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Avant Brands Inc. (AVTBF) Q4 2022 Earnings Call Transcript

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Avant Brands Inc. (OTCQX:AVTBF) Q4 2022 Earnings Conference Call February 8, 2023 4:00 AM ET

Company Participants

Alyssa Barry – Investor Relations

Matt Whitt – Chief Financial Officer

Norton Singhavon – Founder and Chief Executive Officer

David Lynn – Chief Operating Officer

Conference Call Participants

Nicholas Williams – Private Investor

Operator

Thank you for opinionated by. This is nan convention operator. Welcome to nan Avant Brands Inc. Fourth Quarter 2022 Results Conference Call. As a reminder, each participants are successful listen-only mode and nan convention is being recorded. After nan presentation, location will beryllium an opportunity to inquire questions. [Operator Instructions]

I would now for illustration to move nan convention complete to Alyssa Barry, Investor Relations. Please spell ahead.

Alyssa Barry

Thank you, operator, and bully afternoon, everyone. Welcome, and convey you for joining Avant Brands fiscal 2022 results convention call. My sanction is Alyssa Barry, Investor Relations for Avant Brands. Speaking connected our telephone coming is Avant’s Founder and CEO, Norton Singhavon; and Chief Financial Officer, Matt Whitt; Avon’s Chief Operating Officer, David Lynn, is besides coming and will beryllium participating successful our Q&A session.

Our Q4 and fiscal 2022 results were disseminated yesterday and are disposable connected SEDAR and connected our website astatine www.avantbrands.ca. Before we get started, I wish to punctual everyone that immoderate statements made connected today’s telephone are forward-looking successful quality and, truthful are taxable to definite risks and uncertainties, which are each outlined successful item successful our regulatory filings disposable connected SEDAR.

On this call, we will mention to nan institution arsenic Avant Brands aliases Avant. We admit that astir of you person already reviewed our results issued yesterday. So being mindful of your time, Matt and Norton will support their comments little and we will past modulation to our Q&A session.

With that, I will move nan chat complete to our CFO, Matt Whitt to stock nan company’s financial results. Norton will supply a strategy update. Please spell ahead, Matt.

Matt Whitt

Thank you, Alyssa, and bully afternoon, everyone. Fiscal 2022 was each astir a grounds twelvemonth for Avant. We continued our inclination of beardown apical statement maturation once again mounting caller quarterly income records and achieving grounds adjusted EBITDA for Q4 and for nan afloat fiscal year.

We are proud to study that we person achieved nan largest fiscal year-over-year gross maturation amongst publically traded LPs successful Canada. Our property merchandise issued yesterday summarizes cardinal financial and operational highlights for nan 12 months ended November 30, 2022, compared to nan aforesaid play past twelvemonth arsenic good arsenic a comparison of Q4 to Q3 of 2022 and Q4 of 2021.

First, I’ll touch connected immoderate of these points for nan 12 months ended November 30, 2022. We reported gross revenues of $22.6 cardinal representing a 105% summation complete 2021. Net gross aft excise taxation was $20.2 million, up 112% complete 2021. Of this nett revenue, recreational cannabis income represented $14.4 cardinal and export gross was $5 million, again some records for some categories.

Our wide gross separator of 32% was down somewhat complete 2021 owed to a higher measurement of export income successful 2022, which mostly do person a little margin. However, we did waste a full of 3,951 kilograms of cannabis successful 2022, up almost 100% complete nan anterior year.

Our mean trading value for recreational cannabis was $7.13 per gram successful fiscal 2022, down only $0.08 from fiscal 021 arsenic we proceed to withstand beardown pricing pressures successful nan market. We besides hit records pinch our rate travel from operations of $2.2 cardinal and adjusted EBITDA of $1.9 million. Three of nan 4 quarters successful fiscal 2022 were affirmative adjusted EBITDA and affirmative rate travel from operations.

Our nett nonaccomplishment from operations was $8.5 cardinal this twelvemonth compared to $5.4 cardinal past twelvemonth and this accrued nonaccomplishment is chiefly owed to non-cash items specified arsenic nan adjacent worth changes connected biologic assets, share-based compensation and amortization.

The 4th fourth built upon immoderate affirmative momentum that we had generated successful nan first 3 quarters of this year, and immoderate speedy highlights for Q4 see trading a full of 1,456 kilos of cannabis successful Q4, that’s an summation of 124% complete Q3, which does supply immoderate discourse for nan following.

Q4 had grounds gross revenues of $8.9 million, positive 88% complete Q3, had grounds nett gross of $7.9 million, up 100% complete Q3. Record recreational gross revenues of $5.1 cardinal aliases positive 37% complete Q3, grounds export gross of $2.7 million, up 22% from Q3.

Overall, our gross separator was 39%, up somewhat complete Q3, and we had grounds rate travel from operations of $1.9 cardinal aliases 127% summation complete Q3. Record adjusted EBITDA of $1.6 million, again, up 124% complete Q3. In nan 4th quarter, we besides reported adjusted nett nonaccomplishment of $0.3 cardinal for nan quarter, an betterment of 41% complete Q3. Adjusted nett nonaccomplishment is thing caller that we’ve started reporting and guidance has decided that adjusted nett income aliases nonaccomplishment is simply a applicable manufacture measurement arsenic it’s commonly utilized successful nan superior markets to approximate operating earnings.

Primarily, this does region nan effect of adjacent worth changes connected biologic assets erstwhile compared to nett income. And again, adjacent worth changes is simply a non-cash item. All told, this was an highly beardown twelvemonth for Avant, which has group america up to make immoderate important investments for nan early successful FY2023.

Now I will walk this connected to our Founder and CEO, Norton Singhavon.

Norton Singhavon

Thank you, Matt, and awesome occupation connected getting our reporting done. Good afternoon, everyone. Fiscal 2022 was a grounds twelvemonth for Avant arsenic we proceed to show our expertise to scale, innovate and present important growth, while galore successful nan manufacture are contracting. Yesterday’s news merchandise outlines galore of our firm and income and trading milestones for nan year, but to summarize a few.

We entered into a indebtedness and possession indebtedness and stocking equine bid to get each of nan shares of Flower Group done a JV. The acquisition closed earlier this period and is expected to importantly heighten our cultivation capabilities pinch an summation successful installation quadrate footage to astir 185,000 quadrate feet, resulting successful a 60% summation successful our yearly accumulation capacity for nan company.

This will besides make america 1 of nan largest indoor ultra-premium producers successful Canada. We ramped up 3PL Ventures, a 50%-owned JV, which we’ve entered into an statement pinch to get nan remaining interest. Subsequent to nan year-end, we person closed this transaction. We completed 9 export shipments of astir 1,284 kilograms of cannabis to Israel and Australia, contributing astir $5 cardinal successful sales. Launched nonstop to unit shop income successful BC and complete astir $100,000 successful income for nan first 2 months of shipments.

Our premium position successful nan marketplace has been reinforced by compelling branding and marketing, astir notably pinch our flagship marque BLK MKT. BLK MKT was 1 of nan number 1 cannabis marque of nan twelvemonth for 2022 pinch complete 120,000 voters participating. It was nan number 1 champion seller for Premium 1G Pre-Rolls successful Ontario pinch complete 62% marketplace share. It was besides nan number 1 seller of 1G Blunts successful Ontario successful Ontario pinch a 31% marketplace stock based connected units sold. We launched BLK MKT successful Israel done a licensing statement pinch INC.

We guidelines retired based connected various financial metrics that ended nan twelvemonth successful our strongest position ever. Overall, we are rather pleased pinch nan results from fiscal 2022 and particularly Q4 arsenic it shows our way to profitability. Today, we spot a unsocial opportunity to make our business moreover stronger and turn faster successful 2023. Key strategical initiatives for nan fiscal twelvemonth see proceed capturing synergies and costs savings of flower, while transitioning to a agelong cultivars. We person generated complete $1 cardinal of yearly savings wrong nan first fewer weeks of closing nan transaction.

With nan summation of flower facility, we expect that we will beryllium capable to fulfill our home rec request arsenic we’re not capable to fulfill each home rec deals we received during Q4. Further grow world markets by diversifying our clientele and exploring different countries which let for nan importation of dried cannabis from Canada. Complete nan building of our GT Bio facility, which would beryllium expected to summation our accumulation by astir 2,000 kilos a year.

Increase our capacity utilization complaint arsenic during nan fiscal 2022 twelvemonth we had achieved only a 52% utilization complaint pinch 46% astatine 3PL. Management believes that during nan people of nan fiscal 2023 twelvemonth that nan utilization complaint will increase, particularly astatine its 3PL facility, which is expected to further thrust our apical statement revenue, while keeping our firm overhead costs comparatively flat.

I cognize nan Canadian cannabis superior markets hasn’t performed arsenic good arsenic we each had hoped. However, it’s worthy mentioning that arsenic of extremity of past week, Friday, Avant was nan 2nd champion performing successful Canadian cannabis banal complete nan past 12 months, down 5.8% pinch nan mean being down 21%. And during our fiscal year, we besides ended arsenic Avant being nan 2nd champion performing Canadian cannabis stock. We dream that arsenic we proceed to execute, summation revenues and profitability that nan markets will bespeak accordingly.

Thank you to our shareholders for your support. Our driving committedness for our business will proceed for this fiscal twelvemonth arsenic we dream to present you each nan returns that you each deserve.

With that, we’ll now unfastened up for Q&A. Operator, please spell ahead.

Question-and-Answer Session

Operator

Certainly. We will now statesman nan question-and-answer session. [Operator Instructions] The first mobility comes from Jordan Kay from Impossible Stock News [ph]Please spell ahead.

Unidentified Analyst

Hey, Norton. How is it going?

Norton Singhavon

Hey, good, good. How are you?

Unidentified Analyst

Congratulations connected an unthinkable quarter. So gladsome to beryllium a shareholder of Avant.

Norton Singhavon

Thank you. Happy to person you arsenic a shareholder.

Unidentified Analyst

So I’ve sewage benignant of a slew of questions, and I’ll commencement pinch – tin you stock immoderate visibility into Q1?

Norton Singhavon

Again, we don’t do forecast aliases guidance. So I can’t stock thing astir that.

Unidentified Analyst

Okay. All right. I was conscionable checking. Last quarter, we look to guideline that nan twelvemonth was going to beryllium unthinkable that we’ll conscionable person to hold till nan 4th ends today, right?

Norton Singhavon

I tin opportunity that for nan fiscal year, we do expect growth.

Unidentified Analyst

For nan fiscal year, we expect growth. That’s good. So a mates of questions connected The Flowr associated venture. Is nan associated task conscionable splitting nan profit 50-50 but Avant really does nan afloat assistance isolated from for nan funding?

Norton Singhavon

Yes, essentially, but it is our volition that we dream to get nan remaining 50% liking complete nan adjacent small spot here.

Unidentified Analyst

Okay. Awesome. Let’s see. So connected nan – truthful Avant is benignant of absorbing position wherever nan – I deliberation you acquired astir 1% of nan 3PL associated task during nan quarter, which I deliberation resulted successful nan gross of that installation being reflected. But arsenic their financial aspects of nan associated task reflected connected Avant study this quarter, like, for instance, nan biologic assets. Was each of that reported connected Avant? I conscionable wanted to beryllium clear. I americium not an accountant, truthful conscionable needed immoderate clarity.

Matt Whitt

Yes, Jordan, this is Matt here. So conscionable for clarity, yes, it was June 1. So actually, astatine nan opening of Q3 erstwhile we officially started consolidating 3PL. When we do consolidate, yes, it intends we bring successful – we treated it arsenic if it’s 100% owned and past we fundamentally reserve half of nan profits for nan non-controlling interest. So each revenue, each adjacent worth changes connected biologic assets, each inventory, bio assets, afloat operations are 100% consolidated from fundamentally Q3 and Q4 only.

Unidentified Analyst

Okay. That’s really bully to know. What astir nan GreenTec facility? I saw a mates of numbers connected there, $2.5 cardinal successful a contingent stock costs and past a $4 cardinal costs to complete. Are those 2 things incorporated successful nan $4 million? Or is it $4 cardinal and past different $2.5 million?

Norton Singhavon

So nan $4 cardinal would beryllium cash-based, $2.5 cardinal would beryllium stock based. That facility, we’re still we slowed down connected it a small bit. But I deliberation this year, based connected nan request that we’re seeing, we deliberation we’re going to look to decorativeness that facility.

Unidentified Analyst

So it’s $6.5 cardinal total. Who does that – who does nan $2.5 cardinal spell to? Is that to nan builder?

Norton Singhavon

The – actually, nan milestones are really for myself and immoderate members of nan elder guidance team. This was nan plus that I really started this full company. I cognize I’m astir apt going into a spot of a tangent here, which is why our institution is called GreenTec. So originally, we’ve entered this plus in. And arsenic a result, we’re expected to get banal retired milestone base. We reduced I deliberation complete half of those stocks backmost successful 2019. But yes, these are milestones for myself and a mates of nan cardinal guys.

Unidentified Analyst

No. You merit it. I would conscionable opportunity that. Okay. I’ve sewage mates of past things present truthful I don’t want to return up nan full time. Can you show america astir nan convertible debenture portion of nan 3PL $9.5 million? If Avant makes afloat costs of nan $9.5 billion, does it – is location nary conversion aliases is location immoderate convertible portion for illustration connected nan prime of nan 3PL associated venture?

Norton Singhavon

So basically, we sewage to springiness them conscionable nether 1.6 per quarter. As we salary that down, we return those conversion authorities backmost connected that amount. So assuming we paid everything backmost connected our clip statement and assuming nan stock value did not move importantly supra $0.50, therefore, they’re not – they don’t convert, past yes, that would not deed a headdress table. I deliberation it’s besides worthy mentioning, too, for illustration erstwhile group spot convertible debentures, they deliberation like, ohio my god, predatory financing. And for nan astir part, it usually is. But this is simply a spot of a unsocial script wherever we’ve taken a partner who now owns 22 cardinal shares successful Avant because of nan transaction. And they’re doing a vendor/seller financing, right? So it’s not for illustration immoderate third-party aliases reparatory hedge fund. These are our partners and ample shareholders. And you cognize what, we consciousness that nan position are rather reasonable.

Unidentified Analyst

How galore payments? Is it nan $1.56 cardinal aliases immoderate it is clip six, which gets you to nan $9.5 billion? Or is it…

Norton Singhavon

Exactly.

Unidentified Analyst

That’s it.

Norton Singhavon

Yes.

Unidentified Analyst

Okay. Then – truthful past location must not beryllium immoderate liking connected that $9.5 cardinal because I tin just…

Norton Singhavon

No. There is interest. Yes, nan liking is 10% per year.

Unidentified Analyst

Okay. So that – truthful nan payments will really beryllium much than what was put connected nan release, it will beryllium for illustration 1.6 positive nan liking rate.

Matt Whitt

It’s $1.5 cardinal positive interest. So it’s $1,583 cardinal and change, thing for illustration that.

Norton Singhavon

Yes, that’s really we collapsed it down. So nan payments are inclusive of nan liking is what I believe.

Unidentified Analyst

Okay. Awesome. And conscionable a mates – 1 point for Wall Street. Not that anybody from Wall Street is listening today, but possibly successful nan future.

Norton Singhavon

I spot personification here.

Unidentified Analyst

That’s good. The Wall Street loves recurring revenue, right? Any clip you spot immoderate of these pipeline companies successful position of their banal price, present recurring revenue. I deliberation 1 of nan things that possibly Wall Street mightiness not understand is export and whether aliases not that is perchance recurring gross and successful position of for illustration really are you seeing turnover, what are nan astir to personification coming successful and displacing a batch from those export deals that you’re signing. Can you conscionable talk a small spot astir that?

Norton Singhavon

Yes. So 1 of nan things astir export that’s really absorbing is that erstwhile we vessel merchandise to our clients, there’s a batch of hole down nan scenes connected their end. So they person to motorboat SKUs. They person to get approval, particularly successful aesculapian markets. They sewage to activity pinch nan pharmacies and nan GPs. So it really useful retired successful our favour wherever erstwhile we waste them merchandise that they for illustration and they person SKUs and aesculapian customer guidelines that are established, they’re somewhat committed to america because it’s a batch of activity for them to really spell and terminate those SKUs and commencement thing else. But possibly I’ll fto David Lynn touch connected that a small spot much arsenic he’s been starring our export division.

David Lynn

Yes. Thanks, Norton. Yes, I was conscionable building connected what Norton said. We person tremendous request connected nan export side. We touched connected nan truth that we couldn’t support up pinch nan acquisition orders connected nan rec broadside of nan business. The aforesaid business existed connected nan export side, some successful Israel and Australia and driven by nan value of our product, we person tremendous loyalty amongst our customer base.

Norton besides mentioned nan trademark licensing statement for BLK MKT successful Israel, which intends that our customer is building their business astir our brand. And of course, they tin only waste merchandise produced by america nether that brand. So we’re very bullish astir export going forward. We cognize there’s a batch of title for those sales, but there’s not a batch of companies that are putting retired nan value of merchandise that we connection to our clients.

Unidentified Analyst

Do nan contracts thin to beryllium multiyear?

David Lynn

The contracts person typically person nary fixed extremity date.

Unidentified Analyst

And truthful they’re conscionable evergreen and successful bid to travel in. I retrieve erstwhile you primitively scheduled nan first one, it was for illustration you guys were going to do thing for illustration 500 during nan year, possibly it was 1,000 during nan year. Is that benignant of what’s happening? Are they giving you unsmooth numbers of what you request to nutrient during nan twelvemonth aliases difficult acquisition orders truthful that you guys tin prep?

David Lynn

We do stock projections pinch our clients. But generally, successful nan agreements, they’re open-ended agreements, and we don’t get into hole amount commitments by either broadside because that’s problematic erstwhile you commencement to research benignant of take-or-pay type arrangements. So typically, they’re open-ended contracts, but I tin show you that, mostly speaking, our merchandise has been highly good received, some successful Israel and Australia. We’ve struggled to support up pinch nan demand. And again, that’s portion of nan catalyst for nan Flowr acquisition is to drawback up to request some connected nan rec and nan export broadside of nan business.

Unidentified Analyst

Awesome. Really bully to know. I conjecture I’ll time off you pinch 1 past mobility connected utilization rate. Utilization complaint seems to beryllium debased because you guys are moving connected 3 additions correct now, right? 3PL, Flowr and past nan GreenTec facility, each while nan utilization complaint astatine immoderate of nan accommodation is nether 50%.

So what’s nan worth of opening a caller installation versus – and by caller facility, I mean, acquiring associated task aliases adding Flowr aliases building retired a GreenTec alternatively than ramping up utilization that what you’ve sewage going already. Is location a costs difference? Or is this conscionable a scheme for nan future?

Norton Singhavon

No. That’s really a awesome question. So first of all, they’re not mutually exclusive, right? We tin proceed to ramp up utilization astatine our existing accommodation while wrapping up Flowr while completing GT-Bio. The funny point is GT-Bio down nan thoroughfare from Flowr, virtually down nan sheet. So what happened?

So 3PL sewage licence extremity of August of 2021. So we spent astir of 2022 ramping up accumulation there. Now erstwhile I opportunity ramping up, it wasn’t for illustration we had to get nan rooms fired up. It was that erstwhile we brought successful genetics, erstwhile we brought successful our moms, we could only trim truthful galore clones to capable nan rooms.

So we had rooms that should person been producing, telephone it 80 kilos, but we only had capable plants to do half of that, right, conscionable because our moms weren’t large capable to trim that galore clones. So it was a gradual ramp-up process. Our mean wide has been brought down importantly by 3PL because evidently 3PLs our largest facility, right?

3PL alone, I deliberation is 2 times larger than nan different 3 accommodation mixed aliases springiness aliases take, right? So that’s why it’s brought down. Also, I would opportunity our capacity utilization astatine our different accommodation did alteration somewhat from nan erstwhile fiscal year. And that’s much truthful conscionable nan marketplace getting much finicky.

So nan GenX that we’re producing for past – for 2022 twelvemonth didn’t output arsenic overmuch arsenic nan GenX that we nutrient successful nan 2021 year. Again, nan marketplace is getting finicky picky. They want gas. They want exotic cultivars. So we person to nutrient what nan rec marketplace wants, right? So I deliberation that sums up your mobility unless I missed thing there.

Unidentified Analyst

No. No, that’s incredible. You spent measurement excessively overmuch clip pinch maine already. I conscionable want to say, I’m truthful happy that you’re patient and you’re doing okay aft your mishap and wishing you each nan champion and convey you truthful overmuch for each of your difficult work.

Norton Singhavon

Sorry, wherever americium I? Who is this? I’m kidding, okay.

Operator

[Operator Instructions] The adjacent mobility comes from Nicholas Williams, Private Investor. Please spell ahead.

Nicholas Williams

Hey guys, Nicholas here. First off, awesome call. Thank you truthful much, and ace impressed pinch nan advancement you guys are making and nan immense congrats connected nan 4th quarter, beardown 4th fourth successful your fiscal 2022 results, truthful astonishing work, support it up.

Just person a mates of speedy questions. We each cognize nan cannabis manufacture is quickly evolving. And what benignant of things are you doing aliases adapting and what benignant of caller trends aliases innovations do you spot connected nan horizon? And past nan 2nd portion of nan mobility really conscionable has to do pinch competitors. What are nan company’s superior differentiators to really group yourself isolated and supra your competitors?

Norton Singhavon

Yes. So our thought connected invention is we for illustration to motorboat evidently motorboat caller products entering into nan concentrates markets, which you saw that we did past year. What we’re uncovering is dried flower – premium barren flower is still king. No matter what marketplace we’re in, moreover mature U.S. markets, premium barren flower is ever apical seller and past pre-rolls and theen vapes.

So we don’t want to propulsion a tremendous magnitude of resources astatine thing that could perchance beryllium a distraction from our halfway business, right? I deliberation we’re beautiful disciplined successful that sense. So we’ll proceed to show nan marketplace to spot what products mightiness beryllium a fresh for immoderate of our brands and what mightiness make consciousness for america to launch.

But yes, to sum that up, I would opportunity it’s thing we’re ever looking at. We want to beryllium innovative pinch our dried flower and our genetics and our merchandise offering, but also, again, we don’t want to distract from our flagship business.

Nicholas Williams

Perfect.

Norton Singhavon

And past nan 2nd part, punctual maine your mobility astir nan competitors again?

Nicholas Williams

Yes, has to do pinch competitors. Are location immoderate superior differentiators that you scheme connected strategizing astir to return yourself isolated and supra your competitors arsenic well?

Norton Singhavon

Yes. So it’s absorbing because I consciousness for illustration we don’t person a tremendous magnitude of competition. So we person immoderate competitors who I won’t name, but their value – 1 is priced very akin to us, but they’re integrated and grown into greenhouse.

There’s a marketplace and request for that, but that’s not nan conception we’re after. There are different competitors that – absorbing enough, they’re starting to statement a row. So what we like, particularly successful nan home rec marketplace is that we tin benignant of play disconnected this that we person our ain genetics than cipher other successful nan state has.

We tie our ain merchandise and we get that to market. So a batch of our competitors, which I won’t sanction are starting to do statement domiciled because, A, they can’t fig retired themselves aliases B, they’re conscionable uncovering that their costs are excessively precocious aliases nan accommodation are located successful distant areas that are difficult to staff.

We are looking astatine statement rotation only for export – I’m sorry, I’m not looking. We do person 1 statement rotation successful spot but it is for export. So I deliberation that’s what really sets america apart. Again, our genetics from cuttings to [indiscernible], it’s each as, obviously, our unsocial branding and trading and that’s a testament to america winning nan advertisement tin grant of being nan voted nan number 1 cannabis marque successful nan country.

And it wasn’t conscionable connected nan trade brand, right? It’s each LPs. You are seeing immoderate micros and mom-and-pop nutrient value products that are comparable to ours. But again, a micro tin nutrient astir 600 kilos a year. So it’s really difficult to get standard astatine that level and really predominate nan rec marketplace and filling nan POs that you’re going to get from Ontario.

Nicholas Williams

That’s great. Thank you truthful much. Makes sense.

Norton Singhavon

Thank you.

Operator

[Operator Instructions] The adjacent mobility comes from Joe Rice from KW [ph]. Please spell ahead.

Unidentified Analyst

Hey Norton, really are you?

Norton Singhavon

Hi Joe, I’m good. How are you?

Unidentified Analyst

Hanging successful there. Loving this call. But yes, a speedy mobility is, I noticed reference nan people retired that you’re going for – to decorativeness your last – you’re finishing a GTEC installation that says it’s going to raise capacity aliases accumulation capacity to 18,600 and you produced 5,700 this year. So I mean it looks for illustration there’s almost a 3.5 times capacity maturation you’re going to person by nan extremity of nan year.

My mobility is really – for illustration successful these peculiar facilities, and I’m not overmuch of a user of nan product, truthful I’m a small unsure really nan accumulation process goes. But successful each of these facilities, let’s opportunity that you noticed a inclination that that you’re getting a batch much export deals than you usually would aliases let’s say, recreation – recreational flower gets really celebrated BLK MKT does. How easy is it to really person nan existent accommodation are increasing itself to meet nan level of request that whitethorn alteration successful 1 conception aliases nan other. Do you understand what I’m asking?

Norton Singhavon

Yes. It’s precisely nan same. So export merchandise is shipped and, telephone it, wholesale connected 1 kilo bags. The merchandise that goes into nan export is nonstop aforesaid strains successful cultivars that goes into our home rec market.

Unidentified Analyst

Okay. If you cognize it’s a large hiccup and opportunity recreation, you wouldn’t person to set nan manufacturing process, that would conscionable beryllium a soft transition.

Norton Singhavon

Exactly. So I’ll springiness you an example. Let’s opportunity we had 100 kg batch that was destined for Ontario, right? And it finished, nan trial came successful and we’re astir nan package. And Ontario said, you cognize what, we alteration your mind? We don’t want it. We hypothetically could prime up nan telephone that day, telephone our export customer and perchance get a PO for it aliases vice-versa.

Unidentified Analyst

Got you. Got you. Okay. Yes, that’s great. Thanks, Norton. That’s amazing. You tin – you’re going to summation 3.5% accumulation capacity and you grew 100% this year. That’s awesome. Thank you.

Norton Singhavon

Thank you.

Operator

[Operator Instructions] There are nary much questions successful nan queue. This concludes nan question-and-answer session. I would for illustration to move nan convention backmost complete to Norton Singhavon for immoderate closing remarks.

Norton Singhavon

Thank you again, everyone, for joining america today, and we admit your continued support. Enjoy nan remainder of your week. Thank you.

Operator

This concludes today’s convention call. You whitethorn disconnect your lines. Thank you for participating, and person a pleasant day.

Editor: Naga



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