WeedMD Inc. (WDDMF) CEO Angelo Tsebelis on Q4 2019 Results - Earnings Call Transcript

WeedMD Inc. (WDDMF) Q4 2019 Earnings Conference Call June 11, 2020 10:00 AM ET

Company Participants

Marianella delaBarrera - VP, Communications and Corporate Affairs

Angelo Tsebelis - CEO

Lincoln Greenidge - CFO

Stephen Ng - CCO

Conference Call Participants

Neal Gilmer - Haywood Securities

Graeme Kreindler - Eight Capital

Operator

Thank you for standing by. This is the conference operator. Welcome to the WeedMD Inc. Fiscal Year 2019 Financials Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity for analysts and members of the media to ask questions. [Operator Instructions]

I would now like to turn the conference over to Marianella delaBarrera, Vice President Communications and Corporate Affairs with WeedMD. Please go ahead.

Marianella delaBarrera

Thank you, [Ariel] and good morning everyone. Welcome to WeedMD’s fourth quarter and full year 2019 conference call. Please note this call is being recorded. For copies of our press releases and supporting documents filed today or rather last night or to retrieve a recording of this call, please visit the Investor Relation's page of our website at www.weedmd.com. The replay will be available later this afternoon.

With us today is Angelo Tsebelis, Chief Executive Officer of WeedMD; and Lincoln Greenidge, WeedMD's Chief Financial Officer. During the Q&A position we will also be joined by Stephen Ng, our Chief Commercial Officer.

Today we will review the highlights and financial results for the fourth quarter and full-year 2019, as well as recent developments and provide a business and operational update. Following these formal remarks, we will be prepared to answer your question.

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 a number of 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, and other than as required by applicable security blog, 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 Angelo. Angelo, please go ahead.

Angelo Tsebelis

Thank you everyone for joining us for our full year 2019 earnings and business update conference call.

This is my first public conference call as CEO, and I'm excited for this opportunity to recap what we've achieved to-date, and to discuss our outlook for the future. Following that Lincoln will walk us through the financial highlights for the period, after which we'll be happy to take any questions.

For the first few months since my appointment, I've had the pleasure and opportunity to work with one of the most talented teams in the business. Our cultivation, operations, commercial and corporate teams are doing an incredible job, even under some truly challenging circumstances to propel our business forward.

Bringing two companies together is never easy. Integrating our teams and respecting our physical distancing policies and other measures has added a new dimension of complexity, but I'm extremely proud of the effort and the results to-date.

We are now looking ahead to drive our strategic plan and to execute on delivering high margin, high quality products to the market. The foundation of our business continues to be our stellar cultivation platform. During my most recent visit, I was energized by the passion and enthusiasm of the teams and can proudly report that the rooms and plants have never looked better. The pride and attention to detail that goes into our cultivation platform is impressive. And the proof is definitely in our final product. We are well on our way of achieving our goal of growing craft cannabis at commercial scale.

I'll take a few minutes to recap some of the highlights from this past fiscal year. 2019 was a year of significant growth for WeedMD. We experienced 162% year-over-year revenue growth compared to the previous year. And more importantly, we're well positioned for continued growth given the increased capacity of our production platform.

At the same time, we made a series of strategic investments to enhance our infrastructure and improve our overall operations. We capped off the year by completing the transformative acquisition of Starseed Holdings. Our strong medical platform coupled with the continued development of our adult-use brand Color Cannabis continued to be a top priority. With our successful outdoor harvest in 2019, the commissioning of our CO2 extractors and 20 fully licensed grow rooms in our greenhouse, we will continue on this growth trajectory throughout the balance of this year and well into next.

The company's $2.9 million fourth quarter net revenue was comprised entirely of consumer sales as availability and demand for Color Cannabis continue to expand. The strong momentum carried into the first quarter of 2020, where the company generated preliminary unaudited net revenue of $12 million, a record high quarter for WeedMD, with the Starseed medical brand and direct-to-consumer platform contributing significant high margin revenue.

This solid year-over-year and quarter-over-quarter revenue is reflective of our strategy, which emphasizes customer centric initiatives to drive direct-to-consumer sales, stronger margins and cash flows we execute on a commercial plan and we expect it will continue to drive our growth going forward.

In addition to our record sales growth, we delivered on a number of other strategic accomplishments in 2019. Some of these include the launch of our Color Cannabis brand, our outdoor harvest as one of the first in Canada to cultivate cannabis outdoors we harvested a yield of over eight tons of finished product. And I'm happy to report that we just completed planting our second season this week leveraging our experience and learnings from last season. We licensed our new 50,000 square foot purpose-built facility specifically designed for our current and future outdoor cannabis operations and processing.

In addition to this new facility, we were successful in advancing and completing a number of other licensing [products] [ph] with Health Canada, including our sales and automated packaging lines at Strathroy and Aylmer facilities, the licensing and launch of CX Industries, our extraction and processing system in Aylmer, Ontario and research license at our Bowmanville facility which enables us to expand our human research capabilities. We also finalized the acquisition of our 150-acre property in Strathroy.

And finally, perhaps our most notable 2019 achievement was the acquisition of Starseed Holdings, which was completed in December. For those of you not familiar with the transaction, Starseed is a medically focused cannabis company distributing to ensure patients with coverage under their benefit plans. The Starseed merger was a significant achievement for us and mark a major step in our plan to reshape the company into a fully integrated cannabis operator with full processing, production, and B2C service platforms.

First and foremost, Starseed was the perfect complement to WeedMD’s existing high quality cultivation and operations. Already widely recognized throughout the cannabis industry for its cultivation, acclaimed genetics library, and one of Canada's first and largest outdoor cannabis harvest, our cultivation costs are among the lowest in the industry. Having said that prior to the Starseed acquisition, WeedMD’s business model primarily focused on wholesale LP-to-LP product distribution.

Now the combination with Starseed has brought the layered and unique direct-to-consumer medical platform onto WeedMD’s high quality cultivation, extraction, manufacturing infrastructure. Starseed is a partner that provides us a benefit plans to other insurance providers to offer medical grade cannabis and services to patients. It's closed loop medical system has direct and exclusive access to consumer audience of over 350,000 patients.

Additionally, Starseed enjoys third-party distribution agreements with notable retailers such as Shoppers Drug Mart, and has access to over 40 independent cannabis clinic network across Canada. As Starseed transaction brought WeedMD a valuable medical sales channel to generate superior margins through its direct-to-consumer sales model, it has also substantially strengthened our balance sheet with concurrent financing that occurred earlier this year.

We believe that revenue mix shift from wholesale to direct-to-consumer will continue to drive stronger margins and cash flow. This model coupled with our solid operational infrastructure and emphasized balance sheet, positions WeedMD for continued growth on a clear path to profitability. Our first quarter 2020 net revenues of $12 million represent 320% increase quarter-over-quarter increase, reflecting the company's first full quarter with Starseed.

Revenue from adult-use and medical channel increased meaningfully quarter-over-quarter to record high sales in Q1 of 2020 driven by higher product availability and customer acquisition initiatives. Additionally, WeedMD completed a substantial landmark sale of its inaugural outdoor-cultivated biomass, earmarked for extraction, in international markets.

In addition to these preliminary revenue results, our strong business momentum has continued in 2020 as Starseed Medicinal has added four more strategic partners to its already strong base. These include LiUNA Local 1059 from London, Ontario, The International Union of Painters and Allied Workers, The Insulators Local 95, and myHSA, a digital provider administrator of healthcare spending accounts.

We expect to add additional partners throughout the coming years as more companies are recognizing that wellness programs are effective way to engage their employees in healthier living.

As we move ahead, we look forward to executing against our commercial plan by focusing on the following key initiatives during 2020, scaling our unique medical distribution business model by way of paid benefits. Delivering quality cannabis to the adult-use market via Color brand, and launching quality customer focused cannabis products in traditional and new formats to drive greater revenue across all markets.

This includes our recently introduced oral vape that we’ll launch in our medical channel in the coming weeks. A critical component of our strategy is to continue to improve operational performance as we complete the integration with Starseed.

This combined with our revenue growth - puts us firmly on the road to profitability. We are working towards profitability by sustaining and operating a lean and efficient business across our streamlined sites, capturing higher margins products rooted in low cost quality cultivation platform, and securing an estimated $10 million in synergy and SG&A cost reduction run rate by the end of 2020.

As part of these efforts in 2019 and early 2020, we've already successfully completed the integration of our Toronto offices, bringing many of the Starseed and WeedMD professionals, professional teams together for more efficient collaboration and to streamline costs.

Likewise, our production facilities in Aylmer, Bowmanville and Strathroy have been integrated to better support the increasing product demand that we've been experiencing with our continued increase in new patient registrations.

To summarize, we accomplished a great deal in 2019 and in early 2020. We achieved substantial revenue growth, reached a number of key operational milestones and completed our transformative acquisition of Starseed. The acquisition of Starseed complements our strong cultivation and product development capabilities while further solidifying our medical position in Canada.

Looking ahead, we see multiple drivers for our continued growth and margin expansion, including some favorable market trends that continue to drive the Canadian and global market. Our unique B2C medical platform and further expansion of our market share with a focus on high margin, high finished products by capitalizing on our mass craft ROE spreads. We believe these factors will continue to substantially expand our revenue and contribute to long-term positive EBITDA.

We're extremely optimistic about our prospects and look forward to updating you as we continue to execute our strategic plans in 2020 and beyond. One of the other highlights, I should mention is that in March, we announced the appointment of Lincoln Greenidge, our Chief Financial Officer. Lincoln brings over 20 years of corporate finance, M&A, capital markets and operations experience to the WeedMD team. We're very excited to have him here with us and look forward to his continued contributions to our organization success.

This concludes my opening remarks, and now I'll pass the call over to Lincoln who will review our financial results. Lincoln?

Lincoln Greenidge

Thanks for the warm welcome, Angelo, and good morning to everyone.

There's no better time to learn about our company then coming in during the time, leading up to an earnings release and on top of that in the midst of a pandemic. However, I'm happy to be here with you all. Today I'll briefly review our fiscal year 2019 financial highlights. I'll keep my comments focused mainly on our through end 2019 results as Angelo has already mentioned the highlights of the fourth quarter.

The reported net revenue for the year ended December 31, 2019 of $20.8 million, representing an increase of $12.8 million or 162% year-over-year, primarily attributable to increase sales to LPs and the provincial distribution channel for the Adult-Use markets. As a percentage of revenue, direct to patient sales accounted for $1.8 million or 8.6%, and wholesale accounted for $19 million or 91.4%.

2019 gross profit before changes in fair value was $5.3 million, a 19% gross margin compared with 41% in the prior year. The margin decrease was primarily due to the company ramping up production, as it brought newly licensed cultivation rooms online, as well as decreases in selling prices due to the implementation of excise tax partially offset by improved costs to sell. We expect to see tangible improvements as we continue following strike rates ramp up to full capacity in the second half of 2019 with additional greenhouse and outdoor growth.

Other initiatives included packaging automation and optimization operations at each of our Aylmer, Strathroy and Bowmanville sites should also have to improve our gross margin moving forward.

General and administrative expense totaled approximately $90 million for the year ended December 31, 2019, compared with approximately $10 million for the year ended December 31, 2018.

The change was mainly attributable to an increase in our operational footprints and an increase in headcount to support the company's growth. Our integrated cultivation of our operations increased significantly over the prior year consequently also resulted in a significant year-over-year increase in headcounts.

Adjusted EBITDA was total $13.9 million for the year ended December 31, 2019 as compared with the loss of $5.7 million for the prior year period mainly driven by increase general and administrative expenses of $8.5 million partially offset by the improvement of gross profit before changes in fair value of approximately $1 million which was driven by the sales increase.

Please note adjusted EBITDA is not recognized measurement under International Financial Reporting Standards, and this data may not be comparable to data presented by other companies. Management will use adjusted EBITDA to be an important measure of the company's day-to-day operations by excluding interest, tax, depreciation and amortization, stock-based compensation, fair value changes and non-cash items and non-recurring items.

This measurement is useful in assessing the results of operating and strategic decisions. Net loss and comprehensive loss for the year ended December 31, 2019 was $10.4 million, compared to a loss of $895,000 for the prior year. The year-over-year increase in net loss is primarily a result of a favorable $8.8 million gain reported in the fourth quarter of 2018 or the termination of an office lease as well as year-over-year increases in general and administrative expenses.

Share-based compensation and amortization partially offset by an increase in sales and unrealized gains on changes in fair value of biological assets. As for our balance sheet, we ended the year with cash and cash equivalents of $8.2 million. Total assets as of December 31, 2019 reached $209.8 million including inventory and biological assets of $39 million an increase of 388% over the prior year.

Our assets increased as a result of increases in inventory and biological assets, primarily driven by the increase in cultivation capacity as a greenhouse expansion, as well as the above growth. As Angelo noted earlier in February 2020, we secured a $25 million strategic equity investment from LiUNA Pension Fund of Central and Eastern Canada. We consider closing of Starseed. LPs investments have strengthened our balance sheet to support our continued commercial growth and our expanded distribution channels.

Before turning the call over to Angelo, I want to offer some insights on our performance in the first quarter as we saw the height of the Coronavirus impact in the global markets. While the COVID-19 pandemic has affected the global economy, we continue to see the fundamentals of the Canadian cannabis industry strengthening, as we see retail momentum accelerate in post COVID, build-outs of retail locations and provinces like Quebec, Saskatchewan, and Alberta advanced and new cannabis products commonly referred to as cannabis 2.0 going into production.

As Angelo mentioned earlier, we achieved preliminary unaudited first quarter 2020 revenue of $12.1 million, which is a record for the company and represent the first full quarter of our integration with Starseed Holdings. I believe this revenue figure is quite challenging and this demonstrate the strength of our fully integrated sales model and improved operational infrastructure.

Also it's important to mention that the first quarter revenue mix was quite diversified, including significant medical and adult-use sales and the last scale sale of almost half of our outdoor cultivated biomass. With our best-in-class operations, unique medical distribution platform and intense balance sheet from the $25 million strategic investment we received from the LPs we believe WeedMD is well positioned for continued growth and a path to profitability.

As we continue to capitalize on the increasing Medicinal and adult-use utilization of cannabis as growth resumes in the capital markets. Our integrated cultivation, extraction and fulfillment operations will enable us to produce low cost, quality, cannabis to create a wide range of quality high margins finished products. We should significantly add to our profitability during the remainder of 2020.

With that, I’ll turn the call back over to Angelo for closing remarks.

Angelo Tsebelis

Thank you, Lincoln.

In closing 2019 and early 2020 has truly been a transformative period for WeedMD. In 2019, we made a series of plans, strategic investments and completed the build of our vertically integrated infrastructure, encapsulating indoor and outdoor cultivation combined with in-house extraction, product development and manufacturing. It encompasses our historical strength - as one of Canada's first and largest outdoor cannabis harvesters, and our strong brand and customer recognition built from providing high quality products for medical patients and adult-use consumers.

We have taken the necessary steps to transition our business into a higher margin direct-to-consumer operating model accomplishing large part to the acquisition of Starseed and by integrating this unique direct-to-consumer medical platform into our overall operations. We are accelerating our medical revenue growth and captive channel to Starseed. We'll also be launching a new medical brand under the WeedMD label Entourage.

In the coming weeks, we will also be announcing the launch of a new medical delivery - float program which kicks off in the Greater Toronto area. We are simplifying and streamlining our production processes by optimizing our facilities. Strathroy is our cultivation hub that will optimize overall biomass production. Everything from [grade A flower through to] extraction grade biomass for outdoor operations.

Aylmer is our extraction facility that is now commercializing that biomass into baits and other new formats and products. And Bowmanville is our medical fulfillment center, where we are also exploring opportunities to incubate startup ventures and partnerships in the industry. Before we take your questions, I'd like to expand a little on Lincoln's remarks about COVID-19. And its impact on the capital and cannabis markets as well specifically how it relates to our company.

Certainly the pandemic has impacted all of us, and we continue to work through these unprecedented times. We've taken all the precautionary safety measures such as physical distancing, and following our stay-at-home home policies. That would have seemed almost inconceivable to most of us just a few months ago. At WeedMD, we have a dedicated team actively monitoring the situation and business continuity plans in place to ensure we keep functioning and continue functioning at maximum capacity.

Our team is well equipped to handle this outbreak, regardless of its duration. We continue to follow government and Health Canada recommendations and guidance to ensure the safety and well-being of our employees and customers. Protecting our employees and the community is always our top priority. And we are taking steps to keep everyone safe. We recently took additional steps to maintain our financial footing and ensure are business continuity.

We're continuing to scrutinize and manage all discretionary and non-essential expenditures and want to thank our colleagues for their professionalism and dedication during these difficult times, and their continued commitment to our patients and customers. As the situation continues to improve, we are reviewing a phased approach for return to the workplace strategy. Despite the presence of COVID-19, we anticipate that growth expectations for the Canadian cannabis market and WeedMD will continue to improve as we move into the second half of 2020 and beyond.

In the long term, my team and I remain confident that WeedMD will emerge as a formidable leader in the Canadian market. Our combination with Starseed has squarely positioned us to capture meaningful market share, and we have a strong balance sheet to support our expansion and pathway to profitable growth. We remain excited for our prospects and look forward to reporting our continued progress to you on future calls.

This concludes our prepared remarks. And I’ll now pass the call back over to Marianella so we can open it up for questions.

Marianella delaBarrera

Thank you, Angelo and Lincoln. This concludes our opening remarks. Ariel, we are now ready for the question period.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Neal Gilmer of Haywood Securities. Please go ahead.

Neal Gilmer

Maybe wanted to start with respect to the sort of those wholesale sales, you touched a bit of it on your prepared remarks. But it's obviously a little bit lumpy in nature and affected Q4 and then obviously positively Q1. How should we be looking at that going forward, you sort of have a base of little over $7 million if you exclude that in Q1. Is that what we should be looking for as a build off into the Q2 and subsequent quarters or are you looking to do further wholesale sales of that remaining outdoor biomass that was harvested last October?

Angelo Tsebelis

The biomass and large LP-to-LP bulk sales is really not core to our strategy going forward. As we mentioned even in Q4, we started seeing the real ramp up of our consumer direct-to-consumer model, whether it's through our medical or retail channels in the adult use sector, obviously having the large biomass for the outdoor and we’ll be continue to be opportunistic, if opportunities present themselves, but it's not core to our growth going forward.

Neal Gilmer

And then yes, as you did touch on, you showed some really solid growth in the adult use, I sort of look at it 48% on a quarter-over-quarter basis in Q1 and medical [indiscernible] but skewed with the Starseed acquisition, but still strong growth there.

Could you comment a little bit on where you saw at least on the adult use side some of that growth come from, is that in any particular province or that's I think above what you've seen from some of your peers if you can provide any color on that Q1 growth in the adult use channel would be great.

Angelo Tsebelis

Yes, thank you Neal. I mean, our Color cannabis, really we really started transitioning and ramping-up sales and marketing activities at the end of 2019. And we started seeing some of those results, Q1 is really all about positioning ourselves in that what we'd like to call that mass craft segment, we really do take pride in the quality of the cannabis, we're putting out and really, that's where Color will shine.

But being able to do it at scale, and so really turning around a number of processes and operations from a packaging and processing perspective into more automated, streamlined processes in Q1 was the key and really getting a balanced sales and marketing strategy across the country. We saw some pretty good results across multiple provinces. And really the question continues to be, how can we do more of that and get more of our product in the market.

So we’re really starting to see some real energy built around Color and the provinces are definitely responding.

Neal Gilmer

Maybe two more if you don't mind. You’re talking in prepared remarks about achieving those $10 million in synergies through the combined organization. Can you tell us sort of where that comes off of, is that from the Q4 levels, if we annualized sort of your Q4 operating expenses by the time we get to December of this year, we're expecting that to be around $10 million lower and maybe just a little bit more color on where those synergies come from, and how we should be looking at from a modeling perspective?

Angelo Tsebelis

Yes, really that $10 million number was really a synergy that we had identified when we were putting - finalizing the transaction quite frankly. So a lot of it is was planned SG&A savings that we'll continue to work through, but also the synergies and bringing the two organizations together. Obviously, that happened at the end of Q4. So really, it's really from those numbers.

And you're right, looking at the end of 2019 as sort of comparison point and I'm happy to say and we mentioned a couple of those initiatives already underway. We started by streamlining the operations and activities that occur each of our facilities. We've synergized and brought everybody together in the Toronto office right now. So we've now finalized org charts. We're working towards that leadership team and working its way through the organization as we continue to work with a number of different initiatives throughout the rest of the year. So pretty confident and hopeful that we'll get there.

Neal Gilmer

And my last one would just be sort of on some of those 2.0 products. Do you have an estimated timeline of when you think those will be in the marketplace?

Angelo Tsebelis

So as I mentioned, we will have the launch of our first vape imminently, we're launching in the medical channel first, we felt that this was a real strong position for us with the number of competing vapes in the marketplace, it made total sense for us to focus on our captive channel and being able to capture a more unique product, but we will be launching Color base, I would say sometime in Q3 will be more specific as continued to progress. And I'm hopeful and without don't quote me on it, but we're probably looking to launch at least one more 2.0 product later in the year.

Operator

[Operator Instructions] Our next question comes from Graeme Kreindler of Eight Capital. Please go ahead.

Graeme Kreindler

Just wanted to dig a little deeper with respect to the Q1 preliminary revenue and I appreciate the color with respect to the wholesale channel there. I'm just wondering if you're able to provide a bit of a breakdown in terms of on a sequential basis, how much of that would be organic growth from the WeedMD side versus how much of that comes in from the Starseed acquisition? Thanks

Stephen Ng

Yes, hi Graeme, thanks for your question. It’s Stephen here. Most of the adult use revenue is effectively organic. But by and large that was Q for Q, most of it was Color. On the medical side sequentially if you sort of normalize for Starseed contribution in Q4, probably looking at also somewhere around kind of 30%, 40% sequential growth on the macro side as well.

Graeme Kreindler

Then, with respect to building-off your comments on the launch of derivative products and plans for the adult use market, I'm just wondering, in general, Angelo you talked about positioning in the mass craft segment. So I guess it's kind of a two-fold question, number one, you look at that segment, you look there's been a recent trend towards going to - consumers going to a value segment. What are your thoughts in terms of that segment? Is that somewhere that you might look to participate in the near future? And then from a bigger picture perspective, you had some comments in the prepared remarks about continuing to see growth overall in the Canadian market. I was wondering in terms of how you're looking at that growth or what you're seeing, is that going to continue to be a straight line from the end of Q1, which had some really positive tailwinds from it in terms of consumer behavior because of COVID? Or do you think we might see a little more volatility throughout the year as behavior shifts, but net-net, you see it in a growth position? Thank you.

Angelo Tsebelis

So there are few questions there. I'll try to address them each in sequence. So the first one was really about our strategy around 2.0 and our mass craft strategy specifically in the adult use segment. If you look at most mature markets across North America, we continue to see that dry cannabis and flower continues to be the highest percentage of sales. So if you look at markets especially even in the U.S. where they didn't have this staggered launch of 2.0 products, we continue to see 50 plus percent of that coming through in terms of dry bud quite frankly and pre-rolls.

And so we really feel that we have an opportunity there because of the high quality and craft quality that we can deliver. But we can do it at scale because of the size of our cultivation. So we're confident that by focusing on that segment, we can create some price stability as well around that particular segment. So that doesn't that - now having said that, we also have our outdoor which creates significant biomass for us which is perfectly positioned to start really feeding the CX industries portion of our new extraction business for derivative products. So we will be in that space as well.

And as I mentioned, having this captive medical audience, there is a real opportunity to not only focus on that adult use segment, but also for the medical channels where you have, you'll have significant overlap in terms of similar formats. So we think that we’re uniquely positioned to really capitalize on that.

With respect to the growth, I look specifically in terms of Ontario, I mean Ontario, as we all know, we keep saying has been slow to ramp-up. And so knowing that we have a number of new retailers that and it'll be in the hundreds in the coming months. And hopefully by the end of the year, we feel that just that ramp-up in that initial start-up, we’ll reinvigorate the Ontario market and obviously being the largest province, it should invigorate the entire country. So we feel we're well positioned to succeed in our backyard and we'll look forward to that. So that's where we kind of see that that demarcation point in terms of what the future looks like. Hope that answers your question.

Graeme Kreindler

Yes, thank you. Just a follow-up then. So I guess the segmentation of the adult use market going forward, it's really going to continue to focus on that Color brand, as well as the launch of new derivative products. You don't have any immediate plans to potentially place any product in a value segment or anything like that.

Angelo Tsebelis

No, we’re seeing that, we’re seeing that it's becoming a popular brand. I mean I'd like to see what happens when it comes, as we come out of COVID. Obviously, the market has almost created a bit of a bookings, you're starting to see some really strong brands emerge at the super premium level, and those are the craft growers. And then we're starting to see some of these value brands really take shape.

We still firmly believe that there is a significant market there that that really wants quality cannabis and we feel that we're well positioned to deliver on that. So not sure that we'll jump into that value brand.

Stephen Ng

Yes, Graeme, just to add to that. I mean, I think it's important that a lot of the initiatives we're taking on the retailer side in terms of being good partners there, it’s to ensure that we're creating the pull through for our product. I think if you look into some of the data, a lot of the value brand sales are really transacting on at the provincial website level whereas at the retail level, you really have an opportunity to influence your product and the mix there. And frankly, frankly, as a retailer, it's important that, they don't want to see you race to the bottom on pricing as well for the kind of business. So that's going to remain our focus.

Graeme Kreindler

Yes, okay, understood. And then my final question here, I wanted to touch on the balance sheet, you're scanning through the financial statements. The conversion date for loan covenants, if I understand correctly is at the end of this month, and you're currently in negotiations with your lenders in terms of amending some of the covenants or perhaps some of the terms, I was wondering if you could provide an update in terms of how those negotiations are going and what the potential impacts of that could be on a go-forward basis? Thank you.

Lincoln Greenidge

It's Lincoln, thanks for the question. It’s Lincoln speaking. We have good partners and our vendors and the negotiations are going very well. We’re confident that we will see extension and in our returns and we see no issue at all with that partnership continuing for the duration of the loan agreement.

Graeme Kreindler

Any chance you could share what the cash position as of today obviously has changed quite substantially from much reported as of Q4?

Lincoln Greenidge

At this point, we would not provide that information. I couldn’t say that. In a month's time, we'll be releasing our Q1 earnings. And at that time, I will obviously be happy to have a conversation on our cash position as well as delighted to talk about the results of our operations.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Angelo Tsebelis

I'd really like to thank everyone again for joining us on today's call and for your continued interest in WeedMD. We do look forward to having follow-up conversations with many of you and for updating you on our continued progress. Thank you again and have a great day.

Marianella delaBarrera

Thank you. Thank you, Ariel.

Operator

This concludes today's conference call. You may disconnect your lines. Thanks for participating and have a pleasant day.