IM Cannabis Corp. Q1 FY2024 earnings call

• Regulatory Milestones: German legalization effective April 1st and Israeli Ministry of Health's medical cannabis access reform effective April 1st were game-changers. German market saw sales impact in March but acceleration in April. Israeli reform included changes in prescription process, HMO prescription ability, and increased prescribers. - Resource Allocation: Shifted focus to German market, leading to decision not to complete Oranim Pharmacy purchase. - Financials: G&A expenses decreased 28% vs Q1 2023, selling and marketing expenses decreased 18% vs Q1 2023. Adjusted operating expenses down 29% vs Q1 2023 when excluding Oranim deal impacts. - Supply Chain: In Germany, working on sourcing EU GMP-certified suppliers and auditing third parties for supply. - Reverse Merger: Initiation with Kadimastem is in early phases, completion uncertain.

In Q1 2024, IM Cannabis' revenue was $12.1 million, a 3% decrease from $12.5 million in Q1 2023. German sales were affected by March uncertainty but saw a surge in April with monthly sales nearly double the last six-month average. Israeli business was impacted by price reductions for slow-moving inventory. Revenue contribution from German market started to accelerate post-April 1st legalization, while Israeli market continued dealing with inventory clearance and price adjustments. Gross profit in Q1 2024 was $1.8 million, down 39% from $2.9 million in Q1 2023, mainly due to slow-moving stock price reductions and exchange rate effects.

• Will focus resources on German market to capitalize on post-legalization growth. - Infrastructure and supply agreements in place to support German market acceleration seen in April. - Will continue to evaluate additional capital and financing sources as needed.

• Regulatory uncertainties, such as delay in German nonprofit social clubs and home grow legislation affecting market development. - Supply chain bottlenecks with limited Canadian cannabis producers having EU GMP certification. - Impact of canceling Oranim Pharmacy purchase leading to goodwill reduction and balance sheet changes.

Q: Scott fortune from ROTH inquired about key initiatives to benefit from Germany's stronger positioning and supply chain acceleration.

A: Oren Shuster stated IM Cannabis has an EU GMP facility in Germany, audits third parties for EU GMP compliance to secure supply, exports from Israel to Germany, and focuses on supply channels due to regulated market requirements.

Q: Scott fortune followed up on supply timing and Israel's inventory-clearing.

A: Oren mentioned ongoing supply addition in Germany with second half expected to see significant growth, and inventory-clearing in Israel is ongoing with a conservative approach, mostly cleared but monitoring expiry dates.

Q: Aaron Gray from Alliance asked about efforts to get products in front of physicians in Germany.

A: Oren Shuster said IM Cannabis works with all major online clinics in Germany, conducts physician education to drive prescriptions, and engages with patient groups, noting dynamics in the pharmacy landscape as the market evolves.