Thank you, operator and good morning, everyone. I would like to begin by first noting that as a result of the COVID-19 pandemic, it remains a challenging time for all and I certainly hope that you and your loved ones are continuing to stay safe and healthy.

We will speak to several COVID-19 related matters later in today's call. But given that we are here to report on Flower One’s fourth quarter and full year 2019 financial results, I'd like to begin today's discussion by setting the stage for our CFO, Geoff Miachika, by providing an overview of the many company highlights from 2019.

These highlights speak to just how far we've come as a business. In terms of execution against our plan and the many industry leading operational proficiencies we have created within cultivation, extraction, brand partnership development and product manufacturing.

We previously described 2019 as a transformational year for the company, and it truly was. In January of 2019, we were deep in the construction phase of the conversion of our 400,000 square foot greenhouse, and we were still in stage one foundation work and the construction of our adjoining two level 55,000 square foot production facility.

The full conversion of the greenhouse was completed in April 2019. We planted the first crop in May, 2019 and by June 2019, the entire greenhouse was planted, and we completed our inaugural harvest.

With the greenhouse fully operational it officially became the largest cannabis cultivation facility in the State of Nevada. And this is not only the largest cannabis cultivation facility but in a very short period of time, we've demonstrated this facility could cultivate flower at an industry leading price with a reported harvest cash cost per gram of just $0.40, which is 10% reduction from the previous quarter.

As we moved into Q3 of 2019, we focused on two operational priorities. The first was to begin preparing our dry cannabis inventory from our initial harvest for Nevada’s retail channels.

We have signed this inaugural dry cannabis inventory to support the launch of Old Pal, a leading a California brand that was looking to expand its brand presence into the Las Vegas market. That first sale of Old Pal occurred in August 2019.

Since then, we have transformed the Old Pal brand from a new market entrance to now being one of the top selling brands in the entire state. In the past six months, sales of Old Pal SKUs increased steadily month over month.

The second operational priority was to continue to tightly execute on completing the construction and commissioning of our 55,000 square foot production facility, which is directly adjoined to our commercial scale greenhouse. This direct physical connection was by design to ensure the seamless workflow and transfer of our harvested dried and cured flower from our greenhouse into our state of the art extraction lab where an increasing level of our inventory could be turned into higher margin product derivatives.

We completed the construction and commissioning of this facility in Q3 of 2019. The commissioning process and state approval of our extraction and technology lab was nothing short of transformative for Flower One as it represented our commitment to offer our current and future brand partners all three major forms of cannabis extraction, that is ethanol, CO2 and LPG, at a commercial grade and commercial scale level.

We believe we are one of only a handful of cannabis companies in the United States that has demonstrated operational capabilities to manufacture an array of finished product derivatives by applying all three forms of major cannabis extraction at a commercial scale. And so, similar to the milestone of completing our greenhouse with our production facilities fully operational at the tail end of Q3 of 2019, it officially became the largest production facility in the State of Nevada.

Our ability to design and build a high quality operation of scale in less than 18 months is a testament to the company's focus, dedication and ability to execute. That tenacity has ensued as we continue to scale our operations, launch new brand partners and service our customers.

That ability to execute and have a half million square foot asset fully operational was paramount to showing our brand partners that we are able to not only accelerate their market entry into Nevada by partnering together, but could also confidently supply the market as demand grew for their brands and their SKUs. Old Pal is a prime example.

So the brand currently holds multiple SKUs in the top 10 best selling cannabis brands in Nevada. We have proven to our brand partnership with a great team at Old Pal, if you want to be a brand leader in any state, you need a partner who has the cultivation capacity, consistency and scalability to supply your brand in the market.

We don't believe there is another cannabis company in Nevada that has the ability today to supply the consistent high volume of dry cannabis inventory required to allow Old Pal to maintain its leading market position. But beyond Old Pal, assembling a robust portfolio of brands is not an easy task for any cannabis company.

At Flower One, we began identifying potential brand partners in 2018 and then spent all of 2019 nurturing our relationships with various brands to gain a deep understanding of those that would offer the most compelling value proposition and brand experience to the Nevada and Las Vegas cannabis consumer. We signed our first brand partner in January, 2019.

By the end of the year Flower One has secured a portfolio of 14 brands, which represented a full offering along the pricing spectrum from value brands like Old Pal to premium priced top shelf brands like Cookies, which we are excited to be launching in the coming weeks. We recognized early that all cannabis markets, including Las Vegas, require product offerings at every price point as cannabis consumers are diverse in both their buying habits and their product expectations.

Today, Flower One has a brand portfolio that covers a broad range of SKUs from packaged Flower to the pre-rolls and infused pre-rolls, vape products, edibles, topicals and boutique concentrates. Kellen will provide a full update on our latest brand partnership efforts and a number of exciting and significant brand launches planned for the coming months.

With the largest cultivation facility and the largest production facility in the state, as well as the collection of industry leading brands, we began Q4 poised to build market share and have our first full quarter of revenue. We completed Q4 with revenue of $5.8 million, which represents sequential growth of 132%.

For the full year, revenue totaled $9.5 million, surpassing our guidance of $9 million in revenue for the year. Jeff will go into further detail on the financial shortly.

So we converted and canopied the 400,000 square foot high tech cannabis greenhouse. We fully commissioned a 55,000 square foot production facility, capable of producing an industry leading range of SKUs and brands using all three forms of cannabis extraction.

We welcomed 14 cannabis brands into the Flower One family, all of this making Flower One the largest cannabis cultivator, manufacturer and brand fulfillment partner in Nevada. 2019 was a transformational year for the company.

And with that, I'd like to turn the call over to Geoff Miachika to discuss our Q4 and 2019 full year financial results in more detailed. Geoff.

Thanks, Ken. As a reminder, all figures discussed today are in U.S.

dollars unless otherwise noted. As Ken noted, revenue for the fourth quarter of 2019 was $5.8 million, representing a sequential increase of 132%.

For the full year, revenue totaled $9.5 million ahead of our expectations of $9 million for the year. Cost of sales for the fourth quarter was $3.2 million inclusive of production cost expense and cost of inventory sold.

This resulted in a gross margin of 44% for Q4 2019, up solidly from 25% in Q3 of 2019. We continue to expand sales out of our lower cost greenhouse, which is evidenced by our margin growth quarter over quarter.

These sales along with upcoming premium brand launches for Cookies and 22Red will contribute further to further margin growth over time. G&A expenses for the quarter totaled $6.8 million, which is predominantly composed of consulting services, cannabis taxes and selling insurance and security costs.

Since the start of COVID-19, we've been actively identifying additional ways to manage expenses or reduce our overhead costs. Through Q2 2020 and into the third quarter, we anticipate we will reduce our variable operating costs by more than 60% as a result of the completed operational efficiencies and right-size crop management plan Ken will discuss shortly.

Net loss for the quarter of $35.9 million was mainly driven by a fair value loss on the biological assets of $34.7 million. This is primarily due to a reduction in the expected selling price of the flower, which drives the fair value adjustment determined at the point of harvest in accordance with IAS 41 of IFRS accounting standards.

Removing this fair value adjustment on biological assets, our net loss would be reduced to $1.2 million. Net loss also includes $6.6 million of finance expenses, $3 million in realized the fair value of inventory sold and inventory provisions and $779,000 FX losses along with the aforementioned G&A costs.

These expenses were offset by $4.5 million fair value gain on derivative and $9.6 million deferred income tax recovery as a result of the fair value loss on biological assets. For the year, the company had net income of $525,000.

Cash costs of cannabis inventory and biological assets as a result of cultivation activity for the full year totaled $10.2 million and $6.4 million respectively. During this same time period, we invested a net amount of $51.2 million in property, plant and equipment, primarily for greenhouse facility.

At the end of December, working capital totaled $36 million, including $6.7 million in cash. Post fourth quarter, we continue to raise capital to support our general corporate and working capital needs.

In March, we closed the private loan for $10 million and in early May, we successfully closed a $7.8 million private placement, which was increased from our original offer size in April due to strong investor demand. More recently, just last week, we continued to strengthen our balance sheet with the conversion of our November 2019 and March 2019 debentures.

More than 56% of our November 2019 debentures and 26% of our March 2019 debentures have been converted since issuance, which we believe is a strong sign of investor confidence in Flower One. Our ability to raise capital, even in the current economic conditions marks another vote of confidence from our shareholder base and Flower One’s long-term growth plan.

Given our strong revenue performance to date, as previously reported, we anticipate the company will generate revenue of $8.9 million for Q1 2020, roughly at the midpoint of our prior guidance of $8 million to $10 million for the quarter. As we’re now more than 2.5 months into second quarter of 2020, I wanted to provide some commentary on April and May sales.

After a very strong March in which we generated record revenues, we did see a dip in April and may as a result of COVID-19 and Nevada's requirement to go to a delivery only model until just a couple of weeks ago. Based on our preliminary sales data for those two months, we are anticipating roughly $2 million in combined sales for April and May.

While is still early stages, the reopening of casinos and the Las Vegas strip appears to be having a positive impact on inventory levels at cannabis retailers. We have seen a notable increase in our weekly orders from retail accounts in the first week since the reopening occurred.

And so we are now expecting a second quarter 2020 revenue of between $3.25 million and $3.75 million. Many of you are also likely wondering when Flower One anticipates being cash flow positive.

On our third quarter, 2019 earnings call, we estimated the company would be cash flow positive in late second quarter or early third quarter of 2020. Unfortunately, given the unforeseen circumstances of COVID-19, this date has naturally been pushed out.

We are not in a position at this time to commit to an exact date for being cash flow positive. However, we are actively modeling several different revenue scenarios that will place us on a growth trajectory to achieve that very goal.

We will continue to update the investor community as we have more clarity on the timing and remain confident we are on the right path to achieve positive cash flow in the future. Now to provide a deeper understanding of the growth opportunity ahead of us, I'll turn the call over to Kellen O'Keefe, our Chief Strategy Officer to discuss our brand and sell through approach.

Kellen?

Thanks, Geoff. To start, I'd like to take a moment to reiterate what Ken said about the tremendous achievements made by Flower One in 2019.

The launch of our flagship facility was achieved in nearly record time and quickly established a new standard and class of facility for the cannabis industry. We are extremely proud of what of our team has accomplished in such short period of time.

We feel confident that we are currently positioned for growth. Over the past several months, we have made significant improvements to our post-harvest and curing processes, which have increased the quality of our product.

These constant improvements and attention to detail are part of what differentiates Flower One from other cannabis operators, and our commitment to quality is embedded into the culture of our organization. Not only have we seen an increase in the pricing of our top tier flower, but we have also expanded our production capabilities, giving us the ability to produce additional premium cannabis derivatives that can be used to make hundreds of SKUs.

Prior to COVID, we were approaching a pivotal time in our business as we transitioned from onboarding our facility to optimizing and streamlining our processes for making products for our brand, white label and retail partners. Our platform allows us to work hand in hand with both brands and retailers to identify the constantly evolving consumer demand and then create and launch products accordingly.

We believe that we have developed an industry leading platform that can bring products from concept to shelf in record time, adding another significant value proposition to our customers. The fourth quarter was another exciting three months of brand launches and new partner additions to our industry leading brand partner portfolio.

In the final months of 2019, we launched Palms Premium prerolls and Kivas Camino gummies. We also welcomed leading California brands, Cookies and 22 Red, both known for their proprietary world renowned genetics.

Our cultivation and production teams have been working very closely with both brand teams to ensure that all products meet their very specific quality standards. This collaborative approach between brand and producer is instrumental to our success and continues to add tremendous value to Flower One.

Initial sales of 22Red’s entire selection of dry flower and preroll products, vape cartridges and CBD selections, are expected to be in dispensaries in early Q3. Similarly, Cookies’ entire lines, including the namesake Cookies brand along with Lemonnade, Powerzzzup, Grandiflora, Runntz and Minntz are anticipated to launch in the beginning of Q3.

As Ken mentioned earlier, we continue to broaden our brand portfolio. In Q1 of 2020, we added Heavy Hitters as our newest brand partner.

Heavy Hitters is known for its clean, cold filtered high potency vapes. They have been a leader in the California vape market for many years having built a dedicated following of loyal consumers who consume their products on a regular basis, purchasing more consistently and routinely than other brands in their category.

We expect to launch Heavy Hitters vape formulations in Q3. The launch of Heavy Hitters follows the Clear and Old Pal’s vape products, which launched in April.

Flower One now has three very strong vape brands competing in Nevada. In addition, Cookies and 22Red along with several other brand and white label partners will also be launching vape products in the coming months.

Our unique ability to provide consistent, reliable and scalable fulfillment is key to our continued success in Nevada and beyond. Flower One has built an industry leading team, focused on delivering on our promise to be the first national high quality, low cost brand fulfillment partner in cannabis.

We remain committed to that goal. And even in the midst of a global health pandemic, I am as confident as in the Flower One team as I have ever been in the history of our company.

Our team's response to COVID only further demonstrates that we have the best people in the business and that we are prepared to adapt to new circumstances and emerge as one of the leading cannabis companies in the world. With that, I'll turn the call back over to Ken for closing remarks.

Thanks a lot Kellen. As we're at the midpoint of our 2020 fiscal year, we would like to provide a current update on Flower One's business and the Nevada cannabis market.

As previously announced, our preliminary revenue of approximately $8.9 million was what we reported for the first quarter of 2020 and that's roughly at the midpoint of our guidance range of $8 million to $10 million for the quarter. More importantly, we reported in March 2020 revenue of $3.9 million and this represents our highest recorded monthly sales to-date.

As we are well aware, March was impacted by the dramatic changes to the global economy resulting from the COVID-19 pandemic. COVID-19 related changes to the cannabis landscape in Nevada created a very fluid and ever changing market over the past three months.

We've provided regular updates via our corporate news releases on these market changes. But to briefly recap, the key market adjustments were as follows.

On March 18th, Nevada Governor, Steve Sisolak, issued an executive order for all nonessential businesses in the state to temporarily close. Then on March 20th, the state of Nevada published emergency regs to clarify and confirm which businesses are essential and thus could remain open.

All licensed cannabis establishments were deemed essential but could only make sales of product through delivery service. By May 1st, all cannabis retailers in the state were committed to expand their service from delivery to curbside pick-up.

And ultimately by May 9th, all cannabis retailers were permitted to reopen their physical storefronts subject to specific physical distancing criteria and protocols. Nevada’s classification of licensed cannabis businesses as an essential service was noteworthy, while also consistent with many other states throughout the U.S.

that have legalized cannabis. This recognition by many state governments that cannabis is an essential service will only help to advance the overall maturity of the industry from an economic and social policy perspective, as well as from a federal legislative perspective.

And while Flower One was able to continue to operate during Nevada's state of emergency, as just stated earlier, the closure of all businesses along the Las Vegas strip had an obvious and notable impact on the market during the months of April and May. That being said, two very major positive COVID-19 related developments have occurred since that time; first, on May 29th, Nevada entered phase two of its reopening; and second, on June 4th, all casinos and restaurants, including those on the Las Vegas strip, were allowed to reopen with certain restrictions and protocols.

While this is still early days in the reopening of Las Vegas and as Geoff had mentioned in the last week alone, we have already seen a notable increase in sales and reasonably expect to see our sales continue to grow as an increasing number of tourists return to the state. We are extremely encouraged by the level of tourism traction Las Vegas has experienced in the first week of its reopening.

When COVID-19 emerged and became a significant market reality in Nevada, our first pandemic priority was to protect our employees by enhancing our workplace health and safety measures to ensure that we were compliant with all recommended public health guidelines. Our operational and leadership team in Nevada did an exceptional job in responding and implementing a wide range of enhanced hygiene, sanitation and workflow protocols to minimize employee risk to COVID-19.

We provided a detailed news release outlining these enhancements, so I won't go into further detail at this time. Our Nevada leadership team's responsiveness and truly collaborative efforts to execute all of these changes ensured that we were, that there really were no major impacts to our business going forward.

Our second most immediate pandemic priority was to protect our live plant inventory at both our 400,000 square foot flagship greenhouse, our Bruce Street property and our 25,000 square foot NVL facility to ensure the full potential market value of those crops was maintained and not compromised in any way as a result of the workflow shift and other operational adjustments implemented due to COVID-19. Thus far, I'm very pleased to report that all of our harvest post COVID-19 has been executed very smoothly with no major delays or adjustments.

In fact and as Kellen mentioned earlier, these harvests have yielded some of the highest quality flower to date in the company's history. The high quality level of these most recent harvest is important and notable for two reasons.

First, a number of these harvests are for the proprietary strains we are growing for brands who fully expect to be premium positioned in the market as top shelf, high demand brands, including Cookies and 22Red, both of which we plan to launch in early Q3. Second, the highest quality of these most recent harvests are important as part of our overall operational response plan to COVID-19, and a proactive response to the temporary constriction of the Nevada cannabis market resulting from COVID-19, the company immediately created a crop management plan to conserve cash and reduce burn rate, while simultaneously preparing for a strong resurgence of Las Vegas tourism.

To preserve value of the inventory, the company nurtured is pre COVID-19 planted cannabis until harvest but did not replant in any of the zones. This has created a robust product inventory to serve our customers as the market reopens.

By not replacing any of the zones, cultivation costs will be minimal as we entered Q3 and Q4 of 2020, and the timing in a lot of respects couldn't be better as Flower One will not incur the cultivation related costs during the costlier summer months of cultivation in Nevada. This crop management plan will be seamlessly adjusted and rightsized as we replant zones in response to growing market demand.

It is important to note that our NVL facility will continue to operate at full capacity with a continued focus on delivering premium great flower, along with refining strain specific cultivation formulas for the more than 150 cultivars contained within our genetic bank. With our bank of flower inventory to quickly respond to changes in market demand as Las Vegas emerges from COVID-19, Flower One enters Q3 of 2020 ready to serve our customers, while operating with direct costs that will be approximately 60% lower compared to Q1 of 2020.

And speaking about serving our customers during COVID-19, our sales team has done a tremendous job, continuing to broaden our reach, adding 11 new bulk and retail accounts, allowing us to maintain a market penetration rate of over 90% in Nevada. Thus far, in 2020, one of the most critical operational improvements we have made is to the quality of flower produced at our greenhouse.

Through the collaborative efforts of our entire operational team in Nevada over the past six months, along with investments in various systems to better control our cultivation variables and transform our drying and curing processes, we've been able to establish some of the highest quality cannabis products Flower One has ever placed into the market. These quality improvements could not have been achieved at a better time for the company.

We would have not be as strongly positioned as we are over the coming quarter to launch a number of premium grade brands, such as Cookies and 22Red without having these improvements and advancements in place. The Cookies’ launch in particular will be very significant for the company.

And we could not be more excited about the prelaunch demand we are already observing in the market. We reasonably expect to complete our first round of preorders for Cookies later this week ahead of schedule.

There's certainly been a lot to update you on today concerning the many advances we've achieved in our cultivation. However, these advances in no way overshadow the comparable achievements we have made within our production facility.

Flower One's 55,000 square foot production facility, the largest in Nevada, continues to make dramatic improvements and gain efficiencies in its upstream extraction processes, resulting in all of its first pass distillate achieving an average of 92% THC across all lots. In Q2 of 2020, we successfully validated and optimized our fresh frozen harvest process to expand our product offerings and enable Flower One to offer even more best-in-class concentrates to the market.

The breadth of SKUs emerging from our production facility continues to increase, reflecting our continued focus on producing the widest and deepest range of high market finished product derivatives available in the market today. Our production facility is now delivering more than 100 SKUs to the Nevada market.

As Kellen noted, these manufacturing proficiencies allowed us to launch oil based product derivatives for both the Clear and Old Pal. In addition, we are looking forward to launching Heavy Hitters products in Q3 of 2020.

Last but certainly not least essential to our success as a publicly traded company, we continue to strengthen our corporate governance policies and practices over the past six months. During the first half of 2020, we made two new additions to our Board of Directors.

On January 8th, we welcomed Molly Hemmeter, former CEO, President and the member of the Board of Directors of Landec Corporation, a publicly traded health and wellness company to our Board. Molly brings over three decades of experience to Flower One.

And just last month, on May 11th, we announced the appointment of Bern Whitney, a partner of FLG Partners to join our Board and to serve as the Chair of our Audit Committee. Bern brings more than 35 years of diversified operational experience in technology, biotech and manufacturing to Flower One, and we are excited for his addition to our team.

Both Molly and Bern have already made significant and strong contributions on governance and corporate strategy matters, providing sound advice as we look to enhance our strategic and operational priorities. This was definitely a longer update than our past quarterly calls.

However, with such a rapidly changing world since early March, we wanted to make sure to provide you with as much detail as possible regarding our progress, our achievements and our resiliency through the first half of 2020. With the Las Vegas open again and the launch of the Cookies brand literally just weeks from now, we could not be more excited about the opportunities which lie ahead for us.

We believe the greatest challenges of COVID-19 are behind us and the many operational adjustments, learnings and improvements we have been able to make through this short but challenging period speaks volume about the team we've assembled at Flower One. Everyone at Flower One from our employees working daily in the greenhouse to maintain the highest quality flower, to our scientists, our product development team and packaging staff and our entire leadership team and Board of Directors, has truly demonstrated an exemplary level of commitment throughout these challenging times, to ensure that we are strongly positioned for the opportunities that lie ahead of us.

If the events of ‘20 to date haven't demonstrated anything, they have shown that the professionalism, depth and overall cannabis competencies as Flower One team are amongst the best in the industry when it comes to large scale cultivation, large scale extraction, brand portfolio development, product manufacturing and retail fulfillment. On behalf of our Board of Directors, our senior leadership team and all of our employees, I want to thank you for your continued support of Flower One.

We hope all of you continue to stay safe and healthy at a time when we all certainly need to stand together. With that, I would like to turn the call back over to the operator for your questions.

Thank you.

Just a couple of questions, you have 44% gross margin in the quarter. Now in Q1 you did $8.9 million in revenue.

What type of growth, are you seeing positive gross margin comparatively to that 44%, or is that probably a good number going forward?

It's tough to say at the moment, but I think we would expect that number to be comparative for Q1 2020, for sure. We haven't finished the analysis yet.

Of course, the delays in the year-end audit really resulting from the bio asset and inventory modeling and whatnot, is what drive that number, and so we're still continuing to work on that for Q1.

And that number also included some depreciation costs, isn't it?

Yes.

And you mentioned that you're going to try to drive variable operating costs down by 60%. So what types of costs are those?

Predominantly labor. We are fortunate that a lot of our workforce down in Nevada is contract labors and we can adjust accordingly as we shift in the cultivation plan as Ken noted.

So, we'll have drops in the labor force, which will predominantly drive that number down.

And then when you take a look at sort of your sales mix, what type of sales -- if you take a look at your Q1 of $8.9 million, what percentage is Flower versus concentrates?

Still pretty high on the flower side, being about the 65%, 70%. Just to add to that, I would say following that generally when we're supplying the market a lot of our distribution of products does sort of fall in line with the market and certainly in Nevada, what we're still seeing even as up to the end of Q1 in the market is that flower remains very predominant, it’s about 48% of the market.

And then when you add in pre-rolls that's another almost 13%. So it's the largest part of the market.

And certainly through COVID-19, I think the retailers certainly observed an even higher than normal demand of Flowers. So, we certainly expect that particular category to remain strong through the rest of the year.

And I think a number of our launches, including Cookies really reflect our strategy to meet that market demand.

Just a couple of question, so I was confused a bit regarding the cultivation cost moving into Q3, Q4. Are you going to draw down inventory and therefore, that's why you're seeing a reduction in cultivation costs, or how how's that working?

Yes, correct. I think, what we observed up until now and certainly through Q1 is that we’re pulling down some of our best flower right now in the greenhouse.

And so, we've continued to do that and that flower and bank inventory will certainly allow us as the market returns here and we're seeing quite a correlation from the June 4th opening of Vegas, that's even in that short period of week one subsequent to the opening we saw a direct correlation between that reality and the kind of ordering we're seeing from our retail accounts. So we really expect, because of our scale and because of the quality of that flower that that will really carry us very strongly on the revenue side through certainly Q3 and depending on demand possibly Q4.

So as we move into Q3, our intention is to tightly evaluate the market and our inventory levels. And thankfully with our cultivation team, we have the ability to kind of very quickly rightsize our crop management plan when we see that uptake.

And if we see the normalizing of Vegas and the return of tourism continue through the year, we'll definitely continue to adjust that crop management plan accordingly.

Greg actually got quite a few of mine, but I guess we'll talk about [in March] [ph] you said you had your highest sales $3.9 million. I believe, doing some backwards calculation from the state data, it looks like that might be in the 20, 20 plus percent range of market share for the month.

I was just wondering if even though you're seeing reduced sales later in the month, April, May, do you think your market share has remained relatively the same?

What I would say is, first off, if we just look at March, I think your calculations are pretty accurate. I think the state reported, I believe, it was a weaker month in terms of the official state numbers, it was around 43.

So when you take our sales and you account for the fact that wholesale pricing and you adjust that 43, I think it does take you to a number around sort of 20%, 23%. But a couple of things to say there, I think again, that market share you know month to month relative to looking at total or official Nevada sales and our numbers, you know it's a hard number to really measure against the retail number, because you know unless we're really looking at wholesale to wholesale sales, it's not what I would consider an easy calculation to make based on that.

But, so you would see variability there. But certainly in terms of April and May, I think coming into April, the market at the retail level was holding higher inventory levels than normal and that's our belief and some of the data suggests that as well.

And the reason for that was into March, I think a lot of the retail was loading in inventory, not being fully aware of the implications of COVID but preparing for what's considered a pretty heavy market period for Nevada in terms of 4/20. And when all of that, when the market constricted, I think retail was holding a higher level of inventory than they normally would through the year.

And as a result, you know probably our market share during those months, probably went down a little bit. But as we go forward here, I would say two things and Kellen and Geoff might have other things to add here.

But one, as we've emphasized this morning, we're really excited about Cookies. I think the crop we’re pulling down and the quality of product we have already ready for that launch is exceptional.

And you know Kellen can elaborate a little bit more on that in terms of the feedback we've had from their brand team. But that product will certainly based on the feedback we've had from sales, it will be a high demand product.

So we're really excited about that. And then secondly, I think as we look at the market broadly in Nevada and the operators, it's still early to tell but you know, we do sort of feel that the cultivation and production may not be as strong or you know some operators might struggle with that going forward here, you know during these challenging times.

And we think there's an opportunity there as a result to take more market share. So I guess, you know as we go forward, Patrick, we certainly see market share increasing.

But I think that 20% market share number that you've calculated for March is high. I think we're probably at this stage you know reasonably in the 10% to 15% range, you know on a variability again, but you know sort of on a month to month basis.

So Kellen or Geoff, I don't know if you want to add to that.

Just to add with the launch of Cookies and 22Red, and these higher value brands coming, you're still at a consistent cash cost per gram for those. So you're going to see some increased margin percentages on those as you've got Cookies and 22Red that garner some pretty big value in the market.

So we should see some, hopefully, some increased market margin as we move into Q3.

Sure, if I could just add a little bit. I mean, from my perspective, as I look to develop brand specific and SKU specific projections and look to see what each brand can potentially do inside the Nevada market as it relates to their success and performance in other markets and the demand that we see in forms of preorder and shelf space allocation.

I think it's very easy to look at these brands and expect that they're going to take far more market share than we have from on the brand side, which will continue to increase that number. So I feel very strong and again, looking at all the brands in our portfolio and what they should potentially capture as far as market share that will be in a very strong position.

The other thing I'll add, Patrick, is just to very quickly to Kellen’s point is that the diversity of brands and SKUs that we offer does have a real sort of strong value proposition in the market. And just to kind of give you a specific example around that.

Even in April in May, which were challenging months for the entire industry in Nevada, we were really able to expand our offering and sort of the basket size, if you will, of our orders with retail accounts. I think the fact that we were able to provide sort of this larger or deeper brand and SKU offering was a strong value proposition for the retail buyers and we definitely saw an expansion of the number of SKUs our accounts were ordering.

If I could ask one more quick one, it is related to the new brand launches. I guess is there any risk to launching these premium products in kind of a recession environment.

Like have we not seen any shift in consumer behavior towards value brand with lower priced flower and whatnot? Thank you.

Kellen, I don't know if you want to take that question. I can certainly answer it.

Sure Ken, I'm sorry. You're just having a little bit of a phone audio issue.

Would you mind just repeating the question? I'm sorry, Patrick.

He might have gone off the line there from in terms of operator. So Kellen, Patrick's question was really just around Cookies.

And because that's a sort of top shelf premium price brand in this COVID environment where things are a little bit more challenging for the consumer from a pricing standpoint. Do we see any challenges there in the market with launching premium priced brands?

Well, I think that's a great point, which brings us really two our fundamental value proposition at Flower One, which is again, the ability to produce the quality that we can at the price point we can. So as we look to launch Cookies premium flower we're going to be launching it in a category of its own that is significantly cheaper than indoor and of course, significantly higher quality than anything that has been produced outdoor or in a greenhouse as of yet in the cannabis industry.

So from that standpoint, while it might be premium for or defined as premium for greenhouse flower, it will still be significantly cheaper than the premium indoor flower, in which case we think we're going to do considerable volume. Again, that intersection of where quality and price meet is extremely important and where really truly value comes from.

So I think that's really what we're excited about and is really the value proposition that the high tech greenhouse in our facility brings to the table, and our ability to produce premium products at the lowest possible price point.

And Patrick, if I can just add to that. It’s Ken here.

I think two other things to keep in mind. One, Old Pal is our brand for the lower end of the pricing spectrum that true value brand and obviously, we launched that back in August, as I mentioned earlier in the call, and that brand continues to grow month over month.

So we again, in this environment, we don't feel like we're going to lose any of that market because of the way we've selected our brands along the pricing spectrum. So Old Pal now more than ever is certainly a brand that fits into the market.

But just to Kellen's point, talking about premium brands. I think, Kellen raised a very good and highlighted a very important point, which is it's one thing to sort of have brands positioned as premium brands in the market.

But if there are premium brands that are priced right and offer value to the consumer at that price point and as importantly offer margin to the retailer, those two things are critical to us being able to take more market share. And from day one of us planting and harvesting our inventory of the greenhouse, you know we've really focused on making sure that we demonstrate to the market, our ability to be low cost.

And I think if you look at the way we've reported our harvested cash cost per gram quarter by quarter, we've always been steady. And certainly by Q4, we were actually even better in terms of being more efficient coming down 10%, as I mentioned, down to $0.40 cash costs per gram.

So why is that important? It's ultimately important because everything we do is about our customer, and our customer in Nevada are the 70 dispensaries in the state.

And if you look at COVID-19 right now, a lot of those retailers are being aggressive with price, which you would naturally expect in the market right now. And as they get more aggressive with price, they have to think of their business in terms of what are they getting in terms of gross margin or gross profit per square foot in their store.

It's about economics all along the value chain. So for those retailers, they want to maintain that gross margin per square foot in their store.

And as a large scale and efficient low cost high quality cultivator that can take those products right from dry flower and take those cost savings through our product derivatives, all of that value is what we say back to the retailer in order for you, even in an aggressive pricing period, to maintain your gross margin per square foot. We're really the only supplier in the market at scale that can protect your gross margins.

And so I think all of that is really important as we go forward when you consider pricing, it's the pricing of the product at retail, it's the true value you're offering to that consumer relative to the purchase price and it's how that product gets placed into the retail channel in terms of the margin being offered to the retailer. And I think that's really where our competitive advantage exists in the marketplace.

I want to follow up on the retail side of things. Obviously, with 70 dispensaries there, what we've seen as the falloff in Nevada, you know, because the tourism and a lot of travel there.

Can you guys quantify a little bit of the local market and you're serving that versus kind of the tourism side and percentages, you know as you see dispensary, some are doing better that are tied to more than local versus the tourism side. Can you quantify kind of how you’re looking at the retail market from that standpoint?

Sure. Maybe I can take this one.

I think, you know, what's important to remember is, one, it's very difficult for even the dispensary to make the determination as to the local versus tourist percentage of our customer base. And if so even if they do have it, it's often difficult to get all of that information.

But what's important to remember is that dispensaries were forced to close. And so you know, even though they were deemed essential by having been forced to close their doors to retail, they were all forced to you know immediately either ramp up their delivery operations or in some cases even try to build them from scratch.

And so there was a considerable decline attributed to the closure of the stores, and based on the fact that there really wasn't the delivery infrastructure in place for those stores to service anywhere near the number of customers that they were seeing in the retail environment. So I think that's important.

You know, we've heard a lot of estimates and the range in the estimates of the decrease in the total sales is so wide that it, again, it's very difficult to even try to say to percentage with any degree of accuracy. But you know what we're excited about is we have seen a very healthy return to Vegas over the last two weeks.

You know, all of the hotels are reopening or are in the process of reopening, and opening to really, really strong crowds. So we're very optimistic and we've seen a really strong return.

And with dispensary's open, we're confident that they'll return back to their normal levels. And then of course what's really important is that we're also going to see the addition of almost doubling the dispensaries.

You know, some of our clients are opening, you know six or seven additional locations on as an individual client. So there's you know quite a bit to be excited about as far as the dispensary and retail growth in the state.

Scott, just one small additional point, you know when you talk about sort of Vegas returning. You know, I think the indication that we've heard this week is that additional resorts on the strip are opening this Friday.

So I think again to Kellen point, what the market's observed and what the operators on the strip have observed is positive and they're seeing demand and therefore, they're expanding the number of properties that are going to open. So all indications and all signs are very, very positive from a market standpoint.

And follow up on that, I mean obviously, your 90% penetration into these retail dispensaries, Kellen mentioned more dispensaries coming on board. What is the timing?

Obviously, Nevada's been delayed opening up these new dispensaries, I think they've licensed out to 120. What's kind of your sense of the timing on that, because that provides a new growth opportunity?

And provide any color on kind of the average SKUs, or are you seeing an uptick in the number of SKUs that you are selling into each dispensary? You know, my sense was once they went to delivery that, you know a lot of these dispensaries were focusing on their own in health products, but kind of talk to me about the growth opportunities of the timing of dispensaries and continuing to expand your SKUs within that dispensary.

Well, maybe it'll also be important to just note that, Scott, we sell ingredients and biomass, and distillate, and formulated distillate, and terpene blends to all of the top producers in the state. So if we're, if you're not one of our brand partners and you're the leading edible brand with a leading vape brand.

Right now, they're buying, again, the top customers are buying 100% of their distillate and biomass from us. So it's important to note that we are participating in that side of the market as well if that makes sense.

And I don't know, Ken, if you wanted to add to that.

No, not specifically on that point. I think in terms of store opening, Scott, as Kellen mentioned, because we interface with almost all of the dispensaries in the state, we've got a pretty good indication of where they're at to-date but also where some of them are planning to go in terms of expansion.

And as Kellen alluded to without getting specific, we know a number of our key retail accounts and key retail partners are definitely working towards expansion of their retail footprint and have already been in discussions with us in terms of the strategy to be able to manage the initial inventory for those stores. I think at this stage, it's probably a little bit difficult to quantify precisely what the pace of the store openings will be.

There's still ongoing litigation around those additional retail licenses, Scott. But, we certainly feel that as we go through this year, we're going to see additional stores open up.

I think the number we used previously for a very long time was 67, we're sort of up to 70. We know that there's a number of other retail outlets that aren't captured in that 70 in terms of dispensaries on tribal land.

And so we have very good relationships with those retailers as well and those retailers are also expanding. So it goes beyond the number of 70.

But we certainly are going to see a larger amount of those stores as we move through the year. And then in terms of SKUs, Kellen, I don't know, if you want to speak to Scott's question on SKUs as far as what we can expect in the market going forward.

Yes, I mean, as far as I'm concerned, we're going to constantly increase the number of SKUs we're putting into the market. Given the number of brand partners we're on-boarding and then of course for a brand like Cookies, for example, we'll be rolling out with around probably 10 SKUs, maybe a dozen SKUs and then of course that will expand.

And that's SKUs per strain, and then we'll expand into a whole another variety of products, including whether that's edibles, beverages, tinctures that are not in our first phase of product rollout. So as far as I'm concerned, the number of SKUs will just constantly increase overtime as we on-board more Brand Partners and as they rollout additional products.

And Scott, if I can just add to that, I think we've highlighted this point before, but I do think it's worth reemphasizing. When you talk about product manufacturing, I think we really succeeded on four fronts; large-scale efficient cultivation, really proficient on extraction, obviously, just a solid portfolio of brands, but the fourth bucket is that product manufacturing bucket.

And I think one of the things that we've demonstrated and proven in a very short period of time is what are Flower One's proficiencies on manufacturing a diverse SKU of products for different brands. So whether you're looking at prerolls, infused prerolls, package flower, pure cannabis derived oils for vape pens, edibles, topicals, et cetera.

We've shown we've got that real breadth of manufacturing proficiency. And I don't think again, that really exists in the market it certainly doesn't exist in the market at scale.

But I think that even boutique concentrates and doing those products, I mean, I just think really we can engage in a conversation with any brand in the U.S. cannabis market, and be reasonably confident that we can get the product to market quickly and at scale.

And I think that's one of the things that we’ve tried to express and demonstrate to the market is that we're really unique in that space. We're not just a edible company or a vape company from a manufacturing standpoint.

We really can do it all and we've demonstrated that. And that that proficiency I think is something that we will really be able to harness in the market and certainly, beyond Nevada when that opportunity presents itself.

First one from me is just kind of jumping back in terms of the product mix, I think you've mentioned that was about 60% or 70% flower today. Just want to get some further color in terms of where you think that can go over the next, like 18 to 24 months as you bring on some more derivative product formats?

And you're also providing inputs for some other companies, so just further commentary on where you see that going and then the potential impacts on the margin profile for flower versus both those derivative products? Thanks.

I'll start very briefly, but I'll hand it over to Kellen. He can speak to this in more detail.

But you know, the one comment I'll make right off the top is, you know as a business, as Kellen mentioned, we do bulk and we do wholesale finished goods. I think the intention remains and the focus remains the same.

Over time we'll continue to shift our inventory to the higher margin product derivatives. So you will see us over time broaden our SKU count across all categories for the most part and we'll cater that or construct that just for obvious reasons we'll tie that and rightsize that to what the market demand is.

But I'll leave it there and maybe just allow Kellen to speak to the SKUs and just where the market may go as far as a shift in terms of Flower versus other SKUs.

Yes, I think that it's safe to assume that we will continue to see flower to be very strong, but other categories will probably continue to make a larger impact. You know, we've seen vape continue to resurge since vape crisis and return to be very strong of course, because of its discretion and ease of use.

And then we've also seen a very, very large resurgence of edibles or a growth in the edible and beverage category, which I think will continue. If you look at Las Vegas and the Las Vegas landscape.

Given the difficulties of consuming cannabis in and around casinos and whatnot, we think a lot more products that offer more discretion will continue to become more popular over time. The only thing I would say as to why I think flower will continue to remain that strong of a category for us is because we are going to be introducing brands and products in categories, for example, like preroll where we are going to have a significant advantage given the biomass that we are able to generate and then of course the machinery, automation and processes that we are able to add to make sure that we are among the most efficient, if not the most efficient, in that category.

So by adding that pre-roll production, for example, and then our brands that we expect to take considerable market share within that category, those are the things that I think will keep that flower number high or relatively consistent. I think to add to what Ken said, overall, I think we will optimize for of course margin but also, I think if you look at the total product mix of the entire market, we will often see our product mix very much mimic that as we'll try to make a wide variety of products that will help actually fill the dispensary shelf.

Thanks operator. So, once again, I just would like to thank everyone for joining the call.

It's been really you know, a tremendous year when you look at 2019 and all the momentum that we continued to build through Q1. As I mentioned, you know we firmly believe the worst on COVID is behind us and the market's opening up and we've seen that already in terms of the demand that we're getting from the retail account.

So, we really spent the last 60 days preparing for that ramp and to garner more market share, and feel we’re really probably the most strongly positioned company on the supply side in terms of filling retail shelf space to do that. So we're extremely excited about what lies ahead.

And I think the most imminent milestone or catalyst for us is the launch of Cookies, and the entire team has been working incredibly hard for that launch and we can expect to see that, as I said, in the coming week. So thanks again for joining the call, especially for the folks as always on the West Coast, this is particularly early for all of you out there.

So, thank you for taking the time and we look forward to updating your further on our Q1 call.