Good afternoon, Ladies and Gentlemen, and Welcome to The TerrAscend Corp. First Quarter 2022 Financial Results Conference Call. Joining us on today's call are Jason Wild, Executive Chairman, Ziad Ghanem, President and Chief Operating Officer, and Keith Stauffer, Chief Financial Officer. At this time, all lines are in a listen-only mode, and following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for operator assistance. As a reminder, this call is being recorded today, Thursday, May 12, 2022. I would now like to turn the conference over to Keith Stauffer, Chief Financial Officer. Please go ahead. Good afternoon, everyone. Today's presentation includes forward-looking statements about the business outlook in the states in which we, the company operates. Each forward-looking statement discussed in today's call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Risk Factors in our 10-K that was filed with the Securities and Exchange Commission and available at www.sec.gov and on our website at www.terrascend.com. The forward-looking statements in this presentation speak only as of the original date of this presentation, and we undertake no obligation to update or revise any of these statements. I'd now like to turn the call over to Jason. Good afternoon, everyone, and thank you for joining us today. The strategic measures we have taken thus far operationally and through M&A have us well-positioned to deliver strong growth. Today, we are among the leaders in each of our four key markets, Pennsylvania, New Jersey, Maryland, and now Michigan. Our strategy is to go deep within a number of attractive states, and in doing so, hold leadership positions in those markets. This strategy could not be more evident than with New Jersey officially opening for adult use sales on April 21st. A significant day, not only for TerrAscend, but the entire industry. Today, we have two of the 12 retail locations open in a market expected to grow to $2.5 billion by 2025. I believe that by focusing specifically on entering medical-only states early, we can eat while we dream, profitably growing with the market until adult use comes into play. This was our playbook in New Jersey, and we are following the same steps in Maryland and Pennsylvania, both of which we expect to move ahead with adult use in the not-too-distant future. Speaking of Maryland, we continue to lay the groundwork for a scaled and vertically integrated business. We recently announced the acquisition of Allegany Medical Marijuana Dispensary, an 8,000 sq ft retail location attractively located within 6 miles of three states. During the quarter, we also closed on Gage, a leading operator in Michigan, one of the largest and most sophisticated markets in the country. Gage brings to us pristine operations, an incredible brand, an elevated retail experience, and meaningful partnerships with other leading brands. With the acquisition now closed, integration is well underway. We are excited about our path forward in Michigan and will look to expand our retail footprint rapidly, as evidenced by our recent acquisition of Pinnacle and its five dispensaries. In a very short period of time, TerrAscend has grown substantially. Today, we have assembled a phenomenal portfolio of assets in a financially disciplined way, which will enable us to drive the profitable growth that we expect in the future. Let me take you through our portfolio. Our retail footprint at the end of the first quarter comprised 26 open doors across four states and Canada. With the acquisitions of Pinnacle in Michigan and Allegany Medical in Maryland, as well as the planned openings in Lodi, New Jersey, and several new stores in Michigan, our footprint at the end of the year is expected to surpass 40 stores across five states and Canada. Our cultivation footprint provides us with scaled capacity in our four core states. We completed the upgrade and expansion of our Pennsylvania facility, which provides us with availability for further expansion to support future demands. We also have significant capacity expansions underway in both New Jersey and Maryland. Finally, in Michigan, we were just recently approved to open our extraction lab and our Monitor II, phase 2 cultivation expansion is planned to become operational mid-year, both of which will enable us to bring more cultivation and manufacturing in-house to support our growth plans and further expand our margins. Quality and branding remain very important to us. We strongly believe that these capabilities will win the day in increasingly competitive market environments. In addition to our high-quality own brands, we have partnerships in place with leading brands that have the same focus, including Cookies, Pure Beauty, and Khalifa Kush. Our intention is to leverage all of our leading brands and genetics across all of our markets. From a talent perspective, I am very pleased that we have completed the build-out of a diverse executive team, which includes Ziad Ghanem, who joined us during the first quarter, and our most recent additions, Jodie Lampert to head HR and Lynn Gefen to lead our legal team. All of the work that we have done in our core markets for the last several years is falling into place now. The first quarter transition has positioned us to go on to bigger and better things going forward. New Jersey is now in full swing with adult use sales. In Pennsylvania, we continue to cultivate and bring to market a high-quality flower, new strains, and new products, including our new vapes. In Maryland, expansion is well underway, and we will be vertically integrated once Allegany closes shortly. In Michigan, we are well positioned with our retail and supply expansions. Additionally, there are increasingly attractive M&A opportunities for us to deepen our presence in existing markets and expand into new markets. We are here in this good position because we have been financially disciplined and possess a strong balance sheet without having relied on high-cost capital options like sale-leasebacks. I would now like to turn the call over to Ziad, who will provide a further review of our business by state. Thank you, Jason, and good evening, everyone. As Jason mentioned, we are successfully executing on our long-term growth strategy on all fronts. We could not be more excited about our leadership position in each of the four key markets in which we currently operate. Starting with New Jersey, adult use sales began on April 21st, a significant milestone for our company. Over the last several quarters, we have been preparing for this transformative event, working side by side with the CRC to obtain all of the necessary approvals, ensure sufficient inventory, the right level of staffing, and new adult use packaging, all to ensure that our patient and customer experience was in place in eager anticipation of this day, and we were ready. TerrAscend was chosen as one of only seven operators authorized to participate in opening their adult use sales, a testament to the readiness of our team. Today, only 12 dispensaries are open for adult use sales, serving the total state population of approximately 9 million. Of the 12 open dispensaries, our Maplewood and Phillipsburg locations held their adult use grand openings. Lodi will be our third location, expected to open for patient and adult use sales after we finalize the approval process, which is expected shortly. Our grand openings were a huge success. Public data suggests that the state generated $1.9 million in sales and completed over 12,400 transactions on opening day. We estimate that our two locations over indexed, representing 20% of total gross sales that day and 18% of total transactions. That does not even include our branded products sold in other dispensaries. All in, we believe that our product market share is even higher. Our first three weeks of adult use sales confirms our previously disclosed projection that each of our three retail locations have the potential to generate $40 million in revenue annually. Further fueling our confidence is that we are hitting the sales level without edibles and concentrates, two categories that we expect could account for up to 40% of sales in our stores. Being first to market with these in-demand products will drive foot traffic to our stores and increase an average basket size. Our fast start in Maplewood and Phillipsburg speaks to the excellent relationship we have been able to foster with the town, leadership, and stakeholders. We are experiencing the same trusting relationship with the town of Lodi and eagerly await the opening of the store. Additionally, we are ensuring that we have ample inventory and throughput capacity, not only for the increased adult use demand, but equally important to ensure that there is no adverse effect on availability or experience for our medical patients. Initial data indicates that patient wait time has not been impacted and is averaging less than two minutes. In Q1, our priority was to ensure enough inventory for our stores while being conservative with respect to supplying the wholesale market. Not only did we meet the demand of our medical patients and new adult use customers, but we resumed selling our branded products at wholesale at the beginning of Q2, which we expect to continue to do going forward as planned. Having one of the leading scaled cultivation and manufacturing footprints in the state is a key enabler to continue to be a leader in this important market. We are also excited about two significant incremental growth drivers in New Jersey, our recent approval of hydrocarbon extraction and our exclusive partnership with Cookies. With respect to hydrocarbon extracted products, we were the first operator to launch concentrate with the introduction of our live resin dabs last Saturday in New Jersey. This is a significant win for us. Concentrates represent up to 20% of sales in other markets and had not been available in New Jersey. These products and form factors are often preferred by the cannabis connoisseur and have larger market share among the more sophisticated markets like California and Michigan. Additionally, we soon plan to introduce Cookies branded products to the market through our Cookies Corners, a store within a store concept, in each of our retail dispensaries in the state, subject to CRC approval. Needless to say, we expect hydrocarbon extracted products and the Cookies brand to drive more traffic and loyalty to our dispensaries. Finally, we recently signed a lease for a new facility which will enable us to expand up to the 150,000 sq ft canopy limit over time. With this scale, we expect to continue to be both a retail and wholesale leader in New Jersey. We believe the New Jersey adult use launch sets the stage for other states in the Northeast to similarly approve adult use sales over the next 12-24 months. Most notably, Pennsylvania and Maryland, where we also have established leadership positions. Moving next to Pennsylvania, I'm pleased with our continued progress and execution despite the statewide vape recall during the first quarter. The impact of the vape recall was significant to both our retail and wholesale business. With Q1 behind us, we expect the impact of that recall to have minimal impact in Q2 due to our fast action to replace the recalled product with new, fully compliant ones. Today, we are able to produce the same volume as we did prior to the recall across four categories and 20-30 strains within each. Thus far, patients have reacted positively to these new products in our stores, and we are seeing the same at wholesale. Our facility renovation in Pennsylvania is complete. Pennsylvania opened the genetics window on December 1st for 30 days, and hence, we believe we now have one of the largest and most diverse genetics libraries in the state. We initially introduced limited new genetics through our stores in Q1. The velocity of sell-through and consumer feedback has been excellent. We can't wait to see the reaction at wholesale now that we are harvesting larger quantities of product to sell through. From a retail perspective, our six stores in Q1 performed in line with expectations outside of the vape impact. At wholesale, we have reached near full penetration again and are now focused on driving larger order size and frequency, driven by the new strains and products that we initially launched in our own locations. The action we took in the middle of last year resulted in us now selling the highest quality flower we ever have. Combined with what we believe to be the best genetics library and brand in the state, we are well positioned in the near and long term as the state moves towards adult use. Staying in the Northeast, Maryland is another limited license market in which we are an early mover. Maryland is a $600 million medical market with a population of roughly 6 million. Adult use is expected to be on the ballot in November, with a rollout possible by mid-2023. We are extending capacity and adding dispensaries, which will enable us to capitalize on growing demand. Since the closing of the HMS acquisition in 2021, which provided us with cultivation and processing capability, we have made significant progress in expanding our wholesale distribution points with our branded products. We now have 60% of market distribution points at wholesale as compared to 25% at the time of the acquisition. In Maryland, our strategy remains consistent with the other states in which we operate. Become a vertically integrated leader in a pre-adult use market. To that end, and subsequent to the first quarter end, we acquired Allegany Medical, an 8,000 sq ft high-performing dispensary in Cumberland, strategically located in close proximity to the West Virginia and Pennsylvania borders. We plan to rebrand this dispensary as the Apothecarium, our award-winning retail dispensary concept. We will also increase the penetration at this location with TerrAscend's high-quality branded product. We will continue to pursue further retail expansion through M&A up to the 4 dispensary limit to fully prepare ourselves for the potential future adult use demand. In Hagerstown, the build-out of our 150,000+ sq ft facility is progressing on schedule and on budget. Upon completion, we will have additional cultivation and manufacturing capacity. This will allow us to launch additional brands and form factors into the market. The extraction lab should be turned on this quarter with cultivation operational in Q3. Now, for a discussion of our newest market, Michigan. We closed on the Gage acquisition late in the quarter. We are very excited to have added a leading position in Michigan, the third-largest U.S. market, estimated at approximately $2 billion in sales annually. We were fortunate to be able to enter the Michigan market with the highly recognizable and sought-after Gage brand and its exclusive library of genetics, as well as exclusive licensing partnership with Cookies, Pure Beauty, and Khalifa Kush. Integration is well underway and ahead of schedule. Additionally, progress on revenue growth and margin expansion drivers continues according to plan. We now have 12 Gage or Cookies dispensaries in Michigan and one in Canada, with seven new locations planned to open over the coming months. Furthermore, upon closing of the Pinnacle acquisition, we will add five more dispensaries. Capitalizing on Gage's strong brand recognition and retail experience, our plan is to rebrand this, these dispensaries under the Gage or Cookies banner. We will begin supplying these stores with our sought-after Gage and Cookies branded product. We expect our brands to achieve the same penetration level as our current stores. These plans, along with the additional potential M&A, put us on track to end the year with at least 25 dispensaries in the state. We are pleased with the ongoing gross margin trajectory and expect further improvement from the just-opened extraction lab, the Harrison logistics and packaging facility, and the Monitor II cultivation expansion once completed. Since joining TerrAscend in January, I have had the chance to do a full comprehensive review of the company's strengths and opportunities without ignoring the exogenous challenges that all MSOs are facing in these early days of industry growth. We have a U.S. map that is wide open for us, allowing us to be selective with the increasing pace of opportunities that are constantly knocking at our door. The multiples have been trending down considerably, and we will continue to make financially disciplined decisions. In addition to all this, we have a meaningful backing from Jason and the JW Asset Management that continues to help drive our strategy, not only from a financial perspective, but also continuing to present attractive opportunities to TerrAscend, especially in these more trying times in the capital markets. To summarize, we have put together a seasoned and experienced leadership team. The hard decisions have been made over the last year. Our Investments and Core Infrastructure are in place in our four key markets, and we are ready to go. I would like to now turn the call over to Keith to provide a financial update. Thank you, Ziad, and good evening, everyone. The results that I'll be going over today have already been filed on both SEDAR and EDGAR. I'd also like to remind everyone that effective with our previous 2021 10-K filing in March, we became a U.S. filer with the SEC and report our results in accordance with US GAAP. All of the results that I will reference today are stated in U.S dollars. Net sales for the first quarter totaled $49.7 million, a decline of 7% year-over-year and up 1% sequentially. The results are mainly related to the temporary impact of the vape recall on our Pennsylvania business, combined with our continued accumulation of inventory in New Jersey versus selling wholesale in preparation for adult use sales. Our Canada business also experienced a soft quarter, both sequentially and year-over-year. The declines were partially offset by the three weeks of revenue contribution from the Gage acquisition. Regarding sales by channel, wholesale revenue for the quarter was $24 million, a decline of 2% sequentially, driven by the PA vape recall, the continued build of inventory in New Jersey and softness in Canada, partially offset by the addition of Gage. Retail revenue for the quarter was $25.7 million, an increase of 4% sequentially, driven by the addition of Gage and partially offset by the vape impact in our six Pennsylvania stores. New Jersey and California retail sales were stable sequentially, and this was pre-adult use for New Jersey. Gross margin for the quarter was 30.5% as compared to 42.3% in the previous quarter. Adjusted gross margin for the quarter, excluding one-time impacts, which includes reserves for the PA vape recall in Q1, was 38.4% as compared to 49.8% in the previous quarter. The sequential margin compression was driven by the under absorption impact of lower volumes related to the vape recall in PA. Front-loaded costs in New Jersey ahead of adult use sales and an unfavorable mix from the addition of Gage for part of the quarter. We expect for Q1 to be a low point for gross margin as we have already begun to recover from the temporary impact of the vape recall and as our New Jersey adult use business begins to accelerate in Q2 and then more fully in the back half of the year. We continue to execute on our gross margin expansion plans in Michigan, which include the opening of our extraction lab, the opening of our Harrison logistics and packaging facility, and the upcoming completion of the cultivation expansion in Monitor. G&A expenses excluding stock-based compensation were up $2.2 million versus the previous quarter, including Gage. As a percentage of revenue, SG&A increased to 38.7% in Q1 from 34.5% in Q4. The increase as a percentage of revenue was impacted by flat revenue, combined with front-loaded spending increases in New Jersey and the addition of Gage for part of the quarter. Adjusted EBITDA for the quarter was $3.3 million versus $11.9 million in the previous quarter. This decline was driven by the gross margin compression in Pennsylvania and front-loaded costs in New Jersey, as well as the decision to accumulate inventory in the state in preparation for adult use sales. Similar to what I mentioned about gross margin earlier, we expect for Q1 to represent a low point for adjusted EBITDA and adjusted EBITDA margin as we recover from the temporary effects of the vape recall in Pennsylvania, as our New Jersey adult use business continues to ramp and as the margin expansion activities in Michigan progress. Turning to the balance sheet, we ended the quarter with a healthy cash balance of $88.4 million versus $79.6 million at the end of December. This healthy cash position will enable us to continue to invest in the business, both organically and through M&A. During the quarter, we used $18.8 million in cash from operations, mainly driven by an increase in working capital as we continued to prepare for adult use in New Jersey, as well as $8 million of interest payments. We expect to convert the working capital build to cash over the coming weeks and months. We received $24 million in proceeds from warrants and options during the quarter. We also paid $3.3 million to terminate our lease in Frederick, Maryland, as we prepare for the transition to our new Hagerstown facility. We made the final scheduled earnout payment of $7 million for our State Flower business. Finally, CapEx spending during the quarter was $4 million, mostly related to the ongoing work at our Hagerstown facility. In conclusion, we continue to execute on our strategic priorities and invest for future growth. We expect substantial revenue growth in Q2, fueled by the beginning of New Jersey adult use sales, the continued rebound in Pennsylvania, as well as a full quarter of Gage. As a result of these key revenue drivers, we expect gross profit margins and adjusted EBITDA margins to rebound in the second quarter and then to more fully accelerate into the back half of the year, further fueled by SG&A leverage from continued disciplined management of spending. This concludes our prepared remarks. I'd now like to ask the operator to open the call for questions. Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. Please stand by for your first question. Your first question comes from Andrew Bond of Jefferies. Please go ahead. Hi, Good evening. Andrew Bond on the line for Owen Bennett. Thanks for taking our questions. Sure. First in New Jersey, appreciate your commentary around being first to market with vape as well as resuming those wholesale operations at the beginning of 2Q. I think everybody on the call is familiar that product format variety and product selection variety is quite limited in the market currently for rec customers. Two-part question. First, curious on your thoughts in general around the overall market product variety and how that trends over time. Then secondly, do you think your New Jersey operations are better positioned on product variety versus peers? And if so, how or to what extent do you think that benefits your retail and wholesale operations? Thank you. Sure. Ziad, would you like to take that question? Sure. Hi, Andrew. Thanks for the question. For the first part of the question, the overall market performance and also from a product perspective, we're very excited about the start out of the gate in New Jersey. As I mentioned in my remarks, we are even more confident about the numbers that we shared in the past. Currently, the limited assortment or the limited menu that exists was driven by multiple factors. Initially, we wanted to collect data to see how can we protect the patient's inventory. Second, we wanted to make sure that with the new labeling and the new product label and serialization, the complexity that came in within days of the launch made the full menu more complex. Currently, we have multiple strains of flower on our menu. We have multiple strains of vape on our menu. We have limited edible assortments to grow expansion exponentially this week. We have introduced the concentrates. We expect in the next few days to week to have a full menu in our stores, and we believe that the diversity of the products will give us an advantage both from a wholesale perspective and a retail perspective. The product has been extremely popular around with our patients, and we have been able to rotate multiple strains on a daily basis, and the reaction has been very positive. Perfect. Very helpful, Ziad. Thank you. Secondly, just on the newly signed lease for cultivation in New Jersey. Given the current state of the market and also, you know, some wholesale opportunities coming online into next year with new stores licensed, I'd assume you want that facility up and running as soon as possible. Can you just walk us through what you can share around the timing of the ramping of that facility from plants in the ground to initial harvest? Thank you. Yeah, Andrew, I would say two phases for our New Jersey. The first phase is really, we strongly believe, and the data shows that New Jersey is going to be a demand market. We will continue to plan very strategically on how we distribute our products between our stores and wholesale, and what percentage we carry in our stores from a third party versus our own brand in order to offer our patients and our customers a diverse product. That's phase one, and we feel pretty good that we have a good plan for this. As far as expanding our cultivation footprint, we plan to fully introduce more cultivation space, and we will, in a planned way, expand up to 150,000 sq ft that we are licensed for. We will start. The project has already started in that facility, and then we will share more the details of the completion of the project and the bringing online of extra cultivation product. Great. Thanks very much. Looking forward to following along with the rest of the year. Thank you. Your next question comes from Kenric Tyghe of ATB Capital Markets. Please go ahead. Thank you, and Good evening. Just I'm wondering if you and the team could help us better understand, or perhaps, Keith, if you could break out the moving parts on the gross margin compression in quarter. You know, clearly there are a number of moving parts, but, you know, just the quantum of that decrease is obviously a big negative surprise. I realize that we're through it, but I certainly think being able to kind of handicap or tease out the various pieces of it might be instructive for the call as people try and handicap the recovery profile looking to the second quarter. Yeah, sure. Should I take that, Jason? Sure. Hi, Kenric. For sure, it was a big impact and a variety of different factors. The first and foremost, you've heard it multiple times in our prepared remarks, is really the vape recall, and that by far had the largest impact on our gross margins. The volume loss there, combined with just the under absorption at the facility, really hit us in Q1. Like we talked, we feel confident as we look forward that that's the trough and it's gonna pick up from there. That's the first point. The second point is around Michigan, and it's a little bit distortive because we only have Gage in our numbers for 22 days. Gage was dilutive to our margin in the quarter. A full quarter in Q2 is gonna be more representative. We believe that dilutive impact in the quarter will bounce back next quarter. The third that we didn't highlight in the prepared remarks, but want to explain is with Maryland. We're in the process of transitioning out of the existing smaller facility and into the new expanded Hagerstown facility in the coming weeks. We've been scaling down the production and the output from Frederick in order to sort of hedge against just that disruption of moving live plants and just make the process more manageable. That had a dilutive impact on the quarter as well. Last but not least is New Jersey, like we mentioned several times, really we have some costs up front there that we've been incurring and incurred even more so in Q1 in the run-up to adult use here in April. Really, those are the four moving parts. PA by far the largest. I kind of went in descending order of impact in the explanation there. Keith, just safe to say that the PA recall, and if I'm reading your comments correctly, was, you know, well in excess of or at least half of that, the downdraft in quarter, would that be a fair characterization? Yes. Yeah. Again, just wanna emphasize if I haven't been clear enough, which is, again, we see Q1 being the trough here. Like we said in our prepared remarks, we expect a rebound in Q2, and then further inflection from there in the back half of the year, as we build into New Jersey adult use and as Pennsylvania continues to recover the volumes. Then as Gage- Great. The margin expansion activities in Gage continue. Great. Thanks, Keith. Just one more quick one for me. Just with respect to New Jersey, certainly the understanding, I think, of expectations ahead of adult use were that that you know the likes of yourselves and one or two of your competitors were very well-positioned, and if anything, were sitting inventory rich and chomping at the bit to get at the market. And yet in quarter, it appears that you know you were looking to preserve inventory or rather build inventory for your own stores. So could you just help us reconcile how that evolved? I realize, again, a lot of moving parts, dates getting bounced around, but any insight there would be useful as well, and then I can pass it on. Thank you. Yeah, I can take this one, Keith. Kenrick, in our case, we are not trying to reserve inventory for our stores. The inventory that we have, like the way we promised before, it's still in the same position we had. What has been the challenge for us and for many others is the manpower, the new labeling, and the transition of those product to adult packaging into the stores. As time has gone, we are that much closer to have no restriction, no handcuffs around having a full menu and full launch of all those SKUs and product in our stores. Just wanna confirm, it is not an inventory pinch. As a matter of fact, we have resumed our wholesale at the beginning of the quarter for SKUs that were easy to label and easy to produce. Inventory continues to be strong. It is the logistics that's getting better. Great. Thanks. I'll pass it along. Just to Yeah. Yeah. I would just add to that. We did, though, hold back product as we got to the end of Q1, and originally we thought we were gonna be approved, I think it was on March twenty-fourth, and then, you know, that was delayed. In the remaining days of that quarter, we realized that there was a good chance that we would be one of not everybody getting approved for adult use. We decided to pull back on making wholesale sales at the end of Q1. The other reason that we did that was because we had the feeling that they were gonna go from giving that 30 day notice period, which was what we expected on March 24th, to in the beginning of April for the day that they rescheduled, you know, the vote, that it might be a lot quicker than 30 days, which would give us less time to acquire wholesale product from others, and would just put a little bit more of a, you know, a rush on all of us to have enough product to stock our stores. You know, there was a holdback towards the end of the quarter, and it was intentional. We felt like we had an even better chance of, you know, retaining all of that product and selling it all through our stores, especially if not everybody was gonna be approved to go rec. Sure. Thanks, Jason. Appreciate that. Your next question comes from Andrew Partheniou of Stifel GMP. Please go ahead. Hi, good evening. Thanks for taking my questions. Maybe just first on New Jersey. You reiterated that you believe your stores can do $40 million annually in sales, which is a pretty impressive number. Also mentioned that, you know, due to your positioning, you accounted for 20% of total sales on the first day. That number seems to be significantly higher than the $40 million annually. I'm just wondering, is that $40 million annually, you know, do you see that as a comfortable number, a long-term kind of target when things settle out? Or do you see some upside to that? Yeah. I mean, we definitely see upside to it. I could tell you that one of the things that we've been discussing over the last couple of weeks is when we were looking at what we thought we could do at least $40 million per store. But we had been throwing around some math and around trying to figure out how much these stores could be if there was, you know, a whole lot of demand in excess of $40 million. We originally were thinking, you know, maybe $50 million-$60 million per store. What we've seen over the last few weeks is that we actually think that all of our dispensaries, even including Phillipsburg, which is smaller, have the ability to drive, you know, more like $70+ million in sales, you know, assuming that the demand is there. I'm not sure that was the answer to your question, but we definitely feel more confident than ever that we should be hitting, you know, $40 million run rates and sustaining $40 million run rates in the coming months. We actually have expanded our view on what these stores can do with demand that's in excess of that. Because as you see, it's based upon those first day stats that were put out by the state, you know, we were already, you know, pretty much there. Maybe just to jump in and just add a clarification there, Andrew. I'm not sure that the day one sales are representative where you can just take that times 365. I think. Right The day one sales for the whole state were, you know, pent-up demand to some degree. Yeah, so I don't know if that addresses your question as well. Nope. That's perfect, and the qualification is definitely well understood. Yeah. A follow-up to that, or maybe transitioning towards the commentary around M&A. You know, you discussed around acquiring more stores in Maryland in the past, entering new states like Massachusetts, and today you discussed, you know, the valuations are decreasing. Just wondering on, you know, if you could give a little bit more color on kind of what you're seeing, what's the pipeline looking like? At what stage of discussions that you're at and, considering where equities are trading, would you see this as more of cash deals or a combination of cash and equity, you know, unchanged from in the past? Sure. You know what? I'll take that. There's definitely been an increase in reach-outs to us about, you know, deals that had become available. We think that there are gonna be some amazing opportunities. We have been thus far really focused on and really happy with the opportunities that we have in, you know, in the states where we operate. We, you know, I've joked internally with the M&A team that the best deals that you get are the deals you get when you don't need deals. That's definitely the position that we feel like we're in. I wouldn't say that the opportunities at this point that we're seeing are, you know, like we'd be crazy to turn them down. But we think we're gonna get to that point in the coming months. There are, you know, based upon our wide-open map and the ability for us to add different states opportunistically and, you know, where it could be, you know, we don't need to necessarily enter this state or that state. There's just so many attractive single state operators in different states. The fact that we could be opportunistic and really wait for the ones that we'd be crazy to turn down, that's what we think is gonna happen in the coming months. We are working on, as we've mentioned in the past, we are working on more acquisitions within the states that we operate in, and those are, you know, similar terms to say, the Pinnacle deal in Michigan and the Allegany deal in Maryland. Those are already super attractive, especially based upon the fact that we've already got scale in those places. In terms of entering some additional states, we think that in the coming months, we're gonna be able to really be super opportunistic, and not to throw too many clichés around, but that we can really wait for our pitch. We've got the balance sheet to be able to use cash as a component. We also have the ability, we have more capacity under our debt facility that we could deploy in order to, you know, use cash in a transaction. The fact is, so many of these deals are, and all of these private assets have gone down as much, if not more than the public assets, that even if we use stock, and don't get me wrong, I think, you know, the stock is much lower than it should be here right now. Even if we use stock, these deals would be amazingly accretive because we'd be buying assets for much, much lower multiples. Thank you for that very fulsome answer. I'll get back in the queue. Sure. Your next question comes from Vivien Azer of Cowen and Company. Please go ahead. Hi. Good morning. This is actually Victor Ma on for Vivien Azer, and thank you for taking the question. Just to kind of, this is more of an industry-wide question, but commentary out of California suggests that price deflation, you know, hasn't abated. Our industry conversations would suggest that in part was a function of excess planting in 2021 after the wildfires in 2020. To the extent that's true, do you have an early read on what the plant cultivation is in the state for 2022, relative to last year? Thank you. Ziad, do you wanna take that? Sure. Victor, I just wanna make sure. Yeah. Sure. Victor, I just wanna make sure I understand the question. Are you specifically asking about California, or are you asking in general in the market? Specifically about California, given that it has an outsized impact on just industry pricing. Sure. Yeah, we have seen and felt that impact. We continue to work very closely with the team in California to really address the issue. We still are seeing and maintaining a premium price to our specialty and quality flower from State Flower. At the same time, the team proactively have realized that challenge and have started internal initiatives to reduce the cost per pound to produce a pound by almost $200. With those two combined together, we are combating that wave effectively. Got it. Thank you for the color. Your next question comes from Eric Des Lauriers of Craig-Hallum Capital. Please go ahead. Thank you for taking my questions. First, can you just talk about the pricing dynamics that you're seeing in Michigan? I know it's obviously another, you know, challenged state here, and then how Gage's pricing is kind of holding up, and then sort of how that's informing your premium strategy in your other core markets. Thanks. Sure. I'd be happy to take this, Jason. I can start. You know, we're watching very closely the pricing situation in Michigan. With our genetics and with our brands, both the Gage brand and the Cookies brand, we continue to see our premium price exist in the market. In Michigan, we have held back by design, kept our Gage product in our stores and our Cookies product in our store. Moving forward, going forward, as we see the number of dispensary increase, as we see the pricing pressure increase, we will start very thoughtfully addressing some of the non-vertical dispensaries in the state that are not associated directly with the cultivation. We will start a wholesale outreach in order to put strategically our brands and accomplish bigger penetration with that premium price in those dispensaries, in a way that does not cannibalize in the same MSA any of our stores. Pricing, we're watching very carefully. Expanding and using the penetration or the higher number of stores and leveraging this to our advantage is something we just started, and we'll keep an eye on that dynamic to make sure our premium product continue to offer us a premium price. Eric, does that answer the question? No, that's great. I mean, you know, if you can speak to specific dollar amounts for ASPs or percentage premiums, you know, obviously that would be helpful for anyone listening, but I understand if you don't want to get into that detail. My second question here is just on New Jersey. I appreciate the color that you gave on one of the earlier questions, just kind of around the timing and phases of the expansion. My question is just a clarifying one. Do you plan on transitioning out of your current production location, like you are in Maryland, for this second cultivation facility, or should we think of that as you guys eventually having two cultivation facilities in New Jersey? Thanks. Yeah, I can take this. Yeah. I can take this. Go ahead, Jason. Go ahead. You start. I can add more. I was just gonna say, New Jersey changed the law about a year ago where you could have two different cultivation locations. Maryland does not allow two different locations. That's why we need to close one to be able to open up the other one. New Jersey doesn't require one location, and the plan is absolutely to keep our current location and have everything at the other location be additive. Okay, great. I suppose less disruption on the horizon in New Jersey as well. That's great. Thank you for the color. Yep. Yep. Your next question comes from Matt McGinley of Needham. Please go ahead. Thank you. My first question's on the retail and wholesale segment split. I understand Gage as being a predominantly retail business at present, and it looked like it added about $11 million in revenue in the first quarter. Now the factors that you cited with holding inventory in New Jersey and the soft vape sales in PA would have, I think, primarily hurt the wholesale revenue in the first quarter. When we look at your segment splits, they were about within $1 million of one another of what you reported in the fourth quarter. I'm not sure what else dropped off in retail, if the $11 million in Gage revenue was still mostly retail or am I just off on that assumption? Is that a dated assumption that Gage is, you know, more equally weighted between wholesale and retail versus what we would have seen a few quarters back? Keith, do you want to take that? Yeah, sure. Hey, Matt. Yeah, so again, the 22 day period sort of distorts things because it happens to have some more wholesale sales in it for Gage. When you take a full quarter split, it's more representative of what you're thinking, and correctly thinking. That short period that Gage gets into our numbers does have wholesale sales in it. Can you tell me what the rough split is between wholesale retail at this point? Yeah, it's a little bit more skewed towards wholesale, just given that that's lumpy versus 22 days of retail is, you know, pretty much a straight line in the quarter. It's a little bit more skewed towards wholesale. Yeah, that makes sense. My second question is on the inventory. Your overall inventory went up by about $22 million quarter-over-quarter, but it looks like the inventory that Gage had in early March, which wouldn't be the same amount that it would have at the end of the quarter, was around $26 million. I know you made the comments that you built a lot of inventory in New Jersey, but I guess we can't see that within the numbers because it looks like Gage was a pretty substantial part of that. I guess can you help us understand if your $60 million of inventory, how much of that is actually New Jersey versus these other states? And then how should we think about that inventory when you report the second quarter? Will the initial New Jersey channel fill shipments reduce your inventory levels? Or will you be rebuilding at around the rate of depletion and those dollars will stay relatively static going forward? Yeah. Good, good questions, Matt. The first thing to understand is the Michigan opening balance. Well, first of all, I'll start out by saying if you take those three markets, which are by far where the inventory is, it's split roughly evenly, a third, a third, a third between the three markets, and then there's some inventory in Canada. It's really Pennsylvania, New Jersey, Michigan. Also keep in mind that there's a step up in fair value in the inventory number for Gage for Michigan. That's a pretty notable impact of $several million. Looking forward, we expect a pretty significant sell-through, of course, in the New Jersey balance that we built up over the past few months and even longer than that. New Jersey will come down, Pennsylvania will come down, and Michigan will be more or less steady state from what you're seeing at the end of March. Okay. Very good. Thank you. Your next question comes from Glenn Mattson of Ladenburg. Please go ahead. Hi. Thanks. Yeah, I missed part of Ziad's comments when he spoke to Pennsylvania, but I was curious just if you could kind of like exclude the vape issue. You know, last quarter, you talked about having in December achieved a top three position in the state again and all the benefits that you're starting to see from the cultivation rebuild. If you could kind of exclude the vape issue, just a better sense of did that continue into Q1 and just generally thoughts on your market position in Pennsylvania. Yeah. Thanks, Glenn. You know, I'll take a minute or two just to recap Pennsylvania. Pennsylvania is super important. It's a super important state for us. We really believe today, and I have a lot of confidence more than ever that it will be a big winner for us for years to come. I'll share with you why I am so confident with as much detail as I can with actually facts and trends over a few quarters to give a better color on it. Q3 and Q4 of 2021, we had vapes available, and the flower was going and being impacted by the facility construction and renovation. We anchored our sales and wholesale around the non-flower SKUs. In December, as I said, we replenished our library with outstanding genetics. Q1 came in, we lost vape during the recall, and we showed increased flower sales in a down market. Increasing flower sales with even the small batches that we put out of the new genetics in our stores was very exciting to us. Today, for Q2 2022, we have 50% of our new flower that are being produced are new genetics, and we just got full vape production. Starting in Q3 of 2022, for the remainder of the year, we will have full production of new strains with no old genetics from a flower perspective. We have full vape production of more than 30 strains in the four different vape categories. In the last two-three weeks, we have seen vape numbers recovering, where we sold in each week around 12,000 units per week of vape from almost nothing after the recall. We expect to get well over the 15,000 units per month that we had prior to the recall. Per week. Per week. Correct. Okay, great. That's helpful color. Thank you. Just a question on the Michigan, when you are able to turn on the cultivation and the other facility, the processing facility. That plus, you know, market dynamics, what do you expect the Michigan market kind of margins to settle in at? Maybe if you don't want to give specific numbers, maybe versus current normal company margins and that kind of thing would be great. You want me to take that? Sure. Sure. Please, Keith. Yeah. Okay. We've been talking about this for a while, and now it's finally coming to life where we're gonna have the capability to extract and produce our own distillate and fill our own vape carts and other manufactured products. That's gonna be a huge margin driver. Soon the cultivation expansion is gonna become a reality here. We continue to believe and see through our projections that that's going to bring our costs down in Michigan. Yes, we're feeling some pricing pressure, but Ziad outlined how we're dealing with that with the premium brands and premium pricing levels. We expect to see margins like we've described in the past where we can run the business in Michigan in the 40%-45% range in the future. There's gonna be a glide path to get there as we go through the months of this year, but that's what we fully expect and see coming to fruition. Great. Thanks. Thanks, guys. That's it for me. Yeah. I would just add to that our extraction lab was finally approved, I believe, yesterday or the day before. That had been delayed. That had been expected for a while. That's been delayed. Also, our packaging and logistics facility in Harrison was also approved in the last few weeks. Those should be additive to margins going forward. Then when we have the new flower come on from you know, the finishing of the facility in the middle of the year or the operationalization of it in the middle of the year, that will further drive better margins. We're also taking advantage of the fact that all the third-party product that we sell, you know, we're buying it better than we did, you know, in prior quarters. Your next question comes from Noel Atkinson of Clarus Securities. Please go ahead. Hi. Good evening, and thanks for taking our questions tonight. First off, just again, a little bit on Pennsylvania here. Can you talk a little bit about your canopy utilization in Pennsylvania in sort of Q1 and now versus what you were seeing in Q4? And then also as a follow-on, you know, what are you seeing for flower margin overall in the state and for trends? Sure. Ziad, do you wanna take that? Yeah, I can start. In Q1 versus Q4, what has changed from a production perspective is the mix of the old genetics versus the new genetics. We started planting at the beginning of Q1. We went through the nine-week cycle of cultivation. Last call, we shared fewer strains and smaller poundage that we put out and how we tested them in all our stores. Today, we are producing half of our cultivation with new genetics. The testing from those genetics has been extremely exciting. We just look at the test of around 110 pounds that came in from those new strains, and we saw THC level at 32s and 29s, 28s and 27%. The biggest change in production and cultivation in that facility has been the mix of genetics. We have spent and adjusted the facility and reconstructed and renovated the facility, whereas we grow the demand and advance towards adult use, we will be able to exponentially increase the cultivation and take full advantage of the high demand that we are convinced will be there, and there would be more demand than the supply that exists at that point in the state. Okay, thanks. Just as a second question here. I realize you are selling or will be selling third-party products as well as your own in your New Jersey stores. If you have all three New Jersey stores up and running and operating to expectations or beyond, you know, what is your inventory availability out of your existing facility? Is it able to serve those high end of your expectations, or do you have to wait to get the additional facility online to get to those numbers? Yeah. As I mentioned, from a New Jersey perspective, it will be the remainder of the year will be a demand model for us. Depending on what ratio of third-party to our own brand in our stores will determine what we'll do in wholesale and how we mix it. We have also modeled, even if we put 100% of our own product in our stores, we'll still have, and we already have started supplying wholesale to other peers in the market. Independently from that mix, yes, the wholesale availability will allow us to reach our upper expectation. Okay. Thank you very much. Your next question comes from Andrew Semple of Echelon. Please go ahead. Hi there. Good evening. Just wanna dig into the details behind the Pennsylvania retail store performance in the quarter a little bit more. Just trying to piece together how the retail business as a whole performed. I know you spoke to New Jersey being roughly flat sequentially. Just wanna get a better understanding, maybe what were some of the headwinds faced on the retail side. I know you've spoken to the vape impact, mostly from the wholesale standpoint, but could you also walk us through how that may have impacted store performance as well? Yeah. From a retail perspective, Andrew, we're happy, we're satisfied with the performance of our retail stores. Collectively, we haven't seen any pressure on the retail stores. In part, in Q1, I have mentioned that we've seen an increase in our flower sale. We have released some of those flower into our stores initially, but our wholesale team has done also a good job, quickly acquiring replacement for the vapes that we have lost. The combination of both has allowed us to not see any pressure on the retail business in Pennsylvania. We expect going forward with the availability of our new strain and our new flower, the new product from all the vape that I described, that our own brand will increase. We already started seeing that reversal from that 70%-30% mix to get closer to 50/50, and that's something we're extremely excited with, both from the basket side, from the stickiness of the patients, but also from gross margin. Maybe just to add there, we did see an impact at retail from the vape recall. I think everything Ziad was describing was sort of setting aside that specific impact. Yep. That's temporary. Overall, we see that coming back. Understood. Could you maybe just speak to how pricing has moved in the Pennsylvania markets, given, you know, the step-up in quality you've seen on the production output coming out of your facility, specifically on the dried flower side? Yeah, Andrew, with the new genetics and the new products and the new vapes, we are seeing the pricing holding for us in Pennsylvania. Great. Thank you. Your next question comes from Howard Penney of Hedgeye. Please go ahead. Mr. Hedgeye, your line is open for questions. Please go ahead, sir. Sorry, that was me on mute. I apologize. I was curious. I thought I heard you say in Michigan you might be converting your stores, potentially converting your stores to either a Cookies or a Gage brands. I was just wondering how the capital allocation decisions go and how you decide one brand versus the other. I'm asking this question under the assumption that you have to pay some sort of loyalty fee to Cookies. I have a second question after that. Sure. Ziad, do you wanna take that? Yeah. Howard, are you asking about Michigan? I didn't hear the question. Yeah, I thought I heard. Maybe I didn't hear it properly, but I thought I heard you say you were thinking of converting the Pinnacle stores to either a Cookies or a Gage brand. That, did I not hear that? Yeah, got it. If I didn't hear that wrong. Yes. You're asking about the Pinnacle? Yes. After closing, as we learn the Pinnacle business and as we dive deeper into the segment of the customers and all dispensaries, we'll make the decision to rebrand the stores. We will have the strains and the products from both Gage and Cookies. From a rebranding perspective, we are prepared, we're budgeted for this, but we will run them for a few months before we make that decision. The return on capital is the same whether you open one or the other, there's no difference? That is correct. You rebrand it to one or the other. That is correct. Yeah. Okay, awesome. Thank you. I think just based on your commentary in New Jersey throughout the call, it seems like New Jersey, the state will make it not too burdensome to expand the menu, and there's not a lot of regulatory hurdles to go through to bring in new products. Just wanna confirm that given the state of the history of the state, that they're not gonna burden you with a lot of hurdles you have to jump through to expand your menu and bring on new products. Yeah. Howard, that's accurate. The CRC has been extremely collaborative on bringing any new product. We saw this with our concentrates, and that's why we were able to bring those quickly to the market and launch that category on Saturday. We're seeing the same reaction, and we expect the same ease in expanding and bringing in new products. Perfect. Thank you so much. Ladies and gentlemen, at this time, I would like to turn the conference back to Mr. Jason Wild for closing remarks. Please go ahead, sir. Thank you, everybody, for joining us here today. I look forward to reporting in the not too distant future the results of our Q2. As we've mentioned multiple times, there will be substantial progress in Q2, and even more so, beyond in the second half of the year. Thank you all so much for being on the call here today, and we look forward to speaking to you soon. Ladies and gentlemen, this does conclude your conference call for today. We would like to thank you for participating and ask that you please disconnect your lines.