Good morning, ladies and gentlemen, and welcome to the Delta 9 Q2 2021 financial results conference call. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on August 16th, 2021. I'd now like to turn the conference over to Alexa Goertzen. Please go ahead. Good morning, everyone, and welcome to the Delta 9 Cannabis Q2 2021 earnings call. At this time, all participants have been placed in listen-only mode. Following the presentation, we will open the line for a question and answer session for financial analysts. Delta 9 would like to remind listeners that today's call may contain forward-looking statements that reflect the company's current views with respect to future events. Any such statements are subject to risks and uncertainties, which could cause results to differ materially from those projected in the forward-looking statements. For more information regarding risks and forward-looking statements, please refer to the Delta 9 Cannabis Inc. public filings, which are available on SEDAR. I would now like to turn the call over to Delta 9's Chief Executive Officer, John Arbuthnot. Thank you, Alexa, and good morning, everyone. Thank you for taking the time to join us for Delta 9 Cannabis's Q2 2021 earnings call. With me this morning is the company's Chief Financial Officer, Jim Lawson, and our VP of Corporate Affairs, Ian Chadsey. Our earnings press release, Q2 2021 financial statements, and management discussion analysis documents have now been made available on SEDAR and our company website. With that, let's begin. Through the first six months of 2021, the Canadian cannabis industry has continued to expand, posting retail cannabis sales of CAD 313 million in the month of May, based on figures from Statistics Canada. This is up 68% over the previous year. Annualized retail cannabis sales in Canada are now on pace to exceed CAD 3.8 billion this year, up from CAD 2.5 billion in calendar 2020. The industry continues to deal with challenges relating to an oversupply of cannabis products, generally compressed wholesale gross margins, growing pains at provincial Crown distributors, and market volatility. We continue to believe that the growth rate in the Canadian cannabis market and the global reform of cannabis laws represents a generational market opportunity for companies like Delta 9 to push through these challenges and to grow and unlock significant value for investors. I'm pleased today to be presenting you with Delta 9's Q2 2021 financial and operating results. These results show a continued upward trend in year-over-year revenues, gross profits, and adjusted EBITDA. We have many positive takeaways from today's results, which we will highlight, as well as analyzing our misses, the challenges we've encountered, and the changes we're making to continue to drive growth and create shareholder value. We'll begin with a discussion of operating results and material milestones that the company achieved over the reporting period. Firstly, on cannabis cultivation and processing. On this side of our business, we'll begin with an update of activities at our Delta 9 facilities in Winnipeg. The primary purpose of these facilities is to cultivate, process, and manufacture high-quality cannabis products. The company's proprietary cannabis production methodology is based around a modular, scalable, and stackable production unit, which we call the GrowPod. In Q2 2021, the company had 297 GrowPods licensed by Health Canada and in operation within our Delta 9 facilities. We're now operating these assets at or above the original design capacity for the facility and are now beginning to assess efficiencies in terms of the number of harvest rotations per year, average grams per harvest, and overall potency in order to maximize returns from these assets. We anticipate that once we've been able to maximize the efficiency of these assets, our production capacity may exceed the design capacity for approximately 8,325 kg of dried cannabis per year. The company's purpose-built processing center, which was licensed in April 2020 and allows for fully automated bottling, packaging, capping, and labeling functions for our consumer packaged cannabis products, is now fully operational. We anticipate that once the processing center is operating at capacity, it will allow for processing of up to 25,000 kg per year of dried cannabis flower material. The company recently announced that we've expanded our Health Canada license perimeter from our previous 80,000 sq ft to 95,000 sq ft, our first step in allowing for future expansion of cannabis-related operations on site. We will continue to update the market on expansion progress as the company further develops our forward-looking expansion plans through 2021 and as licensing approvals are received from Health Canada. On our portfolio of cannabis products, there's been a significant amount of excitement in the cannabis space over the rollout of Cannabis 2.0 and derivative products. However, dried flower and cannabis pre-rolls continue to demand over 70% market share by category in the Canadian marketplace, with much of the consumer demand in the high-potency segment. Delta 9 currently produces approximately 30 different genetic varieties of cannabis, each with its own unique chemical and cannabinoid content, and with another 100 or more strains being stored in an on-site seed bank to provide product options into the future. We are continuing with our production pivot towards higher-potency cannabis strains, which are the highest demand segment with the Canadian consumer. Over the past 12 months, the company has increased its average THC potency in its harvested cannabis flower products to over 18% from less than 15% at the beginning of 2020. Cannabis pre-rolls became an increasingly important category in 2020 as consumers moved to smaller packaging sizes and sought convenience in a pre-rolled setting. The company's pre-rolled products currently account for approximately 15% of our overall product offering, with our Bliss and Twist pre-rolls making up two of our top 20 selling products in Delta 9 retail stores over the past year. We plan to further invest in automation of our pre-rolls manufacturing this year, which will increase the company's capacity to produce and distribute pre-rolled products across all of our provincial markets. On oils, extracts, and derivative products. Over the past 12 months, we've seen a successful initial sell-through in the market for our Cannabis 2.0 products, including ingestible cannabis oils, vape cartridges, and cannabis concentrates. In the second half of this year, we will relaunch all of our 2.0 product lines, including new products, new and improved formulations, and leveraging partnerships with the industry's leading white label suppliers to drive margin improvements. Our full 2.0 product portfolio will include three formulations of ingestible cannabis oils, three formulations of vape 510 cartridges, cannabis kief, and pressed hash in the concentrate format category. It's our belief that these categories will continue to become an increasingly important component of the medical and recreational use cannabis market in the future. In our retail stores, Delta 9 is carrying the full complement of new 2.0 cannabis products from the industry's leading manufacturers. We believe that through our retail unit, we will be able to extract valuable intel on which of these new product formats are having a positive impact with the consumer and will be able to pivot to capitalize on these new product opportunities. Overall, 2.0 cannabis products became better supplied over the back half of 2020 and into 2021, addressing previous supply shortage concerns for many of these product categories. We now see over 15% of retail revenues coming from these categories within the past 12 months. From a distribution standpoint, we continue to believe that the domestic market for recreational use cannabis presents a major growth opportunity for the company over the next several quarters and years. Wholesale revenues from the sale of recreational use cannabis products are expected to make up a large component of the company's overall business. The company has undertaken a strategy to add new distribution markets incrementally as our increased supply capacities come online in order to reach our ultimate goal of becoming a national distributor of recreational use cannabis products. Throughout the year last year, Delta 9 added two additional provincial markets, Newfoundland and Ontario. We have expanded our SKU selection across virtually all provincial markets we participate in. At the end of last year, Delta 9 was licensed for distribution in Manitoba, Saskatchewan, Alberta, British Columbia, Ontario, and Newfoundland, with these six provincial markets representing over 50% of the Canadian population. As the company increases our supply capacity, we plan to expand our distribution into additional provincial markets through supply listings or formal supply agreements within those markets. Now, on vertical integration and cannabis retail sales, we believe that there are a number of benefits to pursuing a vertical integration strategy into retail, including giving us control over direct-to-consumer sales force and product distribution, control over direct-to-consumer branding and marketing initiatives, capturing additional revenues and gross margin from retail sales, and providing direct feedback from consumers regarding product trends, marketing strategies, et cetera. Over the past 12 months, Delta 9 has made significant progress in expanding our retail footprint. We started 2020 with four operating retail stores in Manitoba, and as of today's date, we now operate 12 cannabis retail stores, having opened three stores within the first six months of this year. We plan to open and operate up to an additional eight retail outlets in jurisdictions which allow for private cannabis retail over the next nine months. Investors can look forward to numerous store openings in Q3 and Q4 2021. We are actively pursuing retail expansion opportunities in all Canadian provinces which allow for private cannabis retail sales, and we will continue to expand on our vertical integration strategy into the retail segment. On business-to-business opportunities, the company derives a portion of our overall revenues from the sale of Delta 9 GrowPod, and from providing consulting and licensing services to other licensed and pre-licensed cannabis companies. We believe that these opportunities provide us with a number of benefits, including complementary business verticals, which produce diversified and high-margin revenue streams, third-party validations for the company's proprietary GrowPod platform, valuable partnerships with other pre-licensed and licensed cannabis companies, and the opportunity for international expansion and non-cannabis revenue streams. To date, Delta 9 has sold almost 300 GrowPods to third-party facilities across North America. We've successfully licensed 11 third-party facilities as micro cultivation partners, representing over 125 GrowPods for just our micro cultivation partners. We will continue to pursue and expand on these B2B revenue opportunities over the coming year. We're also continuing to pivot to expand our sales and marketing efforts for our B2B segment in the United States, and we anticipate to see larger growth from our U.S. B2B sales in half two 2021 as this pivot begins to take effect. Now, turning to our financial results for this quarter, I will just look to begin by reminding investors of major changes in accounting policy which took place at the end of 2020. As a part of our year-end 2020 audit, the company has changed its accounting policy pursuant to IAS 41 to determine the measurement of fair value biological assets and has changed the classification between biological assets and work-in-progress inventory. We've done this to provide more accurate, reliable, and relevant information regarding our financial position, financial performance, and cash flows. Major changes here include changing the classification of a biological asset versus work-in-progress inventory to occur at the point of harvest rather than the point of transfer to finished goods inventory. This is reflected in moving assets from biological assets to inventory. Changing the fair value estimates to be determined on a strain-by-strain basis rather than an average basis. Changing expected harvest yield expected from flowering plants to be determined on a strain-by-strain basis, again, rather than an average basis. Incorporating the concept of a cost to finish included in cost to sell, including all costs necessary to complete the production of a product subsequent to the end of the point of harvest, such as drying, curing, labor, packaging, labeling, product treatment, quality control, et cetera. Again, we feel these changes provide a much more robust valuation model and are in line with similar models used by our industry peers. We would encourage investors to review the notes for the financial statements and MD&A, and please feel free to follow up with management with any questions you may have. Now on to the financial results for Q2, the period ending June 30. We'll begin with an assessment of the balance sheet. The company ended Q2 with approximately CAD 5.5 million in cash, a decrease from CAD 8.1 million as at December 31, 2020. We would note that this is up from CAD 4.6 million at the end of Q1 2021. The company had a working capital position of CAD 20.7 million, again, a decrease from CAD 22.9 million as at the end of last year, but in line with the company's working capital position as at March 31st this year. Total assets at the end of Q2 totaled CAD 74 million. As the company's asset base has expanded over 2020, we've maintained a healthy debt-to-equity and debt-to-asset ratio. The company's already begun planning for repayments or refinancing of our convertible debentures with maturity in July 2022, and we continue to pay down principal on our term debt facilities. We believe the company is currently well-capitalized to continue to execute on our expansion plans. We can act opportunistically where assets become available, which can expedite expansion, provide strategic value, and improve the financial and operating performance of the company. On key performance indicators. Quarterly, we provide updates on progress of key performance factors for our business. In Q2 2021, the company produced approximately 2.2 million grams of cannabis, in line with production figures from Q1 this year. As the company continues to improve its production efficiencies, we expect that these production numbers will continue to increase over the coming quarters. Production cost and total cost per gram increased to CAD 0.65 and CAD 0.80 respectively. This is compared with CAD 0.60 and CAD 0.75 in Q1 2021. We would highlight that these production cost figures are quite competitive, even comparing to our largest competitors, and in the context of the current cannabis flower market here in Canada. We anticipate that the decrease in production cost per gram generally over the last 12 months will translate into improved gross profitability in our upcoming quarters. Total grams sold in the quarter reached a record 1.7 million grams, up from 1.1 million grams in Q1 this year, and 1.25 million grams in Q4 last year. We've made significant progress, not only in the rebounding in our cannabis wholesale sales in the last several quarters, and overall grams sold, but we've also seen improvements in customer feedback and overall sell-through from provincial wholesalers to retailers over the back half of 2020 and into half one 2021. This leads us to believe there is continued positive momentum in Delta 9 Cannabis wholesale business. The company's average selling price remains steady at CAD 3.23 per gram in Q2. This is up from CAD 3.16 per gram in Q1 this year. We've now seen average wholesale selling prices stabilize over the past several quarters. We feel that Delta 9 can reach sustainable profitability from our wholesale cannabis sales at current market levels. Continuing to address the company's wholesale business and improving overall grams sold and average selling price will continue to be a key focus for us moving forward. In our retail KPIs, we have discontinued reporting grams sold and average selling price per gram as these metrics have become increasingly obfuscated by the introduction of Cannabis 2.0 products and a regulatory grams equivalency for things like edibles and drinkables. We continue to see positive trending in our number of retail transactions processed per quarter, and have seen increased retail activity in store and online from Q1 2021. Our average cart size of CAD 46.89 per transaction in Q2 remains elevated from pre-COVID levels. Including our investor web page, retail store, and medical clinic, Delta 9 now sees over 1 million unique website visitors to our websites each year. Now on revenue and revenue segmentation. Total net revenues for the three-month period ending June 30 were CAD 16.75 million. This compares with CAD 3 million for the same period in 2020. Sorry, CAD 13 million. Excuse me, folks. That compares with CAD 13 million for the same period last year, an increase of 29%. Sequential quarterly net revenue increased 27% from CAD 13.2 million in Q1 this year. Total net revenues for the six-month period ending June 30 were approximately CAD 30 million. This is versus CAD 24.8 million for the same period in 2020, an increase of 21%. From a revenue segmentation standpoint for Q2 this year, retail revenues have increased 22% year-over-year to CAD 10 million. Wholesale revenue increased 489% year-over-year to CAD 5.6 million. B2B revenue was CAD 1.8 million. This is down from CAD 3.1 million the year earlier, but a sharp rebound from Q1 where B2B revenues were CAD 186,000. We would point to year-over-year increases in net revenue as a positive indication that the company's diversified revenue and growth strategies have been able to contribute to overall revenue growth. We attribute the increase in sequential quarterly revenue to strong performance from the company's retail and wholesale segments and the obvious rebound in our B2B sales and GrowPod deliveries within the period. In the upcoming quarters, our focus will be on three main initiatives to drive revenue growth. That is the continued expansion of the company's retail store chain, while continuing to market the company's price-leader strategy to leverage customer acquisition at new and existing company stores. Building continued momentum in the company's cannabis wholesale segment with a focus on expanding product distribution in the company's six provincial markets, and renewing B2B revenues through a focus on creating relationships in the Canadian micro-cultivation industry and expansion into emerging markets, including the U.S. We continue to believe that given the relative novelty and uncertainty of the global cannabis industry, our diversified revenue and vertical integration strategy will allow us to better react to market challenges than our competitors with single business segment strategies. Gross profit before accounting for changes in the fair value of biological assets for the three-month and six-month period ending June 30 was CAD 4.9 million. This represented 29% of net revenue and CAD 8.6 million, also 29% of net revenue. This compares with CAD 3.95 million, or 30% of net revenue, and CAD 8.5 million, or 34% of net revenue, for the previous year. This also compares with CAD 3.7 million, or 28% of revenue, for the three-month period ending March 31st this year. We would note the overall increase in gross profit before changes in biological assets as a positive indication of the company's ability to maintain an increased gross profit in a challenging market environment. In terms of profitability by segment for the first six months of 2021, the company's wholesale cannabis business segment showed 33% gross margin. The company's retail cannabis segment showed 26% gross margin, and the company's B2B segment showed 42% gross margin. Gross profit after accounting for changes in the fair value of biological assets for the three and six- month period was CAD 4.89 million and CAD 7.8 million. This compares with CAD 5.2 million and CAD 12.7 million for the same period last year. This also compares with CAD 2.95 million for the three-month period ending March 31, 2021. Operating expenses for the three-month and six-month period ending June 30th, 2021, were CAD 5.7 million and CAD 11.9 million versus CAD 5.4 million and CAD 10.3 million for the same period last year. We would note these increases for the three-month period are approximately CAD 300,000, and for the six-month period, approximately CAD 1.6 million. The most notable increases in operating expenses over the previous period were amortization, personnel expenditures, and insurance costs over that period. We would note that the increase in personnel expenses, which is the largest cash increase to operating expenses year-over-year, is mostly due to the increase in our number of operating retail stores year-over-year. We would note as well that the company has been able to generally achieve proportionately higher revenues and gross profits versus increases in our overall operating expenses over the past eight quarterly periods. We will continue, of course, to monitor these operating cost levels and implement prudent cost controls to improve profitability over coming quarters. The company's net loss from operations for the three and six-month period was CAD 803,000 and just over CAD 4 million. This is versus a net loss from operations of CAD 193,000 and a net income from operations of CAD 1.8 million for the three and six-month period last year. This also compares with a loss from operations of CAD 3.2 million for the first three months of 2021. We would attribute the net loss from operations for the three and six-month period to reduced gross profitability due to overall weakness in our wholesale segment. We are confident that our renewed focus on revenue growth, gross profitability, and cost controls will return the company to profitability over the coming quarters. The company's adjusted EBITDA for the three and six-month period was CAD 1.19 million and CAD 1.2 million. This is versus CAD 49,000 and CAD 1.17 million for the same period last year. This also compares with adjusted EBITDA of just CAD 6,000 for the first three-month period this year. We would attribute the improvement in adjusted EBITDA versus the previous year and the sequential period, the increases in net revenue across the company's business segments. Management would highlight positive adjusted EBITDA for the period as meaningful in terms of the relative strength of our company's operating results in the context of the overall weakness from the Canadian cannabis market. As we look forward to the balance of the year for 2021, management feels that the company is well-positioned to continue to execute on our vertical integration and growth strategies. In our production and wholesale segment, the company will continue to push forward to maximize the utility and efficiency of our existing assets. Increase production output, and increase our ability to supply volumes of cannabis across all of our markets. We are nearing a point where we can sell every gram of cannabis that we can produce. A stark contrast to our competitors who have shuttered capacity and sold off assets in 2020. From here, there is an opportunity to grow, either through further capital spending, expansion, or through acquisition of assets, brands, or complementary products. In our retail segment, we will continue to add distribution capacity by adding new stores to our existing chain. We will continue to position as retailer of choice for both retail customers and suppliers, seeking the best locations and positioning as the most competitive LP-owned retailer in the cannabis space. In our B2B segment, we will continue to cultivate long-term and value-added relationships with our B2B customers as we deliver on GrowPod projects across the country, while deploying resources into international markets to position our non-plant touching businesses to realize growth on the ever-growing cannabis opportunity globally. I want to thank everyone for taking the time to join the call this morning. With that, I will turn the call back over to the operator for any questions we may have. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled 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 your handset before pressing any keys. One moment for your first question. Your first question comes from Scott Fortune with Roth Capital. Please go ahead. Yeah, good morning, and thanks for the update and the questions here. Can you provide a little more color on B2B, but overall for the business now that Canada has kind of reopened, for the most part, and the trends that you're seeing into third quarter, kind of continuing on second quarter, just a little more color on what we're seeing on third quarter as far as sales and activity within the stores. Yeah. Thanks, Scott. Firstly, on the B2B activities, CAD 1.8 million in revenue for the quarter, up from CAD 186,000 in the first quarter this year. Starting to see the momentum back in the GrowPod segment, deliveries across multiple projects in Canada in the second quarter this year. I think, reflecting overall opening up of the Canadian marketplace in the context of COVID. I think we certainly see that as positive. We had obviously seen the impacts of COVID-19, closing down travel and things like that, and overall hampering the B2B segment. I think, certainly positive to see the momentum coming now in that business segment. Again, would emphasize that the focus for us moving forward on the U.S. market, obviously, we see huge opportunity in the United States. A number of states opening up for recreational or medical market opportunities, even in advance of federal legalization. Giving the company, I think, significant growth opportunity for those international markets. I think we will continue to expect to see the deliveries and expansion and the revenues for that segment through Q3 and into the back part of the year. On the retail side, obviously saw an increase in overall retail activity in the three-month period for Q2 versus Q1 this year. I think we're seeing a seasonality component there. Obviously, January, February months, as reported by Statistics Canada, are generally weaker months from a retail sales activity standpoint. We do then see some torque out of that into March and into Q2. For us, store openings into the back part of the year here will be key in driving revenue growth, and continued expansion in the retail segment. Again, would generally indicate to investors to look forward to announcements in the coming weeks and months around retail store openings into the back part of Q3 here. Perfect. One follow-up for me is around kind of your gross margins. I appreciate you breaking out the segments for that, kind of wholesale 33%, B2B at 32%. When you look at the retail at 26% or overall for your business, where can we expect to see some upside on the gross margins? I know there's some retailers in Canada that they're doing 30% plus gross margins from that standpoint. Kind of step us through on the cadence and the upside to the margin profile here. On the wholesale, the cannabis production wholesale side of the business, Scott, really the focus for us has to be on cost controls in terms of the cost per gram. We're continuing to see the overall competitive forces within that segment are really driving margin compression. I think the relative safety for the company is that low cost center, in terms of the cost per gram of production in the CAD 0.65 range. We do feel that is sustainable. I would generally be bullish that there may be some additional efficiencies for us to squeeze out there. I think we have to assume that the overall Canadian wholesale market is going to continue to be relatively competitive in coming quarters. I think for us in the retail segment, you'll see in that 26% gross margin, I think we've been historically around the 26%-28%. We do look to position as price leader. I think that will be increasingly important across the prairie markets. Manitoba, Saskatchewan, Alberta are key markets as they do reach saturation and again, see a relatively competitive market environment from a retail standpoint. I would then position that given we are at the low end of the margin spectrum as a retailer, those margins are certainly sustainable as we see increased competition from our larger public markets counterparties in the retail segment. The B2B segment, I will touch on and just say that we would anticipate margin expansion in that segment. We've historically seen B2B margins in the 55%-60% range. Q2, I would note that the B2B revenues are principally focused around GrowPod deliveries themselves. It's typically sales of security equipment, sales of production equipment, which come after GrowPod sales, where the company does see an inflated gross margin. We should look to see those B2B margins in the coming quarters, I would say rebound to the 50%-60% level. We are seeing some cost increases in that segment. Costs of shipping containers, et cetera, are increasing. I would, again, generally indicate that we should see some increases in gross margin into the B2B segment. Overall or on a consolidated basis, if the company can model towards 30%-35% on a consolidated gross margin basis, again, we're comfortable with our current cost structure that there's a profitable business to be made there. That's helpful. Thanks for the detail. Congratulations on the quarter again. Thank you, Scott Fortune. Ladies and gentlemen, as a reminder, should you have any questions, please press star one. There are no further questions. Oh, my apologies. We do have another question from Tim Manas with Allen Investments. Please go ahead. Hello, John, how are you doing? I'm well. Great. Hey, listen, I'd just like to know if you have any future plans with getting into the organic side of the cannabis business? It's a good question. It's something we've looked at. Tim, I think for our core Delta 9 branded products, it's probably not something we'd go down. More from an infrastructure perspective, our facility from a watering or fertigation perspective is fully automated. It causes challenges using organics and things like that in a fully automated system as we have. I think where we would look to organics would be through other avenues, things like our partnerships with microcultivation partners across the country where we- essentially purchase, process, and resell the products under those brands. I think it's those types of premium products where you do see that opportunity in organics to be seeing potentially elevated average selling prices for products. Not something that the company's currently entertaining bringing in-house. Okay, well, thank you, and congratulations on a great quarter. Thank you. There are no further questions at this time. Please proceed. There being no further questions, I want to thank everyone again for joining us this morning. If there are any follow-on questions for management, again, please don't hesitate to contact us. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.