4Front Ventures Corp

fourth quarter and fiscal year 2021 earnings conference call. At this time, we are assembling today's audience and plan to be underway shortly. We appreciate your patience and please remain on the line.

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Good afternoon and welcome to the Forefront Ventures fourth quarter and fiscal year 2020-21 earnings conference call. Today's conference is being recorded. At this time, all lines have been placed on mute to prevent any background noise. After the prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star 2. I would now like to turn the conference over to your host, Forefront Ventures Interim Chief Financial Officer and Chief Investment Officer, Mr. Andrew Toot. Thank you. You may begin.

Thank you, Cynthia, and welcome, everyone, to Forefront Ventures' earnings call for the fourth quarter and the year-end 2021. I'm joined on the call by our CEO, Leo Gontmaker, President Carl Toscano, COO Joe Feltham, and Jake Wooten, our EVP of Finance. Before I begin, I'm obligated to remind everyone that during the course of this conference call, management may be making some forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. These results are outlined in the risk sections of our filings and our disclosure materials. Any forward-looking statements should be considered in light of these factors. Please also note as safe harbor, any outlook we present is as of today, and management does not undertake any obligation to revise any forward-looking statements in the future. So, with that out of the way, let me give you a really quick overview of the call today. As always, I'm going to start with a review of our thesis and strategy. Then I'll provide some color on our fourth quarter results and an update on the progress we've made in the business over the last few months. I'll then hand the call over to Leo, who will go into a more detailed review of our operational trends and will highlight the milestones we achieved during the quarter before looking ahead to what's on deck for 2022. We'll conclude with question and answer session where the entire management team will be available for any follow ups. So at forefront, We're guided by a simple thesis. After perfecting our high quality, high margin production capabilities in Washington state, we're replicating them in large cornerstone recreational markets like California, Illinois, Massachusetts, and Michigan. We believe the sweet spot in the cannabis value chain is in low cost, high quality production and distribution of cannabis consumer packaged goods at scale. In Washington, one of the most competitive markets in the world, Our facilities continue to outperform more than 600 license holders while maintaining incredibly attractive margins and profitability. As the ongoing developments in our other states take shape, we are now beginning to see similar results on a much larger scale, currently serving an addressable market of over 76 million people. As we deliver on this thesis, let's dive into the fourth quarter results and our important recent developments. First and most important to our long-term growth prospects, we are pleased to now have a fully capitalized infrastructure in place to drive a robust 22 and beyond. Our 170,000 square foot state-of-the-art production facility in Commerce, California is up and running smoothly as designed. And the activity and interest we've seen after just a few months of operations have us more confident than ever that Forefront is uniquely positioned to be a truly disruptive force in the California market that is ripe for consolidation and subsequent streamlining of cost efficiency. Our timing for entry into California is proving to be impeccable, and we believe 2022 will be a transformational year in what is the biggest cannabis market in the world. As a management team, we've been incredibly busy advancing significant discussions with a growing number of potential partners and strategically attractive businesses. To that end, we're extremely pleased to have announced the acquisition this afternoon of Island Cannabis Company. Island is a California mainstay with high-quality products, including pre-rolls, flour, and vape, that distributes into hundreds of retail locations on any given month. Our commerce facility allows us to acquire brands and manufacture them significantly cheaper and more profitably, which is exactly what we're doing here. Equally as crucial to our California strategy, the management team at Island brings deep operational expertise and experience in the local market. In particular, the additions of founder and CEO Ray Landgraf and COO Brandon Mills to our operations will strengthen our bench and provide lasting impact as Island is folded into our larger platform. Leo will delve deeper into our multi-pronged California strategy later in the call. but we are excited to have the island team on board as we build momentum in that state. Switching to Illinois, we continue to see strong results at our retail locations and increased demand in our wholesale business. After further optimizing our cultivation processes over last summer, we saw good sequential growth in Q4, with our wholesale business contributing nicely to Illinois sales into the end of the year. Construction of our Madison facility, the one we used to call Big Daddy, remains ahead of schedule. The completion of phase one construction is expected to end in Q4 of this year, coming online in early 2023. As we have preached for years, Forefront aims to be the poster child for scaled, efficient production, and the opening of Madison will mark yet another significant milestone as we continue to iterate and perfect that engine in Illinois. With only two open dispensaries out of our allowable 10 in Illinois, we see a lot of room for growth as we expand our retail footprint in addition to expanding our wholesale presence of low priced quality products in the medium term. So stay tuned there as we have a lot of unrealized potential in this state. In Massachusetts, we announced the close of New England cannabis in January. This transaction significantly bolsters our wholesale presence in the Massachusetts market. It's one that is poised to expand significantly with the addition of meaningful new retail licenses this year. The acquisition of NECC and its licensed, fully operational 55,000 square feet cultivation facility immediately scales Forefront presence as a dominant wholesaler and producer in Massachusetts. The transaction more than doubles the company's total flowering canopy in mass to over 30,000 square feet, and the facility also has potential to expand an additional 10,000 square feet of flowering canopy if need be. Furthermore, the NECC facility nearly triples Forefront's kitchen, processing distribution space in Massachusetts, and will supplement the products currently sold via wholesale distribution and through Forefront's existing mission dispensaries. Forefront's full suite of popular brands has already achieved wide-scale consumer support in the state's rapidly growing adult-use cannabis market. and has won several awards, including first place for High Burst as the best fruity non-gummy edible in High Times 2021 Massachusetts People's Choice Cannabis Cup. The acquisition firmly established our presence as a leading operator in the region and allows us to expand the distribution of our products in the wholesale market, supporting our goal of being the premier low-cost finished goods wholesaler in Mass. With that, let me now review the year-end numbers. 2021 system-wide pro forma revenue was $132.7 million for the year, an increase of 50% over 2020. 2021 GAAP reported revenue was $104.6 million, an increase of 68% over 2020. 2021 adjusted EBITDA was $34 million. up 479% year-over-year, representing an adjusted EBITDA margin of 32.6%. Q4 2021 system-wide pro forma sales were 33.8 million, an increase of 35% over the same quarter last year and a slight sequential increase from the third quarter of 21. While we expect pricing and limited license states to naturally become more competitive, We think wholesale growth in Mass and Illinois are poised to strengthen over the year as additional retail comes online in those understored states. As a reminder, pricing compression in the cannabis industry is a fact of life and one that we have been proactively positioning for for years. Low-cost, high-quality operations matter, and we will see that continue to come home to roost as the industry evolves. With California now online and NEC already closed, we are expecting strong growth to resume as we move through 2022. Q4 2021 adjusted EBITDA was $13.2 million, an increase of 75% sequentially from the third quarter of 2021. Our balance sheet leaving the year is in solid shape. As of December 30, we had $22.6 million of cash, and $48.3 million of related party long-term debt, which doesn't come due until 2024. Despite the rocky performance of cannabis stocks in the capital markets and headlines around the lack of progress on banking reform over the past year, we continue to feel very good about our access to additional capital, our market position, and ability to execute on our strategy. So our thesis continues to prove valid. We are successfully introducing the brands, products, and best in class SOPs from Washington into new markets at scale. We continue to add SKUs on a monthly basis, developing and launching a dozen new lines since Q4 alone. We are executing on our strategy of continued expansion into our core markets of Massachusetts, Illinois, and now California. We're shaping up for a very active 22. Which brings me to my final point. As I have been saying for some time, We are entering into one of the most active M&A environments we've ever seen in our industry. As I briefly mentioned during last quarter's call, details on safe banking and the timing of meaningful change on the federal side remain hazy, but their inevitability is very apparent. Our goal has consistently been to become a larger company. We are open to the right opportunity to be part of a larger enterprise, But in the meantime, it's very important for us to continue to create shareholder value by perfecting our low cost production engine and proving out our investment thesis. Everything we are doing right now is not only building our company, but is setting us up to be the ideal merger partner as we become the poster child for scale and efficiency. As a management team, always looking for ways to maximize value for our shareholders, we continue to explore new means to augment our growth via accretive acquisitions, or as part of larger platforms. With that, I'll now turn the call over to Leo Gontmaker, our CEO, who will dive a little deeper into our assets by state and provide us with additional color on our near and midterm plans. Leo?

Thanks, Andrew, for the update on our business progress and on the strength we see in our model within the industry. As just discussed, In the fourth quarter and into the year, we reached several substantial operational milestones that pretend lasting momentum expecting to drive our growth well through 2022 and beyond. While we experienced ridiculous delays during the California approval process last year with the opening of our commerce facility, we are more confident than ever that we now have the strategy, facilities, and teams in place to realize considerable growth in the coming year. In the spirit of not burying the lead, let's start with California. Our commerce facility is only just starting to make waves in the industry, and we believe that we now have the means to considerably disrupt the world's largest cannabis market. As everyone knows by now, California has been absolutely devastated in the last year, with operators struggling to move products and prices hitting all-time lows, a death knell for inexperienced operators without the capability to scale. We are only just starting to see a rebound as retailers begin to clear some inventory, municipalities enact much-needed tax holidays, and pricing in general improves from its November-December trough. We view the pricing collapse in California as a golden opportunity to begin consolidating market share from unprofitable operators that are unable to keep up due to our significant competitive advantages in cost derived from automation and scaled manufacturing. Simply put, This is what we do. We have now built a disruptive asset with over $500 million of processing capacity whose low-cost production only gets lower as that capacity gets filled. We have a four-pronged strategy to feed this beast. Let's start with pricing. After just about three months in the market, we've made solid strides starting the direct sales snowball, having penetrated over 150 retailers so far and the response to our product has been fantastic. We are now ready to flex the pricing muscle that the scale of our facilities affords us. Starting April 1st, as we ramp into 420, we are introducing pricing in California that is truly eye-popping across all brands and SKUs, coming in on average 50% lower than the competition. For instance, pricing for Marva's, the number one selling gummy in Washington, will wholesale at $4 for a 100 milligram 10-pack box. Price that still drives gross margins in excess of over 50%. For comparison, wholesale pricing for the leading gummies in the California market on average is between $8 and $9 for a comparable 100 milligram product. We said we were going to come into this market with the goal of being the outsized price leader, and we're doing it. As the market starts to go again, We truly believe this new pricing model will set the standard for cannabis in California. Moving on to brand acquisition and incubation. The current distress in the California market, timed with our scaled low-cost production coming online in the state, has created the perfect storm for us to begin to selectively and accretively consolidate strong brands with good shelf space who are struggling to turn a profit. We have this unique asset that can manufacture acquired brands cheaper and more profitably than they could on their own. As Island and others are folded onto our platform, margins expand as capacity is absorbed and fixed costs are leveraged. Additionally, each acquisition comes with an installed base of retailers, which presents a chance to cross-sell a diversified portfolio of high-quality, low-cost products. We believe the commerce facility lends itself to open-ended, profitable growth for the foreseeable future, and as we continue to execute in California, we expect to announce similarly accretive strategic acquisitions over the coming months. Lastly, California brands tend to travel well, and we look forward to introducing those in our existing markets of Washington, Massachusetts, and Illinois, and one day across the country via interstate commerce. Third-party production. As retailers look to single-source private label products and brands look to improve profitability by going asset-light, we've seen very strong interest from the market to use our facility for third-party processing. We have a high-throughput extraction lab, kitchen line, vape fill, pre-roll fill, flower co-packing, tincture, gel cap, and mitt capabilities. We're currently exploring multiple opportunities for symbiotic partnerships with brands and retailers alike, that we expect to announce as we move through the year. We expect to have retail presence in California this year as well. While we believe that the sweet spot for value creation in the cannabis industry is finished goods production, vertical integration is necessary at this point in the industry's growth curve. The retail presence not only drives higher emergence, but would allow us more direct control over the distribution of our products and brands in the marketplace. Lastly for California, I'd be remiss without highlighting two crucial aspects of the island acquisition that don't necessarily jump out at you. First, we're ecstatic to have Ray, Brandon, and the island management team join the forefront family. This industry lacks breadth and depth of operating talent, and we believe our company's success in acquiring and retaining talent to our management team is imperative to value creation. Second, the island acquisition adds premium flower to our product suite. While we have no aspiration to become an escaled cultivator, we believe flower is an important addition to our sales team's product litter. Moving to Washington, which remains stable with wholesale prices having rebounded from their lows in 2018, our facilities are seeing very consistent performance despite having some more outdoor products in the market again causing us to take on price. While we don't anticipate outside growth in the Washington market, we continue to hold serve, which is a testament to the market reception for our products and the focus of the team. On to Massachusetts. Our operations and opportunities in mass have been significantly bolstered by the acquisition of NECC in January. In addition to doubling our canopy and tripling our processing and production space in Massachusetts, the asset is simply one of the best design cultivation facilities we've ever come across. brand new facility, we are already producing premium flour efficiently, which bodes well for what's been a more competitive market in the state. While we think the market's headwinds in mass might be transitory as the number of retail locations are expected to increase, the long-term trend will be towards reducing pricing, which is precisely what we have forefront our position for. In Illinois, we continue to see good momentum in our two retail locations, plan to add to our Illinois retail footprint as we move through 2022. After further optimizing our cultivation processes over the summer, we saw our wholesale business ramp nicely in Q4 and are seeing that momentum continue into the current quarter. Plus, with the construction of our Mattson facility ramping up and ahead of schedule, we look forward to its capacity not only being able to meet our growing retail needs into 23 and beyond, but also generating meaningful wholesale revenue as our suite of products hit that market next year. As for guidance, we've always said the revenue in EBITDA opportunity from our current assets of $650 million in revenue and $250 million in adjusted EBITDA. To reiterate our thesis, we believe that the sweet spot for outside value creation in this industry is around the low-cost, high-quality production and distribution of cannabis consumer packaged goods. With our core footprint and capabilities now in place, we've really built out this company to not only address current opportunities at hand, but also the market demand for the future. We are now as confident as ever in our ability to drive sustained growth and capture significant share of every market we enter. We're very well positioned to be a major piece of the cannabis landscape for years to come, and we can't wait to share our continued progress with you. We're always thinking three steps ahead, and I'm convinced that our model will continue to build value for forefront stakeholders well into 2022 and beyond. With that, I will now turn the call over to the operator to open the line through Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first question from Neil Gilmer with Haywood Securities. Please go ahead.

Hey, Neil. How you doing? Hey, good afternoon. Good. How are you guys doing?

Doing well. What's going on?

Yeah, for sure, for sure. I wanted to start, obviously, I think, on Island. And, you know, can you give us any sort of sense of the terms, is it all stock or is there a mix of cash and stock? Any sort of metrics on, you know, what Island's been doing in the past? And then maybe lastly, just trying to clarify, you know, obviously just, you know, learned about this shortly before the call. they have their own production facility or were they using someone else and they're basically just bringing this all into your commerce facility and folding the brands into the forefront umbrella? Multi-part question there.

Let me flip this over to Carl and then Leo. Carl on sort of the terms and then those guys can sort of tag team with the additional color on island.

Sure. Hi, Neil. Hi, Carl.

Yeah, we are, you know, not that we're guiding, but we're modeling or the current modeling for Island standalone is let's say low teens and top line. The terms in essence were, you know, roughly 1.2-ish of top line in total consideration. The consideration is really primarily split between a vendor take back note, which is you know, low, mid, fully picked interest with a balloon payment at 54 months, that's probably, let's say, 60%. And then the 40% of consideration is share consideration, common shares of our company, which makes up roughly 1% of our total outstanding shares. There is some conditional, 4 million warrants attached, but they are triggered upon very successful operations in California. So that's the total of the consideration. In terms of the production, yes, they do have a standalone production facility in Oakland, which will be closing, and they will be moving all the production of all of their products into our facility in commerce, and they do have two growth facilities right now. I'll let Leo give the details, plus I guess another small farm that will be attached that will be producing the flour, which of course will be packaged in our commerce facility.

Maybe Leo, you can give some detail on the cultivation assets.

Yeah, sure. We're excited to bring on their cultivation. It's a sun-grown hoop house, which fits well with our low-cost type of production model. And our sales team is definitely excited to have a flower product on the menu to add to our offering.

Again, no plans for – I'm sorry, go ahead.

As you say, what sort of scale of cultivation? Obviously, they've got their own flower product now. Would you be able to scale that up and use some of that for other flower products under some of your other brands?

Yeah, so they're currently selling everything they produce.

We have plenty of input as far as making everything that we have, derivative products. Island has an infused pre-roll currently under their brand that we'll continue making in a more efficient way with our machinery. But aside from that, we're going to be using the flour to continue to grow the Island brand. Okay.

Okay. That's helpful. Thanks, guys. Maybe on the Q4 results, EBITDA growth certainly outpaced revenue growth. Can you just give a little bit more color? Obviously, I haven't ripped through all your financial statements yet, but a little bit more color how you're able to sort of achieve that. margin expansion on, you know, relatively flat revenue quarter over quarter.

Yep. I'll turn that over to Jake. Hey, Neil. No, it's a great question and call out. To be honest, we're trying to focus folks on the year-end EBITDA number. You know, Q4 had some year-end adjustments that manifested themselves in that single quarter that did not, you know, and I won't get too much into the weeds here, but a non-cash balance sheet inventory revaluation upon us updating our costing model for manufactured products. So basically, we took that adjustment all in Q4 and didn't go back and restate, didn't feel like it was warranted to restate prior quarters. But it does lead to, if you're solely looking at Q over Q, a little bit of a an eye-opener. And then, you know, that's why we're trying to kind of refocus on an apples-to-apples basis. Had we spread that inventory adjustment back, you know, to quarters one, two, and three, respectively, you know, you're looking at a pretty similar, you know, position in terms of EBITDA quarter over quarter.

Okay. All right. That's helpful. Thanks. We'll take a look at that then. Maybe my last one for me is just – Any comments you guys have on what you've seen through Q1? Obviously, you've probably heard some of your peers' comments with their results and conference calls through the month of March here. It's relatively modest to no growth in Q1. Have you guys seen similar trends, I'm assuming, across many of your markets or anything stand out from your perspective you'd call out?

Yeah, I'll turn that question over to Joe Feltham, our COO.

Yeah, hey, Neil.

Do you mind, my phone just cut out for the last little bit of it. Do you mind just repeating the last little bit of your question, Neil? I want to make sure. I answer it fully here.

Yeah, for sure. So it was just basically sort of what sort of trends you guys are seeing in Q1. I was talking about how some of your peers are sort of saying it's been pretty flat, whether you guys are seeing similar trends in your markets or whether there's any something sort of stand out in one of your markets that you think is warranted to call out.

Yeah, absolutely. For us, it's customer acquisition. So We're seeing some of that same softness in, like, say, average tickets or net sales at our dispensaries. So average tickets are definitely down quarter over quarter. Let's call it, in some markets, as much as 10%. That's deliberate on our part because we've been lowering pricing to try to capture more market share. So while our average tickets are down, we have kind of flat revenue, which means we're increasing our customer count. So that's where we're, you know, we are definitely seeing more competition in Massachusetts and Illinois. We are welcoming it. We have been lowering prices end of last year. We'll continue to do so into this year. And as long as we see customer counts going up, then to us that means we're gaining market share. So that's what we're really focused on right now. We are seeing that in Q1 of this year. We feel like we're seeing that trend line continue in Q2 of this year. So as long as we continue to see that, we feel like we're kind of countering the softness, so to speak.

Okay, great. That's helpful. Thanks for all your answers. I'll pass them on.

Thanks, Neil.

We will take our next question from Ty Cullen with 8 Capital. Please go ahead.

Hey, Ty. How are you doing? I'm very well. How are you guys doing? We're excellent.

Great, great. Well, thanks for taking my questions here. I'm just wondering if you could maybe speak to the, you know, on California, if you could speak to the economics of white label production versus sort of your own brands. and maybe if you could kind of speak to the pipeline of those conversations you're having for white label opportunities.

Sure. I'll turn that over to maybe Leo to take first crack with an assist from Carl.

Sure, absolutely. Fantastic question.

With our suite of products, there's a lot of variety in what we can offer in terms of white label or private label. So, you know, taking the simplest variety of someone wanting to take our product in our form factor with their design on packaging that we offer. For the most part, the profit margins on white label look better than the profit margins on our product because we get to cut out the distribution fee. If people start to have many requirements about different touch points they want and different packaging, pricing goes up and then it's a different story. But For the most part, we're looking at similar margins pretty close between selling our own versus doing white label, private label with the new pricing that we're releasing on April 1st year. As far as people we're talking to, we've been approached by, I would say, 75% of the people which probably sits at about 50 to 70 people at this point that have come in toward this facility about some sort of white label, private label opportunity. While that's part of our business and we're hoping a big part, we definitely have been selective about trying to find the correct relationships that allow us to leverage our machinery to its full capacity and to its best efficiency. And some of those bigger conversations have been with groups like grass store delivery, groups like MedMen, you know, initial conversations with ease, and then a lot of smaller retail chains that have anywhere between four to six stores. Grupo Floor is a group of stores here that has a five chain. That was our first little deal for some vapes and pre-rolls to kind of test out how it goes at their store, private label something new for them. And then, you know, 20 other smaller ones that are very early stage across the board for different products.

Okay, appreciate that. And just as a follow-up for me, I appreciate the comments on sort of the M&A pipeline in California and what you plan to do in the coming months there. But I'm just wondering if you could maybe speak into a little more detail, you know, just how many potential assets are out there? How big is that universe? And maybe if you could also comment on how leveraged the California growth story is defining those acquisitions whether there's a risk that the Commerce Facility can't scale quick enough if you can't get those deals done quickly.

Thanks. Paul, Leo?

Well, I think Leo would probably be better situate to provide a number of the potential M&A targets, but I will tell you we're having Let's call it five discussions a day between M&A and White Label, at least. Leo will probably bump that up over the last couple of weeks for him. There is a multitude of targets. The real question is, what's the most efficient use of our facility and what's the strongest growth path for us to take? For sure, the pricing gesture is that Leo introduced, um, we have various names for it, but let's just say we're coming out with what we consider very strong, a strong show of our abilities and our pricing is search to search two purposes, right? It, um, will definitely, um, you know, increase the probability of quicker absorption of our product onto shelves. But secondly, To a certain extent, it shows, it flexes a little bit of muscle, right, Ty? And it will get the message out as to how efficient we can be. And that may alter the nature of all the white label discussions that we're having. It is truly a Tetris game right now. So to be able to provide you absolute clarity as to the path that we will be taking is difficult. We do know this. We know that we are interested in acquiring some strategic retail to help bolster the organic growth of our products on shelves. We are interested in significant white label deals that do not require a significant alteration of the commerce facility and that can properly fit into the production schedule that we have. And mostly, most importantly, I think we are very well served to be able to bring on brands and manufacture people's products more efficiently. And there's just such a pipeline of this sort of stuff coming. It's very difficult to give you an absolute number. We do have a spreadsheet that has over 50 targets on it, but I don't know exactly how to focus that answer better for you. Yeah. Sorry. So maybe if you would like to raise the question or if that answers it or Leo, maybe you can add to it.

Yeah, I can add a little bit more color, you know, with, with the new pricing that's been given to market, you know, in what we believe is industry leading across the board by, by a large margin. We think that model probably suits white label better for retail than it does for other brands. It suits us being able to acquire and bring in other brands that are having trouble, but we're now undercutting the market in general across the board in every category. Going to a retailer and looking at white label there, they're for the most part have been okay with paying the same price or slightly higher for white label for their product, knowing that they're getting our product for so cheap. And then we work together and they take a little margin extra on one of the products and they do a smaller markup on the other. That's part of what we offer is having that flexibility and being able to work with the retailers on the margins they need to hit while also making it make sense for us. As far as the deal flow, I would say that five to six a day at minimum. There is a lot of interest more than ever in the industry today. to actually be a part of something bigger and to be more realistic about what the value of one's company is and what the future looks like in this industry for people that don't take the consolidation lens. And I think for us, it's just making sure that we take the best deals, we vet them, and leverage our assets to the best of our ability.

And I feel good about our ability to do that with the amount of deal flow we have on the table.

Okay, that's some really great color. Appreciate the discussion. That's it for me. Thanks.

Awesome. Thanks, Ty.

As a reminder, if you would like to ask a question, please press star 1. We will take our next question from Eric Delorier with Greg Hullum. Please go ahead.

Great. Thank you for taking my question. I'm good. How are you? We're doing great. Good to hear from you. Good, good. I was wondering if you guys could provide a bit more color on the pricing dynamics you're seeing in Massachusetts. And then as we think about this recent acquisition, kind of bolstering your cultivation capacity here, should we think of this more as a wholesale growth opportunity for you guys, or is this more about kind of margin protection amidst this pricing pressure? Thank you.

Carl and Joe, do you want to take a crack at that?

I think Joe should take the first kick, but it's an excellent question.

Yeah, absolutely. So in regards to pricing, just some flour pricing, for example, we have seen that at the start of 21, for us at least, we sell a few different brands of flour, but the average across those brands, was almost as high as $11.75. That is now down to about $10.25. And we think it could go as low as $9, kind of an average gram across different quality in Massachusetts. So that's something like real numbers we're seeing. percentage-wise similar declines in other major categories like vapes and edibles as well. So for the NECC acquisition, it's kind of twofold. It's an expansion of our product portfolio. This facility has hydrocarbon extraction, which our other two facilities don't, and it's pretty rare in Massachusetts. So for us, that's bringing in all of our live resin brands and products, higher-end concentrates, stuff that we sell a decent volume amount out of our stores, call it almost 15% of our store volume. That's all third-party product now. So we'll get the margin capture from that. But it also gives us the ability to have all of that on our wholesale menu, which we think is important for offering retailers a one-stop shop. And look, our belief is that high-quality flour will always sell. So this is just, we love the flour that's coming out of this facility. Leo and I think it's one of the best that we've been in across the country. so you know even as pricing declines having a high-end brand or high-end product for us in mass is important for our overall wholesale strategy and um we think nec will really deliver that very helpful thank you anything else there

Go ahead, Cynthia. Sorry.

And, sir, if you did have further questions, you can press star 1 again. And we'll go next to Howard Penny with Hedgeye. Please go ahead.

Hi. Thanks for the question. Do you have a target? How's it going, Andrew?

Good.

Do you have a target for the number of wholesale doors you'll be in in Massachusetts and California by year end?

I doubt that we're going to want to disclose. I'll turn it over to Joe.

Yeah, I mean, we could give you more color offline, but north of $500, Howard, between the two markets. Probably more of that California than Massachusetts, but between the two, my goal is north of $500.

Great. Thank you. And I'll ask offline. How about a comparable, I think you said, was it Marma's wholesale price in Massachusetts that you think you can get to or what you're at now or maybe along those lines, sort of where you are?

Sure.

So Marma's comparable wholesale in Massachusetts today is around $8. And so probably we'll, will not be nearly as low as California, but will probably be approaching six by the end of the year.

That's great.

Thanks so much. Thanks, Howard.

And at this time, there are no further questions.

Mr. Gauntmaker, at this time, I will turn the conference back to you for any additional or closing remarks.

Thanks everyone for joining and I'm looking forward to updating you all again in May. Take care.

This concludes today's call. Thank you for your participation.