audience a better understanding of the business through a PowerPoint presentation and then questions with management. The discussion's gonna be led by Nicholas Sosiak, CFO, who's also joined by Zohar Krivorot, CEO. You should see the presentation in the webcast. If you'd like a copy, simply email me at Glen, G-L-E-N, @bristolir.com. We'll break for questions at the end of the formal presentation. As a reminder, this is not an earnings call, but rather a general introduction and overview presentation. We're only gonna take questions through the web portal and encourage questions to help you better understand the business. If you're listening over the phone, please access the web link that we sent earlier today to ask a question. Remember, you can submit a question using the text box within the portal at any time.
I'll ask the question on the air for everyone to hear, and then Nicholas or Zohar will then answer. I'm not gonna reference any names, but simply read the questions asked. As we have a fairly large audience today, if I can't get to your question online in time, and it is not yet been addressed during the call and can be, I'll come back to you by email. I'm not going to read the forward-looking statements, but I do state that they apply, and I reference them on page two of this PowerPoint. With that said, once again, thank you for joining us. Remember, this is fairly informal, and we do encourage questions to help you better understand the business and its growth path. And now I'll turn the call over to Nick to start his part of the discussion and presentation.
Thank you, Glen. Good afternoon, everyone, and thank you for joining us today as we dive into yet another successful quarter for Cannara. For those who are just learning about us, my name is Nicholas Sosiak, and I am the CFO of Cannara Biotech, in charge of the fiscal performance of the company, but I also oversee and direct our brand and product development, in addition to our sales and marketing strategies. Even more multifaceted than myself is the founder and main shareholder of the company, Zohar Krivorot, who joins us today but is often found at one of our facilities, overseeing the entire operation, from grow to packaging. As CEO, Zohar has taken a highly unique approach to building our business by developing a passion for cultivation and processing, leading our operational teams to strive for excellence as we continue to grow our capacity and capabilities.
Today, we are here with you to provide an update on our milestones and financial achievements for Q4 and fiscal 2023, as we continue to grow our market share and product lineup across Canada. We hope to provide you with a unique perspective, given our deep involvement and passion for the company. General disclaimers and forward-looking statements are located on slides 2 and 3 of the deck, which is available for download on our website, www.cannara.ca. Cannara Biotech is a vertically integrated Quebec-based licensed producer of premium-grade cannabis and derivative products at scale. We own and operate two mega facilities located in Quebec, spanning over 1.6 million sq ft, and sell our branded products, Tribal, Nugz, and Orchid CBD, within Canada, mainly to Quebec, Ontario, Alberta, BC, and Saskatchewan.
Being built in Quebec was not by accident, as Quebec is the province that has the lowest cost of electricity in the country, which also happens to be one of the largest cost inputs in indoor cannabis cultivation. We are focusing on growing and expanding our assets organically and have increased our production capacity by 50% since last year to over 30,000 kilograms of premium cannabis annually. Once fully built, our facilities are expected to output approximately 100,000 kilograms per year. We are Cannara Biotech, and we are publicly traded on the TSXV under the ticker LOVE, L-O-V-E, and on the OTCQB under the ticker LOVEF. We are hyper-focused on achieving our milestones and goals here at Cannara. Still, a relatively young company with many more milestones to be achieved.
Zohar had the idea in 2018 of creating a large-scale cannabis business here in Quebec and raised over CAD 55 million of capital to invest in our first facility, Farnham. It took almost three years from ideation to being able to sell our first gram of cannabis here in Quebec in February 2021. What really changed Cannara, though, and our scale, is the acquisition of the Valleyfield facility in June 2021. The facility was built by a previous licensed producer for over CAD 250 million, building a purpose-built, 1,000,000-sq.-ft., state-of-the-art cannabis production facility, and we were able to acquire 100% of this asset for CAD 27 million. That's just over 10 cents on the dollar. Following this acquisition, we are now able to scale into other larger markets in Canada, and as a result of this increased capacity.
We launched in Ontario in October 2021 with our three flagship brands, and as of today, stand amongst the top 10 producers in that province. We then launched in BC in September 2022 and continued to gain market share quarter-over-quarter in this province. Our most recent market that we've entered is in Alberta, receiving approval in March 2023 and officially starting sales in May 2023. From May to this October, we were able to penetrate the Alberta market share, gaining just over 2.3% of this market. We now have nine of our 24 grow zones activated at our Valleyfield facility, representing just over 80,000 plants, producing just over 30,000 kilograms per year, and we plan to open our tenth room in January 2024.
We are also backed by our financial partner, BMO, who has been very supportive of the cannabis industry and continues to invest in our story by recently upsizing our term and credit loan to a total of CAD 60 million. Now, with increased production capacity, capital, strategies in place for sales and marketing, innovative products and development, and new distribution networks, we are positioned for national success. We have superior products, lower cost of production, and as a result, retail selling prices, which provides for an extremely strong value proposition.... Cannara may be the sole licensed producer in Canada that is currently increasing its production capacity quarter-over-quarter, increasing its market share quarter-over-quarter, and entering new Canadian cannabis markets in addition to having international sales capabilities.
We just posted a record-breaking quarter across all financial metrics, including positive net income and positive cash flows. We strongly believe in the platform we have built here at Cannara, growing and scaling organically with demand to maintain consistency and quality of this delicate product. We are proud to be the ones owning, designing, and building all of our operational assets in a completely vertically integrated fashion, which gives us full control of full control of all the inputs and quality measures to produce the product we do here at Cannara. Our platform has proven to be amazing and will offer a huge value proposition to our consumers, which will in turn provide for high demand for our product. For our new and prospective investors, I will now take a couple of minutes to review our prized assets, the Farnham and Valleyfield facilities.
significant amount of time, effort, and money has been invested in these facilities to provide Cannara with our competitive advantage. Our Farnham facility spans an impressive 625,000 sq ft, with 170,000 sq ft dedicated to cannabis operation. The unlicensed space is leased out to non-cannabis tenants, earning an additional revenue stream. Within the Farnham facility, we will find 11 grow rooms spanning 22,000 sq ft total. These grow rooms are complemented by dedicated spaces for packaging and cannabis processing, ensuring a streamlined and efficient production cycle. Beyond cultivation, a significant portion of our facility is earmarked for propagation. These activities play a crucial role in servicing our broader operations at our main facility, Valleyfield. Beyond the numbers, Valleyfield is a symbol of Cannara's growth strategy.
Strategically, strategically positioned to meet and exceed the dynamic demand of the cannabis market. The Valleyfield facility is not just a space, it's a state-of-the-art environment designed for excellence in every harvest that we do. Featuring a staggering 24 independent growing zones, each measuring 25,000 sq ft and holding about 10,000 plants, allows us for precise and versatile cultivation practices. More particularly, our cutting-edge technology that employs advanced LED lighting for optimal growth conditions, our fully blacked-out roof, giving us complete control over lighting exposure, our automated tables enhancing the cultivation process for efficiency, and finally, the temperature and humidity control, giving us full control over the environmental factors that affect cannabis greatly. To provide some perspective on scale, when we compare our Valleyfield to Farnham, Farnham has 11 growing zones measuring 2,000 sq ft each, holding about 1,000 plants each.
Valleyfield has 10,000 plants in each room, making it 10 times bigger than a Farnham room. Each Valleyfield zone undergoes a meticulous redesign, which costs upwards to CAD 1 million to replicate indoor growing conditions. This includes growing without the sun, eliminating variability, and maximizing the consistency of our product. We plan to open our tenth grow zone in January 2024 and prepare two additional grow zones for activation towards the end of 2024, bringing us to 50% completion of the main area of the facility. Cannara's success hinges on three fundamental pillars: quality, accessibility, and brand culture. We produce premium-grade cannabis, combining top-tier quality with disruptive pricing, making our products accessible to a wider audience. Our grassroots brand culture fosters transparency and consumer loyalty, turning our consumers into actual brand ambassadors.
This trifecta of principles not only defines our approach, but will also shape our future direction. Our approach combines rare genetics, high THC and CBD profiles, and sophisticated cultivation methods, such as hang drying and slow curing at scale to ensure quality cannabis. To excel in this ever-evolving cannabis industry, constant innovation is just not an option, it's a necessity. We're at the forefront of this dynamic market, having forged a strategic alliance with 50-time award-winning cannabis breeder, Exotic Genetix. This collaboration is not just about importing expertise, it's about pioneering and setting a new benchmark in the Canadian cannabis sector. We've carved out a niche for ourselves by recognizing the distinct nature of cannabis consumers. Unlike those in traditional sectors like alcohol or tobacco, cannabis users seek an array of unique and personalized experiences, fueled by the diverse world of cannabis genetics.
Understanding this and shaping consumer trends is paramount, akin to the influence seen in the fashion industry. Our partnership with Exotic Genetix is crucial. It empowers us with cutting-edge insights into cannabis genetics and ensures we're always ahead, delivering trend-setting products to the market. Our second fundamental tenet is accessibility. From the outset, we have been committed to a pricing strategy that's as good as our products. In the increasingly competitive landscape of the cannabis industry, our edge lies in a sustainable business model that delivers a robust value proposition. Now, let's take a moment to explore Cannara's projected annual production capacity over the next five years, our pledge to meeting growing demand for premium-grade cannabis in Canada. The graph below, before you, illustrates our estimated annual production capacity in kilograms from 2022 to 2027.
As you can see, there has been and will continue to be a significant and strategic increase in production capacity over the coming years. Next, we will look at the factors that underpins Quebec's appeal at our strategic location for our operations, a crucial aspect of our continued success as a producer in this environment. Quebec is not just a location for Cannara, it's a strategic choice. Quebec offers a significant cost advantage for our operations. It has the lowest electricity rates in Canada at a mere 5.3 cents per kilowatt, compared to Alberta at 13.6 cents per kilowatt. As our Valleyfield facility is located in an agricultural development zone, we have even further reduced rates at 3 cents per kilowatt. This significant cost advantage directly contributes to the efficiency and sustainability of our operations.
In addition, the province's high barrier to entry have resulted in fewer licensed producers, making it a severe underserved market. Despite this, Quebec has the third largest cannabis retail market in Canada. These factors combined make Quebec an ideal environment for us, allowing us to leverage these advantages to enhance our competitive advantage. Now we'll pivot to our competitive advantages and how these factors play in our continued success. As I mentioned, time and time again, we uniquely combine a craft-like quality with industrial scalability done right. Imagine experiencing actual quality-grade cannabis done at scale, where every detail is meticulously crafted. This is Cannara. Our approach goes beyond just the product. It's about transparency, revealing every significant detail, from harvest dates to terpene percentages, giving consumers an unfiltered view into the quality of our product that they receive.
Our community responsiveness is also key. We listen, we engage, we innovate, constantly in a dialogue with our consumer base. This has led us to launch initiatives like our Discord community, fostering a deeper connection with our consumers and sales reps on the ground. Finally, our thought leadership is recognized through prestigious awards, a testament to our relentless pursuit of excellence and commitment to customer satisfaction. Just last week, we took home four unique Kind of the Year awards for our brands and products, voted by retail owners and sales reps nationwide. Moving on to a deeper look into our flagship brands, Tribal, Nugz, and Orchid CBD. They are each uniquely tailored and cater to a specific niche in Canada's cannabis market. Our value proposition is strategically positioned for growth amidst the market evolving dynamics.
We're witnessing a shift here as former market leaders experience a decline in market share, accompanied by a widespread reduction in prices across every single category. This trend is challenging for those producers who haven't streamlined vertical integration and a compelling value proposition, leading them to one thing: undercut prices, often at a loss, to maintain market relevance. This price-centric environment is where our focus is sharp and clear. We're intent on capturing the ever-increasing value-driven segment of this market. As of today, our brands together offer an impressive selection of 97 unique SKUs, reflecting our commitment to innovation, diversity. Our product range continues to grow each quarter, driven by our team's relentless pursuit of new and inventive offerings that leverage the unique properties of the new genetics that we find. For us, our...
and our consumers, Tribal is not just a brand, it's a journey through cannabis and its varied experiences. Tribal represents a house of cannabis genetics, putting genetics to the forefront while providing an unparalleled experience in quality and flavor. Tribal offers each genetic in four standardized formats, including dried flower, pre-roll, live resin, vape carts, and live resin dabbable extracts, including offering accessories and apparel. Our brand, Nugz, is rooted in the core cannabis culture, showcasing the principles of plenty, quality, and value. Nugz offers an extensive range of products, including 3.5 gram packages of dried flower, bulk options of 14 and 28 grams, large format pre-roll packs, vape carts, accessories, and an assortment of solventless extracts. Our commitment to variety is evident in our rotating flowers and product formats, ensuring that consumers always have something new and exciting to look forward to.
And finally, our third brand, Orchid CBD, serves as a distinctive niche in the cannabis market, emphasizing a harmonious balance between and wellness-oriented experience. Orchid CBD proudly showcases its signature, signature strain, CBD Runtz, available in both 3.5-gram packages and pre-roll formats, along with oil tinctures and vape carts. Having explored our brands, now we will look at our market and our growth strategy. In our opinion, the outlook for the Canadian cannabis industry is exceptionally promising. As the world's second largest legal cannabis market and leading exporter, Canada has cemented its position as a global cannabis powerhouse. With sales reaching CAD 4 billion last year and projections setting the market on course to hit CAD 7.6 billion in 2026, the growth trajectory is both clear and compelling.
We are deeply invested in this burgeoning market, with a strategic focus on enhancing our Canadian operations. We are extremely confident in succeeding in our domestic market. We are committed to expanding our market share, production capabilities, and continuous innovation. For 2024, we look to continue on execution of our five key objectives. Our first focus is operational excellence, ensuring consistency and repeatable quality products while improving our cost efficiencies, which will in turn continue to improve our gross margin. In addition, we plan to open one more 25,000 sq ft growing zone in January of 2024, and prepare for two more by the end of calendar 2024. For us, innovation and genetic releases are key to market expansion and success as it drives consumer demand.
For 2024, we will be innovating quality products that ensures we use all byproducts of the cannabis plant. We will also continue investing in our 9-month-long Pheno Hunt process to uncover the latest genetics for the Canadian market. With increased production, new innovations in genetics, in addition to a push on the sales and marketing front, we expect to substantially increase our market share in our key markets and plan to enter a new market in 2024. Prior to 2023, our investment in sales and marketing was minimal, relying heavily on word of mouth and organic growth to grow our revenues, to the point that Cannara has not yet invested a marketing dollar in any in-store display ads. We are now planning to activate these strategies to further increase our market share.
Finally, we are hyper-focused on our financial performance, ensuring we are building a sustainable, long-lasting business. For the new year, we look forward to substantially increasing our already positive Adjusted EBITDA, net income, and operating cash flows. Quarter-over-quarter, Cannara has focused on increasing its cannabis supply, aligning with its increasing demand in lockstep. During the third quarter of 2023, we activated our ninth growing zone four months ahead of schedule. For Q4, we increased our cannabis net revenues from CAD 14.9 million to CAD 17.2 million, an increase of 15%, and sold over 5,900 kilograms of cannabis, compared to 4,582 kilograms in Q3 of 2023.
Our quarterly cannabis production reached 6,600 kilograms, which is only about 700 kilograms more than what was sold in the quarter, signaling to us to open another grow zone as more production is required to meet demand. Vigilance in optimizing labor and operational costs remains a top priority for us. Continuous improvement strategies are in place to enhance gross margins and ensure sustained resilience, especially amongst ongoing price pressures. However, despite this, we continue to report strong gross margins at 38% before fair value changes, and 54% after fair value changes. As Valleyfield continues to stay up the scale, fixed costs are actually gonna stabilize. In addition to our cost improvement strategies, we will further see increases in our gross margin in the quarters to come. We are committed to innovation, driving the creation of novel products for 2024.
The success of our company's 2023 endeavors, launching over 70 new SKUs in 2023, serves as a testament to our dedication to this objective. In 2023, we focused on growing our product catalog outside of Quebec, increasing our SKU count in Ontario from 29 to 84 SKUs by the end of December 2023, which is a 190% increase, in addition to BC climbing to 15 active in-market SKUs. In May of 2023, we entered the Alberta market with only 3 vape SKUs, and as a result of the success of these SKUs, quickly climbed to 35 active and available SKUs. Finally, in Quebec, subsequent to our year-end, we received approval for 20 additional SKUs, almost doubling our SKU count from 2023.
This increase in SKU count is expected to further penetrate our share in the Quebec market, and we will continue to do the similar strategies for 2024. As I mentioned earlier, uncovering the latest genetics is directly correlated to the success of our product launches. We strongly view genetics as a means of brand differentiation. We have set a strategic goal for fiscal of 2024 to release a total of five new genetics across our flagship brands. Tribal has already released two new genetics in Q1, Jigglers and Drip Station, totaling the current lineup to eight active new genetics. We anticipate the unveiling of two more new exciting genetics under Tribal in summer of 2024.
Nugz plans to introduce one new genetic, in addition to a unique genetic blend, and under our Orchid CBD brand, we are gearing up to release a new CBD-dominant genetic in 2024, catering to the growing demand of CBD-focused products. As of the fourth quarter of 2023, Cannara was the third-largest licensed producer in Quebec by market share, capturing approximately 8.5% of this market. Although this represented a slight decrease from the previous quarter, I'm happy to report a positive shift thereafter. The decrease is a result of not introducing any new SKUs in Quebec during 2023, while the province introduced over hundreds of new SKUs in market. Although we look to increase our market share quarter-over-quarter, I actually believe this is a testament to the quality and resistance of our product lineup.
With 20 new SKUs launching in October 2023, our market share in Quebec has already begun to climb, reaching 8.8%. Within Canada's second-largest market, Ontario, Cannara has made significant strides. In the third quarter of 2023, our market share in Ontario was 2.7%. By the fourth quarter, this grew to 3%, marking an 11.1% increase. This growth has positioned us as the ninth-largest producer in Ontario's cannabis network. Our growth trajectory in Ontario is particularly notable in specific product categories. For instance, in the vape market, our market share rose from 2.7% in Q3 to 5.2% in October 2023, a 92% increase.
Additionally, we have consistently maintained around a 10% market share in the concentrate category... Next, I turn to Alberta and our remarkable growth in Canada's second-largest cannabis market. Our entry into this market in May of 2023 marked a significant milestone. From May to August, Cannara achieved a phenomenal growth in market share, skyrocketing from 0.1% to 1.2%. The key driver of success in Alberta is our strong value proposition, and in October, we further increased this market share to 2.3%, a 92% increase. As Cannara advances into 2024, our robust financial performance remains a priority and expected to continue to increase positively quarter over quarter. We have maintained our 10th consecutive quarter of positive Adjusted EBITDA, in addition to increasing our positive cash flow and net income.
As we continue to gain market share, we will expect our efforts and strategy to the Cannara platform to result in in substantial positive changes across all financial metrics. I will now finalize and take some time to review our latest quarterly and year-end results, which showcases our record-breaking financial performance. In Q4 of 2023, our net revenue soared by 53%, reaching CAD 18.3 million, a significant jump from Q4. This upward trajectory continued throughout our fiscal year, with net revenues for the full year increasing by 60% to a total of CAD 57.6 million. Our gross profit before fair value adjustments was equally robust. We achieved CAD 6.9 million, a 45% increase from the same period of 2022, and for the full year, we rose that figure to CAD 21.1 million, a 49% increase.
We also had held steady on our gross profit percentage at 38%. Our operating income showed extraordinary growth as well. We saw an increase of 553% in Q4, reaching CAD 5.8 million, and a 4,400% increase for our fiscal year, totaling CAD 11.9 million. These figures clearly demonstrate our operational efficiency and our strategic focus. We earned net income of CAD 4.6 million, an 80% increase, and for the year, CAD 7 million, a 201% improvement. Our earnings per share also increased from 0.3% to 0.8%, and we are cash flow positive, posting positive operating cash flows of CAD 2.8 million for Q4, a significant turnaround from negative cash flows last year.
For the full year, we brought home positive cash flows of CAD 5.4 million, compared to negative cash flows in 2022. Lastly, our working capital as of August 31 is CAD 30.5 million, positioning us very well for future growth and investments. These figures are not just numbers. They are a reflection of our strategic acumen, operational excellence, and commitment to growth. They represent a solid foundation for future success and a compelling reason for you to consider investing in us. When comparing Cannara to its peers, although we may not be currently holding up to top revenue position, we are number one in our peer set for revenue growth, gross margin percentage, EBITDA, and net income margin.
As evidenced by today's deck, with increasing production capacity, market share in existing markets, and entering new markets, we are confident that we will become leaders in the Canadian cannabis industry. It's widely understood that the success of a company hinges on the strength of its executive team. We are confident that our C-suite is not just skilled and experienced in executing our strategic plans, but is also deeply and passionate and committed to this business. Supporting us is a dedicated team of vice presidents for each department, sharing our enthusiasm and commitment to Cannara's success, each bringing a wealth of experience and special knowledge in their respective areas. With the help of our team, we have increased our employee headcount and contracted workers to a total of 461 employees as of August 31st, 2023, to support our operational growth.
Our board continues to provide overall excellence in governance. We have built a sound board of directors holding even further knowledge and overall industry experience in cannabis, real estate, pharmaceutical, IT, and finance. Between management and its directors, insiders hold over 50% of the company, which makes everyone vested in the success and future of Cannara. In today's presentation, I've charted the course of Cannara's ascent in the competitive landscape of Canadian cannabis. Our aggressive pursuit of growth is yielding an expanding market share and establishing us as a forerunner in our industry, distinguishing ourselves with unparalleled progress in operational income, surpassing that of any publicly traded Canadian cannabis company. Our financial robustness is anchored by solid gross margins and disciplined cost management. With complete ownership of our large-scale cannabis facilities in Quebec and a product lineup tailored for premium segment, we are setting industry standards.
As we look to 2024, we are not just anticipating growth, we are actively laying the groundwork for it. Our financial health and strategic investments today are designed to secure a legacy of prosperity for Cannara and our investors. Thank you for your time today. We'll now open the discussion to answer any and all of your questions. If any question goes unanswered, please email me, nick@cannara.ca. Thank you again.
Super. Thanks, Nicholas. Great presentation. We'll now start taking questions, and we have quite a few in the queue already. Again, to our audience, just use the question box within the webinar portal to go ahead and type your question. Nick, you or Zohar can answer, you guys could decide on your own. First question is, what are you seeing in terms of change in the overall Canadian cultivation capacity? What percentage of sales and percentage of production is branded versus wholesale, and what is your cost of production per gram?
Yeah, so I mean, what we're seeing on an overall market condition for production capacity is that it's definitely scaling down. We've seen a bunch of production sites close down and never reopen. There's a lot of M&A going on, and we feel that from the B2B market. This year, the demand for B2B cannabis has substantially increased from last year, and that's because our competitive set has shied away from actually growing their own cannabis and sourcing it from third-party suppliers. However, as the reduction of production capacity is reducing in Canada, the source of quality cannabis is also decreasing.
So, for us, B2B is not a huge percentage of our market, it's really just for some product that didn't have a home through a SKU, due to timing issues. So, probably less than 5% is B2B. So we're, and that's probably gonna decrease in the future as we continue to scale operations and focus on the retail side. So I think, you know, our strategy of focusing on production capacity is key here, as the industry in total decreases production capacity, especially production capacity towards premium quality cannabis.
Okay, thank you. I think the last part of that question, and I don't know if you publicly disclosed this, so if you haven't, you don't need to, but what is your cost of production per gram?
Yeah, absolutely. So we're in the cost of called the flower is ranging between CAD 0.50 and CAD 0.70. And then, all-in costs can range between CAD 1.20-CAD 1.60.
Okay, thank you. Next question: Can you go more into the Valleyfield acquisition and how you were able to acquire it for so cheap? Can you also help reconcile the dollar value in your plant, property, and equipment on your balance sheet?
Zohar, you want to take the acquisition?
Yeah. So the TGOD, the previous owner of the facility, reached out to us through BMO, I believe.
They asked us if we would be interested in putting a bid, and so we drove down. It's about an hour drive. We walked through the facility. It was my first time seeing the facility. I was pretty impressed. We put in a lowball offer, thinking that we're probably not gonna get it, but it was an all-cash offer. Luckily, we got the call saying that, you know, if we can show them approval funds, "It's yours." We acquired it in June, and we right away started completing. It was about 90% completed, but there was still 10% that needed to be done. They were planning to grow in soil. We grow in a different substrate, so there was a few tweaks that needed to be done in the actual rooms.
And that took a little bit of time and money, but like Nick, Nick said earlier, I think we're up to nine rooms, and the tenth room is gonna be open in January. So,
It was a distressed asset for TGOD in terms, and we were right, at the right time, at the right moment, with a cash offer .
And I guess a key also in Quebec, when an agriculture asset is built in Quebec, to sell it to another owner, the other owner needs to be also a Quebec resident. So most cannabis companies and offers that were offered for the building were from foreign investors or outside of Quebec, and we were built in Quebec. So we were, you know, the right offer, the right timing, which led us to that acquisition.
Okay, thanks. The last part of that question was if you could help reconcile its dollar value on, I guess, your balance sheet, the PPE portion of your balance sheet.
Absolutely. I mean, it's right now, if you look at our PPE sheet, it reflects the CAD 27 million that we spent for it, plus any improvements that we've invested into the rooms. So it does not reflect the CAD 250 million that's been invested prior. That's how the accounting rules unfortunately work. But yeah, so there, in my opinion, there is hidden value beyond the PPE on our balance sheet of this asset that's only valued at CAD 27 million, when the total cost of production was CAD 250 million.
Yeah, and that was CAD 250 million total cost of production back in 2018. I mean, if you would have to go and acquire 70 acres of land and bring in all the power and start from scratch today, I would assume that would be close to CAD 350 million to build a facility like that. So, we got lucky.
Yeah, excellent. Next question. What is your view of the cannabis industry in Canada versus the U.S.? And I guess I'll add to it, 'cause I'm sure it's gonna come up later, what are your plans in terms of the U.S. market and how you potentially fit in it?
I mean, the U.S. right now, they're still trying to figure out themselves how they want to proceed. So we're taking the sort of wait approach, see how it pans out, before investing any human capital or money, or anything. We don't think it's gonna happen anytime soon, at least not for the next 12-24 months. So I think Israel, Germany. We can probably see a better business for those countries than the U.S. But like I said, we're still looking. We're still scanning every time there's a new press release, or every time there's a new change, we're monitoring it, but-
Our focus is in Canada. We feel that there's a, as I mentioned earlier, a CAD 7.6 billion market in Canada alone, and the competitive landscape is primed for us to succeed in Canada. We don't want to be the first movers in the U.S., just the first movers in Canada. We saw what happened. We definitely have our eyes on the U.S. Our partnership with Exotic as well allows us to understand the different markets in the U.S. as well. So we're keeping our eye out, but our main focus is Canada.
Okay, thank you. Next question is, do you see competition intensifying, I guess, for overall business performance, versus the original, I guess, market that was chasing growth?
I mean, look, the competition right now, whatever players you see today on the market, those are the players that we got to fight against or compete against. We don't see any newcomers that are popping up just because you can't raise capital in this business, and it takes a lot of money to start a cannabis, at least at scale. So we pretty much know who our competitors are. We, we know how to fight them, if you want to call it. But, as far as any new ones, I think what you see is, is pretty much what the landscape's gonna look like in the next 12 to 18 months.
Okay, thank you. And I guess to carry on from that as the next question is, what are the challenges that you see your competitors having? What are some of your own challenges? And then maybe differentiate with some of your strengths.
I think any competitor that is growing at scale has challenges because it's not easy to grow cannabis at large scale just 'cause there's so many different factors. Rooms are big, climate control could be challenging. So I think they have the same challenges as we do. Our advantage is the facilities that we acquired was purpose-built with the latest and greatest technology catered for cannabis, where a lot of our competitors were tomatoes and cucumber greenhouses that got converted to cannabis. And I think they're seeing the most issues right now with humidities. And I visited a few of my competitors' gardens, and it's not pretty.
So yeah, I think the biggest challenge to growing scale is managing your garden efficient and automated as possible, 'cause you know, it's big rooms. There's a lot of things that can go wrong. So that would be the biggest challenge for a large-scale producer like Cannara. And we differentiate ourselves from our competitors because of the facility and a little bit of what we've implemented as far as technology goes, to keep up those rooms with redundancy and efficiency.
I also think, you know, the passion that Zohar puts into every day, going into the facility. I haven't seen any CEO, you know, in this market or any other industry, as vested into the operation as he is. He knows it from planting the seed to the final packaging. He's there at the facility every day. So the excellence, the swiftness, the ability to change on demand and find problems and fix them, like, we're never gonna avoid problems, but it's being proactive on those problems. And having Zohar at the facility every single day, finding those problems, you know, the day later, fixing them, saves a lot of cost, saves a lot of headache, and really elevates our platform on succeeding.
So there's a lot of competitive advantage we have. Mainly, it's, you know, if we didn't have the assets, we wouldn't be able to to do what we do. But having this access to this asset, having Zohar on the team, having our, the rest of the team, you know, just as passionate, going, you know, from the branding to the product development, to the trim team, to everyone involved in the operation, they see the success, so that just pays in dividends, as we continue.
Okay, thank you. I've got, I guess, a few more market-related type questions, that, and this one sort of covers a lot of it. You've already put up the slide regarding sort of the Canadian market and its growth, but what do you, as a management team, see in 2024, 2025, within the Canadian cannabis industry? How does that include M&A, and how do you see Cannara playing a role in that?
So I think we still see quarter-over-quarter growth in all the provinces. It's slowed down a little bit, but I still think as innovation comes in, as regulations change, that you know we're gonna meet those numbers. But it's also a huge market for us at this point as well. And you know we can see the market stagnate and we will still see significant substantial increases in our market share. So we're not relying on the growth of the market although we're confident in its growth. We're just relying on our platform to be able to capture the market share based on our product offering. So that's really what we see.
Could you repeat the second question, Glen?
... I think you captured it, so-
Okay.
Yep. Next question, it's, it's more, I guess, financially related. How much does it cost to get a grow room up and running? I know you mentioned this, but maybe repeat it. How many grow rooms do you currently have running, and how many do you expect to open over the next 12-18 months?
We have, in Valleyfield, we have 24 growing rooms. Each room is 25,000 sq ft. We are currently 9 rooms in operation, the 10th room going up in January. There is a cost involved to turn on a room, mainly because the previous owner, although he never grew anything in that facility, was designed to grow in soil, and we grow in a different substrate, Rockw ool. So there's a few changes that needs to be done. Cost can vary up to CAD 1 million per room. But then once that money is spent, that room is, can do 4 harvests a year and, obviously pay back for that CAD 1 million fairly quickly.
So that's really, as far as timeline, we have 1 room going up in January, 2 more rooms by the end of the fiscal year, and that will complete the west site, and then we have another 12 room on the east site that are planned for 2025 and 2026.
Okay, thank you. Without giving guidance, how should investors think about your margin profiles, your net income, and your EBITDA going into 2024 and beyond, compared to your 2023 results?
Yeah, absolutely. So 2023, again, was a growth year. We ended. We started 2023 with 6 rooms, and we grew to 9 rooms, by, I believe it was April of 2023. And when you turn on a room, it doesn't mean that you're getting the revenues right away. There's a 3-month gap, 3- to 4-month gap between when you harvest and you get the revenue. So, just the timing of us not even changing anything, we're gonna see increased, you know, across all financial metrics is because now we have a full 9 rooms activated and producing as of the new fiscal year, compared to almost 6 months in 2023.
So, definitely the continued, you know, it's we're doing this in lockstep, so every quarter, every quarter for us is almost a rearview mirror for us. We're geared for 2024 to increase and show increases quarter over quarter. And that's just a factor of getting, you know, the rooms from 6 to 9 to then 10 to 12, increase, opening up marketing strategies and sales, strategies in, in our key provinces, opening a new province. So yeah, I think, I think investors should expect just increases all across the board. We're just at the beginning.
Okay, thank you. Again, this may be a guidance type question, so, don't answer if you don't feel comfortable with it: What would your revenue totals reach if you actually did achieve that 100,000 kilograms of annualized cultivation output? Maybe give a range. I don't know how you want to answer that.
I think it's easy math. Just look at our revenues today, today, look at our production capacity today. Again, there's probably a factor in because the CAD 60 million that we produced in 2023, again, is not a full active 9 rooms. So, yeah, I would just say, look at the kilograms produced. I think in disclosing our financial statements also is our average sale price per gram, which hovers around CAD 3. So you can kind of do the math from there.
Okay, thank you. Do you think you could get to a point where you're growing beyond the 100,000 kilograms in cultivation? And if so, what does that require in terms of CapEx?
Yeah, that's too far in the future to answer. We definitely have the facility. We have the land, the facility. We can build pretty much an identical copy-paste of our current facility on the land that we already own. But we... That's not, you know, that's definitely past the 2027, 2026 years, so we're not, you know, we're... In this industry, we got to think of growth, but we got to think of near-term growth. So, you know, objective by objective, we're gonna get to that 100,000, but, and if there's more demand, if U.S. allows for exporting, Canada as a hub for Germany, Israel, so eventually, we can also turn on exportation to other countries, which we already have the license for.
We just choose not to, to do that avenue right now 'cause we're focused on Canada. It's more of a plan B for us. So yeah, no, we definitely have the ability to scale beyond the 100 kilograms. We have the Farnham facility, too. That's only the main 170,000 sq ft of the 625,000, but that's in the future to be determined, as we build this business.
Okay, thank you. Next question. Your discipline is unique in the industry. How should we think about your capital allocation? Do you have a target hurdle rate or other metric?
We right now, we're really focused on CapEx spend to generate revenue. We know that every million dollars that we spend into Valleyfield turns on a room, which produces 800 kilograms per harvest, and we have 4 harvests per year. So then you can take my CAD 3 figure as well and figure out how much revenue that comes out per each room. So the capital investment of CAD 1 million to generate, you know, 8x of that is definitely what we're focused on, 2023, 2024, 2025. We have the platform to invest, so there's not gonna be big capital expenditures on other businesses or other avenues other than really focusing on opening more grow rooms as we scale up demand.
Okay, thank you. What are some asset areas where M&A might be interesting for you?
To be honest with you, we're not really actively looking. We don't think there's any real assets out there in Canada that make sense for us today, at least. I think what we purchased in 2021 from The Green Organic Dutchman, it's what's gonna put us on the map. It's an hour away from our current facility, but I get calls at least 3-4 times a month saying, "Please buy me out, or bail me out, or take it for free." And there's really nothing good out there right now. So we're vertically integrated. We do our own extraction, we do our own pre-rolls, we do our own infused , we grow our own cannabis. Maybe edibles one day, I don't know, but right now there's nothing on the horizon that I would consider looking at.
Okay, thank you. Can you talk about why you're only expanding one extra grow room in 2024, according to your last, I guess, to this PowerPoint?
So, you know, it's not just one extra grow room, it's a big grow room, right? It's 25,000 square feet. It's big. So, I think that's where we're comfortable with, and we don't wanna overbuild either. So, we've decided to just go with one for 2024, and then two-
Yeah, just to clarify, it's one for fiscal 2024, which ends in August.
Right.
Then we're planning to turn on two more by the end of 2024, which will get activated beginning 2025 so .
For 2024, it's actually three rooms, which is the same as what we did in 2023. It's just stretched out over a longer period of time.
Yeah, calendar year versus fiscal year. So, yeah.
Yeah. Again, that's our plan. Depends on how market opens. You know, we have the full flexibility of scaling faster than we planned. So, this is just up to just making sure... Our goal is to make sure that we're building a sustainable business, a lucrative business that's earning cash flow. And we don't want to put the cart before the horse, so it's really making sure... We can turn on, within two months we get, or three months we get 800 kilos of production. So it's not a timing, it's just a timing thing, to be able to turn on a room, and cater to the demand. So again, very similar to what we're doing in 2020, three for 2024, it's just 'cause of the fiscal... Our fiscal year end is, August versus December.
Okay, thank you. Can you talk a little bit about your current debt situation, your relationship with BMO, and anything else you want to cover on your debt, I guess, around the debt topic?
Absolutely. BMO is probably the only bank right now in the space that's really supporting and supporting the cannabis industry, invested in the cannabis industry. They recently upsized our term loan and credit line from CAD 50 million-CAD 60 million, providing us, you know, more working capital to reinvest into the grow rooms. So for us, they're a great partner. We're meeting all the covenants, we're paying our principal, we're paying our interest. And it's just, you know, it's working well. We're not in a position right now to need extra capital or go to the markets for extra capital. We have the operational cash flow to reinvest into the business for 2024.
Okay, thank you. I have probably five or six questions around this topic, so I'm just gonna try to consolidate everything into sort of one statement. Can you comment a little bit about your share buyback strategy, what you purchased in 2023, and how you think about it, if you expect to continue this into 2024?
Yeah. So, for us, we decided back in earlier this year that the amount of shares that we're trading within the public markets was too high. So we initiated a share consolidation. And usually with share consolidations, there's some sort of, you know, some negative connotation, 'cause it's usually done in scenarios where the company is not performing well. In our scenario, we were performing well, and I think the share consolidation was helpful to have a revamped look at our stock price and our share count. So the NCIB was really to basically soften any fallout, to soften the impact of that share consolidation.
As well as we feel as management, that the share price was significantly and is still significantly undervalued, which is why Cannara initiated that NCIB. But we have to remember that our... the amount of cash that we have, the ROI that we're able, near-term ROI, that we're able to generate from a dollar of cash, is much more greater because of our operations. So it's much more greater to invest right now into our operation than it is to buy capital. So it was a two-pronged strategy. We had- we definitely set an amount to the market, and we had a strategy of just making sure that that the stock was supported, but on the other side, making sure that-...
Any dollar that we have is reinvested into the business to to have a greater ROI. So which is why we didn't achieve the full the full amount of our NCIB. But I think it worked well. It supported the stock. It's over now. Will we do it in the future? Depends on the market and and and how we plan. We still feel that it's still undervalued, but again, we're we're hyper-focused on building our business in 2024. So the the thought of, you know, spending dollars on our actual business and capital investment is definitely, you know, stronger than than an NCIB at this point in time.
Okay, thank you. I guess on the same topic, a different question: would you consider an automatic share purchase plan to continue purchases through a blackout period or a substantial issuer bid?
Well, we were doing that under the NCIB, so we would have, we had a, a share buyback program, during blackout periods. We would have to do another NCIB, issue a new NCIB to do that, or issue an equity raise, but we're not in the market right now for, for requiring cash flows. And again, we feel our stock price is undervalued, and we just need to continue our focus approach on, on building the business, showing quarter-over-quarter growth, waiting for the markets to de-exhaust themselves and turn around and, and start looking at opportunities in the sector.
Great, thank you. You're currently leasing out some of your real estate to non-cannabis tenants. Do you have any plans to expand that type of business and take advantage of the unused space while you build out your capacity? Is it possible, I guess, with the facilities outfitted to run cannabis operations, and what cash flow, if applicable and meaningful, could leasing provide?
I mean, right now, we have two tenants in Farnham that are paying us a lot of money in rent, and we have no plans to terminating their lease or kicking them out. We occupy about 175,000-200,000 sq ft out of the 625,000, and there's really no plans for us to expand above and beyond that right now. And then we have a support building that's built with the facility in Valleyfield, that's another 150,000 sq ft that could potentially be turned into drying rooms. And then we can move all our drying and trimming to Valleyfield and then use the space in Farnham, where we used to have drying and trimming, to potentially other packaging or stuff like that.
The short answer is, we have no plans to tell our tenants to terminate their lease and leave.
Or, or expand. I mean, we right now are expanding. The Farnham is fully utilized, both on the non-licensed and the licensed. Again, we're focused on Valleyfield, so after 2027, you know, that's up in the air. On the Valleyfield side, you know, we're hyper-focused on building our own operation. We don't believe in leasing out our space, our cannabis production space to other producers. That could lead to a lot more problems than what the rental fee will bring back. So, because of the cost of acquisition of Valleyfield, we're able to support this asset and the costs relating to this asset, with, you know, only 30% activated.
So we have that luxury of just, you know, opening zone by zone and not requiring to lease it out. So that's our focus. I mean, is there opportunities in the future for our leasing business? We're always open. That's the whole point of that, is to extrapolate value from any asset that we have as much as possible. But our main focus is on using those assets for cannabis.
Okay, super. I'm just doing a time check. It looks like we're right on the hour. I've got a couple of good questions here in the queue. Well, there's still quite a few questions, but I think most of them have been answered in one way or another. And to our audience, if your question has not been answered, we'll definitely come back to you by email. But a couple of questions here in our remaining time. Can you talk about, you're currently listed on the TSX Venture, what your plans are to uplist to the TSX?
Yeah. It's been a big year for 2023. You know, scaling, we're really focused on operational excellence. But yeah, that is the next natural step, is to look at the greater exchange, get more visibility, get greater liquidity. It's a process, so it's something that, you know, it's on our radar.
Okay, thank you. If Cannara's Q4 profitability can be understood as its forward run rate, and your expected improvement in 2024, the stock appears seriously undervalued. Can you, I guess, give your reasons for why you think that is, and, and I guess actions that you are taking to correct this?
It's the market condition. As you know, it's been several years of companies making false promises, not living up to their strategy, their business strategy. Investors losing a lot of money on these companies and strategies. And now there's this investor fatigue in the cannabis industry, right? Where no one's looking. In my opinion, that's and just like in any market, that's the time where investors start, should start, looking and evaluating the companies that will succeed, when no one's looking. So I think right now, the whole market as a whole, no one's looking. You know, it's uniform across all stock. If you look at our stock value two years ago, four years ago, where it is today versus, you know...
80% of other cannabis companies were nowhere near the downtrend they are. But we're stuck in the same industry that they've created. So I think it's just a matter of time, just like how markets evolve. There's ups and downs, and we need to show- and that's why we're hyper-focused on operational excellence, 'cause that's the only way I can show investors that we know what we're doing, is by printing out proper financial statements that show value for our consumers- sorry, for our investors. So that's definitely our focus for 2024 is to grab that attention. Is focus on printing those financial statements, better financial statements so quarter-over-quarter.
And then, you know, try to gain visibility, you know, through different avenues, like uplisting and trade shows and conference shows and webinars like this. But again, the investor fatigue is hard. But I think, you know, as we stick to our story, as we prove out what we're doing, you know, time will tell.
Super. Thank you for that. To our audience, again, if your question has not been answered yet, and you want a specific answer to a question, just either email myself, Glen@bristolir, or Nick. Nicholas, Zohar, I'll give it to you to give any closing remarks that you want for the remaining folks that are still on the call, and then we'll end the call.
Sure. I mean, look, it's as far as Cannara, and Nick said we're super focused, price, consistency, quality. My job in the garden is to make sure we grow the best cannabis derivative, every format category that we do. Nick's job is to, you know, make sure the brands and the financials are there, and people support us, and we're visible. And together we act as a family, you know. It's we're 400 employees, and we know each everyone, and everybody knows us. You know, it's we run it like a family business, although we're a public company. So yeah, focus, focus, focus, and let the numbers speak for themselves.
I echo Zohar's thoughts. We're in this for the long run. We built a platform that has taken five years of just grinding from the top all the way down to the bottom, grinding and building. So we're super excited to share this with potential investors and our consumers across the Canadian cannabis industry and look forward to 2024. Thank you, everyone, again for joining us. Thank you, Glen, for hosting this webinar, and I'll see you on the next one.
Perfect. Thank you. Thanks, Nick. Thanks, Nick. Thanks to our audience, and this concludes this presentation.
Thanks, guys.