Financial Data and Key Metrics Changes - For Q2 2026, total revenue was $20.3 million, down from $41.8 million in Q2 2025, reflecting a strategic shift towards higher-quality nicotine customers [14] - Gross profit decreased to $3.5 million from $7.7 million, with gross margins at 17.1%, slightly down from 18.5% in Q2 2025, primarily due to a change in product mix [15] - Net loss reduced to $6.6 million from $8 million in the same period last year, indicating improved financial stability [16] Business Line Data and Key Metrics Changes - The company has consolidated its customer base to focus on high-quality clients in the nicotine sector, moving away from lower-value cannabis clients [4] - Net accounts receivable improved to $37.9 million from $47 million at the end of fiscal 2025, with cash collected versus revenue for 2025 at 116%, up from 67% in 2024 [6][15] Market Data and Key Metrics Changes - The nicotine sector faced international headwinds, particularly with a decline in e-cigarette volume due to pressure from Chinese manufacturers [5] - The U.S. e-cigarette market is estimated to be nearly $100 billion, with over 90% of it being illicit, highlighting the demand for flavored e-cigarettes [8] Company Strategy and Development Direction - The company is focusing on innovations such as age-gating technology through its joint venture with IQTech and G-Mesh technology for vaping hardware [12][18] - The Malaysian facility is on track to ramp up production, increasing capacity significantly from 6 to 80 production lines [12] Management's Comments on Operating Environment and Future Outlook - Management views Q2 2026 as an inflection point, expecting top-line growth, consistent cash flow, and bottom-line improvement in future quarters [4][18] - The company anticipates continued positive trends in financial metrics and revenue generation as it moves closer to profitability [13] Other Important Information - The company has made significant progress in discussions with regulators globally to institute age-gating technology as a compulsory standard [10] - The FDA's position on age-gating technology is seen as a potential unlock for the flavored e-cigarette market, which is currently dominated by illicit products [9] Q&A Session Summary Question: What impact does Walgreens' resumption of selling vape products have on shelf space allocation? - Management noted that there is tremendous demand for flavored e-cigarettes, and retailers are eager to re-enter the market as regulatory clarity improves [21][23] Question: Can you provide details on the Charlie's partnership and its expected production numbers? - The partnership is expected to produce between 2 million to 3 million chips a month, with a goal of reaching 10 million devices monthly over a year [25][26] Question: What drove the spike in Chinese imports of e-cigarettes? - The surge was driven by anticipated policy changes in China, specifically the introduction of a VAT on e-cigarette exports effective April 1 [30][31] Question: What percentage does the company own of the IKE Tech joint venture, and how will expansion be funded? - The company is providing financial funding for day-to-day operations and expects strong interest from investors for future expansion [36][40] Question: Are there different age-gating technologies being developed? - Management confirmed that while other solutions exist, their technology is considered the most frictionless and secure, using blockchain for verification [42][43] Question: Have any countries implemented age-gating technology? - Currently, no countries have implemented it, but discussions are ongoing with regulators in several regions to push for mandation [49][50]