Avicanna Inc.

So I believe we're live. We'll get started. Thank you for joining everyone. Good morning. Thanks for joining our Q3 2023 earnings call. This is also a corporate update. My name is Aras Azadian. I'm the CEO of Abicana, and I'm joined today by Philip Cardella, who's the CFO. Phil, do you mind just starting with the disclaimer, please?

Good morning, everyone. Hi, I'm Philip Carnella, CFO. Before we begin, I would like to remind you that there are several risk factors and other cautionary statements contained in our CDAR filings, including the information form for the year end of December 31st, 2022. We will not review these risk factors and other cautionary statements on this call. However, we encourage you to read them carefully. Various remarks on this call concerning expectations, predictions, plans, prospects constitute forward-looking statements or information. These forward-looking statements or information are subject to the risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward statements or information reflect management's current view only. We undertake no obligation to revise or update such statements or make additional forward-looking statements in the future, except as required by applicable laws. References may be made during this call to future-orientated financial information and financial outlooks, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as forwarded from statements or information. While we believe that such estimates have been prepared on a reasonable basis, reflecting best estimates and judgments, the actual financial results of the company may vary from the amounts discussed herein, and such variation may be material. During today's call, we may refer to non-IFRS measures such as adjusted EBITDA as not defined or reconciled in our earnings materials in the appendix of the presentation. These non-IFRS measures as defined by the company may not be comparable to measures with similar titles used by other companies. Certain information that may be mentioned during this call, including industry information estimates, is obtained from third-party sources, including public sources, and there can be no assurance as to the accuracy or completeness of such information. Although believed to be reliable management, it has not independently verified any of this data from third-party sources. Thank you very much.

Thank you, Phil. So going into the overview, this past quarter has been transformational for us. We've delivered record revenues of nearly $6.3 million, which we filed last night. We did so while stabilizing our consolidated gross margins at about 46%. This has resulted in our best financial performance in terms of EBITDA since our IPO, which was in 2019. And during this quarter, we acquired and integrated the medical cannabis by shoppers business, which we launched and launched the MyMedi.ca medical cannabis platform. We believe this has further solidified our leadership position as a truly medical company within the cannabinoid space. During the third quarter, we also made progress in our other business segments, particularly in Canada, where we increased the number of our commercial SKUs to what is now 27 and increased the number of our listings to what is now 131. Digging into MyMedi into more detail, MyMedi.ca is our new medical cannabis platform, which we launched on the 2nd of August this year upon the company's acquisition of medical cannabis by Shoppers Business from Shoppers Drug Mart. MyMedi was launched as Avicanna's new medical cannabis care platform that features a multi-branded, diverse, and scientifically curated portfolio of products from Avicanna and other select Canadian licensed producers. This platform also features pharmacist-led patient support programs, educational resources, all to facilitate the incorporation of medical cannabis into a healthcare regimen. Through MyMedi, the company provides medical cannabis access and support nationwide to tens of thousands of Canadian patients who obtain medical authorization and documentation. During the third quarter, we prioritized the launch and integration of MyMedi into our operations. This has led to MyMedi having contributed a major portion of the revenues with approximately $5.8 million during the third quarter alone. I will note some unique differences between MyMedi.ca in comparison with other medical platforms within the Canadian market. MyMedi.ca is a multi-brand platform, as I mentioned earlier. We cover 200 SKUs across 40 different brands. This is in contrast to the approach of most other medical cannabis platforms that generally limit the offerings to patients to their own specific products. Through IMEDI, we're offering training, medical education for products and services, resources to facilitate the incorporation of medical cannabis into healthcare regiments, including Avicanna's own Avicenna Academy and the Canadian Consortium of Investigation for Cannabinoid Syllabus, which is an accredited course. In addition to that, as I mentioned earlier, we're providing pharmacist-led but also bilingual patient support programs and a variety of specialty services. The special services include Veterans Affairs and a dedicated program for veterans, which includes adjudication and good faith coverage as well. Since the launch, we've transitioned over 96% of the patients from the Legacy Medical Cannabis by Shoppers platform to our new platform, and I've grown the actual patient base by approximately 10% during the third quarter. We've developed the infrastructure to offer insurance reimbursement services to patients through more than 15 private insurance providers, public institutions, including eight worker safety boards, including WSIB, where we are a preferred vendor. Overall, all insurance adjudication and reimbursement accounts for about 60% of the MyMedi platform's revenues. We've established relationships with over 50 specialized clinics and medical institutions, which combined includes about 1,500 healthcare providers. We've also enhanced the education of our own portfolio and inventory management that have streamlined access to Avicanna's own products, 27 own products, which now represent about 17% of my Medi sales. That's an approximate increase of about 40% since the last quarter. I'll expand on our medical or medical and other commercial channels within the Canadian market. During the third quarter, we progressed our commercialization efforts in Canada with particular focus on expanding our proprietary products, including the Rofido brand that's on the screen across several medical channels. Rofido is now being offered as a portfolio of 30 plus proprietary products, which includes a range of scientifically driven drug delivery systems, including oral, sublingual, topical, transdermal deliveries with varying ratios of cannabinoids. We are We were and are proud to be the first medical cannabis brand that's been made available for in-pharmacy dispensing in major Canadian hospitals, specifically Sunnybrook Cancer Centre. And we're proud to see continued access of Rofido products onto the Sunnybrook Cancer Centre and hospital through the MyMedi platform. Rofido products are also enrolled in a number of real-world evidence clinical trials with major Canadian institutions, including SickKids Hospital and UHN. In addition to Rofido, the full range of our 27 SKUs have now progressed across various channels. Overall, we've experienced growing demand for our proprietary cannabis 2.0 products and extended access to the select SKUs from our portfolio and to other medical cannabis channels, including Medifarms, CannaFarms, Canopy Growth, Spectro Therapeutics. This means our products are now available on seven different medical channels, medical cannabis channels, including MyMedi, which we believe represents about 50% of the registered medical cannabis patient base in Canada. We've experienced adoption, expansion of our proprietary products, also in adult use channels, which combined with the Canadian channels represents about 131 total commercial listings. We further progress our exclusive partnership or agreement with Viola Brands in Canada. We have now launched a total of 10 commercial SKUs under the Viola brand. This includes the Viola Drops, which utilizes Avicana's In-Fluid technology that delivers cannabinoids in a water-soluble nano-emulsion And we're happy to see these products available across several medical channels, including the Ontario Cannabis Store, which is the largest adult use provincial retail channel in Canada. Biola Brands, for those of you that don't know, is an American social equity brand that's owned by Al Harrington or launched by Al Harrington that we've successfully partnered with. These Canadian commercial efforts during the past quarter were in large part to the accomplished translation of our R&D efforts from the lab into the market through an efficient and asset-light manufacturing model. Through the past third quarter, we saw 27 of our finished products manufactured through six specialized licensed producers, with whom we also have supply agreements for various of their products onto the MyMedi platform. Quickly touching on some of our international progress. We've demonstrated our commitment to expanding our products and intellectual property internationally. We've now completed transactions in over 20 international markets, and our belief is that international opportunity legislation for cannabinoids will strongly focus towards medical and pharmaceutical applications rather than adult use. Our majority-owned subsidiary, Santa Marta Golden Hemp in Colombia, also has continued to deliver high-quality, accessible cannabinoid active pharmaceutical ingredients internationally for medical and pharmaceutical applications under our Arias Santa Marta brand. Since its establishment six years ago, Santa Marta-Goldenham provided Avicana with its own dependable economical source of API. And in the past three quarters or in the past quarter, we also saw the continued utilization of our own API into our own drug candidates and pharmaceutical preparations. More specifically, our 10% CBD pharmaceutical preparation, which is marketed or will be marketed under different brands, including Trunerex. Trunerex is now under review for marketing authorization with three regulatory agencies, which includes Anvisa in Brazil, Ecuador, and also Envima within Colombia, all through the last quarter as well. Phil, do you want to go through a deeper dive into the financials, please?

Yes, thank you. Okay, I will start this morning's financial update by reviewing the results and summarizing the MyMany.ca medical cannabis care platform and transaction. We began transitioning the operations of the Medical Cannabis by Shoppers platform at the end of May and completed the acquisition and transition to the new MyMedi.ca platform on August 2nd. To acquire this business unit, Avicana purchased all of the inventory from Medical Cannabis by Shoppers and entered into a two-year revenue share agreement. The inventory was purchased at fair value and is to be paid over six months following the August 2nd closing date. The transaction was non-dilutive, yet significantly accretive to the company as it required no initial cash payments to be made by Avicana and therefore enables us to dedicate resources on building the platform to hire and integrate new employees and to facilitate a smooth transition to minimize disruption to patients and disruptions on the continuity of revenue. A special word of thanks to all the hard work and experience from our team. We've achieved strong revenue in this past third quarter and a relatively small increase in our operating expenses due to their dedication. Our total revenue for the nine months ended September 30th, 2023 was $10.7 million, which included $8.5 million in revenue generated from medical cannabis by shoppers business during both the transition period and the subsequent to the launch of MyMany.ca. In the three month period alone, revenues totaled $6.25 million with MyMany.ca contributing $5.8 million of that. During the third quarter, the average gross margins for MyMedi.ca was 47%, and the company expects to see margin improvements largely due to the increase in sales in our own products through the platform, which offers significantly higher margin of opportunity than sales of products purchased wholesale. Currently, our own products make up 17% of the sales on the MyMedi platform. Outside of MyMedi.ca, our Canadian sales experienced a 34% growth compared against the same nine-month period in 2022. from 1.2 million to 1.6 million. And then almost doubling in units sold from 64,000 to 127,000 in those same periods respectively. The company has continued to drive cost control measures resulting in an increase in operating costs for the nine month period of only 23% and an adjusted EBITDA loss of 3 million compared against an EBITDA loss of over 5 million during the same period of 2022. During the last quarter, there was an adjusted EBITDA loss of 473,000 for the three month period compared against the EBITDA loss of 1.8 million for Q3 2022. This reflects our lowest quarter to date. We will continue to drive down costs with a goal based on our current rate of progress of being EBITDA positive by the first quarter of 2024. In conjunction with the EBITDA goal, we continue to work to strengthen our working capital position with the goal of achieving positive operating cash flows and limit our reliance on cash flows from equity and debt financings. We will achieve these working capital improvements by managing inventory to ensure we consistently have sufficient stock levels, but staggering purchases to ensure payments don't become simultaneously due. We will continue to manage our collections while adhering to vendor payments and maintain relationships and slowly chip away at our long-aged current liabilities. As of September 30th, 2023, from the beginning of the year, cash outflows from operations have significantly decreased to approximately 550,000 compared to 6.6 million in the same period in 2022. These improvements are not only due to the increased revenues in the MyMedi platform, but also to the quick and dependable receivables from insurance providers. Simultaneously, cash flows from financing were only 2.7 million compared to 7.6 million in 2022. As of the close of this past quarter, from the beginning of the year, we have conducted only one private placement transaction compared to a total of five private placement transactions in the prior year. Thank you for your attention, and I'll pass this back to Aras.

Thank you, Phil. The results of our financial and business performance this past quarter clearly validated the significance of this quarter for the company. We're optimistic, as Phil mentioned, about our capacity to further scale our business and our path towards EBITDA positive in the very near future. We look to the rest of 2023 and 2024. Our focus will be to continue to serve our patients in Canada, continue to work towards firmly establishing our position as a leading medical cannabis company in Canada, and also in parallel advancing our R&D intellectual property, including our pharmaceutical preparations towards establishing our pharmaceutical pipeline and the company as a biopharmaceutical entity. While the year is not yet finished, it's very easy to say that this has been the most successful and progressive year for us and thus far in our seven-year journey. As a founding CEO, as most of you know, I've witnessed every phase of the evolution of this company and I'm very proud of the team's execution and more so the resilience during the difficult past few years. I want to thank everyone who has had a part in this for their work, their commitment, and the unvarying support from many of you that are on this call. Thank you very much. I think that wraps up our call. Thank you for joining.