Earnings call: Avant Brands reports record revenue, optimistic outlook

Avant Brands Inc. (AVNT) has announced a record-breaking fiscal year with substantial growth in revenue and profitability, according to their latest earnings call. The company reported a 33% increase in gross revenue, reaching $30.2 million, and a net revenue climb to $26.3 million, up by 31%. Canadian recreational net revenue saw a 10% increase, while B2B and export revenues surged by 96%. Avant Brands also achieved a 132% increase in adjusted EBITDA and reported positive cash flow from operations, marking significant financial improvements over the previous year.

Key Takeaways

• Gross revenue hit a record $30.2 million, a 33% year-over-year increase.
• Net revenue also reached a record high at $26.3 million, reflecting a 31% year-over-year increase.
• Canadian recreational net revenue grew to $15.8 million, while B2B and export revenues saw a notable 96% increase to $10.2 million.
• Adjusted EBITDA reached $4.4 million, a 132% increase from the previous year.
• Positive cash flow from operations was reported at $5.4 million.
• Two seller financings were restructured to reduce quarterly payments and extend payment terms.
• The company expects continued growth and profitability in the future.

Company Outlook

• Avant Brands anticipates sustained growth and profitability going forward.
• The company is optimistic about its export market, having signed 11 export agreements and expecting to start monetizing some in Q2.

Bearish Highlights

• Avant experienced a cash crunch in January and February due to slow sales but has seen improvements since.
• The company had a weak Q4, particularly in recreational sales, attributed to market factors such as inflation and competition.
• Concerns about insolvency were raised, emphasizing the need for restructuring and debt cleanup.

Bullish Highlights

• The company has started shipping on one of its four major deals, with completion expected by early Q2.
• Past deals are beginning to monetize, and the domestic B2B segment was reactivated with early success.
• The CEO is optimistic about future sales and cash flow, expecting a record quarter soon.

Misses

• There was a discrepancy between kilograms produced and sold due to inventory accumulation for export shipments and weak Q4 recreational sales.
• Avant operates close to but not at full capacity to maintain strain variety and allow for facility maintenance.

Q&A Highlights

• The company operates at about 70-78% production capacity, with Israel and Australia being the largest export markets.
• Avant aims to drive a high selling price for its premium brand, BLK MKT, to offset excise taxes and maintain margins.
• Exports are seen as recurring and sticky sales, with strong relationships in place with clients like IMC in Israel and another in Australia.

Avant Brands' CEO, Norton Singhavon, provided insights into the company's financial status, operational strategies, and market challenges during the earnings call. Singhavon assured that Avant's cash flow is sufficient to cover debt and operating costs, based on projected revenue. He also outlined the company's focus on high-quality premium branding and its strategic approach to sales channels, including selective availability of its premium brand BLK MKT to maintain its high-end image.

The CEO also highlighted the company's cost reduction strategies in labor, energy, and packaging, balancing it with maintaining their premium product positioning. Despite the setbacks in Q4, Avant Brands is confident in its recovery and future growth, with a focus on optimizing production and scaling up operations in a challenging market.

InvestingPro Insights

Avant Brands Inc. (AVNT) has demonstrated impressive revenue growth and profitability in its recent earnings report. To provide further context to these fiscal achievements, let's consider some real-time data and insights from InvestingPro.

InvestingPro Data highlights that Avant Brands has a market capitalization of $20.25 million USD, indicating the size and market value of the company in the current economic landscape. Despite the reported revenue increase, the company is not profitable over the last twelve months, with a negative P/E ratio of -10.14. This suggests that the company has been operating at a loss when looking at earnings relative to share price. Additionally, the revenue growth of 102.0% over the last twelve months as of Q3 2023 is noteworthy, reflecting a significant increase that outpaces many competitors in the industry.

From the perspective of InvestingPro Tips, it is important to note that Avant Brands' stock price movements have been quite volatile, and the stock has fared poorly over the last month with a 1 Month Price Total Return of -15.73%. This volatility is critical for investors to keep in mind, especially considering the stock has taken a substantial hit over the last six months, with a 6 Month Price Total Return of -46.99%. These metrics underscore the importance of cautious investment strategies and the potential for high risk when investing in the company's stock.

For readers looking for more in-depth analysis, there are additional InvestingPro Tips available on the InvestingPro platform for Avant Brands. These tips can provide further guidance on the stock's performance and what investors might expect moving forward. To access these valuable insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With this code, investors can unlock a comprehensive suite of tools and data to inform their investment decisions.

The insights provided here are just a glimpse of the detailed analysis available on InvestingPro, where there are a total of 6 additional InvestingPro Tips for Avant Brands Inc., offering a deeper dive into the company's financial health and stock performance.

Full transcript - GTEC Holdings (AVTBF) Q4 2023:

Operator: Thank you for standing by. This is the conference operator. Welcome to the Avant Brands Fiscal Year 2023 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Carl Luescher [ph], Investor Relations. Please go ahead.

Carl Luescher: Thank you, operator and good afternoon everyone. Welcome and thank you for joining Avant Brands fiscal year 2023 results conference call. My name is Carl Luescher, Investor Relations for Avant Brands. Speaking on our call today is Avant’s Founder and Chief Executive Officer, Norton Singhavon and Chief Financial Officer, Miguel Martinez. Avant’s Chief Operating Officer, David Lynn is also present and will be participating in our Q&A session. Our 2023 annual results were disseminated yesterday and is now available on SEDAR+ and on our website at www.avantbrands.ca. Before we get started, I wish to remind everyone that some statements made on today’s call are forward-looking in nature and therefore are subject to certain risks and uncertainties, which are all outlined in detail in our regulatory filings available on SEDAR+. On this call, we will refer to the company as Avant Brands or Avant. I will now turn over the discussion to Miguel to share the company’s financial highlights. Norton will then provide his strategic update. Please go ahead, Miguel.

Miguel Martinez: Thank you, Carl. Good afternoon, everyone. Thank you for joining us today. We are pleased to report another strong year for Avant Brands. Our press release issued this morning summarized key financial and operational highlights for the 2023 fiscal year. In the latest fiscal year, our company achieved milestones across all financial metrics, indicative of our growth trajectory and operational efficiency. Gross revenue achieved a record high of $30.2 million from the sale of 7,105 kilos, marking a 33% and 93% increase compared to the previous fiscal year. Net revenue similarly reached a record high of $26.3 million, reflecting a notable 31% increase compared to the previous fiscal year. The Canadian recreational net revenue was $15.8 million, showing a 10% increase versus the previous fiscal year. Our B2B and export revenues experienced exponential growth reaching a record $10.2 million, indicating a 96% increase compared to the previous fiscal year. Our overall gross margin slightly increased to 34%, an improvement from the 32% reported in previous fiscal years. This is a reflection of recreational gross revenue margins of 48% and export sales with a margin of 35%. The overall average is slightly reduced from the sale of aged and out of spec product, which is sold in the Canadian B2B market. The weighted average selling price for flower decreased to $4.23 per gram from $6.07 per gram in the previous fiscal year. It’s important to note that despite this overall decline, our export selling price actually increased during the year and we have maintained pricing integrity with our flagship recreational brand, black market, without implementing any price reductions. The decrease in average selling price can be attributed to several factors. Firstly, there was an increase in bulk export sales, which have a lower average selling price due to the absence of packaging cost and excise taxes. Additionally, the relaunch of the Flowr (OTC:FLWPF) brand, which was priced lower than Tenzo and BLK MKT contributed to this decline. Furthermore, a strategic decision was made to divest Flowr’s existing stale-dated and off-spec inventory at discounted prices upon assuming ownership during the fiscal year. We continue to remain confident in our current pricing strategy amongst all channels. Selling, general and administrative expenses on the cash basis, so net of depreciation and stock-based compensation, totaled $8.8 million, which was an increase of $1.8 million over the prior year which is primarily due to increases in professional fees, salaries and wages and Health Canada regulatory fees. While the increase year-over-year is 26%, SG&A as a percentage of net sales has slightly decreased from 35% to 33%. Adjusted EBITDA attained a new pinnacle at $4.4 million, reflecting a 132% increase compared to the previous fiscal year and an adjusted EBITDA margin at 17% of net revenue, indicating solid operational efficiency and profitability. Net loss from operations significantly narrowed to $1.5 million, a notable improvement from the $8.5 million loss reported in the previous year. We are confident that the company will continue to drive revenue growth, while reducing its losses and reaching net profitability in the near future. Cash flow from operations achieved a record positive inflow of $5.4 million, which is an $8.9 million improvement over the $3.5 million outflow in the previous fiscal year. This also marks our sixth consecutive quarter of positive cash flow from operations and underscores our commitment to sustained financial health and operational stability. These results reflect our company’s dedication to driving growth, enhancing profitability and delivering value to our stakeholders amidst a dynamic market landscape. Earlier this week, the company announced the restructuring of two of our seller financings, with F-20, our largest obligation, which was a quarterly payment of approximately $1.8 million, is now significantly reduced to $450,000 per quarter. MENA, which was also due in full in December, is not extended another 6 months – now extended another 6 months with approximately $60,000 in monthly payments. These amendments enable Avant to reinvest our strong cash flow from operations into near-term strategic objectives. So, the company can remain committed to growing the business in a sustainable manner. For more information about our debt restructuring agreements, please visit our website. With that, I will turn the call over to our CEO and Founder, Singhavon to expand on our operations and provide an update on strategic initiatives.

Norton Singhavon: Thank you, Miguel. Avant Brands achieved record-breaking results in 2023 with momentum expected to continue into 2024, thanks to ongoing efforts to optimize cultivation efficiencies, reduce expenses, and most importantly, drive revenue. Our recent product launches have been well received reinforcing our leadership in the premium cannabis space. Dedication to quality and consistency across operations has enabled us to expand market share even in this competition. This quarter, we executed four new export agreements driving growth in the international cannabis distribution market. Export sales is our fastest growing channel supported by partnerships in Israel, Australia and Germany. Export is a category that I am most excited about as it gives us a chance in building the most iconic cannabis brand in the world, BLK MKT through trademark licensing agreements. In Q4 fiscal 2023, Avant saw temporary sales dip due to product accumulation for large export shipments, which were later fulfilled in Q1 of 2024. Decrease orders from Ontario cannabis store were also a factor influenced by inflation, changing dried flower consumption trends and demand for larger format products. Avant’s performance was further affected by limited product visibility and support in major Ontario retail chains, mainly those with 10 or more stores. This stems from Avant’s decision to avoid pay-to-play data programs, preserving adult gross margins and ensuring compliance with the Alcohol and Gaming Commission of Ontario’s policies. Avant maintains the dedication to the Canadian adult-use market and global expansion. Anticipated gross revenues for Q1 2024 falls within the range of $8.2 million to $8.7 million further solidifying BLK MKT as a leading global cannabis brand. While Q4 presented a temporary setback, we have restored our previous run-rate from earlier quarters in fiscal 2023. With confidence, we project continued growth as we offset declining Canadian adult-use revenues with lucrative high volume export deals. In conclusion, Avant Brands is dedicated to leading the premium cannabis industry through innovation and excellence. We appreciate the ongoing support of our shareholders as we continue on this path of growth and success. Together, we are poised for a future filled with growth, opportunities and success. Thank you for your support and interest in Avant Brands. Now, we will open the floor to questions.

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jordan Kay, Private Investor. Please go ahead.

Jordan Kay: Hi, Norton. Hi, Miguel. Hi, David.

Norton Singhavon: Hi, Jordan.

Jordan Kay: I’ve got a bunch of questions. I think I am going to split it up in half, I’ll do the first half, and then get back into queue and let others ask the questions, if that’s alright.

Norton Singhavon: Honestly, if you have questions, you can just go through them, you don’t have to jump out and jump back in.

Jordan Kay: Alright. Well, here we go. Question for you. The first one is, if you guys produce, let’s just say this quarter, you had produced 3,000 kilograms of cannabis, what does that look like in revenue if you could turn around the next day and sell all of it?

Norton Singhavon: Yes, I mean, a quick and dirty math is you use our average selling price of – I think it was what, $4.40 a gram, $4.50 a gram. So one thing you got to consider though is that 3,000 kg isn’t all fully monetizable at that price point, right, some of it is going to be popcorn, some of it is going to be trim. So out of 3000 kg, our sort of quick and dirty math is 50% to 60% of that is what we call our ultra-premium flower. Then there is another call it 20% to 30% of popcorn and small buds and then the balance is trim. So popcorn and small buds, we use for pre-rolls, trim goes to extraction. But yes, that gives you an idea of sort of how that breaks down. So wouldn’t it be 3,000 kg x $4.30 a gram, it’s more like, 1,600 kg x $4.30 a gram and then you will probably take another 20%, 30%. Assuming we have that velocity and demand for pre-rolls and move that at, call it, a lower price point somewhere between $2 to $3, depending on whether we sell a bulk or whether it goes into our products.

Jordan Kay: Okay. Yes, and I can do some rough math on that. And that puts you a little bit higher in terms of revenue then it looks like Q1 is going to come in, but that’s good to know. My next question is about the current financing payments that you have. So by my calculation, it’s somewhere around $1 million just in the financing from the GreenTec loan, the F-20 and the MENA. Is that that right that this quarter we will see about a million?

Norton Singhavon: Miguel, do you want to take this one?

Miguel Martinez: Sure. Sorry, go ahead, Jordan, I don’t think your question was quite finished.

Jordan Kay: Yes, that’s okay. So the amount of money that you are going to have to pay MENA, F-20 and the – whoever the lender is on GreenTec, here in well, I don’t know, if it would be Q2 or Q1 based on those refinancings. But let’s just call the next quarter. So Q1, well, I guess it depends on when those agreements are effective. Anyway, my point here is, based on your eight point whatever it is, in Q1, if that carries into future quarters, does that create enough cash flow for Avant to cover all of its operating costs, all of its SG&A, all of its financing payments in terms of cash flow or does Avant currently need more money since there is very few dollars in cash on the balance sheet right now to pay its obligations?

Norton Singhavon: Miguel, actually let me take this one. Jordan, so – yes, I understand your question. So yes, I’ve done the math, we are about just under a million dollars a quarter for debt obligations. To touch on that, obviously, Q4 was a little tight. But if you look at sort of the run-rate that we had throughout Q3, our EBITDA and cash flow range from anywhere around $1.6 million to $1.9 million. So assuming that our revenues can sort of remain flat, at worse, at that $8 million mark, there should be enough cash flow to service these debt payments, which is why we structured them the way we did to give ourselves comfort and cushion that we wouldn’t have to restructure these again at some point in the near future.

Jordan Kay: Totally. And Nort, that’s what I was hoping that you’d say. My concern is that I took a look at the current liability section and the accounts payable went from $5 million to $13 million in two quarters, which like to me what that means is that you may have been paying off some other debts, but other debts are racking up. And let me rephrase that another way, should we expect that number to go higher given the cash flow, meaning so the debt might get paid, but is there other stuff that’s not going to get paid?

Norton Singhavon: No. So I would say having a slow November and December definitely put a hindrance on our ability to sort of get caught up with everything. And especially we wrote a big check in November for $1.8 million to the guys of F-20. Then we had a slow November and a slow December. So, we felt that cash crunch in January. We felt that in early February, but the products that we were pushing out the door in December and January, those cash flow started rolling in over the last few weeks. So we are in a position now, where it was tight in the early part of the year, but we are starting to get caught back up slowly and surely. So I don’t see that number increasing, I see it hopefully decreasing.

Jordan Kay: Okay. I mean, that’s good. Norton – and you talked about this in previous calls, but what – the holiday quarter, where all the local governments order from you guys. Isn’t that Q4 or am I missing something?

Norton Singhavon: Yes, that’s – that’s Q4 right. Yes, but you would have to – you have to remember that most of these orders, they are planning out a reasonable time in advance, right. I don’t see cannabis as a hugely seasonable – seasonal product in my opinion. But this is my personal opinion. But you also have to remember, Jordan, like what we noted in our – and what I had read out and also in the earnings report is that our rec sales are declining. And I’m not going to sit here and sugarcoat it, our rec sales are declining and that is a major factor in why Q4 was where it was.

Jordan Kay: Is this the value buds problem?

Norton Singhavon: This is a whole – it’s a plethora of problems. So, number one, obviously inflation, who is going to go buy BLK MKT, which is one of the most expensive cannabis brands in the country, right, number one. Number two, we are seeing a lot of uptick in higher velocity, higher format SKUs, right. And honestly, the biggest thing in my opinion is just retail pay-to-play data programs. We don’t participate in it. They are pricey. You know, I have nothing against those producers who participate in that. But in my opinion, especially BLK MKT being the sort of the premier brand that it is, we shouldn’t have to “grease” to get our products supported, right. So we are losing market share primarily in Ontario, for all those reasons that I just stated. Now, what’s interesting is BC has actually, if I’m correct, David has sort of picked up for us over the last fiscal – over the last fiscal year. So Ontario is going to be a bloodbath. I mean, I don’t like to name drop. But when we – when we recently went through this analysis on should we participate in the data programs, BZAM was one of the ones that was brought to us, right, we said BZAM does it, they are killing it. They are moving lots of product. They are dominating in all categories. But look at what happened this morning, they fall for CCAA. So, our thought is that our rec business is going to decline in Ontario, probably for the next couple of quarters. I don’t see it being overly concerning. But I see as if we weather it out, we don’t give up 15% to 20% of our gross margins on these data programs, that eventually these companies will pay-to-play themselves out of business and will remain – will survive and our rec sales and market share should eventually turn back around and start growing. But it’s hard for us to grow the rec business aggressively without doing what I call stupid things.

Jordan Kay: Yes, totally. And again, I would never recommend that you do anything that would put the business at risk. I just wonder like if you are not in, like, let’s just say, a chain that’s got 100 plus stores and there was a way to work on something creatively, that might be interesting, but we can talk about that?

Norton Singhavon: The problem is that, it’s not a one or dine, right, you open up Pandora’s Box (NYSE:BOX), you get in chain number one, then chain number two that’s been supporting, it’s, like hey, buddy, like what’s going on, how come we are not getting this deal, right? And they are saying well they have more stores than you. So, it’s not a one store thing. If you start it, you have to continue it and other stores are going to expect it. So even stores that have been supporting you that have been moving your product, maybe hundreds of thousands of dollars every few months that weren’t getting this sort of tick back are going to ask for it. And it’s something that is I think a very slippery slope. It would – it’s a lot of work for us to try and grow our rec revenues by call it a million dollars a quarter. We have to do a lot of things. But we look at how hard it is to grow our revenue by a million dollars in export. I’m not to say that it’s extremely easy, but it is a lot easier than trying to push water uphill on rec, when you have companies with – some companies with unlimited bankrolls almost that have given up a good chunk of their margin for that shelf space.

Jordan Kay: Right. But I assume that export picked up here in Q1 and the revenue is still around 8.5 on average of the numbers you gave and Avant did 8.9. And again, I don’t know how this happened, but Avant did 8.9 in Q4 2020 – whatever the prior year was Q4 2022. And so, the promise here and I am not saying that there is anything, varies here, but the promise was, hey, we were able to do 8.9 with 3PL and our other assets, you are going to – we are going to buy flower, right, which is going to grow our case by 30%, 40%. And so, you should expect 30%, 40% additional on top of that. And so, like the promise of $8 million a quarter seems to be a little bit light. So can you talk a little bit about that?

Norton Singhavon: Yes. So Q4 of last year, in my opinion, was completely sort of sandbag. And what I mean by that was that there were export shipments that should have gone out in Q3 that went out in Q4. So realistically, last year, Q3 probably should have been $6 million and Q4 should have been, call it $7 million, right, instead of $8.8 million and $5 million, if that makes sense. So that sort of touches on that. But on your point, yes, no, I completely agree with you. Our thesis this whole time has been we are going to buy a flower because we have excess unmet demand. And we still stand by that. We have tremendous unmet demand. So the challenge is that we didn’t forecast our rec business to sort of decline at the rate that it has declined over the – over this fiscal year, right. But looking into the future quarters, what I see is I see us getting close to being able to sell all of our product. I think we are already getting visibility into that. It’s going to be a mix of export. It’s going to be a mix of rec. And it’s going to be a mix of Canadian wholesale. Once we are in a position, where we can stabilize in selling the vast majority of our products, then we look at slowly upgrading these sales channels, right. We might take some bulk wholesale sales that we are getting, I don’t know $253 for domestically and look to upgrade that into export channels. But again, there is significant demand that we are seeing in export. We have signed 11 agreements to-date and zero of them were cold calls. They were all inbound to us. So these are other groups in other countries that know who we are that know our product and they reach out to us and they want to do business. So we are excited about future markets or even expanding our current agreements in export.

Jordan Kay: Of the 4 that you issued that press release about, are any of those in Q1?

Norton Singhavon: I’ll let David Lynn touch on that one.

David Lynn: No, we have just – we mentioned that in that news release. We have started to ship on one of those four deals should be kind of early Q2 most likely end of Q1, early Q2. So, it’s – it can be a long sales cycle and then it can take a while to activate those deals. But by the same token, some of the deals that we did several months ago or late last year, those are starting to monetize. And the ones that we did even further in the past, those have been building over time. So sorry, I would share Norton’s optimism about the export market and also highlight the point about domestic B2B that’s segment we’ve been in and out of over the years depending on whether we had excess inventory or not. But we reactivated that channel in Q1 and we have had very good early success. So there is good upside there too. And it’s certainly at a minimum an outlet for excess inventory.

Jordan Kay: Okay. Let me see I have got a few more here. Can we talk about GreenTec Bio?

Norton Singhavon: Sure.

Jordan Kay: So that property is now mortgaged, right?

Norton Singhavon: Correct. Sorry, not mortgaged, borrowed against, yes – yes, slightly different.

Jordan Kay: Yes, slightly different. So, it’s borrowed against I think the numbers $3.5 million.

Norton Singhavon: Yes.

Jordan Kay: How much value is left in that property?

Norton Singhavon: I mean, the value is in the eyes of the beholder, right, somebody wanted that….

Jordan Kay: You don’t know, if you went to the market, you don’t know how much that would be worth.

Norton Singhavon: I would say that the government assessment, which I would say where we are British Columbia that the tax assessment is usually fairly accurate to what the property is worth. And furthermore, we did run an appraisal also before we ran the – before we bought against it. And it’s come in basically around – the appraisal I believe was, I want to say 3.8 million, 3.9 million. And the government assessment was around 3.3 million. And the reason why we borrowed against that was I don’t know if I told you in the previous call, but we were thinking about selling it and leasing it back, right. But now we are at the mercy of a landlord, right, who knows who the future landlord would be, whether they would be collaborative or difficult, right, number one. Number two, Kelowna Industrial real estate has been one of the hottest sectors in all of Canada, right. So we lose the appreciation on that. And as I said, we are not in control, we are not on the driver seat. So we thought of well, why don’t we just borrow against it, pull money against it that way, we are still in control of our destiny. We don’t have to deal with the landlord. And when we sort of broke down the numbers between paying interest versus paying a cap rate on a lease and assuming a very modest 2% growth per year on the real estate value, we were way better off borrowing against it and paying the dues on the interest versus losing control and paying a lease.

Jordan Kay: Yes and that makes – that makes sense to me. And I was – the reason I was asking was because if that was the source of further capital question is was it worth selling and ultimately trying to pay down some of the debts that you guys currently have, if you are not able to sell all your current capacity. But I know you all worked very hard on that facility for a while now. Nort, there is the – I brought this up before there. There are some pretty sizable management bonuses associated with that and I did see – and this will be two questions, I did see there was $1.5 million worth of share based payment. With the total market cap, I think the company had today of like CAD27 million or CAD 28 million. And I think the bonuses on the GreenTec Bio or north of $2.5 million, you could tell me, if I am wrong there like all these shares that are being issued and again, I am not saying it’s a lot of comps. But I am saying like, the companies, the market cap, the number, can you shed some light, because your common average investors like me are sitting here thinking we are getting diluted fairly substantially and we don’t know when the corner is going to turn, so that – our stock are the ones that the company ends up with more, not less.

Norton Singhavon: Those milestones have a floor price of a dollar.

Jordan Kay: I am not sure if you are aware of that. So the lowest price those shares get.

Norton Singhavon: Yes, I wasn’t aware of that. So, 2.5 million shares of options are issued. Yes. So, 2.5 million, yes, I don’t remember the dollar value, if it’s $2.5 million, then it’s $2.5 million and the minimum price of a dollar. So if the stock is at $2, we get at $2, but the stock is at $0.10, we still get at a dollar and it is staggered over time. I think really what actually is more realistic to hit on that is about $1 million – $1 million and then the rest is our future 80,000 square foot expansion and getting that built out, getting that licensed, getting that operational, who knows if we are ever going to get that far.

Jordan Kay: Right, right. That makes sense. Okay. So yes, I think maybe if you guys wanted to put out something about that in one of your spreadsheets about that, because I think – and do you know what the $1.5 million worth of share based was on the balance sheet for this quarter?

Norton Singhavon: Sorry, say that one more time.

Jordan Kay: There was $1.5 million worth of share based payments on the balance sheet.

Norton Singhavon: Yes, I don’t exactly recall what that went to. Some of it might have been compensation that we issued in shares. Sometimes we have the occasional consultant whatnot that wants to take compensation in shares also.

Jordan Kay: Okay.

Norton Singhavon: But there isn’t one particular thing, there isn’t like, hey, we gave this guy 1.3 million in stock for example.

Jordan Kay: Yes, I think – well, I think we are all just – just, there is a lot of tension when revenue comes in pretty light, right?

Norton Singhavon: Yes. No, I agree.

Jordan Kay: We are looking at things. Yes, you wouldn’t look at things normally, if the cash was flowing. But we are looking at everything now. And so that’s some of the stuff that, we are thinking about. I guess my final question…

Norton Singhavon: Yes. And mind you, we are looking at 3 months – we are looking at 3 months behind on everything too, which also sort of stock side. Because I am excited about things that are happening in Q1 which ends today and we are talking about stuff that happened 3 months ago. It’s – yes, it’s the downside of public reporting, right.

Jordan Kay: It is – I mean I think it’s also probably good that you have that insight for some of your other negotiations. But Nort, is the – are the finances in your mind a place where you would consider selling the company as I cross your mind like…

Norton Singhavon: Okay. Are you asking me my personal opinion or my CEO opinion?

Jordan Kay: Yes. Well, you can give me both and let me know what you are thinking.

Norton Singhavon: I mean, my personal opinion would be an yes, no. My CEO opinion is that I have to consider sort of my fiduciary duty, right. I am not interested in selling the company at $0.10. If somebody came in at – or $0.12 cents, somebody came in at 100% premium at $0.24, that doesn’t interest me today. Now, if we are on the verge of bankruptcy that might be a different story. But I see the sales that are coming in from Q1, I see the cash flow that’s coming from all of our initiatives to make up for that shitty quarter that we had. So I am confident, but I’m also a bullish guy. So no, I am personally not interested, but at the end of the day, I have a fiduciary to briefing the board, right that somebody came along and said, hey, we are going to give you $0.35 a share for the whole company. I have a duty where I had to bring that to the board and say, hey, XYZ LP is offering $0.35 a share, what do you guys think right. And it would be a discussion amongst management and obviously they would partially consider the CEO’s recommendation. And maybe they would say we follow management’s recommendation not to pursue the sale or they may say we disagree with management and we would like to proceed engaging in a transaction here.

Jordan Kay: Yes. And I know you love people to come to you and stuff, it’s just – if things are tight, that might be something that you would want in your back pocket. And I know it’s unthinkable considering where we thought we would be at this time, but just look at that?

Norton Singhavon: I feel like the tide is behind us though with the debt restructuring and sort of this non-performing quarter behind us, like this is all in the past, right. Like we are not sitting here at December 1, at December 1, if you asked me, might be a different story, right, I am like wow, we just had terrible quarter. Our cash flows are going to suffer in January and February. What the heck that we do guys and imagine we didn’t restructure that debt. I’d be like we are – yes, we have got to do something. But what do we do? We push more product out the door, we signed four new export agreements. We have relentlessly negotiated the terms of all of our debt financing. We reduced our payments with that 20 alone by $1.2 million, right. So today, where it stands, I am a lot more optimistic about our future and our cash flows and our ability to survive and service all of our obligations, simply because of all these initiatives that we’ve done.

Jordan Kay: Okay, that sounds good, Nort. And I know you probably don’t have this and I know other people probably asked the same questions. Do you have any visibility into whether or not Q2 will be a good quarter?

Norton Singhavon: I would say my thoughts for whether it’s Q2, Q3 or Q4, I think somewhere in that – somewhere in those quarters we can expect a record quarter. But I wouldn’t put your hopes up on a $20 million quarter, if that’s what you are asking. I think this company is going to have sort of slow and steady growth. That’s the only way it’s going to be sticky revenue. But what we are seeing is that the company is on a growth trajectory and we’ll continue to be. Yes, we had a slight blip in Q4, but we are sort of back on track in my opinion to I think even better than what we’ve previously done.

Jordan Kay: Nort, those were excellent answers to my questions. I appreciate all your time.

Norton Singhavon: No worries.

Operator: The next question comes from Jeremy Lee, Self Employed. Please go ahead.

Jeremy Lee: Okay. Hi, guys.

Norton Singhavon: Hi.

Jeremy Lee: Alright. So, based on the – you said 60% premium, $4.5 per gram and 60% popcorn, trim $2 to $3 per gram. I got a weighted average of about $3.3 per gram. So, well actually to start off, can you talk about the discrepancy between the kilograms produced and kilograms sold?

Norton Singhavon: Yes. So part of that is going to be, like I said, popcorn and trim. So, that’s going to go into inventory, right. So that doesn’t really get – that doesn’t that move at the velocity that – or regular ultra-premium flower move. As highlighted in the press release, part of it is that we had to accumulate lots for export shipments. So how export works is that, we are not shipping it a bunch of orders everyday for $25,000 or $50,000, right. We get a purchase order, it could be anywhere from a couple of 100 grand, outbursts even close to $1 million, right. We don’t have all that products sitting in stock when we get that purchase order. So we have to accumulate it. Sometimes it could take 2 months, 3 months and we got to do all the import permitting from the receiving end. Then we then have to apply for the export permit on the Canadian side. So that takes time. That’s why there is a discrepancy there. And also as I mentioned to Jordan and on this call, we had a weak Q4 in terms of rec sales.

Jeremy Lee: Okay. So full capacity right now is about 16,000 kilograms divided by 4 per quarter. It’s about 4,000 kilograms. So you have the 40:60 weighted average number, 3.3, that’s about like $12 million per quarter in revenue?

Norton Singhavon: Yes.

Jeremy Lee: How far are we getting from full capacity?

Norton Singhavon: I would say we are pretty close to full capacity. It’s fully selling that product. So our – so that number is 16,000 it’s – I actually how we do it is we don’t operate 100% capacity. And what I mean by that is that to operate at 100% capacity means you are probably running 8-week strains, which we don’t. Part of that also means that you don’t have a room shutdown for more than a day, right. The room comes down to harvest and you sanitize and cleaning on new plants in there right away. So typically we try and target a 70% to sort of 78% production capacity as an output versus actual capacity. That 16,000 number is also slightly skewed, because I think the more accurate number might be taking sort of a 17,300 approach and times in that by sort of 70% for the actual output, if that makes sense. I know it’s a little bit confusing.

Jeremy Lee: Yes. Could you talk about the international market and how it’s different from domestic as in like revenue per gram and margin per gram, I know just noticed about that in your statement, but…

Norton Singhavon: Yes. So, in the Canadian market, we have to put in – we put our flower and driers and we sell it. There is – it’s, it can be labor intensive at times, because we hand package for the most part. And we are reliant on the government and they are reliant on the stores and the stores are reliant on consumer trends. So there is a lot of variables that come into play, right. You get a couple Reddit reviews where people say, I don’t like this product, it affects the sales, right. BLK MKT, our rec brands, for the most part, sort of have a – our consumers like change right whereas if we were a value brand, I feel like consumers might say, hey, this is a cheap and cheerful ounce and I am – I like what I’ve been previously getting. So it’s keeping up to date with rotating trends. It’s dealing with the consumer trends. It’s also at the mercy of, as I mentioned, the stores and the bud tenders. What I like about export is that we ship it in one kilo bags. So pricing ends up being less on a sort of gross revenue amount, but we don’t have to pay excise tax, okay. We don’t have to spend money on packaging and its high volume. We are relying on sort of our export client and they buy enough products to sort of maybe get them through the next month or two, right, whereas these provincial buyers are very conservative, because they don’t want to sit on inventory and more so we have less competition in these other markets, right. We are not fighting other groups that are doing data programs in their retail stores, right. It’s a lot less competitive. I think in my opinion and our gross margin percentage is relatively equal and I believe they are both sitting sort of in that 40ish to almost 50.

Jeremy Lee: Okay.

Norton Singhavon: Sorry to add one more thing on top, licensing our BLK MKT brand is interesting too, because in Israel on top of our selling price, we get an additional, it’s just under 10%, like 7%, sorry 2.5% on their gross selling price, which ends up being, I would say 8% of sort of our selling price give or take.

Jeremy Lee: Okay. And I am not quite caught up on the Germany and Israel markets and Australia. Can you talk about how it’s different from the Canadian market, the size of it, things like that?

Norton Singhavon: Yes, I don’t really know honestly the details of the size. What I can tell you from our perspective sort of our sales pipeline, Israel and Australia are our two biggest export markets. I would say they are fairly close in line in terms of dollar volume, dollar value sold. I would say also previously sort of our average run-rate for export was about $1 million a month. However, you divide that amongst the countries, I would say it started off obviously more weighted in Israel and that’s sort of tipped over now where it’s fairly even. But I see visibility into sort of $1.5 million to potentially even upwards of $2 million a month, and export sales for this company moving forward. And that’s what we’re working to achieve.

David Lynn: The other thing I would just add is when you look longer-term, just to echo Norton’s comments we started in Israel, that’s where we shipped the most. Then we went into Australia, we’ve done really good volumes there. And we have the highest client count in Australia, Germany is our newest market, the markets are all in different stages of their evolution. But if you look at the population of those countries, Israel’s 9 million people, Australia is 27 million people, and Germany, which we are just entering is 84 million people. So, when you look at these markets long-term, and you assume that the cannabis sales kind of normalized more in-line with the population, it’s pretty exciting to be entering new markets and Germany is third largest economy in the world, right. So we’re doing quite a healthy business right now. But we’re most excited about the future, because we’re getting into more and more markets. As we find new deals, we have a word of mouth of fact, where we get calls from, new clients. So there’s enormous upside there. And obviously, there’s other countries that are accepting exports as well, whether it’s UK or Ukraine, or Poland, so we’re going to explore those markets as well.

Jeremy Lee: Okay. Yes. This quarter was pretty scary. Could you talk about, like, breakeven for looking at breakeven – looking at breakeven this quarter? And if you are profitable this quarter, what are the margins look like?

Norton Singhavon: Miguel, do you want to take this one?

Miguel Martinez: Yes, happy to. If I understood your question correctly, you’re looking at that average of $8.2 to $8.7 million gross revenue guidance that was provided and curious about breakeven. This quarter, from a cash flow perspective, we’re looking to be very strong and very healthy. And as Norton alluded to earlier a lot of these sales – it wasn’t just Q4 that was struggled, it was Q4 in the beginning of our Q1. So a lot of this ramp that we’re talking, lot of this coming back to our previous growth rates came in the second half of the first quarter. And that’s putting us in a strong position to pay down some of our liabilities. And we will be better than breakeven on this quarter. And that trend is looking to continue into Q2.

Jeremy Lee: Okay. And I know when you’re talking to Jordan, you had a question where you want to ask about it as like, answered it as a CEO or as you personally, can you talk about, like the debt refinancing? How you thought about that personally and [indiscernible]?

Norton Singhavon: Yes, I didn’t like the dilution that we took on that. I didn’t think our share price would be at $0.10 by the time the 5-day view app rolled around, because when we started renegotiating with them right after we made that payment in November, so we were in meetings, I don’t remember what a share price was around that time but I want to say it was like probably $0.20, $0.20 something cents. So yes, listen like as a shareholder, it hurts me every time we have to dilute but, we also had a dismal Q4, which I think it would hurt more if we had to kind of pick up the ball and go home and what I mean by that is some sort of insolvency proceeding right? That is something that scares me more than anything. So to take a little hit on this dilution at the same time we had a dismal quarter I feel like it’s ripping the band aid off like, let guys like, let’s just get it done. Get this behind us, restructure it, take the dilution clean up the debt, push things out further make up for the shitty quarter and let’s look at – let’s look into next year have a basis for a strong 2024.

Jeremy Lee: Okay. And then the fact that demand or as hard to whatever pay to play whatever, the fact that demand was weak. That’s pretty surprising. Like considering all the good recommendations and hype you get on Reddit, can you talk about like, if you saw that coming?

Norton Singhavon: I would see – I would say that, no, we were a little bit surprised too, that it sort of happened. As quickly as it did, I mean, we were seeing the trends throughout the fiscal year, like our strongest rec quarter to date, I believe, was still in fiscal 2022. I forget which quarter it was, but, 2022 rec was extremely strong, 2023 we started seeing some, some changes quarter over quarter, and there were not major changes, but you start to see a steady decline. And I agree with you, I mean, we have – in my opinion, some of the most consistent and high-end cannabis in this world. And it actually drives me insane when I see that, I’m not going to any names, but we have some of the biggest chains in Ontario, where we have a penetration of 1%, that means we have one SKU and three of their stores, three of 30 other stores, that’s extremely frustrating. And we can’t get it, we can’t get the support that we need in those stores, again, without doing these data programs. So, we’ve run some initial analysis, we don’t think it makes sense. I think we’re better off letting these guys continue fighting themselves, and probably fighting themselves in the CCAA by paying for these fees. And I think it’ll turn around, there’s also amazing independent retailers that we love working with that support our products, they carry a plethora of our SKUs that have their bar tenders strongly supported recommend our products that don’t require data programs, right. So, we’re trying to support them the best we can. But at the end of the day, Ontario, the system, in my opinion is flawed because B.C. you have eight stores maximum, right? So you’re sort of away from these goliaths that control everything. Ontario is very – what I call goliath driven. And that sucks for a niche premium brand. That’s what the highest price points in the country that in my opinion is one of the best products in the country that we don’t get the love that we should.

Jeremy Lee: Thanks, that’s…

Norton Singhavon: Sorry, the final point of that is that if you’re not getting love in that market, what do you do, right? You work elsewhere, you build BC, you build exports.

Jeremy Lee: Yes, like, frankly, from my point of view, that seems a little bit strange. It seems unfair. But if you control your focus on quality, focus on costs, you’ll come up better for I think. Yes, just out there question, can you talk – is there – do you think there’s – would you ever do like a value brand? I guess you’re doing that with your mid-tier brands? But…

Norton Singhavon: Yes.

Jeremy Lee: Do you think pricing is a concern?

Norton Singhavon: pricing is not a concern on value. What – I want to say, value is extremely exciting for us. But what is sort of exciting is an avenue to move our smaller buds, right popcorn, because our pre-roll velocity is not enough to move all of our popcorn. So looking at sort of a discounted smalls brand. And also, a value brand under Flowr, which isn’t really to value, it’s more so what I call, middle of the ground value, we’re definitely looking at that because it moves a lot of velocity. Now, do I want to play there forever? Probably not. And if you’re to ask me if I can move 1,000 kilos in a recreational high format brand that had velocity, or if I would move it and export, I think I would probably pick export because, again, it’s the infrastructure, the logistics, the not fighting for the shelf space. But with the export, I get to build my BLK MKT brand, right? I’m building the BLK MKT brand overseas. So instead of trying to fight here in Ontario with BLK MKT pushing water up a hill, while they’re focused on Ontario, I say, hey, guys, you guys have fun on Ontario. We’re looking at the rest of the world.

Jeremy Lee: Okay, last question. So there was a poll at the end of the year on Reddit where they like had a Sweet 16 bracket voted on which product they like the best. You guys didn’t win at all, but you guys came pretty close. What do you guys have to do to win it all, in your opinion? You know, get on top.

Norton Singhavon: I’m not familiar with that program. But my answers to all of these contests and stuff is really get all your friends and family to go vote or whatever it is, was that a voting poll, right?

Jeremy Lee: Yes.

Norton Singhavon: That’s like the AR kind of a couple of years ago, right? Where you go on Instagram and you vote. And it’s, I mean, in my opinion, it’s sort of like, it’s not a matter of quality, it’s a matter of how many people you can blast to get onto those [indiscernible] vote. I mean, the numbers on product speak for itself, right? Even though BLK MKT is declining in Ontario, I would say we’re still arguably the undisputed champ of sort of the ultra-premium cannabis, right. There are other comparable brands might, sell higher volume and dollars on us but they do pick the data program, there may also be some smaller niche craft brands that might even have product just as nice as ours, and maybe a little bit cheaper. But we’ve sort of found a sweet spot where we’re BLK MKT is a reasonable velocity brand at its price point. And I would say arguably one of the most iconic premium brands in the country and in the world.

Jeremy Lee: That’s all I got. Thank you so much.

Norton Singhavon: Alright.

Operator: The next question comes from Jacob Brodsky, Private Investor. Please go ahead.

Jacob Brodsky: Hello, Norton and team. Hope you guys are doing well. Can you hear me?

Norton Singhavon: Yes. Loud and clear, Jacob.

Jacob Brodsky: Alright. So obviously, this quarter to last quarter, it didn’t look that great. But the year overall was pretty solid. And I know you guys are trying to find your footing now with higher production. I just have a couple of questions here. And I want to start with, cost. Because obviously, there’s like no question about the quality of your products. It’s people love it. It’s super great. But as far as like competing in the market, and especially recreational, like having lower cost inputs is like very, powerful. I mean, we saw this with Tesla (NASDAQ:TSLA), obviously a completely different market, but their cost of production is just so low that they were able to just cut costs, cut costs, cut costs and pretty much put everyone else who was trying to make EVs, pretty much made them give up. And in many ways, we just thought like Apple (NASDAQ:AAPL) say that they’re not even going to do it. So what are the biggest cost inputs? I know, you mentioned that you’re focused on reducing costs, but like, what would you say are the three biggest cost inputs? And like, what are the specific strategies that you guys are pursuing to reduce costs in those areas? Because like, I know, you don’t want to lower costs, like lower prices, like sale prices, but if you did the cost down a lot and could lower prices, like I feel like it’d be very hard for people to compete with BLK MKT.

Norton Singhavon: Yes, I mean, so labor obviously, right, we grow indoors, as labor intensive. Energy is another one, electricity, packaging and nutrients to support producing our product, right. We’re always looking at shaving costs. I like your Tesla example, because I’m a massive car guy. But my rebuttal to that is, and I don’t mean to sound pretentious and arrogant, but this Porsche (ETR:P911_p) 911 Turbo care what Tesla’s doing right? And that’s sort of where we’re at because, your Tesla example would be like, Pure Sunfarms, right? They are a high volume greenhouse producer, they call it the Budweiser and Tesla, whatever, right? We are our flagship brand BLK MKT is what I would call the Porsche 911 Turbo. But one of the smartest things that Porsche ever done in their lifespan was create the Macan right? The Macan is one of the bestselling vehicles. So I would say our Macan is sort of Tenzo and Flower, we are eye on these categories. And it doesn’t mean we can’t have both. We can manufacture 911 Turbo and have the Macan, right. So that’s where I’m looking at. In terms of your question. And listen, we’re always looking at saving cost, right. One of the things, when we bought flowers, we went in there and found massive savings right away, right? We even were able to leverage sort of some of flowers, existing suppliers for certain things, and I don’t want to name names, but sort of play them off of our suppliers and play them back and forth, right, and eventually get sort of a contract that made sense. We’re constantly fighting with our vendors and trying to slash costs. We are facing of inflationary pressures all across, we’re facing buyers wanting to pay less and less, were facing employees wanting to pay more and more, and vendors want to charge more and more. So. I mean, I would say fighting increases is the challenge of its own. Looking for significant decreases is something that comes top of mind. But I think if we sort of hone in and focus on continue driving sales in our brands, that sort of holds, more true to our business model than racing to the bottom right, then Porsche we could compete with Tesla, and it makes cheap electric vehicles.

Jacob Brodsky: Yes, no, for sure. So and then part of that like premium, like highest quality thing is making it almost like a little bit scarce, right? Like part of the reason that that super expensive car model sell for that price is because the manufacturer artificially produces less than what the demand is to ensure that they can get that premium price. So looking like more long-term as you guys, I think stabilize, find these new markets, is that part of your strategy to like to make sure that like your production is almost like lower than what the demand is to ensure that when like retailers do get the product like it sells, because people are waiting for it to come, rather than retailers? Like having a hard time pushing out everything that they have, like, does that make sense?

Norton Singhavon: Yes, it could completely. I think you nailed that with BLK MKT, right BLK MKT needs to be – it doesn’t need to be a 90% penetration, right BLK MKT should be sort of and select limited stores that have the velocity and demand and the demographic to support that product. And there should be deep in those stores, right, versus being scattered and small little towns that might not have demand. So I think for BLK MKT, yes. You’ve nailed that. In terms of our other brands, I would say maybe not as much. I think our other brands can be sort of more common, more commercial, more accessible and available. But listen, BLK MKT is built on sort of a lore exclusivity, unique cultivars that nobody else in Canada has. And we continue to do what we can from a marketing standpoint, to protect that brand positioning, right. But yes, I agree. So instead of flooding the Canadian market with a whole bunch of BLK MKT skews, I would rather do limited drops, which we’ll see with BLK MKT exclusives. This is sort of a new line that we’ve done in under that brand, which is limited drawers with unique cultivars. And I would rather sell that Flower overseas, and hopefully get it licensed in one of our brands. That way, I’m not saturating myself, right.

Jacob Brodsky: Yes, that makes sense. Okay, just one more question on costs. And I’m actually going to kind of squeeze into in this cost, less cost question. Where are you guys currently, as far? Do you know where you stand as far as like competitively costs of growing each gram compared to your competitors? Like, where are you kind of fit, like, are you middle of the road is your cost of production a lot lower than many of your competitors. And then also, this is like, a lot longer-term. But is solar a possibility in Canada, because I know, in my – on my own properties, I was able to install solar, and the loan on the solar was the same as I was paying for the energy. So then in 15 years, once the loan is paid off, like there’s no immediate change for me, and monthly cost of energy. Now I’m just paying a loan instead of paying for the energy. And then in 15 years, my energy costs, like goes pretty much to zero. So yes, those two things were related to cost.

Norton Singhavon: So solar, no, we haven’t looked at it, I don’t want to lie, and they cut something that is one that we’ve dived into. So no, we haven’t looked at it. But that’s an interesting idea. I don’t think there’s enough power, though, that it produces because you we need a solar of power. So in terms of indoor costing, some of the guys that we’ve spoke with our, you know, comparable indoor growers, I’d say we are in-line with what we see sort of as we’re middle ground, I spoke with some guys that are slightly cheaper than us. Usually they’re very vertical focus, right, and I won’t name names, but there are some producers that are indoor vertical growers, they seem to have a little bit of a lower cost than us, but I would say their product won’t be as nice. And then there are some indoor producers that are a little bit, more than us, when I sort of compare looking at some of these indoor facilities that have shut down. I don’t think it’s so much like COGS, right. Like, just to be honest, I think indoor production is somewhere between $0.95 and $1.25. That’s sort of what I estimate, a little bit higher, maybe $1.40, $1.50, that’s in my opinion doesn’t make or break anything, it’s what you – how nice that product is that you produce, and when you get for it, right. So if you’re sort of at the high enough indoor production at $1.40, $1.50, which I think some of the bigger LPs were, and you’re selling it, for $1.75 to $2 a gram or even called $3 But you got to pay $1 a gram excise tax and you got to give up your data programs that significantly eats into your margin. So it’s really about driving, a high selling price, while we are trying to get a hold of your cost of production, but it’s not like you can you indoor a cost $0.40, that’s just impossible. There’s no way to do it, right. If we’re sitting at $1.10 or $1.20, or what I like to see it to $1.05 of course I would right, but as I said, quality and quality out.

Jacob Brodsky: Yes, okay. Just one last question about this next quarter and looking to this next year, I know you gave the 8.2 million kind of minimum guide for Q1, which you guys have good visibility in, because it’s pretty much over now. What is the breakdown of the sales channels for this quarter and how will that breakdown affects like margin per gram and what should we be looking at for expected margins on this like $8.2 million to $8.7 million in revenue for this quarter?

David Lynn: Yes, it’s David Lynn here. It’s a good question. I’d say the mix is in influx. We were previously saying that we might be 60% rec and 40% export. But we’ve noticed a lot of movement between the segments. And as we indicated earlier, we are back into the domestic B2B market. So I think what you are going to see is that rec export and domestic B2B are all significant double-digit percentages of the total. That mix can vary a lot quarter-to-quarter. Something that Norton touched on earlier is the fact that export shipments can shift a couple of days and end up in subsequent quarter, right and those shipment and times are $1 million, right. So you think how your mix can change, that’s why I wouldn’t want to give a really definitive answer in terms of specific percentages, but rather say that all three of those channels will be significant in our mix and all three frankly have pretty good upside for us.

Jacob Brodsky: Yes. Is some of the movement, I know you mentioned in the letter that because of some of the weakness in rec, you are going to be moving a bit more to B2B as well. Like I am guessing there is like lower margins on that, how big of a difference is B2B compared to rec as far as margins are concerned?

Norton Singhavon: So, yes, so B2B number one doesn’t have that dollar on the excise tax. So listen in our order of ranking of gross margin dollar contribution towards your profitability, there is no doubt about it that BLK MKT is likely the highest contributor, right, then from there, I would say between export and our Tenzo brand, they are pretty tied neck and neck. And then obviously the lowest is Canadian B2B. Now Canadian B2B why we have entered into that market, I would say on a temporary basis was because, we sort of hit a cash crunch and we were looking at all of this sort of out of date – out of spec inventory that we had. We had so much inventory at the year end on our balance sheet. It’s easy to sort of get caught up and everyone wants to move the high end product, right. You want to get on the calls and pitch BLK MKT to the export clients, right. That’s glamorous. Everyone wants to do that right. It’s moving the long tested 18%, 2.5 years ago that we forgot about, that’s sitting in the vault at Tumbleweed Farms, right. It’s monetizing that. So we tackle B2B mainly to get cash in the door from just out of date off-spec product odds and sods. So, you have 3 kg leftover from one lot, 3 kg from another and you are talking 4 years of the stuff, right. So just a lot of odds and sods that we said smash it out the door who cares about the pricing, sort of how we looked at it when we took over flower, right. Flower had the same thing, lots of odds and sods and we just smashed it all out, whatever pricing, we don’t care. So we did that. But what’s come from that was that obviously these contacts that are what I call, vault sweeping and buying low end products, hey, we want some of the better stuff, right. What do you got and do you have anything for sale, right. So we entertained, I would say, a limited number of sales on that for sort of newer product, what I would call stuff that would probably be good enough to go out to export at a slight discount into the B2B market. But I don’t see this as being long-term. We want to upgrade the sales channels and to provide contacts that we are not all of a sudden hey, we are a B2B company and we are going to sell product at discount prices to other producers, right. It’s a short-term thing of a vault sweeping.

Jacob Brodsky: Yes, okay. That makes a lot of sense. I appreciate all the answers. Just one last question, since there is going to be more reliance on exports?

Norton Singhavon: You have had one last question in the last six questions, I am kidding.

Jacob Brodsky: How many of the exports that have gone out so far have been like first time customers versus repeat customers like, I guess what I am asking is like what so far has been the health of those that have ordered from you as an export client reordering like have they proven already like some of these customers that they are like able to sell your product and that they are going to be ordering pretty consistently or is most of the volume so far first time exports?

Norton Singhavon: No. Export is very sticky in my opinion and one example will always resonate with me that we got a call from sort of a startup, maybe a year and a half ago and the guy want to buy like 3 kgs as his first order. And you know what, we are like sure we are not too big and proud. These guys are now are one of our biggest export buyers out there. So it’s very sticky. We grow sort of as they grow. One thing that we all agree on internally is that we sort of like dealing with the scrappy entrepreneurial, maybe even startups on export, because as we support them, they support us, right. So there is a little bit of camaraderie partnership there. And it’s a lot easier to get a deal across the finish line versus when we are dealing with sort of the established players like the equivalent of a canopy in Germany. It’s bureaucratic. They have 6 lawyers on the on the e-mail chain, 5 QA people and it’s – they have their entire DBC, which I call the deal blocking crew on all these calls. And they are very difficult to deal with at times, right. I don’t say all of them are like that. But yes, export I would say is very reoccurring and very sticky. I don’t know if there is anything you want to add to that, David.

David Lynn: No, it’s – I would just echo Norton’s comments and lot of these are not in the public domain and they are protected under NDAs. A few of them are in the public domain. So one that we announced in 2021, our first export client is IMC in Israel and that relationship has been really phenomenal for both parties. We have shipped them many millions of dollars of cannabis. They continue to order. We have an order going out as we speak. Our first client in Australia and Norton was telling that story just previously. That first shipment was 8 kgs at the end of 2021. They have also bought millions of dollars of cannabis from us. So, we are really willing to sort of invest the time in building the relationship. We see that pay off in terms of increasing dollar values over time. We have never lost an export client. And the foundation of that success is the quality of our product for sure. It really resonates and works. But at the same time, we have put a lot of time and energy into building the relationships and providing a high degree of service. So, lots of upside on existing export clients whose businesses are building using our flower.

Jacob Brodsky: Okay, that’s really great to hear. And just thank you guys so much for the time letting me ask the questions. I just want to say it makes you guys – keep your heads up, I think we obviously as retail investors see a bad quarter. We are like what happened, but I think that like especially for a company as new as Avant, like this is expected especially you guys just unlocked a lot of new capacity trying to figure out all the sales channels for this new growth. And it’s kind of part for the course here and I look forward to see the company progress as you are selling all of your flower that you are growing and then are able to slowly upgrade those export channels over time. I think things are looking good. So keep your heads up and keep doing good work.

Norton Singhavon: Appreciate, Jacob. And yes, one thing I want to add on is that sort of – sorry, I feel like this Q4 honestly was a bit of a blessing in disguise. We have been a little bit sort of on our high horse that we can sell everything we produce. We are the greatest. We are the baddest, for BLK MKT, nobody can touch us. And I think this humbled us, but what happens is that, we are sort of back in that fire in the belly like, oh, what do we do that hustle mentality. Okay, guys, we need to get creative, right. We can’t be complacent. So this quarter, in my opinion, this happening actually drove a lot of innovation, thoughts and creativity within our team and I think it lays the foundation for our future going forward that we have to get scrappy through this quarter and make up for it in Q1 and hopefully never look back.

Jacob Brodsky: That’s great to hear. Thank you, guys.

Operator: The next question comes from Rahim Rehaman with Private Investor. Please go ahead.

Rahim Rehaman: Hey, hi. Just had a high level question and you can conclude on this, Norton. But mostly, you’ve been quite acquisitive over the last year, smashed down the cash balance and we can see with the debt restructuring and there is some additional debt as well. And Q4 sales obviously suffered. Please could you provide some context on the future looks for Avant and if this – if those acquisitions they were still the right move for the company and shareholders? Thank you.

Norton Singhavon: Yes. So, everyone probably remembers in 2023, we did that world famous bought deal for $23 million. That was sort of the talk of the industry now. We slowly chipped away that cash balance and sort of what we saw was that with our corporate overheads and sort of the size and scale of the company having these smaller facilities and having half of 3PL, there was no chance that this company would be profitable in the long-term. So, it was either we sit on our cash and have it slowly chip away or we fire a bunch of people and get rid of our corporate office, or we deploy that capital to return – to drive cash flows for us in the future, right. So, we made the decision, it was aggressive buying the other half of 3PL, while buying Flowr at the same time. I am the first to say, that was extremely ballsy. And the Q4 being, there is no – I have touched on so many times throughout this Q&A, so I won’t touch on that again. But there was a – it was a speed bump in our path forward. I am still confident that we are going to be able to sell all of that product that we produce. I am confident that, probably a year from today, you shareholders are going to probably look back and say that, management, did the right thing by making those two acquisitions. Otherwise, we are just kind of floundering in no man’s land. We are this small micro cap that’s, not really big enough to be profitable and not really big enough to make an impact sort of at the global scale. But with the Flowr acquisition, with the acquisition of the other half of 3PL, I think we have a great shot at being a contender on the global scale and in Canada.

Rahim Rehaman: Awesome. Thank you very much. Looking forward to viewing that.

Norton Singhavon: Thank you.

Operator: The next question comes from Joe Rice with KW. Please go ahead.

Joe Rice: Hey, Norton, how is it going?

Norton Singhavon: Good Joe. How are you?

Joe Rice: Good, good, good. Yes, I got – I have two or three questions. My first question is when you did the debt restructuring, how much of it was anticipatory in the sense that, okay, if this trend of rec keeps going like this, we are going to be bankrupt, or how much of it was the immediate need for cash right away to just be able to restructure and pay it more consistently? Every time it was due because from the shareholders perspective, I mean I was doing the math on what you were paying before. I think the $1.25 million quarterly and which averages out to 400 a month. And then if you add the 150 that you got to restructure to now, I mean that’s a savings of $265,000. And so I am thinking from the shareholder perspective, okay, we gave up 8% of the company to save only $250,000 a month in cost. I am kind of curious if you were looking more ahead of being more prepared if the trend continue, or if it was something you had to do right away immediately.

Norton Singhavon: No, you see your math is wrong. So, F ‘20 was 1.7 plus interest, so called, 1.8, right, per quarter. Now they are 150 a month, so they are – so it’s 450 a quarter. So, that’s a reduction of CAD1.35 million Canadian. That’s a significant reduction. In terms of our business without debt servicing is sustainable and cash flow positive and EBITDA positive even with that temporary dip in Rec. So, I would say no, when we went out and restructured this, it wasn’t that we were anticipating a decrease in Rec, it was that we just this is not sustainable. We thought that we could use the cash flows from 3PL to sort of finance the acquisition that we did on their half. It doesn’t ever end up working out that way. So, we agreed to an aggressive payment plan. And we made some aggressive payments. We paid them down from $9 million to $9.5 million to $4.75 million. And it just reached to a point where the guys like we need to bring this down to sort of planet Earth where it’s more realistic and manageable, right.

Joe Rice: Right. And also I mean you kind of answered this on the last question, but I was just curious. What percentage of the projection you gave for Q1 was just simply exports. I know always why I am asking because you are saying that export is going to be bad in the next couple quarters. So, obviously you are banking a huge amount on export. So, I am curious what was the amount that you were roughly expecting, if you could give a range, like the general range?

Norton Singhavon: Yes, I would say maybe like 35%, 40% is export.

Joe Rice: Okay. Alright. Cool, awesome.

Norton Singhavon: Yes. Sorry, just to touch on. I think my choice of words sometimes can be sort of overly aggressive. When I say things like our rec days, this is dying or rec days is declining like, it’s not on a death spiral, right. Like we are talking about, going from $5 million a quarter and rec to like $4.2 million or something like that, right. Like so we are not talking about going from $5 million to like $2 million, this is…

Joe Rice: Alright, that sounds better.

Norton Singhavon: This is a decrease of 30% to 25%. Yes, but it’s still a decline, no matter what, how you put it right, it could be 2%, but yes, we are here with decline.

Joe Rice: Your ads are pretty strong, but, yes, so okay. So, considering that exports going to be a big part of the business moving forward. How many actually exports clients do you have altogether? And out of those export clients, what like what, how many of – how much percentage of that export revenue is covered by a small group of clients? Do you have four clients that make up 80% of that rec for business with a bunch of small ones? Like, what is like how spread out are the export clients? I mean, lot of us, are you dependent on just a few of them to get buy.

Norton Singhavon: So, we have 11 deals signed, right. And Israel and Australia, I would say are, we have one big buyer in each of those. But it’s sort of an interesting concept because well, first of all I want to add we signed on another Israeli client and sort of those last deals that we announced. And they are a major player. So, they are not a small start-up, right. So, I am very excited about them. But I think what you will find is that hypothetically and I am just making this up, let’s say our big buyer in Australia, goes under for whatever reason, right. I don’t – I think that gets supplemented by the other smaller groups, because I think the demand for our product is there and what we have done is that certain groups get access to certain cultivars exclusively. So, I think if one or two of these drop off the face of the Earth, it’s picked up by these other clients that their volume will increase because the demand is there. It’s really who is importing and who is distributing it, that’s really all it is. There is sort of a middleman conduit if you think about it.

Joe Rice: Got it. Okay. And also too for, because I live in the United States. And so I am not quite totally familiar with Canadian laws, but you have mentioned you don’t want to get involved in pay to play as the reason why export is or – not export or recreational is down. Could you explain to us maybe you aren’t familiar with how that works in Canada? What exactly you mean by pay to play?

Norton Singhavon: Yes. So, it happens in groceries. So, groceries, grocery stores charge listing fees, right. If you are Heinz Ketchup and you want prime time eye level, you have got to pay listing fees, right. Now, what’s happening with Canadian cannabis is that you are not allowed to charge listing fees. You are not allowed to ask for kickbacks. But a way that these retail chains have circumvented this as they charge you to buy their data. So, you have to buy our data for X thousands of dollars per SKU, per store or X percent of sales, and it’s a blatant way to circumvent listing fees. And I am not saying, I am not sitting here being, all high and mighty and saying it’s completely illegal. I don’t know, I don’t have the answer to that question, but I am saying for us to be fully compliant means I don’t want to double on that. Maybe it’s allowed, maybe it’s not. Maybe it’s gray area. I don’t know. I don’t have the answer. But it also eats into your margin and I feel like it cheapens BLK MKT. I spoke with other CEOs of publicly traded cannabis companies that partake and pay to play. And they have flat out said, pay to play is keeping our business alive. But everyone basically has spoken to has said BLK MKT should not do that. It cheapens your brand. It sort of reeks of desperation that’s eating your margin. You guys have sort of been, we are BLK MKT, we are ultra premium. We are the Porsche 911 Turbo, you don’t have to engage in these sort of low end activities that other producers like us are doing.

Joe Rice: Right. Got it. That makes sense. I mean I am in real estate and they tell us never to discount your commission, because it cheapens your ability to negotiate and your services and your value. So, I totally get that point. And my last question I have is with these new – with the new export becoming a new facet of your business, how much of the lead generation to get more export clients is built around? And I know you said you have had a lot of word of mouth. But I am not exactly how much, but how much do you in the future plan on maybe going maybe hot or cold calling. Doing the typical salesman stuff to get more clients versus waiting for the word of mouth? Are you all waiting for people just to call you or is it an active strategy to hit the phones, pound the pavement and so forth?

Norton Singhavon: So, we are pretty loaded up on Israel and Australia. And the reason is because, we have cultivar exclusivity for per client there, right. So, we don’t have enough cultivars to sort of service some more clients. So, that tackles that question. In terms of new markets, our approach is sort of look at who the major players are, right. In Germany, we have sort of identified some of the major players, either within our network we get introductions or we reach out to them, right. But we haven’t aggressively pursued export, if that’s what you are saying. It’s sort of a sit and wait approach, right now, simply because again, Israel and Australia are fully loaded. We are eyeing Germany and we are eyeing other markets. But as of right now, it’s sort of old school, through our friends, through our network. There is just some sort of thing where I am at some Berlin conference with the booth saying, hey, come do business with me, right.

Joe Rice: I just – it just seems like, I mean I am sure you made a name for yourself enough in the business where they know who you are that. Like, if you were on the phone talking to or actually reaching out, it seems like you may have some fruit, not that I know, how that business works in terms of how to get more clients. It just seems like your name recognition alone would carry a lot of weight if you all had more of an outbound marketing campaign, you know what I mean?

Norton Singhavon: Yes. No, I definitely agree.

Joe Rice: Anyway, that’s all. Thanks guys. Thanks for the clarity on some of these issues we have and look forward to the next quarter.

Norton Singhavon: Thank you.

Operator: The next question comes from Evan Myrick, private investor. Please go ahead.

Evan Myrick: Hey guys. How are you?

Norton Singhavon: Hey Evan. Good.

Evan Myrick: Good. Hey, a question for you about kind of just like getting back on track with the rec sales? It is – are there ever going to be any plans to participate in pay to play or it’s really just off the table and see what happens? And it sounds like kind of the hope is that eventually it’s going to go away and we can still get some shelf space in these places.

Norton Singhavon: As of right now, it’s something that we constantly sort of debate and continue to monitor. I would say right now there isn’t a decision to do anything. But I also don’t want to sit here and be all high and mighty and say we are too good for that, and then, go bankrupt without ever having to do pay a play. So, you have to be open, we have to be nimble, we have to be flexible, right. As of today, no pay to play plans. Does that change in a week, does that change in a year, time will tell, right.

Evan Myrick: Got it. And the last question you said that the pay to play is potentially an impact to brand image. Are you guys, when you say that, are you talking about with the end user, the consumer or are you talking about with the OCS or someone else or like basically people who are the distributors who are buying your product?

Norton Singhavon: I think it’s sort of in general, because you end up being a partner product in some of these stores. And everyone, the cannabis community is a very finicky community. They see and smell that they are like, oh, BLK MKT is a partner product at XYZ store or they are a partner product now and it’s very unique. I really kind of explained it, but it’s a very connoisseur sort of clicky sometimes can be extremely opinionated clientele. And I think protecting the brand integrity, especially on BLK MKT is very important. And as of right now…

Evan Myrick: Yes. Sorry to interrupt. If the user went into a store to go pick up something, would they know pay to play versus normal product? Is there a specific difference there or you are just thinking they might get it leaked to them like somehow?

Norton Singhavon: It depends on the consumer, right. Some consumers are more savvy to what’s going on than others. But I would – I don’t know the answer to that question. But I would say, it has potential ramifications to the brand, but that alone wouldn’t be a single enough reason not to do it, right. I think the more – the bigger reason not to do it is the financial implications and the potential compliance implications. Protecting the brand integrity is low on the pecking order if that makes sense.

Evan Myrick: Yes. And are there other avenues or other stores that you can sell through that you can grow it to basically start getting your product back on the shelves and improving the rec business or really, the big opportunities you have to do the pay to play?

Norton Singhavon: No, I think the big opportunity is doubling down on the stores that don’t charge the pay to play. So, there is a whole coalition of independent retail stores, and collectively they are a strong group and a big group. They are very anti pay to play. They want the Ontario Government to affect change. So, a big change can stop that. Our thought is to double down and support them. Hey, how can we support you, do you guys need some displays, do you need some swag, do you need a product knowledge session, right. How can we support you guys. So, you guys can support us. So, that’s one way to go about it, right. The other thing is obviously some of these trade shows and events and activations have a little bit of a of a presence there without blowing the bank. And number three is look at new markets like, Québec is a massive market and we just dipped our toe in that market. So, we are excited about that market. We will see how it goes. But again, like fighting in Ontario while everyone else is fighting, it doesn’t seem to make sense.

Evan Myrick: Yes. And one last question on the pay to play stuff. In terms of how much product and from the general market sense, not just BLK MKT, how much of the market share to the stores that use these pay to play models have versus stores that do not use these pay to play models?

Norton Singhavon: I would say the big conglomerates in Ontario make up a vast percentage of the market and the stores. Majority in Ontario, yes.

Evan Myrick: Okay. Got it. Two other really quick questions. And how much of the inventory that we say in the balance sheet is made-up by like what you are calling popcorn trim?

Norton Singhavon: Oh, I don’t have that on the top of my head. So, that the year end, Miguel, do you have the answer to that in front of you?

Miguel Martinez: No, I don’t have the answer to that directly in front of me. There is a significant, I think we have touched on earlier, how orders are fulfilled to the market and so there is a certain amount of inventory required to be held on hand. And depending on what’s happening with your sales mix that can flux, let’s say it flux is anywhere from 2,000 kilos to 3,000 kilos just of product that you need to have as you are waiting results from labs to understand your potency. So, you can fulfill orders and so you can schedule packaging run. So, it’s a working capital intensive business for a lot of reasons. And that inventory stock is a big reason for that. How much of this inventory in the…

Norton Singhavon: Sorry. Miguel, I am going to cut you off, sorry, because I sort of remember an exercise that we did. I want to say this was in December and it hasn’t really came to mind that we broke down the product and what we sort of came to the conclusion to that aside from trim, popcorn, odds and sods, off spec, old inventory and an inventory that’s spoken for a future buyer, whether to explore the province. We really only had a couple of million of product, that was like, hey, this is unspoken for. And this is sort of our prime and fresh sellable product. I have a vague memory of that number being a couple of million. So, correct me if I am wrong though.

Miguel Martinez: A couple of million dollars of cost based in inventory.

Norton Singhavon: I don’t remember. I think more. So, couple of million in terms of that we can monetize, I feel like. At the time and yes, now we are speaking three months ago, right.

Evan Myrick: Yes. And I guess the punch line is we don’t have a perfect answer to your question in terms of those kilos, it’s a bit of a moving – not a moving target, but a moving volume.

Norton Singhavon: Yes, I think your question and concern might be, if I am understanding correctly, hey guys, please clarify if you had $15 million of sellable product that you couldn’t move. I think that’s sort of, if I am correct, where you’re going. Yes, and my answer is absolutely not. No, that’s we had a bunch of hotdog meet sitting there.

Evan Myrick: So, it’s not a lot and you are basically just taking opportunities as they come up to get rid of it. And there is – I am guessing the majority of the is, either putting that in pre-rolls or B2B or another. Someone else will put it into their pre-rolls?

Norton Singhavon: Exactly. Vault sweeps, just get rid of all that stuff, right. But yes, there wasn’t – from what I remember, there was only a few million dollars of product that was like sort of fresh and sellable and we went and moved that right away.

Evan Myrick: Yes. Got it. Okay, last question, I think this one will be a quick one. Just looking at some reviews online and stuff, I am seeing some people who have this one complaint where hey, we are buying premium products and we are getting seeds in our flower. Is that a legitimate concern, are these uninformed consumers about that? There are a lot of other premium brands, have seed in their flower and it’s just something that happens?

Norton Singhavon: Very, very rare. Yes, this is – it’s a very, very rare occurrence that makes a loud noise and that makes sense.

Evan Myrick: Yes. Fair enough. Thank you guys very much and good luck in the future. Hope everything goes well.

Norton Singhavon: You’re welcome. Thank you.

Operator: [Operator Instructions] The next question comes from Jordan Kay, Private Investor. Please go ahead.

Jordan Kay: Hey Norton, it came back around to me again. I thought of something that was important. When it comes to your ability to manufacture at a particular facility, I know you say something as a particular amount of square feet and you can grow about, however much estimate per square feet. That would make the business pretty capital intensive because every time you need to create – to generate more revenue, you would have to build more facilities. Have you considered ways to drive further efficiencies at your existing locations so that you could grow more per square foot? And if so, what would be the capital for doing that when compared to building entirely new facilities? Thank you.

Norton Singhavon: Not enough that moves the needle for you, Jordan, like, we can optimize things, right. We can drive our production output versus production capacity from 70% to maybe 80%, 85%, even that’s a stretch, but that doesn’t move the needle. And there isn’t a way to all of a sudden magically double your canopies square footage by going vertical, right. One piece of advice I could give or say, which is my thesis is that, it creates a tough barrier entry. So, for being capital intensive, it means not every LP can jump into it right. Only those who are confident that they can put out good product can do this, right. There is sort of a hybrid approach to this, which is contract growing, right. So, if there is a facility near us, that we know them, we like them, we trust them and they grow pretty good product, there could be an opportunity to get them to grow for us and we sort of come in every other day and manage and oversee. And especially every day during harvesting, drying, curing, packaging, that’s an option too. But the pricing on that’s not that great. We give up a decent chunk of our margin by doing that, right. We sort of go from maybe $1.25 cash cost of production to we are at $2.25, right. But that is a good short-term solution. In my opinion, if we have export demand and we want to say, hey, let’s see if this demand is sticky. So, we have excess demand, we fill it through contract grow and then we maybe use the money that we have made from that and the rest of our business to reinvest into a grow. But I like the fact that its capital intensive because it just means you can’t just snap your fingers and break into our market.

Jordan Kay: How many KGs do you think you are going to match out at your current facility without GreenTec?

Norton Singhavon: I think that’s 15,000 kilos, 16,000 kilos number is a fair and safe number to max out at.

Jordan Kay: And I think you did like 32,000 kilos in the prior quarter, not this one, but the prior one.

Norton Singhavon: Yes.

Jordan Kay: So, you are multiplying and there is not a lot of excess that we are going to be seeing there, so revenue numbers, we are talking $10 million to $11 million, kind of like maxing out there…

Norton Singhavon: I think a little bit more than that. Yes, you got to consider that there is concentrates. You got to consider, it’s monetizing sort of that biomass. And you also have to consider that elevating your sales channels, right. Like I have said, if you are doing some B2B, that’s a little bit cheaper, slowly getting that into export or rec. But the numbers that we have sort of internally is – and don’t quote me on this, but if everything went well in this company, if we sold every single product, if we had no non-performing harvest, and everything tested positive, I would say sort of that the maximum number you could expect on a quarterly basis would be, I think that $15 million range would sort of be the highest that we could see if all the stars align. And prices stay where they are without expansion. Now, there is a whole bunch of things can happen, right. Prices could increase as companies go bankrupt, right. Prices could decrease as more competition comes online. But if you are asking that question today, max pack, max loaded, it would be $15 million. But as you know, conservative, this is no way in the shape forward guidance, it is just sort of putting what the potential would be in this company if stars aligned.

Jordan Kay: And that’s about GreenTec part.

Norton Singhavon: Without GreenTec Bio.

Jordan Kay: Without GreenTec, and did you say that GreenTec has the ability and has the land to build 80,000 square feet?

Norton Singhavon: It does, yes.

Jordan Kay: Okay. But yes, obviously that would be a long time away in terms of construction?

Norton Singhavon: Okay. Correct.

Jordan Kay: Alright. Yes. Well, I think that’s it for me. I will be watching you guys and praying that things keep coming along and keep in touch.

Norton Singhavon: Thanks Jordan. Appreciate you having on the call as usual man. Great questions.

Jordan Kay: Thanks. See you.

Norton Singhavon: Thank you.

Operator: The next question comes from Phil Dee, Private Investor. Please go ahead.

Phil Dee: Hey there, how is it going there? Team, can you hear me?

Norton Singhavon: Yes.

Phil Dee: Okay. Really appreciate the time it has taken here. And really appreciate the insight into the business. But I just wanted to ask if you could expand on or give any guidance on your core product, which is, cannabis. And what is – can you share any insight on to maybe some of the genetics, some of the cultivars that are kind of being worked on now with regards to like, is there any growth or any insight into any future genetics or in-house genetics cultivation, any work over there because it’s clear that you may come out on a product when it grows the brand? So, what’s being done on the front in the regards to that, and if you can talk on it?

Norton Singhavon: Yes. So, I want to say, first and foremost, love the comment about genetics, not enough people understand and appreciate the importance of genetics. With that said, my next comment is that, we are fairly secretive about what we have in the works for genetics. I would say, there are some genetics that we have purchased recently that I am extremely excited about. I think we have the ability to maybe, kick-start our rec revenues again a little bit. So, I am extremely excited about that. But this is something that is top of mind. We are constantly innovating. We are looking at ways to sort of keep consumers excited about the upcoming genetics. And finding genetics, it’s not only that consumers like, it’s that we like growing them too, right. What good is something that sells extremely well, but you pull 1.5 pounds per light, right, and it’s a complete nightmare to hand trim. You don’t want that either, right, or if it’s a 12-week strain. So, we are looking at optimizing that. We are looking at optimizing sort of our annual gross margin per square foot. But genetics is top of mind. I would argue that we probably are one of the best night libraries in this country for ultra premium indoor, right. Some guys will have better genetics for greenhouses that grow great in greenhouses. But for us indoor, I would argue, we have got one of the best in the country.

Phil Dee: Fantastic. And I think you kind of explored my line of questioning up there. The last one, which was increasing yield and are you finding that with the current genetics and then phenols [ph] that you are seeing a steady increase in or I guess like a steady line with current per plant production? Are you seeing like an increase in THC or other type of phenols, like cannabinoids in the current genetics?

Norton Singhavon: Yes. So, let’s say in 2022/sort of early 2023, we were really trying to hone in on the genetics, right. So, I would say what we have done is sort of honed in on what produces well and also what sells well. And we have to have a happy medium. And trying to stay away from the ones that are non-performers, right. Because it happens, right, you commercialize something and you realize, wow, this one is not that great to grow. So, we are now at a point where for sort of our Phase 1 genetic which is, what we have been growing for the last little while, we are pretty dialed in on what we like to grow and what we will sell. Phase 2, which is the new genetics sort of started to come in, we are going to be testing them over the coming months and seeing what is the fit for commercialization.

Phil Dee: That’s great. It’s good to hear. Thank you.

Norton Singhavon: You’re welcome.

Phil Dee: That’s okay.

Operator: [Operator Instructions] Since there are no more questions in the queue, this concludes the question-and-answer session. I would like to turn the conference back over to Norton Singhavon for any closing remarks. Please go ahead.

Norton Singhavon: Thank you again everyone for joining us today. If you have any questions or like to contact us, please reach out anytime. Thank you once again for your continued support.

Operator: This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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