Financial Data and Key Metrics Changes - Total revenue for fiscal year 2025 declined from $151.9 million to $127.5 million, a decrease of $24.4 million compared to fiscal year 2024 [12][13] - Gross profit decreased to $22.7 million from $29.8 million year-over-year, with gross margins at 17.8%, down from 19.6% [14][15] - Net loss for fiscal 2025 was $39.2 million, compared to $40.8 million in fiscal 2024 [16] Business Line Data and Key Metrics Changes - Revenue from the European market increased by $8.8 million or 13.6% to approximately $74.1 million [14] - North American revenue fell to approximately $32.6 million from $63.1 million, primarily due to the strategic pivot away from cannabis [14] - Revenue from Asia Pacific decreased to approximately $12.3 million from $17.6 million [14] Market Data and Key Metrics Changes - Revenue from other countries increased by $2.6 million to $8.5 million, with the majority of sales coming from South Africa [14] - The company reduced net accounts receivable by over 21% year-over-year, marking the first decline in its history [7] Company Strategy and Development Direction - The company is shifting focus from the cannabis sector to the higher-value nicotine sector, aiming for sustainable long-term growth [4][11] - Investments in manufacturing capabilities in Malaysia are being scaled up, with plans for up to 80 production lines [5][6] - The company is pursuing breakthrough technologies like ICE-TECH and GMASH, which are gaining traction with major tobacco companies [5][9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing uncertainty and financial challenges in the cannabis industry, emphasizing a focus on quality over quantity in customer relationships [7][31] - The company is optimistic about its international nicotine ODM business, which is gaining momentum after a slower start [9][10] - Management expressed confidence in the potential of their age verification technology and its regulatory approval process [24][26] Other Important Information - The company undertook significant cost optimization measures, resulting in an estimated annual savings of $10.2 million [8] - The appointment of Jay Yu as the new CFO reflects the company's commitment to strong financial stewardship during its transformation [10] Q&A Session Summary Question: Key milestones for age gating technology approval - Management indicated that the FDA's review of the component PMPA application is expected to be expedited, but the timeline for the next steps is uncertain [23][24] Question: Approval timelines in other markets - Management is optimistic about potential approvals in other countries, with at least two countries moving faster than the U.S. [26] Question: Details on receivables provision - The large provision of $22 million was a cumulative effect across multiple customers, not tied to a single client [34] Question: Future of cannabis revenue - Management believes that Q4 2025 represents the bottom for cannabis revenue, with expectations for new customer acquisition and product development to drive future growth [47][48] Question: Feedback on UK supply agreement - Initial feedback from the UK ODM client has been encouraging, with a backlog of $18 million tied to this customer [39] Question: Tariff landscape and supply chain diversification - The company is seeing increased interest from brands looking to diversify supply chains, which may lead to the consideration of a third facility in Malaysia [42][44]

Financial Data and Key Metrics Changes - For the third quarter of fiscal 2025, total revenue decreased to approximately $26,200,000, representing a decline of 12.7% or $3,800,000 compared to $30,000,000 in the same period last year [17][21] - Gross profit for Q3 was approximately $4,800,000, down from approximately $6,100,000 for the same period last year, with gross margins decreasing to 18.2% from 20.4% [19][21] - The net loss for Q3 was $10,900,000 or $0.19 per share, compared to a net loss of $5,900,000 or $0.11 per share for the same period last year [21] Business Line Data and Key Metrics Changes - Revenue from North America decreased by $3,600,000 or 28.9% to approximately $8,800,000, largely due to new tariffs on Chinese products and the transition of manufacturing to Malaysia [18] - European revenues slightly declined by $300,000 or 2.9% to approximately $13,200,000 [18] - Asia Pacific revenues decreased by $800,000 or 21.4% to approximately $3,000,000, primarily due to reduced demand in South Korea [18] Market Data and Key Metrics Changes - The company reported a focus on higher quality customers, which has impacted revenue but is expected to improve accounts receivable collection [19] - The pending increase in tariffs on Chinese-made goods has affected product pricing dynamics, but the company anticipates less impact due to manufacturing in Malaysia [8][18] Company Strategy and Development Direction - The company aims to become a leading manufacturer of precision dosing technology for global nicotine companies, with significant progress made in securing manufacturing licenses and optimizing pricing strategies [6][10] - The interim nicotine product manufacturing license in Malaysia is a key part of the global business strategy, allowing the company to market its capabilities externally [9][10] - The company is transitioning to FOB factory pricing to enhance flexibility and strengthen market position [8][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about converting consumers from the black market to compliant products with the approval of new technology [28] - The company is focused on innovation, regulatory compliance, and financial stability to capitalize on market opportunities [24] - Management acknowledged the challenges posed by tariffs but highlighted successful renegotiations with customers to mitigate risks [47] Other Important Information - The company has launched new products, including the Sprout device for cannabis and the Vault platform for vaping, aimed at setting new industry standards [13][40] - The Malaysian facility is expected to feature 80 production lines, significantly expanding manufacturing capacity [10][34] Q&A Session Summary Question: Impact of FDA regulations on illicit vape supply in the U.S. - Management believes the new technology will convert consumers from the black market to compliant products, with estimates suggesting the black market could be worth between $5.5 billion to $70 billion [28] Question: EU disposable vape bans and supply constraints - Management is optimistic about benefiting from the EU's shift away from disposable products and does not foresee supply chain constraints due to the new manufacturing capabilities in Malaysia [32][33] Question: Customer reactions to new hardware devices and tariff alternatives - Management reported positive reactions to the new Sprout and Vault products, emphasizing their focus on safety and performance [40][43] - The company has successfully renegotiated contracts to FOB factory pricing to help customers manage tariff impacts [47]