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 that are 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. Drew, please go ahead.

Thank you, Phil. Good morning, everyone.

And thank you for joining us on our first quarter 2022 conference call to discuss our financial and operational results for the period ending March 31, 2022. We entered 2022 moving new SLANG in the right direction, advancing the build out of a more sustainable and efficient infrastructure to successfully operate and expand in the high growth cannabis markets, which offer the strongest opportunities for our near and long-term growth.

As we stated in our last earnings call, 2021 was a transitional year for SLANG, eliminating underperforming assets such as our Oregon operations, and integrating newly acquired assets in targeted high growth markets such as Vermont, to advance a new growth strategy focused on delivering profitable revenue streams. In the first quarter, we successfully completed this milestone transition, laying the foundation for new SLANG to begin a new level of operational and financial growth for the remainder of 2022.

Now, as we continue to advance our transform business model, reshaped by a consolidated supply chain, and newly achieved operating efficiencies, we are placing a renewed focus on the expansion of our product line to drive our continued success in the core and emerging markets we serve. With that said, we are actively and aggressively evaluating our brand portfolio and M&A opportunities to enhance our position as one of today's leading cannabis CPG companies.

Furthermore, we are continuing to strengthen our management team and Board of Directors to support the implementation of our newly defined strategy and guide our aggressive expansion in a more capital efficient manner. It is the extensive expertise and experience of our collective team that is driving a new level of success for SLANG.

And by bringing on additional uniquely qualified, independent board members, we will continue to move in the right direction. In the next quarter, we will be able to provide a more solid update on the number of valuable additions to our board, as we believe these individuals will add incredible value to our business.

And finally, before turning to our financial results, I would like to provide an update on our efforts to expand our geographical footprint across US through the SLANG network of licensed cannabis cultivators, manufacturers, distributors, retail, and ecommerce distribution platforms. And the newly achieved opportunities we have in place to reach a wider consumer base in both our core and emerging markets in a more efficient manner.

Since entering Vermont through our acquisition of HiFi in August 2021, we have firmly established a vertically integrated operational footprint in this rapidly developing cannabis market, immediately positioning Vermont as a leading core market of ours with a number of immediate and long-term growth opportunities. With the addition of cultivation, production, lab and retail operations, we have a unique opportunity to increase our existing product offerings in Vermont.

And achieve higher margin sales as if we were operating this market as an emerging market. In the first quarter, we dedicated our efforts on evaluating cost synergies and building out our Vermont operations This dedicated preparation and investment will allow us to immediately enter the adult use cannabis market in Vermont in a more sustainable and streamlined manner.

Once again, our goal in transforming SLANG has and continues to be focused on controlling our costs and maximizing the utilization of our infrastructure to achieve higher margin revenue streams. We are now in a position to successfully enter the Vermont market as adult use sales begin on May 1, 2022.

Legislation in Vermont has been rapidly changing day by day. Through our acquisition, we acquired four retail locations.

However, due to newly enforced rules, we are currently limited to operating one retail location in the state. Despite that, we are optimistic as this store is located in Burlington and will strongly serve to increase our brand awareness to generate and support our financial success in Vermont.

In Colorado, our other core market, we are in the process of divesting our cultivation operations to support our consolidation efforts and operate more efficiently in this market. As we mentioned in our last earnings conference call, we have further decreased our raw input material costs by now sourcing and contracting distillate at a significant reduction from our prior year average cost of distillate driving new opportunities, or enhanced revenue and margins as we advance in 2022.

It is these successfully cost cutting initiatives and the positive effects of our streamlining our operational infrastructure that have allowed us to reduce our operating expenses in the first quarter. In respect to emerging markets, we have been aggressively entering new rapidly growing emerging markets utilizing our strategic partnership model, enabled us to meet strong demand for our products in the most capital efficient manner.

In the last quarter, we secured an opportunity to enter New Jersey through our preexisting agreement between High Fidelity and Woah Flow, Inc. And was provisionally awarded a medical cannabis license by Trenton, New Jersey in December 2021.

SLANG maintains the rights to capitalize on a new business with potentially significant revenue opportunities. And we are extremely optimistic about the growth opportunities that we hold in this particular emerging market.

Most recently, we announced our entry into Maryland and Michigan. In Maryland, we expanded upon our established strategic partnership with Trulieve and launched our bestselling premium vape product line, O.pen Daily Strains and O.pen 2.0 batteries on May 26 This year.

In Michigan, on 4/20 we launched our O.pen Daily Strains into the market through a partnership with one of the state's leading cannabis operators. Michigan is now one of the largest cannabis markets in the country, demonstrating record growth rates and we are excited to launch our best selling products into this market.

Our partnerships with leading cannabis companies are invaluable for our growth as they allow us to establish our market presence quickly and powerfully without deploying the resources necessary for success as in state operator. In turn, we provide our expertise and operations, sales and marketing in exchange for a royalty on SLANG branded products.

This business model has proven successful for both parties and we are now bringing products on to shelves faster than we have ever had before. We continue to leverage these relationships to enter additional emerging markets as the industry continues to develop.

I would now like to turn the call over to Mike Rutherford, CFO of SLANG to discuss our first quarter 2022 financial results. Mike, please go ahead.

Thanks, Drew. While the significant progress and investment we made transitioning our business to operate more efficiently going forward was not yet reflected in our financial results.

We have laid the groundwork to see the impact of our efforts in the quarters to come. For the first quarter of 2022, revenue from continuing operations was $8.37 million, compared to revenue of $9.09 million in the first quarter of 2021.

The $0.71 million decrease in revenue over the comparable period of 2021 is mainly attributable to a $1.43 million decrease in emerging market sales, a $0.57 million decrease in distribution sales, and a $0.19 million decrease in interest in other income offset by HiFi sales which were not included in the comparative period. In addition, approximately $0.9 million of the $1.43 million of emerging market sales decrease was attributed to the previously announced terminated markets of Nevada, Oregon in Canada.

The remaining decrease was due to the cyclical nature of licensee packaging and hardware purchases, which the company saw a rebound in April 2022 as well as temporary supply chain and component sourcing issues. Gross profit for the first quarter of 2022 was $3.66 million, a decrease of $0.24 million from the comparable period of 2021, while gross margin increased to 44% from 43%.

The decrease in gross profit is a direct result of the reduction in revenue of $0.71 million. However, gross profit decreased less in proportion to the decrease in revenues mainly due to the acquisition of HiFi in August 2021, bringing higher margin sales.

Decreased raw cannabis input costs in Colorado, and improved margins from SKU rationalization taken in late 2021. In addition, comparing quarter-over-quarter gross margin before fair value adjustments of biological assets, further highlights the company's improving margins as first quarter 2022 gross margins before fair value adjustments of biological assets was 43%, 38%, 38% and 35% for the three months ended March 2022, December 2021, September 2021, and June 2021, respectively.

Total operating expenses for the first quarter of 2022 were $7.49 million compared to $9.82 million in the first quarter of 2021, representing a decrease of 23.7% year-over-year. The decrease in operating expenses quarter-over-quarter more strongly demonstrates the progress made more transitional strategy as operating expenses decreased by $3.57 million, or 32.2% from $11.05 million in the fourth quarter of 2021.

First quarter 2021 adjusted EBITDA was a loss of $1.63 million compared to an adjusted EBITDA loss of $349,000 in the prior year period. The decline in adjusted EBITDA year-over-year was driven primarily by the decrease in revenue from emerging markets, distribution and interest and other income.

Although adjusted EBITDA decreased year-over-year, management is continuing to focus on reducing costs where possible, and ensuring the operating expenditures incurred are reflective of the current size of the company. Once again, our results continue to reflect the operational turnaround achieved in 2021.

And our ongoing efforts in the first quarter to restructure our operations in a manner which reflects the true value and potential earnings of our developing assets. We are diligently and strategically entering new markets while steadily increasing margins and decreasing costs in the established markets we serve.

We believe the true impact of our restructuring will be seen in the latter half of 2022. Our balance sheet remains strong, with $16.5 million in combined restricted and unrestricted cash as of March 31, 2022, compared to $12.4 million on March 31, 2021, and $20.83 million at December 31, 2021.

Our strong cash position includes the company's term loan financing, with participation from Trulieve, Pura Vida Investments and Seventh Avenue Investments for aggregate, gross proceeds of US $17.3 million completed in the fourth quarter of 2021. Our financial strength supports are continued to advance strategic M&A and partnership activities in our emerging markets and to build out our brands to meet growing demand by consumers.

I'd like to turn the call back to Drew for some concluding remarks.

Thanks Mike. Our ability to advance a number of key growth opportunities in both our core and emerging markets as a transformed business is allowing us to now drive a new level of financial growth for SLANG.

Our strategic partnership model is supporting our rapid entry into new emerging markets, and we are recognizing continued strong demand to place our leading cannabis brands on shelves of today's largest cannabis dispensaries. In addition, given our strong financial position and continued success of our cost cutting initiatives, we have a new opportunity to advance a number of M&A opportunities while organically building upon our leading cannabis product portfolio to enhance our leadership position in the cannabis industry.

We will continue to reduce our operating costs and focus our growth on generating higher margin revenue streams as we operate a more streamlined infrastructure and advance our assets that present the greatest opportunities for growth. We are very optimistic for the remainder of 2022 and look forward to building upon our strengthen position.

We look forward to speaking with you on our second quarter 2022 call in August. Thank you.