Thank you, operator, and good morning, everyone. Since we just had our fourth quarter earnings call about four weeks ago, and many of our first quarter operational highlights were discussed at that time, my remarks this morning will be relatively brief.

That being said, this is a very exciting time for Flower One, our brand partners and our investors. As many of you know, our teams plan from day one was for Flower One to focus on quickly becoming Nevada’s leading large scale cultivator, producer and brand fulfillment partner.

We executed against this plan throughout both 2018 and the first five months of 2019. A key element of our plan is to establish numerous meaningful long-term partnerships with reputable and established brands, and then to offers these seats retail ready custom package brands to Nevada’s retail dispensaries with consistent reliable high volume just in time delivery.

Already in 2019, we have announced eight brand partnerships, including seven during the first quarter and one subsequent to the quarter end. These brand partners' products represent a diverse consumer spectrum from value oriented brands to mid-tier brands to the more exclusive luxury brands, but this only represents the beginning.

We continue to meet with additional perspective brand partners as we look to bolster an ever expanding and diversified mix of product skews and delivery platforms, including packaged flower, pre-rolls, oils, distillates, concentrates, gel caps, vaporizers, edibles and topicals, to deliver greater choice and brand diversity, something that both consumers and Nevada cannabis retailers expect as the market continues to grow and mature. For Phase I of our brand and product rollout, we are excited to be working with our initial eight brand partnerships who we strongly believe will position Flower One well in the Nevada market as we ramp up our operations at Nevada’s largest commercial scale Greenhouse.

And speaking of our flagship greenhouse, as we announced in our news release after markets closed yesterday, we have now successfully completed the conversion of our greenhouse and the greenhouse is now fully canopy, including two high-tech cutting cell rooms, three multi-density vegetative zones and all eight flower zones. This is a very significant operational milestone for the company.

We believe that our 400,000 square feet fully canopy high-tech greenhouse in the strongest cannabis market of Las Vegas and Nevada, makes Flower one of market leading cannabis cultivator in the United States. And to think within the past 12 months, we have completed the high-tech conversion of the largest greenhouse in Nevada, fully canopied that greenhouse, and established eight strong highly reputable brand partners, representing 60 to 70 skews.

This tightly focused execution is all possible things to a truly dedicated tireless and passionate group of people of Flower One. So I would like to take the opportunity to thank and acknowledge.

In closing and before I pass the call over to our CFO, Geoff Miachika, I think it’s important to express and highlight that as a company, we are very excited about drawing to a conclusion the execution of building out our assets in Nevada. And we are even more excited about moving towards the operational phase of our business plan.

It is the significant accomplishment to be where we are in such a short 12 month timeframe, and it places us in an even more significant position than ever before to deliver value and return on equity for our shareholders as we begin building valuable and significant inventory of biological assets, dry cannabis flower and trim and finished products. With that, I'd like to turn the call over to Jeff to provide our financial review for the quarter.

Jeff?

Thank you, Ken and good morning everyone. Before I begin, I would like to point out that all of the dollar amounts expressed in today's call are in U.S.

dollars, unless otherwise stated. Similar to fourth quarter, our operational activities during the first quarter were largely focused on advancing the conversion of our 455,000 square foot greenhouse and production facility for cultivating high-quality cannabis at scale.

As previously disclosed, we began recording revenue on November 9, 2018 subsequent to the acquisition of the assets of NLVO. As such, while we had revenue of 534,000 for the first quarter of this year, we did not have any revenue in the comparable period last year.

Revenue this past quarter was generated out of our Neeham property. We expect to start generating revenue from our greenhouse in the third quarter of 2019.

Our cost of goods sold this past quarter was 492,000, and this included the cost of inventory sold, as well as direct and indirect production costs, consisting of direct labor, processing, testing, packaging, quality assurance, shipping, depreciation of production equipment, production management and other related expenses. We had $3.6 million in general and administrative expenses for the quarter.

The more significant components of this were accounting and legal fees amounting to $439,000, $457,000 in wages and salaries, $917,000 in consulting fees, $769,000 for general office and admin expenses and utilities for the greenhouse, as well as the Neeham property and $428,000 in travel costs associated with financing activities, brand licensing, project management and operational support attributable to management and staff traveling to and from the greenhouse. For the quarter, we had net income of approximately $1.7 million.

In addition to our revenue and cost of goods sold, the main drivers behind the net income was a fair value gain of $10.4 million on the growth of biological assets, $1 million in gains related to the modifications of the notes payable acquisition of a greenhouse. And we had approximately $72,000 in gains related to the fair value adjustments on the derivative liability.

These gains were partially offset by $2.6 million in finance expenses related to interest accretion and certain transaction costs associated with the convertible debenture, $882,000 in share-based compensation, $2.1 million deferred income tax expense related mainly to the fair value gain on growth of biological assets and a foreign exchange loss of $323,000 related to the cash balances held in Canadian dollars and the derivative liabilities. At the end of the first quarter, we had working capital of approximately $4.8 million, including $5.7 million in cash and cash equivalents.

As mentioned on our last call, the maturity date of the NLVO greenhouse note was extended to March 31, 2020, with interest commencing April 1, 2019 at a rate of 9.5% per annum. Also during the quarter, we obtained equipment lease financing of up to $30 million.

Of which to-date, we have drawn $20 million. And on March 28th, we closed our perspectives offering of convertible debentures raising CAD59 million with the overallotment of CAD7.5 million closing on April 1st.

The offering was made through a syndicate of agents led by Mackie Research Capital and Canaccord Genuity, and also included Cormark Securities, Eight Capital, Industrial Alliance and PI Financial as agent. And as we discussed this perspectives offering on our last call, so I won’t go into discussing that again now unless someone brings it up during the Q&A part of the call.

So that concludes my financial review for the quarter. And now we like to open the call to questions.

Operator?

Good morning guys. Just wanted to be get a little more detail on the first cultivation date and additionally, we are just down and visiting the greenhouse and we saw the operations.

But one thing that you did highlight was that I think you didn’t underestimate the power of the sun, but it’s been far more beneficial than maybe you thought. So, I’m just wondering if the yield that you’re looking at 90 grams per plant is maybe understated right now.

Thanks for the question, Greg. And sorry, I miss the first part of the question there, but specifically on yields and I guess just for the benefit of everyone on the call.

As we initially constructed our internal pro forma, we have obviously built in assumptions with respect to yield. And at that time, we basically factored in for the first year of our production at the greenhouse to be roughly around 90 grams to 94 grams per plant, as Greg’s alluded to.

Given we’re fully canopied in the greenhouse today and the harvest zone 1 is quite eminent, we have a pretty good sense of what the crop is looking like and how it’s performing. And I think it’s fairly safe to say without pinning ourselves to any specific range or numbers that we will be above the 90 grams.

So we’re certainly pleased at the way the crop is looking today.

And when do you anticipate the first harvest happening? I mean, I think you’re originally looking maybe mid to late June.

Has it been move forward or how are you looking at that?

I think timing wise we were originally projecting the first half of June. I think, as I mentioned, the crop is performing well.

Without giving up any precise timing, I would say again as we alluded to in our release, fairly eminent here. So, really the timeframe is here the harvest is very short.

And we certainly hope by next week that we’ll be able to deliver a report to the market with an update on that.

And just one final question, as you alluded to you did sign -- you have signed eight brand partners. The fact that when you take a look at the Nevada market, the ability to source good quality product on a consistent basis is challenging.

So are you finding additional brands coming to you, saying we want to get into Nevada, we need help, we know what you’re doing at your facility. So what’s the likelihood that you could see more brand partnerships in the future?

I would say the pace of enquires coming from various companies, hardware companies, delivery platform companies and a range of brand companies has been fairly consistent. We’re literally getting calls every week.

What I would say as I mentioned in my remarks, having a brand partnership today is significant. Accomplishing that well in advance of first harvest when these brand partners really haven't have the opportunity to see the performance of the greenhouse, I guess really just speaks to the confidence that those partners have in the team and really their historical track record in commercial high-tech agriculture.

So that team has really done a tremendous job, many of them are on the call today. And really those conversations with additional brands is ongoing and our investors and the market can certainly expect us to see additional announcements on those brand partnerships as we move into Q3 and Q4.

It's William here for Graeme, thanks for taking my questions. I just have a question on the new dispensary licenses in Nevada.

I was just wondering if you guys are aware of when these newly awarded dispensary licenses maybe approved for opening and entering in contract with any of these retailers.

Yes, so I can start. Thanks for the question, William.

And if Geoff if has any additional comments, you can certainly jump in. So just as far as the timing, the provisional licenses for the additional dispensaries, which currently in the market there are 67 retail dispensaries.

So we have over 60 new provisional retail licenses that were awarded across the state. I think the best way to describe the geographic distribution of those licenses is it will follow very consistent to the current distribution.

And so, what I mean by that is the majority of those licenses will be in the Clark County and Las Vegas area. So it's significant, it's a doubling of the footprint of retail.

So, we certainly think our timing with respect to operationalizing the greenhouse and beginning our production and our finished products inventory online is very timely. The general timing in terms of when will see those new retailers come online, William, will be -- basically, we expect in Q4, some will be in Q3, potentially.

We have heard that there are a few locations that have made good progress with their TI improvements and have got the local permitting process nearly completed. But the state when they awarded -- the department of taxation, when awarded those provisional licenses back in December effectively gave those provisional license holders 12 months to get their retail licenses operationalize.

So taking us through the 12 month window, obviously, takes us in Q4. So, that's when we would expect the majority of them to come online.

As far as being in contact with those retailers, the process which was laid out in September last year, only allowed existing license holders in the season of Nevada to apply for those licenses. So what that ultimately means is that all of the new retailers coming online, particularly through Q3 and Q4, will already be license holders in the state and all of them already own retail.

So there are already customers in the market and our sales and marketing team, as well as the team that’s leading the relationship with our brand partnerships have been in touch with a lot of those retailers already to-date.

Yes, I would just add, Ken, we are in contact with them. And now that the facility is fully canopy, we are conducting dispensary tours and bringing those retail locations through the facility.

Just one last quick question. Do you guys have a targeted product mix for the licensed brand portfolio like for example are you guys expecting to produce half flower, half derivatives or overweight derivative products?

I think, generally, our skew diversity and composition of our skew portfolio will likely mirror the market. And the composition of the market today, we’re seeing a few anomalies in terms of the Nevada market.

We’ll get some update numbers we think potentially next month from the state. But as of the most recent numbers, the two growing segments in the market are edibles and surprisingly the pre-rolls.

So certainly overtime, we expect Flower to have a diminishing proportion of the market. But at the moment, it still has quite a strong presence and you’ll see that obviously reflected in the composition of our brand partners for phase-one.

We have a number of really outstanding brands that have pre-rolls, including [Hudson & Tom's] and obviously, our in-house brand NLVO has their pre-roll line as well. On the edible side to reflect that growing part of the market, we have CannAmerica, which was a unique brand partner.

And that it was in the market previously under the contract -- under-contract with another fulfillment partner. But obviously, CannAmerica for a variety of reasons has chosen to pivot and work for Flower One.

So we’re quite excited about getting that brand and those products reintroduced into the market. And we think because there is an established brand recognition and consumer affinity to those particular products, we think the retail uptake will be fairly quick.

And I know our brand team is working quite diligently with a range of companies, including some edible companies, which we hope to announce in the not too distant future. So it’s a long way of saying -- I think we’ll continue to keep skew diversity quite broad to really meet the varied expectations and desires of the current consumer market in Nevada.

And I would further add, Ken. The size of our processing building and the biomass that we are generating allows for us to be very responsive to just in time shipping to meet the requirements of those dispensaries in all of the formats, whether it'd be flower, or edibles, or other base.

Just want to get an update on the construction of the extraction and processing part of the greenhouse.

Just as far as the production facilities, so adjoined to 400,000 square foot greenhouse, we have a total of 55,000 square feet of post-harvest processing and custom packaging space. And so right now where we are at is we have -- the first 15,000 square foot of that is already completed.

And we have a two-storey structure of basically two 20,000 square-foot floor place. That building it is completely vertical as you may have seen from some of the footage on the website.

And the post-harvest component of that structure is already commissioned. As you can imagine, because our first harvest is imminent and our team has been working round-the-clock just to make sure that all of the post-harvest equipment is in place and beta tested and ready to go for that inaugural harvest, that inaugural harvest will be constituted about 10,000 plants.

So it's a lot of crop to move through from a harvest perspective. And so those aspects of basically trimming, de-budding, grading and sorting the plant, the buds and moving them into high-tech drawing rooms where the buds really dried according to weight and size, all of that is now been completed.

So as we move through our first harvest shortly, the team will start to turn their attention to the processing aspects of the facility and much of that will get installed as we go into June as far as the extraction equipments, et cetera. So we would certainly expect to be in the production facility by Q3 to be fully operational in that 55,000 square feet.

Just wanted to see if you -- I know its early days and you're just now getting to harvest. But if you can share with us any insights into potential cultivation costs that you're realizing now, and what the timing would be to get to.

When you expect to really maximize or minimize the cost over time, how long that will take?

So, we can't really give at this point obviously any targeted numbers on what the cost per gram look like. Obviously, that's going to be driven in part by the yields here.

So we'll really have to wait for that inaugural harvest. I know, Geoff, and his team have been certainly tracking the relevant numbers, the input numbers for those metrics.

So, it's obviously something we will be monitoring and calculating as we move through the harvest. So I think what's important to note is once we commence that first harvest and completed that first harvest, we're really in a significant phase of company, because the greenhouse will now really be in a perpetual harvest cycle.

So every single week, our crew with the greenhouse is harvest a zone on average of approximately 10,000 plants. So as we move through each zone from zone one through eight for that first harvest in each zone, we'll have a much better handle as we do that on those numbers in terms of cost per gram.

And I think one of the benefits to just the inherent short life cycle of the cannabis plant is that we expect to do roughly six turns for the year. So, we certainly think that our cultivation team, given that relatively short life cycle and getting those six turns through a year with 12 months and if not sooner, we would certainly expect that the cultivation team will have how things really dialled in on the cultivation side.

So we certainly expect -- we would think within that 12 month period, and as I’ve said if not sooner, have a very good handle on those numbers. Geoff, I don’t know if you want to add anything from a cost per gram standpoint to that?

No, I think like you said, there is limited details we can get now. I mean we’re just coming up with the first harvest and that’s going to give us starting indications.

But until we’re at steady state and have worked through our staffing, training completed, assessed all the piece rate for efficiencies and whatnot, you're in the six to 12 months before we can have a handle on the cost program.

Thanks operator. Well, thank you to everyone for participating on today’s call.

In particular, I know when we have these 8.30 AM calls on Eastern Time, there's may joining from the West Coast and it’s quite early there. So we do appreciate you making the effort.

For those of you who are shareholders, we thank you for your continued support and for sharing our vision and our disciplined approach to entering the U.S. cannabis space.

We look forward to reporting on our progress again next quarter. Thanks everyone.