IM Cannabis Corp. Q4 FY2023 earnings call

• Germany: 2023 was a pivotal year for the German cannabis market. The German Ministry of Health's legislation cleared the final hurdle on March 22, 2024, to take effect on April 1, with cannabis social clubs expected to open on July 1. The company has a fully licensed EU-GMP cannabis processing facility and an EU-GDP licensed logistics center in Germany. In 2023, the German team grew 180% while the market grew 20%, was the number five in German cannabis flower distributors and number one in sales per SKU. • Israel: The Israel-Hamas war starting on October 7 impacted the business, causing a CAD 3.2 million decrease in Q4 revenues, supply chain interruption, and a 100% increase in shipping costs. Q4 also involved cleaning out slow-moving stock. The Israel Ministry of Health was working on a regulatory overhaul. • Strategy: 2023 was a year of transformation, including restructuring to focus on sustainable profitability. There was a proposed reverse merger with Kadimastem to maximize shareholder value, with the cannabis business in Israel and Germany poised for growth in 2024.

In 2023, total revenues were CAD 48.8 million compared to CAD 54.3 million in 2022, a decrease of 10%. Fourth quarter 2023 revenues were CAD 10.7 million compared to CAD 14.5 million, a decrease of 26%. The German segment saw significant growth in 2023, with a 180% increase, while the Israeli segment was impacted by the Israel-Hamas war, resulting in a CAD 3.2 million (26%) decrease in Q4 revenues. Total dried flower sold in 2023 was approximately 8,609 kilograms compared to 6,792 kilograms in 2022. Gross profit in 2023 was CAD 9.8 million compared to CAD 9.2 million in 2022, an increase of 7.5%, but Q4 gross profit was CAD 0.8 million compared to CAD 2.6 million in 2022, a decrease of 68%. G&A expenses in 2023 were CAD 11 million compared to CAD 21.5 million in 2022, a decrease of 49%. Non-IFRS adjusted EBITDA loss in 2023 was CAD 8 million compared to CAD 11.5 million in 2022, a decrease of 31%.

• 2024 will focus on Germany, where the company is well-positioned to deliver accelerated growth with existing infrastructure, team, and supply agreements. • Anticipate the medical cannabis market in Germany to accelerate in growth due to the rescheduling of medical cannabis from narcotic to regular prescription medication, which will lower barriers to market entry for new patients.

• Impact of the Israel-Hamas war on the supply chain and revenues. • Currency fluctuations affecting revenues. • Intense market competition leading to pricing pressure in both Germany and Israel.

Q: Aaron Grey asked about the potential reverse merger and operations plan.

A: Oren Shuster stated they signed a non-binding term sheet with Kadimastem, the structure was not final, but existing IMC assets would remain with current shareholders.

Q: Aaron Grey inquired about Germany strategy for patient/doctor awareness and capacity.

A: Oren Shuster mentioned Germany was a key target, with significant infrastructure invested in, including a warehouse with over 4 tons capacity, and supply agreements in place.

Q: Unidentified Analyst asked about supply chain, pricing, and inventory.

A: Oren Shuster said Israel supply chain issues were resolved, pricing was competitive in both markets, and margins were expected to improve with focus on the premium segment.