MediPharm Labs Corp.

Ladies and gentlemen, thank you for standing by, and welcome to the MetaFarm Labs 2022 Third Quarter Financial Results Conference Call. Please be advised that today's conference is being recorded. Before we begin, please note the following caution respecting forward-looking statements, which is made on behalf of MetaFarm Labs and all its representatives on this call. The statements made on this call will contain forward-looking information that involve risks and uncertainties. Actual results could differ materially from a conclusion, forecast, or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusions, forecasts, or projections in the forward-looking information And the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in MetaFarm Labs' filings with the Canadian and provincial security regulators, which are available on the CDAR website at cdar.com. I will now pass the call to David Pittock, CEO of MetaFarm.

Please go ahead, sir.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for MetaFarm Labs' 2022 Third Quarter Financial Results Conference Call. Joining me on the call today are Keith Straughan, MetaFarm's President, and Greg Hunter, the company's Chief Financial Officer. I will address some of our strategic achievements and growth opportunities, and then hand the call over to Keith and Greg to provide more detail on the quarterly results. Our team is focused on driving revenue. both organically and through selective opportunistic M&A activities. Concurrently, we are executing against several priorities to optimize the business and drive towards profitability and positive cash flow. We are executing these plans while maintaining MetaFarm's mid- to long-term orientation and investments in the pharma opportunity. I want to acknowledge the challenging circumstances in the industry. As you are aware, there are several of our peer companies that are struggling with profitability and cash flow issues. Many are carrying significant debt. Raising funds through debt or equity is problematic in the current environment, and some companies are even facing insolvency. MetaFarm, by contrast, has a very strong balance sheet. We have no material debt, and with the proceeds from our Australia business, as of today, we have a cash balance of around $23 million. I am happy to share that through the Australian closure and significant OPEX and headcount reductions, we have successfully reduced our quarterly burn rate from about $6 million per quarter to around $4 million per quarter. Getting to profitability and positive cash flow requires strong execution on many fronts, addressing issues with gross profit, with OPEX, and working capital. I'm pleased to report that the team has made progress during Q3 on all of these initiatives, In October, we closed the previously announced sale of MetaFarm Labs Australia, allowing us to further leverage our GMP facility in Barrie. The sale generated just over 6 million Canadian in cash proceeds. We have already begun producing and shipping EU-bound volume from our Barrie Ontario facility. This sale enables us to deploy cash into our existing operations and against potential future M&A, while lowering operating expenses by about 4 million annually. Staying with OpEx savings for a moment, the headcount reductions we announced last quarter will be fully implemented by Q4. This will result in $3 million in annual savings starting this quarter. Regarding working capital, the finance team has done a good job of bringing rigor to the cash management cycle. We will continue to focus on tight cash management, and you can expect further improvements in 2023. With respect to gross profit, we have completed a line-by-line review of our entire product portfolio. and are in the process of increasing prices, decreasing costs, or even eliminating product lines that are not contributing to the bottom line. We are committed to ensuring that new product revenues are gross margin accretive and are not willing to generate volume for volume's sake. But we have good news on the revenue front. Our Canadian business continues to strengthen, and despite well-publicized market-wide challenges and Q3 headwinds, notably in the Ontario and BC markets, MetaFarm's provincial sales grew 28% quarter over quarter and 81% versus prior year. Speaking of growth, our team continues to make progress on all fronts, pharma and international medical, as well as the Canadian market. As a reminder, the core strategy is to position MetaPharm as the go-to pharma-grade cannabinoid API supplier, pointed towards the international pharma cannabinoid space. We will continue to drive growth and profitability to the international medical and Canadian businesses as a solid bridge to the larger but longer-term pharma opportunity. And the pharma opportunity continues to gain momentum. We continue to position the company to capitalize on the potential of new cannabis-based drugs. In the pharma space, we are creating relationships to provide API, active pharmaceutical ingredients, and finish good formats for future marketable drug products. In the world of research, we are becoming the go-to partner for fully funded clinical trials. Some of you may have seen the recent Globe and Mail article featuring McMaster University. McMaster commented that they evaluated over 50 Canadian cannabis licensed producers before they could find one that met Health Canada's pharmaceutical research requirement for GMP products. I am proud to say that we are the one qualified GMP clinically capable supplier that McMaster found, and that we have shipped clinical research materials to McMaster in Q3. We are also supplying API to several ongoing drug development and research efforts right now. We have partnered with an international pharmaceutical company to supply API to support an abbreviated new drug application filed with the FDA. This ANDA has now been filed. And while it will take time to develop, this is representative of the type of partnerships we will continue to focus on. If even one of the several pharma products in development were to be successful, it could completely change the face of this company. As we mentioned last quarter, in Canada, the government-appointed Science Advisory Committee has just released a number of recommendations in relation to over-the-counter OTC CBD health products. MediPharm participated in providing feedback to Health Canada on proposed legislation in relation to CBD. Our drug establishment license and natural health products, GMP licenses, and award-winning CBD product portfolio make us the only purpose-built cannabis facility ready to participate in this market evolution today. This report, if implemented, could make CBD available through Canadian NHP market channels. increasing access to a much larger base of consumers versus today's cannabis retail channels. Subject to how some of these recommendations are implemented, we believe that MetaPharm is already uniquely positioned to supply a full portfolio of NHP and GMP compliant products today. Again, our GMP pharma quality approach positions us today to be one of the few ready players to address this fast emerging market opportunity. Before I close, I'd like to turn to M&A briefly. Given our strong balance sheet with no material debt and 23 million in cash, we are actively positioning Medifarm as an acquirer of choice. We're taking a very focused approach here. There's many opportunities for companies urgently in need of partners, but opportunities need to fit our unique capabilities in the medical, pharma, global, and Canadian business segments. Needs to accelerate our moves to profitability. We're working with experienced advisors to identify and vet opportunities in Canada and internationally, and have already reviewed several potential transactions. We will be very prudent, both with our balance sheet and with our stock, as we actively look for deals that would further our strengths while driving returns for shareholders. So to summarize, while we have lots of work to do, we've made real progress and we are on the right track. I'm proud of the team's efforts during the quarter on the sales pipeline, on our revenues, on the decrease in our operating expenses and our work on the balance sheet. We are in a very solid cash position and are managing our burn rate down. We believe we have one of the strongest balance sheets amongst our peer group and, as a result, are in a very strong position to benefit from coming M&A and consolidation opportunities. We will remain focused on executing our strategy, which we expect will position the company to generate solid returns for shareholders. I'll now pass the call over to Keith.