IM Cannabis Corp.

Good day and welcome to I Am Cannabis' second quarter 2023 earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the conference over to Anna Taranko, Director of Investor and Public Relations.

Thank you, Operator. Joining me today are IAM Cannabis Chief Executive Officer Oren Schuster and Chief Financial Officer Itay Vago. The earnings press release that accompanies this call is available on the investor relations section of our website at investors.iamcannabis.com. Today's call will include estimates and other forward-looking information and statements, including statements concerning future revenues, results from operations, financial positions, markets, economic conditions, product releases, partnerships, and any other statements that may be construed as a prediction of future performance. This information may involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied by such statements. Factors that could cause or contribute to such differences are described in detail in the company's most recent filings available on CEDAR Plus at www.cedarplus.ca and EDGAR at www.sec.gov. Furthermore, certain non-IFRS measures will be referred to during this call and the term non-IFRS adjusted EBITDA loss will hereafter be referred to as adjusted EBITDA loss. The company believes that the presentation of this non-IFRS information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. Any estimates or forward-looking information or statements provided are accurate only as of the date of this call, and the company undertakes no obligation to publicly update any forward-looking information or statements or supply new information regarding the circumstances after the date of this call. Please also note that all references in this call reflect currency in Canadian dollars. With that, it is my pleasure to turn the call over to Oren Schuster, CEO of IAM Cannabis. Oren, please go ahead.

Thank you, Anna. Good morning, everyone, and thank you for joining us today. Before going into the market details, I would like to start off today by taking you through the initial results of the transformation IMC have been going through since Q4 2022. We are singularly focusing on reaching sustainable profitability, which is supported by the two cornerstones we focused on in our last call in May. First, the strategic shift to focus on meeting patients' and pharmacies' needs Second, right sizing, restructuring to put the necessary resources behind the strategic shift. In Israel, during Q2, we continued the right sizing we started in Q1. We reviewed the entire business from the bottom up. We restructured to become a lean and agile business, able to respond quickly to the changes within our dynamic market. In the process, we reduced our headcount by 36% during the first half of this year. In addition to the restructuring initiatives, we focused on accelerating the path to profitability through active cost management and margin improvement. Our goal was to optimize to drive further efficiencies while maintaining or even improving the services we currently give our patients. For example, we restructured our direct to patient delivery service, improving delivery time for the majority of our patients while reducing costs by about 30%. The transition period and restructure we kicked off in Israel in Q1 has been challenging time for the team. I'm very proud of the effort they made, turning challenges into opportunities. identifying and driving the various initiatives to manage our costs and margins while maintaining sales. This enabled us to reduce our operating expenses in Israel by 42% versus Q2 2022 during this quarter. Taking a look at Germany, the German team refocused and restructured in Q4 of last year. becoming a lean and agile. By refocusing and restructuring, the flower sales in Germany actually accelerated in the six months after the restructure, growing significantly by about 35% in comparison to the six months before the restructure. We grew more than four times as fast as the market during this period. While the strategic shift and the associated rightsizing and restructuring in both Israel and Germany was not always easy, it enabled us to make significant progress toward our goal of sustainable profitability while maintaining sales. Our adjusted EBITDA loss was reduced by 83% versus Q2 of last year to $499,000. I've mentioned the importance of being lean and agile within our dynamic market several times, and I would like to use an example to show you why this is so important. In June, the Health Committee of the Knesset, the Israeli Parliament, passed a resolution to broaden access to medical cannabis, meeting the needs of the growing number of patients. Within the reforms framework, patients suffering from the following indication, metastatic cancer, epilepsy, Crohn's, colitis, dementia, autism from the age of five, MS, AIDS, Parkinson's, Tourette's syndrome, and palliative care will have access to medical cannabis with regular prescription. they will no longer be required to obtain a license in order to receive medical cannabis. Pending for final approval from the Ministry of Health, cannabis will also be able to be used as first line of treatment as opposed to last resort based on medical discretion. In addition, the export process will be simplified. By allowing the growers to separate the post-Harvard process from the growing process, we expect it will facilitate EU GMP certification. By easing the access to cannabis for more medical conditions and giving physicians the ability to use cannabis as first-line treatment, we believe the new legislation has the ability to accelerate market growth which is extremely important in the Israeli market as the growth has been slowing recently. IMC needs to be lean and agile to anticipate as well as to meet the needs of the new patient groups that will start to join the market on December 29, 2023. Additionally, we anticipate that the simplification of the export process will have the potential to accelerate the launch of our leading Israeli ground strains in the German market. In Germany, the first step of the legal reform, which we discussed in May, decriminalization, not-for-profit clubs, and private cultivation, was expected to be finalized before the summer recess. The legislation has been delayed and is now expected sometime later this year. Before moving on to the overview of the Israeli and German markets, I would like to underscore that the rightsizing and refocusing we have been working through since Q4 of last year was led by the strategic decision to exit the recreational Canadian market. This allowed us to fully lean into our heritage as one of the pioneers in the Israeli medical cannabis market. Our extensive expertise within our highly regulated local market gave us a clear advantage when expanding into Germany, another highly regulated medical market. The strategic pivot to focus on the two largest national medical markets is clearly reflected within our organization post-restructure. 24% of our employees are legal and pharmaceutical quality professionals, while sales and marketing also make up 24% of our employees. These percentages mirror the pharmaceutical industry, underscoring our position in the medical cannabis markets. I believe this is the cornerstone for our success and stability within these two similar markets. Now I will give you an overview of both the Israeli and German markets before handing over to Itay for the financials. In Israel, we are number one in the premium sector. We sell IMC-branded premium cannabis, as well as leading Canadian premium cannabis brands, for which we have exclusive distribution rights in Israel. In Q2, we launched our second super-premium, indoor-grown Canadian brand, Blood for 20, with two high THC strengths. These two launches further our market leadership within the premium segment. In addition, we launched the Pico Collection with four high THC flowers. With this launch, we are testing the resonance small but super premium flowers have within the mid-range market segment. We also focused on integrating and optimizing our call center, one of the largest medical cannabis call centers in Israel. We are tracking and improving KPIs such as average price, item per ticket, instant and future orders, on-the-job training, call simulations, and mystery shopper program, round out our call center initiatives. In Germany, we have started to take advantage of our fully licensed EU GMP packing facility and our GDP Logistics Center to drive an additional revenue stream, offering cannabis services to other players within the German cannabis market, from quality and EU GMP services to packing, warehousing, and logistics. We can offer end-to-end cannabis fulfillment services We have started slowly offering warehousing and logistics services onboarding four new customers within the first two quarters of 2023. The B2B services diversify our offering and income sources while improving the overall gross margin of our German business. Turning to our IMC branded flower business in Germany, the team focused on solidifying the two new high THC strains that will launch in Q1 of this year. Overall, while we were able to see the initial results of the shifting strategy in Q1, in Q2 we leaned further into our objectives of sustainable profitability. As Etai will explain while presenting the financial results, the associated restructure along with the active cost and margin management improved our gross margin and overall operating costs while maintaining sales leading to a substantial decrease of 83% in our adjusted EBITDA loss. I look forward to seeing the effect of the reform of the medical cannabis regulation we'll have on the market in Israel once physicians will be able to start writing cannabis prescriptions for the new patient groups on December 29 of this year. I will now turn the call over to our Chief Financial Officer, Itay Vago, who will now review our second quarter 2023 financial results. Itay?