If you would like to ask a question during the webcast, you may drop them in the chat box button on the left side of your screen. Please type your question into the box and click Send to submit it. At this time, it is my pleasure to hand over the session to Nicholas Sosiak, Chief Financial Officer at Cannara Biotech , who will lead the presentation. Sir.
Good afternoon, and thank you for the opportunity to present Cannara Biotech, a company we have built with passion and discipline since 2018, and one that continues to grow as a leader in the Canadian cannabis industry. Cannara trades under the stock symbol LOVE, L-O-V-E, under the TSXV, and is a leading vertically integrated cannabis company based in Quebec, operating over 1.6 million sq f t across two fully owned Quebec facilities. We focus on producing premium-grade cannabis at scale with a disciplined approach to profitability, innovation, and long-term value creation. As I will describe today, Cannara Biotech stands out as one of Canada's most profitable cannabis producers. We've delivered segment leadership, market share growth, revenue growth, industry-leading margins, and positive operating and free cash flow. We have a clean balance sheet with a manageable debt profile and near industry low interest rates.
Also, importantly, we have ample ability to expand within our existing footprint at well above average capital return rates and many unserved opportunities for growth within the Canadian cannabis market. I encourage anyone listening today to view the corporation's publicly available documents for additional information about material factors or assumptions used in the preparation of the forward-looking information and material risks and uncertainties involved in forward-looking information. My name is Nicholas Sosiak, and I serve as Chief Financial Officer here at Cannara. Since joining in 2019, I've been hands-on building this company from the ground up. Across every function, from cultivation to processing to finance, sales, marketing, and product development, it's been a personal and professional journey rooted in a shared passion for the plant and the business we're building. I also want to recognize our founder and our CEO, Zohar Krivorot.
While he couldn't join us today, Zohar has led Cannara since day one, founding the company and guiding it from startup to industry leader. Over the past five years, he's also taken on the role as master grower, developing a deep commitment for the craft and playing a key role in shaping the quality and consistency of our genetics and cultivation. That passion for the plant, the product, and discipline execution is what's carried us through the volatility of the Canadian cannabis market. We've seen meteoric rises and sharp corrections, but through it all, only a handful of companies have consistently grown share, revenue, expanded margins, and achieved real profitability. We believe Cannara is one of these emerging leaders in Canada, and we've done it by staying true to our core: premium product, operational discipline, and full vertical integration.
Today, I'll walk you through why Cannara is positioned to be a dominant and consistently profitable leader in Canadian cannabis and provide an overview of the strongest three and nine months for the financial results in our history. As of August 2025, we are currently the seventh largest producer in Canada by sales and second largest in Quebec, where we've built some strong brand loyalty. We also rank as the fourth largest producer by square footage nationally and the largest in Quebec with 1.6 million sq ft of hybrid indoor cultivation space fully owned and operated by us. Today, our annualized production run rate is approximately 50,000 kg. That's 50 million g, a milestone achieved this most recent quarter through extensive R&D and a significant unlock to our cultivation processes.
These improvements have resulted in a 26% increase in our capacity in the past year without adding any additional capital costs and an often already strong operating performance base. Our output is currently supported by 12 active grow rooms of 25,000 sq f t each at our flagship Valleyfield facility of its 24 zone capacity, as well as 11 smaller grow rooms totaling 22,000 sq ft at our Farnham site, which primarily functions as a temporary post-processing and packaging hub. When we are fully scaled, both of our facilities can double our capacity, going from 50,000 kg - 100,000 kg annually. Unlike most LPs, we can expand without the need for acquisition, requiring only minimal, highly accretive internal capital investment in our project and assets. Our vertical integration is a major advantage.
We have full control over our entire cannabis supply with a scaled in-house capability from cultivation to distribution, allowing us to ensure quality, drive efficiency, and protect our margins in a challenging market. We believe we built one of the strongest operational platforms in cannabis. Our ultra-focused boots-on-the-ground management has led to every level of our business, involving beyond the standard cannabis company, from our cultivation all the way down to our post-processing techniques. We're real operators with a real passion for the plant, constantly refining our techniques to separate ourselves from the pack. This is clearly evident in our 26% yield expansion increase this past year. The recent increase in our capacity prepares us to meet the continued unserved demand for our brands, which we will dive deeper into shortly, and to support Quebec's upcoming brand new vape category launch this November.
We were actually recently approved, pending final procedural steps, for five of the 25 total vapes Cannara Biotech used onboarded by the SQDC, which is the Quebec government for the November launch, giving us a 20% retail shelf space already for this brand new category. Launching this brand new category in our home province is a significant opportunity for Cannara to continue our leadership in this province as a leading house of brands and be Canada's number one premium vape brand, a category where we already own 23% of the national market share. Our success comes down to three key strengths: premium quality, scalable operations, and cost leadership. We deliver high-end flower and extracts at accessible prices without compromising on product integrity.
Our approach combines rare genetics, flavorful high cannabinoid strain profiles, and sophisticated cultivation methods like hang drying, hand trimming, and slow curing, all done at scale and without the need for irradiation. As you can see on this slide, our profitability isn't a one-off. It's part of a consistent multi-year trend. Since inception, we've scaled revenue, grown EBITDA, improved margins year- over- year while maintaining operational discipline. That's what sets Cannara Biotech apart. We've been net income positive since fiscal 2021, operating cash flow positive since fiscal 2022, and free cash flow positive since fiscal 2024. Our most recent Q3 2025 was the best quarterly financial results in the entire company's history. For the nine months of 2025, we posted $80 million in net revenue with a gross profit of $32.7 million.
Revenues are just shy of $2.2 million of our 12-month last year annual 2024 revenue count, where we reported $27.9 million in gross profit. We are already realizing $4.8 million more in gross profit in the first nine months of 2025 compared to the last 12 months of 2024. Our year-to-date gross margin has reached 41%, with steady quarter-over-quarter increases as we scale into improved yields and benefit from our increasing economies of scale. Furthermore, there are further margin improvements available in more automation equipment and improving efficiencies over various manufacturing processes. Adjusted EBITDA for our nine months of fiscal 2025 was $20.7 million, or 26% of our revenues, which is over $5 million more than our 12-month EBITDA in 2024. Our net income for the nine-month period was $9.8 million compared to $6.4 million of net income in the 12 months of 2024, an already 53% increase.
From a cash perspective, we've generated $17.2 million in operating cash flow and $12.3 million in free cash flow in the first nine months of 2025. Our performance over the last three years has shown consistent, scalable, and profitable growth, a rare feature in this Canadian cannabis sector. As you can see, we have almost fully eclipsed our fiscal 2024 numbers in the first nine months of 2025. This is before the full impact of our recent yield improvements and, of course, the Quebec vape launch, which will hit our financials next year. At our Q3 quarter end, we held $14.4 million of cash, up from $7.8 million from prior year ending cash balance, and held a working capital of $49.4 million. We currently maintain $84 million of current assets against $34.6 million in current liabilities for a current ratio of 2.4.
At quarter end, we had approximately 91.4 million basic shares outstanding, with less than 1.5 million shares outstanding over the previous 12 months and less than 3.8 million shares issued over the last three fiscal years. Basic shares issued over this period were largely related to employee stock conversion plans with no dilutive capital raises conducted since the issue of a $5 million convertible debenture raise with Owen Beck back in July of 2021. Cannara is over 50% insider ownership between our CEO and a member of our board of directors, which means Cannara is led by operators with skin in the game, fully invested in building long-term value alongside shareholders. Our top 10 shareholders own over 70% of the float, so we maintain a very, very tight float of friendly, communicative shareholders.
As of September 12th, our market cap is $157 million with a closing price of $1.73, representing a $134 year-to-date increase in our stock price. From March to August of 2025, we executed on five actions, achieving financial milestones that strengthened our balance sheet. Firstly, we repaid $1 million against a $5.7 million convertible debenture that we have with one of our directors, which matures in March 2028. A second partial repayment of $2.4 million will be due in September of 2025, for which we've already locked in a replacement convertible debenture with the same terms. We closed a sale of $5.5 million for an unutilized building that we owned and its associated land. As a result of the transaction, the proceeds were directly used to repay our principal term loan for Cannara, reducing our term debt from $34 million - $28.5 million, reducing our overall liabilities.
We completed an amendment to our existing credit agreements with Bank of Montreal, a leading Canadian bank, reducing our interest rate on our term loan and a $10 million line of credit, which matures December 2027, by 75 basis points, reducing our overall cost of debt to just below 6%. We achieved financial covenants that also eliminated a limited recourse guarantee, which also saved the company $375,000 in annual interest rates. Finally, we announced just recently a $10 million upsize to our existing Bank of Montreal credit facility. The funds will be used for our 2026 CAPEX project, the build-out of a new dedicated processing center at Valleyfield.
This investment, which includes additional drying, trimming, freezing capabilities, and post-harvest capabilities, will unlock the ability to activate additional growing rooms at Valleyfield and expand and give us a clear path for continued growth and expand all the way up to our 100,000 kg. We stand strong by saying Cannara maintains one of the cleanest balance sheets in Canadian cannabis, with ample cash flows to fund our expansion strategy and to service our debt positions and have no significant near-term maturities until December of 2027. With that, our market growth continues to outpace peers, delivering more than five times national industry growth, with a 41% surge in estimated retail sales year over year, the second highest amongst Canada's top licensed producers in sales dollars and the highest in % growth year over year, driven by premium quality cannabis offered at affordable prices.
This is made possible by a low-cost operation, scaling efficiencies, and access to Quebec's low electricity rates, which we'll visit a bit later on. Nationally, we're the seventh largest LP with a 3.6% market share. Within our home market of Quebec, we command a 12.8% share, up from 9.7% a year ago. That's a 32% increase, ranking Cannara as number two in market share in Quebec and only 130 basis points away from the top spot. This is especially significant in Quebec and sometimes overlooked by Canadian cannabis investors. Quebec is the only province in Canada where almost no promotional activity is permitted. With no sales and marketing leaders, growth here reflects product quality and product quality alone, a key signal of our ability to win across Canada.
Looking at our CPG portfolio, some examples of our success include in Quebec, we hold a commanding almost 70% market share of the infused pre-roll market, making Cannara an undisputed leader in this category. In premium vapes, we hold over 20% national category share, despite being one of the highest-priced product lines, demonstrating that we can win not on price but also on quality. That same vape performance we believe will give us an extreme position ahead of Quebec's vape launch this November. Finally, Tribal leads the premium 3.5 g flower segment nationally, now holding over 19% category share with pricing of $30 in Ontario, a disruptive value versus ultra-premium offerings over $45, often with a similar or less quality than Tribal. As shown, our brands are winning in some of the most competitive markets in Canada.
From infused pre-rolls to live resin vapes to dried flower, this performance reflects a clear brand strategy executed with real operational discipline. Tribal is our flagship house of genetic brand, built around exclusive genetic cultivars, high THC flower, and premium extracts. Thanks to our Canadian exclusive partnership with Exotic Genetics, Tribal brings proprietary genetics, giving us a unique edge in both dried flower and live resin products. Our second brand, Nugs, is our format-first trend-driven brand. It thrives in fast-moving categories like bulk flower and infused pre-rolls, and Nugs delivers premium quality at accessible pricing by leveraging exclusive high-yield genetics, excess Tribal inventory, and a full in-house manufacturing. For Orchid CBD, Orchid CBD is designed for those looking beyond high THC products and more of a balanced terpene-rich full-spectrum experience. Leading the way for this brand is our CBD Runtz, holding title as Canada's number one CBD flower.
Our market share success is built on strong inherent competitive advantages present within our asset base. We own and operate two state-of-the-art mega facilities here in Quebec, enabling full vertical integration across all of our processes without the need of third-party cultivation, extraction, or manufacturing. Our first original facility, Farnham, is dedicated to the operation of our nursery, our pheno-hunt process, post-harvest, and packaging. The facility is 650,000 sq ft , of which we occupy 200,000 sq ft today, and the balance of the building is currently leased out to two tenants, which currently generate us almost $4 million a year in rental income. Our flagship facility, Valleyfield, is our particularly significant asset. It is one of the largest purpose-built cannabis facilities in the country and the largest cannabis facility in Quebec. We acquired this facility in 2021 for just $27 million.
This was an extraordinary opportunity considering the highly, incredibly highly over-engineered facility this was built by during the overspending green rush that Canada had. This facility's original construction costs exceeded over $250 million, and this acquisition, acquired at a fraction of the value, has given us leading access to one of the best cultivation facilities in Canada with mass-scale, low-cost cultivation. 12 of our 24 Valleyfield rooms are now fully built out and operational, up from 10 rooms in fiscal Q2. The newly active rooms 11 and 12, after our breakthrough in cultivation just recently, will allow us to increase our capacity to an annual of 50,000 kg, representing an already 50% increase from where we were in 2024.
Activating the two additional rooms required a capital investment of $1.5 million, which will allow these rooms to generate over $10 million in annual net revenue at our current average selling price, returning their investment well within a first year of operations. We view our ability to turn on online additional cultivation capacity with very minimal CAPEX while generating immediate, incredibly strong returns on invested capital as an incredible competitive advantage present within our asset base. To prepare for our next phase of growth in fiscal 2026, we will initiate the first phase of construction on a dedicated processing center at Valleyfield to support additional drying, trimming, and post-harvest capabilities. This $10 million investment will unlock capacity to activate the remaining additional grow rooms left at Valleyfield, providing a clear and sustainable path for continued scalable growth. What sets Cannara Biotech Inc.
apart is our ability to activate capacity within a fully vertically integrated structure in lockstep with demand, delivering best-in-class returns on investment thanks to our minimal capital required to bring new rooms online. It's important to note the benefit of having each expansion occurring within the same facility, using the same team, the same systems, and same SOPs. This drives significant operating efficiencies and margin scalability, and most importantly, consistency as we grow. As we transition from the operational milestones we just discussed, the slide highlights the financial outcomes of that disciplined scaling capacity. Over many past quarters, we've delivered a clear and sustained growth trajectory, with net cannabis revenues tripling and gross profit before fair value adjustments reaching record levels. Gross margin has continued to expand, now at 44% for Q3 of 2025, demonstrating the impact of scale, operational rigor, and tightly managed cost structure.
Rather than chasing growth through external acquisitions or greenfield builds, we've remained focused on high-quality, eternally driven expansion that translates directly into shareholder value. You may ask why we are succeeding and why others may not. On top of our laser-focused strategy and prized assets, we have Quebec. Quebec has been and will always be part of our secret sauce. It's becoming clearer that licensed producers coming out of Quebec are emerging as profitable leaders. As Canada's second largest province with over 9 million people, Quebec provides us with home field advantage and access to some of the lowest utility and labor costs in Canada, which so happens to be close to 75% of our indoor cultivation expenses.
One of the most compelling benefits is Quebec's low electricity rates at just $0.059 a kilowatt, which is substantially lower than those in other provinces such as Alberta, where rates can climb as high as $0.141 a kilowatt. Quebec positions us and gives us a significant competitive advantage within our cost basis and enables us the ability to be disruptive with our pricing while still generating industry-leading margins and cash flow generation. Beyond low electricity rates, Quebec presents the highest barriers to enter the market, particularly with strict restrictions on sales and marketing. These combined factors, combined with the lack of retail data deals, make Quebec an ideal investment for Cannara's growth. While many Canadian LPs are expanding overseas out of necessity, we are actually thriving here in Canada, and this is by choice. The reality is that most can't compete profitably here.
They're losing market share, struggling to build brands, and failing to operate efficiently. Success in the cannabis industry is not simply rooted in scale, first-mover advantage, or capital market access. The history of overbuilt, over-capitalized companies losing market share to more sophisticated operators with better quality product is a testament to this. Success in our industry is a derivative of experience, knowledge, and most importantly, execution. Cannara has built our success from the ground up with an extremely pragmatic, supremely focused operational team backed by a leading commercial strategy and a truly premium product. Thank you for taking the time to learn more about Cannara today, and I'd be now happy to open the floor and take your questions.
Thank you for your wonderful presentation, Mr. Nicholas. If anyone has questions, please feel free to type your questions into the Q&A box, and Mr. Nicholas will address them now. It seems there are some questions in the Q&A section, Mr. Nicholas.
Yep. The first question is, will live rosin vape pricing be the same pricing as your live resin vape pricing? No, because it's a different output product, the yields and the quality of rosin versus resin is different. There will be a premium pricing on rosin vapes. Again, it will be the lowest priced rosin vape available in the premium category market. That's always our goal, to be providing a strong value proposition, both on the quality of the product and the pricing of the product. The second question is, of the vapes approved by Quebec, how many of them compete with the same premium input strategy as your live resin and live rosin vapes? Do you have an idea of how many are comparably priced with your options?
For Quebec, we don't have any information on what's going to be accepted other than we know that we have five vapes accepted and there will be a total of 25 available. Out of the 25, five will be online only and 20 will be retail. The majority of the sales volume will be in the 20 and we have five of that category. We don't know the exact strategy of our competitors. Everyone's holding their cards very tightly to their chests and haven't come out like Cannara . and told the market what kind of products we'll be releasing. We're confident in the value proposition, the quality of our products, and that's why we've already made public our five vapes. We'll see this November what comes out and how our vapes compete with the other vapes available on the market. We have another question.
How long will it take Quebec to onboard more than 25 accepted SKUs? Again, Quebec, we're not sure they're going to do a launch in November. I think first sales will start last week of November and scale into December. I believe they would monitor the market and decide from there when would be the next time that more SKUs will be accepted into Quebec. I would assume that within the first year, probably a new call. If not, shortly after the first year of vape launch, we could expect more than 25 SKUs. I have another question. How do you guard against oversupply affecting your margins? Very good question. I think that we're at a point in time where the market's shifted significantly in Canadian cannabis. If you asked us a question two, three years ago, it would have been a different story.
Most of the production capacity has died down. Basic economy 101, supply and demand. If you look at the overall supply of the Canadian market, that's continuing to scale up single digits. Nothing crazy, but it's still single digits on a $6 billion market. You look on the other side for the supply channel and you have international markets. There is Health Canada data, or Canadian data, that's showing that that market's increasing 40%, 50%, 60% year- over- year. Significant growth. All that supply is coming from Canada. You have the supply where you have companies reducing supply cultivation space, and then you have international, normal Canadian market increasing, and then international market also increasing a lot. I believe we are coming out of an oversupply issue.
Companies that are succeeding, which was always the case and why you would still succeed if you started the company five years ago or today, is how do you, to answer your question, how do you guard against oversupply affecting your margins is quality. Quality and consistency of the product. That's the most important. If you don't control your growth, if you're not the grower, if you're only sourcing cannabis to try to make your brand work, that's where difficulty and challenges come, where oversupply can really hurt you. In our case, we grow a product with proprietary genetics, with a proprietary process, with brands that have strong brand value, with quality and a really good value proposition on the price for the end consumer. That just increases and thrives for the demand of our product. I have another question.
Can you provide guidance for the quarter ending in August 31st ? Unfortunately, no, we don't provide guidance at this point in time. I could say there's market data available public about how Cannara is doing in terms of market share of the overall category. You can see from that, those, and what I presented earlier today in our August category, that our share is continuously increasing month over month, quarter over quarter. For us, every quarter that goes by, we're always looking to beat the next quarter. Hopefully that could answer your question. We have another question. What specifically allowed you to increase your yield in cannabis biomass yield that you announced earlier this summer? It's a great question again. It's the countless hours and hours of work that, one, our team puts in, but two, our CEO puts in.
Zohar Krivorot, as I said earlier in the introduction of my presentation, the CEO, the founder, the original, you know, creator of Cannara is also the master grower and is deeply involved in all aspects of the business. He's at our facility every single day, has built the process of cultivation with our team, our cultivation team, our irrigation team, our plant biologist team. We've gathered so much data over this time, and we're always tweaking, and we're always there. Zohar's always there, making sure that the garden gets improved. One, we're improving our yields, and two, we're improving our quality. There are many dials to turn. Due to the proprietary nature of what we're doing, I'm not sure exactly what we did to increase our yield. It's just, it's in the cultivation cycle.
We adjusted our SOPs and we did try different techniques in the whole cultivation cycle, from all the way from seed to the harvest of a plant. We were able to increase our overall yield because it applied to the whole cultivation SOP. We were able to see yields across the whole board. Going forward, we're going to continue seeing increases because we're going to continue trying different strategies and, most importantly, pheno-hunting. Pheno-hunting in cannabis is finding new genetics, which genetics propel product development and product innovation. We go through a pheno-hunt process finding new genetics. It takes about a year to find new genetics. Not only, one, does it help us innovate and find quality products and different products to differentiate ourselves, we can also unlock higher yielding plants.
Higher yielding plants will, of course, give me more cannabis and, of course, will reduce my cost of goods sold and ultimately increase my margins. It's part of the process, it's part of innovating, and that's why we have a really strong team innovating genetics to unlock further yield benefits, as well as unlock further innovation in our product portfolio. I think that's all the questions we have for today. Thank you again, everyone, for taking the time to listen to our story. Again, we are Cannara Biotech trading under the symbol LOVE, that's Love, under the TSXV. Thank you, everyone.
Thank you for your wonderful presentation, Mr. Nicholas. This is the end of Mr. Nicholas' session. Thank you to everyone joining here today. Thank you, Mr. Nicholas, again.
Thank you.
That concludes Cannara Biotech's presentation. You may now disconnect. For details on upcoming presentations, please refer to the conference agenda. Thank you for your participation, and we look forward to welcoming you to the next session.