Medicine Man Tech Inc

Good afternoon. My name is Pam and I will be your conference operator today. At this time, I'd like to welcome everyone to the Schwoz third quarter conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a live question and answer session. I would now like to turn the conference over to Joanne Jobin, Investor Relations Officer. Please go ahead.

Greetings and welcome to the third quarter 2021 conference call and webcast for Schwoz. We are being hosted by Justin Dye, Chairman and Chief Executive Officer, and Nancy Huber, Chief Financial Officer. Following their presentation, management will take questions submitted via the web link found on Schwoz's Investor Relations website and in the earnings press release. I would also like to remind you that management's prepared remarks and answers to your submitted questions may contain forward-looking statements which are subject to risks and uncertainties. The words anticipate, could, enable, estimate, intend, accept, believe, potential, will, should, project, position, objective, determine, vision, and similar expressions, as they're related to schwas, are, as such, a forward-looking statement. Investors are cautioned. that all forward-looking statements involve risks and uncertainties that may cause actual results to differ from those anticipated by Schwoz at this time. Additional information on factors that could cause results to differ is available in the Schwoz earnings release and on the Form 10-K for the year ended December 31, 2020, and the Form 10-Q for the quarter ended September 30th, 2021. In addition, other remarks are more fully described in Schwoz's public filing with the U.S. Security and Exchange Commission, which can be viewed at www.sec.gov or on the company's investor relations website. I would now like to turn the call over to CEO and Chairman Justin Dye.

Hello and thank you for joining us this afternoon. I will provide a business update. Our CFO Nancy Huber will review our third quarter financial results in detail before I conclude our presentation with some final thoughts. We would then be happy to take your questions. The business continues to demonstrate strong operating momentum and our operating playbook is proving effective. Our growth plans remain on schedule and we're enthusiastic about our future. These factors give us confidence that we're building a differentiated dynamic business at Schwoz and point for profitable growth. During the third quarter of 2021, the company announced closing the acquisition of Southern Colorado Growers, which includes 34 acres of land with outdoor cultivation capacity, as well as indoor greenhouse and hoop house cultivation facilities and equipment. This purchase is the company's first move into cultivation, which will provide high-end premium cannabis directly to our Starbucks dispensaries and significant production of biomass for its Purple Bees extraction and manufacturing facility. We also launched Starbucks home delivery services in Aurora with the second delivery phase expected later this year. We signed an agreement to acquire the assets of Brow 2 LLC, another cultivation asset located in Denver, which includes a 37,000 square foot building for indoor cultivation and equipment. During this quarter, our revenue increased to $31.8 million compared to $7.4 million during the same period last year, representing a 328% increase. The company's adjusted EBITDA for the quarter was $8.8 million, representing 27.6% of revenue. I'm also pleased to report that we generated positive operating cash flow during the quarter, $3.4 million and $4.8 million in operating cash flow for the first three quarters of 2021. Same-store sales of the 17 Starbucks dispensaries when compared to last year prior to take ownership of the assets were $20.7 million, up from $1.1 million the prior year. Average basket size increased to $59.05, up 7.3%. Customer visits totaled 353,370, down by 5.8% compared to the prior year due to the cycling through COVID impacts. However, year-to-date visits were $1 million 46,232, up 5.1% over prior year. This data now includes our four Mesa organic stores acquired in April of 2020. We are pleased to report that these revenues are steadily trending upwards quarter over quarter since completing our acquisitions. This quarter will generate approximately 65% of our revenue from retail and 35% from wholesale products. We expect the wholesale side to continue to increase over the next few quarters with recent acquisitions of SCG and Brow 2. Through the implementation of our operating playbook, we've been able to effectively contribute to growth and efficiencies in our manufacturing and retail locations. At our Purple Bees manufacturing division, we implemented our MRP system, improving our ability for production planning and make costing decisions with real-time information. We held our first vendor summit in September, attended by approximately 83 suppliers from across Colorado, reviewing our product plans and discussing partnering opportunities. In retail, we are reviewing our product categories, aligning product assortment across our dispensaries. Along with strong revenue growth and adjusted EBITDA results, we continue to be encouraged with our retail results. With our two-year stack, identical sales at 49.4%, which we believe better represent market growth due to COVID impact and demonstrates that we outpace the Colorado market as reported by BDS analytics by 31.8%. Wholesale results led by Purple Bee's distillate business also had another record-breaking sales quarter. We also continue to strengthen our management team. I'm delighted to announce the following additions to our leadership team at Schwoz. Vice President of Manufacturing, David Kaufman. Vice President of Cultivation, Robert Pizzoli. Senior Director, Controller, Ashley Barnes. And then Director of FP&A, Eric McQueen. All come with great experience in their respective fields. and will add necessary horsepower to critical areas to drive growth and support our acquisitions. As for the federal and state government laws regarding cannabis legislation, there continues to be a lot of discussion, but no significant movement or changes on any of the acts. We expect that all parties will continue to look at financial reform in our cannabis laws in order to pass the Safe Banking Act so that we can continue to invest and reinvest in our customers and our communities. As always, we will closely monitor any federal and state changes that would impact our industry and are poised to make any changes necessary. We can report that in the recent Colorado election, the state voted down a tax increase on cannabis, which we see as a positive sign of support for cannabis by the general public. We have recently started home delivery products to Aurora, a suburb of Denver, Colorado. and are looking to expand the service into other jurisdictions as delivery is approved. Now, let's move into Colorado cannabis market in general and where Schwoz fits in. Based on recent BDS analytics estimates, Colorado sold $588 million of adult use of medical cannabis product during the past quarter, representing approximately a 10.5% decline year over year compared to $657 million recorded for the same quarter last year. We believe that slight decline in Colorado's growth was directly driven by COVID cycling through the quarter. However, I'm pleased to report that Schwab's outpaced the state by 11.5%, which includes stores where we have year over year measurement continue to demonstrate to the market that we can outpace and capture market share in this hyper growth industry. Turning to the future, we continue to evaluate additional opportunities across the cannabis industry in the areas of cultivation, manufacturing, and dispensaries, not just in Colorado, but in other states as well. Our current criteria for potential acquisitions includes the following. Revenue growth or growth potential that exceeds Colorado's averages. EBITDA profitability with synergy opportunities, attractive acquisition prices that are accretive to our shareholders, and provides additional products and services in attractive locations. Any announcements regarding expansion intentions will be made once we've reached definitive agreements with prospective partners. Let me also reiterate that we believe our home state of Colorado continues to represent attractive geography to build out our platform as it provides us with the opportunity to acquire targets that are sophisticated and profitable and have already weathered the early boom and bust cycle of the cannabis industry. And now I'd like to turn the discussion over to Nancy to continue our third quarter financial review.