Q3 2025 Ispire Technology Inc Earnings Call

<unk> third quarter 2025 earnings call all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad to withdraw your question Press Star one again I.

Philip Carlson: I'd now like to turn the conference over to Philip Carlson from Casey S. A please go ahead.

Speaker Change: Hello, everyone and welcome to <unk> Technologies' earnings Conference call for the third quarter of fiscal 2025, ending March 31 2025.

Speaker Change: At this time I would like to inform you that this conference call is being recorded and that all participants are in a listen only mode.

Speaker Change: Following the Companys prepared remarks, we will be facilitating a question and answer session. Joining us today are Mr. Michael <unk>, the company's co CEO and Mr. Jim Mccormick the company's CFO.

Speaker Change: But again as Mr. Wang who will recap the company's key fiscal third quarter financial results and recent corporate highlights after which Mr. Mccormick will discuss the Companys fiscal third quarter financial results in more detail.

Speaker Change: Before we begin I would like to remind you that this conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.

Speaker Change: All statements other than statements of historical facts in its announcement are forward looking statements.

Speaker Change: Forward looking statements are based on estimates and assumptions made by the company in terms of its experience and its perception of historical trends current conditions and expected future developments as well as other factors that the company believes are relevant.

Speaker Change: Forward looking statements involve known and unknown risks and uncertainties and many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the forward looking statements.

Speaker Change: Further information regarding this and other risk factors are included in the company's filings with the SEC. The company undertakes no obligation to update forward looking statements to reflect subsequent or current events or circumstances or to changes in its expectation, except as maybe required by law.

Speaker Change: I will now turn the call over to Mr. Wang Mr. Wang. Please go ahead.

Mr. Wang: Thank you Phil.

Mr. Wang: Thank you to all who have joined us today.

Speaker Change: Glad to be here today to review our fiscal third quarter of 2025 results and recent highlights.

Speaker Change: As a result over the third quarter demonstrated.

Speaker Change: We have continued to deliver on our promises across multiple fronts of our business.

Speaker Change: Our commitment to executing on our strategic roadmap is a clear.

Speaker Change: As we strive towards becoming a leading manufacturer of precision dosing Nathan and technology for our global nicotine companies.

Speaker Change: We made a significant progress throughout our fiscal third quarter.

Speaker Change: One of our main priorities.

Speaker Change: Has been on managing all our account receivables.

Speaker Change: Mark Hi fleet.

Speaker Change: I am pleased to announce that during the quarter, we were able to reduce our accounts receivable.

Speaker Change: Approximately seven $3 million.

Speaker Change: The previous quarter.

Speaker Change: Approximately $64 million.

Speaker Change: This includes a reduction in the underlying account receivable balance of approximately $2 6 million.

Speaker Change: Reversing the trend.

Speaker Change: Have seen with the increase in our comp ratio during previous quarters.

Speaker Change: This improvement was due to our team put in place strict payment.

Speaker Change: Collection policies.

Speaker Change: And further demonstrates our commitment to enhancing our financial stability.

Speaker Change: We expect to continue making more progress on reducing our accounts receivable in the coming quarters as we focus on higher quality and the larger customers was improved with the payment terms.

For the third quarter of fiscal 2025.

Speaker Change: We reported revenues of approximately $26 2 million compared to $30 million, even for the same period in fiscal 2024.

Speaker Change: The pending increase in tariffs on Chinese made goods has impacted product pricing dynamics in the market.

Speaker Change: However.

Speaker Change: Spec to be less impacted given that we also manufacture our products in Malaysia.

Speaker Change: Which I'll talk to shortly.

Speaker Change: Moving forward, we are optimizing our pricing strategy by shifting more from landed a pricing tool.

Speaker Change: Factory pricing.

Speaker Change: Which will enhance our flexibility and strengthen our market position regardless of the tariff conditions.

Speaker Change: Our gross margin.

Speaker Change: Regarding our Malaysia operation.

Speaker Change: We have now secured our income nicotine product manufacturing license as promised on our loss.

Speaker Change: <unk> earnings call.

Speaker Change: Our growing business in Malaysia is a central part of our global business strategy of delivering leading.

Speaker Change: <unk> and <unk> technology solutions to consumers.

Speaker Change: The income license allows us to officially begin marketing our nicotine manufacturing capabilities externally.

Speaker Change: We anticipate.

Speaker Change: Receiving a final manufacturer's license.

Speaker Change: In the coming few mile, which will accompany with a regulatory requirement in Malaysia.

Speaker Change: Our Malaysian facility was strong future.

Speaker Change: <unk> lines, that's eight zero.

Speaker Change: Significantly expanding our manufacturing capacity from the current fixed lines, we are running now.

Speaker Change: This diversification.

Speaker Change: Our production base is a strategically important.

Speaker Change: And it positions us advantageously in the global marketplace.

Speaker Change: It lowers the risk of a geopolitical factors.

Speaker Change: That increase our pricing.

Speaker Change: I'm also pleased to report that on May 1st we announced that ice pack LLC.

Speaker Change: A key joint venture.

Speaker Change: Filed a component PMT.

Speaker Change: Four is blocked him based point of use eighth gating system with the FDA.

Speaker Change: Another key promise.

Speaker Change: This age verification component is a necessary step towards regulation in our industry.

Speaker Change: The traditional systems typically verify the users aged only once at purchase.

Speaker Change: Which offers a lower bar of safety and security for under age of the individuals looking for vaping products.

Speaker Change: This new and innovative platform requires continual real time verification for device access.

Operator: to welcome everyone to the Ispire Technology third quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise.

More from landed a pricing tool.

This is the type of security that is needed.

Factory pricing.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

Which will enhance our flexibility.

Speaker Change: Especially as we aim to occur over the issue of the youth vaping use.

And strengthen our market position.

Regardless of the tariff conditions affecting our gross margin.

Speaker Change: Our joint venture <unk>.

Speaker Change: Quest hit and expedite the review after the PMT application, citing the system's potential to enhance public health.

Regarding our Malaysian operation.

Philip Carlson: I would now like to turn the conference over to Philip Carlson from KCSA. Please go ahead.

We have now secured our interim nicotine product manufacturing license as promised on our last earnings call.

Philip Carlson: Hello, everyone, and welcome to Ispire Technology's earnings conference call for the third quarter of fiscal 2025, and it's March 31st, 2025. At this time, I'd like to inform you that this conference call is being recorded and that all participants are in a listen-only mode.

Speaker Change: Furthermore, <unk> will benefit from commercial sales of the component as well as from the rights to integrate technology into our own devices.

Our growing business in Malaysia is a central part of our global business strategy of delivering leading <unk>.

<unk> and <unk> technology solutions to consumers.

Speaker Change: This new revenue opportunities will further position <unk> as the leading innovator of a regulatory compliant precision dosing vaping technology.

Philip Carlson: Following the company's prepared remarks, we will be facilitating a question and answer session.

The interim license allows us to officially begin marketing our nicotine manufacturing capabilities externally.

Philip Carlson: Joining us today are Mr. Michael Wang, the company's co-CEO, and Mr. Jim McCormick, the company's CFO. To begin, Mr. Wang will recap the company's key fiscal third-quarter financial results and recent corporate highlights, after which Mr. McCormick will discuss the company's fiscal third-quarter financial results in more detail.

Speaker Change: As we discussed.

We anticipate.

Speaker Change: Last quarter plus.

Speaker Change: Plug and play component of <unk> strategy through our <unk> joint venture.

Speaker Change: Receiving a final manufacturer's license.

Speaker Change: In the coming few mile, which will accompany with a regulatory requirement in Malaysia.

Speaker Change: As transformative potential towards the entire nicotine delivery market.

Philip Carlson: Before we begin, I would like to remind you that this conference call contains four looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in its announcement are forward-looking. Forward-looking statements are based on estimates and assumptions made by the company in terms of its experience and its perception of historical trends, current conditions, and expected future developments, as well as other factors that the company believes are relevant.

Speaker Change: Yeah.

Speaker Change: Our Malaysian facility it was strong future AG production.

Speaker Change: If approved this would be the first component PMT.

Speaker Change: Production lines, that's eight zero.

Speaker Change: Significantly expanding our manufacturing capacity from the current fixed line, we are running now.

In FDA history.

Speaker Change: Allowing for modular use in hundreds.

Speaker Change: This diversification of our production base is a strategically important.

Speaker Change: And products.

Speaker Change: In parallel.

Speaker Change: And it positions us advantageously in the global marketplace.

Speaker Change: <unk> is also preparing to file his own Pos systems, and the disposable vape PMT as full flavored and products.

Philip Carlson: The forward-looking statements involve known and unknown risks and uncertainties, and many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Further information regarding this and other risk factors are included in the company's filings with the SEC.

Speaker Change: It lowers the risk of a geopolitical factors that increase our pricing.

Speaker Change: <unk> corporate the ice pack H casing system.

I'm also pleased to report that on May four we announced that ice pack LLC.

Speaker Change: We are planning to first introduce for flavored products with the potential to increase to between six and the pin flavors.

Speaker Change: Key joint venture filed a component PMT eight four is blocked him based point of use age gating system with the FDA.

Philip Carlson: The company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expectation except as may be required by law.

Speaker Change: If approved.

Speaker Change: This would provide.

Speaker Change: The consumers with safe regulated alternatives.

Philip Carlson: I will now turn the call over to Mr. Wang. Mr. Wang, please go ahead.

Speaker Change: Another key promise.

Speaker Change: This age verification component is a necessary step.

Well effectively preventing youth access.

Michael Wang: Thank you, Phil, and thank you to all who have joined us today. I'm glad to be here today to review our Cisco third quarter 2025 results and the recent highlights. as our results over the third quarter demonstrate. We have continued to deliver on our promises across multiple fronts of our business. Our commitment to executing on our strategic roadmap is clear.

Speaker Change: Towards regulation in our industry.

Speaker Change: This is a much needed the change to the current market, where our consumers all set in venture their health with a risky unregulated products that are continuing to Florida marketplace.

Speaker Change: As a traditional systems typically verify the users aged only once at par.

Speaker Change: Chips.

Speaker Change: Which offers a lower bar of safety and security for under age of the individuals looking for vaping products.

Speaker Change: This technology represents a pioneering approach to expanding adult access to MTA authorized labeled products.

Speaker Change: This new and innovative platform requires continual real time verification for device access.

Speaker Change: <unk> setting new standards for the industry safety and compliance.

Michael Wang: as we strive towards becoming a leading manufacturer of precision dosing, rating technology for global nicotine companies. We made significant progress throughout our Cisco third quarter. One of our main priorities has been on managing all account receivables. I'm pleased to announce that during the quarter, we were able to reduce our account receivable by approximately $7.3 million from the previous quarter. to approximately $60.4 million. This includes a reduction in the underlining account receivable balance of approximately $2.6 million. reverting the trend we have seen with the increase in the counter-receivable during previous quarter. This improvement was due to our team putting in place strict payment and collection policies.

Speaker Change: This is the type of security that is needed.

Speaker Change: Another exciting development during the third quarter was the launch of the <unk>.

Speaker Change: Specially as we aim to occur over the issue of the youth vaping use.

Speaker Change: <unk>.

Speaker Change: Our joint venture <unk>.

Speaker Change: Developed in partnership with <unk>.

Speaker Change: Requested an expedited review after the <unk> application, citing the system's potential to enhance public health.

Speaker Change: A leading California based cannabis company.

Speaker Change: Bob.

Speaker Change: <unk> advanced all in 110 bits of paper or device designed for pure AP performance and safety.

Speaker Change: Furthermore, I fire.

Speaker Change: We'll benefit from commercial sales of the component as well as from the rights to integrate technology into our own devices.

Speaker Change: The crowd.

Speaker Change: Specifically developed to optimize day, no census, and the intricacies.

Speaker Change: This new revenue opportunities will further position <unk> as a leading innovator of a regulatory compliant precision dosing braking technology.

Speaker Change: K to cannabis oil, while eliminating common industry loss like plastic degradation.

Speaker Change: Clogged airflow and inconsistent.

Speaker Change: As we discussed last.

Speaker Change: Last quarter.

Speaker Change: Our plug and play component the PMT a strategy through our <unk> joint venture.

Speaker Change: This the insurers.

Speaker Change: And experience for consumers as clean as the plant itself.

Speaker Change: As transformative potential for the entire nicotine delivery market.

Speaker Change: Initially launching with our railcar then the sprout technology is available to cannabis operators across the U S.

Speaker Change: If approved this would it be the first component PMT a in <unk>.

Michael Wang: and further demonstrates our commitment to enhancing our financial stability. We expect to continue making more progress on reducing our account receivable in the coming quarters as we focus on higher quality and larger customers with improved payment terms. For the third quarter of fiscal 2025, We reported revenues of approximately $26.2 million. compared to $30 million even for the same period in fiscal 2024. The pending increase in tariffs on Chinese-made goods has impacted product pricing dynamics in the market. However, we expect to be less impacted given that we also manufacture our products in Malaysia.

Speaker Change: FDA history.

Speaker Change: Allowing for modular use in hundreds.

Speaker Change: Innovation with sprout product and.

Speaker Change: Underscores our commitment to raising industry standards.

Speaker Change: And products.

Speaker Change: In parallel.

Speaker Change: Our archiving material safety and putting consumer wellbeing first.

Speaker Change: <unk> is also preparing to file his own.

Speaker Change: And the disposable vape PMT as full flavor and products.

We continue to engage in discussions with several large global nicotine and tobacco providers, who are looking to diversify their supply chain.

Speaker Change: That will incorporate the ice pack age gating system.

Speaker Change: We are planning to foresee introduced for flavored products with the potential to increase to between six and the pin flavors.

Speaker Change: While we are under NDA and cannot reveal specific names at this time, we look forward to making announcements as soon as possible.

Speaker Change: If approved.

Speaker Change: As you can see here, we have made significant progress on our strategic priorities.

Speaker Change: This would provide.

Speaker Change: Dos consumers with state regulated alternatives.

Speaker Change: We have reduced our accounts receivable secured our Malaysian mixed view product manufacturing license.

Speaker Change: Well effectively preventing youth access.

Michael Wang: which I will talk to shortly. Moving forward, we are optimizing our pricing strategy by shifting more from land-based pricing to FOB factory pricing. which will enhance our flexibility and strengthen our market position regardless of the tariff conditions affecting our growth market. Regarding our Malaysian operation, We have now secured our interim nicotine product manufacturing license, as promised on our last earnings call. Our growing business in Malaysia is a central part of our global business strategy of delivering leading, waiting, and age-gating technology solutions to consumers. The interim license allows us to officially begin marketing our nicotine manufacturing capabilities externally.

Speaker Change: This is a much needed the change to the current market, where our consumers all set in venture their health with the risky unregulated products that are continuing to fly to the marketplace.

Speaker Change: While the itek PMT on schedule.

Speaker Change: And positioned ourselves to capitalize on growing international opportunities.

Speaker Change: We remain focused on driving a more profitable business model.

Speaker Change: This technology represents a pioneering approach to expanding adult excess to MTA operate labor products.

Speaker Change: Malaysia manufacturing operations as well as focusing on high quality.

Speaker Change: Customers.

Speaker Change: While setting new standards for the industry safety and compliance.

Speaker Change: All while.

Speaker Change: Driving innovative technology solution for the global <unk> market.

Speaker Change: Another exciting development during the third quarter it was a lunch.

Speaker Change: With that I will turn the call over to our CFO, Jim Mccormick to review our financial results in more detail Jim.

Speaker Change: Well.

Speaker Change: Developed in partnership with a walled garden.

Speaker Change: A leading California based cannabis company.

Jim Mccormick: Thank you Michael as a reminder, I will refer to the fiscal third quarter 2025.

Speaker Change: Bob.

Speaker Change: Is an advanced all in 110 bits of paper or device designed for pure AP performance and safety.

Jim Mccormick: The three months ended March 31, 2025 <unk>.

Jim Mccormick: All comparisons are to the prior year ended March 31, 2024, unless otherwise stated.

Michael Wang: We anticipate receiving our final manufacturer's license in the coming few months, which will complete our regulatory requirements in Malaysia. Our Malaysian facility will soon feature 80 production lines. That's eight zero. significantly expanding our manufacturing capacity from the current six lines we are running now. This diversification of our production base is strategically important. and positions us advantageously in the global marketplace as it lowers the risk of geopolitical factors that increase our price.

Speaker Change: Yes.

Jim Mccormick: For the third quarter of fiscal 2025 total revenue decreased to $26 2 million, representing a change of 12, 7% or $3 8 million compared to $30 million in the same period last year.

Speaker Change: Specifically developed to optimize their census, and the intricacies of sophisticated of cannabis oil well, eliminating common industry loss like plastic degradation.

Jim Mccormick: Our revenue results were driven by the performance across our key geographical regions as follows.

Speaker Change: Clog, the airflow and inconsistent sheeting.

Jim Mccormick: <unk> revenues of approximately 13.

Speaker Change: This the insurers.

Jim Mccormick: $2 million in Q3 fiscal 2025 represented a slight decline of <unk> 3 million or two 9% compared to $13 6 million in the same periods last year.

Experience for consumers as clean as the plant itself.

Speaker Change: Initially launching with a rock garden, the sprout technology is available to cannabis operators across the U S.

Jim Mccormick: Revenue from North America of approximately $8 8 million in Q3 fiscal 2025, representing a decline of $3 6 million or 28, 9% compared to $12 4 million for the third quarter and fiscal 2024.

Speaker Change: Our innovation was the sprout product underscores our commitment to raising industry standards.

Michael Wang: I'm also pleased to report that on May 1, we announced that ICTAC LLC, a key joint venture, filed a component PMPA for its blockchain-based point-of-use age-gating system with the FDA. delivering on another key promise. This age verification component is a necessary step towards regulation in our industry. As traditional systems typically verify the user's age only once at purchase. which offers a lower bar of safety and security for underage individuals looking for vaping products.

Speaker Change: Our archiving material safety and putting consumer wellbeing first.

Jim Mccormick: This was largely driven by the new tariffs on China made products the impact of our transition of certain manufacturing activities from China to Malaysia, and the effect of us working only with larger and high quality customers such as multi state operators.

Speaker Change: We continue to engage in discussions with several large global nicotine and tobacco.

Speaker Change: <unk>, who are looking to diversify their supply chain.

Jim Mccormick: Asia Pacific revenues of approximately $3 million, representing a client of <unk> 8 million or 21, 4% compared to $3 8 million in the third quarter of last fiscal year.

Speaker Change: Well, we are under NDA and cannot reveal specific names at this time, we look forward to making announcements as soon as possible.

Jim Mccormick: This was primarily the result of reduced demand in South Korea ahead of anticipated changes in the regulatory environment.

Speaker Change: As you can see here, we have made significant progress on our strategic priorities.

Jim Mccormick: Revenues from Africa, appoint 1 million roughly flat compared to the revenue from the same period last year.

Speaker Change: We have reduced our accounts receivable secured our Malaysian mixed key product manufacturing license.

Jim Mccormick: For the nine month period, ending March 31, 2025 revenues decreased by six 3% to $107 4 million compared to the same periods in fiscal 2024. Once again. This is tied directly to the focus on higher quality customers in the cannabis space.

Michael Wang: This new and innovative platform requires continual real-time verification for device This is the type of security that is needed. especially as we aim to curb the issue of youth vaping.

Speaker Change: While the itek PMT on schedule.

Speaker Change: And positioned ourselves to capitalize on growing international opportunities.

Speaker Change: We remain focused on driving a more profitable business model.

Jim Mccormick: <unk> revenue for higher levels of accounts receivable collection.

Michael Wang: all joined a bunch of ITACs. requested an expedited review of the PMPA application, citing the system's potential to enhance public health. Furthermore, Ispire will benefit from commercial sales of the component, as well as from the right to integrate the technology into our own devices. These new revenue opportunities will further position Ispire as the leading innovator of a regulatory-compliant, precision-dosing vaping technology. As we discussed the last quarter, our plug-and-play component PMTA strategy through our iX joint venture has transformative potential for the entire nicotine delivery market.

Jim Mccormick: For the three months ending March 31, 2025, we reported gross profit of approximately $4 8 million compared to approximately $6 1 million for the same period in fiscal 2024.

Speaker Change: Malaysian manufacturing operations as well as focusing on high quality.

Speaker Change: <unk>.

Oh Wow.

Speaker Change: Driving innovative technology solution for the global <unk> market.

Jim Mccormick: Margins for Q3 were down eight down to 18, 2% from 28, 4% last year.

Speaker Change: With that I will turn the call over to our CFO, Jim Mccormick to review our financial results in more detail Jim.

Jim Mccormick: During the nine month period to March 31, 2025, gross profit increased to $20 2 million from $19 2 million for the same period last year gross.

Jim Mccormick: Thank you Michael as a reminder, I will defer to the fiscal third quarter 2025.

Jim Mccormick: Gross margins for the nine month period to March 31, 2025, we're up to 18, 8% versus 16, 8% for the same period last year.

Jim Mccormick: The three months ended March 31, 2025 <unk>.

Jim Mccormick: All comparisons are to the prior year ended March 31, 2024, unless otherwise stated.

Jim Mccormick: This was primarily due to changes in the product mix and generally improving gross margins in North America.

Jim Mccormick: The third quarter of fiscal 2025 total revenue decreased to $26 2 million, representing a change of 12, 7% or $3 8 million compared to $30 million in the same period last year a.

Jim Mccormick: Total operating expenses for fiscal Q3, 2025 were approximately $15 4 million versus approximately $11 8 million for the same period last year.

Michael Wang: If approved, this would be the first component PMTA in FDA history. allowing for modular use in hundreds of end products. in parallel.

Jim Mccormick: Operating expenses over a nine month period to March 31, 2025, or $43 4 million up from $29 7 million during the third fiscal quarter of 2020 for this increase.

Jim Mccormick: Our revenue results were driven by the performance across our key geographical regions as follows.

Jim Mccormick: <unk> revenues were approximately 13.

Jim Mccormick: $2 million in Q3 fiscal 2025 represented a slight decline of <unk> 3 million or two 9% compared to $13 6 million in the same periods last year.

Jim Mccormick: This reflects higher stock based compensation expense bad debt expense higher sales and marketing cost and one off severance costs related to the company's previously disclosed North American restructuring.

Michael Wang: Ispire is also preparing to file its own PAC system. and the disposable-based PMTA. for flavored ENDS products. that will incorporate the I-PAC age-gauging. We are planning to first introduce four flavored products with the potential to increase to between six and ten flavors. If approved, this would provide adult consumers with safe, regulated alternatives. while effectively preventing youth access.

Jim Mccormick: Revenue from North America of approximately $8 8 million in Q3 fiscal 2025, representing a decline of $3 6 million or 28, 9% compared to $12 4 million for the third quarter and fiscal 2024.

Jim Mccormick: It is worth noting that the benefit of this restructuring will begin to be realized in fiscal Q4 2025.

Jim Mccormick: The net loss for the third fiscal quarter of 2025 was $10 9 million or <unk> 19 per share compared to a net loss of $5 9 million or <unk> 11 per share for the same period last year.

Jim Mccormick: This was largely driven by the new tariffs on China made products the impact of our transition of certain manufacturing activities from China to Malaysia, and the effect of us working only with larger and high quality customers such as multi state operators.

Jim Mccormick: As of March 31, 2025, I aspire held cash and cash equivalents of $23 5 million a reduction of $10 9 million versus the same previous quarter of last year.

Jim Mccormick: Asia Pacific revenues of approximately $3 million, representing a decline of <unk> 8 million or 21, 4% compared to $3 8 million in the third quarter of last fiscal year.

Jim Mccormick: With a working capital balance of negative $2 1 million the reduction in cash equivalents is related to a reduction in standard and related party accounts receivable.

Michael Wang: This is a much-needed change to the current market, where consumers often endanger their health with risky, unregulated products that continue to flood the marketplace. This technology represents a pioneering approach to expanding adult access to PMPA-authorized labored products. while setting new standards for industry safety and compliance.

Jim Mccormick: This was primarily the result of reduced demand in South Korea ahead of anticipated changes in the regulatory environment.

Jim Mccormick: The company fully expects to return to a positive working cash balance moving forward.

Jim Mccormick: Revenues from Africa, appoint 1 million roughly flat compared to the revenue from the same period last year.

Jim Mccormick: For the nine months ended March 31, 2025, net cash flow used by operating activities was $12 1 million compared to $16 9 million in the same period last year.

Jim Mccormick: For the nine month period, ending March 31, 2025 revenues decreased by six 3% to $107 4 million compared to the same periods in fiscal 2024. Once again. This is tied directly to the focus on higher quality customers in Canada space for <unk>.

Jim Mccormick: Net cash used in investing activities for the nine months to March 31, 2025 was $1 7 million compared to $5 9 million provided by investing activities in the prior comparable period.

Michael Wang: Another exciting development here in the third quarter was the launch of the Sprout. developing in partnership with the walkout. a leading California-based cannabis company. is an advanced all-in-one canvas vapor device designed for purity, performance, and safety. is specifically developed to optimize the nuisances and the intricacies of sophisticated cannabis oil while eliminating common industry flaws like plastic degradation. clogged airflow, and inconsistent heating.

Jim Mccormick: Net cash provided by financing activities for the nine months to March 31, 2025, with $2 3 million compared to $10 1 million used in the same period last year.

<unk> revenue for higher levels of accounts receivable collection.

Jim Mccormick: For the three months ending March 31, 2025, we reported gross profit of approximately $4 8 million compared to approximately $6 1 million for the same period in fiscal 2024.

Jim Mccormick: That concludes our discussion of <unk> fiscal third quarter 2025 financial results I will now turn the call back over to Michael.

Jim Mccormick: Gross margins for Q3 were down eight down to 18, 2% from 28, 4% last year.

Michael: Thanks, Jim.

Speaker Change: In closing I am very pleased with the progress we've made over the third fiscal quarter.

Jim Mccormick: During the nine month period to March 31, 2025, gross profit increased to $20 2 million from $19 2 million for the same period last year.

Michael: As I stated previously we.

Speaker Change: We achieved several significant milestones this quarter.

Jim Mccormick: Gross margins for the nine month period to March 31, 2025, we're up to 18, 8% versus 16, 8% for the same period last year.

Speaker Change: Securing our interim mixing manufacturing license in Malaysia.

Speaker Change: Restructuring, our global operations to be more cost effective.

Jim Mccormick: This was primarily due to changes in the product mix and generally improving gross margins in North America.

Speaker Change: Transitioning more of our manufacturing to Malaysia.

Michael Wang: Disinsured. and experience for consumers as clean as the plant itself. Initially, launching with a raw garden, the Sprout technology is available to cannabis operators across the U.S. Our innovation with the Sprout product underscores our commitment to raising industry standards. prioritizing material safety and putting consumer well-being first. We continue to engage in discussions with several large global nicotine and tobacco providers who are looking to diversify their supply chain. While we are under NDAs and cannot reveal specific names at this time, we look forward to making announcements as soon as possible.

Speaker Change: Filling of ice pack component PMT with FDA on schedule.

Jim Mccormick: Total operating expenses for fiscal Q3, 2025 were approximately $15 4 million versus approximately $11 8 million for the same period last year.

Speaker Change: Reversing the increasing trend of our accounts receivable.

Jim Mccormick: Operating expenses over the nine month period to March 31, 2025, or $43 4 million up from $29 7 million during the third fiscal quarter of 2024.

Speaker Change: In addition.

Speaker Change: Pricing scratch just shift from landed two fob factory pricing demonstrates our adaptability and commitment to our long term profitability, regardless of external market conditions.

Jim Mccormick: This increase reflects higher stock based compensation expense.

Jim Mccormick: Higher sales and marketing cost and one off severance costs related to the company's previously disclosed North American restructuring.

Speaker Change: There are several unique and exciting opportunities that exist for <unk> going forward.

Jim Mccormick: Worth, noting that the benefits of this restructuring will begin to be realized in fiscal Q4 2025.

Speaker Change: In particular.

Speaker Change: Receiving Malaysia first further nicotine manufacturing license.

Jim Mccormick: The net loss for the third fiscal quarter of 2025 was $10 9 million or <unk> 19 per share compared to a net loss of $5 9 million or <unk> 11 per share for the same period last year.

Speaker Change: Our age gating technology's potential to revolutionize the.

Speaker Change: Electronic nicotine delivery systems, namely.

Speaker Change: <unk> devices worldwide.

Speaker Change: And our ongoing discussions with the global nicotine providers.

Jim Mccormick: As of March 31, 2025, I aspire held cash and cash equivalents of $23 5 million a reduction of $10 9 million versus the same previous quarter of last year.

Michael Wang: As you can see here, we have made significant progress on our strategic priorities. We have reduced our account receivable, secured our infant Malaysian nicotine product manufacturing license. filed the ITAC PMTA on schedule. and positioned ourselves to capitalize on growing international opportunities. We remain focused on driving a more profitable business model through our Malaysian manufacturing operations, as well as focusing on high-quality customers. All while... driving innovative technology solution for the global vaping market.

Speaker Change: With our strategic focus on innovation.

Speaker Change: Regulatory compliance.

Jim Mccormick: With a working capital balance of negative $2 1 million the reduction in cash equivalents is related to a reduction in standard in related party receivables.

Speaker Change: The increased financial stability.

Speaker Change: We are well placed to capitalize on significant market opportunities, while also being a leader in responsible industry practices.

Jim Mccormick: The company fully expects to return to a positive working cash balance moving forward.

Speaker Change: Thank you again to our investors for their continued support and to everyone who joined US today for your time.

Jim Mccormick: For the nine months ended March 31, 2025, net cash flow used by operating activities was $12 1 million compared to $16 9 million in the same period last year.

Speaker Change: We look forward to updating you further in the coming months.

Jim Mccormick: Net cash used in investing activities for the nine months to March 31, 2025 was $1 7 million compared to $5 9 million provided by investing activities in the prior comparable period.

Speaker Change: If you have any questions. Please contact us through E mail at IR.

Speaker Change: Our <unk> technology is dot com.

Speaker Change: This completes our prepared remarks, and we are now open to questions.

Jim Mccormick: With that, I'll turn the call over to our CFO, Jim McCormick, to review our financial results in more detail. Thank you, Michael. As a reminder, I will refer to the fiscal third quarter 2025 as the three-month-ended March 31st, 2025. All comparisons are to the prior year-ended March 31st, 2024, unless otherwise stated. For the third quarter of fiscal 2025, total revenue decreased to $26.2 million, representing a change of 12.7%, or $3.8 million compared to $30 million in the same period last year. Our revenue results were driven by the performance across our key geographical regions as follows.

Jim Mccormick: Net cash provided by financing activities for the nine months to March 31, 2025, with $2 3 million compared to $10 1 million used in the same period last year.

Speaker Change: Operator, Please go ahead.

Speaker Change: At this time I would like to remind everyone in order to ask a question simply press star followed by the number one on your telephone keypad again that is star one for any questions. Our first question will come from the line of Nick Anderson with Roth Capital Partners. Please go ahead.

Michael: That concludes our discussion of <unk> fiscal third quarter 2025 financial results I will now turn the call back over to Michael.

Nick Anderson: Yes, good morning, and thanks for taking the questions and congrats on the quarter first one for me just on the FDA and the focus on Port shopping just help us understand what that could mean regarding duvelisib based supply in the U S.

Michael: Thanks, Jim.

Michael: In closing I'm very pleased with the progress we've made over the third fiscal quarter.

Michael: As I stated previously.

Michael: We achieved several significant milestones this quarter.

Speaker Change: And I guess two questions off this do you expect a significant reduction in illicit product flow office and two does this change the way you look at the growth opportunity in North America kind of near term here. Thank you.

Michael: Securing our interim mixing manufacturing license in Malaysia.

Michael: Restructuring, our global operations to be more cost effective.

Nick Anderson: Nick Thank you.

Michael: Transitioning more of our manufacturing to Malaysia.

Jim Mccormick: European revenues of approximately $13.2 million in Q3 fiscal 2025 represented a slight decline of $0.3 million or 2.9% compared to $13.6 million in the same period as last year. Revenues from North America of approximately $8.8 million in Q3 fiscal 2025 represented a decline of $3.6 million or 28.9% compared to $12.4 million for the third quarter in fiscal 2024. This was largely driven by the new tariffs on China-made products, the impact of our transition of some manufacturing activities from China to Malaysia, and the effect of us on working only with larger and high-quality customers such as multi-state operators.

Nick Anderson: No.

Nick Anderson: So approval this technology.

Michael: Filing of ice pack component PMT with FDA on schedule.

So on ABB.

Nick Anderson: We will comp work a lot of consumers from currently using green or black market vaping products to actually.

Michael: Reversing the increasing trend of our accounts receivable.

Michael: In addition.

Nick Anderson: More compliant and the staple products.

Michael: Pricing scratch just shift from landed cool Fob factory pricing demonstrates our adaptability and commitment to long term profitability, regardless of external market conditions.

Nick Anderson: The 10 plus.

Right now of course.

Nick Anderson: Yes.

Nick Anderson: You get different.

Nick Anderson: Dollar amount, but by and large.

Nick Anderson: The consensus is the black market for <unk> products.

Michael: There are several unique and exciting opportunities that exist for <unk> going forward.

Nick Anderson: Especially new cigarette.

Michael: In particular.

Nick Anderson: Accounts for anywhere between.

Michael: Receiving Malaysia first federal nicotine manufacturing license.

Nick Anderson: Five and seven times of day.

Nick Anderson: Vehicle market, which last year rates reached over $10 billion so that means.

Michael: Our age gating technology's potential to revolutionize.

Jim Mccormick: Asia-Pacific revenues of approximately $3 million represented a decline of $0.8 million or 21.4% compared to $3.8 million in the third quarter of last fiscal year. This was primarily the result of reduced demand in South Korea ahead of anticipated changes in the regulatory environment. Revenues from Africa of $0.1 million were roughly flat compared to the revenue from the same period.

Michael: The electronic nicotine delivery systems, namely and devices worldwide.

Nick Anderson: The U S black market it is anywhere between five.

Nick Anderson: 50 to.

Michael: And our ongoing discussions with the global nicotine providers.

Potentially even up to $70 billion in retail.

Nick Anderson: So those products.

Michael: With our strategic focus on innovation.

Nick Anderson: Products.

Nick Anderson: We really don't feel comfortable enough to to use.

Michael: Regulatory compliance.

Michael: And increased financial stability.

Nick Anderson: Personally.

Jim Mccormick: For the 9-month period ending March 31, 2025, revenues decreased by 6.3% to $107.4 million compared to the same period in fiscal 2024. Once again, this is tied directly to the focus on higher-quality customers in the Canada-based foregoing revenue for higher levels of accounts receivable collection. For the three months ending March 31st, 2025, we reported gross profit of approximately $4.8 million compared to approximately $6.1 million for the same period in fiscal 2024. Growth margins for Q3 were down to 18.2% from 20.4% last year. During the nine-month period to March 31, 2025, gross profit increased to $20.2 million from $19.2 million for the same period last year.

Nick Anderson: So.

Michael: We are well placed to capitalize on significant market opportunities, while also being a leader.

Nick Anderson: Allowing so many consumers, especially adult consumers use them so.

Michael: Possible industry practices.

Nick Anderson: Of course, there hasnt been a reliable solution too.

Michael: Thank you again to our investors for their continued support and to everyone who joined US today for your time.

Nick Anderson: H gate.

Nick Anderson: Products for.

Nick Anderson: Adult consumers to use and to prevent youth access.

Michael: We look forward to updating you further in the coming months.

Nick Anderson: Two types of products, but.

Michael: If you have any questions. Please contact us through E mail at IR.

Nick Anderson: Finally, with such solution we operate.

Michael: At spire technology Dot com.

Nick Anderson: Optimistic about.

Michael: This completes our prepared remarks, and we are now open to questions.

Nick Anderson: How many percent because their consumers, we can convert from black market two legal market.

Speaker Change: Operator, Please go ahead.

Nick Anderson: So that's number one number two I think in.

Speaker Change: At this time I would like to remind everyone in order to ask a question simply press star followed by the number one on your telephone keypad again that is star one for any questions. Our first question will come from the line of Nick Anderson with Roth Capital Partners. Please go ahead.

Nick Anderson: Until our products are FDA approved.

Nick Anderson: We of course don't plan our cannot sell.

Jim Mccormick: Gross margins for the nine-month period to March 31st, 2025 were up to 18.8% versus 16.8% for the same period last year. This was primarily due to changes in the product mix and generally improving gross margins in North America.

Nick Anderson: Products in the U S. So in the near term.

Nick Anderson: Yes, good morning, and thanks for taking the questions and congrats on the quarter.

Nick Anderson: In the U S probably Barry loophole.

Nick Anderson: First one for me just on the SBA and the focus on Port shopping just help us understand what that could mean regarding duvelisib based supply in the U S.

Nick Anderson: Revenue from such products.

Nick Anderson: However, this technology could be used.

Jim Mccormick: Total operating expenses for Fiscal Q3 2025 were approximately $15.4 million versus approximately $11.8 million for the same period last year. Operating expenses over the nine-month period to March 31, 2025 were $43.4 million, up from $29.7 million through the third fiscal quarter of 2024. This increase reflects higher stock-based compensation expense, bad debt expense, higher sales and marketing costs, and one-off severance costs related to the company's previously disclosed North American restructuring. It is worth noting that the benefits of this restructuring will begin to be realized in fiscal Q4 2020.

Nick Anderson: The United States.

Nick Anderson: I guess two questions off this do you expect a significant reduction in illicit product flow office and two does this change the way you look at the growth opportunity in North America kind of near term here. Thank you.

Nick Anderson: As we all know most countries face.

Nick Anderson: Same challenge as we face here in the U S.

Speaker Change: Im come toward new access pool flavor and in eastern Europe.

Nick Anderson: Nick Thank you.

Speaker Change: Many governments are looking for solutions right now.

Nick Anderson: No.

Nick Anderson: <unk>.

Nick Anderson: The approval of this technology.

Nick Anderson: Finally bebe.

Speaker Change: Packed away.

Speaker Change: Already spoke to a couple.

Nick Anderson: We will kind of work a lot of consumers from currently using.

Speaker Change: Governments.

Nick Anderson: Our black market vaping products to actually.

Speaker Change: Regulation and.

Speaker Change: Tobacco control aspect.

Nick Anderson: Compliance and the Super products.

Speaker Change: There are encouraging opportunities outside the U S.

Nick Anderson: So the big 10 clubs.

Nick Anderson: Right now.

Speaker Change: The deployment of <unk> technology.

Nick Anderson: Course.

Jim Mccormick: The net loss for the third fiscal quarter of 2025 was $10.9 million, or $0.19 per share, compared to a net loss of $5.9 million, or $0.11 per share for the same period last year. As of March 31, 2025, Ispire held cash and cash equivalents of $23.5 million, a reduction of $10.9 million versus the same previous quarter of last year. with a working capital balance of negative $2.1 million. The reduction in cash equivalents is related to a reduction in standard and related party house receivables. The company fully expects to return to a positive working cash balance moving forward.

Nick Anderson: Sure.

Nick Anderson: Yes.

Nick Anderson: Estimate you get different.

Speaker Change: Much much faster than within the U S. So in the near term I think as opportunities are more outside the U S.

Nick Anderson: Dollar amount, but by and large.

Nick Anderson: The consensus is the black market for <unk> products.

Speaker Change: When our own products are FDA approved.

Nick Anderson: Especially in E cigarettes accounts for anywhere between five and seven times apathy vehicle market, which last year.

Speaker Change: Our U S represents.

Speaker Change: Enormous market across Nick did I answer your question completely.

Speaker Change: Yes, that's perfect. Thank you.

Nick Anderson: Rates reached over $10 billion, so that means in the.

Speaker Change: Last one from me just wanted to follow up on the EU and the disposable vape, Dan taking place over the coming months here are there any countries in particular youre looking at and are excited about.

Nick Anderson: The U S black market it is anywhere between five.

Nick Anderson: 50 tools.

Nick Anderson: Potentially even up to a $70 billion in retail.

Speaker Change: Are there any supply constraints that need to be addressed before kind of expanding your product offering overseas. Thank you.

Nick Anderson: So those are.

Nick Anderson: Our products.

Jim Mccormick: For the nine months ended March 31st, 2025, net cash flow used by operating activities was $12.1 million compared to $16.9 million in the same period last year. Net cash used in investing activities for the nine months to March 31, 2025 was $1.7 million compared to $5.9 million provided by investing activities in the prior comparable period.

Nick Anderson: We really don't.

Speaker Change:

Speaker Change: As far as first of all.

Nick Anderson: Feel comfortable enough to to use <unk>.

Speaker Change: To address the.

Nick Anderson: Personally.

Speaker Change: New market as we all know UK led.

So.

Nick Anderson: By allowing so many consumers, especially adult consumers use them. So.

Speaker Change: European.

Speaker Change: Market by spending disposed was you would follow suit.

Nick Anderson: Of course, there hasnt been a reliable solution too.

Speaker Change: <unk>.

Speaker Change: So obviously the industry awards switch.

Nick Anderson: H gate.

Jim Mccormick: Net cash provided by financing activities for the nine months to March 31st, 2025 was $2.3 million compared to $10.1 million used in the same period last year.

Nick Anderson: Products for.

Speaker Change: Tool, what we know as number one.

Nick Anderson: Adult consumers to use and to prevent youth access.

Speaker Change: Pod hubs.

Speaker Change: Why are you only need to replace pods.

Nick Anderson: The two types of products, but.

Speaker Change: That can be used.

Nick Anderson: Finally, with such solution we operate.

Jim Mccormick: That concludes our discussion of Ispire's fiscal third quarter 2025 financial results.

Speaker Change: Device.

Speaker Change: And the other opportunity would it be for some consumers to actually switch to opine systems, all with favorable systems.

Nick Anderson: Optimistic about.

Michael Wang: I will now turn the call back over to Michael. Thanks Jim. In closing, I'm very pleased with the progress we made over the third fiscal quarter. As I stated previously, we achieved several significant milestones this course. securing our infant nixie manufacturing license in Malaysia. restructuring our global operations to be more cost effective. transitioning more of our manufacturing to Malaysia. Filing of Architect Component PMPA with FDA on Schedule, and reversing the increasing trend of our account receivables. In addition, our pricing strategy shift from landed to FOB factory pricing demonstrates our adaptability and commitment to long-term profitability regardless of the external market condition.

Nick Anderson: How many percent because the consumers we can convert from black market two legal market.

Nick Anderson: So that's number one number two.

Speaker Change: So this is where <unk> brand as spire.

Nick Anderson: In.

Nick Anderson: Until our products are FDA approved.

Speaker Change: It's a super strong.

Nick Anderson: We of course don't plan our cannot sell.

Speaker Change: Largely so far.

Speaker Change: Global nicotine or you said revenue.

Nick Anderson: <unk> in the U S. So in the near term.

Speaker Change: Comes from the European region. So we strongly believe we will benefit some.

Nick Anderson: U S coal globally burden loophole.

Speaker Change: The band for disposable.

Nick Anderson: Revenue from such products.

Speaker Change: Whether it's the U K are across a whole year.

Nick Anderson: However, this technology could be used outside the United States.

Speaker Change: So.

Speaker Change: Now second question.

As we all know most countries.

Speaker Change: Second part of the question is.

Speaker Change: Whether or not we.

Nick Anderson: Face the same challenge as we face here in the U S.

Speaker Change: We will have any restriction or bottleneck.

Nick Anderson: Come toward new access pool flavored E cigarettes. So many governments are looking for solutions right now.

Speaker Change: Thomas of our supply chain manufacturing capabilities to support such initiatives.

Speaker Change: Think we'll be in good.

Speaker Change: Shapes important backing and therefore support the change in that.

Nick Anderson: In fact, we already spoke to a couple.

Speaker Change: Regulation.

Nick Anderson: Government.

Speaker Change: As I have stated.

Michael Wang: There are several unique and exciting opportunities that exist for Ispire going forward. in particular. Receiving Malaysia's first federal nicotine manufacturing license. are age-gauging technologies' potential to revolutionize the electronic nicotine delivery systems, namely, and devices worldwide. and our ongoing discussion with the global nicotine provider. with our strategic focus on innovation. Regulatory Compliance. and increase financial stability. We are well placed to capitalize on significant market opportunities while also being a leader in responsible industry practice.

Nick Anderson: <unk> regulation and.

Speaker Change: Previously.

Speaker Change: With our phase two.

Nick Anderson: Tobacco control.

Nick Anderson: Aspect.

Speaker Change: Actually our second factory in Malaysia.

Nick Anderson: There are encouraging opportunities outside the U S.

Speaker Change: Be able to build out up to 80.

Nick Anderson: Where the deployment of such technology.

Speaker Change: Production lines.

Nick Anderson: It happened much much faster than within the U S. So in the near term I think opportunities are more outside the U S. A.

Speaker Change: In total.

Speaker Change: Of course.

Speaker Change: We are on one hand.

Speaker Change: Very excited about this manufacturing license for nicotine products on the other.

Nick Anderson: When our own products, our SBA pool.

Speaker Change: We are also.

Nick Anderson: Our U S represents.

Speaker Change: Very mindful for financial.

Nick Anderson: Enormous market across Nick did I answer your question completely.

Speaker Change: Discipline and.

Speaker Change: Yes.

Nick Anderson: Yes, that's perfect. Thank you.

Speaker Change: Strategic use of our cash so on that front we are.

Nick Anderson: Second one from me just wanted to follow up on the EU and the disposables they've been taking place over the coming months here are there any in particular youre looking at and are excited about and.

Speaker Change: As we continue our conversation.

Our potential customers and to support our own demand.

Nick Anderson: Are there any supply constraints that need to be addressed before kind of expanding your product offering overseas. Thank you.

Speaker Change: We are also looking at.

Speaker Change: Whether certain product lines.

Michael Wang: Thank you again to our investors for their continued support, and to everyone who joined us today for your time. We look forward to updating you further in the coming months.

Speaker Change: Our better supported by more automated the production process.

Nick Anderson: As far as first of all.

Nick Anderson: To address the <unk>.

Speaker Change: So from output of point of view, we feel.

Nick Anderson: New market as we all know U K led.

Speaker Change: Very confident we'd say 80 lines.

Operator: If you have any questions, please contact us through email at ir at ispiretechnology.com. This completes our prepared remarks and we are now open to questions.

Nick Anderson: European.

Nick Anderson: Market by spending disposables, you would follow suit.

Speaker Change: Fully automated we could.

Speaker Change: Pump out.

Speaker Change: <unk> $700 million.

Nick Anderson: <unk>.

Nick Anderson: So obviously the industry awards switch.

Speaker Change: The pump devices.

Operator: Operator, please go ahead. At this time, I would like to remind everyone, in order to ask a question, simply press star followed by the number 1 on your telephone keypad. Again, that is star 1 for any questions.

Nick Anderson: Tool, what we know as number one.

Speaker Change: In a year's time.

Speaker Change: So.

Speaker Change: The capacity certainly we'll be able to support.

Nick Anderson: Pod systems.

Nick Anderson: Where are you only need to replace pods.

Speaker Change: Significant growth in demand, whether it's from our own products all.

Nick Anderson: Definitely use.

Nick Anderson: On your device.

Speaker Change: To support other brands Nick.

Nick Anderson: And the other opportunity would it be for some consumers to actually switch to opine.

Nick Anderson: Our first question will come from the line of Nick Anderson with Rock Capital Partners. Please go ahead. Yeah, good morning, and thanks for taking the questions and congrats on the quarter.

Speaker Change: Got it thanks for the color Michael Congrats on the quarter I will jump back in the queue.

Nick Anderson: All waste available systems.

Speaker Change: Thank you again for any questions Press star one on your telephone keypad and our next question will come from the line of Pablo <unk> with <unk> Associates LLC. Please go ahead.

Nick Anderson: So this is where ice bars, a brand as far.

Michael Wang: First one for me, just on the FDA and the focus on port shopping, just help us understand what that could mean regarding the illicit vape supply in the U.S. And I guess two questions off this. Do you expect a significant reduction in illicit product flow off this? And two, does this change the way you look at the growth opportunity in North America kind of near term here? Thank you.

Nick Anderson: It's a super strong.

Speaker Change: Thank you and good morning, everyone here in the U S.

Nick Anderson: Largely so far.

Speaker Change: Just my question was in terms of cannabis.

Nick Anderson: Global nicotine or you said revenue.

Speaker Change: Can you talk about customer reactions in the U S.

Nick Anderson: Comes from.

Nick Anderson: European region. So we strongly believe we will benefit from.

Speaker Change: What are your new hardware devices Youre doing innovation.

Michael Wang: Nick, thank you. So with the approval of this technology, we strongly believe we will convert a lot of consumers from currently using gray or black market vaping products to actually compliant and safer products so they can trust. Right now, of course, from different estimates, you get different dollar amount, but by and large, the consensus is the black market for vaping products, especially e-cigarette, accounts for anywhere between five and seven times of the legal market, which last year reached over $10 billion. So that means in the U.S., black market is anywhere between five and 50 to potentially even up to $70 billion in retail.

Nick Anderson: The band for disposable.

Speaker Change: How much inroads are you, making there and then related to that of course, we don't know what's going to happen with <unk> on and off every day pretty much but you know what alternatives do customers really they need the vaping hardware.

Nick Anderson: Whether it's the U K or across a whole year.

Nick Anderson: So the.

Nick Anderson: Now second question.

Second part of the question is.

Nick Anderson: Whether or not.

Nick Anderson: We will have any restriction or bottleneck.

Speaker Change: We'll just have to pass it onto pricing to our customers I suppose but if again if you if you can discuss that thank you.

Speaker Change: Thomas our supply chain manufacturing capabilities to support such.

Speaker Change: Thank you Pablo.

Nick Anderson: Initiative.

Speaker Change: Think we'll be in good.

Speaker Change: The first.

Speaker Change: Good shape supporting battery and therefore support the change in that.

Speaker Change: Part of your question.

Speaker Change: <unk>.

Speaker Change: Specific to the.

Speaker Change: Regulation.

Speaker Change: As I have stated.

Speaker Change: Yes.

Speaker Change: Sprouts products with Harsco Bob.

Speaker Change: Previously.

Speaker Change: With our phase two.

Speaker Change: It's just one of the recent innovations to other product relaunch.

Speaker Change: Our second factory in Malaysia.

Speaker Change: We'll be able to build out up to 80.

Speaker Change: The quarter before.

Speaker Change: It's what do we call.

Speaker Change: In line.

Speaker Change: Bulk.

Speaker Change: In total.

Speaker Change: Platform.

Speaker Change: Of course, we.

Speaker Change: <unk>.

Speaker Change: On one hand.

Speaker Change: Both platform.

Speaker Change: We're excited about this manufacturing license or nicotine products.

Speaker Change: Short term there is a pool of DLP.

Speaker Change: Essentially.

The bolt platform.

Speaker Change: The other hand, we are also very.

Speaker Change: Uh huh.

Michael Wang: So those are products we really don't feel comfortable enough to use, we personally. So by allowing so many consumers, especially adult consumers use them. So, of course, there hasn't been a reliable solution to age-gauge products for adult consumers to use and to prevent youth access to such products. But finally, with such solution, we are very optimistic about how many percent of the consumers we can convert from black market to legal market. So that's number one.

Speaker Change: Providing a.

Speaker Change: Very mindful of financial.

Speaker Change: Yeah.

Speaker Change: Pump system that.

Speaker Change: Discipline and.

Speaker Change: Can become a new standard for the industry as you will recall, a long time ago and even to some degree today.

Speaker Change: Our strategic use of our cash.

Speaker Change: On that front.

Speaker Change: We continue our conversation with all potential customers and to support our own demand.

Speaker Change: Traditional.

Speaker Change: Uh huh.

Speaker Change: We are also looking at.

Speaker Change: Pathway plus.

Speaker Change: Whether certain product lines.

Speaker Change: <unk> card.

Speaker Change: Further supported by a more.

Speaker Change: Yes.

Speaker Change: Configuration.

Speaker Change: More automated the production process.

Speaker Change: It was a very very much a standard for the industry, but overtime consumers taste change and brands want more attractive looking devices. So that's why the two quarters ago, we launched the bolt platform.

Speaker Change: So from our output of point of view, we feel very confident with.

Speaker Change: 80 lines.

Speaker Change: The automated that we could.

Speaker Change: Pump.

Speaker Change: Somewhere between $700 million.

Speaker Change: Pop devices.

All four as alternative to traditional individually designed the pod system and the traditional or the battery stick approach nature of the product.

Speaker Change: In a year's time.

Michael Wang: And number two, I think in... Until our products are FDA-approved, we, of course, don't plan or cannot sell products in the U.S. So, in the near term, in the U.S., there is probably very little revenue from such products. However, this technology could be used outside the United States. As we all know, most countries face the same challenge as we face here in the U.S., that uncontrolled use access to flavored e-cigarette. So, many governments are looking for solutions right now. In fact, we already spoke to a couple governments in terms of regulation and tobacco control aspect, there are encouraging opportunities outside the U.S.

Speaker Change: The capacity certainly we'll be able to support.

Speaker Change: Let's turn to growth in demand, whether it's from our own products all.

Speaker Change: Is there to carry compact and the good to look at.

Speaker Change: To support other brands Nick.

Speaker Change: And we launch of that.

Speaker Change: Got it thanks for the color Michael Congrats on the quarter I will jump back in the queue.

Speaker Change: Industrial basis by that I mean, so all of the brands.

Speaker Change: Thank you again for any questions Press star one on your telephone keypad and our next question will come from the line of Pablo would you want it what did you want again associates LLC. Please go ahead.

Speaker Change: Could share the same battery part of polysilicon.

Speaker Change: They don't have to spend all the money.

Speaker Change: To re procure we sell.

Speaker Change: Thank you and good morning, everyone here in the U S. I'm just just my question more industrial economies.

Speaker Change: Battery Park, when a consumer already has.

Speaker Change: They'll go out you know customer reactions in the U S sort of your new hardware devices. You are doing innovation, how much inroads are you making there.

Speaker Change: Back to the pharma and other brand or generic brand.

Speaker Change: So we are trying to build a new essentially platform for the industry that was taking shape now with this new sprouts products.

Speaker Change: Then related to that.

Of course, we don't know what's going to happen with tariffs on and off every day pretty much but you know what alternatives do customers really they need debating hardware, but we'll just have to pass it onto pricing to our customers I suppose where do you think if you if you're going to discuss that thank you.

Speaker Change: This is really performance.

Speaker Change: Focus and the more let's call it.

Speaker Change: Yes.

Yes.

Speaker Change: Specifically.

Design for cannabis oil, especially with the highly corrosive proteins.

Pablo: Thank you Pablo.

Nick Anderson: where the deployment of such technology could happen much, much faster than within the U.S. So in the near term, I think the opportunities are more outside the U.S. When our own products are FDA approved, the U.S. represents an enormous market for us. Nick, did I answer your question completely? Yes, that was perfect. Thank you.

Speaker Change:

Speaker Change: Good question.

Speaker Change: So this is setting a brand new safety standard for the industry.

Speaker Change:

Speaker Change: A specific who they are.

Speaker Change: And similar towards the bolt platform I shared earlier, we would like to make this a new.

Speaker Change: Yeah.

Speaker Change: Rob.

Speaker Change: We talked about.

Speaker Change: That's just one of the recent innovations the other product relaunch.

Speaker Change: Standard.

Speaker Change: For the industry as well.

Speaker Change: So that's why we think our approach.

Speaker Change: The quarter before.

Speaker Change: What do we call.

Speaker Change: Planning tool.

Speaker Change: Bulk platform.

Speaker Change: Also the industry a new platform.

Nick Anderson: Second one for me, just wanted to follow up on the EU and the disposable vape bans taking place over the coming months here. Are there any countries in particular you're looking at and are excited about? And are there any supply constraints that need to be addressed before kind of expanding your product offer? As far as, first of all, to address the EU market, as we all know, the UK led the European market by banning disposables. The EU would follow suit. So obviously, the industry will switch to what we know as number one, pod systems, where you only need to replace the pods that you use on your device.

<unk>.

Speaker Change: <unk> performance on safety point of view or from.

Speaker Change: Both platform, we short time Theres, a full DLP, so essentially with the bolt platform we are.

Speaker Change: Our cost.

Speaker Change: Effectiveness point of view for consumers.

Speaker Change: Those are all.

Speaker Change: The focus and the way we think.

Speaker Change: Providing a.

Speaker Change: Both new platforms will be very attractive to msos.

Speaker Change: Pump system that.

Speaker Change: Can become a new standard for the vaping industry as you'll recall, a long time ago and even to some degree today.

Speaker Change: Had they not only.

Speaker Change: <unk>, new and more innovative products.

Speaker Change: But also too.

Speaker Change: The traditional.

Speaker Change: At that point of view to offer safe port.

Speaker Change: Uh huh.

Speaker Change: Yes.

Speaker Change: Pathway.

Speaker Change: Products to their consumers.

Speaker Change: Yes.

Speaker Change: <unk> card.

Speaker Change: So that is my answer.

Speaker Change: Oh sure.

Speaker Change: Part of that question as far as the second part.

Speaker Change: Asian.

Speaker Change: It was a barrel right.

Speaker Change: That's related to tariff situations.

Standard for the industry, but overtime consumers taste change and brands want more attractive looking devices. So.

Speaker Change: We are facing right now.

Speaker Change: Jim.

Speaker Change: <unk> had in his part.

Michael Wang: And the other opportunity would be for some consumers to actually switch to open systems. are way better voices. So this is where Ispire's brand, Aspire, is super strong. largely so far are global nicotine or e-cig revenue. comes from the European region. So, we strongly believe we will benefit from the ban for disposable, whether it's the UK or across the whole EU. Now, the second part of the question is whether or not we will have any restriction or bottleneck in terms of supply chain manufacturing capabilities to support such initiative. We think we'll be in good shape supporting that endeavour and support the change in that regulation.

Speaker Change: That's why the two quarters ago, we launched the box platform.

Speaker Change: As soon as the President Trump was elected in November.

Speaker Change: All four as alternative to.

Speaker Change: <unk> made it very clear it was a.

Speaker Change: Traditional individually designed the pod system and the traditional old batteries stick approach nature of the product.

Speaker Change: Going to raise tariff.

Speaker Change: Import, especially.

Speaker Change: Chinese made products.

Speaker Change: Is this the industry literally 90, 999% above 18 devices.

<unk> took care of the compact and the good to look at.

Speaker Change: And we launch of that.

Speaker Change: Up to say two years ago or maybe in China today, there is a little bit of diversification.

Speaker Change: Industrial basis by that I mean, so all of the brands.

Speaker Change: Could you share the same battery part of as a part of the system.

Speaker Change: In terms of.

Speaker Change: Our country of origin.

Speaker Change: They don't have to spend all the money.

Speaker Change: Still well over 90% of products are made in China.

Speaker Change: To re procure Lee Sal.

Speaker Change: So some of that.

Speaker Change: And then Trump was elected.

Speaker Change: Battery Park, when a consumer already has.

Speaker Change: Nearly all of our customers.

Speaker Change: Bachelor pharma and other brand or generic brands.

Speaker Change: Started.

Speaker Change: Almost panic.

Speaker Change: So we are trying to build a new essentially platform for the industry that was taking shape now with this new sprouts products.

Speaker Change: A search for a solution.

Speaker Change: Phase.

Speaker Change: And we talk to most of them were negotiated lawful other customers brands, we're worried about.

Speaker Change: This is really performance.

Speaker Change: Focus and the more let's call it.

Speaker Change: Tariff level, let's say.

Michael Wang: As I stated previously, with our phase two factory, our second factory in Malaysia, we'll be able to build out up to 80 production lines in total. Of course, we are, on one hand, very excited about this manufacturing license for nicotine products. On the other hand, we are also very mindful of financial discipline. strategic use of our cash. So on that front, as we continue our conversation with our potential customers and to support our own demand, we are also looking at whether certain product lines are better supported by more automated production process. So from an output point of view, we feel very confident with 80 lines fully automated, we could pump out somewhere between 700 million.

Speaker Change: Just as background.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: For most of the customers with cannabis NSO, our individual operators we had.

Speaker Change: Specifically.

Designed for cannabis oil and especially with the highly corrosive proteins.

Speaker Change: Our business with we generally would sign a supply agreement.

Speaker Change: So this is setting a brand new safety standard for the industry.

Speaker Change: The agreement we typically specify.

Speaker Change: And similar towards the bolt platform I shared earlier, we would like to make this a new.

Speaker Change: Len landed cost.

Speaker Change: Debt.

Speaker Change: You heard me, saying that several times in my prepared remarks.

Speaker Change: Standard.

Speaker Change: For the industry as well.

Speaker Change: We generally sold the products towards the customers.

Speaker Change: So that's why we think our approach.

Speaker Change: Planning tool.

Speaker Change: Also the industry a new platform.

Speaker Change: Landed cost basis many.

Speaker Change: That's what they pay.

Speaker Change: Whether from performance on safety point of view or from.

Speaker Change: When they receive the product from us in the U S.

Speaker Change: Cost effectiveness.

Speaker Change: But given the uncertainty.

Speaker Change: Effectiveness point of view for consumers, but those are all.

Speaker Change: Regarding the tariffs.

Speaker Change: Our focus and the way you think.

Speaker Change: Yes.

Speaker Change: Many brands wanted to almost get guaranteed landed price in the coming.

Speaker Change: Both new platforms will be very attractive to msos.

Speaker Change: Had they not only.

Speaker Change: Quarters in the years ahead.

Speaker Change: <unk> launched new and more innovative products.

Speaker Change: Of course, we cannot agree to that.

Speaker Change: But also.

Speaker Change: We couldnt control.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: At that point of view to all four faithful.

Speaker Change: The level of tariff.

Speaker Change: Bose.

Speaker Change: Specifically.

Speaker Change: Products to their consumers.

Speaker Change: Upon this industry so.

Speaker Change: So that is my answer to your first part of that question as far as your second part that's related to tariff situation.

Michael Wang: pod devices in a year's time. The capacity certainly will be able to support significant growth. whether it's from our own products or to support other brands.

Speaker Change: No.

Speaker Change: Since November there have been I would say.

Speaker Change: A lot of our conversations negotiations.

Speaker Change: We are facing right now.

Speaker Change: Existing supply agreement so toward degree.

Speaker Change: Jim.

Speaker Change: They've had in his part.

Speaker Change: Directly affected our cannabis revenue from the U S.

Speaker Change:

Speaker Change: As soon as the precedent comp.

Pablo Zuanic: Got it. Thanks for the call, Michael. Congrats on the quarter. I'll jump back. Thank you.

Speaker Change: Was elected in November.

Speaker Change: In the quarter, we reported that.

Speaker Change: Made it very clear who was going to raise the tariffs.

Speaker Change: Yes.

Speaker Change: Big reason for the decline.

Speaker Change: Imports, especially.

Speaker Change: In revenue there.

Chinese made products.

Speaker Change: But as of now.

Speaker Change: Is this the industry literally 99, 9%.

Speaker Change: Have successfully renegotiated with most for.

Pablo Zuanic: Thank you, and good morning, everyone here in the U.S. Just my question more in terms of cannabis. Can you talk about, you know, customer reactions in the U.S. for your new hardware devices, your new innovation? How much inroads are you making there?

Speaker Change: Devices.

Speaker Change: Yeah.

Speaker Change: U S cannabis customers.

Speaker Change: Up to say two years ago or maybe in China today, there is a little bit of diversification.

Speaker Change: Uh huh.

Most of them are grade to switch tools F O b factor in price.

Speaker Change: In terms of.

Speaker Change: Our country of origin.

Speaker Change: The factory is.

Pablo Zuanic: And then related to that, of course, we don't know what's going to happen with tariffs. You know, it's on and off every day pretty much. But, you know, what alternatives do customers have, really? They need the vaping hardware, but we just have to pass it on to pricing to our customers, I suppose, if you can discuss that. Thank you.

Still well.

Speaker Change: In China, all in Malaysia, obviously.

Speaker Change: Over 90% of products made in China.

Speaker Change: So as far as President Trump was elected.

Speaker Change: If.

Speaker Change: <unk> placed order was our Malaysian factory.

Speaker Change: Nearly all of our customers.

Speaker Change: They will enjoy a lower <unk>.

Speaker Change: Started almost panic.

Speaker Change: Fair enough.

Speaker Change: Pat.

Speaker Change: A search for a solution.

Speaker Change: Sure.

Michael Wang: Thank you, Pablo. The first part of your question. Specific to the Sprout product we talked about, that's just one of the recent innovations. The other product we launched a quarter before is what we call a VOLT platform. That's a, V-O-L-T, VOLT platform. We shortened it for V-L-T. So, essentially, with the VOLT platform, we are providing a pub system that, can become a new standard for the vaping industry, as you recall a long time ago, and even to some degree today, the traditional. battery plus S10 card configuration was very, very much a standard for the industry.

Speaker Change: We obviously.

Speaker Change: Thanks.

Speaker Change: We talk to most of them were negotiated a lot of our customers.

Speaker Change: Malaysia, and China, both point of view.

Speaker Change: Malaysia is still in the scanning phase scanning up things.

Speaker Change: <unk>.

Speaker Change: Worried about.

Speaker Change: The tariff level, let's say.

Speaker Change: Our product cost slightly more in Malaysia, and in China bus differ.

Speaker Change: Just as background.

Speaker Change: Most of the customers cannabis NSO our individual operators.

Speaker Change: Differential.

Speaker Change: <unk> is more than being offset by.

Speaker Change: Had a business with we generally would sign a supply agreement.

Speaker Change: Kern.

Speaker Change: Tariff difference you can choose.

Speaker Change: The agreement we typically specify.

Speaker Change: Chinese made goods and Malaysia made goods.

Speaker Change: Land landed cost debt.

Speaker Change: No matter, what Malaysia is already more attractive to our.

Speaker Change: As you heard me, saying that several times in my prepared remarks.

Speaker Change: Customers, but over the next one.

Speaker Change: One to two quarters, we plan.

Speaker Change: We.

<unk> sold the products towards the customers on a landed cost basis many.

Speaker Change: Moving.

Speaker Change: Most.

Speaker Change: If not 100% of the candidates hardware to our Malaysia operation to help our customers lower tariff.

Speaker Change: What they pay.

Speaker Change: When they receive the product from us in the U S.

Speaker Change: But given the uncertainty regarding the tariffs.

Speaker Change: They're out there.

Speaker Change: But.

Speaker Change: <unk> really.

Speaker Change: Many brands wanted to almost get guaranteed landed price in the coming.

Speaker Change: Prevent.

Speaker Change: Any further exposure to tariff risks.

Speaker Change: As I said, a successfully renegotiated most of the contracts with our customers to F O B factory.

Speaker Change: At quarter's end of years ahead.

Speaker Change: And of course, we cannot agree to that because we couldn't come to the tariffs.

Michael Wang: But over time, consumers taste change and brands want more attractive-looking devices. So that's why two quarters ago, we launched the Volt platform. It offers alternative to traditional individually designed part system and the traditional old battery stick approach, making the product easier to carry, compact, and good to look. And we launched that on an industry basis. By that, I mean so all the brands could share the same battery part of the part system. They don't have to spend all the money to re-procure, re-sell such battery part when a consumer already has a battery from another brand or generic brand.

Speaker Change: Pablo sorry about the long rounded answer to your question.

Speaker Change: The level of tariff expose.

Speaker Change: Well, that's very helpful color, if I may just one quick follow up.

Speaker Change: Uh huh.

Speaker Change: Typically.

Speaker Change: Upon this industry so.

Speaker Change: So I always have to know about your competitors right.

Speaker Change: Since November there have been I would say.

Speaker Change: Especially the economies.

Speaker Change: Her words based of course on Nickelodeon, but do you think that you have more flexibility because for emulation facility than others. Some of your competitors have also been diversifying their supply chain or do you just have to know.

Speaker Change: A lot of our conversations negotiations.

Speaker Change: Existing supply agreement.

Speaker Change: So tore degree.

Speaker Change: That directly affected our cannabis revenue from the U S.

Speaker Change: I think.

Speaker Change: In the quarter, we reported that that's.

Speaker Change: Even though first of all even though.

Speaker Change: Big reason for the decline.

Speaker Change: The U S and China rates.

Speaker Change: In revenue there.

Speaker Change: Our 90 day agreements tariff now.

Speaker Change: But.

Speaker Change: As of now.

Speaker Change: On one hand, it was still down on what.

Speaker Change: <unk> successfully renegotiated with most how far are.

Speaker Change: Yes.

Speaker Change: As the picture looks like after 90 days.

Speaker Change: U S cannabis customers.

Speaker Change: So even if we follow the current situation here.

Speaker Change: Uh huh.

Speaker Change: Most of them agreed to switch tools F O b factor in price.

Speaker Change: That is 30%.

Michael Wang: So we are trying to build a new, essentially, platform for the industry. That was taking shape.

Speaker Change: The tariff on Chinese made goods in the next 30 days, it's still significant tariff.

Speaker Change: The factory is.

Michael Wang: Now with this new Sprout product, this is really performance focused. And the more, let's call it, specifically designed for cannabis oil, especially with the highly corrosive proteins. So this is setting a brand new safety standard for the industry. And similar to the Vault platform I shared earlier, we would like to make this a new standard for the industry as well. So that's why we think our approach of trying to offer the industry a new platform, whether from performance or from safety point of view, or from cost effectiveness point of view for consumers, those are our focus.

Speaker Change: In China, all in Malaysia, obviously.

Speaker Change: And.

On the other hand as you.

Speaker Change: If.

Speaker Change: We're very aware.

Speaker Change: They place order was our Malaysian factory.

Speaker Change: Many of their Chinese.

Speaker Change: <unk> have.

Speaker Change: They will enjoy a lower <unk>.

Speaker Change: Added some.

Speaker Change: Tariff.

Speaker Change: Overseas manufacturing.

Speaker Change: Uh huh.

Speaker Change: Yes.

Speaker Change: Abilities.

Speaker Change: We obviously.

Speaker Change: I know our key competitor is in Indonesia.

Speaker Change: From Malaysia, and China, both point of view.

Speaker Change: Malaysia is still in the scanning phase scanning up things.

Speaker Change: And some other competitors are also in.

Our product cost slightly more in Malaysia, and in China bus the differential.

Speaker Change: Indonesia.

Speaker Change: Products.

Speaker Change: According to precedent pumps turf chart.

Speaker Change: It is more than being offset by our current.

Speaker Change: Our expected to be.

Speaker Change: <unk>, 35%.

Speaker Change: Tariff difference.

Speaker Change: Yeah.

Speaker Change: And 45%.

Chinese made goods and Malaysia made goods.

Speaker Change: 35 <unk>.

Speaker Change: No.

Speaker Change: No matter, what Malaysia is already more attractive to our customer.

Speaker Change: 45 four.

Speaker Change: That's where.

Speaker Change: A couple of our competitors are trying to set up a factory.

Speaker Change: Customers, but over the next one to two quarters we plan.

Michael Wang: And we think both new platforms will be very attractive to MSOs, as they not only launch new and more innovative products, but also to, from that point of view, to offer safer products to their consumers.

Speaker Change: So.

Among those key.

Moving.

Speaker Change: Locations for.

Speaker Change: Most if.

Speaker Change: Our competitors face.

Speaker Change: If not 100% of the candidates hardware to an agent operation to help our customers lower tariff.

Speaker Change: Immolation setup is still advantageous because Malaysia.

Speaker Change: Among all those countries I mentioned enjoys the lowest.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: But.

Speaker Change: Right.

Speaker Change: In order to really pre.

Speaker Change: So part of it.

Speaker Change: Prevent.

Speaker Change: We strongly believe it will.

Speaker Change: Any further exposure to tariff risks.

Michael Wang: So that's my answer to your first part of your question. As far as your second part that's related to tariff situation we are facing right now. As Jim stated in his part, as soon as President Trump was elected in November, he made it very clear he was going to raise tariff on imports, especially on Chinese-made products. In this industry, literally 99.99% of vaping devices are made in China. up to say two years ago were made in China. Today there is a little bit of diversification in terms of a country of origin, but still well over 90% of products are made in China.

Speaker Change: To have that edge over the.

Speaker Change: As I said are successfully renegotiated most of their contracts or with our customers to F O b tax rate.

Speaker Change: The other countries in Asia.

Speaker Change: Pablo.

Speaker Change: Understood. Thank you very much that's very helpful. Thank you good color.

Speaker Change: Pablo.

And that will conclude our question and answer session I will now turn the call back over to Michael Wang for closing remarks.

Pablo: Sorry about the long rounded answer to your question.

Speaker Change: Well, that's very helpful color, if I may just one quick follow up.

Michael Wang: And thank you all again for joining us.

Speaker Change: So I always have to know about your competitors right and they don't stay you know, especially the Genovese leaping horse based of course on Nickelodeon.

Michael Wang: For the opportunity to share our progress with you.

Michael Wang: We'll look forward to reporting back more.

Speaker Change: Do you think that you have more flexibility because your emulation facility than others. Some of your competitors have also been diversifying their supply chain or is it just hard to know.

Michael Wang: As we continue to make progress so.

Michael Wang: I hope to.

Michael Wang: Talk to you all again.

Michael Wang: During our next quarterly call.

Speaker Change: Oh I think.

Michael Wang: Thank you.

This concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: Even though first of all even though.

Speaker Change: The U S and China our rates.

Speaker Change: Our 90 day agreements tariffs now.

Speaker Change: On one hand, it was still don't know what.

Speaker Change: As the picture looks like after 90 days.

Michael Wang: So as soon as President Trump was elected, nearly all of our customers started almost a panic search for solution phase. And we talked to most of them. We negotiated. A lot of the customers' brands were worried about the tariff level. Just as background, for most of the customers, cannabis MSO or individual operators we had business with, we generally would sign a supply agreement. In the agreement, we typically specify. As you heard me saying several times in my prepared remarks, we generally sold the products to the customers on a landed cost basis, meaning that's what they pay when they receive the product from us in the U.S.

Speaker Change: So even if we follow the current situation here.

Speaker Change: That is 30%.

Speaker Change: Tariff on Chinese made goods in the next 30 days.

Speaker Change: Still significant tariff.

Speaker Change: Uh huh.

Speaker Change: On the other hand as you are.

Speaker Change: Very aware.

Speaker Change: Many of the Chinese.

Speaker Change: <unk> have.

Speaker Change: Adding some.

Speaker Change: Overseas our manufacturing capabilities.

Speaker Change: I know our key competitor is in Indonesia.

Speaker Change: And some other competitors are also.

Speaker Change: The Indonesia.

Speaker Change: Products.

Speaker Change: According to President Trump's Turf chart.

Speaker Change: <unk> are expected to be.

Speaker Change: 35%.

Speaker Change: Uh huh.

Speaker Change: And 45%.

Speaker Change: 35.

Speaker Change: Indonesia 45 for a bit.

Speaker Change: Now that's where.

Speaker Change: A couple of our competitors are trying to set up a factory.

Michael Wang: But given the uncertainty regarding the tariffs, many brands wanted to almost get guaranteed landed price in the coming quarters and years ahead. And of course, we could not agree to that because we couldn't control the tariffs or the levels of tariffs exposed specifically upon this industry. Since November, there have been, I would say, a lot of conversations, negotiations on existing supply agreements. So, to a degree, that directly affected our cannabis revenue from the U.S. in the quarterly report. That's a big reason for the decline in revenue there. But as of now, we have successfully renegotiated with most of our U.S.

Speaker Change: Among those key.

Speaker Change: Locations for.

Speaker Change: All competitive factories.

Speaker Change: Our Malaysian setup is still advantageous because Malaysia.

Speaker Change: Among all those things I mentioned the enjoys the lowest tariff rate.

Speaker Change: Uh huh.

Speaker Change: We strongly believe me at all.

Speaker Change: Continue to have that edge over.

Speaker Change: Other countries in Asia.

Speaker Change: Pablo.

Speaker Change: Understood. Thank you very much that's very helpful. Thank you would call them.

Speaker Change: And that will conclude our question and answer session I will now turn the call back over to Michael Wang for closing remarks.

Michael Wang: And thank you all again for joining us.

Speaker Change: For us the opportunity to share our progress with you.

Speaker Change: We'll look forward to reporting back more.

Speaker Change: As we continue to make progress so.

Speaker Change: I hope to.

Speaker Change: Talk to you all again.

Speaker Change: During our next quarterly call.

Michael Wang: cannabis customers. Most of them agreed to switch to FOB factory price, whether the factory is in China or in Malaysia. Obviously, if they place order with our Malaysian factory, they will enjoy a lower tariff. And we obviously from Malaysia and China both point of view, since Malaysia is still in the scaling phase, scaling up phase, our product costs slightly more in Malaysia than in China. But the differential is more than being offset by the current tariff difference between Chinese made goods and Malaysian made goods. So no matter what, Malaysia is already more attractive to our customers.

Speaker Change: Thank you.

Speaker Change: This concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: [music].

Michael Wang: But over the next one to two quarters, we plan on moving most, if not 100% of the candidate's hardware to Malaysian operations to help our customers lower tariff on their end. But in order to really prevent any further exposure to tariff risk, we have, as I said, successfully renegotiated most of the contracts with our customers to FOB factory.

Pablo Zuanic: Pablo, sorry about the long rounded answer to your question. Now, that's very helpful, very good color.

Michael Wang: If I may, just one quick follow-up. So, I know it's hard to know about your competitors, right? And there are several, especially in the cannabis, vaping workspace, of course, also in nicotine. But do you think that you have more flexibility because you're a Malaysian facility than others of your competitors, or they have also been diversifying their supply chain, or it's just hard? I think even though, first of all, even though the US and China reached a 90-day agreement on tariff now. On one hand, we still don't know what the picture looks like after 90 days.

Michael Wang: So even if we follow the current situation here, that is 30% tariff on Chinese-made goods in the next 30 days, it's still a significant tariff. And on the other hand, as you are very aware, many of the Chinese factories have added some overseas manufacturing capabilities. I know our key competitor is in Indonesia, and some other competitors are also in Indonesia. products, according to President Trump's tariff chart, are expected to be 35 percent. on 45%. And 35% for Indonesia, 45% for Vietnam. That's where a couple of competitors are trying to set up. So among those key locations for our competitors' strategies, our Malaysian setup is still advantageous because Malaysia, among all those countries I mentioned, enjoys the lowest tariff rate so far.

Pablo Zuanic: We strongly believe it will continue to have that edge over the other countries in Asia. Pablo Thank you very much. That was very helpful.

Operator: Thank you.

Operator: And that will conclude our question and answer session.

Michael Wang: I will now turn the call back over to Michael Wang for closing remarks. And thank you all again for joining us for the opportunity to share our progress with you. We look forward to reporting back more as we continue to make progress. So I hope to talk to you all again during our next quarterly call. Thank you.

Operator: This concludes today's call. Thank you all for joining. You may now disconnect.