Vireo Growth Inc. (VREO) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Goodness Growth Holdings Investor Day 2021. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sam Gibbons, Investor Relations. Please go ahead.

Thanks, Megan, and thanks to everyone for joining us this morning and for everyone who tuned in to yesterday evening's video, which is now available for replay in the Investor Day section of our website at www.goodnessgrowth.com. With me on today's call is our Chairman and Chief Executive Officer, Dr. Kyle Kingsley; and our Chief Financial Officer, John Heller. Today's conference call is being webcast live on our Investor Day website at goodnessgrowth.com. The dial in and webcast registration for the calls are also available on our website. Before we get started, I'd like to remind everyone that today's conference call may contain forward-looking statements within the meaning of U.S. and Canadian securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in such forward-looking statements. For more information on forward-looking statements, please refer to cautionary note regarding forward-looking statements in the forward-looking statements disclosure of today's news release and conference call presentation. Now I'll hand the call over to Dr. Kingsley.

Thank you, Sam. Good morning, everyone, and thank you all for joining us for the second portion of our 2021 Investor Day events, the unveiling of Goodness Growth Holdings and our Horizon Strategy. We believe the execution of this plan will more than triple our revenue through fiscal year 2022, in part because we'll be increasing our biomass production capacity by more than 300%. This will enable us to support increasing demand in the majority of our markets that currently have or will be transitioning to adult-use programs. We would have preferred to host these events in person with shareholders and analysts, but challenges related to the COVID-19 pandemic prevents us from welcoming you all in that format. Last night's prerecorded video, which is available for replay on our Investor Day website, was designed to substitute for the in-person experience we would have all preferred for this event and allows you all to spend some more time with our leaders and visit several of our new Green Goods dispensaries, manufacturing facilities and various expansion projects that are currently underway across our portfolio. Our evolution to Goodness Growth Holdings reflects the progression of our business from a predominantly early-stage medical market operator to our current position with one of the strongest potentials for organic growth of any MSO across recreational use in adult medical cannabis markets in the United States. Vireo always has been and will continue to be a flagship brand of medical products, but this holding company model reflects a much more expansive view of our future and clearly distinguishes our plant-touching assets from our science and IP incubator, Resurgent Biosciences. Before we get into our Horizon Strategy and state market updates in more detail, I'd like to spend a few minutes discussing our vision, mission and core values at Goodness Growth Holdings. For those of you who know us well, you're familiar with our goal of replacing pharmaceuticals, alcohol and tobacco products with safer cannabis alternatives. For the past nearly 7 years, as we've operated predominantly in medical new markets, we've assembled one of the strongest teams of medical and scientific professionals in the United States that are currently conducting research of cannabis. Clinical research in medicinal plants is a core competency of our team, and the vision of Goodness Growth Holdings will extend the research efforts of Resurgent Biosciences beyond just cannabis and into the realm of psychedelics to bring the power of plants to the world. We formed Resurgent Biosciences as a strategic move to separate the multistate cannabis operator from the non-plant touching ancillary business opportunities within our intellectual property portfolio. Resurgent does not engage in the cultivation, manufacture or distribution of any psychedelics or cannabis. However, given our team's medical and scientific expertise, we believe the opportunities for psychedelics to transform the future of mental health and psychiatry are far too significant for us to ignore. Similar to Resurgent's approach in cannabis, we plan to pursue clinical research partnerships to determine the efficacy of psychedelic therapies as well as the development of novel technologies and applications. Applications, which could make psychedelic medicine more accessible and affordable for patients and health care providers in the future. Goodness Growth Holdings is committed to taking care of our people, our communities, and our planet as we forge new paths for human wellness with new solutions rather than scientific discovery. We take our responsibility as community leaders seriously, and our partnerships with minorities for medical marijuana and the Last Prisoner Project demonstrate this critical focus of our organization. We'll continue to do everything we can to help those lives -- help those whose lives have been impacted by cannabis convictions through our expungement clinics across our various markets, and we're looking forward to doing more of this important work now that COVID safety protocols are being lifted in most areas. As an organization, we are committed to embracing diversity, and we're proud to be the first cannabis company to sign the CEO Action for Diversity and Inclusion Pledge. We are very fortunate to have Amber Shimpa leading our HR team. And they're doing an incredible job to create an inclusive environment for all of our team members. As of today, approximately 65% of our workforce is made up of diverse individuals, including veterans, minorities, people with disabilities and women. Please turn to Slide 11 of today's presentation, where we've introduced the core components of our Horizon Strategy. First and foremost, We are focused on achieving scale across our operating footprint. Most investors are not aware of the massive scale we are in the process of bringing to bear across our portfolio. This is one of the primary reasons we believe it was important for us to host these events. We will be discussing each of our 5 core markets in New York, Minnesota, New Mexico, Arizona and Maryland in more detail on today's call, but it's important for investors to also realize the additional upside potential that our noncore assets in Massachusetts, Nevada, Puerto Rico could bring us in the future. We also remain interested in growing our retail dispensary footprints in markets like Arizona and Maryland and continue to explore strategic acquisitions of dispensaries in those markets. The second focus of our team centers around our retail shopping experience, our Green Goods dispensary environment and our focus on bringing differentiated brands and products to the marketplace are the major elements of this focus. The goal is to build trusted consumer brands, products and experiences that will ensure the success of our business longer term, and we'll look to augment this strength with more -- with home delivery and e-commerce options as regulatory frameworks allow over time. Finally, we'll continue to leverage the expertise of our medical and scientific teams to support better outcomes for consumers and for our business. We believe that having meaningful protectable IP will be critical in driving success and profitability long term. And we'll continue to engage in clinical research and pursue strategic partnerships to monetize the various opportunities we see in our IP portfolio. On Slides 13 and 14, we've provided an overview of our current markets and operating footprint. We're in the process of expanding our manufacturing capacity and retail store across our markets and believe the organic growth potential of the 5 core markets represent some of the best upside opportunity in the U.S. cannabis industry today. As a reminder, Arizona transitioned to adult use earlier this year, and Mescaline in New York are slated to make these same transitions over the course of the next year. Each of these transitions represent significant growth opportunities for our business. Slide 15 provides a comparison of the current monthly per capita spending trends in our 5 core markets compared to the spending patterns that have occurred in Colorado, Massachusetts and Illinois since those markets transitioned to adult-use programs. As you can see, the trajectory of performance through the transitions in Colorado, Massachusetts and Illinois were all very similar and resulted in monthly per capita spending of between $8.50 and $12 within 12 months of legislation. When you compare this to the current $0.60 per capita monthly spend that we're seeing in Minnesota and New York, it's easy to see why we're so excited about these 2 licenses, which were both won through merit-based application awards in 2014 and 2015. Please turn to Slide 16, where we'll begin our state markets reviews with the largest and most exciting long-term market opportunity in our portfolio, New York. We are proud of our history in New York as one of the first 5 medical cannabis operators. And today, we believe we currently operate the largest legal home delivery service of cannabis products in New York City. With the recent passage of the Adult Use Bill, we expect to be 1 of 10 scaled vertically integrated operators in the state and with the ability to wholesale our products to other operators. Based on the per capita spending patterns we discussed earlier in the presentation, we believe that New York -- the New York market could represent a $2.1 billion to $2.9 billion market opportunity within 12 months of adult-use operations, which would represent a considerable increase compared to the current medical market run rate of approximately $150 million annually. Many investors have been curious what our expansion plans are for this market since the Adult Use Bill was passed. We're pleased to be sharing the details of that plan with you all today. We have commenced work on a 200,000 square foot expansion adjacent to our existing properties in Johnstown, which will significantly expand our cultivation and processing capacity in this market beyond the existing 59,000 square feet we're currently operating. A rendering of this expansion plan is shown on Slide 18. Approximately 100,000 square feet of this proposed expansion will be for state-of-the-art indoor cultivation, which we believe will produce the highest quality flower and biomass yields in our portfolio and may enable us to produce approximately 92,000 pounds of total biomass in New York on an annual basis once the operation is fully ramped. The green boxes in the red ring reflect the future indoor cultivation capacity, and the blue boxes represent the additional 100,000 square feet, which we plan to use for an expansion of our processing and manufacturing space. These updates will enable us to produce the full spectrum of cannabis products, including flower, vapes, soft gels, oils, oral solutions, balms, concentrates, edibles and beverages. We believe these upgrades will enable us to have the strongest assortment of products of any of the cultivators in the New York market. The processing expansion will be GMP-ready and enable an array of extraction and distillation capabilities. And we will also include cleanroom manufacturing capacity and a commercial kitchen. As a reminder, we recently secured an option on an additional 96 acres of land adjacent to our existing manufacturing site in Albany, which is where we will be building this new facility. It is also our expectation that this expansion project in New York will be financed by a REIT or other financing partner. It will not require a substantial cash investment from the company to complete. It is our intention to have this new facility fully operational as early as March of next year. We will be able to open 4 new retail dispensaries in the state with ultimately 3 of our total 8 future dispensaries operating as adult stores and the remaining 5 operating as medical dispensaries. The state is going to require our first 2 new retail dispensary locations to be in economically challenged areas, and our teams will be ready to move forward on construction of those dispensaries once locations are finalized and approved by our regulators. In the meantime, we're in the process of expanding our home delivery business to Albany, Long Island and the Hamptons and are working towards identifying the other 2 new dispensary locations. We believe our clean locations could be a good candidate for a flagship Green Goods superstore and are considering relocating or remodeling some of our other existing dispensaries in preparation for the beginning of adult use sales, which we currently expect will begin sometime next summer. Moving on to Minnesota. Please turn to Slide 19. We continue to be very pleased with the performance we're experiencing in Minnesota. Patient enrollment trends remain strong with between 250 and approximately 320 patients or more enrollment coming in most weeks. And we believe we're gaining market share with the rollout of 4 new Green Goods dispensaries late last year. We currently have 8 of the 13 total retail stores that are operational in the state and recently purchased an additional 20 acres adjacent to our existing manufacturing facility to provide significant flexibility for the expansion in the future. In Minnesota, the state recently passed legislation that will allow us to begin selling smokable flower in the medical market sometime next spring. For the last several quarters, we have been operating below 50% of our cultivation capacity in this market, but we're in the process of ramping up capacity now as we believe the inclusion of flower will serve as a catalyst for significant growth in patient enrollment into the program. The inclusion of flower could substantially augment our sales growth in Minnesota. Please turn to Slide 20, where we'll discuss our opportunity in New Mexico. New Mexico's medical cannabis market is currently at an annual revenue run rate of over $300 million. The state recently passed adult-use legislation, and it's our expectation that adult-use sales will begin there sometime in quarter 1 of next year. We recently completed a 13,000 square foot cultivation expansion that received regulatory approval in late April and is now fully operational. We are considering an additional 3 acres of cultivation later this year as well as manufacturing and processing facilities at our site in Gallup, all subject to regulatory approval. We expect the execution of these plans will result in approximately 145,000 square feet of cultivation in the state, with an approximate potential annual biomass cultivation capacity of more than 32,000 pounds. We currently have 2 operating Green Goods dispensaries in Gallup and Santa Fe with a new store in Las Cruces, recently receiving regulatory approval at opening this month, and an additional store completed and awaiting regulatory approval in Albuquerque. We believe that the Albuquerque store could also open before the end of the month, subject to regulatory approval, which would bring our total number of operating dispensaries to 4. And it is likely that we'll look to add 2 more dispensaries sometime over the next year. Please turn to Slide 21 for a review of our operations and plans in Arizona. Recent data from BDS analytics estimates Arizona's adult-use cannabis market is currently running roughly $1.5 billion annual rate. Demand continues to rigorously outpace supply in the state. We are therefore in the process of significantly expanding our operations in the state to capitalize on the strong growth opportunity. Last fall, we completed the first of 2 9-acre outdoor shade house expansions at our Elephant Head Farm cultivation facility in near Amado. Given the timing of that completion, our first harvest this past spring was a smaller crop than we anticipate during the seasonal growth in the future. Most of that biomass was absorbed into the market as soon as we could finish processing. So we're looking forward to getting the second 9-acre shade house expansion completed later this fall. We are also planning to utilize our recently granted second adult-use manufacturing license to add an additional 10 acres of hybrid greenhouse and add 60,000 square feet of processing and manufacturing capabilities at a new facility near the Tucson area, which will enable us to produce the full spectrum of cannabis products form factors. We expect this expansion project will be completed around the middle of next year subject to regulatory approval. At which point, we expect to be able to produce approximately 100,000 pounds of biomass annually in the Arizona market. On the retail side of things, we're in the process of remodeling our dispensary in the Phoenix area to Green Goods. We are also interested in acquiring additional dispensary licenses if we can identify acquisition targets that meet our criteria. Please turn to Slide 22, where we'll review our operation and expansion plans in Maryland. Maryland's medical market is currently at an annual run rate of approximately $530 million. We believe that we are positioned to be a strong player in the wholesale market here once our expansion projects are completed. As a reminder, from our quarter 1 earnings call, wholesale sales in Maryland were impacted during the first quarter as a result of the move from our former cultivation and processing facility in Hurlock to our new cultivation facility at Massey. And the impact of this move will also impact our second quarter as the facility is not quite fully ramped. Wholesale sales from the new facility should begin again later this month, at which point we expect to return to strong growth in both our wholesale and retail sales channels through the remainder of the year. We're also in the process of completing an additional 75,000 square foot expansion of higher greenhouse cultivation capacity next to the existing facility in Massey. We believe this project will be completed this coming fall, subject to regulatory approval. And at that point, we expect to have a total annual biomass production capacity in Maryland of approximately 59,000 pounds. We're also making some enhancements to our manufacturing and processing capabilities at the facility in Hurlock, which will enable us to offer a full suite of medical to more adult-use leaning products, including concentrates, gummies and hard candy edible products. In retail, our recently opened Green Goods dispensary in Frederick is continuing to outperform our expectations. We continue to be interested in pursuing additional dispensary licenses in Maryland if we can identify acquisition targets that meet our criteria. Finally, we'd like to remind everyone that we have the potential to monetize our noncore assets in the future. These opportunities are not contemplated in the outlook we shared today and can provide additional upside opportunities for our business in the future. In Massachusetts, we have preapproval for a vertically integrated set of medical licenses that would enable us to build a co-located manufacturing and processing facility as well as up to 3 medical dispensaries, all of which could be transitioned to adult use on regulatory approval. We acquired our assets in Nevada and Puerto Rico because we believe they present attractive opportunities to grow low-cost cannabis outdoors at agricultural scale, which could benefit our business in the future if the restrictions on interstate shipment of cannabis are eliminated. In that scenario, we'll feel very good of our combined operating footprint, especially with the asset base we're developing in the Southwest where we can cultivate outdoors at low cost. On Slide 26 of today's presentation, we're providing a few slides to demonstrate how we are positioning our retail stores and products to consumers. We'd also encourage everyone to watch yesterday evening's video presentation, during which our Executive Vice President of Retail, Patrick Peters, brings viewers directly into several of our new Green Goods stores. We currently have 16 operating dispensaries open across our footprint, with most of these already branded under the Green Goods name. These are truly beautiful retail dispensaries that will be well positioned to serve both medical patients and adult-use customers. And they reflect the evolution of our company to a more consumer-friendly shopping experience as compared to the highly medicalized dispensaries we have previously been operating in the early days of our limited license medical markets. Our cultivation teams across our footprint are focused on flower production and flower strain variety in the markets where flower sales are permitted. And as we discussed earlier today, we're making significant upgrades to processing capabilities in order to provide the full spectrum of cannabis product form factors. Our Chief Marketing Officer, Harris Rabin, is developing an impressive arsenal of new in-house brands for these new products and form factors, and we look forward to sharing more of these once it's possible for us to launch these brands and products with the approval of regulatory in our soon-to-be adult-use markets in New Mexico and New York. Please keep in mind that Arizona has been predominantly a flower market for us to date, but the new processing facility that we plan to develop in the Tucson area will enable us to significantly expand our brand and product assortment next year. In the meantime, we've showcased on Slide 28 and 29 some of the differentiated brands and products that we've developed and are currently distributing in our markets. We believe in order to build long-lasting staying power in the mind of the consumer, you need to be able to -- quality and consistency and ideally build brands on top of products that are truly differentiated in order to succeed long term. As industry producers continue to migrate towards lower-cost biomass production, given that we're ultimately engaged in the cultivation of an agricultural commodity, we believe that having meaningful protectable intellectual property will be an important factor in maintaining higher-margin products in the future. Our science and IP incubator, Resurgent Biosciences, will help us stay ahead of the curve as competition continues to increase. Providing a summary of Resurgent's focus area is on Slide 31 of today's presentation. And everything you see here reflects opportunities for us to work with outside partners to commercialize products and technologies that could truly transform our future. Resurgent has a proven track record in advancing clinical research of cannabis in coordination with several leading hospitals across the United States. We're looking forward to expanding our team's work to include the study of additional plant medicines in the psychedelics realm, with new research partnerships over the course of the next several quarters. On Slide 32, we provided a summary of our Chief Medical Officer, Dr. Steven Dahmer's team's clinical research progress. Dr. Dahmer is one of the leading ethnobotanists and experts on plant medicine in the United States, and he has recorded a separate video presentation of our clinical research as an additional resource available for -- on our Investor Day website. This content will be available for viewers to watch after the conclusion of today's conference call, and we'll begin to provide more frequent updates of his work in the future as several of his research trials are nearing publication. Since the formation of Resurgent Biosciences, our scientific team has made substantial progress to commercialize several of the important opportunities within our IP portfolio, including our patent-pending TerpSafe packaging technology and multichannel vaporizer. Both of these innovations are summarized on Slides 33 and 34 of today's presentation and were also featured in last night's video webcast. Our TerpSafe packaging represents the first commercialized product from our IP portfolio that is now available for sale in the United States. And we're marketing this product in-house under our Amplifi brand of terpene enhanced flower. TerpSafe is being manufactured under a licensing agreement with eBottles 420, which... [Audio Gap] Before other growers and distributors of cannabis in North America interested in using this technology to provide consumers with ultimate freshness of cannabis flower. We provided a demo of the technology and an additional video resource on the Investor Day website. Our Chief Scientific Officer, Eric Greenbaum, also recorded a separate video presentation, which discusses the science behind this technology in more detail. And that video will also be available for viewers to watch on our Investor Day website after the conclusion of today's conference call. TerpSafe is a perfect case study for how we expect to collaborate with partners to develop the many long opportunities -- long-term opportunities that we believe Resurgent can generate. And we believe these opportunities could represent substantial incremental value creation for Goodness Growth Holdings shareholders in the future beyond our rapidly growing multistate cannabis operations. We have many exciting opportunities in front of us, and we featured 2 more of our pending patents for portioned extracts and harm reduction in tobacco products on Slides 34 and 36 -- pardon me, 35 and 36 of today's presentation. An issue preventing widespread adoption of concentrate is ease of use and consistent portioning by newer consumers. The Juul projects shown on Slide 35, productizes connoisseur concentrates to be approachable by our consumers. What you see here reflects the combination of both our portioned concentrated Juuls as well as a vaporized delivery mechanism that could significantly improve the ease of use for consumers looking for the highest quality and highest content THC products in adult-use markets. Our series of patents for harm reduction in tobacco products is based on scientific research that demonstrates an opportunity to combine certain formulations of CBD and THC with tobacco in order to potentially reduce cancer risks. Research shows that CBD and THC may offer protective effects against lung cancer and that the addition of cannabinoids to tobacco products may reduce the harm associated with these products. Research has found that the presence of CBD and/or THC decrease cell proliferation in a lab study which cancer cells were incubated with these cannabinoids. The first 2 charts on Slide 36 demonstrate that concentrations of a CBD/THC mixture effectively reduced cancer cell proliferation by more than 75% compared to a control group. Research also found that the presence of CBD and THC decreased cell motility in a wound healing assay that may be indicative of preventative characteristics that could decrease the tenancy of cancer cells metastasizing in patients, which is demonstrated in the second set of images on this slide. Research has also found that increased expression of cannabinoid receptors can further survival advantage in non-small cell lung cancer patients, suggesting increased cannabinoid signaling in gene expression may be beneficial to these cancer patients. This series of patents is more indicative of the longer-term FDA path types of opportunities within our IP portfolio. But you can imagine the potential impact this IP could have in the tobacco industry in the future. That concludes my prepared remarks. I'll now hand the call over to John.

Thank you, Kyle, and thanks to everyone for joining us for our Investor Day events. Please keep in mind that all numbers stated refer to U.S. dollar amounts, unless otherwise noted. Please turn to Slide 38, where we've summarized the recent improvement in gross margin that has resulted from operational efficiency gains in several markets and operating leverage through higher sales volumes. We anticipate that continued organic revenue growth will result in a reduction in SG&A expenses as a percentage of sales as revenues continue to ramp through the end of fiscal year 2022. And we're confident that our efforts to scale production and expand our retail dispensary footprint will drive improved financial performance through fiscal year 2022 as more of our core markets transition to adult-use programs. On Slide 39, we've provided a summary of our previous 5 quarters of revenue performance by state compared with total revenue for fiscal year 2020, excluding our former operations in Pennsylvania and Ohio. And our low and high-end ranges for our outlook revenue for fiscal year 2022. Assuming we're able to execute on the development projects that we've discussed today, that these projects are completed in line with our expected timing, and that we're able to generate the biomass yields that we expect within our markets, we believe that fiscal year 2022 revenue could be in the range of $140 million to $180 million. At the midpoint of this outlook range, this would reflect revenue growth of approximately 280% compared to fiscal year 2020. We'll be able to support this growth in part through the significant expansion of cultivation capacity that are currently ongoing across our operating equipment. On Slide 40, we've provided a state-by-state summary of annual biomass capacity as of the end of fiscal year 2020. This is compared to our expected annualized biomass production capacity once these projects are completed by the end of the second quarter of next year. The result of these projects is expected to increase our total biomass production capacity by more than 300% compared to the level of production we had online at the end of last year. As these projects ramp up, we expect to drive significant improvements in profitability and believe that adjusted EBITDA in fiscal year 2022 could be in the range of $35 million to $55 million. As a reminder, we ended the first quarter with total current assets of $58.6 million, including cash on hand of $40.6 million. We expect net CapEx through the Horizon plan, excluding financing from real estate partners, to be in the range of $15 million to $20 million and that we'll begin to generate positive cash flow from operations during the first half of next year. As of March 31, 2021, we had 153,577,058 shares outstanding on an as-converted fully diluted basis, and we've provided a summary of our share capital on Slide 42 of today's presentation. This concludes our prepared remarks. Operator, we'll now open the line to analyst questions.

[Operator Instructions] Your first question is from Eric Des Lauriers with Craig Hallum.

Congrats on the strong guidance and lots of exciting things across the footprint. I was wondering, first, if you could just expand on the types of facilities that you're building out in Arizona, New York and Maryland. Looks like a bit of a hybrid greenhouse in Arizona and then sort of unclear if New York and Maryland are indoor or greenhouse hybrid. Could you sort of help us understand those facilities a bit more?

Eric, happy to do so. Yes, hybrid facilities, hybrid greenhouse facility in Arizona and Maryland, a full sort of optimized indoor grow in New York.

Okay. And then in Arizona, when you say hybrid greenhouse, should we think of that as like hybrid -- like more hoop house sort of half outdoor have greenhouse? Or is that more like half indoor or half greenhouse? What do you mean by hybrid there?

Yes. It will be pure greenhouse with some environmental controls. So obviously in the Southwest, a little bit less in the way of humidification requirements. But we love really capitalizing on the environment down there to drive down costs. And so it will be full greenhouse production down there, but with some environmental controls for sort of the extremes, heating and cooling capabilities.

Okay. Great. Yes, so sort of a greenhouse indoor hybrid instead of green door -- or greenhouse outdoor hybrid. So switching gears to...

So to be clear, that's for the -- Eric, just to be clear, that's for the Tucson expansion facility. The incremental 9-acre shade house is essentially outdoor grow. So there'll be 18 acres outdoor grow and then the incremental Tucson facility will be the hybrid.

Yes. Great. Okay. Switching gears to New York here. Would love to just hear your updates or any expectations for square footage caps for canopy? And then any timing for the state approval of your expansion plans?

Yes. We're going to definitely build to whatever that limit may be. We -- I don't have a great guess right now as far as canopy limit. I think it's more likely than not that there will be one. But our intent is to sort of build right up to that limit. And I think it's critical in a place like New York where we anticipate pretty substantial shortages and very robust demand in the wholesale market that you optimize the facility really for yield and quality. And so I think you're kind of driven with any kind of canopy limit in New York to full indoor cultivation with optimized yield and quality. So that's our approach there. And we're working with our regulators to -- it's going to be some time, I think, before we have clarity on any kind of canopy limit, but we anticipate that the new cannabis governing body will be up and running in the coming weeks here. And hopefully, over the course of the summer, we'll get some more clarity on some of the regulations and requirements in the program.

Okay. All right. Great. And that's a good lead in into my last question here. So you guys have previously mentioned that you're looking to bring in some growth consultants to sort of capitalize on this New York opportunity. Can you just talk about how that process is going? And then some of the progress that you've made to date improving those deals?

Yes. We're working with a design build partner in New York to really optimize sort of the process and facility to both yield and quality of flower. And that's going well. We're well into that process. And like I said, we're hopeful that we'll have this optimized facility in conjunction with these guys here early next year. So it's going well. Just to answer your question, frankly.

[Operator Instructions] Your next question is from Graeme Kreindler with Eight Capital.

My first question is with respect to Resurgent Biosciences in the announcement that Vireo is going to be -- or sorry, Goodness Growth is going to be involved on the psychedelic side of things. I was just curious in terms of that decision, the timing of it. What drove the decision to get involved in that area now? Certainly, lots of initiatives going on at the state and at the federal level on cannabis in a fast-moving and constantly changing industry. I understand there's a lot of adjacencies, synergies and core competencies to deleverage based on Vireo -- Goodness Growth's skill set here. But in terms of going on that now, could that be a potential distraction for the company as it goes on the cannabis side of things? Would appreciate some color there.

Yes. Great question. So just to be clear, our first, second and third opportunities here are cannabis and our multistate operator is our primary focus. But Graeme, essentially, where we are is we have this IT company, Resurgent Biosciences with sort of a core competency in really plants and medicine. And it seems completely artificial to limit these folks to just a single plant when there's arguably much more substantial low-hanging fruit in adjacent realms like psychedelics. Some of our team members have been looking at this for years, frankly. And I wanted to be sure that we had identified some opportunities that we see as particularly high yield. And we've identified here sort of 2 paths that we're taking that I think are going to be quite high yield over time. And so this is not a distraction. It's definitely an augment for the Resurgent Biosciences team. This is why we built this IP company. And the MSO, make no mistake, is the primary opportunity here for the foreseeable future and remains our teams for second and third focuses.

Okay. Understood. Appreciate the color there. Then just as a follow-up with respect to the guidance provided for fiscal '22, does any of that capital spending include any sort of budgets for Resurgent? And does any of that revenue include any potential monetization for Resurgent here?

Yes. In the guidance, there's no assumption of success for Resurgent on monetizing the IP. And really, we're using current resources for all these initiatives. The incremental spend broadening into psychedelic here for Resurgent is very, very low. No new hires. This is using existing personnel and resources predominantly. There's partnership opportunities that may arise and that there may be some limited expenses there. But this is not an expensive undertaking for us, it's using current resources. And no CapEx. And no CapEx.

Understood. Then lastly, you mentioned in the video yesterday a partner in South America for Resurgent on the psychedelics end. Is it possible to get more details there.

Not quite yet, but we'll be announcing that once finalized.

And we have no further questions at this time. I'd turn the call back to presenters for closing remarks.

Thanks again for joining us for our first Investor Day events. We're very grateful for all of your support and are excited about the future in front of us at Goodness Growth Holdings. We'll look forward to speaking with you all again on our second quarter results conference call in August as well as on the conference circuit later this summer. Thank you.

This concludes today's conference. You may now disconnect.