Good morning and welcome to IM Cannabis' Fourth Quarter 2023 and Full Year 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.

Good morning and thank you operator. Joining me for today's call are IM Cannabis Chief Executive Officer, Oren Shuster; and Chief Financial Officer, Uri Birenberg. The earnings press 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 results of operations, economic conditions, and anticipated courses of action and are based on assumptions, expectations, estimates, and projections as the date hereof. This information may involve known and unknown risk, 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.sedarplus.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 we referred to as adjusted EBITDA loss. 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, I'd like to turn the call over to Oren Shuster, CEO of IM Cannabis. Oren please go ahead.

Thank you, Anna. Good morning everyone and thank you for joining us today. As you know we are a medical cannabis company based in Israel and Germany, which is why we will focus the call today on the regularization in Germany, the impact of the Israel-Hamas war, and in our Q4 results and the potential reverse-merger with Kadimastem, which we announced on February 28. When we take a look at Germany, 2023 was a roller coaster for the cannabis market. The year started out with extremely high expectations surrounding the proposed cannabis legalization. When the German Ministry of Health unveiled its initial legalization proposal in April of 2023, it was a big step forward, but still fell short of the initial legalization expectations. The German government spent the rest of the year reworking step one of the proposal focused on decriminalization, home growth, not-for-profit social clubs, and the rescheduling medical cannabis from narcotic, the most tightly regulated medication to regular prescription medication. While the implementation of the legalization was delayed several times, it cleared the final hurdle last Friday, March 22nd. The new legislation will enter into effect on April 1st with the opening of Cannabis social clubs expected on July 1st. Obviously, our German team is extremely excited to have the relative freedom to operate within the new regulatory structure. The size of the opportunity is massive. The general population is about 83 million people, more than double the population of California. Until the non-profit social clubs are up and running, the only legal way to buy cannabis in Germany will be in the pharmacy with a prescription. We believe if the medical market growth is the rescheduling of medical cannabis from narcotic to a regular prescription medication which will lower the barriers to market entry for new patients.…

Thank you, Oren. I will now provide an overview of Q4 2023 and the annual financial results for the company's continuing cannabis operations. As Oren already mentioned, Q4 was tremendously impacted by the Israeli-Hamas war, which is apparent in our revenues, as well as our expenses. Revenues for 2023 were $48.8 million compared to $54.3 million in 2022, a decrease of 10%. Revenues for the fourth quarter of 2023 were $10.7 million compared to $14.5 million, a decrease of 26%. The main part of the decrease on the fourth quarter about $3.2 million was due to the interruption of the supply chain cost by the Israeli-Hamas war and the slow-moving stock that was moved out at a lower price. Total dried flower sold in 2023 was approximately 8,609 kilograms with an average selling price of $5.14 per gram, compared to approximately 6,792 kilograms in 2022 with an average selling price of $7.12 per gram. The difference is mainly due to increased competition, within the retail segment and mid-range stock discounts to move out slow-moving stock. Total dried flower sold in the fourth quarter of 2023 was about 2,082 kilogram with an average selling price of $4.52 per gram, compared to about 2,334 kilograms in the fourth quarter of 2022, with an average selling price of $5.19 per gram. The decrease in average selling price was caused by increased competition within the retail segment, and mid-rate stock discounts to move out slow-moving stock. Gross profit for 2023 was $9.8 million compared to $9.2 million in 2022, an increase of 7.5%. Gross profit for the fourth quarter of 2023 was $0.8 million, compared to $2.6 million in the fourth quarter of 2022, a decrease of 68%. The downside is mainly attributed to the decrease in revenue -- cost by the war and…

Thank you, Uri. While 2023 was a year of transition, the Israeli-Hamas war had a tremendous impact on our Q4 results from the revenue to the gross margin. The results were not those we expected. Looking forward to 2024, it is the year that we have been preparing for. In 2024, our focus will clearly be on Germany, where we are in excellent position to deliver accelerated growth. We grew 180% in 2023. We are number one in sales per SKU. We have the infrastructure and the team we need to succeed as well as the supply agreement in place, to deliver on our objectives in 2024. With that, I hand the call over to the operator to begin our question-and-answer session. Operator?

Thank you. [Operator Instructions] We have our first question from Aaron Grey. Aaron, please go ahead. Q – Aaron Grey: Hi. And thanks very much for taking the question. And first off continue well wishes and thoughts for all those within the company, during these times. First question for me -- so just in terms of right, the potential spin-off and reverse merger, just at a high level, remind us in terms of like how we could think about where we stand today as it's still like LOI or definitive agreement, right? In terms of the investments you're planning with the existing legacy Israeli and German business, especially with the potential in Germany. So how should we think about the operations and plan, investment between as you're looking to do this high level of potential reverse merger and spin out? Thank you.

Okay. Hi. Thank you, Aaron for the question. So as we said, we signed a non-binding term sheet with Kadimastem, both them being public and we haven't signed a definitive agreement. The idea is that all the assets that belongs today to IMC will be -- will still belong to the shareholders -- existing shareholders of IMC. And it will be separated from the public vehicle, the structure is not final yet. So it's difficult for me to say exactly what will be the structure, and how it will look like, but the general idea is that all the rights will be served -- will be with the current shareholders.

Okay. All right. Great. Thanks that clarification.

I'm not sure that I answered the question, but.

No. That's fine there. So for Germany there, can you talk about the strategy in terms of helping to build kind of patient and doctor awareness on your guys, as I understand that you need to prescribe this specific brand, which is a little bit different than some of the other cannabis markets we just get a broad prescription. And you can just go buy the brand at the respective dispensary or pharmacy. So any plans there? And then also capacity and supply chain as you look to grow within Germany? Thank you.

Okay. So Germany was one of our -- the main target market for us from the beginning. And we invested in building the infrastructure so that Germany will be like a hub that we can bring significant quantity of product through this hub. We have in Germany the ability to get bulk or final products, and we have a very significant warehouse that we can store and distribute product. The capacity in the warehouse, it depends on the packaging, but it's more than 4 tons at any moment. So it's very significant because the product is moving. So I don't think that we have any limitation of the product given the market as it is. I think that, I don't see in the near future fully that we have a problem of utilization. We have enough capacity for the market as I see it.

Okay. Great. Appreciate the color and I'll now jump back in the queue.

I'm sorry you asked about supply. So we have already supply agreements in place to Germany. We are selling a product in the German market for some time. We have been prepared for the legalization. We extended our supply agreement and our suppliers are eager to supply product to Germany.

Okay. Great. Appreciate the color. And I'll now jump back in the queue.

Thank you, Aaron. Our next question is from Scott Fortune. Scott, please go ahead.

Hey. Good morning. This is Nick on for Scott. I just want to echo Aaron's comments. I hope everybody is staying safe out there. First one for me, just on the sourcing side, with the geopolitical issues still kind of playing out here, I wanted to get an update on the supply chain environment and if you've seen any discernible changes just on the sourcing side either in Israel or Germany? Thank you.

Okay. Thank you for the question. In Israel, we had significant issues of supply in Q4, because when the war started, there was a mess year with the Ministry of Health. So it created significant issues in the supply chain. And now everything is okay. The product is coming to Israel. And it's working properly. And with Germany there aren't any issues of supply, beside the fact that you have to be EU GMP certified. And we have done a few audits just lately to more suppliers to make sure that we won't have any supply issues.

Yeah. I appreciate that color. And then, the second one for me, just on the pricing side, with Germany now set to expand here and patients in Israel still growing, just wanted to get an update on the general pricing environment in both countries. Have you seen any notable changes in supply-demand economics and just general pricing? Any color there would be helpful.

The Israeli market is highly competitive. And we can see very clearly there is a decline in prices in many segments of the market. We are more focused on the premium segment. So we feel it less. But definitely everybody feels it in the market. And I don't think that we will see significant change in the near future. Regarding Germany, I think that the market will be -- my assumption is that the market will be highly competitive very similar to other markets and we will see also similar behavior, although there is a lot of supply that is waiting for the opening of the German mall. So it's a question in Germany, I think of how fast the market will evolve and the quantities, but still I believe that it will be a highly competitive market.

Got it. And then just last one for me on the inventory side. You called out moving stock which impacted pricing. Where are we in terms of clearing that out fully? And just your sense of the inventory and just the margin profile in 2024, as you kind of clear out the last bit of this lower cost inventory? Thank you.

So I think that our margins, I believe that our margins will improve. Obviously, there are many factors here. This year we have been impacted also by the currency. Most of the product that we are bringing is from Canada. So obviously, it was a negative impact. So there are a few external factors that I can't foresee, but I think that our focus on the premium segment will also leave us better margins. And regarding something that I missed about Germany I have to -- I want to say we already see products in Germany that are in very highly competitive prices and also below black market today in Germany. So I think that we will see significant down pressure in Germany as well and it will be very quick.

Got it. I appreciate the color, Oren. Thank you.

Thank you.

Are there any further questions? [Operator Instructions] Oren, I don't think there are any further questions.

Okay. Thank you, operator, and thank you all for joining our call today.