Halo Collective Inc.

Thank you, Maddie. Good afternoon, everyone.

My name is Katie Field, I'm the president of Halo Collective, and I will be moderating the conference today. At this time, I would like to welcome everyone to the Halo Collective corporate earnings call Q2, 2021.

All lines have been placed on mute to prevent background noise. As Maddie mentioned, after the remarks, there will be a question-and-answer session.

[Operator Instructions] star one. In addition to myself, the speakers on today's call will be Kiran to do Co-Founder and CEO of Halo collective, and Philip Van Den Berg, Chief Financial Officer of Halo Collective.

Before we begin, I would like to remind listeners that certain statements made during this conference call may constitute forward-looking information and forward-looking statements within the meaning of applicable securities laws. These statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Halo collective and its subsidiary entities or the industry in which it operates.

To be a material different from any future results. performance or achievements expressed or implied by such forward-looking statements.

When used in this conference call presentation, such statements use words such as may expect, believe, plan, and other similar terminology. and include, among others, statements regarding expected operating results, future growth, anticipated capital expenditures, corporate strategy, and proposed acquisitions.

And these statements reflect management's current expectations regarding future events and operating performance and speak only as of the date hereof. Important factors that could cause Halo's actual results and financial condition to differ materially from those indicated in the Forward-looking statements include, among others, economic and financial conditions, the ongoing impact of COVID-19, strategic actions, including acquisitions and dispositions, and Halo success in integrating acquired businesses.

These risk factors are discussed in detail under the heading Risk Factors in Halo's Annual Information Form dated March 31, 2021, and Halo's additional disclosure documents filed on SEDAR. New risk factors may arise from time to time.

And it is not possible for management to predict all of those risks factors, or the extent to which any factor or combination of factors may cause actual results, performance, or achievements to be materially different from those contained in forward-looking statements. With all that, given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Although the forward-looking statements contained in this presentation are based upon what management believes to be reasonable assumptions, Halo cannot assure investors that actual results will be consistent with these forward-looking statements. The Company undertakes no obligation to update or revise any forward.

Looking statements, whether as a result of new information, future events, or otherwise, other than as required under Securities Legislation. With that being said, I will now turn the call over to Philip Van Den Berg, our Chief Financial Officer.

Okay. Thank you Katie.

Can you hear me?

Yes.

Okay Good. Okay, I'll briefly take you through the group results and other developments and the -- and also the outlook.

For the group, Q2 revenues were 9.2 million, which was a 74% increase. Q-on-Q revenues declined with 8%, and that really reflected a large flower sale in January Q1 of 2021.

and taking that away then actually the growth trend continues. Sales volumes increased by more than 300% to 4.4 million grams.

And the price mix declined by 57%. And that's really [Indiscernible] a few times now, in [Indiscernible] is really because of a change in the mix like pre-rolls, flower, trim, they sell at much lower prices.

And that helps volume, but gets the price mixes down. But as long as the margins go up, that's okay.

The like-for-like organic revenue growth was 36%. And that is basically because since the beginning of the year, Winberry farms was consolidated.

The gross profit in Q2 was 2.2 million and adjusted for biological assets, it was 2.5 million. The gross margin was 24.1% and adjusted for the biological assets the gross margin was 27.8%.

Briefly, the operations at ANM, the main contributors basically in this quarter were ANM, MDT, and Winberry, so I’ll discuss those briefly. ANM Q2 revenues were down 4% and Q1 to 11% and it was really because of the Flower sell which I mentioned before, which happened within ANM.

Volumes were plus-15%, price mix minus 16%. But as an example, extract volumes minus 18% price plus 3%.

And we had much higher volumes for the lower-price categories and that brought the price overall down. The reported gross profit was 500 - was just under $600,000 and adjusted for just $1 million.

The gross margin was 15.1% and the adjusted was 23.8%. Given our deal like that -- when you look for the months, for example, the adjusted gross margin in March was 28.2%.

So, we saw throughout the quarter that margins at ANM were actually improving. Mendo Q2 revenues were 1.9 million, which was a 67% increase from Q1.

So, 1.6 million grams, which was like more than a 1,000% up with a mix price of 1.19, $1.19, which was minus 88%. And that really tells you that we had a lot of trim sales and flower sales at much lower prices and that was why the price mix went down at Mendo.

The volumes of trim. Pre-roll, and flowers increased.

And most of the other categories declined, sort it was kind of a double whammy. Because the lower prices increased, the higher-priced categories declined somewhat and that also had an impact on the mix price.

The gross profit was 394,000 with a gross margin of 20.7%. Growth in sales and margin is supported by outsourcing to third-party Greenstone for higher shelf penetration in California.

And also, but this is really for next year, MDT will have an uptake from Bar X in which we have the 44% holding once they start harvesting. Winberry -- the acquisition of Winberry added 3.6 million to revenues.

Sales were 1.2 million grams. [The average] (ph) price was 290.

That was actually up 115%. The [Indiscernible] lower-priced products, flower and trim declined faster.

And it supported the price mix. Winberry basically sells the Halo premium products and it's a distributor of that versus ANM where the margins are somewhat lower and it's a manufacturing entity.

The gross margin in Q2 was 1.55 million, 43.6% of sales, and adjusted - margin was 36.7%, 7sorry not adjusted, in Q1, the margin was 36.7%. Therefore, the 43.6% is an improvement in Q2 on Q1.

Operating expenses. Total operating expenses were 10.9 million, which was year-on-year, a 119% increase.

And Q-on-Q it was a 17% increase. Excluding Winberry, they include -- they increased 93% and Q-on-Q of 13%.

The non-cash element was just over 30% of the total OpEx. Professional was 1.4 million and of that 1.4 million 50% was noncash.

And also, professional in Q2 was down more and 50% on professional in Q1. The increase in OpEx is explained by higher Opex in G&A, and salaries both year-on-year and Q-on-Q.

Turning to EBITDA. EBITDA in Q2 was a loss of 8.9 million and adjusted for non-cash items, the loss was 4.6 million, which includes basically share-based compensation or noncash based share payments of 3.7 million.

To give you an idea, ANM was in Q2 of minus $314,000 and in Q1 it minus 1.2 million of EBITDA. Coastal Harvest was minus 510,000 in Q2, and minus 377,000 in Q1, MDT was minus 443,000 in Q2 and more or less breakeven in Q1.

Winberry was plus 222,000 and in Q1 it was 382,000. Corporates in Q2, it was minus 1 million, in Q1 it was minus 2.4 million.

And in Q2, 2020 it was minus 3.3 million. Corporate is on the declining trend in terms of expenses and the expenses are becoming more and more under control.

The outlook for the remainder of 2021. And I noted the -- in our press release, we stated that revenues are now expected to be in the region of 65 million, previously 75 million.

This has to do with regulatory issues around the opening of dispensaries [in Los Angeles] (ph)and Katie will elaborate on that further if you wished. Furthermore, in terms of the EBITDA, we basically still believe that EBITDA will be positive in Q4.

How we see this developing, I mean, ANM and Winberry are growing steadily. High Tide, close in July and is EBITDA positive because of the three dispensers that we bought in Canada.

[Indiscernible] is going to be closed down and we will get our shares back in exchange for the licenses. So, we don't have the expenses anymore.

That is about 12,000 per month that disappears. Then FlowerShop will start to contribute.

MDT has a new -- as I mentioned, has new distro with Greenstone and MDT we expect to be EBITDA positive in Q4. In fact, it was EBITDA positive in Q2.

Then Coastal Harvest, I mean, it does bulk distillate and live resin has been all over the place. And it's very difficult to predict and we're actually looking what to do with Coastal Harvest, should we continue it or not?

And that's on the discussion that we're having internally. But for now, Coastal Harvest is what it is and continues.

Nature's Best which we closed in Q1; we actually start operating it once everything is done in Q4. We expect a distribution from that.

Nature’s Best is our rosin business. Elegance, which we closed in the previous quarter in Q1 actually, and we expect that also to be built out.

It's our beverage business and is going to contribute in Q4. The retail assets and as I had mentioned, are going to contribute later than expected.

But we do expect them to contribute at least 2 of the 3 in Q4, probably November, December, with what we see now. Then we mentioned in the previous call and it's also been announced that we're spinning off Halo TAC, maybe you could - there's a more elaborate discussion about it in the MD&A.

But basically, the six TAC assets that we have are going to be distributed to our investors so that disappears -- at the moment are very few costs - there are very little cost associated with it. So, it's not going to bring us a big upside by not having them.

But it takes the attention away from something that's really not our core and somebody else can do a much better job with it. And they are going to be [Indiscernible] allocate, distributed to all the investors in Halo.

And they will be listed on the CSE that’s what we are for looking for, we're working on all the documents right now and we expect this to happen in Q4 of 2021. Then the international assets.

Basically, we combined Canmart and Bophelo into a new Company called Akanda, which is its own company. And we are looking at how we can extract more value from that combination.

That is now going to be our international assets. To give you an idea, Akanda right now is spending about 500,000, just under $500,000 per month.

Bar X basically we continue to develop that business. We have a 44% stake in it.

We don't think it will do anything before Q1 2022, but once it starts to contribute, it's -- it's a very -- can be a really profitable business and it can be a real cash cow. Plus, also, we would have an uptake which would support MDT.

So, the development of Bar X is a positive for the Company. So, as I mentioned, the guidance is for the rest of the year remains that we expect it to be EBITDA positive with a focus pretty much on North America in particular in cultivation in Oregon and cultivation and retail in California.

To give you a snapshot of how we get there, I can -- if people are interested, I'll have more detail of course, but revenues per month in Q2 were 3 million, in Q3, we project 5 million as new acquisitions actually start to contribute. And then in Q4, we had 8.8 million and that includes the projection that the retail assets are starting to contribute.

And the gross margin rises from 28% to 30%. And OpEx is 2.8 million in Q2, then in Q3, it's going up to 3.3 million.

What we have done is we are basically reorganizing some of our businesses. As I mentioned, at the same time, in the corporate center a number of people left.

We will have to pay reorganization charges for that. And therefore, we expect the operating costs to go up to 3.3 million per month in Q3.

And then as a certain developments are going to take place in Q4, we expect OpEx to be 2.4 million in Q4. So that's going to be below Q2.

And that's really -- that's what we're aiming at and that's what we're working towards. The increase that we the put -- that we include in Q2 - in Q3 includes redundancy cost of 250,000.

So, the EBITDA then becomes -- it's minus 1.9 in Q2; it is minus per month, minus 1.9 in Q3. And that is basically we have higher sales, [our deals] (ph) have higher costs because of restructuring efforts.

And then in Q4, once those disappear, and our retail assets start to contribute, the EBITDA goes to just about 200,000 in the plus for Q4. Cash flow, the cash used in operations was 9.3 million in Q1 and it went down to 8.8 million in Q2.

Non-cash items were 3 million in Q1 and 6.5 million in Q2. The last items here, are share-based compensation and FX.

The working capital increase was 3.7 million in Q1 and 3.9 million in Q2. And that really reflects the Winberry acquisitions so as a result of that inventory AR and IPO went up.

The cash burn in Q1 was 3.1 million and 2.9 million in Q2. The cash raised from finance was 15.9 million in Q1 from 2 overnight offerings.

In Q2, it was 4.5 million when we -- when we used the ATM. Cash Inflow in Q1 was 7.6 million and outflow was 4.8 million in Q2.

I'll be very brief about acquisitions, but in Q1, we did close - just to remind we closed Winberry, we also took, we had investments in SDF and ZXC, which are the dispensaries in California but we can't facilitate that until we close them. And we're waiting for the social equity contribution to happen, so that we can actually go forward with it.

And then the management companies of those 2 B&C and POI, they actually get close. In Q2, we closed Nature's Best, and we closed Elegance.

And in Q3, so far, we have closed High Tide and we also signed the definitive with William’s Wonder and we are working on the integration with them too. All in all, a total of 458 million shares were issued at a fair market value of 40 million.

So we spent 40 million on acquisitions, co-pays, and shares, and the capital raise was 249 million shares to 19.5 million, and that pretty much concludes my presentation. Thank you.

Thank you, Philip. Let me just remind everyone that you can submit a question or get in the question queue, [Operator Instructions] We do have questions that have been compiled across a couple of different social media outlets and questions that we've received.

So, I hope that these will be helpful while are waiting for others to queue. They're organized by subject matter.

We've been getting a lot of questions about the international business and the planned spinoff of the Company that was incorporated called Akanda. Kiran, a lot of these next questions are for you, are you ready?

Yes, I'm ready.

Okay great. The first question is regarding the timeframe for the planned spin-off of Akanda.

Okay. So, what we can -- all we can really say at this point is that we've hired Boustead Securities to help us pursue strategic alternatives.

If you look at the last 4 or 5 deals they’ve done and they've been very, very successful. There are 2 others very prominent.

U.S. investment banks right now doing the due diligence that Tej hopes to announce sooner rather than later; that have strong institutional followings and actually have research in the space.

As we know, NASDAQ just recently is starting to allow direct listings and New York Stock Exchange and AmEx plan touching entities that don't have any US nexus. Also, there are many other strategic alternatives for those assets.

But it's really our view that those assets are not having full recognition of value under Halo at this point. And we're going to leave it in the hands of Boustead and a couple of other banks to see how we go about untapping that value while the Tej continues to run that business.

Okay.

Great. So, with that being said, what is management's plan for Bophelo’s 2022 cultivation?

So, when I was there, we were looking at what's known as a GACP [shade clock] (ph) grow, and the target is 10 acres under canopy. And we're looking at two to three cycles.

So, it will be quite a large grow with ten acres under canopy. You can see that we're hitting good test results between 20% to 25% THC.

Tej now, is instituting, they're not called control studies in Europe, but they're called stability study. And so, he's been initiating three to six months stability studies depending on the jurisdiction.

He is also being very aggressive in terms of starting to build out distribution or planning to build out distribution, both in the UK and in Germany. And I think there'll be -- I hope that there will be some substantial news flow coming from him over the next 30 to 90 days in regards to his plans and his team's plans to do what they plan to do.

Great. So, building on that question, what gives management confidence that we'll be able to export from Lesotho?

What gives us confidence that we'll be able to export from Lesotho. Well, first of all, we've already made sales to other brokers within Africa.

Smaller sales that have exported our products abroad. Now what Tej is trying to do is capture that margin, by actually either acquiring one of the larger brokers or hiring people from that broker.

In regards to that also Tej is in pretty extensive discussions now with a group in Germany and he is in extensive discussions with two or three groups in the U.K. in order to start rolling up assets within both the UK and Germany.

And it's interesting to note that part of the reason that he left Khiron has nothing to do with Khiron business itself, but it has to do with the fact that its chairman is Vicente Fox and Khiron was much more focused on Mexico which left a lot of opportunity within Europe for someone like us with him. So, leveraging his contacts from both Canopy and from Khiron we see a lot of opportunity within Europe to build the large business end to end.

So, speed, let’s say seed to growth in --

Are you there?

Okay. Kiran, you might be on mute.

Oh, sorry. Sorry.

No, I was on mute. I apologize.

Okay --

Where did you lose me?

I think that you were just talking about the fact that Tej has just a network of international contacts in order to see --

He has a, he has a two-year vision and a plan that he is in the process of implementing. And I'd say that news flow -- I'd say that I would hope that we would start to see news flow over the next 90 days in regards to that plan.

That plan does involve expansion within -- Lesotho itself by leveraging or acquiring key brokers there. Looking at building out sales in Germany, like he did with Khiron.

And looking at -- looking at building out sales of the U.K., which has always been a let's say, a market that's been behind Germany. But I think he has a good vision and a good plan there as well.

So, I think what you'll see is over the next, let's say to be conservative, 90 days that plan of his starting to crystallize. And so far, he has been pretty much on track.

Just a couple of more before we pivot to a new topic. So, the next question was, we drove down a bit more on distribution.

The distribution strategy and the pricing for Bophelo meaning what we've talked about Bophelo was in this low-cost center production. But how does that correlate or translate into - margin?

No, that's a fair question, right now with GACP what that enables us to do is export cannabis as biomass. So, in certain jurisdictions like Australia and others, we can export the biomass as inhalable flower.

But currently in Europe, right now, the way things sit, we have to export it as biomass. That bio-mass would be made into oil for extraction.

The margins there are still substantially high, or at least the gross margin of 50%. Inevitably, we've hired a gentleman by the name of Tony LaCombe, who was responsible for building our Canopy’s operations in Denmark.

And so, the strategy there is, to do GACP grow like Canopy did in Denmark but then move that GACP grow into GMP drying. For those of you that have looked at Bophelo’s satellite pictures, you'll see a very large barn at Bophelo.

And the plan right now is over the next year, and it will take at least a year to build that barn into a CGM drying facility, which would enable us to then take the GAC seed, flower and, visually, put the boxed product through a chute into a GMP facility, dry and cured in that facility, process it in that facility, and then export it as inhalable flower into Europe. But that is realistically at least a one-year plan.

So, over the next year, it is really going to be a GACP route while that gets implemented.

Okay, great. And then do you have any estimate or what is management's estimate on the comparative cost of production per gram into fellow versus other jurisdictions like Canada, for example.

Well, we don't -- a lot of other jurisdictions -- a price of ten to $0.20 a gram. But that's not comparing apples to apples.

So, when we -- when we put our price out and the price, we typically quote is the $0.50 per gram price. What we're really quoting is a price at $0.50 per gram, that is a landed cost in Europe, right?

So yes, our cost may be in [Indiscernible] is $0.25 to $0.20 per gram all-in. For trend up a.

But the BioD and biomass are actually in Europe, there is no such thing. There's ANB Budd, there's only part and hand extractive material.

But on average, our cost of bud is 25%, but way ended, it's more like 50%, by the time you get the air and appearance into place.

Right. Okay, great.

So that wraps up the questions on [Indiscernible] I just want to again, remind everyone that you can enter the Q 00 in the queue for Q and A by pressing star 1. We also received questions on essentially the operations in California.

And the first question was essentially on the delays with the store opening because originally, we had anticipated them opening starting this month. So, I'm happy to comment on that.

The delays are primarily due to the turn-around time with the city's regulating agency, it's known as the DCR. The good news in my view is that we're on the brink of construction at the first site in Westwood on Santa Monica Boulevard.

We have received that the DCRs blessing and now it's just with the planning to get a building permit, which we expect any day now. And the construction team has already [Indiscernible] up and We started to order things and we're really ready to begin construction any day.

And will, of course, keep everyone in the loop on that. We have received positive news in the last week, actually on the Hollywood site, we have been waiting for a site change approval from the original site submitted with the application.

And this is actually before we acquired it. So, once we acquired it, we had to change the site and the DCR has now approved that.

That means that we can and we've already submitted for temporary approval with the city, as well as the state license, so that's basically just administrative that we've done that for Westwood as well. And so now we're really ready to just go full force into the design and planning and the plans for that site and the ideas that this would commence construction right after the Westwood site which is expected to really begin any day.

The only delay that I think that we expect to still encounter is that on the North Hollywood site, we are still waiting for the approval on the site change there. We don't have a lot more to comment on it other than we have these two sites in the pipeline already that are going to be built out and then designed and built out.

And so hopefully and fill up earlier, but by the end of the year, we're going to be in a position to commence construction and complete construction on North Hollywood as well. And as we get an update, we will, of course, keep everyone in the loop.

And thanks for -- thanks for being engaged on this topic. It's a very, very high priority for us.

All right. The next question is regarding the build-out of UVI, which One of the facilities we acquired.

Yuchai, California and have been planning cultivation in your corporate vision. Briefly, we have solidified the does that still about and obtained local approvals recurrently researching financing options for the actual construction.

This is to alleviate some of the need for cash to fund it. And we're just looking at what that mix looks like, but we've been working with some really qualified designers, consultants, and contractors.

So, we have a good team in place. It's really just about deciding how we want to finance it and which options are most attractive.

So, Kiran, I don't know if you have anything else to add to that?

No, that's perfectly correct. We're now looking for financing B the plans are finalized and C we're getting the permits.

But again, it's going to be a six-month to year process on that one.

Okay. Great.

All right. So, the next question is regarding inventory.

So, I'll ask Philip to jump in here. But essentially, the question is, does the size of inventory indicate a deficiency with sales or is it a strategic measure plan for dispensaries in California to have the product on hand ready for the launch?

The majority of the increase in inventory really follows from the fact that we included Winberry, that portion there last year. And that makes that -- makes that comparison looks like I certainly inventory going up a lot, but it's completely in line with the revenues of the business.

What about in California --

Doing out. In California, like, we're not building anything else for the dispensaries.

Yes. But what we are building up is our investment in flower syrup short and also, we closed.

Actuation Canada. And there we have to start or we started putting in inventory as well.

And actually, we acquired inventory with it as well. Those are the major items.

Or is there is no excess inventory in California?

Okay. Great.

The next question is regarding the reactivation of crystal harvest and asking why it's still not showing significant contributions to revenue. I can chime in a little bit, but then Philip, maybe you can add on to it.

Essentially, coastal harvest is currently paying MDP and OGC. Those are our two businesses and Yuchai with raw materials for manufacturing finished goods.

And so essentially, it's a, it's essentially a growth engine as well as for the white-label business. But MDT and OGC.

So, it's not really going to show the type of revenue that you'd expect to see from a subsidiary that is serving dispensaries directly. You're going to see it more in terms of either inter-company revenues to MDT and OGC or bulk sales which have actually been a declining segment of our business there.

So that's primarily I think why we see it more as that continuing with it as more to support our white label and finished products through dispensaries business in Yuchai asset fill up. Do you want to add anything to that?

Nope, that's -- what you said is perfect to Raj.

Okay, great. All right.

The next topic area there was a question submitted on Oregon. And the question was why A&M was showing a lower gross margin than Winberry?

The point to make here, and then I'll ask Philip to chime in as well, is that A&M is primarily manufacturing, whereas Winberry is the distributor. The manufacturing margins are lower.

With the products that have shipped to dispensaries from A&M, those tend to be our lower-priced value line products that in the Hush brand versus the Winberry brand. So that could be another driver for lower gross margins at an and then when dairy and the last thing to keep in mind is that one of them, one of actually the synergies that we anticipated with the Winberry transactions was to in-source production of cartridges of their heart that they had outsourced to a third-party manufacturer.

By actually producing these cartridges that A and M Winberry experienced an increase in the gross margin of its cartridges. A and M actually fueled the gross margin for Winberry.

Philip, do you want to chime in at all regarding A&M versus Winberry gross margins?

I think what you said is absolutely correct. It's The distribution margin on Winberry is higher, but also the average achieved price on Winberry some more.

We're done actually with A and M, so A&M they have a somewhat lower margin, but still makes a very good gross profit because it has a much higher volume than Winberry. That's really it.

It's a low price with high mar and high pressure with a somewhat lower margin.

Agreed. Agreed.

And they both really are -- they exist pretty harmoniously together. So, both businesses are important in Oregon, so all right, so the next question was just sort of overall, the strategic focal points.

That we've been mentioning, both in our press releases and on the call today which is, why do we continue to focus on Barrx, UVI, and the planned acquisition in Oregon? From my viewpoint, Barrx and UVI are both focal points because they are secure.

A chain for flower and, and for the trend to some extent in California and really allow us to offer a broader product. An offering of products to dispensaries.

And they are important for that reason. And from the Oregon perspective, or acquisitions.

And has been important because consolidation will release fuel. A couple of opportunities for us.

The first is also being supply chain, but also the streamlining of operations in terms of where we're growing, where we're -- where we're assembling. finishing products, and where we're actually distributing.

So, to get a better nexus from south to north in terms of the origin of the product, origin of raw materials, and the finishing and distribution of products closer to population centers. So, there's actually been -- we really anticipate some improvements with further acquisitions in Oregon.

[Indiscernible] and Philip, do you wish to comment on the strategic focus for Barrx, UVI, and Oregon [Indiscernible]

No, I think you've hit the nail on the head. You just got to look at Halo as a sum of parts.

You have to look at if you take each of its cards and you add it up, it doesn't really equate to the market cap. So, if you take Triangle Barrx, you take UVI you take a con, you risk-adjusted it just in my mind.

It's just doesn't add up. And so, I think that's part of the reason for unlocking everything the way we're doing.

Right. Okay.

Well, the next area of --

[Indiscernible] I apologize.

No problem. Okay.

So, Philip, the next question is regarding the guidance in financials. I think you did a great job during your presentation commenting on this.

But maybe we can just dive in a little bit here. The first question was the drop in revenue between Q1 and Q2, which that down by approximately 10%.

And so, they're just wondering what is the shortfall from Q1 to Q2 this year?

Yeah. That's really to do with the comparison in Q1 in January of 2021, we had a very large flower sale and that's resulted in that Q-on-Q decline.

But if you look at it beyond January that actually improved of really just that one big sale in January in 2021 that distorted that the growth for a number. But if you exclude that, then thanks for actually going up.

Great. Thank you for reminding us all about that.

Regarding the $75 million guidance you originally and now the downward revision, can you specifically talk a little bit more about this and the key drivers of that.

At the beginning of this year when we gave the 75 million like [Indiscernible] costs, total loss of dispensaries in California. That is now going to be somewhat later.

And that really explains the shortfall of 10 million. That's why [Indiscernible] we're going from 75 to 65.

but since we do not have that many expenses allocated to try and now, it doesn't have a very big impact on the operating expenses. So, once it's starting to come contribute.

You got the big leverage effect and that's when it really starts to complete with. That's why we think that we see the turn in EBITDA in Q4 when they start to contribute.

And also, there are many others, like when we, High Tide. We close Nature's Best.

We just closed. Pretty much close to closing.

Williams, one of which was our goal to mine. We closed Elegance.

So, a lot of acquisitions that closed that we are now starting to focus on to start contributing. And we see those contributing in Q3 going into Q4.

Thank you. Alright.

Kiran, this next question. Maybe you can chime in on this one.

What steps of action has management taken or plan to take in order to preserve financing tools in the event that Akanda spins off and there may be some type of investor selling their positions?

Well, Akanda spinning off is going to free up 6 to 8 million of cash on an annualized basis. And it also remembers Akanda through intercompany will probably enlist 4 to 5 million dollars if they're successful.

So, spinning off actually helps us in that way. And then also helps us in the fact that they owe us money which it inevitably that capital will return to us.

The third thing you got to understand is similar to our condo’s shares are going to be an asset to us, right? So, if you take a comp, that's a lot further behind, like floral growth.

And you figure that at the end of the day, we own 40 or 50% of that in your comp of the floor or grow, the numbers start to get a little silly. In terms of cash.

Right now, I think we probably have 1.27 about 5.7 to 6 million in Wash on the books. Are we still have our shelf open for another 5-10, So I think?

We have ample cash and we haven't kept any credit lines at this point because we don't want to get into a loan. We don't want to get into a loan to own the situation ourselves.

So, we're being very careful in that regard. But cash is not what keeps me up at night, what keeps me up at night right now, is pure execution of all the moving parts.

And so, getting these dispensaries open in California, we have an amazing. sort of what I call fair following wind on the acquisition front.

Because we're in a unique sweet spot, where what's call it a middle fish swimming in the ocean. And there are Great Whites above us and they are minnows below us.

And we're the only one's sort of nipping at the minnows that we see right now, in particular, in Oregon and in California. So, there's a great opportunity there as well.

And really, it's really a balance of trying to grow quickly, that grow quickly in such a way that we don't. But the comps of the tree don't snap.

So that's the fine line balance that we're operating within right now.

Great. Very well side.

Again, we have received a time check here. We have about 5 more minutes, so I have a couple of more questions that were submitted.

Operator jump in, please press star one. You can enter the Q and A queue.

All right. The next question is surrounding the hiring of management and just employees in general.

considering the cash reserve situation, which again Kiran mentioned doesn't really keep them up at night. But how do we balance all of this and You know what is -- why the focus on hiring.

So essentially, what I would like to say first is that it's very important that we have very qualified and exemplary leaders in the Company because we are trying to position ourselves and we are positioning ourselves as one of the premier MSOs on the West Coast. Focused on Oregon and California.

And so, in order to do that, we have to have the right -- the right management onboard. And that runs the gamut from sales and ensuring that we have very well-oiled sales machine-directed dispensaries.

It's in terms of retail and having the right management, their marketing, it’s kind of runs across a couple of different functions. As we are expanding our focus and as we are focusing on these markets, but expanding the ARVR.

Recall in each market. But in addition to that, we're actually looking at the spin-offs of Halo TAC anaconda as an opportunity to spin off some overhead as well.

We think all-in-all it will really be balanced over time. And additionally, we also reduced some corporate overheads this summer.

And Philip, do you want to comment on some of the cost improvements we made in overhead this summer?

Or issuer. Bottom line is that although we are.

A few more people are high, the core hard people. We actually let go more people, shorter is a saving overall.

So, the people that we let go recently, there will be a one-off because of the payments that we have to make. But one that's behind us, then the comprehension will be lower.

Exactly. Now, that's exactly right.

And the talent that we did hire, is really key to positioning just on the leader -- not just as a leader on the west coast, but also a talent for Akanda, that is going to or that we plan to a spin-off. So, it's just a matter of timing there.

And meanwhile, it's still already -- gone.

And then to add to that, some of the people like we're based, taking care of all your expanses not come down. Versus the wishes in Kenmore.

Bophelo. And those expenses.

We have kind of really reallocated them, show the people that we are covering from comparable that are not going to be part of the count down, is becoming kind of an intercompany exercise. So once whatever is going to happen with the count down, those expenses disappear as well.

So, a number of people that were included in our headcount have been moved to Akanda and they will, at some point will disappear [Indiscernible]

Agreed. And so, are there any other -- Philip from your view, are there any other steps that we can take to further reduce the Company overheads?

We're always looking. I think we’re still looking for a professional, professional is pretty much is like a big argument or such legal.

And one of the people that we've hired that someone to like in earlier hiring more people. We hired some in-house council and the work that she docks at the price that we pay as much.

much less than what we are charged by our -- our legal service providers. And our rigs on that.

Agreed. Okay.

Let's see. We don't have time for too many more questions.

So, I guess 1 quick question here Philip. Just to ask about a different topic than cost.

There's a question about why there are no revenues in the financials for Lesotho?

Has made so kind of warm sale. And are we talking about I think -- I think it was about $1000 but that's about it so it's complete right now with the same significance.

They tried to other basically [Indiscernible] has made one sale and that was kind of in [Indiscernible] and that is it. It's fairly small, too small to show us contribution right now.

It's pretty much zero.

Okay, great. Well, I think that just about covers it.

There was one question, Philip, if you have a brief minute here. Because we're running out of time, but folks are wondering about Halo tech and the timing of the spinoff?

I know you had mentioned earlier on the call that we we're still anticipating that it would happen, but do you have any idea of the timing or anything that you can add before we have to sign off?

Yes, we are [Indiscernible] putting together on a prospectus and are also working with legal counsel and tax counsel to make sure that [Indiscernible] do this the right way. Can you repeat that, Katie?

Just the timing of Halo tech and when we that may be complete?

So, the the timing is SQ4, so we're in the process now of doing the paperwork. We're also working with the party that is going to take over the management of Halo tech and we may even merge in a Company in it.

And we're working to get this over the line in Q4. My best guestimate is October, November.

Great. Okay.

Well, I think that's all the questions that we have time for. It's now 2:16 pacific time.

So, Maddie, do you want to close things off or does anyone else have any comments? Okay, Maddie, do you want to wrap up for us?

Thank you.