Goodness Growth Hldgs Inc

Good morning, my name is Devin and I will be your conference operator today. At this time, I would like to welcome everyone to the Goodness Growth Holdings third quarter 2022 result call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question at any time, again, press star and then the number one. Thank you. Mr. Sam Gibbons of Investor Relations, you may begin your conference.

Thank you, Devin, and thanks, everyone, for joining us. With me on today's call are our Chief Executive Officer, Dr. Kyle Kingsley, and our Chief Financial Officer, John Heller. Today's conference call is being webcast live from the Investor Relations section of our website. Dial-in and webcast details for the call have also been provided in this morning's earnings release, which is also available on our website. Before we get started, we'd like to remind everyone that today's conference call may contain forward-looking statements within the meaning of U.S. and Canadian securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in such forward-looking statements. For more information on forward-looking statements, please refer to cautionary note regarding forward-looking statements in the earnings release. We'd also like to remind investors and analysts that on October 13th, 2022, we received notice from Verano Holdings Corp that it was purporting to terminate the arrangement agreement dated January 31st, 2022 with goodness growth pursuant to which Verano had agreed to acquire goodness growth on satisfaction of certain conditions. We believe that this purported termination was invalid and have treated it as a wrongful repudiation of the arrangement agreement. We filed suit against Verano in the Supreme Court of British Columbia on October 21st, 2022, seeking damages. We are unable to comment further on the litigation at this time beyond what has already been disclosed and direct your attention to the pleadings which are available from the court. Now I'll hand the call over to Dr. Kingsley.

Thanks, Sam. Good morning, everyone, and thank you all for joining us today. I'll begin with a high-level review of our third quarter performance and provide a brief update on our management team and board strategic priorities following the wrongful repudiation of our transaction to be acquired by Verano. After that, John will review our financial performance and balance sheet in more detail. Our third quarter results reflect continued revenue growth across each of our operating markets in Maryland, Minnesota, New Mexico, and New York, as well as consistency of our gross margin performance as compared to the prior quarter. Total revenue of 18.9 million increased approximately 41% compared to the third quarter of last year. If you exclude last year's contributions from our former operations in Arizona, which were discontinued earlier this year, total revenue grew approximately 60% year over year, driven by significant increases in retail sales in Minnesota, Maryland, and New Mexico, as well as wholesale sales growth in New York. On a sequential basis, excluding our former Arizona operations, Sales declined 4.5% as compared to the second quarter of this year, with the decline driven primarily by lower sales in New Mexico, as store count across the state has increased significantly following the commencement of adult use sales during the second quarter. As a reminder, there is no cap on the number of adult use dispensaries allowed for licensed operations in New Mexico, and the state has quickly grown store count per 100,000 residents well above industry average trends since the state transition to adult use sales. Our home market in Minnesota remains especially strong following the commencement of flower and edible sales earlier this year. And we are also pleased with substantial increases in wholesale volumes in New York. We expect both these positive trends to remain strong growth drivers for our business as we continue working toward the launch of adult use sales in New York next year. Gross margin performance improved significantly year over year from 38.3% of sales in the third quarter of last year to 50.6%. Gross margin has benefited from our recent wind down of operations in Arizona. And when we exclude previous contributions from Arizona, we've now delivered two consecutive quarters of positive adjusted EBITDA performance with gross margins in excess of 50% of sales. We're also very pleased with recent regulatory developments in Maryland and Minnesota, which should create additional revenue growth opportunities for our business. Last week in the largely expected outcome, Maryland voters approved a ballot initiative to legalize recreational use sales. Even more importantly, however, were the midterm election results in our home state of Minnesota. Democrats gained control of the state Senate for the first time since 2014, which opens a pathway for the state legislature to pass an adult use legalization bill without opposition. Despite strong support from the governor, previous initiatives to pass marijuana reform in Minnesota have been blocked by the former Republican majority in the state Senate, so this has been a very positive regulatory development in one of our most important markets. Lawmakers have already voiced strong support for this initiative since the conclusion of the midterm elections. We believe it is likely that legalization of adult use program could be approved by the state legislature in Minnesota sometime in 2023. Despite the many positive trends we are experiencing in our business, we were extremely disappointed by Verano's decision to wrongfully repudiate our transaction on October 13th. As a reminder, we previously anticipated the transaction to be acquired by Verano would close sometime during the fourth quarter of this year. We reiterate that this repudiation was wrongful, and we will be seeking significant damages through the judicial process based on Verano's breach of contract and its duty of good faith and honest performance. While this unexpected development with Verano has resulted in a steep decline in our share price, we continue to believe there is significant long-term value in our asset portfolio, and that view has been validated by the strong support we've received from some of our largest shareholders over the course of the last several weeks. Our management team and board of directors remains focused on maximizing value for shareholders. The transaction committee was formed by our board of directors to explore strategic alternatives for the company in the third quarter of 2021 and is continuing to evaluate all opportunities to maximize value for stakeholders in the wake of termination of the Verano transaction. We would like to remind investors that the transaction committee, with the assistance of outside advisors, ran a thorough sale process and received multiple bids on the company prior to announcing the agreement with Verano on February 1st, 2022. Transaction Committee will be revisiting those opportunities as it continues evaluating strategic alternatives for the company. We also remind investors that there was some license overlap with the combined goodness growth in Verano asset portfolio, and we were already in the process of identifying potential divestitures to satisfy regulatory requirements in certain jurisdictions if the Verano transaction had closed. So while strategic alternatives for the companies could include a disposition of a material business or assets or a merger sale of the company, we are unable to set a timetable for the completion of this review process at this time. Regardless of any outcomes of this review process, we have an extremely attractive portfolio of U.S. cannabis assets and are looking forward to additional positive regulatory developments in our markets in Maryland and New York, with New York's long-awaited transition to adult use sales expected next week and the recent legalization of adult use sales in Maryland following a successful ballot initiative in last week's election. Quantifying the opportunity in Maryland will depend on outcomes of the state's adult use programs implementation, but historical per capita spending trends across the United States suggest there is still substantial upside for sales growth. Per capita cannabis spending in Maryland is currently around $6 within the existing medical market. Typically adult use markets have been reaching normalized per capita spending of about $15 within two years of legalization. So we're looking forward to unlocking this new catalyst for sales growth in the Maryland market next year. As a reminder, in Maryland, we currently have two operating green goods dispensaries in Frederick and Baltimore, as well as approximately 110,000 square feet of cultivation capacity and approximately 20,000 square feet of processing space, where we are already manufacturing a full spectrum of cannabis product categories. We recently began selling high-dose edibles in Maryland, and we're one of the first movers in this market with edible product offerings of up to 40 milligrams of THC per dose. We are continuing to enhance our manufacturing capabilities in Maryland to accommodate greater variety of adult use products. And we're confident that our dispensaries will likely, will be highly competitive stores in that market when adult use sales begin, which we believe is likely to occur next summer. In New York, per capita spending in the existing medical market is one of the lowest in the country at approximately 70 cents. That maturity based on these per capita spending trends The New York adult use market is expected to be one of the largest in the country with more than $5 billion in potential annual sales at maturity. We were one of the first five licensed operators in this market back in 2015 and are extremely proud of our leadership position we've established in the state's existing medical program. Today we are one of the larger operators with 41,600 square feet of cultivation capacity and produce one of the most diverse product sets operating in the market. The exact timing of the implementation of adult use sales next year remains uncertain. We are encouraged by the state's Cannabis Control Board's recent proposals for certain retail operations. If our operations are governed by similar concepts, we would be able to operate our stores until midnight and maintain our existing home delivery service, which we believe is one of the largest legal home delivery operations in the state and currently accounts for more than 50% of our retail sales. For the past several quarters, we have been focusing on optimizing our flower production capabilities We've been responsibly stockpiling bulk oil inventory where possible so that we can maintain a strong focus on flower production upon the launch of adult use, which will be critical in ensuring long-term success in New York's market. Flower sales and wholesale sales have been increasing nicely since these operating plans were implemented, and as we mentioned earlier, we expect to continue growing wholesale sales in New York leading up to the launch of the adult use program. As far as our expansion plans in New York are concerned, we have received regulatory approval from the state to operationalize 170,000 square feet of the 324,000 square foot structure. As we've done in the past, we have partnered with IIP through a sale-leaseback transaction to finance most of the first phase of construction, which should be completed in the first half of next year. The new building is predominantly composed of cultivation space, as well as a new home for our cloning and vegging space, drying, curing, trimming, and flower packaging operations. The remaining square footage of the new building remains available shelf space for future expansion. As we continue to operationalize the new facility expansion, we will be retrofitting the old facility to enhance our processing and manufacturing capabilities. I'll now hand the call over to John for more detailed review of the financials. Thank you, Kyle.