Medicine Man Tech Inc

Good afternoon. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Schwa's first quarter conference call. Note that all lines have been placed on mute if you are on the phone to prevent any background noise. After the speaker's remarks, there will be a live question and answer session via the web. If you would like to ask a question during this time, please type in the appropriate box. And I would like to turn the conference over to Joanne Jobin. Please go ahead.

Thank you. Greetings and welcome to the 2022 first quarter 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. Examples of forward-looking statements include, among others, statements regarding federal and state legislation and regulation and Schwoz's future results of operations and financial positions. business strategy and plans, and objectives for future operations. The words expect, anticipate, could, enable, estimate, intend, accept, believe, potential, will, should, project, position, objective, determine, vision, plan, target, 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 events, results, performance, or achievements to differ from those anticipated by Schwoz at this time. Additional information concerning factors that could cause events, results, performance, or achievements to differ materially is available in Schwoz's earnings release made available before this call and available on Schwoz's Investor Relations website and in Schwoz's Form 10-K for the year ended December 31st, 2021, and Form 10-Q for the three months ended March 31st, 2022. In addition, other information is 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. Also, Schwoz may discuss non-GAAP financial measures during today's call. A reconciliation of the differences between the non-GAAP financial measure disclosed during the call with the most directly comparable GAAP measure can be found in the earnings press release made available before this call and available on Schwoz'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, and our CFO, Nancy Huber, will review our quarterly financial results in detail before I conclude our presentation with some final thoughts. We would then be happy to take your questions. Schwoz achieved a remarkable performance in 2021, which continued into the first quarter of 2022. Our team continues to nurture our vision of becoming the most admired cannabis company by making a difference in our communities and providing trusted products and experiences that improve the human condition. Our growth plans remain on track. And despite a challenging quarter for the entire industry, we remain steadfast and determined in our long-term plan of building a distinguished house of brands that are driven by passion for innovation, craftsmanship, efficiency, and teamwork. Despite navigating the lingering effects of the pandemic in a challenging environment in our Colorado market, Our team members delivered revenue growth and positive operating cash flow while continuing to grow faster than our market. I would like to thank all of our team members for their hard work, enthusiasm, and commitment to driving operating excellence. Since December 2021, Schwoz has added 14 cannabis dispensaries to its retail network, 10 in New Mexico, four in Colorado, as well as five cultivation facilities, including four in New Mexico and one in Colorado, and one manufacturing asset in New Mexico. Our accomplishments during the first quarter of 2022 included on March the 23rd, the company's common stock commenced trading under the symbol SHWZ, on the NEO exchange, a tier one Canadian stock exchange based in Toronto, Ontario. In March, we also signed defendant documents to acquire all the assets of Urban Health and Wellness Inc. The proposed transaction includes the adult use urban dispensary, as well as 7,200 square feet indoor cultivation, both located in Denver, Colorado. On February the 16th, we announced the acquisition of the assets of Brow 2 LLC, a Denver-based cultivation asset, which includes a 37,000 square foot building for indoor cultivation and equipment. In February, we also acquired the Emerald Fields brand, the owner and operator of two retail cannabis dispensaries located in Manitou Springs and Glendale, Colorado. We officially became a regional MSO when we acquired the New Mexico operating assets of Reynolds Greenleaf and Associates LLC and the equity of Elemental Kitchen and Laboratories LLC. This transaction included 10 Greenleaf licensed medical cannabis dispensaries, the R. Greenleaf brand, four cultivation facilities, three operating and one in development, and one manufacturing campus. Along with our newly formed MSO status, we formed a strong Schwoz New Mexico leadership team with Steve Pear as our New Mexico division president, along with Alex Valterhan and Jacob White, both from our Greenleaf and associates. We also announced that we are adding additional key roles at Schwoz to support our significant expansion within manufacturing, cultivation, and Information Technology. Key members included Dave Kaufman as VP of Manufacturing and Supply Chain, Robert Piziali as VP of Cultivation. In late January, we announced the acquisition of the assets of Drift, which consists of two cannabis dispensaries located in Boulder, Colorado. Our plan is to continue to build and develop our decentralized operating system that fosters agility, efficiency, and responsiveness to our customers and local communities. Most importantly, we continue to build our house of brands, adding Emerald Fields and our Greenleaf dispensaries and expanding the Purple Bees vape brand in both Colorado and New Mexico dispensaries and across the state of Colorado and other dispensaries. With the expansion of our retail square footage and cultivation capability, We expect to launch our small batch crafted flour brands in our dispensaries in 2022. Last week, we announced a licensing agreement with Lowell Farms to bring Lowell Smokes, a premium line of pre-rolled joints to dispensaries statewide in both Colorado and New Mexico. We also plan to add a distribution center in Colorado as part of a retail wholesale playbook expansion. Now a word about New Mexico. On April 1, 2022, we commenced selling both recreational adult use and medical cannabis in New Mexico. We cannot report hard numbers for retail revenue as of yet, but we can say that we're pleased with the sales trends that we're seeing so far. We have an excellent retail footprint now established in New Mexico, and we expect to report on revenue growth from this category in the near future. Our revenue for Q1 totaled $31.8 million and represented an increase of $12.4 million or 64% compared to quarter one, 2021. We reported a net loss of $26.8 million compared to a net loss of $3.6 billion for the same period last year. This was due to a number of items unique in the quarter. Nancy will discuss in greater detail later on this call. The company's adjusted EVA-DA for the quarter was $7.9 million, or 25% of revenue. We're pleased to report that retail sales for the quarter were $26.5 million, up 124% when compared to the same period last year. Colorado two-year stacked IDs for quarter one 2022 compared to Quarter 1, 2021 and 2020 for the same store sales were 22.7%. And one-year identicals were down 8.1% when comparing Quarter 1, 2022 to Quarter 1, 2021. Average basket size for Quarter 1, 2022 was 59.21, down slightly. at 1.7% compared to Quarter 1, 2021. Recorded customer visits for Quarter 1, 2022 totaled 415,308 and were down 6.4% compared to Quarter 1, 2021. New Mexico two-year stacked IDs for Quarter 1, 2022 compared to Quarter 1, 2021 and Quarter 1, 2020 for same-store sales were 37.3%. And one-year identicals were negative 1.9% comparing quarter one 2022 to quarter one 2021. Average basket size for quarter one 2022 was 59.94 or down 1.6% compared to quarter one 2021. Recorded customer visits for quarter one 2022 totaled 122,913. And we're down slightly. at 0.3% compared to quarter one, 2021. While basket sales and customer visits for both Colorado and New Mexico were down quarter over quarter, attributed to macro events and previous year stimulus spending, we're pleased to report that we once again outpaced the industry in the state of Colorado for the quarter by 10.2%. which is a remarkable achievement when you consider the macro challenges faced by the industry at this time. We believe that we will continue to cycle COVID-19 retail numbers for the first half of the year. We anticipate growth in the Colorado market to continue to be challenging this year. However, we expect the adult use market in New Mexico will help offset that slower growth. For now, we do not have a service such as BDS Analytics that publishes comparable market stats in New Mexico. Therefore, we will be working on how to compare our performance in that state in the near future. This quarter, we generated approximately 83% of our revenue from retail. We expect the contribution from the retail segment to continue to grow as we add to our dispensary count and add recreational sales in New Mexico. Through the implementation of our operating playbook, we continue to effectively contribute to growth and efficiencies that are manufactured in retail locations. In retail, we continue to review our product categories, aligning a product assortment across our dispensaries and working with our vendor partners to promote products. We're in the process of remodeling four StarBuds dispensaries and rebannering and remodeling the drift and smoking gun dispensaries. which we expect to be completed by the end of quarter two. In quarter one, we also integrated four acquisitions, and at this time, all of our acquisitions have moved to Schwoz's accounting and retail systems, and will be on a single payroll system by the end of the month. As for the federal and state government laws regarding cannabis legislation, we can report once again that there has been no significant movement or changes on any of the federal acts. Although the House passed the Moore Act again, we remain skeptical it will pass in the Senate. We expect that all parties will continue to look at financial and legal reform in cannabis laws and perhaps pass either the Moore Act or Safe Banking Act or something similar, but the timing is anything but clear. In the meantime, we continue to invest in our customers and our communities. On a positive front, more states continue to legalize both medical and adult use cannabis. 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 will continue to evaluate additional opportunities across the cannabis industry in the areas of cultivation, manufacturing, and dispensaries in both our home states and others. Our current criteria for potential acquisitions includes revenue growth or growth potential that exceeds the applicable state's averages, EVA-DA profitability with synergy opportunities, attractive acquisition prices that are accretive to our shareholders, provides high-quality branded products, and attractive retail locations. Any announcements regarding expansion intentions will be made once we've reached definitive agreements with prospective partners. And now I'd like to turn the discussion over to Nancy Huber to continue our financial review.