SLANG Worldwide Inc.

Thank you, operator and good morning everyone. Our speakers on today’s call will be Mr.

Drew McManigle, Interim CEO and Chairman of SLANG; and Mr. Mike Rutherford, Chief Financial Officer.

Before we begin, please let me remind you that during this conference call, SLANG’s management may make forward-looking statements made within the meaning of applicable security laws. Forward-looking statements may include or not necessarily limited to, financial projections or other statements of the company’s plans, objectives, expectations or intentions.

These forward-looking statements are based on current expectations that are subject to a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied in such statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors contained in the company’s filings with SEDAR.

Please also note any forward-looking statements made here are as of today and except to the extent required by law, the company assumes no obligation to update statements as circumstances change. Now, I’d like to turn the call over to Mr.

Drew McManigle, Interim CEO and Chairman of SLANG. Drew, please go ahead.

Thanks, Phil. Good morning, everyone and thank you for joining us on our fourth quarter and year end 2021 conference call to discuss our financial and operational results for the period ending on December 31, 2021.

When I was brought on as Interim CEO on November 15, 2021, our mission was clear. In order to achieve greater sustainable growth and profitable revenue streams going forward, a strategic restructuring focused on rightsizing the business was needed.

With the strengthened management team working together with our financial adviser, MACCO Restructuring Group, LLC, I’m pleased to report that we have been successful in raising past mistakes and have effectively transitioned away from underperforming assets to operate today as a new SLANG that is strategically advancing into high demand markets with a more nimble and defined growth strategy in place. I would also like to comment that we are continuing to bring in individuals who we find to be appropriate and beneficial additions to our team as we aim to make the new SLANG a leader in the cannabis industry.

Of note, we recently added Kevin Albert, a successful business professional with significant knowledge and experience of the cannabis industry as well as having a deep knowledge of finance and a successful history of M&A experience to SLANG’s Board of Directors. We are also in the process of adding a new sales manager for our Colorado operations and selected a new Chief Operating Officer for our expansion in Vermont and New Jersey.

As you can see, we have strengthened our team from the Board all the way down to drive our new growth trajectory. The immediate success of this transition is now resulting in 2022 being a transformational year for SLANG in which we will begin to see more profitable revenue from our ability to streamline our operations and integrate newly acquired assets in targeted growth markets.

With that said, before diving into our quarterly and year-end financial results, I would like to share a recap of the key operational initiatives, acquisitions and partnerships that were achieved in the past 6 months. The accomplishments that we have made in this short time frame are now reshaping the future of SLANG.

We are now successfully leveraging greater operational efficiencies, a strengthened balance sheet and a strategic entry into key cannabis markets to further elevate our leadership position within the cannabis CPG market and deliver greater return for our shareholders. Our first steps following our management restructuring in November 2021 where our immediate initiatives to cut costs and right-size our infrastructure.

The future of SLANG lies in the new opportunities we are now advancing upon as a stronger and leaner company. Our focus is on expanding position in our core and emerging markets that display the strongest demand for our cannabis brands, and we will continue to eliminate any unprofitable components, which include our Oregon operations to further support our financial growth.

Our rapid entry into new high-growth markets, such as New Jersey and Maryland as well as the benefits from the consolidation of supply chain operations, outsourced manufacturing and enhanced logistics strategically set the stage for SLANG’s growth in 2022. Colorado remains an integral component of our core market strategy.

We have worked diligently to consolidate and streamline our operations in Colorado while refining our market-leading brands to drive higher margin and higher volume products. Perhaps the greatest benefit we have seen has come from our ability to begin sourcing and contracting distillate at a significant reduction from our prior year average cost of distillate, which presents the opportunity for enhanced revenue and margins in 2022.

In addition, we are in the process of divesting several licenses in the state as well as our cost and cultivation facility. These cost-cutting initiatives have already reduced our operating expenses and has positioned SLANG for continued growth as a more nimble and efficient company.

As part of our transformational growth plan, we are targeting only those markets that can deliver highly profitable lines of revenue growth. In August 2021, prior management acquired High Fidelity/Ceres, Vermont’s largest medical cannabis company, adding Vermont to its core market strategy.

Through this acquisition, which was accretive on the prospective adjusted EBITDA basis, we incorporated Vermont’s leading vertically integrated cannabis company into our platform, providing SLANG with another opportunity for profitable revenue growth as additional operational efficiencies and streamline operations can be recognized while delivering an expansive product line to the state. As part of the acquisition, we gained a production, lab and retail distribution facility and a 28,000-square-foot cultivation facility, which we are thoughtfully expanding.

In addition, we acquired 4 dispensaries, including one located in the Burlington area. As you know, Oregon had been a component of our core market strategy, but in evaluating the viable entities in our business, we have wound down all manufacturing THC in the state.

By discontinuing our plant-touching sales and listing various Oregon assets for sale, we are seeing a reduction in operating expenditures of over $2 million annually related to those operations. A final part of our transformational strategy is our entry into additional emerging markets such as New Jersey.

New Jersey’s cannabis market is gearing up to launch and, according to the recent report by MJBizDaily, the state’s recreational cannabis market is expected to become one of the largest on the East Coast, with annual sales projected to top $2 billion within a few years. In connection with our pre-existing agreement between High Fidelity and Woah Flow, Inc, who was previously awarded a medical cannabis license for Trenton, New Jersey in December 2021, SLANG now possesses the rights to capitalize on a new business with potentially significant revenue opportunities.

I would now like to turn to the partnerships that have been instrumental in furthering our expansion into new emerging markets. It is humbling to see more and more industry leaders recognize the value of our product portfolio and our proven track record of success in the markets we serve.

Trulieve has been a key strategic partner of ours. And in 2021, Trulieve further supported our national expansion as we signed partnership agreements to place our product portfolio on their shelves in Pennsylvania, West Virginia, Massachusetts and Maryland.

Our partnership with Trulieve was further deepened this past year. We may have entered a long-term financing of the USD$17.3 million note in combination with two existing shareholders, Seventh Avenue and Pura Vida to support our near- and long-term transformation initiatives.

This investment signifies a strong vote of confidence from our value partners in our brand power and foundational strengths. We also re-launched our products in California, one of our key emerging markets in August 2021 through our strategic partnership with Natura Life + Science.

Natura is a vertically integrated cannabis manufacturing company in California. Through our exclusive license agreement with Natura to produce and distribute the SLANG product suite in California, we are in a position to recognize greater opportunities for generating profitable revenue streams from this market.

We are in a solid position to advance in each of these markets, and I am pleased to report that today, we have a strong cash position, allowing us to continue to build upon our industry-leading brand portfolio by completing additional strategic acquisitions that complement our existing cannabis CPG portfolio and organically grow our most demanded product lines. The SLANG brand portfolio continues to earn market leading positions in each of our core markets.

In fact, due to our continued success in Colorado and Vermont as well as our other emerging markets, we are advancing the development of new products and branding to effectively meet increasing demand. We are doing this while continuing to investigate and implement additional opportunities to reduce manufacturing costs, most importantly, by outsourcing manufacturing where it makes sense in utilizing enhanced logistics.

We are particularly proud of our O.pen brand as it has maintained its number one ranking in the vape cartridge category in Colorado. The most important feat is our enhanced position in this market opens the doors for stronger sales of our most popular brands going forward.

With that, I would like to now turn the call over to Mike Rutherford, CFO of SLANG to discuss our 2021 and fourth quarter financial results. Mike, please go ahead.

Thanks Drew. As Drew discussed, 2021 was a year of transition for SLANG in which our efforts were largely focused on repositioning into the new SLANG that is operating today.

We are on a path to achieve a new level of operational and financial growth as we operate as a more specialty focused, nimble and pragmatic organization. As we close out the year, we have successfully streamlined our operations to reduce costs, eliminate non-profitable assets and achieved a financing transaction with one of our key operational partners and noteworthy shareholders to facilitate our growth in our core and emerging markets.

Important to note in the financial statements and MD&A is the adjusted presentation to reflect discontinued operations related to our Oregon operations as well as our Colorado cultivation activities. The following discussion considers the company’s operating results from continuing operations as the result from discontinued operations have been presented separately in the current year and period as well as comparatives.

For the fourth quarter of 2021, revenue from the continuing operations was $8.84 million compared to revenue of $8.29 million in the fourth quarter of 2020, representing a 7% increase. The increase in revenue was driven by $1.91 million in revenue from our Vermont core market, HiFi for the quarter, offset by a reduction in rental and interest income of $0.51 million and a reduction of $0.48 million and $0.29 million in product sales to the company’s Oregon and Nevada licensees in Q4 2021, respectively.

The remaining offset was a result of slightly weaker sales in the company’s Colorado core market, which reflects the company’s decision to focus on higher margin, higher volume product SKUs. Fourth quarter revenue declined from third quarter 2021 revenue of $9.36 million, mainly as a result of seasonality in our core and emerging markets.

For the full fiscal year 2021, revenue from continuing operations was $37.8 million compared with revenue of $25.5 million in 2020, representing a 48% year-over-year increase. The primary drivers of our sequential year-over-year revenue growth were due to increased revenues associated with the acquisitions of Allied Concessions Group, Inc.

and HiFi, completed on December 31, 2020, and August 11, 2021, respectively, and therefore, the company has transitioned to recognizing majority gross wholesale revenue as opposed to licensing revenue in prior years. Gross profit for the fourth quarter of 2021 was $4.1 million or a gross margin of 46% compared to a gross profit of $3.03 million or a gross profit margin of 37% in the fourth quarter of 2020, representing a 35% increase.

On a sequential basis, gross profit increased 18% from $3.46 million and gross profit margin increased 24% from 37% in the third quarter of 2021. The increase in gross margin in the 2021 fourth quarter is largely due to the acquisition of HiFi in August 2021, which contributed to higher margin sales.

Further supporting an increase in gross margin was an unrealized gain on changes in the fair value of biological assets in Vermont of $1.26 million. Gross profit for fiscal year 2021 was $15.1 million, a 40% gross margin compared to $12.7 million and a 50% gross margin in fiscal year 2020, representing a 19% increase year-over-year of gross profit.

2021 gross margins are reflective of the full year shift to wholesale revenue in the company’s core markets as a result of the completion of acquisitions in Colorado, Oregon and Vermont. The majority of 2020’s revenue and, therefore, margin was attributable to licensing.

Total operating expenses for the fourth quarter of 2021 were $11.05 million compared to $6.15 million in the fourth quarter of 2020 and $10.96 million in the third quarter of 2021. Increased costs in the fourth quarter 2021 were reflective of the consolidation of HiFi operations as well as one-time expenses related to the professional fees in regards to the financing completed in November as well as one-off accruals related to salary and headcount reductions.

For the full year of 2021, total operating expenses were $40.46 million compared to $35.3 million in 2020. Increased costs in 2021 when compared to 2020 were reflective of the consolidation of the acquisitions of Colorado, Oregon and Vermont completed through the second half of 2020 and throughout 2021.

Fourth quarter 2021 adjusted EBITDA was a loss of $2.13 million compared to an adjusted EBITDA loss of $1.05 million in the prior year period and an adjusted EBITDA loss of $1.56 million in the third quarter of 2021. The company remains committed to prudently managing its operating expenses on its mission to further improve the efficiency of our operations.

We believe we will continue to see an improvement in this metric as we recognize greater high-margin revenue from our operations. Adjusted EBITDA from fiscal 2021 was a loss of $4.97 million compared to an adjusted EBITDA loss of $5.47 million in fiscal 2020.

The increase in the adjusted EBITDA is primarily attributable to the increase in revenue and gross profit associated with the acquisition of HiFi. Our results are in line with the operational turnaround achieved in 2021 as we restructured our balance sheet to accurately and fully reflect the true nature of our finances going forward.

Our transition to new SLANG has been completed, and the door has been opened for developing our assets to demonstrate their true value and potential earnings in 2022 and beyond. While we recognize the cash loss for 2021, we have never been more confident for our future growth.

This cash loss includes the results from our turnaround efforts and positions us for success coming through this restructuring to achieve a greater level of clear and transparent growth of SLANG in the new markets we are more effectively serving. We have already begun to see the positive trends in various areas from steadily increasing margins and decreasing costs in recent months, which we expect to continue in 2022.

Our balance sheet remains strong with $20.83 million in combined restricted and unrestricted cash as of December 31, 2021 compared to $6.61 million on December 31, 2020 and $3.5 million at September 30, 2021. Our strengthened cash position includes the company’s recently completed term loan financing with participation from Trulieve, Pura Vida and Seventh Avenue for gross aggregate proceeds of $17.3 million.

Our financial strength supports our continued efforts to advance strategic M&A and partnership activities in our emerging markets and build our brands to meet growing demand by consumers. I’d like to turn the call back to Drew for some concluding remarks.

Thanks Mike. As you have heard here today, we have all of the pieces in place as we complete the transformation of SLANG in 2022.

We are moving forward as a completely new company, leveraging key partnerships and strategic entry into markets with significant opportunities to operate much more efficiently to deliver stronger top and bottom line growth going forward. We are now at a stage where we can effectively build upon this growth and demonstrate continued success from our operational infrastructure that is increasingly benefiting from the streamlined operations and cost reductions that have successfully taken effect.

I would like to thank the current management team, Board of Directors and shareholders for their confidence and patience as we continue to successfully execute on our growth strategy and position the new SLANG as a future leader in the cannabis industry. We look forward to providing you with more positive updates on our first quarter 2022 call in the coming weeks.

Thank you very much.