Item 9 Labs Corp

All right. Good afternoon, everyone, or good morning, depending on where you're calling in from. Appreciate you joining us today. Today is January 18th, 2022. Thank you for joining us again. So this is item nine labs core fiscal year 2021 annual results conference call for the 12 months ended September 30th, 2021. By now, everyone should have had access to the earnings results press release. which was issued earlier today before the markets opened around 9 a.m. Eastern time. This call is being webcast and will be available for replay. In our remarks today, we will include statements that are considered forward-looking within the meanings of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10Q, Form 10K, and in other reports filed at the SEC. The company undertakes no obligation to update any forward-looking statements. On this call, we will refer to certain non-GAAP measures that, when used in combination with GAAP results, provides us with additional analytical tools to understand our operations. We have provided reconciliations to the most directly comparable GAAP financial measures in our earnings press release, which will be posted on the investor relations section of our website at item9labcore.com. And with that, I'd like to introduce Item 9 Lab Court Chief Executive Officer, Andrew Bowden.

Thank you, Brian, and good afternoon, everyone. We greatly appreciate you taking the time to join us on today's call and for being our shareholder, as increasing shareholder value is our highest priority. We will discuss our operating highlights and financial results for our fiscal year ended September 30, 2021. as well as provide an update on our expansion progress on our Arizona and Nevada cultivation sites and the latest national development of our cannabis dispensary franchise, Unity Road. After my opening, our CFO, Bobby Michelson, will give a summary of our fiscal year 2021 financial results. I will then provide an update on our continued national expansion. Following our prepared remarks, we will move into a Q&A portion and answer questions that were pre-submitted prior to the call. With that, I would like to now walk you through some of our recent highlights. Our company has never been in a better position. With Arizona's adult use sales going live in January 2021, Our products and brand have been gaining tremendous traction. We have grown to $2 million in revenue per month and solidified our spot in Arizona as one of the top brands in every dispensary that we sell through, which is more than 50% of Arizona's dispensaries. The state's combined adult use and medical markets have continuously grown each month and surpassed $1 billion in annual sales in November. With expansion underway at our Arizona site, that will add 45,000 square feet, we will be in position to meet this increased demand in the second half of 2022 with our additional cultivation, production and processing space. Our cannabis dispensary franchise Unity Road is gaining strong traction and our team is executing a strategic initiative to expand the brand's footprint from coast to coast. We have a national acquisition plan to accelerate expansion and began executing a couple months ago with our first deal in Adams County, Colorado. We have a robust pipeline of opportunities across a wide range of appealing states and expect to make further announcements over the next few months. There are a tremendous amount of synergies we gained from the acquisition of UnityRoad's parent company, OCG Inc., including expanded business offerings and expertise, operational efficiencies, cost savings, and revenue upsides. Now I'd like to pass it off to Bobby for a summary of our fiscal year 2021 financial results.

Thank you, Andrew. With our 170% annual growth in revenue to $21.9 million, we have demonstrated the scalability of our business throughout fiscal year 2021 and saw growth and profitability in the second and third quarters. In the fourth quarter and through the end of December 2021, we have made additional hires, continued development of our Nevada site, and began construction on our site in Arizona, which has caused our expenses to rise. While we build out our capabilities and bolster our team for future growth, we are confident in the greater demand and believe we are strengthening our position for increased business in Arizona and into other markets. For the 12 months ended September 30, 2021, revenue was $21.9 million, an increase of $13.8 million or 170%. compared with $8.1 million for the 12 months ended September 30, 2020. This growth was primarily driven by our investment into increased production capacity to better meet the market demand for Adenine Labs products. For the 12 months ended September 30, 2021, gross profit was $8.6 million, an increase of $5.3 million, or 170%, compared with $3.3 million for the 12 months ended September 30, 2020. The resulting gross margin was 39% compared with 41% for the 12 months ended September 30, 2020. The company experienced lower gross profit margins in the fourth quarter of 2021 due to price reductions as competition rises in Arizona. Additionally, to deepen the market penetration of Item 9 Labs products, the company sourced plant and extract materials from third parties, the effect of which is higher gross profit but lower gross margins. For the 12 months ended September 30, 2021, total operating expenses were $14.2 million, an increase of $5.5 million, or 63%, compared with $8.7 million for the 12 months ended September 30, 2020. We have invested heavily into fiscal 21 and 22 to meet growing demand in Arizona, as well as funding the buildup of our cultivation and lab site within the state. We strongly believe this expansion will improve earnings and future cash position. Operating expenses as a percentage of revenue decreased to 65% from 107%, reflecting our focus on increasing revenue and scaling our platform more efficiently. We believe this ratio will decrease going forward as we scale the business. Of note, $7.8 million of our operating expenses for the 12 months ended September 30, 2021 were non-cash expenses, including depreciation, amortization, and stock-based compensation. Also of note, 3.9 million of interest expense in 2021 was non-cash amortization of debt discounts. For the 12 months ended September 30, 2021, operating loss was 5.6 million, in line with an operating loss of 5.4 million for the 12 months ended September 30, 2020. After adding back non-cash operating expenses, depreciation and amortization, interest in stock-based compensation, adjusted EBITDA for the 12 months ended September 30, 2021 was $1.7 million, as compared with an adjusted EBITDA loss of $2.5 million for the 12 months ended September 30, 2020. For the 12 months ended September 30, 2021, net loss attributable to the company was 10.9 million or net loss of 14 cents per share compared with the net loss of 12.3 million or 20 cents per share for the 12 months ended September 30, 2020. Cash and cash equivalents totaled 1.5 million as of September 30, 2021. And back to you, Andrew.