Q2 2020 Medipharm Labs Corp Earnings Call

I'll start this because presenter shown there would be a question I'm sufficient.

Ask a question during the session you will need to press star one on your telephone.

If you require any for the rest systems. Please press star zero.

No I like to how the conference over to you Wonder if your speakers to be Laura Dottori. Thank you. Please go ahead.

Thanks, operator, and good morning, everyone with me on the call today, a pot Mccutcheon, Chief Executive Officer, Bobby Kwan, Chief Financial Officer, and keeps drawn a president.

Before we begin please note the following caution respecting forward looking statements, which has made on behalf of Mehdi firm wide and all this representatives on this call.

Oral statements made on this call will contain forward looking information that involves risks and uncertainties, including those introduced by the coping 19 pandemic.

Actual results could differ materially from a conclusion forecast or projection in the forward looking information.

Certain material factors, our assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information.

Additional information about the material factors that could cause actual results could differ materially from the conclusion forecast or projection in the forward looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information are contained in many firms lab filings with the Canadian progress.

<unk> Securities regulators, which are available on SEDAR website at <unk> Dot com.

With that it has now my pleasure to turn the call over the past.

Thanks, Laura and good morning, everyone.

It's in less than two months since our last call, but the significant progress within our business has been both tangible an impressive.

We have made solid progress pursuing our strategy troubled maybe from labs from a leading domestic producer to a top global manufacturer.

We have established records in medical wellness in adult use markets globally setting the stage to become a leading international pharmaceutical pretty sir.

The second quarter, we've had a number of wins, including creating important new customer relationships as part of a next generation of our core business.

Significantly ramped up the piece, where new product launches increased the volume of our pharmacology formulations to both consumers in Canada in abroad.

She's commercialization of Australian operation, giving us a multi jurisdictional GMP platform.

Punch sophisticated ERP system Sep to significantly improve every aspect of our operations, including inventory planning and management of our cost structure.

We also entered into collaboration for first real World evidence patient centered clinical trial with a world renowned research or graduation, and shoppers drug Mart.

While concurrently executing on these initiatives our team is adjusted well to the challenges of working in a cold 19 environment, our operations remain open c. and productive.

We're very encouraged with the piece of our performance.

Well, there's still work that lies ahead and the impact of near term economic turbulence remains unknown. We believe me from labs has positioned itself for a meaningful long term growth.

Differentiated international player in future Pharma company.

Well the last two months, we've added three new independent directors to our board.

Very pleased to welcome Chris Alex former President of Janssen, Johnson, <unk>, Johnson, whatever Canada's leading pharma companies.

Kelly Martin former President and CEO, Nessie, Canada, and Christine Chief operating officer, a B.M. <unk> capital markets.

These individuals representing large pharma major consumer package goods and international capital markets experienced already contributing a high level to our board.

They bring important new connections perspectives in expertise to our business that are exceedingly relevant to our vision will help us grow manage risk and achieve our ambitions.

Now, let's turn to our Q2 performance.

The domestic marketplace for cannabis has not substantially changed since our last call.

However, our sales to Canadian retail or expanding month to month.

We're pleased to report improvement in the topline compared to Q1.

Well, we will have more to stay on this but revenues from Canadian domestic sales increased 25%, reflecting higher volumes of bolt ons treats old and our growing sales of permeate finished products.

You are transforming and diversifying our business, you're gaining market share by focusing on finished product production such as high potency for me in Wales, and new be products.

A year ago, it's actually represent precisely euro revenue.

In Q1, 13% and now in Q2, 16% of our total overall revenue.

We're very pleased with this progress to date.

Our flexible manufacturing capabilities and industry, leading R&D initiatives will allow us to maintain and enhance this trajectory over the long term.

The good recreational candidates into new markets and customer preferences are now beginning to emerge.

You're seeing that consumers want choice and there's significant pent up demand for quality formulations from trusted brand names.

Many farm labs, and our partners through us are delivering high quality branded products that consumers prefer and trust.

What are the true highlights this year the rapid expansion of our product categories beyond adult use to include medical and wellness market.

Whether its bulky <unk> for me CBD and teach see teacher bottles disposable beep cards are topicals, we're doing more for consumers are competitive price points at higher potency levels.

At the end of Q2, we had 60 cost street be skews and production.

Fourfold increase compared to Q1.

This number will continue to expand the second half 2020 as results of our exciting and robust pipeline.

Let me give you an example by connecting the dots between customer supply agreements, we announced an actual worked as being done to enhance our revenues.

We are now manufacturing eight different kronos be pens under the cold and spinach brands in our Barry facility.

This is a great example of how we have evolved major bulk contracts into value added partnerships.

Now it Lps are getting their feet wet Canada's 2.0, we expect to see and are contributing ourselves so development of more creative formulations.

I'm pleased to report that we now have ramped up our CBD islip production, giving a significantly more optionality in product offerings. In addition to our just with based product portfolios.

We have come a long ways diversifying our platform with multiple different product lines and distribution channels.

Weve match, this diversification with greedier sophistication and capabilities our facilities.

Beyond GMP, where our resource allocation has also been robust over the past year. We've spent considerable time in capital implementing Sep.

The system went live in Q2, which is tremendous accomplishment demonstrating our maturity despite being young company.

Our many different levels, having sep in place and the game changer in managing things like product documentation, which is key for large farmer and consumer packaged goods companies.

He will also provide great return somebody from labs inventory planning and cost structure.

Going forward Sep, coupled with the diversification from bulk to finished product distribution directly to the provinces will provide better visibility in our procurement efforts.

As I highlighted the importance of GMP certification over many quarters now its value is now truly being shown.

I would say that nearly 50% of the new international customer agreements, we've signed over the past six months would not have come to us. If we were not GMP certified it's got important.

Another encouraging highlight of the second quarter would the commercialization of Australian facility.

In June we generated the first revenues from contracts, we signed earlier this year, we shipped roughly 650000 king doors of GMP pharma quality products for distribution to Australian customers.

This is the starter something big.

I must congratulate our team Australia for senior vision through to fruition.

Since the beginning of this year, they secured more than a dozen white label supply agreements.

For filling orders for these new customers, we'll keep our production lines busy and give us long term stability.

I'd now like to turn to a critical focus of our strategy pharmaceuticals.

Execute well, our gold, creating a global pharmaceutical quality supply chain that is certified to serve new medical markets internationally.

Our first sales were achieved with supply chain collaboration between our Canadian and Australian GMP platforms.

Sales of GMP certified formulated products are expected to continue ramping up over the balance of this year under the white label supply agreements with multiple customers in our target international markets.

Recall also that Australia will more generally serve as our launch pad into Europe, and Asia Pacific pending Europeans GMP certification of our Canadian facility.

Another exciting development is our participation along with medical canvas by shoppers and Truetrade technologies in the University Health Network study a block chain technology in tracking medical cannabis products from seed to sale.

For those who don't know University Health network is one of the largest research organizations in Canada, consisting of several hospitals, including trial General Hospital rank number for best Hospital in the world by Newsweek.

This observational study will take place over 24 week period will target at least 2000 comedian medical canvas patients and will showcase the power of block chain in providing participating with transparency to our medical Canada's product chemistry composition and effectiveness.

I'm pleased to report that many farm labs is manufacturing seven for about 20% of the proxy available to use in the study.

Three of our own maybe from labs, Brominated CBD wells, including CD 25, CD 25, five and CBD 50.

The other for sprays and form eight wells manufactured for I'll be caught up one of the best positioned clinically trial focused companies we worked with.

This is a fantastic value add endeavor for many farm and consumers is well aligned to our plan to increase confidence in and indications for medical cannabis.

Overall, we're very excited to expand our participation across a range of trials that offer potential upside towards future development of cannabis piece prescription Rx products and formulations that can be registered and various global jurisdictions.

The final highway to our progress in Q2 is the new supply agreement with hybrid farm in Ottawa.

It's unique wellness pharmacy, and medical Canada sales license holder has challenged the status quo when the industry and significantly improved service to candidates users.

Qualified pharmacies were closely with health care practitioners to provide same day registration and delivery as well as drug interaction checks and continuous care monitoring.

Just a well proven model and the King in health care industry, but definitely a new look to our revolving Canada's therapeutic delivery.

I've heard farm believes and I would tend to agree this is the way of the future.

Our churn with more thoughts on future, but first here's Bobby's report on our Q2 performance.

Ticking away.

Thanks, Pat and good morning, everyone.

Although thing just a few weeks since our last report there's been a marked improvement in our financial performance outdoor disrupted quarter one.

Even so these results are still more reflective of our legacy as a single country supplier and the challenges faced with the slow rollout what kind of a 2.0 and they are of our international potential.

As we continue to transition and transform to a global business.

Our growth trajectory will be enhanced through one an increase in our addressable markets and mark Ishares across medical wellness and I don't new segments to gain traction with a new Asia Pacific and UK supply agreements and three incubate new and larger customer relationships.

In the meantime, we continue to build the bridge to that future with steady improvements in our business operations bolstered by strong balance sheet.

Looking to the quarter, we're pleased with quarter to revenues up closer to 25% improvement to $13.9 million compared to quarter one.

About two thirds, although not healthy increase was due to higher volumes of bulk concentrate so what the remainder from growing our shipments. So formulated finished products to provincial distributors thrilled, Canada and importantly, the commercialization of our Australian subsidiary.

As mentioned earlier, we have brought much more focus to finished goods formulation, which is part of the transformation and maturation of our business.

New product format for important I think diversifying our revenue stream domestically and globally.

Give us ammunition to drive market share and move maybe farm up the value chain.

You will recall that Q1 was a low point because of reduced sales of wholesale both oil.

The impact of one dishonor contract and lower average wholesale selling prices that were broadly in line with the conditions in the I don't use market in Canada.

Pricing dynamics have not fundamentally change what has is our proportional revenue from finished products.

In quarter, 113% of revenue came from finished products.

Quarter too it was 16%.

We expect this we continue to ramp up given our portfolio of white label supply agreements and additional traction with oral Mehdi farmlands branded products.

Gross profit in quarter, two was $2.2 million or 16% gross margin and this is essentially flat compared to quarter. One after adjusting for the inventory write down.

We continue to refine our production processes and methodologies and sell through historically acquired higher price raw materials.

These steps are intended to improve production efficiency and gross profit over the coming quarters.

Turning to operating expenses the total amount as reported in Q2 financial statement is impacted by two items under the other operating income line.

First as a cold it related government assistance in Canada, with the Canada emergency weeks subsidy program and to a lesser extent in Australia under their equivalent shopkeeper payments subsidy program for a combined total of $1.8 million.

The second piece is largely timing nature related to a foreign exchange gain on intercompany balances denominated in Australian dollars to the tune of approximately $1 million.

Underlying opex and that's your name and R&D combine this up by approximately $700000 driven principally by nonrecurring legal and filing fees associated with recent financing activities and a slightly higher health Canada fee.

As a result of these factors adjusted EBITDA improved from a loss of $5.7 million in quarter, one to a loss of $2.2 million in quarter two.

Turning to the balance sheet accounts receivable at quarter end, that's $32.9 million with the increase compared to the part quarter impart commensurate with higher sales and this quarter.

A pass through Porsche excluding the one customer we are in legal proceeding represented 30% of all past two as of June Thirtyth and as of today majority of it had been collected.

From quarter to total inventory was $40 million compared to $45 million in quarter one.

We continue to procure only the specific input cloud materials, we need for example in quarter. Two we only bought GMP qualified flowers to support our international needs.

Moreover, in volume terms, we purchase roughly one fifth of what with purchase in quarter one.

Turning to a couple of other balance you'd highlight as you know we completed a private placement offering in June for $37.8 million gross proceeds.

On August so thick and that's plan we received the remaining half of those proceeds net of fees from escrow following shareholder approval.

This financing increases our balance sheet strength.

Disability and liquidity beyond what we reported as of June Thirtyth. When we took in the judicial proceeds of $18.9 million.

Positioning us to support the continued build out of our interest in international markets and support larger future contract.

Consistent with our strategy and in light of current supply demand dynamics in Canada for bulk crude and just like we continue to refine and adjust our capital expenditures to ensure we are optimizing capacity utilization support strategic role and drive further efficiency.

The Sunrise.

Quoted to financial performance improved markedly over quarter, one, but the most important development well the ongoing transition of metaphor from a domestic Canadian operator to a global player.

Our now commercialize Australian facility.

New international customer wins.

Steady ramp up of finished goods for medical wellness and I don't use markets globally.

And our flexible GMP manufacturing capability, all combine position us well for long term value creation.

Now back to pad for his closing comments.

Thanks, Bobby I'll conclude with a couple of forward looking comments on the near and midterm growth catalysts that will drive sustainable future growth.

First our newest sales agreements both internationally and domestically.

These new partnerships represent growth opportunities for the near mid and long term future.

As these new contracts ramp up we expect some early revenue to flow from them in the second half 2020 with significant increases in 2021 and beyond.

The second is in our sales pipeline, where we are active in discussions with large pharma consumer packaged goods companies and direct to consumer brands at home and abroad.

Deals art deals until they are signed but the sense, we get from new potential customers in these categories or they are much much image entering the Canada space and they were a few months ago.

That's in part because their confidence in maybe from labs has grown.

Significantly, reflecting the achievements of ours GMP certifications licensing and now robust Sep system that can handle large product and sales volumes.

To be Franken realistic. These companies are in a market for a high integrity partner with a solid international business model and professional governance.

With these attributes across multi jurisdictional manufacturing platform mini Perm labs is perfectly suited to serve multiple sophisticated new market entrance.

A third and major catalyst is international expansion.

As we previously announced we now possess TJ GMP for both our Canadian and Australian facilities.

We intend to use these certifications to ensure emerging markets that required GMP, where the pharmaceutical inspection co ops status, including in South America, where we now incubating many relationships.

The next advancement in our international business will be the receipt of are you GMP certification.

Maybe farm labs is focusing on Germany, as our primary jump off point based on market size and its well recognize world leading pharmaceutical industry sophistication.

As I noted earlier in the call we still intend to currently serve Europe, my formulating and packaging products here in Canada transporting it somebody from Labs, Australia, and then launching into that you.

Finally in very impressive versus the Canadian market the expansion of our skews.

Broadening the variety and formulations and park formats, we offer is key to satisfying customers and growing our market share here in Canada.

I'm very pleased the initial sales may Perm labs, C., we need 25 regular formula CBD 25, five NCD 50, plus formula.

All our unique reformulated high potency Orioles for the medical use.

More skews are also flowing into our white label agreements.

Our job now its use our multi jurisdictional platform and differentiated capabilities to continue our transformation from a domestic two global pharma company.

With the substantial gains we've made in operations and governance diversification of our customer and product portfolios and renewed strengthen our balance sheet, we're prepared to see the many opportunities in front of us.

We are confident in our ability to deliver a very bright future where employees partners and the shareholders. Many farm lives.

Now we'd like to answer your questions.

Operator could you please open the lines to our cars.

Thank you I say remind us so ask a question you will need to press star one on your telephone. So we draw your question press the pound Ohas King Please limit yourself to one question on one follow up.

Your first question comes from the line of beat Kalydeco. Your line is open.

Hi, Thank you congrats everybody on the quarter next year, how about a couple of questions for you. The first is given the 25% increase in revenue that you reported in this quarter.

Given that most of that is being sold to the provincial distributors I'm, just wondering maybe pots of or whoever you can comment what do you think the likelihood is good because we've seen this in the past where the eventual distributors ticked up possession and ultimately paid the product only to be sent back to the company not not many farm, but in general in the sector.

And companies having to write down problem. So I'm wondering if you could maybe just give some color there given especially that we're about halfway through quarter. Thank you.

No problem David please so much so when the call.

A little bit color to start that one keeps going into a spin upfront. So that's a pretty him first.

Hey, Dave Good morning.

For sure we've seen in the past provincial retailers with larger returns on on products, probably more particularly a into Canada. It's kind of a in the early days of legalization I think inventory I became a problem that we saw a lot of returns on oil.

Gel cap, especially around the THC side, what's encouraging for US is that went to buyers are becoming a lot more sophisticated so a lot of their ordering it's more just in time in nature. So we're sending out you know asking door cases that match up to Peos too.

Retail stores. So I don't think there we're going to see that problem across enjoy industry, just with the sophistication their systems in their warehouses and then just on the product demand side.

What we we've done a really good job with here is kinda filling the gap, where we saw got in the marketplace. So where we saw those returns have your returns on PC gel capsules. For example, those are a product that we distribute to provinces today and EBIT THC oil itself, just like THC and entities.

Also it and I would be very very minor piece of what we ship out things like CBD dominant well like our CBD 50, it's something that you know it keeps becoming reorder over and over again on a weekly basis, so that gives us confidence.

Returns.

Okay. That's helpful. Thanks, Keith I'm moving along here as well have you guys did a really good job, you're bringing s. gionee and cash burn down to this quarter respectfully from last quarter about half spot for rest unique ample cash burn like why our calculations about 9 million this quarter versus 90.

Good morning, and I want to we've got back with some of your prepared comments pot with Sep in particular and some of these efficiencies that creates and how that will ultimately you see gross margin.

Leveling out next quarter I know Bobby use while mentioned that excluding those nonrecurring about where the nonrecurring event last quarter. It was flat at 16%. So I'm just wondering if you see I say t. and any other.

Technologies that you've been able than house.

It really helped drive gross margin higher work through airport panelists you'd expect that number to be flat.

No. So much that question David Yes, it's been a priority of the quarter I'd I'd be moved out and move into the second half the year, we've really taken a deep dive in a in a specific look at a being more efficient in our spend.

Even with now watching such a robust at a p. system I'm just gonna I went to start there just an introduction, bringing a pass over to Bobby personal granularity in terms of cost savings and actually how we reduce those numbers.

Great. Thanks, Thanks for that they've its I guess, you know in relation to lessen the gain so fantastic start tremendous effort by the team but were early days, but nevertheless, like all ERP is uncertain commodity my own by far experiences of them. So the larger institutions.

Overtime, and we already seen some early benefits of this is that certainly we'll see greater visibility to the entire sort of value chain through our production process and as a result that gives us obviously better tightening sort of planning and coordination on control capabilities all of.

Which again will come into in broadly speaking, so hopefully overtime greater production efficiency now on your question with respect to sort of the broader one on a gross margin.

As we've spoken before David I mean, you know there are some drivers that we are pulling on old I'm not at all times and in no particular older certainly we need to burn through.

As I stated in my commentary some of the prior historically acquired higher cost base of inventory from prior year, but in addition to burning sort of those were obviously benefiting from the safety platform and our procurement efforts to ensure that we're buying more effectively we're part were partly more strategic with some select.

Suppliers to benefit from additional efficiencies and certainly when you look at it from let's go to market perspective, we'll also be looking to optimize the product mix and importantly, as we expand our portfolio Brett through new products. You know, we don't be looking at segments as well as.

Introductions, Doug will hopefully be margin accretive. So when you combine all of that I think in the coming quarters Wolves. He will begin to see the benefits of that and then lastly, Ah you know in terms of it sort of the geographic channel mix with with the international side ramping up where inherently at the moment because its.

Medically focus the prices are lot more favorable elasticity is less at the moment, so with pulling on all those channels I think we'll see gain in the coming quarters, not sort of immediately but in the coming quarters, we should see some progression in our and our gross margin.

Okay. Thanks, Bobby and if I can just squeeze one more quick one in here I think Pat you mentioned, you where you you press release that I guess, a month or so ago with your relationship or your partnership with hobby Kona.

Giving it being given that there are a clinically trial focused company I guess my question is given Abhi Kinda also heavily focused on Latin America in Colombia, among other regions should should we be thinking of Optionality here for many form labs with any potential additional international markets for example, Latin America.

Thank you.

Yes, I'll take that question, David or maybe just to park answer the when piece being our work with RV content, now and especially with the the supported the skewing, they're going to the you eight centsfive shoppers trial and say something that we're really excited about and we feel is going to bring a lot of by a lot more data.

In real world evidence to the products that were not only manufacturing ourselves, but also for every corner I think has got a great job positioning themselves is a very clinically trial focused company in Canada and have now I really identified and positioned a significant amount of data from the products are looking at which we will be manufacturing and distributing in cash.

Hi, then looking down the path to me explore extracare distributing them a internationally because of our GMP status with regards to their position in Latin America. It's interesting, we it's interesting opportunity for their company and positioning where they can grow larger volumes of this market adenoids like CBN and CBG.

But having said that at this time, a we're exploring a number of relationships in Latin America I currently outside of our relationship with Abbvie corner. A this number it varies Latin America that we're excited to move into because of our picks nation or mutual recognition approvals through our GMP.

With the with the Therapeutics, Good administration of Australia, which gives the ability actually to export directly into Latin America. So.

We're excited to continue to update the the to the market on our next round of relationships and look to see those in the a in the coming are becoming much for the quarter.

Great. Thank you for that particular me.

Your next question comes on the line of club Fortune of Roth Capital Partners. Your line is open.

Good morning, and congrats for it came through the tough coven environment here just to follow up if not can you provide a little color kind of on the international markets. We've seen some competitor Canadian competitors doing better in on that side and kind of the regular location or legalization kind of opening up those markets.

Or just more specific markets and to central timing wise or additional supply with you with your picks nations opportunities and Ken inflection point, there how should we look at it came second half and moving into 2021.

Yeah. Thanks, so much stock retiring the call I'm Scott is passed over each piece to start that a response.

Thanks, Scott, we're really excited about international market I think that international markets.

Great place for us to two to grow as Bobby mentioned like gross margin leavers. Those obviously wants that we're focused on the most as we're seeing.

Increased selling prices in those regions and the ability to move that product I think what's most encouraging is it region to region.

Update in more of a structured medical regime. So a lot of country first word would have like a special access program were up one patient could get approved and then you could ship them. One model for example, the UK. Since then the UK now update or legislation as such that bulk can be moved into the country.

Great stored there for package, there and then actually given to patients on a and their prescribed so you're not doing like a one patient export the import export process and forms the bureaucracy is actually the same for one bottle or.

20000 model. So this is a great opportunity for many part I think places that were looking towards is obviously a continued signing deals in Europe. As we saw you know that partnership with address in Germany, and now I can't are able to now the big supplier based out of the UK I think new international.

Market, you'll see us really focused on it I just alluded to as well when we'd be Latin America, I think places like Brazil have really done a lot of good work on establishing a program as well it even in places like Peru. So large population a great middle class and looking forward to sending them end products.

They have no production in those areas, so that will be the big opportunity for us as far as what that looks like and not in the back half of 2020, we are a bit cautious to the actual process and then once you look at some of the people you control that for example, indeed.

Which is the FDA in Brazil, the obviously, having the priorities on their hand, and the mix to you know the pandemic. So.

It's hard to get sometimes some candidate I stepped through with them that they kind of prioritize what they're dealing with Cowen 19. So we are we're optimistic on moving product in this year, but we are cost. The fact that you know like they are tightening other things that are now starting so we'll keep the mark.

Okay, and everyone update as we move through those processes and it's something that we are getting really excited though.

Great appreciate the color on that and then just a kind of stepping up through kind of a new products, you're seeing you mentioned, the krona, who with debates and you mentioned kind of the province is doing more just in time the easier can add to kind of step up your inventory ahead of that kind of what do you.

Seeing I guess strength you mentioned the CBD 50, the other strength products, whether they are such and the reorders from that side as as are you seeing a pickup in the second half years of the 2.0 products being offered.

Yeah. Thanks that question Scott.

Yeah as you've seen the trends from from the end of 272019, and then moving into Q1 Q O Q2, we've seen a significant increase in the uptake of the the volume of products and skews that we've actually push into the pension distribution as well as medical where things that we're really excited for now.

That line too as you mentioned during the during the presentation that we have over 60 skews now that's a fourfold increase we've got a very robust pipeline next round of skews, we're able to now I really play a dynamic rule in conditioning, where our products are going to be price and that where we can take advantage of segments.

That are growing a relative to the maturity of the industry.

We are looking at a number of new White label partners, a they're looking to play in a different segments and what are the things that we are positioning and watching closely as the evolution of the value segment now and what that would mean to work with a partner.

We as I mentioned earlier in the in the presentation. We're very excited for some of the higher potency I see we de based products under our own brand I better that are currently actually not competitive with any of our white label partners country manufacturing partners, which is a strategic moves we made I didn't it's important piece because I, we once we want to really position Buddy.

Farm Labs is the top quality producer in Canada, and as we identified the gaps in the maturity of the industry. It really was a mix in terms of the actual quality of some of these products and so that's exactly why we've launched the many apartment labs brand first in shoppers in the medical side now through the friction distribution to position it for.

Fill that gap and frankly, a this to a customers and clients have asked for and now we're excited to take that added margin with our on products and still create a great relationship or say that creates stability in relationships with our contract manufacturing a white label partners.

Great I appreciate it and I'll jump back in the Q.

Thanks Scott.

Again, if you would like to ask your question. Please press star one on your telephone.

There are no further questions at this time I'll turn the call over to Mr., Patrick Mccutcheon for closing remarks.

Thank you so much I just wanted to mention again.

This Q2, what I would say significant increase over Q1 of just over 25% I really gives us the to strengthen the confidence in our ability to continue to deliver a very bright future to our employees our partners and the shareholders as many foreign labs. Thank you everyone for just for the questions.

And plugging into the to the presentation I'll close by saying, we look forward to hosting our third quarter conference call in November and keeping you a breadth of progress in between taking so much for listing and have a great to everyone.

Ladies and gentlemen, this concludes todays conference call. Thank you for participating human Nazis coming.

Oh.

[music].