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spk03: Thank you for standing by. This is the conference operator. Welcome to the Avant Brands Inc. Third Quarter 2021 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Ms. Alyssa Berry, Investor Relations for Avant Brands, Inc. Please go ahead, Ms. Berry.
spk04: Thank you, operator, and good afternoon, everyone. Welcome and thank you for joining us for Avant Brands' third quarter Cisco 2021 results conference call. My name is Alyssa Berry, Investor Relations for Avant Brands. Speaking on our call today is Avant's founder and chief executive officer, Norton Singhaven, and chief financial officer, Kendra Blackford. Avant's chief operating officer, David Lynn, is also present and will be participating in our Q&A session. Our third quarter fiscal 2021 results were disseminated yesterday and are available on CDAR 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 CDAR. On this call, we will refer to the company as Avon Brands or Avon. We recognize that most of you have already reviewed our results issued yesterday, so be mindful of your time. Kendra and Norton will keep their comments brief. and we will then transition to our Q&A session. With that, I will turn the discussion over to Kendra to share the company's financial highlights, and then over to Norton to provide a strategy update. Please go ahead, Kendra.
spk02: Thank you, Alyssa, and good afternoon, everyone. Touching on the key highlights for the third quarter ended August 31st, 2021, compared to the second quarter ended May 31st, 2021, we reported another solid quarter of revenue growth through our three distinct channels, recreational, medical, and export. For the second quarter in a row, we achieved record gross revenue of 3.1 million and net revenue of 2.7 million. Our gross margin increased slightly for the quarter to 40%, and gross margin dollars increased 14% to 1.1 million. We sold 525 kilograms of cannabis during the third quarter, compared to 394 kilograms, representing a 33% increase. Our recreational cannabis sales in Canada accounted for 71% of total sales, compared to 92%, thanks to our initial global export shipment to Israel, which shipped over 200 kilograms of dried cannabis. While the company's medical sales also increased significantly, this business is still emerging and accounts for less than 5% of total gross sales. As export shipments typically have a lower average selling price compared with Canadian recreational sales. Given the large initial export shipment, our overall weighted average selling price decreased by 20% to $5.78 per gram. However, the cost of sales is also lower on export. Therefore, the margins remain attractive and are within the range provided by our recreational product portfolio. During the quarter, sales for our Tenzo brand increased with the launch of new cultivars and packaging. The Tenzo brand has a lower weighted average selling price over our black market brand, and as a result, the recreational weighted average selling price decreased 5% to $6.97 per gram. Operating expenses, excluding non-cash items, was $1.5 million, representing an increase of $311,000, as the company had various one-time non-recurring expenses, such as fees related to the TSX graduation and associated professional fees. Net loss from operations was 2.97 million compared to a loss of 124,000 as the company recorded a non-cash loss of 2.3 million on fair value changes of biological assets. This was a result of the company decreasing the fair value price per gram of flour in order to be more consistent with the current weighted average selling price that the company is receiving for the product mix and various sales channels. As the fair value price per gram is represented by the company's estimates, By nature, they are subject to change on differences from anticipated yields or market value and will be reflected in the gain or loss on biological assets in future periods. Our positive cash flow from operations of 831,000 indicates significant growth within our operations and demonstrates our ability to generate positive cash flow. Adjusted EBITDA loss of $267,000 compared to a loss of $28,000 as the company had various one-time non-recurring expenses as previously noted. Overall, we are pleased with the results we have achieved and our strong capital position with approximately $16.3 million of cash and $26.7 million of working capital and no debt. This provides the flexibility to be strategic and opportunistic as we continue to grow our business. We also have our preliminary base shelf perspective, which we filed in August for up to an aggregate offering of $50 million to provide the company with the flexibility to capitalize on financing opportunities and favorable market conditions during the 25-month period that it remains active. With that, I'll pass it over to Norton for his remarks.
spk00: Thank you, Kendra, and good afternoon, everyone. Further to Kendra's comments, we believe we are well-positioned to continue building upon the foundation we have in place and to further propel our business as we maintain our market leadership position as a premium producer in the cannabis industry. Our summer was a busy one, to say at least, as it relates to a number of key areas, including our graduation to the Toronto Stock Exchange, new board members, and our rebrand to Avant Brands, which has all resulted in Avant being included in the NASDAQ-listed Global X Cannabis ETF, which will continue to elevate our profile and visibility with our consumers and investment community. Our initial feedback to our new name and image has been quite positive, and we'd like to acknowledge our consumers and investors for their continued support. In addition, our 3PL Ventures Inc. facility, a purpose-built 60,000 square foot facility, received its standard cultivation, standard processing, and medical sales license in August, which will enable us to build on our positive momentum and revenue growth. On the sales and marketing side, as Kendra mentioned, we successfully initiated a global cannabis export shipment of over 200 kg to Focus Medical Herbs, which is a wholly owned subsidiary of Ion Cannabis Corp, a NASDAQ-listed company. We continue to expand our international client portfolio by signing additional export agreements with customers in Israel and Australia. Our black market brand continues to be a top-selling premium brand in all Canadian provinces, and our black market One Grand Prix roles have rapidly emerged as a top seller in British Columbia, and are steadily increasing market share in Ontario. Also, finally, we have achieved a steady increase in B2C medical clients while expanding the product offering in terms of cultivars and package size formats. Subsequent to the quarter, we enhanced our portfolio of rare and unique cultivars with the addition of over 80 genetics, most of which are not currently available within Canada's legal supply chain. These products are expected to launch under Avance Recreational Brands, Black Market, Cognoscenti, and Tenzo during the first quarter of next year. We also executed manufacturing agreements with multiple extraction companies, leveraging the company's cultivation expertise and brand equity to execute our strategy within the concentrate segment. We entered into the concentrates category with the debut of Tenzo Vapes, which have received strong initial feedback from the market. As we look ahead, our key areas of focus are as follows. One, continue gaining market share by increasing production, refining our prices and packaging, maintaining our flower quality, and increasing overall brand awareness. Two, further expansion into the global cannabis export markets. Three, actively pursue acquisitions or contractual opportunities as we do believe will require more production in order to fulfill our expected demand in Canada and globally. Four, new product innovation to increase our competitive edge. Five, operate in a cost-efficient manner across the organization to ensure efficiency and maximize output. Six, enhance our investor relations program to increase visibility and shareholder engagement as we evolve and become a more sophisticated organization. With that now, we'll turn it over for Q&A.
spk03: Certainly. We will now begin the question and answer session. To join the question queue, you may press stars and one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause for a moment as callers join the queue. Once again, if you have a question, please press star then 1. The first question comes from Peyton Polenstein, a retail investor. Please go ahead.
spk01: Hi, Noor. Quick question. So about those 80 different strands that you guys are working on that are, most of them aren't in the market. Are those, you know, I want to say from like, were they existing strands that you somehow acquired? Or were they from your research and development team from like cross-sector? you know what I mean, like combining two different strands that are existing to create a new strand?
spk00: Yeah, so back in 2018, we signed an agreement with a consultant who would basically lead the charge on our genetic library. I think the question of what you're asking is that are we crossbreeding internally or are these new cultivars? And to answer that, there are completely new cultivars. Some may have been bred from existing genetics that we have, but we were not the ones that led this process. Our consultant does.
spk01: Okay, thank you.
spk03: Once again, if you have a question, please press star, then 1. This concludes the question and answer sessions. I would like to turn the conference back over to Mr. Singhaven for any closing remarks.
spk00: Thank you again, everyone, for joining us. As a reminder, we'll be hosting our virtual AGM on Friday, November 5th at 2 p.m. Pacific Standard Time, 5 p.m. Eastern Standard Time. Details are in our management info circular, which is available on CDAR and on our website. Or feel free to reach out to us directly, and we'd be happy to send you the details. Thank you, everyone. Have a great rest of your week.
spk03: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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