Stem Hldgs Inc

Please note this conference is being recorded. I will now turn the conference over to your host, Valter Pinto, Managing Director of KCSA Strategic Communications. You may begin.

Thank you, Operator. Good afternoon, everyone. I'm joined today by Mr. Steve Hubbard, Chief Financial Officer and Interim CEO of Stem Holdings. Following our prepared remarks, we'll host a brief question and answer session. The company's Form 10-K for the period ended September 30, 2021, was filed with the U.S. Securities and Exchange Commission today, January 13, 2022. Today's call will refer to various non-GAAP financial measures. Today's discussion will include actual historical information as well as forward-looking statements that are based on assumptions which are subject to risks and uncertainties that could cause actual results to differ materially from those in these forward-looking statements. Management can give no assurance that any forward-looking statements will prove to be correct. Forward-looking statements discussed in this call are relevant as of the date of this call, and the company undertakes no obligation to update or revise any of these statements, except as required by applicable law. Management refers you to the cautionary statements and risk factors included in the company's MD&A, of which any forward-looking statements made are qualified in their entirety. All information is in U.S. dollars unless otherwise specified. I'd now like to turn the call over to Steve. Steve, please go ahead. Thank you, Walter.

Good afternoon, everyone. Thank you for joining us today for our 2021 fiscal year-end conference call. As newly appointed interim CEO and CFO and member of the Board of Directors for STEM since its inception in 2016, I'm pleased to be speaking with everyone this afternoon and look forward to communicating with you all going forward. Today, I will briefly review our financial results for the year ended September 30, 2021, but more importantly, provide more detail as it relates to our strategy going forward. Revenue for the fiscal year 2021 totaled $41.8 million. This includes $17.5 million from driven deliveries that has been subsequently divested. Revenue from continuing operations, not including driven, was $24.4 million, an increase of 48.8% as compared to $16.4 million for the prior fiscal year. Net revenue from continued operations after discounts and returns totaled $20.9 million, which was an increase of 49.3% as compared to $14 million for the prior fiscal year. At the end of fiscal year 2021, the company reported non-cash impairment expenses associated with the driven deliveries divestiture that totaled $52.5 million, predominantly related to the intangible assets and related party receivables of driven deliveries. Adjusted EBITDA loss for the fiscal year of 2021 totaled $5.8 million as compared to $5.5 million in the prior period. The net loss for the fiscal year of 2021 totaling $64.6 million, which was predominantly attributable to the $52.5 million non-cash impairment charge related to driven deliveries. In December of last year, we announced our divestiture of driven deliveries, its subsidiaries, its assets, and liabilities. After careful consideration with our board, we made the strategic decision to divest this asset, which will return 11.5 million shares to the Treasury and immediately improve our balance sheet and cost structure. Our total liabilities will be reduced by $7.1 million, working capital will increase by $4.1 million, and total expenses will be reduced by $9.6 million annually. Immediately, STEM is in a much healthier financial position, allowing us to focus our resources on high growth, high margin, vertically integrated cultivation and processing, and retail operations predominantly in Oregon and California. Our number one priority is operations and to achieve operational profitability in calendar year 2022. To do so, we must get back to our roots and regain our best-in-class reputation. We were founded with a vision for world-class cultivation and we followed with a family of brands and retail locations. We now have a core cultivation capability and a retail footprint to allow for significant growth that will enhance enterprise and shareholder value. In Oregon, we have four cultivation locations. 42nd Street, premier indoor facility just outside of Eugene, with 28,000 square feet and 22 grow rooms. Hillsboro, a state-of-the-art indoor grow room with 10,000 square feet. Milano Farms, sitting on about 14 acres with 12 commercial-grade greenhouses. and Applegate Farms on 40 acres in the foothills of the Siskiyou Mountains of Southern Oregon, currently with two large licensed greenhouses. We are keenly focused on improving yields at each location while also increasing quality. Today, we are producing at less than 50% of our capability. As we increase yield and harvest new high-quality products, we expect significantly increased sell-through from both our retail stores and through our wholesale distribution. Today, we have five retail locations under the TJ's brand. We have stores in Portland, Salem, Three in Eugene, TJ's Garden, and Eugene, period. TJ's Gardens and Yerba Buena will continue to be our leading consumer product flower brands. Yerba Buena is an organically grown cannabis brand known both for its variety of THC and CBD cultivars. Our TJ's Gardens brand is known in Oregon for its unique flower cultivars and terpene profiles and is poised for a renaissance. as our new cultivation leadership recaptures its position as leader in this premium segment of the market. We also have strong brands of products in edibles and extractions that can grow dramatically as we introduce new and exciting products from extracts of our premium marijuana plants. While our primary focus will be in Oregon, we are pleased to announce Foothill Health and Wellness Store in Sacramento, California previously a medical sales-only store, just received approval for recreational adult use sales. We acquired the medical license for this location in 2020, and that has been one of our best performing locations. In 2021, this location did approximately 5.5 million in medical revenues. With our adult use license, we believe we can significantly increase revenue at this location. As we conclude our prepared remarks, As I mentioned earlier, our number one focus is operations and the path to profitability. For our non-core assets outside of Oregon and California, we will be opportunistic in the best interests of our shareholders. Thank you for joining us today. I would now like to turn the call over to the operator for questions.