4Front Ventures Corp

Good afternoon and welcome to Forefront Venture's first quarter financial results 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'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. I would now like to turn the conference over to your host, Forefront Ventures Interim Chief Financial Officer and Chief Investment Officer, Mr. Andrew Tu. Thank you. You may now begin.

Thank you, Operator, and welcome everyone to Forefront Ventures' earnings call for the first quarter of 2022. I'm joined on the call today by our CEO, Leo Gottmaker, President Carl Toscano, COO Joe Feltham, Ray Landgraf, who is our President of California Operations, 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 factors section of our filings and our disclosure materials. Any forward-looking statements should be considered in light of these factors. Please also notice 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. All right. So with that out of the way, let me give you a very 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 color on our first quarter results and an update on what has been a very exciting and busy start to the new year for our company. I'll then hand the call over to Leo, who will go into 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 the rest of 22. We'll conclude with a Q&A session where we will all be available for any follow-ups. So to begin, 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 markets of California, Illinois, Massachusetts, and Michigan. We believe the sweet spot in the cannabis value chain is the low cost, high quality production of cannabis consumer packaged goods at scale, and that is starting to prove itself in spades. We have lived in that sweet spot in Washington for seven years and are confident that the ability to produce low cost and at scale will be the most advantageous skill sets to navigate this industry as it continues to mature. As we sit here today, Our retail locations across the board are performing well and believe are taking market share because transactions, and in many cases, net sales are up despite expected pricing headwinds. Our cultivation and production facilities are dialed in and producing high-quality products at low cost. Our construction project in Madison, Illinois, formerly referred to as Big Daddy, is ahead of schedule with a first phase plan to be delivered in as early as six months. Our production facility in Commerce, California is operating in full swing with strong sales momentum and seemingly infinite blue sky opportunities. Our business has inflected and we expect strong sequential growth to build as we move through the year. So let me spend a minute on two of the biggest growth drivers for our business in the intermediate term, California and Illinois. First on Cali, our 170,000 square foot state-of-the-art production facility in Commerce, California is just a very unique asset that came online late last year. I spent two days in the facility last week touring investors and analysts, and the momentum is palpable as production continues to ramp. The activity and interest we're seeing after just six months of operations has us more confident than ever that Forefront is positioned to be truly disruptive in a California market that is ripe for consolidation and subsequent streamlining of cost efficiency. Our timing for entry into California is proving to be impeccable, possibly a bit serendipitous. Given our success in Washington, we have always thought that the Forefront was uniquely qualified to succeed in this market, where others have stumbled. But the opportunity But the opportunity set we are seeing in California may be larger than we anticipated. The market has been absolutely clobbered by an oversupply of flour, high taxes, and lack of retail stores that has been brutal for incumbent operators. Forefront entered Cali this winter with an asset which solves a major problem in the state. the lack of scaled, low-cost production. We're able to enter the market with our proven and award-winning portfolio of products with pricing as much as 50% lower than the leading incumbents. We're doing this while maintaining very healthy margins. Because we started the year with a revenue base of zero, we aren't faced with pricing pressure headwinds to grow because commoditization has largely already happened. Additional tailwinds in what appears to be a slowly healing Cali market, are an expanding retail base. Recent research indicates that there are currently about 900 active licensed retail locations, which are expected to expand to about 1,200 by the end of 22 and 1,600 by the end of 23. Furthermore, if the cultivation tax is lifted in Cali, our flower-based products will get about an extra 10% additional margin points to play with. 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 closed in April our first strategic deal in California of Island Company. Island is a California mainstay with incredibly high quality products, including pre-rolls, flowers, and vapes. Our commerce facility allows us to acquire brands and manufacture them significantly cheaper and more profitably, which is exactly what we're doing here. We're able to integrate the island production in a matter of weeks, giving us even more confidence in our ability to buttress our growth with simple, accretive acquisitions. Equally as crucial to our California strategy, the management team at Island brings deep operational experience in the local market. In particular, The additions of founder and CEO Ray Landgraf and COO Brandon Mills and team have made an immediate impact to our operations and has strengthened our bench, both on the production and sales side. We are excited to have the Island team on board as we build momentum in the state. In Illinois, construction of our Madison facility remains ahead of schedule. The completion of phase one of construction is expected in Q4 of this year. coming online in early 23. 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 dispensaries open out of our allowable 10 in Illinois, we have enormous room for growth as we expand our retail footprint in addition to expanding our wholesale presence. Let me take a minute to underscore the growth engine that Illinois can be to our story. In Q1, we run-rated 42 million out of Illinois between two retail locations and a small 9,000 square foot grow. Quickly eyeballing some of the other MSOs in Illinois with large cultivation capacity and a full complement of 10 retail locations, I estimate they are doing in the neighborhood of 275 to 300 million of revenue. With Madison coming online, the first box for achieving this kind of scale is checked. The second box is buttressing our wholesale capabilities and capturing the upside by adding additional retail. So stay tuned there, as we have a lot of unrealized potential in this state. With that said, let me now review the numbers. Q1 2022 system-wide pro forma sales was 32.4 million, an increase of 7% over the same quarter last year, and a slight sequential decrease from the fourth quarter of 21. While we expect pricing and limited license states to naturally become more competitive, we think wholesale growth in both Mass and Illinois has potential to strengthen as additional retail comes online in those understored states. As I stated last quarter, Pricing competition in the cannabis industry is a fact of life, one that we've 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. Q1 2022 adjusted EBITDA was $9 million, up 53% from Q1 2021. representing an adjusted EBITDA margin of 28%, which we expect to grow in lockstep with incremental revenue growth. Our balance sheet leaving the year is in solid shape, or leaving the quarter is in solid shape. As of March 30th, we had $8.6 million of cash and $48.7 million in related party long-term debt, which doesn't come due until May 24. Cash balance was down sequentially with the closing of our NECC acquisition in mass. 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, product, and best-in-class SOPs from Washington into new markets at scale. We continue to add additional SKUs on a monthly basis, developing and launching a dozen new lines since Q4 alone. We're 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 2022. Which brings me to my final point. As I've been saying for some time, we're 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, while details on safe banking and timing of meaningful change on the federal side remain hazy, Their inevitability is apparent. Our goal has consistently been to become a larger company. We're 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're doing right now is not only building our company, but 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 stakeholders, we continue to explore new means to augment our growth via creative acquisitions or as part of a larger platform. 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 and within the industry. As just discussed, in the first quarter, we reached several substantial operational milestones that pretend lasting momentum expected to drive our growth well through 2022 and beyond. With the California facility now humming, 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. So 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. It's happening. After a brutal winter in California, where operators struggled to move product and pricing hitting all-time lows, a death knell for inexperienced operators without the capability to scale, we're starting to see a rebound as retailers begin to clear inventory, municipalities enact much-needed tax holidays, and pricing in general improves from its November-December drop. We view the turmoil in California as a golden opportunity to begin consolidating market share from unprofitable operators to accelerate our growth. Due to our significant competitive advantages in cost derived from automation and scaled manufacturing, we can drive meaningful accretion that others cannot. 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 the beast. Start with pricing. After just about six months in the market, we've made solid strides in starting the direct sales snowball. The early response to our products has been fantastic, and the sales force continues to focus on new accounts and deeper penetration into existing accounts. Starting April 1st, we flexed the pricing muscle that our low-cost production affords us, introducing pricing in California that was truly eye-popping across all our 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, wholesales at $4 for a 100-milligram 10-pack box, a price that still drives gross margins in excess of over 50%. For comparison, wholesale pricing for the leading dummies in the California market 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 an 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 acquisitions and incubations. The current distress in the California market, time 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 and acquire 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. It's early days in the integration with Island, but we're very pleased that cross-sales are already showing significant overlap. On the 90-day rolling average, our customer count is up to 240 in May, up from 224 in April, and 188 in March. 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. Air Party Productions 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 and manufacturing. We have a high-throughput extraction lab, kitchen line, vape fill, pre-roll fill, flour co-packing, tincture, gel cap, and mint capabilities. We're currently exploring multiple opportunities for symbiotic partnerships with brands and retailers alike. We expect to onboard the first of our private label clients before the end of the quarter. Lastly, retail distribution. We expect to have a retail presence in California this year. 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 maturation curve. Our retail presence not only drives higher margins, but would allow us more direct control over the distribution of our products and brands in the marketplace. Moving on to Washington, which remains stable, with wholesale prices having rebounded from their lows in 2018. Our facilities have seen a very consistent performance, despite having more outdoor product in the market, causing us to pause on taking price. While we don't anticipate outsized growth in the state of Washington, 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 Massachusetts 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 ACID is simply one of the best-designed cultivation facilities we've ever come across and has contributed to improvements not only in Massachusetts, but across our platform. This brand-new facility is already producing premium flour efficiently, which bodes well for what has been a more competitive market in the state. While we think the market headwinds in Massachusetts might be transitory, as the number of retail locations are expected to increase, the long-term trend will be towards reduced pricing, which is precisely what we at 4400 are positioned for. Our broad portfolio of 22 brands allows us to mix and match products and menus very efficiently, and we've increased house brand sales during Q1 and Q2 in both Massachusetts and Illinois. In Massachusetts, our in-house brands represented around 66% of revenue in 21. We think that number could be as high as 80% for 2022 and potentially push the limit as high as 85%. which we believe to be one of the highest percentages of in-house brand sell-throughs in the state. In Illinois, we continue to see solid performance in our two retail locations and plan to add to our Illinois retail footprint as we move through 2022. After further optimizing our cultivation processes over the summer, we're able to sell out of everything we grow. Plus, with the construction of our Madison facility ramping up and ahead of schedule, we look forward to its capacity not only being able to meet our growing retail needs in the 23 and beyond, but also generating meaningful wholesale revenue as our suite of products hit the market that year. As for guidance, we've always said the revenue and EBITDA opportunity from our current assets is $650 million in revenue and $250 million in adjusted EBITDA. To reiterate our thesis, we believe that the sweet spot for outsized value creation in this industry is 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 have really built out this company to not only address current opportunities at hand, but also the market demands of the future. We're now as confident as ever in our ability to drive sustained growth and capture significant share of every market we enter. We are 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'll now turn the call over to the operator to open the lines for Q&A.

Thank you.

Ladies and gentlemen, we will now begin a question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the number two.

One moment here for your first question. Your first question will come from Neil Gilmer with Haywood.

Please go ahead.

Hey, Neil. Thanks for joining us on your Victoria Day here. I apologize.

No worries. No worries. You're not the first company that's scheduled because you guys, the holiday is next Monday, right?

Tell you what, I'll give you Memorial Day off.

Perfect. Thanks. I'll pass that along. Yeah, thanks for the questions. Maybe just sort of start with your comment about the strong sequential growth. You've touched on a little bit of your prepared remarks, but just wondering if I can get a little bit more of your perspective on I'm going to assume that most of that growth, at least in the near term, is coming from California. And your comments with respect to Massachusetts, Illinois, with new stores coming online, what's your perspective on the timeframe of that? I think there's a few different views out there because that might challenge the growth in some of those markets. So you still sort of see California as the main driver of near-term revenue growth supported by sort of maybe late into this year and into next year from some of those other markets?

Yeah, well, let's take the first one first on incremental growth and why we see improvements there. So maybe Jake, why don't you start and Joe can fill in.

Yeah, happy to. And I'll lean heavily on Joe as well as Ray and Leo to support the California story. But I think, Neil, you're kind of spot on in terms of over the next quarter or two, we see that incremental revenue growth really coming from the California market, as well as our burgeoning Massachusetts wholesale entrance, supported by the incremental square footage we added with the NECC facility. Joe or Leo or Ray, if you want to support kind of either the California or discuss the Massachusetts or Illinois landscape, I think in further detail, that'd be great.

Sure, I can start and touch on it and

Pass it off to Leo. So this is Joe and just touching on Massachusetts and Illinois. You know, Jake hit on it. The NACC acquisition from end of January. We have some really high quality products that we're excited about. We think it's really competitive with some of the best in the Massachusetts market. So that's been growing every month in Massachusetts. We also have a full suite of product launches for this summer. Similar story in Illinois. Quality is improving. We're taking some of those best practices from NECC and applying them at all of our facilities. So the improved flower quality is absolutely helping wholesale and retail in both of those markets. And we've really been focusing on live resin products and getting out live resin edibles and get some new SKUs for us. That'll be in those markets as well. So Callie gets all of those exciting new products too. And then Leo can... you know, speak to some of the other things that he's seen our sales ramp build up in Cali.

Yeah, thanks, Joe. You know, naturally going into Q2 and Q3, we're trying to better quarters in the industry historically, combined with the organic growth we've been seeing since the inception of our sales in January, you know, makes us feel really good about where we're headed in California. Product feedback has been phenomenal. We're seeing reorders from the larger chains, and those orders are growing. More of our brands are starting to penetrate shelf space, where we initially saw some of our partners picking up one or two brands. A lot of them have now expanded that skew set to include all of our brands. You're closer to five and six. Extremely excited about the opportunities we have at hand for private label that we've been working on for the last few months, just combined with the natural sales growth and sell-through we feel really, really good about what's going on in California. And I think the last part of that will be we're finally seeing some retailers come out of what's been a very, very difficult time over the last eight to 12 months and finally starting to get caught up with their vendors and figuring out whose product sells and whose doesn't. Seeing a lot of retailers cut down the amount of vendors they carry, making space for products like ours and overall just feeling really good about the organic growth.

Okay, great. Thanks everyone for that. I guess for my second question, I guess, Andrew, you commented about you expecting EBITDA margins to continue to expand as revenues grow. Is that going to be through the gross margin line or some OPEX synergies? There looks like a little bit of a dip in gross margins in Q1, obviously slightly lower cannabis sales and pricing pressure in that quarter. So is there a little bit of a mix of growing gross margins, but is there also some operating leverage that's going to be driving some of that EBITDA margin expansion?

I'll let Jake take that one.

Yeah, absolutely. Okay.

There is some operating leverage that will drive margin improvement on the EBITDA side. I think the other thing to point out is, as we mentioned, NECC coming online, it's as much of a top-line play from a wholesale introduction as it is an improvement to our bottom line in Massachusetts. We went from approximately 85% sell-through of forefront-developed products up into the 90s as we've introduced some products that we previously didn't carry. So we've got a margin uptick in that respect. And I think as we're selling more and more of our own products, we are pushing some indirect costs, depreciation, amortization through the cost of goods sold line. Ordinarily, a company wouldn't have to, but with 280E, any indirect costs that we can attribute to cost of goods, obviously it's in our benefit to do so. So there's a little bit of noise in that line item, Neil. I'm happy to kind of dig in deeper offline. But I think the statement that Andrew spoke rings true as we expect that EBITDA margin in particular to continue to increase as our top line sales come through.

Okay, great.

Thanks for that. I'll pass the line. Thank you.

As a reminder, should you have a question, please press stars and the number one. Your next question will be coming from Ty Collin with 8 Capital. Please go ahead.

Hey, guys. Thanks. No problem, Andrew. No problem. Day's almost over anyways. Look, Andrew, I wanted to follow up on your comment that you were seeing growth at retail, I guess, despite the price compression environment we're in. Just given the sequential sales decline in the quarter, should we read that as most of the sequential weakness kind of coming from wholesale? Just maybe what were some of the puts and takes in the quarter between retail and wholesale?

Joe, do you want to take that one?

Sure. Yeah, absolutely.

So kind of quarter-to-quarter comparison type, the year-end, we were – uh going into last year we actually blew out some excess inventor inventory in both markets so if you kind of isolate that and eliminate that which you know happens to time to time in our business normally kind of more at the end of the year uh but both retail and wholesale massachusetts and illinois have both been growing q1 over q2 And really, we're expecting Massachusetts to have that stronger growth kind of in the summer for us. Yes, pricing is definitely coming down in that market. We're seeing average tickets come down at our store. And some of the bulk pricing that we're selling is definitely coming down. It's just being offset by higher quality flour prices. and then also live resin products. So it's like you bring pricing down on distillate-based products, but if you offset it with live resin-based products and focus on the sell-through there, that's where it's leading to some incremental top-line growth, but then also really helping the bottom line, like Jake was speaking to.

Okay, that's great, Collin.

And then just for my follow-up, obviously there's a lot of pressure on the consumer right now, and we're seeing the impacts across the consumer products universe right now. How do you think your product portfolio is positioned for a period of belt tightening among consumers, and are there any ways you could tweak the SKU assortment throughout this year, or maybe the marketing approach to address a more value-conscious consumer?

Well, I'm going to turn that over to Joe. But one of the things that I sort of hit on in my script, which I think is a really compelling piece to our story, is that we're entering California at a really turbulent time for the market. So we didn't have a sales base in California that we were seeing melt a little bit. We're coming in at what we feel like is a pretty trophy time in the market, and so all of our growth is incremental. So w and with good momentum in California, we're feeling, we're feeling awesome about that. Um, in terms of, uh, making tweaks to products, you know, Joe Ray, um, I'll, I'll turn it over to you guys.

Sure. Absolutely.

I'll kick it off and then pass it over to Leo and Ray, because I mean, this is kind of the genius behind the Washington model. And what we've been waiting for in these other markets. So, you know, for us, we have 22 brands and we try to launch in each market one new brand a quarter and retire two brands a year and bring on new SKUs. And so the strategy is new brands and new SKUs allow us to bring the price point up on premium product. And that helps offset what we do on what we like to call our economy products, uh, which is, you know, cut, cut the price point until we get to a point where we don't think it makes sense from a margin standpoint, and then just retire that product out of the mix. So, you know, or, and I call it the Washington way, the Leo model, right. It's introduced new products at a premium. And, you know, keep cutting the economy and when you need to retire economy and eventually products that are, you know, viewed as premium eventually, you know, kind of end up coming up in the economy bin. And you better be on top of your game and keep launching new new products, which I'm really proud of our team doing. But that's. That's what we're built for and that's what kind of has us excited about these markets and the trend that way, even though it is tough sledding if you look at where average tickets are going. But Leo, I kind of crazy me speaking about the Washington way without you chiming in.

Yeah, absolutely. I echo what Joe says. We've had a lot of success historically coming out of Washington. being able to play to what the market needs at any given time and being able to always find the sweet spot between price and volume for any given product that we produce. Closely looking at the data and listening to what the market tells us is how we make those decisions on what kind of brands we add and what kind of brands we retire. And having 22 brands gives us the flexibility to hit a bunch of different price points and with that low-cost production, which is really the thesis for our whole company. The way we built this out is in a way that allows us to survive and thrive in markets where pricing is crashing.

Great. Thanks for the call, guys. That's it for me.

Your next question is coming from Tom Carroll with Stanbury Research. Please go ahead.

Hey, Tom, how are you?

Welcome. Hey, yeah, thanks for the question. I really appreciate it. You know, I'm relatively new to the story here, but so we'll keep my questions for another time, my more detailed ones. But there's a theme you guys are bringing up that a number of others are bringing up as well, right? There's just unique M&A opportunity out there right now that's been driven by just the tough environment of the last six to 12 months. So could you maybe talk a little bit more about how your company is approaching this opportunity? You know, so for example, are you focused just in your current footprint of States or, you know, or maybe looking elsewhere, looking into new markets and using, uh, this, this particular, um, you know, robust MNA, uh, pipeline to, to, to expand into other markets. And then, and then secondly, How are you planning to finance this? You know, you've got $9 million in cash, $49 million in debt, and it looks like your share count's gone up a good bit over the last year. So maybe unpack that for me a bit more. Thank you.

Sure. So, you know, I think the question on sort of the targets, the very near-term targets on M&A are really, first and foremost, it's in California, and then secondly, it's in Illinois. So first on California. We have built, and sometimes I feel like it's hyperbole to sort of talk about it, but we have built this low-cost production engine. It's a behemoth that I don't think anyone can beat us on price. And so as we go into the California market, where there are brands that are terrific brands, terrific products, they've got good penetrated store bases everywhere, But people, by and large, haven't figured out that last piece of, gosh, I've got good revenues, but I can't make any money here because we haven't figured out low-cost production. So we have the advantage coming into California of being able to say, look, with our currency, we can buy stuff accretively right off the bat. Then we can shut down their production, throw it onto our platform, and you can make them even more accretive. And then you have all these cross-sale opportunities. So as we look at M&A in California, it's kind of brand acquisitions, and we're not going to be willy-nilly about it and sort of go and buy every brand under the sun. We're going to be really thoughtful about it, and we've had to be because we're seeing so much opportunity in Cali. But we also want to own some retail in Cali. And so that's a place where we can really add some – additional just steady product sell-through for our products in a retail base and capture that extra margin and get the brand awareness out there. So that's Cali. And then on Illinois, as I said, we look at some of the bigger MSOs in the space that are doing $300 million in Illinois. And they've got a full slate of 10 dispensaries and scaled production and cultivation. And we, as I said in my prepared remarks in between the dog barks, was that we're run rating about 40 million in Illinois with two dispensaries and a small grow. So the first piece to getting the kind of scale that some of the other bigger MSOs have in Illinois is having that cultivation production engine on board. So that comes online in the next six months. And then, you know, the second piece is making sure that we've got, you know, the retail. And so we will probably be, you know, adding retail both organically and through M&A in Illinois. Which leads to the last part of your question is capital availability for people in this industry that are good operators is out there. So we are, you know, We are currently looking at any number of opportunities and being able to come to the table with a letter from a financing partner to help us finance it. And so there's plenty of the equity markets that are closed and obviously have been for a long time. But we are seeing a lot of capital sources that are pretty eager to work with us because of the growth trajectory, we only had $133 million in revenue last year, and people see a ton of growth in front of us. And we're proven operators. So our access to capital is not something that, you know, especially when that capital is being targeted, it's super accretive projects, is something that, you know, we're really, really comfortable and confident in.

That's great. Thank you for that. And a follow-up that I'm thinking about is as I'm listening to you chat and you keep talking about you guys as the low cost provider, do you guys share any metrics on kind of like your all in cultivation costs per pound or per whatever unit you use?

Yeah. Leo, do you want to take a crack at that?

Sure. I can speak Washington and I'll let Joe fill in for Massachusetts and Illinois. Historically in Washington, We've been at about $300 a pound for indoor production pre-testing. This is just raw, dried, cured flour. I believe it's one of the better numbers that's out there for indoor production.

Joe, do you want to fill in the blanks for Massachusetts and Illinois? Yes.

It's definitely higher than Washington. I mean, both states just have a much higher cost structure. But we're, you know, sub $2, we think, in Illinois and Massachusetts, which, you know, comparatively speaking, we think that somewhere probably in the top quartile, for sure, it could be as high as the top 10% in those states.

All right, great. Hey, thanks very much. Appreciate your time. Appreciate it.

talk to you tomorrow there are no further questions at this time you may now proceed all right well thank you everyone for joining us it's it wasn't very long since our last conference call but we have an awful lot going on at Forefront and are excited to you know keep you updated as we move through the year as we have there's a lot of activity in our country in our company and a lot of momentum, and look forward to updating you in August. Have a good night. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.