Aleafia Health Inc.

Good day, and welcome to Aletheia Health fourth quarter 2020 and year-end results conference call. I would now like to turn the conference over to your host, Nick Bergamini, VP of Investor Relations. Please go ahead.

Thank you. Joining me on the call today are Aletheia Health CEO Jeffrey Benick and CFO Benjamin Ferdinand. This morning, Aletheia Health filed on CDAR its audited financial statements and notes thereto for the year ended December 31st, 2020, and its associated MDNA. All comments to be made on this call today should be taken with reference to and are qualified in their entirety by those documents. Please note that this call contains forward-looking statements or information and reflects the company's current expectations, estimates, projections, assumptions, and beliefs about future events and financial trends. that they believe may affect the company's financial condition, results of operations, business strategy, and financial needs. By their nature, forward-looking statements involve known and unknown risk, uncertainties, and other factors that may cause our actual results, performance or achievements, or other future events to be materially different from any future events, performance, or achievements expressed or implied by such forward-looking statements. Given these risks and uncertainties, shareholders and prospective purchasers of the company's security should not place undue reliance on these forward-looking statements. Further, they speak only as of the date on which that statement is made, and except as required by applicable law, the company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which that statement is made. This call also contains non-IFRS financial performance measures, which the company believes provides users with relevant information regarding operations and performance. These measures are not recognized or defined under IFRS, and as a result, they may not be comparable to the data presented by other issuers. Jeffrey, over to you.

Thank you, Nick, and thanks everyone for joining us today. It's exciting to see how far we've come over the last two years. 2019 saw us build out our three production facilities. During 2020, we secured the licenses for these sites, while immediately shifting our focus to the development of differentiated cannabis products and brands. It's in the fourth quarter that we are just beginning to see the results from this groundwork we've laid over the last two years. Putting things in perspective, our net cannabis revenue has increased from 600,000 in 2018 to 11 million in 2019 to 41 million in 2020. Capping this off is our strongest sales quarter to date, with 14 million in net cannabis sales. This was driven by growth through all four channels of international, medical, adult use, and domestic wholesale. But what's most important is that 2020 saw us commence what is a major expansion of our product portfolio. As a result, we're beginning to see what will be a significant recalibration of our revenue, away from domestic wholesale and towards the sale of packaged cannabis products. I know Ben will discuss in greater detail, but I'll touch on the non-cash accounting write-downs, which clearly impacted the net loss in the quarter. But it's important to note that these are accounting non-cash, non-recurring write-downs of intangible assets or goodwill. These have no impact on our cash profitability, and they are not associated with the winding down of any facilities or other physical assets. It's something that many of our peers have also gone through. And with that behind us, we are in a great position for continued growth. Removing these non-cash items, we've realized our first annual positive adjusted EBITDA of $10 million on the year compared to a loss of $20 million in 2019. With the licensing bottleneck removed, our team did an excellent job developing new products, including some highly differentiated formats. Since the launch of vapes, we've delivered a total of of new nine new product formats or significant line extensions. Since October, we've released and launched a total of 31 new SKUs, many of which are sold in both the medical and adult use markets. Given where we started six months ago, this is quite an achievement from our team and something that really speaks to their executional capabilities. During Q4, we launched high-potency CBD oil, 510 vape cartridges, and cannabis-infused sublingual strips. Though sales of these products in the out-of-use market only commence in December, we are already beginning to see their impact as we saw a 500% sequential increase in recreational sales over Q3 driven by these new formats. In Q1 of this year, so far, our sublingual strips, Kinslips, were our top-selling product format, and CBD50 was our top-selling individual product SKU. And recently, we launched THC Soft Chews, our first cannabis edible format. Of even greater importance, though, is that much more recent expansion of our dried flower portfolio. This obviously remains the most important category in Canada by a wide margin. This month, we commence shipments of several new dried flower SKUs, including pre-rolls from our outdoor cultivation harvest. Rounding out the product front is the imminent launch of our wellness line, Noon & Night. This is a highly differentiated brand that features formats that are familiar to consumers in non-cannabis form, but which often are not yet available to Canadian consumers. We've received purchase orders for the first two formats under this brand, including Omega-3 soft gels. We're now at the point where we have an incredibly diverse product portfolio. but the consistent theme is that we focused on areas of key competitive advantages, whether that is through novel formats, quality, or pricing. On the international front, we've also made some significant headway. In December, we announced that our Niagara greenhouse was deemed EU GACP compliant. Why that's important is that means flower grown at our greenhouse is eligible to be exported to European Union and other international markets, with the caveat that it must be dried and shipped from an EU GMP certified facility. And we have a strategic partner that does that for us. Since that time, we have sent batches to Germany for stability, quality, and cannabinoid testing, and they were all deemed to meet EU GMP standards. We're now in the final stages of beginning exports to the EU, which securing the customary import and export permits. Similarly, we received an export permit earlier this week, for our greenhouse flower to be exported to the UK. Obviously, the international channels are filled with red tape and take time, but most of the heavy lifting is done, and we're excited to commence our first exports to new countries in Europe in the near future. We also completed our largest international shipment ever to Australia in Q4. We may start to see more regularity in orders from our customers there as we immediately received a larger purchase order in January and are just waiting for the export permits now. Lastly, I will touch on our agreement with Unifor, Canada's largest private sector union, which has 315,000 members. For American shareholders, Unifor would be the equivalent of the UAW in the US. The purpose of this agreement is to gain insurance coverage for medical cannabis for union members and their immediate family members. Unifor has shown great leadership in advancing this cause, which is fundamentally about patient access to medicine. We now have one of Canada's largest employers signed on to the program, with their employees and family members soon becoming eligible to spend $500 per year per person on medical cannabis through their insurance plans. We are working on and hope to have many more large employers sign as we build out this program. The Unifor opportunity truly plays to the strengths of our medical cannabis ecosystem, from products to physician consultation and scheduled home delivery. The team has worked incredibly hard to launch it with our first employer, and as we demonstrate its potential, this is another area that will truly differentiate us from our peers. Ben, over to you.