Good morning, ladies and gentlemen, and welcome to the Delta 9 Q3 2022 Financial Results Conference Call. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that the call is being recorded on November 15th, 2022. I would like to turn the conference over to Alexa Goertzen. Please go ahead. Good morning, everyone, and welcome to the Delta 9 Cannabis Q3 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 Cannabis 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 public filings, which are available on SEDAR. I would now like to turn the call over to Delta 9 Cannabis'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's Q3 2022 Earnings Call. With me this afternoon is the company's Chief Financial Officer, Jim Watson, and our VP of Corporate Affairs, Ian Chadsey. Our earnings press release, Q3 2022 financial statements, and management discussion and analysis have now been made available on SEDAR and our company website. With that, let's begin. Over the first nine months of 2022, the Canadian cannabis industry has continued to deal with challenges relating to an oversupply of cannabis products, compressed cannabis wholesale margins, inefficiencies in provincial crown distributors, oversaturation in the number of operating retail stores, and cannabis capital markets volatility. In the past year, Canadian cannabis industry sales have continued to expand, posting monthly retail cannabis sales of CAD 394 million in August this year, based on the most recent data from Statistics Canada. Annualized retail cannabis sales now exceed CAD 4.8 billion, and with the market continuing to grow at over 10% on a year-over-year basis, we anticipate that over the next five years, the Canadian cannabis industry will at the least double in terms of retail cannabis revenues by the end of this decade. Recently, we saw progress in the United States market in terms of material cannabis reforms at the federal level. In October 2022, President Biden announced that he would pardon certain individuals convicted with criminal records for cannabis possession, and at the same time announced a sweeping review of the scheduling of cannabis under the Controlled Drugs and Substances Act. Federal rescheduling of cannabis in the United States is seen as a gating item to allow firms like Delta 9 to participate in the U.S. cannabis market. Other international markets, such as Germany, have made progress on federal adult use legalization initiatives, targeting a German launch in early 2024. In international markets such as Israel, Australia, Asia Pacific nations, and various countries in the E.U. continue to make progress on advancing more progressive medical and recreational use cannabis laws. 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 grow and unlock value for investors. I'm pleased today to be presenting you with Delta 9's Q3 2022 financial and operating results. These results include the second full quarter of operating results from our acquisition of the Uncle Sam's Cannabis and Discount Cannabis stores in Q1 this year, and a partial quarter of operating results from our Garden Variety acquisition, which closed in September. 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 operations and material milestones for the company that were 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 production unit, which we call the Grow Pod. In Q3 this year, the company continues to have 297 of these modular Grow Pods licensed by Health Canada and in operation within our facilities. We are now operating these assets at or above the original design capacity of the facility and are now beginning to assess efficiencies in terms of number of harvest rotations per year, average grams per harvest, and overall potency in order to maximize returns from these assets. The company has identified three main growth drivers which we feel will allow us to maximize the profitability of our cultivation and processing assets. The first is refining our cultivation and processing techniques to maximize THC potency and qualitative quality features of our cannabis products. As Canadian cannabis consumers have become more discerning in their purchasing decisions over the past few years, we know that the success of our cannabis cultivation business will rest on our ability to produce the highest potency and quality cannabis products. We've made strides in the past 12 months in improving our average THC potency in our harvested cannabis flower products, and we'll continue to push our cultivation teams to pursue excellence in terms of our production outcomes. Second, the company is currently in the process of automating our pre-roll manufacturing. Over the past 12 months, pre-roll SKUs have become Delta 9's best-selling products in terms of units sold across numerous provincial markets. However, we have been bottlenecked on our ability to produce these products internally and have often had to source third-party manufacturing. Automating this manufacturing process will allow the company to realize over CAD 1 per gram in incremental contribution margin from our pre-roll product offering and will contribute excess capacity to this important product category. Third, the company has begun a gradual retrofit and upgrade of its older technology lighting systems to new state-of-the-art LED systems, which the company has developed with its international lighting suppliers over the last 2 years. These lighting upgrades are anticipated to increase the company's cultivation capacity to approximately 20,000 kilos per year from our current capacity of approximately 10,000 kilos annually. These upgrades are also anticipated to improve average THC potency and overall cannabis flower quality, in line with our first key growth driver. We feel that this increased potency, quality, and capacity will not only increase our average selling prices and contribution margins from cannabis wholesale sales, but should also assist in driving cost efficiencies and lower our cost per gram of production. We will continue to update the market on the progress of these key growth drivers as the company further develops its forward-looking expansion plans through the balance of 2022 and into 2023. On our portfolio of cannabis products over the past three quarters, Delta 9 has been narrowing the scope of our cannabis cultivars under production to those that are the highest in demand and at the higher end of the potency range. We currently produce approximately 12 different genetic strains of cannabis, each with its own unique chemical cannabinoid content, terpene, and flavonoid profiles, and we continue to maintain more than 100 additional strains being stored on-site in a seed bank to provide for product optionality in the future. We are continuing with our production pivot towards these higher-potency cannabis strains, which are the highest demand segment with the retail cannabis consumer. For the past 18 months, the company has increased its average THC and harvested cannabis flower to over 20% on average in Q3 this year, from less than 15% at the beginning of 2020. In Q3 this year, Delta 9 launched its new Scoops cultivar across key provincial markets such as Ontario and Alberta, and we have seen encouraging success in our newer high-potency, high-quality products. Our next new cultivar is scheduled for launch in January 2023. We are planning multiple new high-potency product launches over the next 15 months. Cannabis pre-rolls have become an increasingly important category in the Canadian cannabis market as consumers have moved to smaller packaging sizes and seek 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. In Q1 this year, we released our new 0.25-gram pre-rolls, offering Canadian consumers a convenient personal use setting in the pre-roll category. In Q2, we expanded our product offerings further and launched a new infused pre-roll incorporating high-potency cannabis distillate into our pre-roll lineup. We have several new pre-roll product launches planned in early 2023 once the company announces the completion of its automated pre-roll manufacturing process. On oils, extracts, and derivative products over 2022, 2021. Delta 9 saw initial success and sell-through in the market for our Cannabis 2.0 products offering, including ingestible cannabis oils, vape cartridges, and cannabis concentrate. Thus far in 2022, Delta 9 has relaunched 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 now includes three formulations of ingestible cannabis oils, three formulations of 510 vape carts, cannabis kief, and pressed hash in the concentrate formats category. It's our belief that these categories will continue to become an increasingly important component of the medical and recreational use markets into the future. In our retail stores, Delta 9 continues to carry the full complement of these cannabis derivative products from the industry's leading manufacturers. We believe that through our retail segment, we will continue to extract valuable intel on which of these new product formats are having a positive impact with the consumer and be able to pivot to capitalize on these new product opportunities. 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 years. 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 capacities come online in order to reach our ultimate goal of becoming a national distributor of recreational use cannabis products. At the end of Q3, Delta 9 is licensed for distribution in Manitoba, Saskatchewan, Alberta, British Columbia, Ontario, and Newfoundland and Labrador, with these six provinces making up well over 50% of the Canadian adult use cannabis consumer population. The company is currently undertaking license applications in additional Canadian markets. We highlight Québec as our next key planned market entry, as well as exploring international distribution opportunities in Australia, Israel, and the E.U. On vertical integration and retail cannabis sales over the past 18 months, Delta 9 has made significant progress in expanding its retail footprint. Delta 9 started the year 2020 with only four operating retail stores in Manitoba. We fast-forward to early 2022 when Delta 9 opened our 17th cannabis retail store in the city of Winnipeg. In late Q1, 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 and operating as Uncle Sam's Cannabis and Discounted Cannabis brands. The combination of the Uncle Sam's cannabis stores and Delta 9's existing store network has made Delta 9 a leading multi-banner retailer of cannabis products in Canada. In September, Delta 9 announced the closing of its acquisition of three Garden Variety cannabis stores in Manitoba. The CAD 3.25 million all-stock transaction is anticipated to add approximately CAD 8 million in annualized retail revenues, and we anticipate the deal will be immediately accretive to EBITDA. Delta 9 has two planned store openings in Q4 2022 and an additional store planned for Q1 2023 as we continue to position as one of the country's largest vertically integrated cannabis retailers. The company also has an aggressive growth strategy to actively acquire cannabis retail stores that will provide meaningful revenue growth and positive adjusted EBITDA. Investors can look forward to numerous [audio distortion], 2023 integration into the retail segment. On business-to-business opportunities, the company derives a portion of our overall revenue from sales of cannabis genetics, sales of grow pods, and from licensing and consulting activities provided to other licensed and pre-licensed cannabis companies. To date, Delta 9 has licensed 15 third-party facilities across Canada and the United States, representing over 180 Grow Pods for our micro and standard cultivation partners. We will continue to pursue and expand on these business-to-business revenue opportunities over the coming year, and we are also continuing with our pivot to extend our sales and marketing efforts for our B2B business in the United States. We anticipate to see larger growth from our U.S. B2B sales in 2023 and beyond as this pivot begins to take effect. Now on to the financial results. We will begin with an assessment of the balance sheet. During the first half of 2022, the company undertook multiple financing and refinancing transactions to strengthen our balance sheet and continue to fund growth. The first, the company's closing of our CAD 32 million credit facilities from connectFirst Credit Union in Q1. The credit facilities include a CAD 23 million commercial mortgage facility, a CAD 5 million acquisition facility used for the Uncle Sam's transaction, and a CAD 4 million revolving overdraft facility. These credit facilities mature after five years and amortize over a 12-year term. The interest rate under these facilities is a five-year fixed rate of 4.55%. As we've noted previously, these facilities provide an attractive and industry-leading interest rate, annualized interest, and principal payment savings versus our previous credit structure and expansion in operating capital through the acquisition and working capital facilities. The second financing initiative was 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. In Q2, the company announced a CAD 5 million non-dilutive shareholder loan, as well as a CAD 2 million overnight marketed offering of equity units. The Company ended the quarter Q3 with CAD 2.8 million in cash, inclusive of the Company's draw on its operating line of credit, showed a working capital deficiency of CAD 12 million due to the reclassification of our CFCU loans as current. We note that as of September 30, the company was showing a breach of its debt service coverage ratio covenant for its credit facility with connectFirst Credit Union, which required the classification of this debt as current on our balance sheet. The company continues to make required interest and principal repayments on all of its existing credit obligations and does not anticipate any deterioration of its credit condition. Subsequent to the end of the reporting period, the company obtained a waiver from CFCU, indicating the bank will waive its right to demand repayment under our lending agreements. The company intends to secure additional or expanded waivers as necessary as the company works to improve its adjusted EBITDA results and bring its covenants back into compliance. Total assets as of the end of Q3 this year total CAD 98 million, up from CAD 75 million as of the end of last year. We believe the company is currently well-capitalized to continue to execute on our growth plans and can act opportunistically where assets become available, which can accelerate expansion, provide strategic value, and improve the financial and operating performance of the company. On key performance indicators, in Q3 2022, the company produced approximately 1.96 million g. This was down from 2.5 million g in the second quarter this year. This was primarily due to a planned production slowdown over the summer of 2022, which affected our Q3 harvest numbers. We anticipate harvest quantities to increase back to historic levels in Q4 2022 and Q1 next 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 increased to CAD 0.76 per g versus CAD 0.55 per g in Q2 this year, again, as a result of the planned summer slowdown in production. We would highlight that these production cost figures are still quite competitive, even comparing with our largest competitors in the context of the current cannabis flower market. As the company continues to refine our production techniques and expand, we anticipate that our economic cost base will be essential to improving gross profitability from this segment in the coming quarters. Total grams sold was steady within this quarter of 1.4 million g, in line with our Q2 numbers this year. We note that overall grams sold in the trailing 12-month period represents a significant improvement over the previous four quarters. The company's average selling price decreased to CAD 206 per g from CAD 365 in Q2 this year. Although we highlight this figure was impacted by one-time excise tax reassessment, which would have otherwise led this result to be in line with previous quarters. We have seen average wholesale selling prices stabilize over the past several quarters and feel that Delta 9 can reach sustainable profitability from our wholesale cannabis sales at current levels. Continuing to address our wholesale business and improving overall grams sold and average selling price will continue to be a focus for us moving forward. The company saw a record 376,000 retail transactions in Q3, up from our previous record of 348,000 retail transactions in Q2 this year, with strong contributions from our newly acquired Uncle Sam's, Discounted Cannabis, and Garden Variety stores. Average transaction size has trended lower, as a result of the increased Alberta market activity, which generally sees lower average transaction sizes. On revenue and revenue segmentation, total net revenues for the three-month period ending September 30 were CAD 15.7 million, an increase of 3% year-over-year, but down 10% sequentially from CAD 17.5 million in the second quarter. From a segmentation standpoint, for Q3, the company recorded retail revenues of CAD 13.8 million versus CAD 10.4 million in the same period last year. Wholesale cannabis revenues were CAD 2.8 million versus CAD 4.1 million in the same period last year. B2B revenues were CAD 345,000 versus CAD 1.1 million in the same period last year. The company saw relative strength in its retail segment in Q3 this year, while price and margin compression continue to impact cannabis wholesale revenues due to overall competition. Our B2B segment continues to see volatility relating to revenue recognition due to an uncertain overall business environment, which we see impacting business sentiment and capital investment. In the upcoming quarters, we'll focus on three main initiatives to drive revenue growth. The first is a continued expansion of the company's retail store chain, including further organic store build-outs and acquisitions as the company continues to execute on its retail roll-up strategy. We've spoken about key improvements and investments the company's planned in its cultivation and processing business, which we feel will help us drive momentum, increase revenue, and improve margins in the cannabis wholesale segment, with a focus on expanding our product distribution across our six existing provincial markets, adding new provincial markets through new listings, as well as through bulk wholesale arrangements with other licensed cannabis companies. Expanding B2B revenues through a focus on creating relationships in the Canadian micro-cultivation industry and expansion into emerging markets such as 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 of biological assets for the three-month period was CAD 1.9 million, or a 12% gross margin. This compares with CAD 4.8 million or a 31% gross margin for the same period last year. A decrease of 60% year-over-year. We would attribute this decrease in overall gross profit, again, before changes in the fair value of biological assets, to overall price and margin compression in the company's wholesale and B2B segments. Gross profitability in this three-month period was impacted by one-time items, product impairment costs, and write-downs totaling approximately CAD 1.6 million. Gross profit in the retail and wholesale cannabis segments declined in the three-month period ending September 30 as a result of one-time items, product impairment costs, and write-downs. Gross profit across the company's core businesses has been impacted over the first nine months of this year by lower gross margins due to increased competition, increased costs due to inflation, and decreased customer spending based on macroeconomic uncertainty. We do expect that as production cost per gram trends downward on increased production capacity with the introduction of sales of higher-margin cannabis products in Q4 and Q1 2023, that the company will experience a general improvement in gross profitability from our wholesale cannabis segment. The company has seen relative stability in its retail cannabis segment over the past several quarters and will continue to address KPIs such as average transaction size, units sold per transaction, and opportunities for higher-margin product sales to continue to improve our overall retail margins. We would also highlight that once the company's B2B segment begins to produce more stable and more meaningful revenue contributions, the company's overall consolidated gross margin is expected to improve. Operating expenses for the three-month period ending September 30 were CAD 7.4 million versus CAD 6.3 million last year. The most notable increases here were amortization, an increase of CAD 378,000, and personnel expenditures, an increase of CAD 650,000. The increase in overall operating expenses is largely due to the increase in number of operating retail stores versus the previous period. The company's loss from operations for the three-month period was CAD 6.2 million, versus a loss from operations of CAD 55,000 in the prior 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 versus adjusted EBITDA of CAD 191,000 for the same period last year. We attribute the EBITDA loss in the period to lower than anticipated gross margins, as noted previously from our material growth segments. Although, again, we remain confident that the company's recent acquisitions and renewed focus on revenue growth and gross profitability will return the company to a strengthened and adjusted EBITDA position in the coming quarters. As we look forward to the balance of the 2022 operating year and into 2023, we do feel that the company is positioned to continue to execute on its 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 of high quality 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 chains. We will continue to position as retailer of choice for both retail customers and suppliers seeking the best locations. We're 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 Grow Pod projects across the country, while deploying resources into international markets to position our non-plant touching businesses to realize growth in the ever-growing cannabis opportunity globally. Thank you to 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, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw from the question queue, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Research Capital. Please go ahead. Thanks, operator, for taking my question. Hi, John. You guys mentioned that there is a one-off item impacting gross profit this time. Did you report the amount of one-off item, and is it related to inventory write-down? The one-off items then in their entirety are impacting both revenue through a cannabis excise tax adjustment as well as inventory write-downs or adjustments to cost of sales impacting gross profitability. Those numbers in aggregate are approximately CAD 1.6 million for the three-month period. Okay. That's great. Yeah, I noticed you guys paid more excise tax the same despite lower gross sales compared to last quarter. Yeah. Yeah. Again, you're seeing that figure reflect the current excise tax payable, attributable to the three-month period, and then also the excise tax adjustment coming in this period, reflective of costs incurred in a previous period. Do you think that's going to be a temporary thing? Next quarter, can we see excise tax normalizing back to its lower level? Correct. We don't anticipate any forward excise tax adjustments and would expect any inventory impairment to be a much more normalized number. Just speaking historically, Ben, I believe over the last two quarters or the first two quarters of 2022 our average one-time charges were in the area of CAD 100,000-CAD 200,000 as opposed to what we're seeing here at CAD 1.6 million. Okay. Yeah. Also, while looking at segment-wide gross margins, retail cannabis and B2B look healthy at around 25% gross margin. Your wholesale cannabis segment looks like it has 3% gross margin. I mean, excluding one-off and temporary factors, where do you think this will normalize it in the long run? In the normalized long run, Ben, in terms of the cannabis wholesale segment, we would see in the, I would say 30% gross margin range. Again, should take a meaningful step towards that, a more historical norm than what we would see as the forward norm, into the fourth quarter. Then obviously, anticipate that number becoming more stable outside of any one-time items into 2023. Cost per gram also is materially up this time. Is it mainly due to higher labor costs and inflation or is there any other reason? No, actually, cost structure then was quite stable within the quarter. You're seeing that increase in the cost per gram related to the decrease in overall grams produced within the quarter. Net effect there was we intentionally took a portion of our facility cultivation offline during the summer months where we see peak heat accumulation within our facility. We do that in order to maintain the overall quality and potency of the remaining product that we are producing. That summer slowdown in late Q2 and early Q3 planting process results in the number of crops harvested in the third quarter decreasing. We have now resumed our call it regular planting schedule and would see Q4 production output numbers now back north of 2 million g. Again, returning to the historical norms closer to the 2.5 million g range. If not in Q4, then by Q1, at which point you should see that cost per gram reach again, the more historical CAD 0.50-CAD 0.55 range. Okay, makes sense. Okay, thanks a lot, John, for taking my questions. All the best for next quarter. Thanks very much, sir. Once again, ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touchtone phone. At this time, we have no further questions. Please proceed with your closing remarks. If there are no further questions, I again want to thank everyone for joining us for the call this morning, and we'll turn things back over to the operator to wrap up. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.