Good afternoon, ladies and gentlemen. Welcome to the Columbia Care’s Third Quarter 2019 Earnings Conference Call. I’m your operator for today’s call. Please note that all lines have been placed on mute to prevent any background noise. This call is being recorded for replay purposes. A replay of the audio webcast will be available in the Investor section of the company’s website approximately two hours after completion of the call and will be archived for 30 days. I would now like to turn the call over to your host for today, Gary Santo, Vice President of Investor Relations for Columbia Care.

Thank you, Jesse. Good afternoon, everyone, and thank you for joining us for Columbia Care’s third quarter 2019 earnings conference call. With me today are Nicholas Vita, our Chief Executive Officer; Lars Boesgaard, our Chief Financial Officer; and David Hart, our Chief Operating Officer. Earlier this afternoon, we issued a press release reporting our third quarter results, which we also filed with the applicable Canadian securities regulatory authorities on SEDAR. The company also issued a press release describing the company’s first M&A transaction, which we will also be discussing on this call. A companion presentation outlining the proposed transaction is available in the Investor section of our corporate website at www.col-care.com, where you will also find copies of the two releases, as well as a replay of this call. Please note that the remarks we make today regarding future expectations, plans and prospects for the company constitute forward looking statements within the meaning of applicable Canadian Securities Law. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which we disclose in more detail in the Risk Factors section of our final prospectus dated March 21, 2019, filed with the applicable Canadian securities regulatory authorities and can be found on www.sedar.com. We remind you that any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we may update any such forward-looking statements in the future, we specifically disclaim any obligation to do so, except as otherwise required by applicable law. Also, please note that on today’s call, we will refer to certain non-IFRS financial measures, such as adjusted EBITDA and gross profit margin, excluding changes in fair value of biological assets. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Columbia Care considers certain non-IRS measures to be meaningful indicators of the performance of its business, in addition to, but not as a substitute for, IFRS results. A reconciliation of such non-IFRS financial measures to their nearest comparable IFRS measures is located in our press release issued earlier today. Nick will begin his comments today with a high-level overview of our accomplishments during the third quarter followed by Lars, who’ll provide an overview of our financial performance, after which Nick will discuss our pending M&A in more detail. With that, I will turn the call over to Nick.

Thank you, Gary. In addition to David, Lars and myself, we’re also joined by Mary Miller, our General Counsel and Chief Risk Officer; and Josh Snyder, our VP of Business Development; and Cristina De Tomasi, who’s also a member of the Investor Relations team. First, I’d like to thank everybody on the phone for their support, and frankly, for the team for all the work that they’ve been able to really orchestrate and execute on over the past quarter. Third quarter for us was an extraordinary quarter. As many of you know, we are in the sort of the mode, whereby we are building out and actually executing and operationalizing all of our licenses for the – that we’ve effectively built over the past several years. And we ended the quarter with about $22 million – a little over $22 million in revenue, which is a 123% year-over-year during the same period. We now have, at the end of the quarter, 26 dispensaries are operational across 12 jurisdictions and that includes recent openings in Delaware, Florida and Maryland As Gary mentioned, we just announced our first major acquisition in the history of the company, where we can discuss later. But ultimately, we know at our heart, we’re really an execution-based story and company that really focuses on the mission and vision for the organization. Just a couple of highlights, both in the third quarter and some things we’ve accomplished to date. In addition to having 20 – having a sort of significant year-over-year growth, sequentially, we have an increase of 25% in retail sales quarter-over-quarter, and 50% – 15% in aggregate. Our adjusted EBITDA was negative $11.3 million, which really relates to the growth initiatives we’re undergoing in the build-out and operationalization of different markets. We completed and actually staffed 11 additional dispensaries that were available for inspection and approval from the regulators. Unfortunately, the regulator – the regulatory counter was very full. And some of those – all 11 of those facilities were actually pushed to open in the fourth quarter, which they have done at this point. The other sort of subsequent events that have taken place. We’ve launched operations in Maryland. We’ve expanded our footprint in Delaware, with the opening of dispensaries in Florida as well. We’re now operational in 12 of our 15 – actually 13, if you think about it pro forma, the Green – The Green Solution announcement, 13 of 15 jurisdictions. We’ve received approval to, as I mentioned, to open and operate all 11 dispensaries that were on hold in the third quarter from our regulators in different markets. And then we’ve opened – we’ve entered into a number of agreements, both with strategic partners and with our shareholders, including a lock-up that now represents over 60% of the available flow. So with that, let me turn it over to Lars, and he can give you a quick update on the quarterly financial performance.

Thanks, Nick. So I’ll take us through the key financial results from our third quarter of 2019. Starting with revenue. We reported total revenues in the third quarter of $22.1 million, and as Nick just said, that’s an increase of 123% over last year, and our growth does continue to be entirely organic as we added no new business through acquisitions. Our gross profit before fair value adjustments was $5.3 million, an increase of $1.6 million over last year, which was driven primarily by volume growth of our business and offset by production cost of subsidiaries that are not yet recognizing significant revenue in the last quarter. The impact from fair value adjustments related to biological assets was $10.4 million, compared to $7.6 million in 2018. The increase was driven by a cultivation of industrial hemp during the third quarter of 2019. Operating expenses for the third quarter was $33.8 million, compared to $15.1 million last year. The increase was primarily caused by an increase of $7.2 million in share-based compensation expense due to issuance of equity awards in 2019. The remaining increase was primarily due to increased salaries and benefits, professional fees and higher facility expenses. Our adjusted EBITDA for the third quarter was a negative $11.3 million, compared to negative $4.2 million in the previous year. The lower adjusted EBITDA was primarily caused by higher operating expenses. And as of September 30, our cash on hand balance was approximately $85 million. Now turning to the results for the first nine months of 2019. Our revenue for the nine months was $54.3 million, which is an increase of 92% compared to the same period in 2018, and again, driven entirely by the organic growth of our dispensary network and increased per store sales. Gross profit before fair value adjustments was $15.1 million, an increase of 21% compared to 2018. The impact from gross profit value adjustment related to biological assets was $3.6 million, compared to $5.2 million in 2018. And that difference was driven by the relative increase in recognition of fair value upon harvested biological assets, including inventory sold during the period. Operating expenses in the first nine months of 2019 was $95 million, compared to $32.2 million for the same period in 2018. The increase was primarily due to $16 million increase in share-based compensation, the recognition of an $11.1 million in non-cash listing fee expense, reflecting the consolidation of assets acquired in our reverse-takeover transaction in April, as well as increased salaries and benefits, professional fees and higher facility expenses. Adjusted EBITDA for the first nine months of 2019 was negative $33 million, compared to negative $8.2 million in 2018. And again, the difference was primarily due to high operating expenses. With that, I’ll turn the call back to Nick.

Great. Thank you, Lars. A few words just before I begin to sort of provide the background on the combination with The Green Solution. First and foremost, I’d like to thank the support and the trust and the confidence of not only our Board and our team, but The Green Solution team and the founders, the Speidell brothers. We’ve been looking a long time at the M&A markets. And for those of you, who know me know that I actually spent a lot of time in M&A in prior lives, while I worked in financial services. And there have been a lot of really interesting cycles that we’ve seen, that have occurred over the past several years since the founding of the company. But we never really found what we considered to be the right match for our organization and for the values of our organization. I think, that’s very important, because in a market that’s growing so quickly, where mistakes get made all the time, it’s absolutely critical that lines of communication remain authentic, remain high-integrity and remain focused on the long-term objective. And in this case, the long-term objective is, obviously, build shareholder value. But to do so in a way that’s consistent with what we all believe in. And candidly, Colorado was – has always been a bit of a, sort of an interesting market for us, because it seems to be a little bit far afield from what we’re known for. We’re known for innovation, we’re known for medical, we’re known for all of these things. But we recognize that the world is changing, and that in order for us to really fulfill our mission, we have to have the right skills and the right assets and the right infrastructure and the right know-how. And so, as we look out on this – looked out into the marketplace, Colorado is the second largest cannabis market in the world. So we found the best operator that happens to be the largest operator in that market to combined with us and we’re delighted about it. So just to provide some key transaction benefits. Number one, it gives us the ability to have scale and leverage and a critical mass in obviously the second largest market in the world, which is Colorado. Two, it increases our U.S. footprint to 93 facilities that are either open or under development, which comprises of 74 dispensaries and 19 cultivation and manufacturing locations that covers 15 jurisdictions in the U.S. and it’s a substantial addressable population. It creates a robust and comprehensive product portfolio that allows us to play up and down the medical health and wellness and legalize adult consumption markets. That’s very important, because I think a lot of people like to talk about brands. But brand is a little bit of a myth in the cannabis market, because the brand without scale, a brand without leadership, a brand without execution, and a brand without substance is really not a brand at all, it’s just an idea. And what we love about the TGS team and the TGS operation is that, they’ve taken an idea and they’ve built it over the past decade from the ground up, and they’ve done what we’ve tried to do nationally. And so that synergistic sort of mindset is something that we really, really respect and we think that our investors will be the long-term beneficiaries of that. Next, it – as a week like to consider ourselves as disciplined operators, and I think our balance sheet is a reflection of that. And the way we’ve always focused on sort of winning licenses organically and really growing the business. But ultimately, the operation execution and the management expertise for integration has to be on both sides of the equation. And as we think about the size and the scale of the business that TGS has built, while we may have one of the largest footprints, both nationally and globally. The fact of the matter is, in order to bring businesses together requires incredible skills and art. It’s not just an analytical exercise, it’s a human exercise, and ultimately, our most important asset are our people. So the ability to take those two asset bases and ideas and put them together into one high-performing organization is something we feel very confident and very excited about. And then finally, what it does is, it enables us to leverage in a lot of the products and services that we’ve developed independent of one another. And I think two examples of that are the Columbia National Credit card, which we now can bring to Colorado, which we believe will be a huge competitive advantage. And then separately, we can to take TGS’ successful reward loyalties program and add that into the banks. And so that allows us to create a national platform that’s scalable and has all of the attributes that consumers really expect from a transactional and from a sort of a loyalty perspective. Speaking strictly from a financial perspective, I think, the last point I would make is that, TGS is profitable, meaning, they generate EBITDA. And in a market where capital is constrained, in a market where people are concerned about integration risk and cap unfunded or underfunded capital needs, we feel very proud of the fact that we found partner – we found a partner that actually generates substantial amounts of EBITDA and we expect that to continue. So to the extent that Columbia Care has a business model that’s really built on to two standard principles. One, our high-growth markets that require capital; but two, we have existing markets and more mature markets and those are still growing relatively quickly. But as the model matures, they should – they begin to produce EBITDA, and that is the cornerstone for becoming self-sufficient under any market circumstance. So with that, let me turn it over to you, Gary. I think that we’ve covered some of the high-level things, but I think it’s most productive. We just open up the call for Q&A.

Sure. Operator, feel free to open up the queue.

Absolutely. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Matt Bottomley with Canaccord Genuity. Please proceed with your question.

Yes. Good afternoon. Congrats on the deal, everyone. I think TGS was probably the first company I ever toured, I think, it was back in 2016. And I know how impressive the size of scales of their facilities are. Just a couple of quick questions on TGS specifically, and how it’s going to integrate with Columbia Care. And then one – maybe one housekeeping item on the quarter. First, is there any sort of color you can give with respect to where you think the adjusted EBITDA margin will line up in Colorado versus the rest of your platform directionally?

So we’re not releasing that information just yet. And I think it’s probably inappropriate for us to do that until after the close. But we feel – suffice it to say, we feel very good that their core business being productive – being EBITDA positive – materially EBITDA positive, is obviously a great starting point. And the addition of some of our products and services and the combination of the scale, we believe will allow us to actually enhance that margin profile over the long-term. So we will be providing that guidance, but just not today.

Okay. And then is there any specifics worth going over? I know the rule has changed in Colorado with respect to having public company ownership being able to consolidate revenues from the State. Is that now completely done, or are there anymore steps needed in order for that to be complete?

So that’s – that process from a regulatory perspective is fairly well understood at this point. There is obviously an approval process we need to go through from a State and a local municipal level on a side-by-side basis. But our expectation is that, it shouldn’t take a disproportionate amount of time to get through.

Okay. And last question just on the deal and then just one other quick one. Is there any breaks or anything like that associated between any of the parties?

No, there isn’t.

Okay. And one housekeeping item on the quarter. Just wondering if you can give some color on the adjusted gross margin. So came down a little bit. This is obviously excluding all the fair value adjustments. Just wondering how that’s tracking going ahead, because I know you had a lot of activity subsequent to the quarter and I know a lot of the times expenses can kind of front run revenues in that way. So just wondering if there’s any directional guidance on where your gross margin will be to render the year?

So I’m not sure if we’re providing any guidance on gross margin for the rest of the year. But what I can tell you is that, the message that we’ve communicated over the past several quarters is really that, now our manufacturing facilities are coming online, particularly in markets like California, Massachusetts. It’ll allow us to capture a lot of the gross margin we’ve lost, because we haven’t been able to produce our own products and actually sort of make – take advantage of that fully integrated model that we like. And so we’re beginning to see the fruits of that sort of start to pay off, even in places hopefully, like Ohio. But the fact the matter is that – all of that is predicated on our ability to execute and build out the facilities, get them approved, get them open, and then translate that square footage into product and revenue-generating square footage. So, Lars, I don’t know if you have anything to add.

No, I think that’s true. And as we – as you probably know, as you’re ramping up in a particular market, you have to build your call center and you have to start operations right before you can [indiscernible] start reaping the benefits through retail sales. And to Nick’s point, I think, we’re – we saw a bit of a trough here in Q3, and we’re optimistic that that’ll stop – that stopped increasing.

Okay. I appreciate that. I’ll jump back in queue. Thanks, guys.

Thank you.

Thank you. The next question comes from Russell Stanley with Beacon Securities. Please proceed with your question.

Good afternoon, and thanks for taking my questions. Just first on TGS. Congrats on that. It looks like market share there’s currently around kind of 4.5%-ish. Just wondering if you can provide, I guess, any context for that if I – if I’m right, and just how that market share numbers trended over the last few years?

So our – that’s about the – what the market share is sort of assumption seems in line with our understanding of that as well. Their market share has increased over the past several years. And we actually expect TGS will be very well positioned, because as everybody knows, the Colorado is still very fractured. There’s – there are a few statistics that I think that I don’t know, Josh and David, if you’d like to share with the group. But we think that having critical mass in a market this size will only benefit the incumbents and the larger players over time, but…

Yes, I think on the retail front, it remains highly fragmented. And I think, what was attractive about TGS is not only the number of dispensary, but they’re going to have opened by the end of this year. But it’s also the scale they’ve built some cultivation manufacturing to start entering the wholesale market to service a number of the smaller operators in the market.

Great, thanks for that color. Just moving on to today’s Columbia Care business, and I apologize if I missed it, I delved in a few minutes late. But can you give us an update, I guess, on where you’re exiting for 2019 in terms of the dispensary count? What the latest is there? And if you can drill down even for Florida, for example, given that – the importance to the market?

So we’re still targeting 51 facilities either open or under development by the end of this calendar year. Obviously, they’re – the big variable is always going to be a regulatory approval. But let me hand it over to David. He’ll give you some specifics.

Thanks, Nick. Yes, so we anticipate having nearly completed or open that 51 dispensaries. Obviously, a large chunk of that is going to be in the Florida market where we continue to move through lease execution into permitting and construction and ultimately, requesting inspection becoming operational. And so that’s on a weekly basis, we are bringing new dispensaries online in Florida. I think you’ll see the cadence from us. We’re going to announce the sort of the best process that we have been going forward. But we continue to anticipate getting a number of these across the finish line between now and the end of the year. We clearly had a number of – we’ve highlighted the 11 that were completed and staffed and prepared to be opened by the end of the quarter. And the – all of those have now been opened and in operational. So, the biggest challenge we have, I think, Nick has highlighted is just getting regulatory approval. In many of our markets, it’s just the timeline issue we’re getting regulators to come in for inspection. Particularly in Florida, I think, there’s just a lot of activity not only from us, but from a number of other players. And so getting on the calendar for regulators and inspectors that come in is just a challenge at this point.

That’s great. Appreciate that detail. Just one more for me and I’ll get back in the queue. I think, you’d previously targeted being operational in all of your markets by the end of the year. I think that really just leaves New Jersey and Virginia at this point, if I’m correct. So what’s your latest there in terms of being able to start operations?

So we – based on the timelines we’ve seen from the construction and development teams, we will be ready. We will be asking for inspections by the end of the year. But the the real question is, whether or not our regulators will be able to accommodate those timelines and come and visit us and give us the green light. So we feel good about sort of the timeline we’ve described for the things that we’re – that are – that we actually have control over. But there’s always a variable out there that’s sort of the x factor.

Understood. That’s a great color. Thanks for the detail. I’ll get back in the queue.

Great. Thank you.

Thank you. Our next question comes from Matthew Pallotta with Echelon Wealth Partners. Please proceed with your question.

Hi, thanks for taking my question. Just quickly going to Florida, you guys have three dispensaries operational to date. Just wondering what the progress is on ramping up the production facility to supply, obviously, those locations and then the other ones you guys – I think you guys have already over a dozen locations walk down in the state. So just wondering, yes, if you can provide some color on the progress of the ramp-up in that state on the production side?

Sure. So we have two operational locations, one in Arcadia, Florida and the second is in Lakeland, Florida, where we have active cannabis. So in addition to those two, we have incremental cannabis coming online in our KD [ph] in the next 10 days or so. So we remain confident that we’re going to have enough biomass to support what our current dispensary opening calendar has in front of us.

When you expect that facility to be fully ramped up, say, it support, that doesn’t – dozen or more stores that you guys are planning to have there open pretty shortly?

Yes. So we’re confident with the cannabis we have right now that we can satisfy the dispensary leases that have been signed and the facilities that are under development. Our Phase 2 and Phase 3 approach to our Lakeland facility have already commenced, and there will be – I don’t think we provide guidance as to when the – that facility will be completed, but it is underway. So we still remain confident, given the ischemic that we anticipate in all these dispensaries that will have enough biomass to satisfy demand.

Okay. And then with respect to Puerto Rico, we’ve been hearing some – that some other companies in the jurisdiction there have had some issues with licensing and licenses being held up there. You guys experienced any such similar issues as your licenses being put on hold, or is that specific to some of the other companies there?

So I think that – there was a lot of, I would say, there was some political dislocation around the governor’s tenure a couple of months ago. And I think there was some blood collateral sort of impact as a result of that, that did actually sort of delayed certain decision-making processes. We have had one of our processes slowed down. But our understanding is that, that the temporary phenomenon and we feel fairly confident that the program will continue to grow and evolve. I think, another contributing factor that some of the operators have actually been shutdown in Puerto Rico. And so I think you have a regulator that’s really beginning to get their feet underneath them, and is really willing to enforce the rules and regulations, because it’s a very fast-growing market. And, in fact, I think, it’s one of the largest programs in any of the regulated states. So there’s always a political dynamic to this. Puerto Rico happen to have a particularly unique set of dynamics, this – over the past, it’s called six months. But we see things kind of resuming into a normal course pattern in short order.

But it’s essentially, that you’ve had approved already. Has licenses there been paused or sort of put on hold for any reason, or is everything that was approved still operational?

So we have – so we’re waiting for a final approval for manufacturing cultivation center in SIDRA. But we do have approval, and we’re operating in San Juan. And then we have two other facilities that are going to be going through the final approval process…

… one of which is this quarter.

Yes. One of which is this quarter and the other one is in Q1. So, that’s generally in line with our expectations. But obviously, if that changes, then we’ll come back to Street, let everybody know.

Okay. And then, just with respect to The Green Solution, you said you expect that to close in each 120. Is there any sort of – do you expect it to be any sort of DOJ issues at this one, like a – ensure a second request that we’ve seen hold up some other transactions in the industry, or do you expect this transaction not to be subject to that sort of oversight?

Let me turn it over to our General Counsel and Chief Risk Officer, Mary Miller. Mary-Alice Miller: Yes, correct. We’ve actually worked closely with our HR Counsel. And we believe based on the facts and circumstances in our situation that we would not have a second review. So our expectation is to be able to get through the process pretty quickly within 30 days of filing.

Okay, great. Yes, that’s all for me. Thanks very much for those responses.

Okay. Thank you.

Thank you. Our next question comes from Scott Fortune with ROTH Capital Partners. Please proceed with your question.

Good afternoon. Congratulations on the acquisition.

Thanks, Scott.

Real quick. Can you just provide more additional color on the progression and kind of new stage you mentioned California ramping up production there like Maryland, Ohio and Delaware. And with this acquisition, kind of what your thoughts are continuing to develop in West – Southwest in California, per se?

So let me take that second piece first, and then I might ask David Hart to help out and pink shade it with a couple of the specific market questions. Strategically, for us, it’s really about finding the right partner at the right time in the right market. And I think, TGS was sort of an anomaly in a standout. We’ve been looking at every market. We’ve been looking at all the acquisition opportunities that everybody else has. And I think that the Western markets are interesting to us now that we have a fully integrated platform, particularly in California. But it is very complicated. It’s different than operating on the East Coast. And so we’re not – there are certain skills that we have that are transferable. And there are certain skills that we think we probably need to bolster in order to really build critical mass. I think, the key for us is defined something that not only hits our strategic objectives and our tactical objectives, but also fits our financial objectives. And one of the unique attributes of TGS that we’ve really had a hard time finding is that, they’re EBITDA positive, they’re growing, they’re capturing market share, and they have an infrastructure that’s built out. So they don’t have any – really any real capital needs going forward. So all of those things allow us to really focus on executing on our business. Now, there may be certain expansion print plans that require us to go back to the market. There may be certain opportunities to continue to consolidate the markets that we may want to sort of be engaged with. But all of that is part and parcel with having a strategic growth profile like ours, where we expect to maintain triple-digit growth rates for the next few years. So the – we’re looking at all markets. But I think this particular partnership and collaboration and acquisition was unique, because it has transferability from a know-how perspective into all those markets, particularly in the West Coast. So as we think about the actual progress we’re making on the ground in particular markets, whether it’s California, whether it’s Florida, David, let me turn that over to you and see if you’d like to sort of provide some color there.

Sure. In California, we have finished our construction efforts in San Diego and our manufacturing facility. We’ve staffed that facility as well and are calling for – it’s likely to be operationalized before the end of this month in November. You’d mentioned Delaware. Delaware, we’ve announced two new dispensary that are now open and are operational heading into grand opening, Wilmington and Rehoboth Beach, we’re really excited about those two opportunities. And we’re also nearly complete with our Phase 2 build-out in our cultivation manufacturing facility in Delaware to match what we think will be the supply demand requirements were those two incremental dispensaries in Delaware. As Nick mentioned, we’re really excited about not only the partnership with TGS, but the product portfolio that they’ve developed over time. I think, it’s applicable in a number of our markets, including California. And so given the throughput capabilities that we’re going to have in our San Diego manufacturing facility, where we’re excited to be able to bring not only what is the existing Columbia Care product portfolio, but components of the TGS portfolio into the market as well.

Okay. And then one of the follow-up question on kind of your initiatives for home delivery and credit card lunch, Can we get a few more metrics on those? And how those have gone and expected new markets for those initiatives?

Sure. With home delivery, we – we’re bringing those – we’re bringing home delivery to two new markets before the end of the year in Florida and in Maryland. We haven’t given more information other than we will be launching in those two markets. With respect to the CNC card, we continue to roll that out into each market that becomes operational. And we’re so very excited about the uptick that is experiencing in each new market that we go to. And as soon as we can become operational in number of dispensaries in Florida, we’re really excited about the potential presidency down there as well. So our goal still is to have the CNC card in all of our operational dispensary’s by year end and we’re still confident we’re going to be able to achieve that objective. We continue to learn how to optimize the CNC platform in each one of our dispensary from a supply chain and logistics perspective, but also how we introduced this into each one of our dispensaries with not only our team members, but our patients and customers. So continues to evolve and we refine the platform in each new market that we go to.

Great. Thanks. I’ll jump back in the queue.

Thank you. Our next question comes from Graeme Kreindler with Eight Capital. Please proceed with your question.

Good afternoon, and thanks for taking my questions. First one is for Nick. You mentioned in the prepared remarks with respect to the TGS acquisition, that the world is changing and a mark – a marketable shift into – going into a State like Colorado, which is like you said, one of the second largest market that exists right now. So my question is, with respect to the comments how the world is changing, how do you guys think about your core strategy right now that wellness focus? And then particularly, states like Massachusetts or Illinois, which a wreck are on the cusp of going wreck and staying competitive, given that changing landscape? Thanks.

Sure. So it’s interesting. We’ve seen that there is a disconnect between the way politically markets are described in the way consumers and patients consider themselves. And so in Massachusetts, where we’ve seen continued growth for medical and adult use in California, where you see really one program, but there has been almost an abandonment of the health and wellness sort of providers of just for the sake of adult use. We believe that there is a huge opportunity to actually bring some of that into a marketplace, like Colorado. Now the benefit here is that The Green Solution has always had in health and wellness approach. And so it may be operating in a adult U.S. market. But the fact is, it’s really a deregulated market or less regulated market than more accustomed than we have in many of the East Coast states. And so when we think about the opportunities and really leveraging those opportunities in places like Illinois or Delaware, or Washington, DC, or New York or New Jersey, where we have licenses, they currently operate as medical programs. But it soon will be broader and really encompass adult use. The concepts that we can – and then sort of know-how that we can draw from a company like TGS, I think, will enhance our ability to really capitalize on those opportunities. So what we’re seeing just – so to give you sort of a very practical example, we have people who will go into a retail store and purchase our CBD products. While Columbia Care Platinum is a very respected good name that people have learned to know and trust in the markets, where we offer it, it’s available in retail pharmacies. But those patients often come to our dispensaries, looking for other cannabinoid or plant-based solutions. And so there’s a migration it happens when you go from one to the next. And the reality is that, there are a lot of people who are sort of looking at a market like Colorado, where they don’t have access to a lot of the products that we specialize in. So some of those higher-end, very precisely manufactured dosable and unit dosable products that we’ve seen so successfully rolled out in other markets. That – those we think will create an enormous amount of interest and actually open the market up to additional segments of the total addressable market. So as you think, there’s an enormous amount of synergy by sort of taking what it is we’re very good at, and introducing it into a market, where there really isn’t a logical competitor from the standpoint of the thing that we’ve really focused our efforts on. But by the same token, we think there’s an opportunity to take a lot of things that in this case, TGS has become very good at in arguably the most competitive market in the United States, and help us really refine and optimize our own business. So that we as our markets convert from medical to adult use, we can continue to be the absolute leader in medical and health and wellness. But what we can do much more effectively is basically play up and down the value chain to capture more market share, to leverage our assets more effectively, and to really expand on some of the joint IP and then sort of called brands and brand architectures that we’ve worked so hard to develop independently. So we actually think there’s absolute complementarity. And we also think that the fastest-growing part of the market is actually not adult use, it’s going to be health and wellness and it’s going to be medical. And so what we do is, what – by combining with The Green Solution is were able to sort of really capture the fastest-growing part of the market, while maintaining relevance in the sort of large – the existing part of the market.

Okay, thanks for the color there. And just to follow-up on the TGS part there. Are they currently – are they fully funded for all their initiatives and expansion either on the retail and both the manufacturing side?

Yes, they’re.

Okay. And then lastly, I wanted to ask a question with respect to the credit card program. If I recall correctly, the goal was to have that program rolled out in all of Columbia Care states by the end of 2019. So I was just wondering, one, whether that’s still on track? And two, are there any sort of updated transaction metrics or recent consumer insights you guys can share in terms of the roll out of the program, how that’s changing things at the store level now that it’s been out in the market for a couple months now?

So let me start off with some very high-level comments, and I’ll turn it over to David and Josh to sort of provide any context of. I mean, we’re obviously – this is still sort of a beta program. But the trends that we’ve seen in terms of increasing basket size, in terms of increasing – filling opportunities, streamlining the process, all of those have been continued to sort of play out in each market. At the same time, we’ve seen a very, very robust sort of response rate from consumers who are interested in this type of a product. And we’ve also seen a lot of interest from, let’s call it, from businesses that are interested in sort of finding means – electronic means to transact. So all of the things that we found to be true with our pilot program roll out in New York has been mimic and replicated in all of our other markets. I think what we haven’t done, which you will see shortly is the launch of a concerted marketing program to really drive awareness and expand beyond the Columbia Care. And that’s something we’re very excited about. But let me hand it over to Josh Snyder, and he and David can provide some additional context.

Yes, sure. So just from a market roll out perspective, in the last quarter, we’ve rolled it out to California, Delaware, obviously, we’re going to work to get it rolled out in Virginia and New Jersey when those market come online as well, working through a process in Florida and expect to have that in the next certainly by the end of the year and its continue to go really well. We’re really excited about it.

Okay, that’s it for me. Thank you.

Thank you.

Thank you. Our next question comes from Robert Fagan with GMP Securities. Please proceed with your question.

Thank you very much for taking my question and congrats on the acquisition announced, of course. I wonder if you can just kind of go back a little bit to a Matt’s question around the gross margin. But more specifically on kind of the operating leverage that you guys are going to be able to generate, senior kind of adjusted SG&A base, kind of remain pretty flat recently with despite increase in sales and what’s the profitable contribution coming from TGS? I’m just kind of wondering when that operating leverage benefit should really start to ramp-up? Is that something that could get going before you close TGS, or is that something that will really meaningfully increase post closing?

I think it really increases post closing. And I say that, because if I were to be conservative, our goal has always really been to sort of cram as much of the CapEx into 2019 and much as the development effort into 2019. So 2020 can become a – sort of an execution year, where we actually have the fixed assets in place, we have scalability in place, and we really can begin to lean in both the wholesale and the retail markets. And so it really just is a question of time, meaning, in some of the markets, where we’re one of the earlier first – or sort of first movers, we know how those dynamics are. There’s often a full ramp in markets, where you have a more developed marketplace. You may have more bodies, but obviously more competition. So when we think about sort of really seeing that scalability and we see that benefit of the operating model, it really begins to come into play once our facilities are built out, and once we sort of turn the corner from a regulatory perspective, get the green light to open our door and actually begin to generate revenue. And that’s ironically, it seems very simple to say, but it is 100% true. The other kind of, I would say, sort of operating leverage that we will – we expect to take advantage of in the coming quarters, the fact that we won’t have to buy as much product in the wholesale market. We can be a wholesale actually seller and we can be a self-supplier in markets, where our cultivation of manufacturing capacity hasn’t yet been perfected. And that’s obviously been a big drag on our margin, too. But what we’ve seen at the operating level in individual markets is that, once we have that open, it’s a very different story. And so we feel good about the direction things are heading in. And this is the trough year, so we have a lot of very positive catalysts to look forward to.

Great, thanks. That’s a good color. The next one is just kind of on the growth outlook for TGS. It seems like you guys are paying a pretty nice acquisition valuation and attractive as well on a go-forward basis. I think, you mentioned 1.6 times 2020 revenue, which could suggest that TGS will get kind of better than 20% growth next year. Is that based on what do you think will be kind of like market share gains for them within Colorado, or are there significant new store opening plans or expansion into any other states?

Well, I think that the – for the – let me those points in reverse order. TGS has a competitive advantage in a leadership position in Colorado. We don’t want to disrupt that. We want that to continue. And so how they take market share and how they have been taking market share is really through execution and disciplined, deploying capital and resources. We expect that to continue and we expect the existing management team to really lean in and take advantage of the fact that there’s a big supporter of there, that has every interest in seeing them succeed. And so, as David mentioned earlier, it’s a very fractured market. There are a lot of opportunities to consolidate, but there are also a lot of inefficiencies that can be taken advantage of it. As far as the sort of the margin guidance is concerned, we haven’t provided that guidance yet. I don’t think we will until after close. But what we can tell you is that, it contributes and contributes a lot to our business, both in absolute numbers and from a margin perspective. So we’re excited about that.

Okay, great. Last one for me is, I’m kind of marching the first acquisition – major acquisition that you guys have done and potentially could point to maybe a shift in strategy that they would focus more on M&A going forward. Is that kind of something that you guys see happening? And how are you viewing valuations of potential targets in the market now in the context of the decline in at least the public market valuations?

Boy, it’s interesting. So if you look at this transaction just on a financial basis, there are other transactions, where they have about the same revenue, but the multiples that they’re paying on a forward basis is north of eight times, right? So let’s just sort of take a step back and sort of look at the different strategies and the way they’re being capitalized upon and executed. Our view has always been that, in some cases, it’s better to build than it is to buy. But you really have to find a really sort of attractive match in order to justify any premium whatsoever relative to your own capital pool. So I’m – I – it’s not a shift in strategy. I think you have a team that’s exceptionally skilled and familiar with an M&A product and know-how sort of play in restructurings, in very traditional environments, we obviously have a very sophisticated Board that helps us think through those issues. But we really don’t want to be out there and indiscriminately buying businesses, because the integration is real. And we don’t want to combine with somebody unless we can dedicate our full attention to making sure that it’s a successful combination. So will we continue to look at M&A? Absolutely. Will we be the highest bidder? Absolutely not. And I think one of the things we’re encouraged by is that the TGS team, having built their business organically was very focused on somebody who saw the world the way they did, which is, Rome wasn’t built in a day, it takes time. And the way to sort of build a partnership is by sort of going forward one foot in front of the other. And this is one of those moments, where the relative value of the way we constructed this partnership in this collaboration and this acquisition was based on the idea that together we could build something better. It wasn’t based on the idea that they had to extract every dollar value, because fortunately, we’ve got a young team that’s very smart, very capable, and they want to build something and they want to build something that’s the best. So – and we want to do that with them. So we’re excited about the opportunities and the uniqueness of this opportunity. But I think more importantly, we’re excited to demonstrate to the market that just because we haven’t been buying businesses, it doesn’t mean we’re concerned about M&A. It means that we just, frankly, wants to be the disciplined buyer out there. And for companies that are interested in building long-term shareholder value, rather than sort of a flash in the pan, we’re a good partner for them. But if somebody’s looking to sort of shift their liabilities and sort of get a liquidity event in the absence of the financial markets, we’re probably not the right partner for them.

Great. Thanks a lot, guys. Great job on the acquisition.

Okay. Thanks.

Thank you. Our next question comes from Vivien Azer with Cowen. Please proceed with your question.

Hi, thanks for taking the question, and congrats on the acquisition. Nick, it’s interesting looking at data for Colorado. Growth have gotten pretty anemic in 2018, and not entirely surprising given that it’s quite a mature adult use cannabis market. But over the course of the summer and into the fall, it looks like growth has ticked up pretty dramatically in that market growing 23%, if my math is right in the third quarter. As you were doing your due diligence, were you able to unearth any insights around what’s driving the acceleration in growth over the course of 2019? Thanks.

So, Vivien, it’s really a combination of things. I think that in some cases, there are operators – sort of significant operators in Colorado that have actually lost market share. And so it’s not that the – it’s funny as the market – in a market like this where you do have a level of competence, a rising tide doesn’t necessarily raise all ships. And so what we noticed as we went through sort of our review of the State of Colorado is that, there were some folks that really had a very disciplined approach. For example, in this case, our view is that pricing continues to be an important factor in different brands and different prices and different categories, but also innovation and sort of recognized names are important. And so finding that balance between the types of products, the way in which people have their experience in the facilities, and then how they actually think about sort of their own journey has had a pretty profound impact in, I think, creating a more sophisticated consumer base, where it’s not that everybody’s just showing up to all the same places. It’s that people are now beginning to choose and become more selective. And so one of the thesis and one of the ideas behind this combination was the fact that, whereas a lot of the other sort of participants had really focused on a business model that worked two years ago. The TGS team was really hard at work building out the infrastructure to become one of the lowest, if not the lowest-cost provider of flower in the marketplace. They were working to develop brand architectures and product offerings that sort of span the gamut, that sort of suited their manufacturing capacity, and, frankly, their level of automation. So all those things allow them to become very competitive from a margin, and from a cost perspective. But at the same time, there are also tons of innovation on the CRM side. So the way people engage with customers is something that we found really does matter. And so it’s fascinating. I don’t think it’s any one thing, I think it’s a combination of things. And I think it’s really execution-driven, as much as it is market-driven.

That’s an interesting insight. And just as you raised question, as soon as you raised the notion of pricing in your comment, maybe just if we could follow-up with that, where is TGS’ pricing compared to the broader markets – for the end consumer?

It’s funny. So I’ll use the comparison to where’s the Columbia Care pharmaceutical products are generally viewed as sort of higher-priced products because of how they’re manufactured and their intended use case. TGS has done a wonderful job of building specific brands. They’re actually quite well-known not only in Colorado, but outside of Colorado, that have different pricing points. And so, I – we actually have, I believe we’ve uploaded the deck, if I’m not mistaken. So there’s a small slide deck on the – on our website, and I think it’s probably filed with the regulators, too, that you can look at that. So I think gives you some idea of the types of products and the types of brands that they have. But it spans the gamut. And what’s great about is that, it doesn’t just span the gamut, because they have one source of biomass or one source of flower, one manufacturing center. It says they have the capabilities to actually play up and down the curve for quality and expectations relative to those price points. And that allows them to become a very disciplined sort of marketer and an access point for differently priced products. So they have – if you look at the portfolio they have, it goes up and down the – some of the value chain.

It’s very helpful. Thank you so much.

Sure.

Thank you. We have reached the end of our question-and-answer session. So I’d like to pass the floor over to Mr. Vita for any additional concluding comments.

So I just want to thank everybody for their continued support. The market has been challenging in a lot of ways. And one of the things that we’re really excited about is that, this is the time people have often asked, why we weren’t buyers before, why we weren’t engaged in M&A? And we think about our our own company a little bit like – from a – a little bit if we were sort of managers have a portfolio of a lot of little companies. And the fact is that, we’re better buyers now. And through all of the financing complexities and through all of the regulatory, I guess, regulatory confusion. The fact is this – the industry itself, and certainly, individual operators in certain markets are really outperforming and they’re doing a really good job. And so we’re really proud of the fact that, whereas you hear a lot of headlines about what’s going wrong and what’s not working, we’re out there sort of, I think, communicating to the market that this is actually a great place to be you can do it profitably. And by the way, it’s not always about growth at any cost or all costs, it’s about making sure you find the right way to sort of move forward. And so we hope that transactions like this and the industry begins to really embrace and approach similar to this. And so that all of us can sort of look at value creation and get beyond the volatility. But none of this would be possible if we didn’t have the support of you. None of this would be possible without the support of the unbelievable team that we have here at Columbia Care, and none of this will be possible without the support of The Green Solution team. So we’re just very grateful to be here and thankful for all the kind words supporting in time. So thanks very much, everybody. We’ll talk to you next quarter.

Ladies and gentlemen, this does conclude today’s teleconference. Again, we thank you for your participation, and you may disconnect your lines at this time.