Good morning, ladies and gentlemen, and welcome to the Delta 9 Q1 2022 financial results conference call. If at any time during this call you require assistance, please press star zero for the operator. This call is being recorded on May 16, 2022. I would now like to turn the conference call over to Alexa Goertzen. Please go ahead. Good morning, everyone, and welcome to the Delta 9 Cannabis Q1 2022 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 the 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.'s public filings, which are available on SEDAR. I would now like to turn the call over to Delta 9's CEO, John Arbuthnot. Thank you, Alexa, and good morning, everyone. Thank you for taking the time to join us for Delta 9's Q1 2022 earnings call. With me this morning is the company's CFO, Jim Lawson, our Senior Vice President of Capital Markets and Strategy, David Kideckel, and our VP of Corporate Affairs, Ian Chadsey. Our earnings press release, Q1 2022 financial statements, and management discussion analysis have now been made available on SEDAR and our company website. With that, let's begin. In the past year, Canadian cannabis industry sales have continued to expand, posting monthly retail cannabis sales of CAD 336 million as of the most recent Statistics Canada data. Annualized retail cannabis sales are now approaching CAD 4 billion. With the market plan to increase at compound annual growth rates of approximately 10% over the next five years, the industry is expected to double in terms of retail cannabis revenues by the end of this decade. 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, an overall saturation in cannabis retail stores, and market volatility. We continue to believe that the growth rate in the Canadian cannabis market alone, as well as the global reform of cannabis laws, represents a generational market opportunity for companies like Delta 9 to grow and unlock significant value for shareholders. I'm pleased today to be presenting you with Delta 9's Q1 2022 financial and operating results. These results include several transformative financing and M&A transactions, which we feel position Delta 9 for material growth into the back part of 2022. We have many positive takeaways from today's results, which we will highlight, as well as analyzing our misses, the challenges we have encountered, and the changes we're making to continue to drive growth and create shareholder value. We'll begin with a discussion of operations and material milestones for the company achieved over the reporting period. On the cannabis cultivation and processing side of the 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 unit that we call the Grow Pod. As of the end of Q1 this year, the company had 297 of these Grow Pods 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 of our facilities and are 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 the return of these assets. We will continue to update the market on expansion progress as the company further develops its forward-looking expansion plans through 2022 and beyond, and as licensing approvals are received from Health Canada. On our portfolio of cannabis products, Delta 9 currently produces approximately 30 different genetics of cannabis, each with its own unique chemical cannabinoid content, terpene, and flavonoid profiles, and with another 100 or more strains being stored in an on-site seed bank to provide product options into the future. We're continuing with our production pivot towards higher potency cannabis strains, which are the highest demand segment with the retail cannabis consumer. Over the past 12 months, the company's increased its average THC in its harvested cannabis flower products. The company continues to improve processes for drying, curing, and processing of dry cannabis flower material and will continue to strive to produce the highest quality cannabis products at scale. Cannabis pre-rolls have become an increasingly important category over the past two years as consumers have 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 Blitz and Twist pre-rolls making up two of our top 20 selling products in Delta 9 retail stores over the past 12 months. In Q3 last year, Delta 9 launched a new 14 pre-roll multi-pack of our best-selling Blitz and Twist pre-rolls in Manitoba and Saskatchewan, and we plan launches of these multi-packs across additional provincial markets in the coming quarters. The company also plans to release several other pre-roll and infused pre-roll products in the coming quarters in an effort to increase our overall market share in this important category. In Q1 this year, Delta 9 released our new 0.25 gram pre-rolls, offering Canadian consumers a convenient personal use setting, again, in this important pre-roll category. On oils, extracts, and derivative products, over the past year, Delta 9 saw successful initial sell-through in our various markets for our Cannabis 2.0 products, including adjustable cannabis oils, vape cartridges, and cannabis concentrates. In 2022, 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 now include three formulations of ingestible cannabis oils, three formulations of 510 vape carts, cannabis kief, and pressed hash in the concentrate formats category. It is and continues to be our belief that these categories will continue to become an increasingly important component of the medical and recreational use cannabis markets into the future. In our retail stores, we carry the full complement of these 2.0 cannabis derivative products from the industry's leading manufacturers. We continue to 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 consumers and be able to pivot to capitalize on these new product opportunities. From a distribution standpoint, we believe that the domestic market for recreational use cannabis presents our most major growth opportunity for the company over the next several quarters. Wholesale revenues from the sale of recreational use cannabis 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 capacity has come online over the past few years in order to reach our ultimate goal of becoming a national distributor of branded recreational use cannabis products. At the end of this past quarter, Delta 9 was licensed for distribution in Manitoba, Saskatchewan, Alberta, British Columbia, Ontario, and Newfoundland, with these six provincial markets representing well over 50% of the Canadian population. The company is currently undertaking license applications in additional Canadian markets, and we highlight the Quebec market as our next key planned market entry, as well as exploring international distribution opportunities in Australia, Israel, the EU, and Latin America to expand our distribution potential into 2022. On vertical integration and retail cannabis sales, over the past two years, Delta 9 has made substantial progress in expanding its retail footprint. Delta 9 started the year 2020 with only four operating stores in our home market in Manitoba. In Q1 this year, Delta 9 successfully opened its 17th cannabis retail store on Portage Avenue in Winnipeg. Most notably in Q1 this year, the company announced a transformative retail acquisition to acquire all of the assets of Uncle Sam's Cannabis Ltd. in connection with their 17 operating retail cannabis stores based in the province of Alberta. The Uncle Sam's and Discounted Cannabis retail cannabis stores acquired in this transaction have demonstrated significant revenue, EBITDA, and earnings growth, over their past two years of operation. We do expect the Uncle Sam's Cannabis transaction to be immediately accretive in 2022, while the acquisition represents an attractive revenue multiple of approximately 0.68x annualized revenue. The combination of the Uncle Sam's Cannabis stores and Delta 9's existing store network has made Delta 9 a leading retailer of cannabis products in Canada. As of today's date, Delta 9 operates 35 cannabis retail stores across Canada and is positioning as one of the country's largest vertically integrated cannabis retailers. The company has an aggressive growth strategy to actively acquire cannabis retail stores that will provide meaningful revenue growth and positive adjusted EBITDA. We plan to open and operate several additional retail locations and jurisdictions which allow for privatized cannabis retail over the next 12 months. Investors can look forward to numerous store openings throughout 2022. On business-to-business opportunities, the company derives a portion of our overall revenues from sales of cannabis genetics, sales of Grow Pods, and from licensing and consulting activities provided to other licensed and pre-licensed cannabis companies. We do believe that these opportunities provide a number of benefits to the company, including giving us a complementary business vertical which produces diversified and high-margin revenue, a third-party validation of the company's proprietary Grow Pod platform, valuable partnerships with other pre-licensed and licensed cannabis companies, and exposure to international expansion through this non-cannabis revenue stream. To date, Delta 9 has licensed almost 24 third-party facilities across Canada and North America, representing almost 200 Grow Pods for our microcultivation partners. We will continue to pursue and expand these business-to-business revenue opportunities over the coming year. The company is also continuing its pivot to expand its sales and marketing efforts for its B2B segment into the United States. We anticipate to see larger growth from our US B2B sales into the back part of 2022 and beyond as this pivot begins to take effect. Onto financial results, we'll begin with an assessment of the balance sheet. The company ended the quarter with approximately CAD 13 million in cash, inclusive of the company's draw on its operating line of credit, and showed approximately CAD 15 million in working capital. During our Q4 2021 earnings call, we highlighted balance sheet strengthening as a major near-term focus for management. During Q1 2022, we announced two material financing and refinancing transactions. The first is the company's closing of a CAD 32 million credit facility from ConnectFirst Credit Union. These credit facilities include a CAD 23 million commercial mortgage facility, a CAD 5 million acquisition facility used for the Uncle Sam's retail transaction, and a CAD 4 million authorized overdraft facility. These facilities mature over five years and amortize over a 12-year term. This facility is anticipated to be established in multiple tranches and advancing at various times, and for various purposes, including CAD 11.2 million for the repayment of the company's previous Canadian Western Bank credit facilities and CAD 11.8 million for repayment of the company's existing convertible debentures. The interest rate under these facilities is a five-year fixed rate of 4.55%. The company has already used a portion of these facilities to repay, again, our facilities with Canadian Western Bank, and we do expect to repay our CAD 11.8 million convertible debentures on the maturity date of July 17 this year. As noted in our press release, February 1 this year, these facilities provide an attractive and industry-leading interest rate, annualized interest and principal repayment savings, and expansion in operating capital through the acquisition and working capital facilities. The second material financing transaction is the company's closing of a CAD 10 million strategic financing from Sundial Growers in the form of a three-year CAD 10 million secured convertible debenture. The financing provides acquisition capital, as well as capital for general corporate and working capital and growth purposes. The result of these two transactions is a balance sheet which provides significantly improved working capital, alleviating concerns around the current maturity of the company's unsecured convertible debentures and positioning Delta 9 with two new strategic partners in ConnectFirst and Sundial Growers to help facilitate the next stage of the company's growth. Total assets at the end of Q1 totaled CAD 106.8 million, up from CAD 74.7 million as at the end of last year. We believe the company is currently well capitalized to continue to execute on our expansion plans and 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, on Q1 this year, the company produced approximately 2.5 million grams, in line with production numbers from Q4 last 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 per gram decreased to a record CAD 0.57 versus CAD 0.61 in the fourth quarter last year. We would highlight that these production cost figures are quite competitive, even comparing versus our largest competitors in the context of the current Canadian cannabis flower market. As the company continues to refine its production techniques, we anticipate that our economical cost base will be essential to improving gross profitability in the upcoming quarters. Total grams sold decreased to approximately 900,000 grams in Q1, down from 2.2 million last quarter, although we do note that our overall grams sold in the past four quarters represent significant improvement over the previous four quarters. The company's average selling price increased in the quarter to CAD 3.14 per gram from CAD 2.07 per gram. We have seen average wholesale prices stabilize over the past several quarters and feel that Delta 9 to reach sustainable profitability from our wholesale cannabis segment at these current price levels. Continuing to address our wholesale business and improving overall grams sold and average selling price will be a continued focus for us over the upcoming quarters. While we saw fewer overall transactions at our retail stores in Q1 due to seasonal weakness on the back of the holiday shopping season in Q4 last year, our average cart size appears to be stabilizing around the CAD 42-CAD 43 dollar per transaction level over the past few quarters. On revenue and revenue segmentation, total net revenues for the three-month period were approximately CAD 12.5 million versus CAD 13.2 million for the same period last year, a decrease of 6%. Sequential net revenues decreased 27% from CAD 17.1 million in Q4 last year. From a revenue segmentation standpoint, for Q1 this year, the company recorded retail revenues of CAD 10.2 million, wholesale cannabis revenue of CAD 2.8 million, and B2B revenue of CAD 121,000. The company encountered challenges in our material revenue segments in Q1 this year. However, we remain bullish that the company's recent completed acquisition of the Uncle Sam's Cannabis Ltd. Alberta assets position the company as one of Canada's largest and fastest-growing retail chains, will deliver significant revenue growth for the company in Q2 this year and beyond. In the upcoming quarters, we are focused on three main initiatives to drive revenue growth. First being a continued expansion of the company's retail store chain, including further acquisitions as the company continues to execute on its retail roll-up strategy. Building momentum in our cannabis wholesale segment with a focus on expanding product distribution in our six existing markets, adding new provincial markets through new listings, as well as through bulk wholesale agreements with other licensed cannabis companies. Finally, expanding our B2B revenues through a focus on creating relationships in the Canadian micro-cultivation industry and expanding into emerging markets, including the United States. We continue to believe that given the relative novelty and uncertainty of the global cannabis industry, the company's diversified revenue and vertical integration approaches will allow us to better react to market challenges than our competitors with single business strategies. Gross profit before accounting for changes in the fair value biological assets for the three-month period was CAD 3 million or 24% of net revenue. This compares with CAD 3.7 million or 28% net revenue for the same period last year. We attribute the decrease in gross profit and gross profitability to the overall decrease in revenue versus the previous period. Again, note that we remain bullish on a meaningful revenue rebound, which should contribute to improved profitability in Q2 this year. In the company's wholesale cannabis business segment, we would note that the company has continued to see downward trending in per gram production costs as a result of incremental efficiencies in labor costs and overall economies of scale as production output has scaled over the last 12 months. We expect that as production cost per gram continues to trend down, and with the introduction of sales of higher margin cannabis derivative products in 2022, the company will experience a general improvement in gross profitability from our wholesale cannabis segment. In the company's retail cannabis business, we anticipate that the introduction of higher margin, cannabis extract and additional stock of ancillary cannabis products will assist in improving overall gross profitability, again over the coming year. We also highlight that once our B2B segment begins to produce more meaningful revenue contributions, the company's overall consolidated gross margin is expected to improve. Operating expenses for the three-month period were approximately CAD 6.5 million, versus CAD 5.7 million for the three-month period one year ago. The most notable increases in overall operating costs were amortization, an increase of CAD 280 thousand, insurance, legal, professional consulting, and investor relations fees, and personnel expenses, which we note were an increase of CAD 430 thousand. The increase in personnel expenses were largely due to the increase in the number of operating retail stores versus the previous year. The company's loss from operations for the three-month period was CAD 2.9 million, versus a loss from operations of CAD 3.2 million, modest improvements over the previous period. This also compares with a loss from operations of CAD 3.5 million for the sequential period ending December 31 last year. We are confident that our renewed focus on revenue growth, gross profitability, and prudent cost controls will return the company to profitability over the coming quarters. The company's adjusted EBITDA loss for the three-month period was CAD 1.7 million. This compares with an adjusted EBITDA of approximately CAD 7,000 for the same period in 2021. We attribute the adjusted EBITDA loss in the period to lower than anticipated revenues and lower than anticipated margins, as noted above. Again, we remain confident that the company's recent acquisitions and renewed focus on growth and profitability will return us to a positive adjusted EBITDA position over the coming quarters. As we look forward to the balance of 2022 operating year, we feel the company is well positioned to continue to execute on its vertical integration and growth strategy. 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 provincial markets. In our retail segment, we will add to our retail and distribution capacity by adding new stores to our existing chain. We will continue to position as a retailer of choice for both retail customers and suppliers, seeking the best locations and positioning as the most competitive LP-owned retailer in the Canadian 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 Grow Pod projects across North America while deploying resources into international markets to position our non-plant touching businesses to realize growth in the ever-growing cannabis opportunity globally. I wanna thank everyone for taking the time to join our call this morning. With that, I will turn the call back over to the operator for questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If 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 pooled 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 Ven V with Research Capital. Please go ahead. Thanks a lot for taking my questions. Good morning, everyone. My first question is about growth outlook for next quarter. We see that last year in Q2 Delta 9 rebounded strongly with a sequential growth of 26% over Q1. This time around, do you guys see similar kind of growth in Q2? Yeah. Thanks, Ven, and good question. You know, I think in terms of outlook for the second quarter, we have generally seen the seasonal rebound in our cannabis retail segment. Obviously, you know, do anticipate seeing that seasonal slowdown in the first quarter. Again, we've seen now I think those conventional shopping patterns start to rebound into the second quarter. As well, you know, again, as we've seen the last two years, the disruption in purchasing patterns from provincial purchasing boards around the holiday shopping season, which impacts Q1 results, has started to again shift back into growth mode. Would anticipate meaningful rebounds in both our cannabis retail and wholesale segments into the second quarter here. On B2B, this segment for us obviously has been the most disrupted in the last 24 months by COVID and overall market conditions, as well would be the one segment for us that has been impacted by supply chain issues. That's really what you're seeing in terms of project delays and revenue recognition in the first quarter here. Again, we do see that smoothing into the back part of this year and overall will rebound, we would say meaningfully, from the Q1 results into Q2. Overall, across the board here, you know, anticipate again meaningful rebound into the second quarter. We will be in a position to provide formal guidance to the market in the coming weeks on our Q2 revenue results. I'm trying to understand your adjusted EBITDA. Usually, Delta 9 was the only company which re-reported positive EBITDA for eight quarters in a row. I think this time around, due to seasonality and slightly higher operating expenses, the EBITDA was a bit of a loss, marginal loss. I wanted to understand when do you think Delta 9 will be back to positive EBITDA? You know, I think it's too early for us to guide on the second quarter, then formally in terms of that rebound, or adjusted EBITDA profitability, although again, as we've seen historically, you know, the company reaches between CAD 15 million and CAD 20 million in quarterly revenue. You know, we've seen sustainable results above adjusted EBITDA breakeven. With it in mind that we do anticipate revenue to rebound meaningfully more towards the CAD 20 million quarterly revenue mark for the second quarter here. And again, with proven cost controls in mind, as the company has demonstrated over the past 2 years, you know, feel that rebound to adjusted EBITDA profitability is not far off. Yeah, you mentioned in your presentation that in 2022 also, the key focus would be retail expansion. Can you add more color, like which provinces will be key focus? If you can add more about if you have any target number of retail stores by the end of 2022, that would be great. Yeah. Our core market focus then, in terms of retail acquisitions, will be the prairie markets, Manitoba, Saskatchewan and Alberta. We feel that there is a good opportunity to, you know, to really play the role of consolidator across these markets. We are now seeing a shakeout, you know, in terms of those markets having reached, call it, peak saturation in retail. We are beginning to see store closures across those markets. At the same time, we do see that there have been quality operators and assets developed over the last few years across those markets. Significant activity on the back of the Uncle Sam's acquisition. I think that has certainly been successful in positioning us as an acquirer for those markets. Look for us to continue to focus on the Alberta market in particular, expanding outside of the Edmonton market, I think becomes key focus for us then. Taking a more meaningful presence in key markets like Calgary, Lethbridge, and beyond in the Alberta market. As well looking to put a more substantial footprint into the Saskatchewan market, which has been a little bit smaller for us historically. Mm-hmm. Yeah. Finally, do you see any regulatory changes or legislation coming that may impact the Canadian cannabis industry positively over the near term or long term? We do anticipate then on the back of the Health Canada reviews, which are anticipated for this year in terms of the overall Cannabis Act and regulations, that we will likely see modest opening up of restrictions relating to milligram restrictions in edible products as well as purchasing restrictions around drinkable cannabis products. Overall should improve the landscape for those two product categories, which I don't feel have been fairly represented in terms of overall industry revenues. Expect modest improvements. You know, in our view, more material elements which government you know may consider over the medium to long term would be excise tax reform, although we are not bullish that those types of changes will be coming on this round of Health Canada review. Okay, perfect. Thanks a lot, John. That's it from me. Thank you, Dan. Ladies and gentlemen, as a reminder, if you do have any questions, please press star one. Your next question comes from Mark Fillion, and he's a shareholder. Please go ahead. Oh, hi, John. I've got a question about the distributor license you obtained in Manitoba. I'm wondering if you could shed some light on how this might improve market share in the Manitoba market, or how this will impact revenues. If you can add any color on that, please. Yeah. Thank you, Mark. Good question. Company announcing early on in Q2 here that we have been successful in obtaining a distribution and cross-docking license from the province of Manitoba. Unique market dynamic in the Manitoba market in that while MBLL, our provincial Crown corporation here, does act as provincial distributor, they do not actually receive physical deliveries of product in the market. Means that shipments are going direct from suppliers to retailers in many cases. This does introduce an element of market inefficiency in small shipments coming from outside of province to individual retail stores, particularly rural stores in Manitoba. The real thought process behind this distribution license is allowing out-of-province suppliers to consolidate orders through a single cross-docker or distributor operating within the province. Delta 9 has already begun to provide now these services to several outside of market producers. Again, contributing to the overall efficiency of the space. Our goal will be to expand that business meaningfully into the back part of 2022, although too early for us to provide formal, I would say guidance around where we feel that revenue picture will land. You know, overall I think this plays to that, you know, to the company's vertical integration strategy, really wanting to participate in as much of the overall value chain from seed through to end sale and end consumer within the cannabis space. Also, I would say opportunity for us to take this outside of Manitoba into markets like Saskatchewan, which again allow for privatized distribution functions. Company's goal as we expand our retail footprint into the Saskatchewan market would be then to look at out of province opportunities for distribution as well. Okay, great. Can you also tell me the recent news release regarding a shareholder loan of some nearly CAD 5 million? If there was no description in the news release in terms of for what purposes that amount would be used. For now, Mark, simply general corporate and working capital purposes. You know, really wanting to ensure that the company's working capital position is providing for flexibility for the company's balance sheet as well. You know, obviously, company has been active in terms of in terms of retail M&A, you know, and want to ensure that there's a sufficient cash balance there to be meaningfully investing in those assets on the back of many M&A transactions. Obviously, more announcements to come as definitive agreements are reached in terms of any any forward M&A deals. We would say use of proceeds would be targeted towards working capital as well as as future acquisitions. Terrific. Thanks, Ron. There are no further questions at this time. Please proceed. There being no further questions, I wanna thank everyone again for joining us for today's call. We will turn things back over to the operator. 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.