Australis Capital Inc

Good morning, everyone, and welcome to today's Astralis Capital Conference call discussing the results for the third quarter of fiscal 2022. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions could constitute forward-looking statements related to, among other things, for our future growth. Trends in our industry are financial and or operational results, and our financial or operational performance. Such forward-looking statements are predictive in nature and may be based on current expectations, forecasts, or assumptions involving risk and uncertainties that could cause actual outcomes and results to differ materially from the forward-looking statements themselves. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian security laws. Risks and uncertainties and variable factors are discussed in the company's various public filings at www.cedar.com. Except as required by ethical law, we disclaimed any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Note that on today's call, which is recorded, we will refer to certain non-IFRS financial measures, such as EBITDA, that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with the IFRS. Since we are conducting today's call from our respective remote locations, there may be brief delays or other minor technical issues during this call. We thank you in advance for your patience and understanding. I would now like to introduce Mr. Terry Booth, CEO of Adacia. The call is yours, Mr. Booth. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to our Q3 conference call. It's been an eventful few months as we continue to execute at Audacious. We now not only have a growing footprint in the U.S., but we're also expanding internationally through our partnership with GTH in Thailand and the completion of our project in Australia. Consumers in multiple markets now have access to our award-winning product lines with sales in California growing as our pending acquisition of Herb and our partnership with EASE are supporting our efforts in that market. The quarter itself saw us continue to grow at a high rate. Compared to the same period last year, revenues increased by over 2,400%, clearly showing how our transition from an investment co into an operating co is successful. While sequentially, top line revenues increased relatively modest, 4.4% compared to the last quarter. This is mainly due to us cycling out some older consulting arrangements, such as BodyMind, an investment we now have largely exited. Adjusted for these steps, we saw continued growth in our core business of Alps and cannabis. Alps continued to go from strength to strength. With ESG projects proliferating across the globe, Alps, with its unsurpassed offerings, is often a partner of choice to help growers establish operations. We are helping clients with their project from the Arctic to the desert, as, for instance, our project with Pure Harvest in Kuwait shows. The ALS pipeline continues to grow, and we continue to work on a growing number of large projects that will see us generate significant revenues. Speaking of growth facilities, while at MJBiz.com this last fall, which was very successful for the company, we launched the Audacious Achieve series, and launch the Audacious brand. The Achieve series is a set of standardized facilities powered by Alps. We are in a growing number of discussions on building Achieve facilities for customers, and we already announced that our New York partners, First Americans of the St. Regis Mohawk Tribe, we will be building an Achieve 12. That brings me to what I believe will be one of the more significant projects under development. We announced our partnership with First Americans back in December. The importance of this project is it provides Audacious with a clear early movers advantage in a market that is not expected to fully implement adult consumer use for another 18 months or so. There is, however, some movement on the hemp side and we have our finger on that pulse as well. Our partners, a group of highly accomplished entrepreneurs with a deep background in retail operations. Rick and his team from First American built a thriving commercial hub on the Mohawk territory And Rick was also involved with the establishment of the casino resort that attracts close to 2.5 million people annually. As one of our planned dispensaries will be right opposite this casino, we anticipate significant traffic. New York State is one of the main prizes in cannabis. The fourth most popular state in the U.S. with over 20 million people. This is a market that is expected to generate billions of sales in the coming years. Being able to establish a presence with our brands well before most other companies will be able to start servicing this market provides us with a very significant competitive advantage. We look forward to working with Rick and his team in establishing a thriving cannabis operation in this exciting part of the world. Not only are we movers in New York, we also have a head start in Thailand. Thanks to our partnership with GTH, Golden Triangle, Thailand recently removed cannabis from its narcotics list. While THC for the general market still limits the potency below 0.3%, this is an important step that opens the door for further legalization down the line. In the meanwhile, we will be focusing on the development of our CBD business in Thailand. We will be reporting shortly on our trip our team recently made to Thailand, but suffice to say at this point that with our partners, we've been able to establish significant distribution with major retail chains, and third-party distributors for when we are fully up and running with our production. To this end, we sold hemp seeds to GTH, making us the first North American firm with cannabis-related sales to Thailand. These seeds are growing on the land made available to us by Kohn Cayenne University, one of our partners who are making meaningful contributions to GTH, such as the land in which we grow our hemp and later cannabis, on extraction equipment and with R&D capabilities. Moving quickly, GTH has also already opened four franchise stores under its Hemp House brand. These we plan will eventually be turned into dispensary-type operations once adult consumer use is fully legalized. Until such time, we are likely to convert the Hemp House stores into clinics, as we have a license to grow medical cannabis, which is sold through the government. We will be able to cover the entire industry vertical in Thailand, providing us with an early-move revenge we believe combined with our distribution networks will set us up for the success that we require in this market with 67 million people furthermore thailand is the first asian country to make this move but we anticipate other markets such as malaysia and china to follow having an international distribution network with exceptionally strong connections in the region will set us up we believe to become one of the dominant forces in canada's in this region of incredible potential gth itself is a spinoff from the highly successful ethnic foodstuffs company NR Instant Process PCL, also known as NRF, a Thai public company with a market cap in excess of $400 million and sales across the globe. The reason they wanted to work with us as a partner is because they recognized our operational excellence across the value chain, from cultivation through to manufacturing, derivatives, branding, and our executive team. We are very excited about this partnership as we believe this will become a very material contributor to revenues and margins in the quarters and years to come. We're off to a great start and there's much more to come. While we continue to be very active in the M&A arena, at any given time we have upwards of 40 projects under assessment. We are currently laser focused on driving organic growth. Our efforts in California are a good example of our hybrid approach. On the one hand, we made our entry into the space through the pending acquisition of Herb's Dispensary in San Jose. This is progressing well, and we are close to having a definitive agreement. As we stated previously, through the Herb acquisition, we are also able to enter into a partnership with Eaze, the world's largest legal cannabis delivery service. The beauty of this partnership is that it takes out customer reach well beyond the San Jose area, and the SKUs that we launched in California are available on the Eaze menu statewide. The effect of this has become immediately apparent as the initial batches of loose and provisions products produced in California are completely sold out. The effort of this has become immediately sold out. We are producing a second larger batch which should be available to the market in the next couple of weeks. Our success in California clearly shows that if a company makes great products, they will sell, even in a competitive market such as California. We at Audacious strive to supply customers with products they are looking for. While there is a place for value brought in the market, this is a highly competitive space with little to no customer loyalty. At the higher end, things are different. Shortage of two premium products and consistency of supply of premium products mean that a company able to supply high quality and designer products consistently to the market will be able to carve out market share. This is exactly what we are doing. For instance, even without the heavy spend on marketing and with no advertising, our loose products rank second in their category in California. This reflects both the attractiveness of the loose products to consumers, but also the ability of the loose team to sell. And selling is what they do best. The sales team that came with loose has exceptional connections within the Canada space that have enabled them to ensure our products can be found in a growing number of dispensaries, which comes on top of the success we have had in the East. we are looking to replicate our efforts in other jurisdictions. For instance, in our home market, Nevada, we will be launching loose and Mr. Natural products shortly, as well as further provisions edible wines. Tsunami recently won the inaugural New Woo Cup for Best Extract. Our extraction scientists, under the leadership of Dr. Duke Fu, are second to none, which is also one of the reasons we increasingly are becoming the partner of choice. as Thailand and our new project in New York clearly show. Further activities in Nevada center on increasing production capacity, the development of a cannabis campus on the 23-acre plot of land we own in Sandy Valley near Las Vegas, where we also own the last remaining water rights. On the back of our successes, we now have also gone live with our REC Relief website, www.recrelief.ca. This is an e-commerce site for the sale of our CBD-infused topical pain relief medication. Developed to service our growing audience amongst followers of the PBR, which with over 83 million captive fans and over 2 billion social media impressions, represents a very interesting market for us. With the site now live, we have commenced generating revenues for the Record Leaf brand. There will be many more promotional activities surrounding the Record Leaf brand, for instance, On February 1st, we announced directly 2022 PBR ticket giveaway, in which we are giving away over $10,000 in premium PBR tickets and experiences for 21 lucky winners. The last drawing takes place on April 18th. I would encourage everyone to visit our site and check it out, and perhaps participate in the contest to win a PBR experience. Take it from me, I've watched PBR events, and I'm very confident in stating that these athletes can do with some high-quality pain relief. And what works for them, having Justin thrown up a raging bull, should work for any and many other people too. Before I hand over the call to John, I want to add a few more things on ALPS. In the past, I've gone into great detail on what ALPS does and what makes it so special. I won't repeat all of that here. You can find it in our press releases and call recordings, which are on our ASA-Corp website. What I do want to focus on is how ALPS, which continues to sign new projects, including $1.4 million in fees, for ALPS project in Kuwait, not the most vegetable friendly climate, and that is where ALPS comes in. The quality of projects delivered by ALPS over the years has cemented their brand as the developer of the highest quality facilities that are built to deliver simultaneously on margin economics and sustainability. Consequently, we see strong traction for projects of this kind. Furthermore, being a preeminent innovator in the space, The launch of our APIS suite of compliance and industrial computerized service solutions is making waves. Our first APIS installation is already up and running in Australia, with further suites being developed and delivered to other projects. APIS is unique in the industry and has given ALPS a great competitive advantage as the first mover, and based on years of facility design and growing experience. APIS has started to imitate and outperform. Consequently, interest in the solution and ALPS is high. For example, We were able to enter into a partnership with Priva, the global leader in environmental control solutions for the horticultural sector. Priva has installed customer base, an installed customer base of over 12,500 facilities worldwide. This is a captive audience who we know want to hear more about APIS. I look forward to updating the market once the joint team heads out and starts spreading the gospel on APIS. While at mjbiz.com, we also announced the launch of Adace and Achieve facilities. Without going into too much detail, it is important to note that the Achieve concept delivers high-quality cannabis at low operating costs, but in a standardized format that is quick to develop and build. Consequently, our customers will be able to get their product to market much sooner, while at the same time knowing that they will be fully compliant with all rules and regulations. Those companies looking at overseas markets can also opt for EU GMP compliance, further expanding their economic reach. Our New York project will see an achieved facility being built, and we are in talks with a growing number of companies interested in this concept. Going forward, ALPS is a very active pipeline and potential project. It is in negotiations on many, and we look forward to informing the market as we continue to execute on our sales. On that note, I will hand the mic over to John, who will go over. John Paul?

Thank you, Terry, and Thank you, everyone, for tuning into our call today. As Terry mentioned, lots of exciting things taking place, and Q3 was a pivotal transitional quarter for us as we spent heavily on areas with strong future revenue potential, as Terry discussed, while making moves away from previous revenue streams such as fintech. As we reported after market yesterday, we continue to generate significant growth year-over-year with revenues over a 2,400% above last year's Q3. Even with lower fintech and consulting revenues, as we pivoted away from certain sales channels, we still exceeded last quarter by 4.4% with sales of 2.4 million. As Terry mentioned, we entered the California market and quickly sold out our limited production runs. Based on this success, We advanced ordered key raw materials for much larger production runs that will be scaling up very quickly. Our trailing 12-month performer revenues continue to climb, now at $9.9 million, up 14% from their same 12-month trailing revenue numbers as of the previous quarter in September. The performer numbers include sales from Green Therapeutics, which we acquired last March. We are now in the final stages of the licensing transfer process, which we are confident will get approved by Nevada regulators later this month. Growth profit improved to $1.8 million compared to a $0.2 million loss for Q3 in the prior year. And even more impressively, growth profit is up 49% compared to Q2. The improvement in growth profit over the prior quarter was driven by higher utilization rates and very attractive growth margins on the ALPS services businesses. Operating expenses grew 26% compared to Q3 the prior year, well below the revenue growth rate. Q3 operating costs were 9% higher than Q2, driven by costs related to the company presence at MJBizCon, which Terry mentioned, the Audacious brand launch, annual meeting cost, and offset partly by lower accrued service costs as we finished final settlement with prior management people from the previous management team prior to the proxy fight. Our operating costs dropped 14.7% versus last year. as well as 2% from Q2. The improved gross margin more than offsets the extra spending we've been doing on growth initiatives. During this fiscal year, after nine months, we have made some big capital investments. ALPS has spent $1.7 million developing their APIS service line, as Terry talked about, in addition to cost spent previously. We advanced $2.4 million to Bella Fleur to get their cultivation build-out started prior to winter. We also spent $1.9 million on land and water rights in a future facility in Sandy Valley, Nevada. To help finance this, we raised $3 million in an equity raise from high net worth individuals. We generated $4.1 million from land sales that we no longer need. and reduced our investment in body and mind by $3.5 million, all signs that we are focusing on investing in our operation. Looking ahead with being able to consolidate green therapeutics results in Nevada when the license transfer gets approved, we have several other levers for sales growth. Sales through GTH in Thailand, the expansion in California, further expansion in Nevada, and new projects in the works at ELPS. Thanks everyone for tuning in. I now have the call back to Terry.