Good day and welcome to IM Cannabis Second Quarter 2022 Earnings Conference Call. Today’s conference call is being recorded. At this time, I would like to turn the conference over to Maya Lustig, Director of Investor and Public Relations. Please go ahead.

Thank you, operator. Joining me today are IM Cannabis Chief Executive Officer, Oren Shuster and Chief Financial Officer, Shai Shemesh. The earnings release that accompanies this call is available on the Investor Relations section of our website at investors.imcannabis.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 maybe constructed as a prediction of future performance. The 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 SEDAR at www.sedar.com and EDGAR at www.sec.gov. Furthermore, certain non-IFRS measures will be referred to during this call. The company believes that the presentation of this non-IFRS information provides useful supplementary data concerning the company’s ongoing operation 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 on this call reflect currency in Canadian dollars. With that, it is my pleasure to turn the call over to Oren Shuster, CEO of IM Cannabis. Oren, please go ahead.

Thank you, Maya. Good morning, everyone and thank you for joining us for our second quarter 2022 earnings call. We are very pleased with our financial results and operational execution in the quarter particularly compared to our peers, have recently performed. Before I go into the overall and regional details, I would like to describe the big picture we are creating. We are a multi-market cannabis company with the leading position in each of the three largest federally legal markets in the world, Canada, Israel and Germany. Our strength lies in our ability to work as one unit to meet and exceed and customer demand and regulatory requirements in the different markets in which we operate. Our global supply chain and regional expertise set us apart from our peers and we will apply that to upcoming growth opportunities, particularly in Germany. This is by far one of the largest and the most exciting opportunities we have in front of us. The German government has suggested that it considering the legalization of cannabis. When it comes to recreational cannabis consumption, our estimates suggest that the German market could be 2.5x greater than that of Canada. Not only is Germany an economic leader in the European continent, but it is also a social and cultural leader. As such, we believe Germany legalization efforts could encourage similar initiatives in other European countries such as Italy, Spain, France and the UK. To say that the European cannabis market potential is immense would be an understatement. To have the early-mover advantage is the key to successfully grabbing a large market share in the continent of almost 750 million people. We are in a favorable position to scale up rapidly and in the untapped European market. And here is why? We have built a seamless international…

Thank you, Oren. We continue to operate from a position of financial strength. As we continue to grow our revenue base, we are uncovering a variety of operational improvements that will allow us to scale sustainably. I will now provide an overview of our second quarter for 2022 financial and operational results. Revenues increased 114% to $23.8 million in the second quarter of 2022 compared to approximately $11.1 million in the second quarter of 2021. The increase in revenues is primarily attributed to an increase in the quantity of medical and recreational cannabis products sold as well as from the higher average selling price per gram, the company realized from its portfolio of premium branded cannabis products in Israel and Canada. Gross profit before fair value adjustment increased 830% to $5.6 million in the second quarter of 2022 compared to $0.6 million in the second quarter of 2021. Total operating expenses were $22.6 million in the second quarter of 2022 compared to $10.1 million in the second quarter of 2021. The increase in operating expenses were partly due to restructuring expenses of approximately $9.2 million, of which the vast majority are non-cash expenses associated with the closure of the facilities in Israel and Canada as well as the growing corporate activities in Israel and Canada following the company’s acquisition in 2021. Net loss was $18.98 million in the second quarter of 2022 compared to a net loss of $5.01 million in the second quarter of 2021. Basic loss per share in the second quarter of 2022 was $0.27 compared to basic loss per share of $0.1 in the second quarter of 2021. Diluted loss per share in the second quarter of 2022 was $0.3 compared to diluted loss per share of $0.23 in the second quarter of 2021. Non-IFRS adjusted EBITDA was negative $4.6 million in the second quarter of 2022 compared to an adjusted EBITDA loss of approximately $5.7 million in the second quarter of 2021. Cash and cash equivalents totaled $5.86 million at June 30, 2022 compared to $34.05 million at June 30, 2021. In Q2, we begin to see our consolidated operation yield substantial synergies as reflected by our immense year-over-year revenue growth. We expect our operational enhancement to be increasingly visible as we move forward. And as we have previously noted, we have reached positive adjusted EBITDA in Israel and a positive adjusted EBITDA on a group level. Finally, I would like to point out that while ours is an opportunistic approach to deploying capital, we currently do not have any new acquisition in the pipeline. Thus, we do not foresee any significant capital expenditures in the short-term. I would like now to turn the call back to Oren for closing remarks. Oren?

Thank you, Shai. This is an important time IMC growth trajectory as we aim to rapidly capture market share while fully optimizing the components of our global model. By pursuing efficiencies while also introducing new and sought after premium brands in different markets, our goal is to position ourselves as a leading consumer packaged goods company serving the cannabis industry. Our focus on operational competence is already yielding benefits that we believe will be more visible as the year unfolds. As mentioned, during our call last quarter, we are building our track record of success in Israel and product category leadership in our brands in Canada, while leveraging our distribution infrastructure in Germany. We are very well positioned to emerge as the major player in the European premium cannabis market. The opportunity in front of us is truly remarkable and we are working diligently to seize it and to generate long-term value for our shareholders along the way. With that, I hand the call over to the operator to begin our question-and-answer session. Operator?

[Operator Instructions] Our first question comes from the line of Aaron Grey from AGP. Please go ahead.

I just want to confirm you guys, can hear me?

Loud and clear. Please go ahead.

Fantastic. Thank you. Just want to get some further color in terms of, the Israeli market going forward, we are hearing a lot from the LPs about, there being too much products in the market. It talks historically about the demand for indoor. So, just want to get your own color trend of how you are looking at the Israeli market, specifically on the go-forward under the current regulatory and medical conditions and how you see the growth opportunities, both overall and as well within IMC? Thank you.

Hi, Aaron. Thank you for the question. It’s Oren Shuster. What we see in the Israeli market is that on one hand, there is over-capacity I would say of indoor grow of greenhouse grow in Israel. On the other hand, significant demand for premium indoor products. We launched in this quarter, the ultra premium segment in Israel actually. What we have seen is a very high demand for the premium and ultra premium products that we are importing and the acceptance in the market is amazing. So, I think that there is over-capacity of low quality products and high demand for high quality products in the market. I think that this will continue in Israel, the demand for high quality products. And I believe that it will only increase because they think that they now more patients understand the difference is in quality and looking for high quality. So, I feel very comfortable about that. Regarding the general market in Israel, we don’t have indication, strong indication for significant change in the market in the near future. However, I know that there is the Ministry of Health is speaking about changing the policy to a prescription-only instead of prescription and license like it is today. If it will be prescription-only, the number of patients will grow significantly in Israel in a very short time. But we don’t have any assurance when it will happen and if it will happen. I don’t know – I hope that answered your question, Aaron.

Sorry. Yes. I was on mute. No, appreciate that color on those. That was really helpful there. And then when we look at other international opportunities for you guys, UK has been a market that a number of international operators have started to focus on a bit and seeing the growth opportunities there. So, I would love to get your outlook on how you think about the UK and potentially increasing your exposure to the market? Thanks.

So, I think that the UK market is very interesting. And we see that the market is starting to grow. It’s still a small market relatively, but definitely the potential is huge. We are looking at the UK market, and we want to approach the UK market. And probably we will do that through our operation in Germany. In Germany, we just extended our facility to be able to have – to be to be able to get products and to process it in our facility and then to distribute it in Germany or in other European countries. And we also extended the logistics center to be able to get significant quantities of product. So, now we are more focused on building the supply chain to be able to have a premium supply to our facility in Germany. And later, we will start to distribute from Germany to UK.

Okay. Great. Thanks so much for the color. Oren, I will go and jump back in the queue.

[Operator Instructions] You have no further questions. Please proceed.

Thank you, operator.

Sorry. Go ahead.

Thank you, operator and thank you all for joining our call today. Please continue to track our progress as we continue to execute on our growth strategy. And I look forward to speaking with you in the coming quarters.

I am sorry, we just have a question that came in. I am going to open the line for Adam Altberg. Please go ahead Adam.

Hi. Sorry about that. I had sent a question over the Zoom by text. I don’t know if people are still on. But anyways, can you please comment further on cash in the bank? And I know that Shai mentioned some segments of the business being cash flow positive, and the overall business close to being cash flow positive. So, maybe you can provide some more color around that. And any plans that you have to address the cash needs that the company may have in the short-term or if you don’t have any cash needs, maybe you can comment on that as well. Thank you.

Adam, thank you for your question. It’s Shai. Well, as I said, as I previously said currently – first of all, currently we have the sufficient cash in order to proceed with the operation and growing concern and all this. We have sufficient cash there was to continue with our strategy, of course, that we keep on exploring additional financing upon it as we progress with our strategy. Regarding the cash flow positive, yes, in Israel, we are cash flow positive. We are in Germany, not yet there, it’s a little bit of cash consuming. Canada is part – this is part of the restructuring in all the cost, the cash cost saving that we did, we are aiming to get there, I believe by the most likely by the end of the year or even before that. So, this is it.

Okay. So, the bottom line is you do not need any cash right now. That’s all that I want to know.

We do not need cash, but we are always open for additional financing to support our strategy.

Okay, beautiful. Thank you very much for answering.

You have no further questions. Please proceed. Oren, would you like to add closing remarks?

Yes. Thank you, operator and thank you all for joining our call today. Please continue to track our progress as we continue to execute on our growth strategy. And I look forward to speaking with you all in the coming quarters.