Harborside Inc

Good afternoon all. Welcome to today's conference call to discuss Harborside's second quarter 2021 financial results. A press release detailing the financial result was distributed prior to the call and is available on the investor relations section of the Harborside website. On the call today are Matt Hawkins, Chairman and Interim CEO, Tom DiGiovanni, Chief Financial Officer, Listeners are reminded that certain matters discussed on today's conference call, or answers that may be given to questions asked, could constitute forward-looking statements that are subject to the risk and uncertainties relating to Harborside's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Harbicide's annual information form and other periodic filings and registration statements. These documents may be accessed via the CDAR database at www.cdar.com. Any forward-looking statements made today on this call are based on assumptions as of today and Harbicide's assumes no obligation to update these statements as a result of new information or future events. I'd like to remind everyone that this call is being recorded today, Tuesday, August 31st, 2021. And I would like to introduce Mr. Matt Hawkins, Chairman and Interim CEO of Harborside. Please go ahead, sir.

Thank you very much. Good afternoon, everyone, and thank you for joining us today. I'm excited to update you on our progress. During today's call, I'll provide an overview of the business and briefly review our Q2 2021 results before turning the call over to Tom DiGiovanni, our CFO, who will go into a more detailed review of our numbers. We will then open up the line to questions. First off, I'm very proud to report that for the second quarter of 2021, we achieved positive adjusted EBITDA of approximately 1.1 million. Positive EBITDA continues to be an important company milestone. We first reached in Q1 of 2020 and have sustained every quarter since. Our continued solid EBITDA performance speaks to the underlying strength of our business and the changes we continue to make to improve operations. I'm also proud to report that our Q2 2021 gross revenues increased 25% sequentially to $16.2 million, and we reported a 4.1% sequential gross profit improvement for the quarter. We remain committed to our ongoing strategic review of the business, and together, management and the board continue to evaluate opportunities in the marketplace to maximize shareholder value. As we scale up our operations and execute on our California-focused growth strategy, our immediate areas of focus include pursuing additional accretive merger and acquisition opportunities and building out of a world-class management team. We hope to make additional announcements very, very soon. On the M&A front, subsequent to quarter end, we completed the previous announced acquisition of Sublime, an award-winning cannabis product manufacturing company known for its expansive line of high-potency, high-quality Fuzzy's branded products. Sublime had California's number one pre-world brand in 2020, with distribution to over 500 active customers covering almost 70% of the California market. The acquisition of Sublime provides us with a number of synergies, including Harborside's ability to access Sublime's production capabilities and robust distribution network. When combined with utilization of the high-quality cannabis grown in our 200,000 square feet of greenhouses in Salinas, we expect to see improved gross margins as well as to expand the overall sales and distribution of our combined suite of branded Harborside, Key, and now Fuzzy's products, both on our own store shelves and to additional retailers and distributors throughout California. We've known the supply team for years and have been longtime customers with their products broadly available in our retail stores. We are excited that they are now part of the Harborside family and are already finding the acquisition to be accretive to both revenues and EBITDA. In addition, since completing the $5 million strategic investment in Loud Pack, a premier cultivator, brand operator, and distributor in the California market, We engaged them to provide services aimed at identifying production efficiencies and improving harvest yields at our production campus. And in Q2, LALPAC began producing harborside-branded products under a contract manufacturing arrangement. The first of these products recently became available in our dispensaries and is also being sold through our distribution network. We've also increased the availability of LALPAC-branded products, including Smokey's Edibles, Kingpin Bakes, and Dimebag Flour, at all of our retail locations. We continue to expand our talent management team, and during the quarter, we announced a key hire, Travis Sickenbotham Jr., who joined us as vice president of production, overseeing our Salinas, California production campus, which includes cultivation, post-harvest, processing, and packaging facilities. Travis has a master's degree in horticulture, and he joins Harborside with more than eight years of experience in the hemp and cannabis space, where he has previously managed a 2 million square foot grow operation that had sales of hemp-related CPG products across 20 states, excuse me, more than 20 states. We are thrilled to welcome him to the team, and his impressive cultivation and business development expertise will be instrumental in leading our production teams implementing further improvements at our cultivation facility. We expect that this will ultimately reduce operating costs and boost profitability for the business. Also, subsequent to the end of Q2, We appointed Amar Iqbal as the Chief Operating Officer of Harborside. Amar came into the organization as part of the Sublime acquisition, and his operational background with Amazon, as well as his track record of results as CEO of Sublime, make him well-suited to drive further operational improvements at Harborside as the company continues to grow. We remain committed to bringing in a new CEO and are currently evaluating several potential candidates for that role. I hope to have an update on that front very, very shortly. Last quarter, we announced that we secured a $12 million revolving line of credit with a federally regulated commercial bank. The line of credit has an initial interest rate of 5.75%, which provided us with one of the most competitive costs of capital in the entire cannabis industry. During Q2, we drew down approximately $11.4 million of the credit facility to complete the purchase of our 47-acre production facility campus in Salinas, California. This transaction lowered our borrowing cost significantly and is expected to improve overall cash flow and enable us to make further capital investments in facilities to increase production and meet consumer demand. Taking a quick look at our operations, we continue to make great strides toward implementing improvements in our operational efficiencies, and during the second quarter, we completed the greenhouse upgrades at our Salinas Cultivation Facility. The upgrades included, among other things, the installation of blackout curtains, supplemental LED grow lights, and the incorporation of a state-of-the-art environmental control system. We expect these upgrades to generate as much as 50% increase in annual cultivation capacity and enable a perpetual harvest cycle at the facility. We commenced initial planning in July and are expecting our first harvest from the upgraded facility into September. During the second quarter, We also announced that we received approval from the California Bureau of Cannabis Control to commence adult use retail sales at our existing San Leandro Wellness Solutions dispensary, which will enable us to better compete in that local market. We are already seeing higher revenues in that location as their customer base expands. We also currently expect to have the Haight-Asbury retail location in San Francisco open for business during the fourth quarter of this year. With that, I will now turn it over to Tom DiGiovanni, our CFO, to provide an overview of our second quarter 2021 financial results. Tom, take it away.

Thank you, Matt, and good afternoon, everyone.