Entourage Health Corp.

Thank you, Arial, and good morning, everyone. Welcome to WeedMD’s fiscal year 2020 results conference call.

Please note this call is being recorded. For copies of our press releases and supporting documents filed pre-market earlier today or to retrieve a recording of this call, please visit the Investor Relations page on our website at www.weedmd.com.

The replay of this call will be available later this afternoon. We are joined today by George Scorsis, Chief Executive Officer and Executive Chairman of WeedMD; and Beth Carreon, our newly appointed Chief Financial Officer.

Shortly, we will be reviewing the business highlights and financial results for the full year 2020 and provide preliminarily first quarter 2021 update. George will kick things off with an overview of the CannTx acquisition LOI we announced earlier this morning.

And following formal remarks, we will open the floor for analysts and media questions. I would also like to remind everyone that during today’s call, we will discuss our business outlook and make forward-looking statements.

Actual events or results could differ materially. Due to several risks and uncertainties including those mentioned in our most recent filings with SEDAR, these comments are made based on predictions and expectations as of today.

Other than as required by applicable securities laws, the Company does not assume any obligation to update or revise them to reflect new events or circumstances. Now, at this time, it’s my pleasure to introduce George Scorsis, WeedMD’s CEO.

George, please go ahead.

Thanks, Marianella, and thank you to everyone joining us this morning. First off, I want to thank you for your patience as we finalized a few commercial matters that resulted in our need to file our financials this morning and the SEDAR registry opened up at 7 a.m.

It’s my pleasure to be with you today. Although I’ve been CEO -- in the CEO role for about six months now, I’ve actually been part of the WeedMD family for quite some time, and over two years, first off as an advisor to the Board, followed by the appointment to Executive Chair.

So, this Company isn’t new to me, but I’m excited about the future. What I want to say to our shareholders and analysts on this call is that since taking the reins as CEO, WeedMD has transformed into a KPI-driven organization.

Everything we do is now tracked daily, weekly and monthly to ensure enterprise-wide metrics are established, and most importantly are met. And even more importantly, our KPIs drive us to be disciplined with every dollar and how we utilize it.

I can therefore assure you that going forward, my management team and I have made it abundantly clear to the team that we will never again miss our deadlines. That’s my commitment.

I can also tell you that I’ve seen firsthand the transformation of this Company, and what it’s been through in the past year, and I’m very proud of how far we’ve come on meeting many of our deliverables. Part of our transformation has meant putting the right leadership and structure in place, and I’m very confident this won’t be an issue moving forward.

On that note, I’ll briefly recap our progress and achievements over 2020, before providing an update on the milestones accomplished thus far in 2021. All of which have translated into significant growth for WeedMD over the last few months, and is a reason we’re seeing record revenue growth over the past quarters.

In fact, we’re on track to realize higher revenues and gross margins these first two quarters of 2021 than we did the entire year of 2020. This will be a breakout year for WeedMD, extremely confident of what we’re going to deliver.

In a few minutes, we’ll also be joined by the newest member of our leadership team, our Chief Financial Officer, Beth Carreon, who will walk us through the specific financial highlights and first quarter revenue milestones. I want to pause here to give a sincere acknowledgment to Beth.

She’s a true professional, having spent the last couple of years at Tilray Canada and prior to that over a decade at Nestlé Canada. She has also started her professional career with stints at three major accounting firms that is very experienced and highly knowledgeable in both cannabis and the CPG sector.

Needles to say we’re thrilled to have her on our team. Her background speaks volumes to the expertise she is bringing forward.

Beth has been working tirelessly over the last month, taking control and oversight of financial filings and working with the Company’s auditors during that time, which turns out to be a complex period of transition for us. This would not be an easy entrance for a new CFO, coming in during the middle of the year and audit.

But, Beth has taken on the CFO role with grace and gravitas, unseen before at WeedMD. So, please join me in a very warm welcome to Beth, whom you’ll hear from shortly.

I’d also like to begin by acknowledging the overwhelming support I’ve received personally from employees, partners and shareholders since assuming the role of CEO in January. I’m excited about WeedMD’s future.

No doubt we’ve had our challenges in the past, like everyone else in the industry. But our employees, investors, patients and clients have always stood by us.

And I want to thank you for that. Because you are part of what drives us and me independently.

So, what kind of things are we tracking? As part of our KPIs we’ve implemented and executed a number of strategic goals for WeedMD in 2021 and beyond, all of which have contributed to our most recent sales growth.

We remain focused on continuing to lower our cost, expanding our gross margins, providing quality products and introducing new Cannabis 2.0 product launches. In other words, this is now a completely performance-driven business.

But as we eyeball the industry, we’re very realistic to what is happening on the M&A front. The significance of establishing strong relationships with strategic partners is now more important today than it ever has been.

We continue to review opportunities that will be accretive to our business and shareholders. It is now that I’ll pause again to give a very warm welcome for our friends and soon to be colleagues from CannTx Life Sciences.

Earlier today we announced that we entered into an LOI to acquire CannTx and its businesses which includes the addition of its Royal City Cannabis brand. CannTx is privately held craft cultivator that is well-known in the industry for housing a team of genetics specialists and tissue culture production.

Its share company values and our ethos, and better than anyone else you’ve seen working in this space, understand the importance of growing cannabis as both an art and the science, ultimately driving quality products to patients and consumers. The brand Royal City Cannabis is part of the elite group of craft cultivators recently praised by the Ontario Cannabis Store.

And it’s coupled with a portfolio of premium flower and solventless high margin extracts, such as their rosin and bubble hash. This will allow us to also participate in new segments with premium and craft offerings, which we do not have in our portfolio currently.

I’ve been in the cannabis industry for over eight years. And I can tell you that growing cannabis actually is not that hard, but I’ll add a caveat, is consistently extremely challenging to grow great cannabis.

And I can also tell you that very, very few people in the industry do this consistently. And this is exactly what this acquisition will bring us to.

The industry and consumers have evolved. And while we recognize the need to be dynamic in the space, we must learn from the past, but also understand consumer’s appetite for products going forward.

It’s not about mass producing acres of outdoor biomass anymore or even greenhouses full of biomass. It doesn’t matter how many brands or grow operations you collect or snap up.

If you want -- if you can’t expand with quality products and turn that into high margin cannabis brands that sells, simply put, this industry is not for you. So, we’re coming together, two likeminded companies that’ll be shaping future opportunities and sustainable growth and profitability rooted in quality cultivation and products.

Now, let’s take a brief look at 2020. Last year was always meant to be a transformative year for WeedMD.

Following the integration with Starseed, we undertook an assessment of our business practices and recalibrated to improve our long-term strategy to be profitable on sustainable basis. In addition to integrating the Starseed and WeedMD teams, we focused on five key things: One, establishing cultivation and production efficiencies; two, increasing our brand recognition and expanding into new product formats; three, building out our retail outreach for our premium adult-use brands for strategic growth; four, leveraging our unique medical platform and continuous expansion of it; and lastly, centralizing our processes and reducing our working capital to focus on driving down cultivation costs, while producing more grade A product.

Why? Because all of this will drive margin expansion across all of our direct-to-consumer and patient channels.

Today, we’re seeing the results with our adult-use brands. Color and Saturday cannabis experienced tremendous growth over the past year and both becoming award-winning top brands.

To-date, with the steady growth and consumer demand for dried flower and vapes across Canada, we’ve seen our products expand to over 1,100 retail stores nationally in the past 12 months. This represents a 350% increase from the previous year.

We took the time to gain further insights into what customers want and have changed the way people consume cannabis by launching consumer centric products, focused on terpene profiles. As I noted, “Gone are the days of maximizing biomass.

We’re only interested in producing terpene-rich cultivars with high-cannabinoid counts, hence the 30% increase in grade A products, we’ve been seeing lately”. Our commitment to research and development has brought innovative products to market, that is attracting discerning consumers.

For example, we’ve expanded our product offerings of vapes, live resin and pre-rolls. To-date, we have over 50 SKUs in the Canadian marketplace.

On the medical side, we continue to build our patient base through 2020 and into the New Year. We are strategically aligned as a preferred supplier for Canada’s largest construction union, having signed six LiUNA locals to our Starseed patient programs.

We expanded regional coverage to Manitoba announced earlier this year as well. Additionally, LiUNA could provide us with access to over 2 million members across North America as the state site opens up in the U.S.

So, we’re eyeing developments closely and can confirm that ongoing discussions are currently taking place. And as soon as the regulatory environment changes in the U.S., this provides a tremendous opportunity, unlike any other LP in Canada.

Monthly registrations on our medical platform were up 20%. Starseed now has over 35 SKUs available for direct-to-patient access to this unique platform.

Medical is our unique selling proposition, and it’s an area that we’ve doubled down on due to the margins. Turning to our cultivation program as noted, we’re moving upstream and producing more quality grade A cannabis than ever before.

In fact, 30% more grade A was being produced just this month alone. We are significantly increasing our production of quality flower and continuing to focus on our genetics, which again brings light to the acquisition of CannTx.

I now want to address our outdoor cultivation. I’m sure many people are -- like to ask this question.

Let’s get ahead of it. In this industry, you need to adapt and be disciplined.

Being frank, considering the high value, high margin grade A product that we’re seeing in our greenhouses, and now the indoor craft grow from CannTx, it simply does not make commercial sense for us to plant 27 acres outside. We don’t need it.

And we instead want to participate in higher margin categories and being a wholesaler than in previous years. We are therefore electing to turn this year into an R&D opportunity if that’s a very small batch with a select few strains.

We know that we’ll do very well outside, all to see if yields for planting THC and other cannabinoids are being further improved. Again, it’s not about growing copious amounts of biomass production, but understanding what is feasible.

At Aylmer and Strathroy, we have continued to enhance productivity and automation, centralizing our processes and reducing working capital to drive margin expansion of both adult-use and medical cannabis markets. Now, I’d like to talk more about our most recent performance and offer some updates on our preliminary quarter.

As noted, heading into ‘21, we saw growth and increased consumer demands across all of our segments, as we doubled our sales in our marketing teams across channels in 2020. While other companies reported softer sales and revenues in the first quarter, we are seeing the exact opposite.

And with record sales in both adult-use and medical specifically, to note, adult-use $6.5 million in gross revenue; medical Strathroy 5.5 million in gross revenues. Can we sustain this going forward?

Absolutely. And we continue to see this heading into Q2, which is even more important.

We are not seeing softening in our business. What do we attribute this to?

All these successes is based on the platform that we built in the months prior. As a result of the increased brand recognition, retail engagement and sales momentum, I’m pleased to report preliminary unaudited first quarter 2021 revenues of $12 million.

Note that when compared on a year-over-year basis in the first quarter of 2020, we recorded substantial outdoor bulk biomass sale of approximately $5 million. Taking that into consideration, this preliminary revenue figure actually represents a substantial year-over-year increase of 40%, an increase of 72% from Q4 2020.

This is also a reversal of our revenue. Now, almost 90% of our product is going direct-to-patient or consumer versus bulk wholesale in the past.

We are totally different company, consumer and patient-centric now. At the same time, we are continuing to lower costs by canceling numerous CapEx investments that do not align with WeedMD’s transformation.

We continue to look for opportunities to consolidate and optimize our operations, such as the closure of our Bowmanville facility. This has improved our operational efficiencies and aligned the successful integration of WeedMD and Starseed with cost saving measures.

We expect to fully divest from BMV or Bowmanville this quarter, selling that asset and using the proceeds to pay down our debt. I want to round up the discussion with an update on a new corporate rebrand initiative.

As we reported in our recent proxy statement, WeedMD is currently in the process of rebranding. We are expanding our commercial initiatives into new markets.

In order to maintain alignment with our market evolution, our corporate name needs to be better defined of who we are today. We’ve evolved as a company and the industry has evolved, especially when you consider the strategic amalgamation we expect to finalize with CannTx later this summer.

With that, we plan to stay true to our roots. Our new name will fit perfectly into the brand ethos as we marry up our cultivation practices, processes and brands.

I expect to be able to provide more details on this process in the next quarterly update and look forward to updating you at our AGM scheduled for June 30th. Shareholders will be asked to vote on the brand and we will share more details about this shortly.

This concludes my opening remarks. I’ll now hand over the call to Beth Carreon, our CFO, who will view our financial results.

Thank you, George, and good morning, everyone. Thank you all for the warm welcome to WeedMD and I look forward to the opportunities ahead.

I echo George’s appreciation in your patience during the past few weeks as we deferred our filings and this call. I too commit to meeting our deadlines moving forward.

Today, I will review our full year 2020 financial highlights and briefly share our preliminary unaudited Q1 2021 gross revenue. Please note that the financial information that we discussed today is prepared in accordance with international financial reporting standards or IFRS.

And it’s in Canadian dollars unless otherwise indicated. For the 12 months ended December 31, 2020, we reported net revenue of $29.4 million, which we presented plus 41% growth compared to $20.8 million in 2019.

This is due to the full year impact of the acquisition of Starseed, the growth in our adult-use business and the one-time sale of dried cannabis to a license holder in Q1 2020. For the fourth quarter of 2020, our net revenue grew plus 78% to $5.1 million from $2.8 million in Q4 2019.

This is largely due to full quarter impact of the acquisition of Starseed and growth in adult-use, mainly driven by cannabis 2.0. Our channel mix, based on gross revenue during 2020 was 38% direct-to-patients and 62% wholesale compared to 9% direct-to-patient and 91% wholesale during 2019.

We generated plus 544% year-over-year gross revenue growth in our direct-to-patient business or $11.5 million increase to bring our year-end gross revenue to $13.6 million compared to $2.1 million in the prior year. This increase is primarily attributable to the full year impact of the Starseed acquisition in December of 2019.

Gross revenue of our wholesale business grew plus 4% or $0.8 million, primarily due to Cannabis 2.0 in our adult-use business. In 2020, our average selling price per gram net of excise taxes of dried cannabis for adult-use slightly decreased by 3% to $4.10 program from $4.23 per gram in 2019.

For direct-to-patient, the average selling price per gram decreased slightly by 2%, to $7.38 per gram from $7.50 per gram in 2019. Generally, we expect our average selling price on an aggregate basis to improve over time as we continue to grow our direct-to-patient business and as we introduce premium products and new form factors in our adult-use business.

Gross loss before changes in fair value was $22 million for full year 2020 versus gross profit of $4 million in 2019. For the fourth quarter of 2020, gross loss before changes in fair value was $22.5 million, versus $2 million in the same period of 2019, a decline of which was mainly driven by inventory write down of approximately $26 million.

Weighted average cost per gram from clone to harvest of inventory on hand, as at December 31, 2020, slightly increased by 3% to $0.89, while weighted average cost per gram of inventory on hand decreased by 42% to $0.46 from $0.79 in 2019, partly due to the inventory write down mentioned earlier and partly due to operational efficiencies. Going forward, we expect improvement in our gross profit before changes in fair value, as we see the impact of our business transformation take hold and we benefit from positive products and channel mix.

From an operations perspective, kilograms harvested for full year 2020 increased by 15,763 kilograms or 88% to 33,751 kilograms compared to full year 2019, partly due to additional flowering rooms becoming operational a Strathroy. Moving to expenses.

For full year 2020, our selling, general and administrative expenses increased by $9.4 million or 52% to $27.6 million versus $18.2 million in 2019. In Q4 2020, increase was 76% or $11 million versus $6.2 million in 2019.

Increase is partly due to cost assumed from the integration of Starseed and partly due to investments related to business growth. In 2021, we expect to see a meaningful decrease in our operating expenses, as a result of the cost savings measures George mentioned earlier.

Net loss for 2020 was $89.6 million or $0.43 loss per share, compared to a loss of $10.4 million or $0.09 loss per share of 2019. Increased loss was largely due to the impact of impairment of assets, as well as inventory write down and the above mentioned increase in selling, general and administrative expenses.

Adjusted EBITDA decreased by $31.7 million minus $43.6 million for full year 2020 from minus $11.9 million for full year 2019, primarily driven by the full year impact of the Starseed integration as well as commercial cost incurred in order to drive overall Company growth. We have taken comprehensive cost cutting measures across our businesses in 2021 and expect to see the results of this effort reflected throughout the course of this year.

Moving on to our balance sheet. We ended full year 2020 with cash and cash equivalents of $22.3 million, compared to $8.2 million in 2019.

As George previously mentioned, we closed on a $30 million financing provided by LiUNA Pension Fund in Q4 2020. Earlier in 2021, we also closed on a $17.5 million bought deal equity financing.

Together, this provides us with greater financial flexibility to manage our operations and execute on our plans. Looking ahead, we are focused on our journey to sustainable profitable growth.

Through the business transformation initiated in the latter part of Q4 2020, we have been taking actions to be leaner and more efficient in our business. And we will continue to evaluate our cost structure throughout the year to ensure financial discipline across all facets of our organization.

Just as important as our cost cutting efforts, we will continue to drive sales growth across our businesses. This is already evident by our sales momentum in Q1 2021 that George alluded to earlier.

Our preliminary and audited first quarter 2021 gross revenue of $12 million represents plus 40% growth of $3.4 million increased from $8.6 million when excluding the one-time bulk sale revenue in Q1 2020. On a sequential basis, this represents plus 72% growth in Q1 2021 versus Q4 2020.

To conclude, with our commitment to executing our business transformation initiatives, we will manage our costs, strengthen our balance sheet, drive growth in our key channels and products and deliver shareholder value. As George mentioned, we continue to meet increasing demand for our award winning products as we gain more market share and look towards the horizons of international expansion for broaden margins.

These are the drivers for why we continue to believe WeedMD is well-positioned for growth and profitability in the future. With that, I’ll turn the call back over to George for closing remarks.

Thank you, Beth. In closing, WeedMD has gone through a transformative realignment.

While we continue to execute on these strategic initiatives in 2021, we are already seeing a positive first quarter with our results. We’re on track as a performance driven company, bringing added value to our shareholders and making strategic partnerships and acquisitions.

We continue to apply the same exceptional high standards and level of care for which WeedMD is known. With this solid foundation, we are on a clear path to further revenue expansion and profitability.

Looking ahead, we are well-positioned for continued revenue growth and to achieve improved margin performance during the remainder of this year and into the next. That concludes today’s update.

We’re now happy to take your questions.

Thank you, George. This concludes our opening remarks.

And we’re now ready for questions. Arial, please go ahead with the call in.

Hi. Good morning, and thanks for taking my questions.

And congratulations on the very encouraging Q1 pre-release here. I just wanted to ask a question regarding the transaction on CannTx here.

Wondering if you could provide some more detail in terms of what the production profile looks like for the Company and the facility, or any other sort of metrics from a financial perspective just to help assess how that’s going to fit in on a combined basis with WeedMD? Thank you very much.

Hey, Graeme. Good morning.

Thanks again. We’re excited by the transaction.

What this ultimately provides us with is based on their craft designation, they produce approximately 10,000 kilograms annualized to keep them within that craft designation. We definitely didn’t want to acquire anyone for the basis of more biomass, but really for the quality of the product, more so than anything.

We’re going to be able to provide the transaction details in the upcoming weeks. But really what it does is it gives us new competencies within our business, everything from a craft designation to more premium offerings.

If you take a look at some of their Royal City Cannabis products on line, you can really see the feedback that they’re getting from the consumer. So, it allows us to go into some of the higher margin categories with Royal City priced at a premium to what you would see some of our Color cannabis products but also offer solventless.

So, really from a revenue outlook, I can give you kind of insight that it’s going to allow us to play into further categories and really build on the brand. The company currently, based on their current revenues, they just launched Royal City Cannabis.

So, it would be negligible for us to really kind of comment that the current number is the rationale for the transaction moving forward. We believe that by our distribution capabilities and bringing it through our entire network, we can put a 5x to 10x on it moving forward.

Understood. I appreciate the details.

Thank you very much for that. Then, following up on the comments made about the split in the Q1 preliminary revenue, particularly on the medical side, I think on a sequential basis, if my math is correct, you’ve got a near doubling of the medical segment here.

So, I’m wondering, in a market that’s been largely flat, from an overall perspective. Does this doubling of revenue -- is that taking share from other LPs or are these -- is this net new patient uptake, given the access to the network you have there?

Thank you.

Yes. It’s a great question.

Medical has really been, what I would say, one of the shining stars of our business. Now, we always knew that we had it as a unique selling proposition in terms of our business.

And it’s not just the offerings, but it’s also the processes and our outreach. And what we’ve seen is a little bit of both Graeme.

We’ve seen -- we’ve increased what we call our captive audience, which is the unionized patient that has paid insured model, we have improved that. But we are actually stealing what we consider non-captive patients from other LPs.

And I think it’s because what we’ve done is, we’ve streamlined and we perfected our process in terms of medical. We really make our medical offerings easy for the patient.

And as we bring them through the entire system, it’s probably one of the best designs that I’ve seen in the industry. So, it is a little bit of both.

We’ve increased our captive audience. But I would say that a large load of our patient base has actually been those that resided with other LPs.

And we continue to see this in the upcoming quarter.

Okay, I appreciate that. Thank you.

Then my last question here and I’ll get back in queue. With respect to your potential for continued acceleration and the revenue growth for the balance of the year, I’m wondering if you could provide us with a bit of insight in terms of the Company’s current or expected internal capacity for processing and packaging that has been a bottleneck for various LPs at times.

And as you’re approaching big steps up in the revenue, particularly in products that are either going direct to the province or direct-to-patient, what that downstream capability looks like? Thank you.

Yes. Great question, Graeme.

So, what you would have seen in our Q4 filings is you would have seen CapEx that was related to a significant amount of automation. And we needed to get to that point, we could no longer just be a business that worked from and continued to increase our headcount in order to be able to fulfill, because it doesn’t matter how much headcount you put against it, you’re going to constantly be seeing roadblocks in your operations.

And that’s exactly where the pinch point happens. It’s very rarely in cultivation.

It happens post-cultivation and post-harvest in your operations. So, what we’ve done is we’ve invested extensive amount of dollars in both, what I would call, the concentrate automation, but also our filling automation with filling lines, and as well with how many vapes we can actually produce.

So, that is no longer a bottleneck that I would say, existed in Q4, which is allowing us to now hit these numbers that we’ve just released for Q1. So, for instance, if you take a look at Q2, I would say, the maximum output that we could have ever put out there, regardless of our cultivation, would have been about $2 million to $3 million in revenue.

We can easily double, triple that capacity moving forward, based on the automation that we put in place, which is why you’re seeing some of our ratings, even with the OCS in our fulfillment rest 100%, very rare that an LP can actually provide 100% fulfillment to any of the regional boards. And we can do that now.

So, we’ve really mitigated all of those areas. And none of those are going to be pinch points moving forward in terms of our output.

Hi, everyone, and congratulations on the Q1 guide and the transaction announcement this morning. My first question, I just wanted to take a bit of a deeper look into your revenue metrics, first on the medical side of the business as a direct-to-patient.

I noticed that there was a large shift from dried cannabis sales to extract-based sales from the break that’s in the MD&A. But volumes were quite consistent.

So, just wondering if you could help outline some of the dynamics that were at play from a product mix perspective on the medical side, and how we should be expecting that trend to continue? And then just to tag on to that, for the wholesale and adult-use business, there was a volume decreases on the dried cannabis sales to provinces.

So, just a little bit of color on kind of what’s happened there. And given the impressive Q1 guidance, maybe a bit on how those dynamics have been at play on the medical adult-use side since then?

Thanks.

Hey Shaan, I’ll address the first part, and really in terms of patient trends and what is happening in the marketplace. So, if you saw previously, I would say that where WeedMD actually didn’t really perform that great was in terms of innovation and offerings for all of our patients.

And really, flower was one of the only offerings that we did have both flower and oil. As we became a little bit more innovative, we started seeing that patient’s transition into vapes, just for ease of use.

So, we did see that crossover into vapes and different vape offerings. So, you’re definitely going to see that.

The trend has somewhat stabilized right now. Although we are seeing on the medical platform, we have seen extensive views into other non-flower derivatives such as topicals, with our Mary’s offerings.

So, you’re going to start seeing more of a cross section of different applications dependent on what the patient is actually using them for. So, I would say, it was a little bit of our lack of innovation, but also our progression of innovation, that you’re started seeing the patients really convert over to some of these other different offerings.

So, in terms of our revenue split, I’m going to hand it off to Beth to discuss that.

Yes, Shaan. So, in terms of our Q4 2020, in our wholesale channel, our dried cannabis actually went up 32% versus previous year, and our cannabis -- our 2.0 products actually drove that growth, incremental volume for wholesale.

And that’s about 560,000 in Q4 alone. From a direct-to-patient perspective, the dried cannabis went up 70% and cannabis extracts went up plus 551% in Q4.

Okay. Thank you.

And then, the second question that I have, in your prepared remarks, there’s a bit of commentary on developing some of the international channels and getting into the higher margin side of the business over there. And appreciating some of the nuances on the global aspect of the transaction that was announced earlier today.

Just wondering, could you outline maybe what the opportunity pipeline looks like for WeedMD on that international front, and maybe what kind of timeline we would expect for an announcement there? Thank you.

Yes. Thanks, Shaan.

Just to be clear, when we take a look at international assets, we have no ambition starting to build out cultivation facilities in multiple countries and be a CapEx heavy asset. That’s just not our business model.

We have a unique selling proposition with our medical, which is a paid insured model that I think really separates us from many of the other participants. So, we are looking for asset-light opportunities within countries that do have medical platforms almost exclusively, you look at whether it be the UK or in Germany, and for us to participate from providing biomass, but also product and IP is the way we would enter these markets.

We also touched on the U.S. The U.S.

-- in Canada, we represent roughly 350,000 lives with our key shareholder and our key patient base. In the U.S., it’s well over 2 million.

Again, if we were to take the model that we had here and we implemented in the U.S., you can understand the magnitude of the opportunity, based on regulatory environments changing and permitting it, of course. So, none of our international ambitions would include a CapEx-heavy endeavor.

It’s just -- it’s not the model that we want to take. We want to really be hyper focused on Canada and not be distracted, but really give some of our -- what I would say, our brain capacity and our IP and uniqueness to some of the international markets to capitalize on them.

Yes. Hi.

Congratulations on your appointment, George. Very nice to see you in the Canadian industry in the leadership role.

And congratulations…

Chris, great to hear from you again.

Yes. Congratulations.

And congratulations on a great deal. I think that is a gem that you bought there.

And kudos to Mike Abbott. Just a couple of questions.

Was there any adult-use in the Q1? How much of that was adult-use versus wholesale?

In Q1 we published $6.5 million was our adult-use, $5.5 million was our medical. So, that was generally the split of the $12 million that we provide guidance on.

So no B2B, no wholesale?

B2B was, I would say, marginal. And that’s what we’re quite proud of.

It was a complete reversal in trends from Q1 last year, Chris, where you saw 90% of our product actually was wholesale. This year, you would see 90% of our product was actually either direct-to-consumer or direct-to-patient.

So, again, it’s part of our philosophy of trying -- of attempting to go into higher margin offerings and not just being a bulk wholesaler.

Excellent. So, I think that leads to a big question.

You produced 18,700 kilos but you sold 2,000 -- a little over 2,000. So, obviously, your producing and growing much more cannabis than you need.

So, what’s going to happen with Strathroy? Because that’s a huge engine you have.

And if you’re going to drive the smaller truck, you don’t need that much.

Great way to frame it up. Chris, I mentioned it somewhere in the presentation today.

If we don’t learn from the past and we don’t become dynamic and change our processes and our platforms, then we would all be doing the wrong thing for our shareholders. We have such an immense cultivation platform, and we’ll continue to use it.

But, we’re only going to grow what’s needed for the industry. And I can tell you that we are also going to move up towards more premium offerings and focus more on A flower.

So, what we call in our organization moving forward is level loading. You don’t grow more than what -- you don’t see it in any other industry, whether it be CPG or agriculture, you don’t grow more than what the consumer demand is.

So, what you will see is us level load our facilities. I already mentioned that growing 27 acres outdoor would be absurd and we’ve already stopped that project.

So, you will not see that biomass enter into our facility, but also from our in-house facility, we’ll start seeing some of our greenrooms being a little bit more flexible in how we use them. We’re not just going to simply put every single room into flower, but really understand the consumer demand in terms of genetics and pull back on rooms if we need to.

Because that ultimately has an impact on our headcount, our cost structures and a few other things, we’re going to be prudent and disciplined with everything we do.

Okay. That’s excellent.

Just one last one rhetorical question. How big do you think the small batch market is?

Because I think there’s about 20 different companies that are vying to have more than micro level sales into that market? So, how do you define the premium flower market and how big do you think it can get?

And we’ve got people all the way canopy growth [ph] buying 7 acres down to a little grow in my area here Berry Cold [ph] Carmel. So I mean, you got a huge number of players, over two dozen now vying to grow more and sell more, with only 100 core listings at the OCS.

I mean, it sounds like listings are gold.

Yes, I think Chris. So, I would say my theory and whether it’s accurate or not, is, I believe it’ll mimic other industries in the sense that consumer preference will lean more towards what I call the craft growers.

And that will be more of their preference points. And I think that you will start to see more and more of them start stealing share from the larger cultivators.

The caveat of that is as a micro cultivator or as a craft cultivator our biggest challenge will continuously be distribution. You won’t be growing, because you’ll only be able to grow so much.

That’s why we feel that we have great distribution across all of our platforms. We have an in-house sales team, we can market.

And we think when we really bring on someone like CannTx, who has a premium flower offering really good genetics, as well as solventless, and you kind of put it into our infrastructure, that’s when you win. And you’re right, because the OCS is not going to just continue to expand listings, they’re actually going to go through a process of SKU rationalization, and they’re only going to work with the vendors that they work with well, and they trust.

So we think we have a good parallel between the two and both synergies, but I think you’re right. I think the challenge will be distribution of many of these craft operators.

But again, I do believe that they will continue to steal share from the larger cultivators.

Great. Thanks.

And again, congratulations to the whole team.

Thank you, Chris. Good hearing from you again.

Thank you all again for joining us on today’s call, and for your continued interest in WeedMD. We look forward to having follow-up conversations with many of you and updating you on our continued progress at our AGM being held on June 30th at 11 a.m.

Details on the Investor Events page of our website to follow. If you have further questions, please reach out to Marianella or our Investor Relations team.

Stay healthy and safe everyone. Thank you.

And have a great day.