Good day, and welcome to the Lowell Farms Inc T hird Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Bill Mitoulas, Investor Relations. Please go ahead. Mr. Mitoulas, you may proceed with your conference. Thank you very much. Good afternoon, and welcome to the conference call to discuss Lowell Farms Inc's Financial Results for the Fiscal Third Quarter of 2021. Before we begin, please let me remind you that during the course of this conference call, Lowell Farms Inc management may make forward-looking statements. These forward-looking statements are based on current expectations that are subject to risks and uncertainties that may cause actual results to differ materially from expectations. These risks are outlined in the Risk Factors section of our Form 10 filed on EDGAR and our listing statement filed on SEDAR. Any forward-looking statements should be considered in light of these factors. Please also note that any outlook we present is as of today, and management does not undertake any obligation to revise any forward-looking statements in the future. This call includes George Allen, Chairman of the Board, Mark Ainsworth, Co-Founder and Chief Executive Officer, as well as Chief Financial Officer, Brian Shure, who will go into detail about the company's financial results for the quarter later in this call. The Q&A portion of this call will be open to analyst questions to provide further insight into the company's performance, operations, and go-forward strategy. For those of you who may happen to leave our call before its conclusion, please be advised that this conference call will be recorded and archived on our investor relations website page. Now, I will hand the call over to George. George, please go ahead. Thanks, Bill. I'd like to take a few minutes to talk about something that is important to us. Through our business, we interface a lot with the diverse community of marijuana growers in California, and they are desperately hurting right now, and they have no voice. It's tragic, and it's happening to hardworking people that embody the finest of the American entrepreneur. It's a group of people that every investor or consumer in cannabis owes a debt to because they were our pioneers. They were the first ones to wade into this market way before Canada, way before anyone else, and they made huge contributions to the plant and to the culture. It's sad and was probably predictable and definitely avoidable, but nonetheless, it is a tragedy. Prices in California weed have fallen so far so quickly that thousands of growers are facing heartbreaking decisions right now. Decisions between completely abandoning their harvest, which probably represents their life savings, or borrow more money to take it down and risk that they don't get anything back. Now, these are not the big overbuilt Canadian LPs or large American MSOs. The vast majority of Californian weed is grown by very small businesses with no reserves and no bank accounts. These are passionate people who found a home working with their hands among like-minded pioneers, and they waded through endless regulatory tax burdens to do it right. They didn't have any risk factors in their prospectus. They had a second mortgage. Now, I was struck by a story I heard last week of a grower in Humboldt who jumped to his death from a four-story building. It was sorrowful. He jumped because he was so in the hole, he saw no way out. It's a modern-day Grapes of Wrath story. I came to find out that he was a close friend of a friend. Well, we're all friends in this business, and if you're smart, you respect those that came first, as their road has been the longest with the most risk, and many of them won't be coming back, unfortunately. California was the first place in the world to revisit marijuana, and those that answered the call led the way for the rest of us. These aren't stoners. Don't make that mistake. They all saw a revolution in the plant, and they went all in. They worked their fingers to the bone, partially because they were foolish enough to believe that the halls of power in Washington, D.C., were occupied by public servants whose job it is to make sure that the law follows the will of the people. Well, it turns out Washington would prefer to argue over things we don't agree on rather than fix the things we do. Thus, you get what we have here, an inefficient market structure that simultaneously manages to hurt the environment, the consumer, and the entrepreneur all at once. If you want to know where to find the suffering caused by the inaction in Washington on cannabis, it's right here. Now, this is not a rant for our account. While the Lowell brand was built in partnership with this community of growers, and we cherish that heritage, we will survive nonetheless. We have the scale and the resources to do so. It's a eulogy for those that don't, and without them, cannabis won't be the same. We don't take their passing lightly because they are our brethren and because their toil carved the road upon which we glide. Now, with that, I think it's time to turn our attention to our business. There is a lot to discuss, so let's get into it. While we remain very bullish on our unique strategy and our positioning of Mark in the market, the quarter was decidedly a disappointment for us in the context of our top and bottom line performance, and nearly all of it was related to the impact we face from wholesale flower prices. We do, however, see strength from here, and we believe the shifts that we have made will reposition our business for immediate growth and profitability without relying upon a recovery in the wholesale flower margins. I'll start with the source of the shortfall. While you may recall from the last call that we discussed, we expected soft flower prices during the quarter. Wholesale bulk flower sales lagged our expectations even still. The collapse in wholesale bulk prices left us with a $3.9 million revenue gap to fill relative to Q2 bulk prices, bulk revenues of $5.4 million. Now we made up some of that ground with growth in CPG and our new LFS business, as well as licensing, but not enough to bridge the gap fully. We will talk more about that momentarily. I'd like to focus for a minute on Lowell Farm Services or LFS. I'm very pleased with the launch of LFS, and it is the arrow in our quiver in a market that is seeking a bottom. As you will recall, we launched this business for two reasons. Number one, to align ourselves with the California outdoor cultivation market, a growing format with a price advantage. Number two, to gain access to a substantially wider variety of high-quality flower for our branded products. I'm very pleased to report we are making great progress on both fronts, and the thesis is playing out very well. As a comparable source of flower, we are very proud of our greenhouse. It is truly a best-in-class property, but in a bare-knuckle brawl of oversupply, our cultivation costs cannot compete with the cost advantage that outdoor flower has. Our average cost per dried flower lb is $396, or $196 when compared on an equivalent dry lb basis that some of our peers use. This is an outstanding figure relative to most greenhouse operators worldwide, and we're very proud of it. Our cost to acquire outdoor flower using LFS is approaching $200 per lb. We're nearly half the cost of our greenhouse flower. What's better yet, our business model at LFS allows us to avoid the agricultural perils of owning any single farm or property. Hence, we're still very excited about this business. Indeed, Q4 is a very busy time for the team. We're expecting to more than triple sales over the third quarter for LFS. The additional source of outdoor flower allows us to bring lower price offerings to market under different brands to address a consumer who is stressed. One of the keys to gaining share during the third quarter in CPG was our house flower brand, which enjoyed incredible growth during the quarter at a lower price point than our Lowell flower. During the quarter, we serviced 486 unique store fronts. According to retail sales data collected from Headset, the consumer wallet is under challenge. The California consumer is weaker, probably a result of deteriorating disposable income from dissipating stimulus checks and inflation elsewhere. Headset data shows sequential market shrinkage in Q3 of 1.9% and YoY growth of just 5.4%. What is even more telling is that the consumer clearly rotated out of ultra-premium categories, especially high-end indoor flower. Against that backdrop, our brands grew collectively 16% sequentially during the quarter and 22% YoY. Keep in mind that Headset data is sell-through data, not our sales data, which is sell-in. We think sell-through data is very helpful because it speaks to shelf velocity and relative performance of our products, and it is a leading indicator of sales. Mark will comment specifically on wholesale revenues for the quarter. This quarter, the sequential growth in our CPG products and wholesale revenues lagged the growth at retail sell-through. We believe that retail sales are a leading indicator and that we should see resulting CPG sales accelerate in the fourth quarter. According to Headset, sequentially, our market share grew from 177 basis points to 211 basis points or a gain of 19% over the course of the quarter. This suggests that we are doing something right. The outperformance was headlined by Lowell, which grew 12% sequentially and 85% YoY. This is particularly important because it demonstrates the power of our platform as a consolidator in California, as Lowell was a brand that we acquired in March of this year. As part of our success, we recovered the number one brand position in non-infused pre-rolls during the quarter, an important position that demonstrates strength and brand credibility. I'm incredibly proud of the team and the progress we've made restoring Lowell's brand promise. Lowell now makes up 70% of our branded product offering. Now House Weed is our second-largest brand and enjoyed nearly a 4x growth during the quarter as we used it to push lower-priced flower. The brand really resonates with consumer and now makes up 17% of our branded products portfolio on a sell-through basis. Elsewhere in our portfolio, we saw some attrition, especially in our two edible brands, MOON and OPC, which have been starving for attention but suffering to get it due to their small scale. That said, our two largest brands are very healthy, and we are building up for more product depth behind the House Weed brand and preparing for launch of our new outdoor brand, Chula. During this volatile time, it is incredibly important to retain a house of brands in order to respond to shifts in consumer trends without adjusting the core value proposition of any single brand. As you know, our organic material at the farm first goes into our CPG production, and what we don't use there goes into wholesale lots that we liquidate on the B2B bulk market. This was the source of our shortfall for the quarter. We prefer to run our business with excess supply of raw materials, as stock outs are the death of CPG brands. This strategy traditionally works because there is an active market for bulk flower among wholesalers that has traditionally allowed us to liquidate excess inventory. At the end of the second quarter, we began to see wholesale bulk prices drop, and the volume appetite of buyers dissipate. The reduction in price accelerated as we went through the third quarter and have fallen to levels that are fairly unprecedented. At the current levels for bulk, there are very few growers who are recovering variable costs. The drop-off is extremely painful to many, as I discussed above, and we were not immune to the drop in bulk revenues as the drop in bulk revenues falls completely to our bottom line, and we have undergone a comprehensive exercise to recover profitability by increasing our operational efficiency and reducing costs via automation, vendor renegotiation, staff reduction, and overtime elimination. We are also working to reduce our active inventory balances in an effort to harvest working capital. Lastly, on licensing, I am extremely encouraged by the launches with Ascend in both Massachusetts and Illinois. We saw high demand in both markets. Now, somewhat disappointingly, we did hit a production ceiling in Illinois towards the end of the quarter that had been unforeseen originally, and it was governed by staffing shortages at Ascend. We are actively working with Ascend to adopt some of our automation processes in order to increase output. Now, we ended the quarter with an annualized GMV run rate of $11 million based off of September. Not a bad start. More importantly, the brand success in these two markets continues to come with very little brand marketing expense. We increased our production capacity with Ascend, and we see enormous potential to increase demand with high ROI initiatives. We also announced tonight the anticipated launch of Lowell in Michigan on identical terms as the first two markets. Now, Michigan is a smokers market, and we're excited to see how well we do. Altogether, I'm very pleased with our positioning and execution as we work to digest the shifting sands of the bulk flower market. With that, I'll turn it over to Mark for his comments. Mark? Thank you, George. During the quarter, we generated revenues of $12.5 million, and our new business, Lowell Farm Services, generated $800,000 of those revenues, up from zero in the prior quarter. During the quarter, we accepted 50,957 lbs of third-party wet flower, yielding revenues per lb of wet flower of $15.70. The launch was extremely exciting for us as we developed the systems and processes for handling third-party grades. While I was excited to see the new facility come to life, we did experience inefficiencies in our process that we have adjusted in real time. Many of the systems and processes we developed were at scale levels that nobody has experienced in cannabis yet. We spent a lot of time refining our process and equipment for efficiency and space utilization. We expect to process nearly 300,000 lbs of wet weight in the fourth quarter, a six-fold increase from Q3. We have built many valuable relationships with some amazing farms in the cannabis space who are producing outstanding products. We have seen THC potency levels well into the thirties with tremendous terpene profiles. The diversity of raw materials that LFS provides access to is tremendous, and we plan on using that to expand our product offering in CPG, as George discussed. As to CPG, we booked $8.9 million in CPG revenues, up 1% from $8.8 million in the prior quarter. Sales during the quarter skewed heavily towards flower and pre-rolls, which made up 44% and 31% of sales respectively. We saw exciting growth in flower and vapes during the quarter, up 24% and 27% sequentially. They were both driven by impressive gains from our House Weed brand, which is winning shelf space across the state. Pre-rolls and edibles both contracted during the quarter. We attribute the contraction to timing of channel inventory absorption. Given the health we see in shelf velocities, we are not concerned. Conversely, the contraction in our edible category is more indicative of shrinking brand proposition, but edibles only made up 6% of our CPG sales during the quarter. We are adding some exciting SKUs in the lineup in Q4, including our House Weed-infused pre-rolls and our highly anticipated Lowell Hash Wrap. As George mentioned, we are also adding our new flower brand to our lineup in Q4 under the Chula brand. As to bulk sales were down sequentially $3.9 million or 71% in the third quarter. The drop was attributed to a 36% decline in volume and a 55% decline in realized price. The drop in volume was attributed to our ramp-up of LFS. We trimmed less of our greenhouse flower as we diverted resources towards our LFS clients. Essentially, our timeline for producing finished flower from the greenhouse stretched out and we had less flower to sell. We expect our production timeline to fully recover by the end of the fourth quarter, amounting to approximately 2,000 lbs of flower which pushed from the third quarter into the fourth. Moving forward, we are taking steps to professionalize our bulk sales program as we incorporate inventory from our LFS clients. We are committed to getting them the best price we can, and we are transforming our L.A. distribution facility into a showroom that we can use to showcase the finest selection of California cannabis. Lastly, before I turn it over to Brian, I would like to acknowledge the continued efforts made by the amazing team at Lowell Farms. Nobody is satisfied with the financial results we posted this quarter, but nearly all of the shortfall is attributed to factors outside of their control, whereas all of our successes are directly the result of their efforts. Nonetheless, they are committed to Lowell being successful inside this new reality. With that, I turn it over to Brian. Brian? Thank you, Mark. Before I begin, please note that we are reporting our Q3 results in U.S. GAAP, and a portion of my commentary will be on a non-GAAP basis. Please refer to today's earnings release for a full reconciliation of GAAP and non-GAAP results. We report all figures in U.S. dollars unless otherwise indicated. I would also note that our quarterly report has been filed with the SEC and CSE today. As Mark highlighted, we reported Q3 revenue of $12.5 million, down 18% sequentially and 12% YoY. Revenue in the quarter was adversely impacted by bulk flower sales, primarily due to lower market pricing in the current quarter. In the third quarter, we generated revenue of $802,000 associated with Lowell Farm Services and $715,000 of license fee revenue, both of these reflecting new revenue sources for Lowell Farms, which are expected to increase over the next several quarters. Q3 revenues included over $6.5 million in Lowell-branded sales resulting from our acquisition of the Lowell brands earlier this year. While year-to-date revenues included $13.3 million in Lowell branded sales. I should also note that revenues were impacted by the decision to significantly reduce lower-margin third-party agency and distributed brand sales, and focus primarily on higher-margin own brand products. In Q3, agency and distributed brands declined $0.2 million or 34% sequentially, and $1.8 million or 74% YoY. On a year-to-date basis, we reported revenue of $38.7 million, an increase of $5.2 million or 15% over the same period last year. We anticipate revenues in Q4 to be in the $15 million-$17 million range, reflecting increasing Lowell Farm Services and Lowell brand revenues, constrained somewhat by the headwinds that are impacting bulk flower pricing. Turning to the balance sheet, working capital was $31 million at the end of the third quarter, compared to $22 million at the end of the second quarter, and the company had $17 million in cash, compared to $9.1 million at the beginning of the quarter. An $18 million private equity investment was closed during the quarter, while accounts receivable and inventory together increased $1.2 million, reflecting improving sales at the end of the quarter. Capital expenditures of $1.4 million were incurred in the third quarter, including investments on automation equipment and Lowell Farm Services infrastructure. Turning to gross margin. Gross margin, as reported, was 1% in the third quarter, compared to 38% sequentially and 35% YoY. The margin decline over the second quarter this year and third quarter last year was due primarily to bulk sales, lower market pricing and volume sequentially, and lower market pricing YoY, and to start-up costs associated with Lowell Farm Services. The margin decline YoY was offset somewhat by an increase in margin from higher profit owned brand sales, primarily the Lowell brand. We expect to continue to see market price compression in the bulk flower market, offset in part by gross margin improvement from increasing Lowell brand sales and increased revenue and margin contribution from Lowell Farm Services. Operating expenses were $7 million or 56% of sales for the quarter, compared to $6.2 million or 41% of sales in Q2, and $4.2 million or 30% of sales in the third quarter last year. Operating expenses in the third quarter include startup costs associated with LFS and licensing and reflect the impact of continued marketing initiatives focused on the Lowell brands. Impacted primarily by the lower gross profit due to bulk flower pricing, the operating loss in the third quarter was $7 million, compared to an operating loss of $473,000 sequentially and operating income of $772,000 YoY. The operating loss year to date was $13.1 million compared to $11.1 million in the same period last year. Net loss for the third quarter was $8.7 million compared sequentially to net income of $731,000, which included income from insurance claim proceeds of $2.6 million and compares to a net loss of $1.2 million in the third quarter last year. Adjusted EBITDA in the third quarter was negative $5.2 million compared sequentially to adjusted EBITDA of $740,000 and adjusted EBITDA of $1.9 million YoY. With that, I'll turn the call back to Mark. Mark? Thank you, Brian. I am incredibly thankful for the team's passion to execute at the best of their abilities. I am also thankful for our investors who quarter after quarter continue to double down on their support. I look forward to sharing more with you as we continue to solidify our positioning within the California market and beyond. Thank you. With that, I turn it back to the operator. We will now begin the question- and- answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Bobby Burleson with Canaccord. Please go ahead. Hey, guys. Thanks for taking my question. I guess first off, just curious with LFS, how much capacity there is there to offset or backfill, you know, weakness that you're seeing in the other areas. Yeah. I think our expectations, Bobby, and thanks for your question. I think our expectation for the quarter is a couple of things. LFS will give us revenues from processing third-party flower, and I think we're expecting somewhere between $3 million-$3.5 million of revenues from that in the quarter. In addition to that, it gave us access to a fair amount of flower that we're stockpiling to use in CPG to allow us to reduce our overall costs. That flower or that feedstock, it really ends up being a question of that where do we want to book that and how fast do we want to use that in CPG products. There's incremental revenue from there, substantial incremental revenue there that we can generate and margin dollars, more importantly. It's really a question of just how much we want to use it in the fourth quarter versus in the first quarter alone. The first quarter is a reason to sort of to retain inventory for, because first quarter is usually our greenhouse's weakest performing quarter, historically, as well as there's not a lot of outdoor flower in the marketplace. I think we're gonna be making decisions and watching price action towards the end of the quarter in order to make allocation decisions. I think we've got a fair amount of room to run. If you couple that with the fact that we were short in the amount of bulk flower that we sold last year, in last quarter, we can add that extra volume into this quarter. I think we've got a fairly, you know, decent shot. I think the $15 million-$17 million revenue guidance here accounts for the current pricing environment. Okay, great. How are you seeing, you know, just secondhand, how the pricing environment's affecting competitors that are, you know, smaller in scale? Are you seeing maybe a bunch of those guys go under here pretty soon? You know, will that help normalize or rebalance supply demand? Yeah, I think. I mean, certainly, I think on the cultivation side, as I said at the beginning of the call, you know, this community is really struggling and can't last long. I mean, they were already overtaxed and overburdened and managing minimal margins at the pricing environment that existed, and this one is certainly one that's gonna be hard to watch, but it is gonna take. We're gonna see supply sort of exit, I think in a pretty precipitous way. I think there's a fair amount of conjecture out there about how long it takes to shake out. I think a lot of it will depend on what happens to the outdoor flower that is harvested this fourth quarter, how much of it comes in relative to how much came in last year, as well as how fast it sort of hits the market and gets absorbed in the marketplace. I think last year there was a fair amount of conjecture that some of the outdoor flower got stretched into the summer months as cultivators sort of held out hope that prices would rise in the summer as it had the year before. This year I suspect everyone's, you know, so desperate for cash flow that they're gonna sell product at very very soon. We'll see. I think you know forecasting where prices go in this market is really difficult, and there's so many factors that we haven't even spoken about that go into it. I think the only thing we can do is try to build our business around a cost structure and an operating model that works where the market is today, and sort of hope for the best and plan for the worst. Okay, great. I apologize if I missed this at the beginning of the call. I had to jump on late, but the success of your CPG business right now in terms of number of doors that you guys are in and, you know, any kind of color on where you see that going and where your share is in terms of doors at this point? Yeah. I feel really good about where we are in terms of doors. I think we said it in the comment section above. I think it's 486 doors. I think the reality is the doors. Of course, that's flat from the prior quarter. It's really about are you in the doors that matter. In addition to the doors, it's all about getting into delivery. We're seeing a fair amount of shift move into the delivery-only platforms in California, as a fair amount of purchasing moves into digital format purchasing. I think from our standpoint, our access to doors right now is where we expect to be and where we would hope to be. I think it's for us it's about increasing the amount of shelf space that we have in those stores. We saw House Weed grab a lot of shelf space in the store. We've seen Lowell pre-rolls grab shelf space as well. I think for us we've got a fair number of new product launches that I think will do well. We're also seeing you know a fair amount of you know product density improve, meaning the largest operators in the space are gaining more and more shelf space in the market. I think we're the fourth or fifth largest you know house of brands today in California, and we're enjoying the same type of accretion as a couple of our peers are. Feeling pretty good about CPG, and I can get you in full detail the comments we had made on our CPG growth. The full reality is we're seeing a lot of traction in terms of sell-through data. Our brands are performing really well, especially in light of a California consumer who appears to be pretty stressed. Okay, great. Thank you. Thank you. Our next question will come from Jason Zandberg with PI Financial. Please go ahead. Hey, guys. Thanks for taking my question. Hey, I just wanted to get some more color on your relationship with Ascend. I believe you broke out the revenue from that. I could be wrong, but I didn't have a chance to write that down. Could you sort of expand on contribution in Q3, and then now with Michigan added, any outlook in terms of you know, further states to add? Any sort of timeline on that front? We said two things about Michigan. We said, first of all, the revenues that we booked from Michigan was $715,000. I'm sorry, we said two things about licensing. $715,000 for revenue during the quarter that we booked. And we also said that we were running at a licensing run rate, I think, just looking it up. What'd we say? Sorry. I think we said we're running at $11 million annual run rate as of September in terms of GMV, meaning the wholesale value of products that Ascend is selling under our brand. Michigan is a big market, as you know, and it's definitely a large cannabis market, we're pretty excited about the launch there. We've got some regulatory hurdles to get through there, but very, very excited to get that out. We've got a number of other markets we're discussing with both Ascend as well as a couple other players. We've even had discussions about international expansion that we're evaluating right now. It seems like there is market demand. We're seeing a fair amount of the more that operators are getting concerned about a path towards commoditization, the more they're focused on bringing brands in. The conversations and dialogue we've had are extremely healthy. We've been really pleased with the work that Ascend has done. They've been great partners to us. You know, even notwithstanding the staffing issues that they've had in Illinois, we chose to stick it out with them as being partners. They've just been you know extremely good stewards of the brand, and I think you can't overlook that. We're working to make sure that this brand is everywhere where the recreational consumer is getting introduced to cannabis, and Ascend has really shown strength there. While we're looking at other partners, we haven't announced anybody else just yet. That $715,000 that happened in Q3 would be full quarter of Illinois and a partial quarter of Mass. Is that correct? That's correct. Yeah. Okay. They only had one month of Mass in there. Right. All right. Okay. Just switching over to the Lowell Farm Services. So we appreciate your guidance in terms of, you know, sort of what to expect in Q4. Two questions. One is just in general, what do you expect seasonality to look like in this business? And the second question, you know, given your comments about the financial viability of some of these smaller producers, what's your exposure to some of these players, and how do you mitigate. Any loss in terms of, non-payment? Yeah. I think it's a good question. I think in terms of seasonality, there is a fair amount of seasonality in terms of outdoor harvest. You tend to see two cycles for outdoor harvest. That would be sort of May, June timeline and then again in October, November, December. We also have a pipeline and a universe of clients that use the facility that are mixed light customers, meaning greenhouse customers, and they have a more a steady base of revenues. Given the fact that it's only our second quarter, we're sort of working through that customer pipeline, but we continue to think there's a lot of opportunity out there in terms of third-party clients. You know, I think in terms of how do we get paid, obviously we. You know, this is a tough one, right? Because we've got these clients who they've given us every asset that's important to them, their flower, and we have, you know, they owe us money. We don't collect until we're done with the work, and then we invoice the work. But obviously for us, I think the relationship that we have is we typically make around $160-$180 per lb for dry lb. That's what our revenues end up being in terms of how much we charge them per dry pound. I think as long as market prices for flower are north of that dollar amount, I think we consider ourselves as being relatively safe in terms of our credit exposure. I think we still have a fair amount of room downward from here that would put that at risk. In addition to that, I think there's a fair amount of opportunity for us to broker sales for them. That's one of the reasons why we're working hard is to help this community bring flower to marketplace by using our sales channel to get it out to not only into CPG products but also into bulk customers. There's a revenue accretion opportunity there for us too, which we really didn't account for during our forecast for the quarter. Okay, great. That's good clarity. Thank you. Again, if you have a question, please press star then one. Our next question will come from Doug Cooper with Beacon Securities. Please go ahead. Hi, good evening, guys. Hey, Doug. You're throwing a lot of numbers around. I wanna make sure I got them all. And then I wanna sort of, to the extent possible, talk about gross margin in each one of these sectors, and just maybe even get back to where it was excluding the bulk sales. Why don't we just start. Of the $12.5 million, $800,000 in Lowell Farm Services, can you talk about what the gross margin is in that business? I don't think we gave gross margin out this quarter. I think, Doug, I'm happy to give that to you, but let's schedule up a call on the side so we don't have to be forecasting. Okay. I don't think we have that readily now, so I don't wanna do it off the cuff. Okay. Maybe just stick to the revenue side then. $800,000 was Lowell Farm Services, $700,000 was the licensed revenue. And at 15%, that's sort of gross transaction value or merchandise value, however you wanna call it, about just under $5 million. Does that sound about right for the quarter? It does. Your arithmetic there is right. The only thing I'd tell you about that, Doug, is that and we probably should have been a little bit clarifying about this earlier. We make revenues on those relationships in two ways. Number one, we make basically 100% margin dollars from a royalty fee that we generate that is exactly 15% of wholesale revenues. And then we make revenues from the sale of non-cannabis materials to our partner at a modest markup. That revenue blend there is basically a combination of both revenue sources. What I said was that we ended the quarter at an annualized run rate of roughly $11 million on the CPG front. I think that would give you a sense as to where we ended up in third party licensed revenues. Assume that run rate continues for the balance of Q4, that would be in terms of that'd be, we'll call it $1.5 million of licensed revenue in the fourth quarter, excluding, I guess, the non-cannabis materials. I think, you know, we're probably short on that. I think the two things that we've seen, I think we've been pretty conservative about Q4 in terms of licensing. I think the packages or the equipment that the non-cannabis materials that we sell, I think those are probably pretty lumpy. The royalties themselves, we definitely see them growing QoQ. I was a little surprised to hear that we had hit a ceiling cap at Ascend in terms of their production capacity. We're working through trying to get automation equipment right now that I think will release a fair amount of more demand. The demand in Illinois has far exceeded our supply, and that is something that we're working through right now. It's been something that's obviously difficult for us to see orders come in that we can't fulfill. I think that's a short-term issue that we can get through. Any idea, based on that $11 million run rate, which I'm assuming is Illinois and Massachusetts, where that ranks. It is Illinois and Massachusetts. Where does that rank for Ascend Wellness Holdings brand' portfolio? You know, maybe the top five? I'm quite certain it's by far their only or by far their largest third-party licensed brand. I don't know how it ranks internally. They haven't given us that transparency in terms of how it ranks internally. Most of their brands internally are, you know, multi-format brands. I suspect that they're larger. Of course, you know, there were no volume commitments in our relationship with Ascend, so I can't force them to give us inventory. As I said, we have a good working relationship with them. We're working through the staffing issues that they seem to be facing right now and trying to address that with automation. I don't have a good sense of where how much relative of their. I don't know how much of their organic material they're giving us on a relative basis. Okay. Between LFS and the license, that's $1.5 million, so that would leave $11 million for the rest of the business in California. $6.5 million, is that what you said the number was for Lowell branded smokes in California? Did I hear that right? I think what we said was, we said CPG in total was $8.9 million during the quarter. I don't think we gave that number. I did give you a percentage of our brand portfolio on a sell-through basis that was represented in Lowell. But I'd be reticent to multiply that percentage. I thought Brian said that. Maybe I did, maybe I heard wrong. Yes. We did. Brian, sorry, Brian. We did say that we had over $6.5 million in total Lowell branded sales in the quarter. Does that include the licensing? Yeah. That includes the licensing? That does include the licensing. Would that include the gross transaction value of the license? No, no, that would just include the $715,000. Okay. The Lowell brand, in essence, did $5.8 million in California. Correct. Okay. Would that carry typical CPG kind of margins? I'm just kind of trying to get to the, you know, the bulk business obviously lost money on a gross margin basis, I'm assuming, in the quarter. Yes, that's correct. 100%. Okay, just, you know, I don't want to take up all the time here, so we'll just one last one. You know, I think you the pre-roll business you said was. Can you talk a little bit about how you're seeing the pre-roll business roll out? My, you know, assumption going forward is that if pre-roll prices come down to where flower is, then people will move to pre-rolls. You said, I think you said you retained the number one non-infused pre-roll position. Then can you speak to automation and how that's going to bring the prices of pre-rolls down? I'll leave it, and then I'll circle back. Look, I think you got it right. I mean, I right now we've seen in CPG in California, you've seen YoY contraction in flower and growth in pre-rolls. Actually, the delta between the two is almost a perfect dollar for dollar swap. I think there are dollars moving from flower into pre-rolls, and we expect that to continue as pre-roll prices get more accessible to the consumer. I don't want to talk a lot about automation because it is something that we're working really hard on, and it's part of our plan. I do think it's safe to say we're paying attention to what's happening in other markets, and we're very aware of this transition from flower into pre-roll. This concludes our question- and- answer. Thank you again for joining the call and taking the time to get an update on our business. We look forward to talking with you on our next earnings call. The conference has now concluded. Thank you for attending today's presentation. You may now dis-