.
That's great. Thank you. Thank you very much. The question number two is, could you give us a little color on how the search for the new CEO, president of the business is going?
Sure. I'll take that one. As we mentioned back in the end of 2020, we engaged Heidrick & Struggles to lead a search for a permanent CEO. Peter Bilodeau has done a wonderful job on an interim basis. We just came in and decided that it was, with Peter's full support, to go ahead and get the process started. What's been really encouraging is that the quality of talent that we've seen and interviewed in this process has been unbelievably superior to what my expectations were initially. We're seeing candidates from all kinds of top-tier brands, CPG companies, retailers, and they're all coming from C-level positions at these companies. Having said all that, we are extremely close to making an announcement. I would imagine that before the end of June, we will have some type of announcement that addresses that.
Super. Thank you. That's it for me. I'm super appreciative of your responses. Thank you.
Thanks.
If there are no further questions at this time, I'll turn it back to Matt for closing remarks.
Sure, thank you for that, and I appreciate everybody joining today. The replay for this conference call will be available in approximately two hours on Harborside's website in the investor relations section. As always, I'm available for follow-up conversations, so please don't hesitate to reach out. Hope everybody has a great day, and we'll be in touch soon. Take care.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.