Q2 2024 Flora Growth Corp Earnings Call

Thank you for standing by this is the conference operator, welcome to the Florida Corp. Second quarter 2024 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.

Operator: Thank you for standing by. This is the conference operator. Welcome to the Flora Growth Corp. second quarter 2024 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad.

Operator: Thank you for standing by. This is the conference operator.

Operator: Welcome to the Flora Growth Corp. 2nd quarter to 2024 results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded.

Operator: After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator, pressing star, then zero.

After the presentation, there will be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad.

Operator: Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Dany Vaiman, Chief Financial Officer. Thank you, Operator, and good morning, everyone. On behalf of the Flora team, welcome to our Q2 2024 Results and Corporate Update Conference Call. Before we begin, I wish to inform listeners that certain statements to be made today by the management team may contain forward-looking information.

Get assistance during the conference call you May signal, an operator by pressing Star then zero.

Dany Vaiman: I would now like to turn the conference over to Dany Vaiman, Key Financial Officer. Please go ahead.

I would now like to turn the conference over to Danny Layman, Chief Financial Officer. Please go ahead.

Dany Vaiman: Thank you, operator, and good morning, everyone. And on behalf of the Flora team, welcome to our queue to 2024 results and corporate update conference call.

Danny Layman: Thank you operator, and good morning, everyone.

Operator: Today's goal will include estimates and other forward-looking information and statements concerning future revenues, results from operations, financial position, market, economic conditions, partnerships, and other statements that may be 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.

Speaker Change: On behalf of the Florida team welcome to our Q2 2024.

Speaker Change: Results and corporate update conference call.

Dany Vaiman: Factors that could cause or contribute to such differences are described in detail in the company's most recent filings available on EDGAR at sec.gov and CDAR at CDAR.com. Any estimates of 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 supply new information regarding the circumstances after the date of this call. On the call today, we have Clifford Starke, CEO, as well as Dany Vaiman, CFO.

Dany Vaiman: Before we begin, I wish to inform listeners that certain statements to be made today by the management team may contain forward-looking information. Today's call will include estimates and other forward-looking information and statements concerning future revenues, results from operations, financial position, market, economic conditions, partnerships, and other statements that may be construed 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 EDGAR at sec.gov and SEDAR.com.

Speaker Change: Again, I wish to inform listeners that certain statements to be made today by the management team.

Speaker Change: Good day and forward looking information.

Speaker Change: Today's call will include estimates and other forward looking information and statements concerning future revenues results from operations financial position market economic conditions partnerships and other statements that may be constructed as a prediction of future performance.

Speaker Change: Insulation, they 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.

Speaker Change: That could cause or contribute to such differences are described in detail in it.

Speaker Change: Company's most recent filings available on Edgar and as you can see that Gov and SEDAR at SEDAR com.

Dany Vaiman: Any estimates of 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 supply new information regarding the circumstances after the date of this call.

Speaker Change: Estimates or forward looking information or statements provided accurate only as of the date of this call and the company undertakes no obligation to publicly update any forward looking information or supply new information regarding the circumstances. After the date of this call.

Dany Vaiman: On the call today, we have Clifford Stark, CEO, as well as Danny Damon, CFO. Following the presentation, Clifford and I will be available for the question-and-answer period.

cliff Stark: On the call today, we have cliff Stark C O as well is Danny <unk> CFO.

Dany Vaiman: Following the presentation, Clifford and I will be available for the question and answer period. The Q2 2024 results press release and accompanying 10-Q have been filed on EDGAR and CDAR. Also, note that all amounts mentioned in this call are in US dollars unless stated otherwise. I'll now turn over the call to Clifford. Please go ahead. Thank you, Dany.

cliff Stark: Following the presentation, because it's one that I will be available for the question and answer theory is the Q2 2024, our results press release.

Dany Vaiman: The queue to 2024 results press release and the company 10 queue has been filed on Edgar and cedar. Also note that all amounts mentioned in this call are in United States dollars unless stated otherwise.

cliff Stark: The company's 10-Q filed on Edgar and SEDAR.

cliff Stark: Also note that all amounts mentioned in this call are in United States dollars unless stated otherwise.

Clifford Starke: I'll now turn over to Clifford. Please go ahead.

cliff Stark: I'll now turn over the call to Clifford. Please go ahead.

Clifford Starke: Thank you, Danny.

Clifford: Thank you Danny.

Clifford Starke: Good morning, everyone on the line. Welcome to the Flora Growth Q2 2024 Results and Corporate Update Conference Call. Let me start by noting that in the second quarter, Flora made several accretive acquisitions and formed strategic partnerships to capitalize on the most robust market trends. These actions are designed to further diversify our activities and continue building in rows to areas where we see potential for growth. The first acquisition was TrueHC and came in April at the time of Germany's legalization of cannabis.

Clifford Starke: Good morning everyone, my line. Welcome to the floor, gross Q2 2024 results and corporate update conference call. Let me start by knowing that in the second corridor floor made several accretive acquisitions and form strategic partnerships to capitalize on most robust market trends. These actions are designed to further diversify our activities and continue building in rows to areas where we see potential for growth. The first acquisition was QHC and came in April at the time of Jeremy's legalization of cannabis. Today, we have seen meaningful integration with the QHC team. I have established key initiatives to stimulate our business activities in the country.

Clifford: Good morning, everyone on the line.

Clifford: Welcome to the Florida growth Q2, 'twenty 'twenty four results and corporate update conference call. Let me start by knowing that in the second quarter. So I made several accretive acquisitions.

Clifford: Strategic partnerships to capitalize our most robust market trucks.

Clifford: These actions are designed to further diversify our activities building and rose to areas, where we see potential for growth.

Clifford: The first acquisition was to AC and came in April at the time was Germany legalization of cannabis to date, we have seen meaningful integration with a true HD team established key initiatives to stimulate our business activities in the country.

Clifford Starke: To date, we have seen meaningful integration with the TrueHC team and have established key initiatives to stimulate our business activities in the country with the largest population and the greatest person power in Europe, Jeremy Booth, Europe's fastest growing cannabis mark, with the following two phases, German legalization expected in the coming 12 to 18 months. Jeremy is excited to become the largest federally legal adult-use cannabis market globally. The German government has indicated it intends to pursue a second phase of legalization focusing on regional pilot programs with commercial supply chains.

Clifford Starke: With the largest population and the greatest purchasing power in Europe, Jeremy boosts Europe's fastest growing cannabis market. With the following two phases, Jeremy's legalization is expected in the coming 12 to 18 months. Jeremy is excited to become the largest federated legal adult-use cannabis market globally. The German government has indicated that intensive pursuit of second phase of legalization focused on regional product programs with commercial supply chains. With approximately 230,000 medical-carrot patients today, Jeremy can use to lead the way in European medical cannabis as well.

Clifford: With the largest population migrations purchasing power in Europe.

Jeremy: Jeremy boost Europe's fastest growing cannabis market with.

Jeremy: The fall in two phases German legalization expected in the coming 12 to 18 months Jeremy is excited to become the largest veteran legal adult use cannabis market globally.

Jeremy: The German government has indicated it intends to pursue a second phase of legalization.

Jeremy: Regional pilot programs with commercial by chance.

Clifford Starke: With approximately 230,000 medical cannabis patients today, Germany continues to lead the way in European metal cannabis as well. Moving on to the U.S. market, and in May 2024, the U.S. administration announced that it is moving to reschedule cannabis under U.S. federal law. The Justice Department is expected to post its proposed rule to reclassify cannabis from Schedule 1 to Schedule 3 under the Controlled Substances Act in the Federal Register. It is important to emphasize that this is the first time in the history of the United States that all major presidential candidates are open to initiating important cannabis reform.

Jeremy: With approximately 230000 medical power stations today, Germany continues to lead the way in European Moe candidates as well.

Jeremy: Moving on to the U S market and then maybe 'twenty 'twenty four the U S administration announced that is moving to reschedule, Canada U S Federal law.

Clifford Starke: Moving on to the U.S. market and in May 2024, the U.S. Administration announced that is moving to reschedule cannabis under U.S. federal law that Justice Department has expected to propose its role to reclassify cannabis from schedule 1 to schedule 3 under the control substance act in the federal register. It is important to emphasize that it is the first time in the history of the United States that all major party-presidential candidates are open to initiating important cannabis reform. On the Democratic side, both Kamala Harris and Tim Walsh are widely expected to take a progressive stance. Vice President Harris has expressed support for cannabis legalization and given Walsh legalized recreational cannabis in its home state in Minnesota.

Speaker Change: The justice apart is expected to post its proposed rule to reclassify cannabis from schedule one to schedule III control substance locked in the Federal Register.

Speaker Change: It's important to emphasize that there was the first time histories and other states. It's all major.

Speaker Change: Party presents.

Speaker Change: Pilots urban's initiating client kind of a sweet spot.

Clifford Starke: On the Democratic side, both Kamala Harris and Tim Walsh are widely expected to take a progressive stance. Vice President Harris has expressed support for cannabis legalization, and Governor Walz legalized recreational cannabis in his home state of Minnesota. More recently, President Trump suggested he would be in favor of reform.

Speaker Change: On the Democratic side, both come out of Harris and Tim Walsh are widely expected to take a progressive stance.

Speaker Change: Vice President Harris has expressed support for Thomas legalization and Governor Walz legalized.

Speaker Change: Autonomous in its home state of Minnesota.

Speaker Change: More recently he hasn't dropped.

Clifford Starke: More recently, President Trump's former President Trump suggested he would be in favor of reform. As the U.S. continues to move toward progressive cannabis legislation; floor intends to capture media opportunities and market trends. In the quarter, we established a joint venture with the HALF through a group holdings to capitalize on the beverage market in the United States. The joint venture will link our U.S.-based C2G team in Althea's Peak, which is recognized as a market leader in cabs and choose beverages, and operates its world-possible technology in vision. This partnership is positioned to facilitate market access via traditional channels like wine and liquor stores.

Speaker Change: Former President Trump's desk that he would be in favor of reform.

Clifford Starke: As the U.S. continues to move toward progressive cannabis legislation, Flora intends to capture new opportunities and market trends. In the quarter, we established a joint venture with Althea Group Holdings to capitalize on the beverage market in the United States. The joint venture will link our U.S.-based CPG team and Althea's Peak, which is recognized as a market leader in Camson's fused beverages and operates its world-class emulsion technology, Envision. This partnership is positioned to facilitate market access via traditional channels like wine and liquor stores.

Speaker Change: As in the U S continues to move towards progressive canvas legislation foreign times of Catford media opportunities the market trends in the quarter, we established a joint Bachelor Adelphia Group holdings to capitalize on the beverage market in United States. The joint venture will link our U S based CPG team analyses peak.

Speaker Change: It is recognized as a market leader in <unk> beverages, and operators World class technology and vision.

Speaker Change: This partnership is positioned to facilitate market access via traditional channels like wine and liquor stores.

Clifford Starke: We believe that these types of beverages is robust to the beverage market segment, currently representing a very small fraction between 1 to 3 percent of all U.S. Cannabis sales. Cannabis and fused beverages are beginning to overtake alcohol when it comes to first-time daily use.

Clifford Starke: We believe that these types of beverages are robust to the beverage market segment, currently representing a very small fraction between 1 to 3% of all US cannabis sales. Cannabis-infused beverages are beginning to overtake alcohol when it comes to first-time daily use.

We believe that these types of beverages is robust to the beverage market segment currently representing a very small fraction between 1% to 3% of all U S kind of the shelves.

Speaker Change: I'm a bit confused about which is all over it.

Speaker Change: Alcohol when it comes to first time daily use.

Clifford Starke: Another area where we want to leave a mark is in the global e-commerce space. To this end, Floor acquired Australian vaporizers in June. Australian Vaporizers was founded in 2010. It's become one of the largest online retailers of vaporizers, hardware, and accessories in Australia. Australia vaporizers has the potential to drive synergies within floors of main portfolio, including our high-end brand Vessel.

Speaker Change: Another area, where we want to leave a mark is in the global ecommerce space.

Clifford Starke: Another area where we want to leave a mark is in the global e-commerce space. To this end, Flora acquired Australian Vaporizers in June. Australian Vaporizers was founded in 2010 and has become one of the largest online retailers of vaporizers, hardware, and accessories in Australia.

To this end were acquired Australian Vaporizer June Australian Brothers was founded in 2010 has become one of the largest online retailers vaporizer hardware and accessories in Australia.

Clifford Starke: Australian Vaporizers has the potential to drive synergies within Flora's remaining portfolio, including our high-end brand, Vessel. With that, I'll pass it along to Dany, who will discuss the financial results for the quarter. Dany, please go ahead.

Speaker Change: Dave Rogers has a potential to drive synergies within floors remaining portfolio, including our high end brand vessel.

Speaker Change: With that I'll pass on Danny Who'll discuss our financial results for the quarter are Danny. Please go ahead.

Danny Damon: With that, I'll pass on Danny, who discusses the financial results for the quarter. Danny, please go ahead.

Danny Layman: Thank you Clifford.

Danny Damon: Thank you, Clifford.

Dany Vaiman: Thank you, Clifford. Let me start by noting that, in addition to the acquisitions we made in the quarter, Flora launched several new products to stimulate organic growth. Vessel unveiled the second generation Compass Rise, which has a unique design and the ability to stand upright.

Danny Damon: Let me start by noting that in addition to the acquisitions we made in the quarter, floor aligns several new products, the stimulator of gun and growth. Vessel unveiled the second generation Compass Rise, which has a unique design and the ability to stand upright. JSCBD introduced a series of new gummies for sleep and relaxation, underscoring an already best-selling line of products.

Danny Layman: Start by noting that in addition to the acquisitions, we made in the quarter Flora Lai of several new products to stimulate organic growth.

Speaker Change: Vessel unveiled the second generation cockpits rise, which has a unique design and the ability to stand up right.

Dany Vaiman: Jeff CBD introduced a series of new gummies for sleep and relaxation, underscoring an already best-selling line-of-file. Revenues for the second quarter of 2024 were $15.7 million compared to $21.5 million for the second quarter of 2023. Revenues for the six months ended on June 30, 2024. We're 33.7 million compared to 40.8 million for the six months ended between 30 and 20. These decreases are primarily due to the company's deliberate discontinuation of several unprofitable product lines, as well as increased competition.

Speaker Change: <unk> introduced a series of new Grammys for sneakers relaxation.

Speaker Change: The score in an already best selling line of products.

Danny Damon: Revenues for the quarter for the second quarter of 2024 were 15.7 million, compared to 21.5 million for the second quarter of 2023. Revenue for the six months ended June 30, 2024, were 33.7 million compared to 40.8 million for the six months ended June 30, 2023. These decreases, I primarily, due to the company's deliberate discontinuation of several unprofitable product lines as well as increased competition. Total operating expenses were 6.7 million in Q2, 2024, compared to 44 million in Q2, 2023. A decrease of 37.3 million, or 85 percent. Excluding non-cash impairment charges, the decrease in operating expenses quarter or quarter was 2.5 million or 28 percent.

Speaker Change: Revenues for the quarter.

Speaker Change: For the second quarter of 2024 were $15 7 million compared to $21 5 million for the second quarter of 2023.

Speaker Change: For the six months ended.

Speaker Change: The 30th 2024 were $33 7 million compared to $48 million for the six months ended June 32023.

Speaker Change: These decreases primarily due to the company's deliberate discontinuation of several unprofitable product lines as well as increased competition.

Speaker Change: Total operating expenses were $6 7 million in Q2 2024 compared to 44 million in Q2 2023, a decrease of 37 point, a 3 million or <unk> 85 per cent.

Dany Vaiman: Total operating expenses were $6.7 million in Q2 2024 compared to $44 million in Q2 2023, a decrease of $37.3 million, or $85 million. Excluding non-cash impairment charges, the decrease in operating expenses quarter over quarter was $2.5 million, or $28 billion.

Speaker Change: Excluding noncash impairment charges the decrease in operating expenses quarter over quarter was $2 5 million or 28%.

Danny Damon: For the 2024 and 2023, year-to-date periods, total operating expenses were 13 million and 51.7 million, respectively. This represents a decrease of 38.7 million, or 75 percent. Excluding non-cash impairment charges, the decrease in operating expenses year-over-year was 4.8 million, or 29 percent. Net cash used in operating activities was 1.6 million in the six months ended June 30, 2024, compared to 7.8 million for the six months ended June 30, 2023. A decrease and an improvement of 6.2 million are 79 percent.

Dany Vaiman: For the 2024 and 2023 year-to-date periods, total operating expenses were $13 million and 51.7 million, respectively. This represents a decrease of 38.7 million, or 75%. Excluding non-cash impairment charges, the decrease in operating expenses year-over-year was $4.8 million or $29 million.

Speaker Change: The 'twenty 'twenty, four and 'twenty twice to me year to date periods total operating expenses were $13 million and $51 7 million respectively.

Speaker Change: This represents a decrease of $38 7 million or <unk> 75 per cent.

Speaker Change: Excluding noncash impairment charges the decrease in operating expenses year over year was $4 8 million or 29%.

Net cash used in operating activities was $1 6 million in the six months ended June 30 of 2024 compared to $7 8 million for the six months ended June 30th 2023, a decrease and an improvement of $6 2 million or 79%.

Dany Vaiman: Net cash used in operating activities was $1.6 million in the six months ended June 30th, 2024, compared to $7.8 million for the six months ended June 30th, 2023, a decrease and an improvement of $6.2 million, or $7.9. On a consolidated basis, the net loss for the quarter was $2.7 million, compared to $44.6 million in the comparable quarter, a decrease of $41.9 million, or $94.6 million. Flora finished the quarter with $6.1 million in cash and $21.4 million of current assets, including $6.7 million of saleable inventory.

Speaker Change: On a consolidated basis, the net loss for the quarter was $2 7 million compared to $44 6 million in the comparable quarter.

Danny Damon: On a consolidated basis, the net loss for the quarter was 2.7 million compared to 44.6 million in the comparable quarter. A decrease of 41.9 million, or 94 percent. The lower and finished the quarter was 6.1 million in cash and 21.4 million of current assets, including 6.7 million of saleable inventory. Networking capital was $3 million.

Speaker Change: Decrease of 41 9 million or 94%.

Speaker Change: Florida finished the quarter with $6 1 million in cash and 20 154 million of current assets, including $6 7 million of Sellable inventory.

Dany Vaiman: Networking capital was $3 million. In addition, we have set the stage for a wide array of financing alternatives to further fuel our business. In terms of performance for each of our divisions, Just CVD maintained a Gross Profit margin of 34% at sales of 4.4%. Soft selling products in the quarter included the Bear, Nighttime Bear, and Bleach Gun. Approximately 41% of its revenues stemmed from direct to consumer sales, and the remaining 59% channeled it to business to business. In the quarter, Josh C.B.D.

Speaker Change: Net working capital was $3 million.

Danny Damon: In addition, we have set the stage for a wide array of financing alternatives to further fuel our business plan. In terms of performance for each of our divisions, just CVD maintained a gross profit margin of 34 percent at sales of 4.4 million. It stopped selling products in the quarter, including the bear, nighttime bear, and bleach gummies. Approximately 41 percent of its revenues stemmed from direct-to-consumer sales, and the remaining 59 percent generated through business-to-business sales. In the quarter, just CVD added 120 million bill costivers to its network. Vets will maintain a gross profit margin of 53 percent on sales of 1.4 million.

Speaker Change: In addition, we have set the stage for a wide array of financing alternatives to further fuel our business plan.

Speaker Change: In terms of performance for each of our division just C. V. D maintained a gross profit margin of 34% and sales of $44 million.

Speaker Change: It's off seven product a product in the quarter included the bear nighttime there and beach guys approximately 41% of its revenues stemmed from direct to consumer sales and the remaining 59% generated through business to business sales in the quarter just CBD added 120.

Dany Vaiman: added 120 new old Bill costumers to reach an end. Vessel maintained a gross profit margin of 53% and sales of 1.4 million. Corp Product represented 35% of sales in Compass Product, contributing 41%. The largest individual item sold was the wood slate, representing 11% of vessel sales.

Speaker Change: The new wholesale customers to its network.

Speaker Change: Vessel and maintain our gross profit margin of 53% on sales of $1 4 million.

Danny Damon: Core products represented 35 percent of sales, in compressed products contributed 41 percent for sales. The largest individual item sold was the wood slate representing 11 percent of vessel sales. Vets were 59 percent from direct-to-consumer and 41 percent on business to business. Vets will added 60 new wholesale costivers, including several multi-state operators in the quarter.

Speaker Change: Core products represented 35% of sales in Congress products contributed 41% of sales the largest individual item sold was the wood slate representing 11% of vessel sales.

Dany Vaiman: Vessel sales were 59% from the Rectic consumer and 41% from the business. Vessel added 60 new wholesale customers, including several multi-state operators. Patibo earned $9.6 million in revenue with gross margins of $8.4 billion in the quarter, including income from continuing operations of $0.2 million.

The vessel sales were 59% from direct to consumer and 41% and business to business.

Speaker Change: Vessel added 60, new wholesale customers, including several multi state operators in the quarter.

Danny Damon: But TiVo earned 9.6 million in revenue with gross margins of 8.4 million. in the quarter, including income from continuing operations of 0.2 million. All sales were business to business and included broad name pharmaceuticals.

Speaker Change: But people are $9 6 million in revenue with gross margins of eight 4% in the quarter.

Speaker Change: <unk> income from continuing operations of 0.2 million.

Operator: All sales were business-to-business and included broad-name pharmaceuticals. I will now hand the call back to the operator for the question and answer session. Thank you. To join the question queue, you may press star and one on your telephone keypad. You will hear Joan acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys.

Speaker Change: Wholesale is a business to business and included broad named Pharmaceuticals.

Operator: I will now hand the call back to the operator for the question-and-answer session. Thank you. We will now begin the question and answer session. To join the question, Q. You may press star, then one on your telephone keypad. You will hear Joan acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys. To the joy of question, please press star, then two.

Speaker Change: I will now hand, the call back to the operator for the question and answer session.

Speaker Change: Yeah.

Speaker Change: Mhm.

Speaker Change: Thank you.

Speaker Change: The question and answer session to join the question queue. You May Press Star then one on your telephone keypad you live here Joan acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any key.

Operator: To draw your question, please press star then two. The first question comes from Aaron Grey with Alliance Global Partners. Please go ahead. Hi, good morning, and thank you for the questions here. So first one for me, just in terms of profitability. Thank you so much for the question and thank you for joining us on the call. Yes, this Q2, as we noted in our MD&A and our financial disclosures, was a bit unusual in the sense that we had a fairly large inventory impairment charge of $700,000 in the quarter, which drove down the gross margin.

Speaker Change: Cause majority a question. Please press Star then two.

Speaker Change: First question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Aaron Grey: First question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Aaron Grey: Hi, good morning, and thank you for the questions here. So first one for me, just in terms of EBITDA and profitability, maybe even tie-and-grove smartness. So I think you had a 700 K inventory impairment there.

Aaron Grey: Hi, good morning, and thank you for the questions here. So first one for me just in terms of.

Aaron Grey: The EBITDA and profitability, maybe even kind of gross margin. So I think you had a 700 K inventory impairment. There. So does that do you think on the board for gross margins as you exited some low profit Skus you mentioned on the go forward there how should we think about the evolution of gross margin and how that ties into you guys.

Danny Damon: So just as you think on the before for growth margins, as you accident some low profits used you mentioned on the go forward there, how should we think about the evolution of growth margin and how that ties into you guys going back to EBITDA profitability? Thank you.

Going back to the EBIT profitability. Thank you.

Danny Damon: Do you want to know about?

Aaron Grey: Yeah.

Aaron Grey: Oh.

Danny Damon: Yes, Sean, thank you so much for the question, and thank you for joining us on the call. Yes, this Q2, as we noted in our MDNA and our financial disclosures, was a bit unusual in the sense that we had a fairly large inventory impairment charge, like 700,000, in the quarter, which drove down the growth margin.

Speaker Change: Yes, Sean. Thank you so much for the question and thank you for joining us on the call. Yes. This Q2 as we noted in our MD&A and our financial disclosures was.

A bit unusual in the sense that we had a fairly large inventory impairment charge of 700000 in the quarter, which.

Speaker Change: Drove down the gross margin.

Dany Vaiman: If we look at it on a go-forward basis, I think on a consolidated level, we're probably looking at in the mid-30s in that range from a gross margin perspective, and as we grow and add more profitable lines to our portfolio, we expect that number to gradually increase. Okay. All right. Thanks for that.

Danny Damon: If we look at it in a go forward basis, I think in a consolidated level, we're probably looking at it in the mid-30s in that range from a growth margin perspective, and as we grow and add more profitable lines to our portfolio, we expect that number to gradually increase.

Speaker Change: If we look at it on a go forward basis I think at a consolidated level, we're probably looking at a and in the mid thirties.

Speaker Change: That range from a gross margin perspective, and as we grow and add more a profitable lines to our portfolio, we expect that number to gradually increase.

Speaker Change: Yeah.

Okay, alright, thanks for that second question.

Aaron Grey: Okay, all right, thanks for that.

Aaron Grey: Second question for me. You guys have a couple different eyes in the far right there on some initiatives that could heat up and drive some revenue. So just as we think about the near-term opportunities to drive revenue growth, what are you seeing as what could be the biggest impact of the P&L in the next six months here? I guess specific focus on more Germany. Do you think it's more of just EBITDA with some of the hemp issues that you have there? Then we guys have a couple different eyes in the far right. I see what we should think of it.

Speaker Change: You guys have a you know a couple of different irons in the fire there.

Clifford Starke: You guys have a couple different irons in the fire there, on some initiatives that could heat up and drive some revenue. So just as we think about, and Near-Term Opportunities to Drive Revenue Growth. What do you think could be the biggest impact of the P&L in the next six months here? I guess a specific focus on more Germany. Do you think it's more just CBD with some of the hemp issues that you have there? Then you guys have a couple of kinds of fires.

Speaker Change: On some initiatives there that could eat up and drive some rapidly. So just as we think about it.

Speaker Change: And near term opportunities to drive revenue growth what are you seeing as what could be the biggest impact in the P&L in the next six months here.

Speaker Change: I guess specific.

Speaker Change: And even more for Germany do you think it's more just CBD with what's on the hemp initiatives that you have there when do you guys have enough coverage.

Speaker Change: Just trying to see what we should think about it what are the most near term growth ops person would be more longer term in terms of when it came out.

Clifford Starke: I'm trying to see what we should think of as the most near-term growth opportunities versus what the more longer-term in terms of when it's impacting out. I think the U.S. team is very dedicated and focused on becoming a real brand and a better contractor. We've picked up distribution in the federal states as we go into the fall. You know, we see ourselves getting to the six to eight stage relatively quickly here on the U.S. side. That's where the growth is going to come from. In Germany, the business partners come together quite nicely.

Clifford Starke: What are the most near-term growth thoughts versus what the more long term in terms of when it impacts P&L? I think the US team is very dedicated and focused on becoming a real brand and a better sector. We've picked up distribution in several states. As we go into the fall, continue to, you know, we see ourselves getting the six state states where I'll take it quickly here. On the US side, that's where the growth is going to come from. Germany, the business partners come together quite nicely. We also have some partnerships we're working on that would really put our our our our our skews that the proper place in what's happening.

Speaker Change: I think the U S team is very dedicated and focused on becoming a real brand on the beverage sector.

Speaker Change: Picked up.

There are several states as we go into the fall contributed here.

Speaker Change: We see ourselves gains of six to eight states relatively quickly here.

Speaker Change: On the U S side, that's where the growth's going to come from.

Clifford Starke: We also have some partnerships we're working on that really put our our our our skews at the proper place in the topic. Germany, for example, we're realizing it's very e-commerce driven. We have a great partnership which we can't really get into right now.

Speaker Change: Germany, the business pilots coming together quite nicely.

Speaker Change: We also have some partnerships we're working on that we really put our all of our skus.

Speaker Change: Proper place in what's happening in Germany, we are realizing it's very e-commerce driven.

Clifford Starke: Germany we're realizing it's very e-commerce driven.

Clifford Starke: We have a great partnership, which we can't really get into right now. But you're going to see, besides what we talked about before, our seeds, cones, flour, accessories, vessel, gestal, and so forth. We'll all be established on this one platform that has, I would say, probably two and a half million viewers on a monthly basis in Germany, and it's by far the leading source for consumers to be able to actually identify what they want to actually purchase within this medical cannabis market and recreational market in Germany. So I would say two strong U.S. on beverages, and Germany we're touching every fast that we possibly can with the European market.

Speaker Change: Great partnership, which we can't really go into right now.

Speaker Change: See besides what we've talked about before our seeds clause flower accessories fossil jobs, so on and so forth will all be established almost one platform that is.

Clifford Starke: But you're going to see, besides what we talked about before, our seeds, clones, flower, accessories, vascular, gestal, and so forth, we'll all be established on this one platform that, I would say, probably has 2.5 million viewers on a monthly basis in Germany, and it's by far the leading source for a consumer to be able to actually identify what they want to actually purchase within this medical cannabis market and the recreational So I would say the two-pronged US on beverages and Germany; we're touching every facet we possibly can within the European market. Okay, great. Thanks for the call there, Cliff. I'll jump back in the queue. The next question comes from Sean Long with Haywood Securities. Please go ahead.

Speaker Change: I would say, probably two and a half million viewers on a monthly basis in Germany, and it's by far the lead the leidy.

Speaker Change: Leading source for consumers to be able to actually identify what they want or she purchases of astellas cannabis smoking attrition market in Germany. So I'll say two prong U S on beverages and Germany, we're touching every facet, we possibly can within the European market.

Aaron Grey: Okay, great, thanks for the card, Clifford. I'll drop back in the queue. Thanks, Aaron.

Speaker Change: Okay, great. Thanks for the color there cliff I'll jump back in queue.

John: Thanks, John.

John: The next question comes from Sean Long with Haywood Securities. Please go ahead.

Sean Long: The next question comes from Sean Long with Table Security, please go ahead. Hey, guys, thanks for taking the time. I just wanted to kind of look at the recently completed Australian vaporizer acquisition, and what does that look like from the capital perspective. Okay, so Australian vaporizer's person very familiar with it. When I was one of the largest shareholders of Namaste back in the day, that was the main asset. When it came back to us recently, obviously we had some short-term struggles and actually closing the transaction, which we ended up doing relatively quickly, recently. Instead of the integration, it's more that the business plan has actually changed.

John: Yeah.

Clifford Starke: Hey guys, thanks for taking the time. Just wanted to kind of look at the recently completed Australian vaporizer acquisition and want to kind of touch on what's left in terms of the integration process and what that looks like from a capital perspective. So Australian Vaporizers, personally, I'm very familiar with it. When I was one of the largest shareholders of Namaste back in the day, that was the main asset. When it came back to us recently, obviously, we had some short-term struggles in actually closing the transaction, which we ended up doing relatively quickly recently.

Sean Long: Hey, guys. Thanks for taking the time just wanted to kind of.

Sean Long: Look at the recently completed Australia, they price of acquisition and one is kind of a touch around what's left in terms of the integration process and what does that look like from a capital perspective.

Speaker Change: Okay, So Australia vaporize yours person I'm very familiar with it when I was a little one of the largest shareholders of Mama stay back in the day.

Speaker Change: That was the main offset when it came back to US recently, obviously, we had some short term struggles and actually closing the transaction as we end up doing relatively quickly recently.

Speaker Change:

Speaker Change: Instead, the integration, it's more that the business plan has actually changed so.

Clifford Starke: Instead of the integration, it's more of that the business plan has actually changed. So a retail individual is not the actual ability to actually order a battery or vaporize even nicotine on the e-commerce platform. Everything's getting driven through doctors and pharmacists, which, short-term, is a little bit confusing, long-term needs to be a huge success for a couple reasons. A lot of smaller players are on.

Clifford Starke: So a retail individual is not the actual ability to actually order a battery or vaporizer, even nicotine, on the e-commerce platform. Everything's getting driven through the doctors and pharmacists, which short-term is a little bit confusing, along tremendous to be a huge success for a couple of reasons. A lot of smaller players are gone. And second is a lot of, for example, the puff goes to the world and not registering their products properly to the marketplace. That's so, which is a hard work component. There's also another category of significant growth for us, is doing extremely, extremely well in the Australian market.

Speaker Change: Our retail individual doesn't have the actual ability.

Josh: Josh you order a battery or vaporize your.

Josh: Nicotine.

Josh: On the e-commerce platform everyone's getting driven through the doctors and pharmacists with short term is a little bit confusing Walter that there shouldn't be a huge exhausted all for reasons of all of the smaller players are gone.

Clifford Starke: And second, a lot of, for example, the puff goes to the world and not registers their products properly from the marketplace. That's all, which is a hard work component. There's also another category of significant growth for us is doing extremely, extremely well in the Australian market. After the US, it is the second largest market for us. So it's not really integration or cost. Those guys really bought that. They had cash and a balance sheet with plenty of inventory.

Speaker Change: And second is a lot of for example, the pockets of the world are not registering their polished pop ups in the marketplace vessel, which is a hardware component, which is also another category of significant growth for us.

Speaker Change: It's doing extremely extremely well in Australia market. After you ask your second largest market for us. So it's not really integration or cost those guys really bought that they had a cash and balance sheet plenty of inventory.

Clifford Starke: After the US, is a second largest market for us. So it's not really integration or cost. Those guys really bought that. They had a cash and balance sheet, plenty of inventory. The first shipment of vessel came, I think, two weeks ago. And definitely, it's going to integrate it properly on that aspect. But I would say there's not really touch-ups or issues. It's more just integrating the platform out for more selections to consumers through the pharmacist and doctors.

Speaker Change: The first shipment of the vessel came I think two weeks ago and everyone's got integrated properly on that aspect, but I would say there is not really catch ups or issues. It's more just integrating the Pos and offer more more options too.

Clifford Starke: The first shipment of the vessel came, I think, two weeks ago, and everything's going to integrate it properly in that aspect. But I would say there's not really any touchups or issues that's more just integrating the platform out for more, more selections for consumers through the pharmacist and doctors. Thank you. And my next question is kind of turning back to Germany and the adult use market there. And it's kind of the first full quarter that we're seeing in the early phase.

Speaker Change: To consumers to pharmacists and doctors.

Speaker Change: Awesome. Thank you and my next question is kind of turning back to Germany and.

Sean Long: Awesome. Thank you.

Sean Long: And my next question is kind of turning back to Germany and the adult use market there. And it's kind of the first full quarter that we're seeing in the early phase. And I'm just wondering what you guys are seeing there. And basically how you guys are expecting that to develop over the coming months and what's the preparation required.

Speaker Change: The adult adult use market, there and it's kind of the first full quarter that we're seeing.

Speaker Change: In the early phase and I'm just wondering what you guys are seeing there and basically how you guys are expecting that to develop over the coming months and what sort of preparation required.

Clifford Starke: And I'm just wondering what you guys are seeing there and basically how you guys are expecting that to develop over the coming months and what the preparation for it is. So, Germany, obviously, since April, has had a big influence on prescriptions, just worries about your access. And really, to access scripts even outside of, you know, German medical systems throughout the EU.

Speaker Change: Two questions. So Germany, obviously since April has had a big influx of prescriptions just weird you access the ability to access scripts you been outside of you know German.

Clifford Starke: Two questions. So Germany, obviously, since April, has had a big influx in prescriptions. It just worries your access. And really the access scripts even outside of, you know, German medical systems throughout EU. So there's been that influx, which is interesting: high quality products as well as low quality products. Price dependent are all selling within the marketplace. And that's what I'm saying. for us. Unfortunately, we have so many others round of a lot of our skews relatively quickly. What we're doing is we've sourced high quality local quality flower, which should be arriving in the next couple of months, and just integrating it to do form one into our current pharmacy market, which is traditional for us.

Speaker Change: German medical systems drove EU, so there's been a impulses interesting as high quality products as well as low call it quality products price dependent on all starting with in the marketplace.

Clifford Starke: So, there's been that influx, which is interesting, is high quality products, as well as low quality products, price dependent, are all selling on the marketplace. For us, unfortunately, we, and many others, ran out of a lot of our SKUs relatively quickly. What we're doing is we've sourced high-quality, low-quality flour, which should be arriving in the next couple of months, and we're just integrating it to form one into our current pharmacy market, which is traditional for us.

Speaker Change: For us Fortunately, we close and many others round of a lot of our skus relatively quickly.

Speaker Change: What we're doing.

Speaker Change: We sourced high quality low quality.

Speaker Change: Flower.

Speaker Change: What should be arriving in the next couple of months.

Speaker Change: And just integrating it to do for them one into our current pharmacy market, which is traditional for us. The second is e-commerce relationships, all while I'm, referring to which is not public yet, but Australia, while we're focused on integration wise.

Clifford Starke: The second is this e-commerce relationship online, I'm referring to, which is not public yet, but that's really what we're focused on integration-wise. And Germany was continued to keep on growing, and we're trying to focus really on just finding opportunities that didn't realize. I never really envisioned it going so e-commerce driven versus traditional. So we adopted really close into that. I think we've done a good job. But the growth is really going to come from just getting more skews on to certain platforms, and feeding our pharmacies, because a lot of people on certain quality strings are still about.

Clifford Starke: The second is this e-commerce relationship online that I'm referring to, which is not public yet, but that's really what we're focused on integration-wise. And Germany, we just continue to keep on growing, and we're trying to focus really on just finding opportunities that I didn't realize I never really envisioned it going so e-commerce driven versus traditional. So we adapted really closely to that.

Speaker Change: And Germany, which continues to keep on growing.

Speaker Change: All we're trying to focus really on just finding.

Speaker Change: Opportunities that didn't realize I never really envisioned it going so e-commerce driven.

Speaker Change: If we're successful.

Speaker Change: So we adopted really closer to that I think we've done a good job, but the growth really going to come from just getting policy more skus onto our platforms and feeding our pharmacies because.

Clifford Starke: I think we've done a good job, but the growth's really going to come from just getting more SKUs onto certain platforms and feeding our pharmacies because a lot of people on certain quality strains are really sold out. Awesome. Thank you so much.

Speaker Change: A lot of people on certain quality stranger to be sold out.

Speaker Change: Awesome. Thank you so much that's really helpful.

Sean Long: Awesome. Thank you so much.

Sean Long: That's really helpful.

Bill Kirk: The next question comes from Bill Kirk with Rod Capital Partners.

Speaker Change: The next question comes from Bill Kirk with Roth Capital Partners. Please go ahead.

Operator: That's really helpful. The next question comes from Bill Kirk with Roth Capital Partners. Please go ahead. Cliff, a dany, good morning. Hey, so Danny, you mentioned 120 new wholesalers for just CBD. I think the number was 64 vessels.

Bill Kirk: Please go ahead.

Danny Damon: Hey Cliff, a Danny, good morning. Hey, so Danny, you mentioned 120 new wholesalers for just CBD. I think the number was 60 for Vessel. How many wholesalers are in the base number that you're adding the 120 and 62? And what kind of bump from new wholesalers in terms of your sales by division? What kind of bumper do you expect? Yeah, I think that's a good question.

Bill Kirk: Hey, Cliff, Hey, Dan and good morning.

Hey, Bill.

Operator: How many wholesalers are in the base number that you're adding, the 120 and 62? And what kind of bump from new wholesalers in terms of your sales by division? What kind of bump would you like?

Bill Kirk: So Danny you mentioned, a 120, new wholesalers for just CBD I think the number was 64 vessel how how many wholesalers are in like the base number that you're adding the 120 and 62 and what kind of bump from from new wholesalers.

Speaker Change: In terms of your sales by division, what kind of bump would you expect.

Speaker Change: Yeah, I think that's a good question and thank you for that Bill and good morning.

Dany Vaiman: Yeah, I think that's a good question. Thank you for that, Bill. And good morning.

Danny Damon: Thank you for that, Bill, and good morning. I think if we look at it from a grand scheme of things, there are close to 20,000 points of distribution overall for the business and the company. But you're looking at a dollar value, not all of them are material, obviously.

Speaker Change: I think if we look at it from a from a Grand scheme of things. There are you know close to 20.

Dany Vaiman: I think I think if we look at it from the grand scheme of things, there are, you know, close to, 20,000 points of distribution, overall for the business and the company, but you're looking at a dollar value, not all of them on material, obviously. From a bumping in sales perspective, I think that particular increase would be between 2 and 3%, and immediate to short term.

Speaker Change: 20000 points of distribution overall for the business in the company, but you are looking at a dollar value not all of them on material. Obviously are from a bumping and sales perspective, I think that particular increase we would expect it to be between two and 3%.

Danny Damon: From a bumping itself perspective, I think that particular increase, we would expect it to be between two and three percent in the immediate to short term. So that would be the number that best reflects that increase in the number of wholesale distribution for just.

Speaker Change: Immediate the short term.

Speaker Change: So so so that would be the number that are best reflects that that increase in the number of wholesale distribution for just.

Dany Vaiman: So that would be the number that best reflects that increase in the number of wholesale distribution for justice. Okay, and then, and then Cliff, I have a broader question on CBD or intoxicating hemp curses THC. It seems like some of the hemp groups are at odds with some of the proposed THC legislation that's out there. So can you talk about that conflict a little bit and maybe the success and opportunities for hemp and just CBD? differ from THC in the U.S.? Yeah, I think I think there's a couple.

Cliff: Okay, and then and then cliff I have.

Clifford Starke: Okay, and then Cliff, I have a broader question on CBD or intoxicating hemp versus THC. It seems like some of the hemp groups are at odds with some of the proposed THC legislation that's out there. So can you talk about that conflict a little bit and maybe how the success and opportunities for hemp and just CBD differ from THC in the US?

Speaker Change: Broader question on CBD or toxic hitting hemp versus THC and it seems like some of the hemp groups are are at odds with some of the proposed THC legislation. That's out there. So can you talk about that conflict a little bit and maybe how.

Speaker Change: The success in opportunities for Hampton just CBD.

Speaker Change: Differ from THC and the U S.

Clifford Starke: Yeah, I think there's a couple of bad things out there that are creating negative atmosphere problems in the hand space that go active or not. The way we operate a business is incredibly and building trust for the consumers, direct and do the wholesale channels. And there's real opportunities for growth. There's a lot of people out there that are selling thick, reactive hemp that are not falling within the limits, and it's causing real issues for other people to build real businesses. for us, it's more or less now focused on our traditional lines of gummies, tinctures, so on, so-called 300 different skews, but really the team, like I said before, has really dialed it on the beverage front.

Speaker Change: Yeah, I think I think there's a couple of.

Clifford Starke: There's a couple of bad things out there that are creating a negative atmosphere problems in the hand space, psychoactive or not. You know, the way we operate our business is, you know, incredible ability to build trust with our consumers, both direct and through the wholesale channels, and, you know, there's real opportunities for growth. I just- There's a lot of people out there that are selling psychoactive hemp that is not falling within the limit, and it's causing real issues for other people trying to build real businesses. Um... for us.

Speaker Change: There was a couple of bad sees out there that are creating negative atmosphere of trouble with that.

Speaker Change: Faith psychoactive or not.

Speaker Change:

Speaker Change: The way, we operate our businesses as you know and credibility and building trust with our consumers so direct and wholesale channels.

Speaker Change: And.

Speaker Change: There's real opportunities for growth I just.

Speaker Change: A lot of people out there that are that are sell.

Speaker Change: Selling psychoactive hubs that are not falling within the limits, that's causing real issues for other people trying to build their businesses.

Speaker Change:

Speaker Change: For us it's.

Clifford Starke: It's... More or less now focused on our traditional lines of gummies, tinctures, so on so-called 300 different skews, but really, the team, like I said before, is really talented on the [inaudible]. So everyone's really, really focused on developing that. And we see that as a huge, huge growth opportunity versus just selling other gummies. I'm going to the White House on September 25

Speaker Change: More or less now focused on our traditional lines of gummies to ensure so on and so forth are 800 different skus, but really the team like I said before is really a dog on the beverage front.

Clifford Starke: So, everyone's really, really focused on developing that, and we see that as a huge, huge growth opportunity versus just selling another gummy.

Speaker Change: So everyone's really really focused on developing that we see that.

Speaker Change: The huge huge growth opportunity versus just selling other gummy.

Clifford Starke: I'm going to the White House, September 25th. I don't; I think there's a lot of political noise on the synthetics, obviously, besides the bad scenes in terms of companies and people. There's, you know, there's a real risk of synthetic side, which you understand. The rest, I think, will be perfectly fine on. And again, I don't think we're actually worried about it in 2024 anyways. They don't fall and, you know, running into the political movement here, I think we learn a lot more. But it's tough to comment on politics; I'm going to show comfortable overall. Sure.

Speaker Change: I am going to the White house to number 25th I don't I think there's a lot of political noise on the synthetics, obviously, besides the bad seeds in terms of companies and people there.

Clifford Starke: I don't think there's a lot of political noise about synthetics, obviously, besides the bad seeds in terms of companies and people. There's, you know, there's a real risk on the synthetic side, which we understand. The rest, I think we'll be perfectly fine on.

Speaker Change: There's a real Russell synthetic side.

But you understand the routes I think will be perfectly fine on.

Clifford Starke: And again, I don't think we have to worry about it in 2024 anyway. Throughout the fall and, you know, running into the political movement here, I think we'll learn a lot more, but it's tough to comment on politics unless you're comfortable overall. Sure.

Speaker Change: And again I don't think we have to worry about it in 2024 anyways.

Speaker Change: Throughout the fall and running into the political movement here I think we'll learn a lot more but it's tough to comment on politics always feel comfortable overall.

Danny Layman: Sure Danny.

Clifford Starke: Danny, I think you mentioned increased competition. Is Cliff what you're referring to with some of those folks pushing some of the psychoactive products? Products may be a little haphazardly, is that where the competition is coming from? Um, yeah, just often. I really think, I really think that this whole, you know, a lot of the major players are moving into the D9 space on the beverage front. They're very credible.

Clifford Starke: Dany, I think you mentioned increased competition. Is that Cliff what you're referring to with some of the folks pushing some of the psychoactive products, maybe a little haphazardly? Is that where the competition's coming from? Yeah, just offset. I really think, I really think that this whole, you know, a lot of the major players are moving into the denying space on the beverage front. They're very credible. There's other groups; they're, you know, running smoke shops that, you know, children shouldn't be going into and buying and leaving. And I understand that.

Danny Layman: Danny I think you mentioned increased competition is that is that cliff, what you're referring to with with some of the folks pushing some of the psychoactive.

Speaker Change: <unk>, maybe a little haphazardly as is that where the competition is coming from.

Danny Layman: Yeah, just I'll say I really think I really think that this whole you know a lot of the major players are moving into the DNI in space on the beverage front.

Clifford Starke: There are other groups. They're wearing smoke shops. They're wearing smoke shops. They're wearing smoke shops.

Speaker Change: Very credible there's other groups there right smoke shops at you.

Clifford Starke: You know, children shouldn't be going in and buying and leaving, and I understand that. So how do we actually govern this properly? It's very similar to alcohol. How's it going on the fold?

Speaker Change: Children shouldn't be going into in buying and leaving that I understand.

Clifford Starke: So how do we, how do we actually govern this properly? So it's very similar to alcohol. How does it get unfold?

Speaker Change: So how do we how do we actually govern this properly.

Clifford Starke: And it's a really politically awkward situation for everyone from MSOs to us, to, you know, even the private prisons. Everyone has an angle in the shoe, and I understand from a political standpoint. You people were in jail for cannabis and still are for, you know, extremely small amounts, and you're given a situation now where there's some static, and MSOs don't feel comfortable with all given top-backs opposite put It's actually going to, you know, states and falling laws and now see a New York kind of switching over finally. I was with Aaron in New York a while ago. After I'd been there, walked around.

Speaker Change: So it's very similar to alcohol how has it gone unfold and that's a really political awkward situation to have launch from msos to us too.

Clifford Starke: And it's a really political, awkward situation for everyone from MSOs to us to, you know, even the private prisons. Everyone has an angle and an issue. And I understand a political standpoint. You people were in jail for cannabis, and so are for, you know, extremely small amounts. And you're given a situation now where there's some static and MSOs don't feel comfortable with that, with all given cat-backs opposite put into actually going to, you know, states and, and, and following law. And now see a New York kind of switching over finally. I was with Aaron in New York a while ago; after I'd been, I walked around.

Speaker Change: Even the private prisons of everyone has an angle an issue and I.

Speaker Change: I understand the political standpoint of new people in jail for cannabis and still are for.

Speaker Change: Extremely small amounts and you're given a situation hours garlock and Msos don't feel comfortable with.

Speaker Change: With all give us the top box office it put in to actually join to states and installing law you now see in New York kind of switching over finally.

Speaker Change: And in New York, a while ago after dinner walked around it it's extremely uncomfortable walking in the stores that are selling illegal.

Clifford Starke: It's extremely uncomfortable walking in the stores that are selling illegal, you know, cannabis derivatives, hemp derivatives, mushroom derivatives, so on so forth. While it's, you know, we're just trying to build a real, credible, trustworthy business. So if everyone is on the same page and they get scavenged properly to protect buildings, everyone else, that's what we're trying to do. And I think that's what will be implemented. I don't think it's a scare of our business. I don't think CBV is anything that's one of the opposite way. Some CBV retailers are, you know, the big box stores are starting to feel very comfortable, obviously.

Clifford Starke: It's extremely uncomfortable walking into the stores that are selling illegal cannabis derivatives, hemp derivatives, mushroom derivatives, so on and so forth. Well, we're just trying to build a real, credible, trustworthy business. So if everyone's on the same page and it gets governed properly to protect traveling and everyone else, that's what we're trying to do. And I think that that will be implemented. I don't think that's a threat to our business. I don't think CBD, I think it's going the opposite way. Some CBD retailers or big box stores are starting to feel very comfortable.

Speaker Change: Cannabis derivatives have derivatives mushroom Gilberto small and so for us.

Speaker Change: Well, it's you know, we're just trying to build a real credible trustworthy business. So everyone's on the same page and I guess got one property to protect children and everyone else. That's what we're trying to do.

Speaker Change: So that will be implemented I don't think it's a scare of our business I don't think C D and it's one of the opposite way.

Some CPD retailers or the big box stores are starting to feel very comfortable obviously on the beverage side, you're seeing a big alcohol just rose feeling very comfortable on the total wines, so on and so forth and they're fighting anyone who oxy is.

Clifford Starke: Obviously, on the beverage side, you're seeing, you know, big alcohol distillers feeling very comfortable with Tola, wine, so on, so forth. And they're fighting anyone who actually is saying notices that they're doing anything wrong. So it's all moving in the right direction. But in this political environment, which is very tricky and confusing for everyone, I think we just have to get to November and then, you know, stay close to what's happening day to day. But I do think, you know, there has to be a better way to protect kids as well as make sure the right companies are actually operational in certain states.

Clifford Starke: On the beverage shy, you're seeing, you know, big alcohol just feels feeling very comfortable and the total wine, so on so forth. And they're fighting anyone who actually is saying a notice that they're doing anything wrong. So it's all moving in the right direction.

Speaker Change: And I noticed that they're doing anything wrong. So it's all moving in the right direction.

Clifford Starke: But in this local environment, which is very tricky and confusing for everyone, I think we just have to get to November and then, you know, stay close to what's happened day to day. But I do think, you know, there has to be a better job to protect kids as well as make sure the right companies are actually operational in thanks. That's perfect. Thank you, Cliff. Thank you, Dany. Once again, if you have a question, please press star, then one.

Speaker Change: But in this political environment, which is very tricky and confusion for everyone. I think we're just after you get to November and then you know what.

Speaker Change: Stay close to what's happening day to day, but I do think.

Speaker Change: There has to be a better job to protect kids as well as make sure. The right companies are actually operational I'm certain states.

Speaker Change: Okay. That's perfect. Thank you. Thank you Danny.

Clifford Starke: That's perfect. Thank you, Cliff. Thank you, Dany. Once again, if you have a question, please press star then 1. There are no more questions. This concludes the question and answer session. I would like to turn the conference back over to Clifford Starke for any closing remarks. Please go ahead.

Speaker Change: Once again, if you have a question. Please press Star then one.

Operator: Is there no more questions? This concludes the question and answer session.

There are no more questions. This concludes the question and answer session I would like to turn the conference back over to Cliff Chen for any closing remarks. Please go ahead.

Clifford Starke: I would like to turn the conference back over to Clifford Starke for any closing remarks. Please go ahead. Thank you for all stakeholders. We're going today. We're working hard to build the company. I think all seriousness and macro trends come into effect and pause the matter on both sides politically. And we're very, very excited for it. And if anyone needs more information, we're happy to provide it and show it to Dany and me. Thank you very much.

Clifford Starke: Thank you to all the stakeholders we've joined today. We're working hard to build the company. I think all the series and macro trends will come into effect and pause the matter on both sides politically.

Cliff Chen: Thank you for all our stakeholders, who joined today, we're working hard to build the company.

Speaker Change: I think all series of macro trends come into effect in a positive manner on both sides politically and we're very very excited for it and if anyone needs more information.

Operator: And we're very, very excited about it. And if everyone needs more information, we're happy to have provided me with such a daddy and I, and thank you very much and have a great day. This brings to close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day. [inaudible] Clifford, Clifford.

Speaker Change: We're happy to provide it and show that and I. Thank you very much and have a great day.

Operator: And have a great day.

Operator: This brings to close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Speaker Change: This brings to close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Operator: Thank you for standing by. This is the conference operator.

Operator: Welcome to the Flora Growth Corp. 2nd quarter to 2024 results conference call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator, regressing star, then zero.

Dany Vaiman: I would now like to turn the conference over to Dany Vaiman, key financial officer. Please go ahead.

Dany Vaiman: Thank you operator and good morning everyone.

Dany Vaiman: And behalf of the Flora team, welcome to our queue to 2024 results and corporate update conference call. Before we begin, I wish to inform listeners that certain statements to be made today by the management team may contain forward-looking information. Today's call will include estimates and other forward-looking information and statements concerning future revenues, results from operations, financial position, market, economic conditions, partnerships, and other statements that may be constructed as a prediction of future performance.

Dany Vaiman: 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 Edgar at scc.gov and cedar.com. Any estimates of 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 supply new information regarding the circumstances after the date of this call.

Dany Vaiman: On the call today, we have Clifford Stark, CEO, as well as Danny Damon, CFO. Following the presentation Clifford and I will be available for the question and answer period. The queue to 2024 results press release and the company 10 queue has been filed on Edgar and cedar. Also note that all amounts mentioned in this call are in the United States dollars unless stated otherwise.

Clifford Starke: I'll now turn over to Clifford. Please go ahead. Thank you, Danny.

Clifford Starke: Good morning everyone, my line. Welcome to the floor, gross Q2 2024 results and corporate update conference call. Let me start by knowing that in the second corridor floor made several accretive acquisitions and form strategic partnerships to capitalize on most robust market trends. These actions are designed to further diversify our activities and continue building in rows to areas where we see potential for growth. The first acquisition was QHC and came in April at the time of Jeremy's legalization of cannabis.

Clifford Starke: Today, we have seen meaningful integration with the QHC team. I have established key initiatives to stimulate our business activities in the country. With the largest population and the greatest purchasing power in Europe, Jeremy boosts Europe's fastest growing cannabis market. With the following two phases, Jeremy's legalization expected in the coming 12 to 18 months. Jeremy is excited to become the largest federated legal adult-use cannabis market globally. The German government has indicated that intensive pursuit of second phase of legalization focused on regional product programs with commercial supply chains.

Clifford Starke: With approximately 230,000 medical-carrot patients today, Jeremy can use to lead the way in European medical cannabis as well. Moving on to the U.S, market and in May 2024, the U.S, administration announced that is moving to reschedule cannabis under U.S, federal law that Justice Department has expected to propose its role to reclassify cannabis from schedule 1 to schedule 3 under the control substance act in the federal register. It is important to emphasize that it is the first time in the history of the United States that all major party-presidential candidates are open to initiating important cannabis reform.

Clifford Starke: On the Democratic side, both Kamala Harris and Tim Walsh are widely expected to take a progressive stance. Vice President Harris has expressed support for cannabis legalization and given Walsh legalized recreational cannabis in its home state in Minnesota. More recently, President Trump's former president Trump suggested he would be in favor of reform. As the U.S, continues to move toward progressive cannabis legislation, floor intends to capture media opportunities and market trends.

Clifford Starke: In the quarter, we established a joint venture with the HALF through a group holdings to capitalize on the beverage market in the United States. The joint venture will link our U.S.-based C2G team in Althea's Peak, which is recognized as a market leader in cabs and choose beverages, and operates its world-possible technology in vision. This partnership is positioned to facilitate market access via traditional channels like wine and liquor stores. We believe that these types of beverages is robust to the beverage market segment, currently representing a very small fraction between 1 to 3 percent of all U.S, cannabis sales. Cannabis and fused beverages are beginning to overtake alcohol when it comes to first-time daily use.

Clifford Starke: Another area where we want to leave a mark is in the global e-commerce space.

Clifford Starke: To this end, floor acquired Australian vaporizers in June.

Clifford Starke: Australian vaporizers was founded in 2010. It's become one of the largest online retailers of vaporizers, hardware, and accessories in Australia. Australia vaporizers has the potential to drive synergies within floors of main portfolio, including our high-end brand vessel.

Dany Vaiman: With that, I'll pass on Danny, who discusses the financial results for the quarter. Danny, please go ahead. Thank you, Clifford.

Dany Vaiman: Let me start by noting that in addition to the acquisitions we made in the quarter, floor aligns several new products, the stimulator of gun and growth. Vessel unveiled the second generation compass rise, which has a unique design and the ability to stand upright. JSCBD introduced a series of new gummies for sleep and relaxation, underscoring an already best-selling line of products. Revenues for the quarter for the second quarter of 2024 were 15.7 million, compared to 21.5 million for the second quarter of 2023.

Dany Vaiman: Revenue for the six months ended June 30, 2024, we're 33.7 million compared to 40.8 million for the six months ended June 30, 2023. These decreases, I primarily, due to the company's deliberate discontinuation of several unprofitable product lines as well as increased competition. Total operating expenses were 6.7 million in Q2, 2024 compared to 44 million in Q2, 2023. A decrease of 37.3 million or 85 percent. Excluding non-cash impairment charges, the decrease in operating expenses quarter or quarter was 2.5 million or 28 percent.

Dany Vaiman: For the 2024 and 2023, year-to-date periods total operating expenses were 13 million and 51.7 million respectively. This represents a decrease of 38.7 million or 75 percent. Excluding non-cash impairment charges, the decrease in operating expenses year-over-year was 4.8 million or 29 percent. Netcash used in operating activities was 1.6 million in the six months ended June 30, 2024, compared to 7.8 million for the six months ended June 30, 2023. A decrease and an improvement of 6.2 million are 79 percent.

Dany Vaiman: On a consolidated basis, the net loss for the quarter was 2.7 million compared to 44.6 million in the comparable quarter. A decrease of 41.9 million or 94 percent. The lower and finished the quarter was 6.1 million in cash and 21.4 million of current assets, including 6.7 million of saleable inventory. Networking capital was 3 million.

Dany Vaiman: In addition, we have set the stage for a wide array of financing alternatives to further fuel our business plan. In terms of performance for each of our divisions, just CVD maintained a gross profit margin of 34 percent at sales of 4.4 million. It stopped selling products in the quarter, included the bear, nighttime bear and bleach gummies. Approximately 41 percent of its revenues stemmed from direct-to-consumer sales, and the remaining 59 percent generated through business to business sales.

Dany Vaiman: In the quarter, just CVD added 120 million bill costivers to its network. Vets will maintain a gross profit margin of 53 percent on sales of 1.4 million. Core products represented 35 percent of sales in compressed products contributed 41 percent for sales. The largest individual item sold was the wood slate representing 11 percent of vessel sales. Vets were 59 percent from direct-to-consumer and 41 percent on business to business. Vets will added 60 new wholesale costivers, including several multi-state operators in the quarter. But Tivo earned 9.6 million in revenue with gross margins of 8.4 million, in the quarter, including income from continuing operations of 0.2 million. All sales were business to business and included broad name pharmaceuticals.

Operator: I will now hand the call back to the operator for the question and answer session. Thank you. We will now begin the question and answer session to join the question, Q. You may press star, then one on your telephone keypad. You will hear Joan acknowledging your request. If you're using a speaker phone, please pick up your handset before pressing any keys. To the joy of question, please press star, then two.

Aaron Grey: First question comes from Aaron Grey with Alliance Global Partners. Please go ahead. Hi, good morning, and thank you for the questions here.

Dany Vaiman: So first one for me, just in terms of EBITDA and profitability, maybe even tie-and-grove smartness. So I think you had a 700 K inventory impairment there. So just as you think on the before for growth margins, as you accident some low profits used you mentioned on the go forward there, how should we think about the evolution of growth margin and how that ties into you guys going back to EBITDA profitability? Thank you. Do you want to know about?

Dany Vaiman: Yes, Sean, thank you so much for the question and thank you for joining us on the call. Yes, this Q2 as we noted in our MDNA and our financial disclosures was a bit unusual in the sense that we had a fairly large inventory impairment charge like 700,000 in the quarter which drove down the growth margin. If we look at it in a go forward basis, I think in a consolidated level, we're probably looking at it in the mid-30s in that range from a growth margin perspective, and as we grow and add more profitable lines to our portfolio, we expect that number to gradually increase.

Clifford Starke: Okay, all right, thanks for that. Second question for me. You guys have a couple different eyes in the far right there on some initiatives that could heat up and drive some revenue. So just as we think about the near-term opportunities to drive revenue growth, what are you seeing as what could be the biggest impact of the P&L in the next six months here? I guess specific focus on more Germany. Do you think it's more of just EBITDA with some of the hemp issues that you have there?

Clifford Starke: Then we guys have a couple different eyes in the far right I see what we should think of it. What are the most near-term growth thoughts versus what the more long term in terms of when it impacts P&L? I think the US team is very dedicated and focused on becoming a real brand and a better sector. We've picked up distribution in several states. As we go into the fall, continue to, you know, we see ourselves getting the six state states where I'll take it quickly here.

Clifford Starke: On the US side, that's where the growth is going to come from. Germany, the business partners come together quite nicely. We also have some partnerships we're working on that would really put our our our our our skews that the proper place in what's happening. Germany we're realizing it's very e-commerce driven. We have a great partnership which we can't really get into right now. But you're going to see besides what we talked about before our our seeds, cones, flour, accessories, vessel, gestal, and so forth.

Clifford Starke: We'll all be established on this one platform that has I would say probably two and a half million viewers on a monthly basis in Germany, and it's by far the leading source for consumers to be able to actually identify what they want to actually purchase within this medical cannabis market and recreational market in Germany. So I would say two strong U.S, on beverages, and Germany we're touching every fast that we possibly can with the European market.

Aaron Grey: Okay, great, thanks for the card, Clifford, I'll drop back in the queue. Thanks, Aaron.

Sean Long: The next question comes from Sean Long with table security, please go ahead. Hey, guys, thanks for taking the time. I just wanted to kind of look at the recently completed Australian vaporizer acquisition, and what does that look like from the capital perspective. Okay, so Australian vaporizer's person very familiar with it. When I was one of the largest shareholders of Namaste back in the day, that was the main asset. When it came back to us recently, obviously we had some short-term struggles and actually closing the transaction, which we ended up doing relatively quickly recently.

Sean Long: Instead of the integration, it's more that the business plan has actually changed. So a retail individual is not the actual ability to actually order a battery or vaporizer even nicotine on the e-commerce platform. Everything's getting driven through the doctors and pharmacists, which short-term is a little bit confusing along tremendous to be a huge success for a couple of reasons. A lot of smaller players are gone. And second is a lot of, for example, the puff goes to the world and not registering their products properly to the marketplace.

Sean Long: That's so, which is a hard work component. There's also another category of significant growth for us, is doing extremely extremely well in the Australian market. After the US is a second largest market for us. So it's not really integration or cost. Those guys really bought that. They had a cash and balance sheet, plenty of inventory. The first shipment of vessel came, I think, two weeks ago. And definitely it's going to integrate it properly on that aspect. But I would say there's not really touch-ups or issues. It's more just integrating the platform out for more selections to consumers through the pharmacist and doctors.

Clifford Starke: Awesome. Thank you.

Sean Long: And my next question is kind of turning back to Germany and the adult use market there. And it's kind of the first full quarter that we're seeing in the early phase. And I'm just wondering what you guys are seeing there.

Clifford Starke: And basically how you guys are expecting that to develop over the coming months and what's the preparation required. Two questions. So Germany, obviously since April, has had a big influx in prescriptions. It just worries your access. And really the access scripts even outside of, you know, German medical systems throughout EU. So there's been that influx, which is interesting is high quality products as well as low quality products. Price dependent are all selling within the marketplace.

Clifford Starke: [inaudible] for us. Unfortunately, we have so many others round of a lot of our skews relatively quickly. What we're doing is we've sourced high quality local quality flower, which should be arriving in the next couple of months, and just integrating it to do form one into our current pharmacy market, which is traditional for us. The second is this e-commerce relationship online, I'm referring to, which is not public yet, but that's really what we're focused on integration-wise.

Clifford Starke: And Germany was continued to keep on growing, and we're trying to focus really on just finding opportunities that didn't realize. I never really envisioned it going so e-commerce driven versus traditional. So we adopted really close into that. I think we've done a good job. But the growth is really going to come from just getting more skews on to certain platforms, and feeding our pharmacies, because a lot of people on certain quality strings are still about. Awesome.

Sean Long: Thank you so much. That's really helpful.

Bill Kirk: The next question comes from Bill Kirk with Rod Capital Partners. Please go ahead. Hey Cliff, a Danny, good morning. Hey, so Danny, you mentioned 120 new wholesalers for just CBD. I think the number was 60 for Vessel. How many wholesalers are in the base number that you're adding the 120 and 62? And what kind of bump from new wholesalers in terms of your sales by division? What kind of bumper do you expect?

Bill Kirk: Yeah, I think that's a good question. Thank you for that, Bill, and good morning. I think if we look at it from a grand scheme of things, there are close to 20,000 points of distribution overall for the business and the company. But you're looking at a dollar value, not all of them are material, obviously. From a bumping itself perspective, I think that particular increase, we would expect it to be between two and three percent in the immediate to short term.

Bill Kirk: So that would be the number that best reflects that increase in the number of wholesale distribution for just. Okay, and then Cliff, I have a broader question on CBD or intoxicating hemp versus THC. It seems like some of the hemp groups are at odds with some of the proposed THC legislation that's out there. So can you talk about that conflict a little bit and maybe how the success and opportunities for hemp and just CBD differ from THC in the US?

Bill Kirk: Yeah, I think there's a couple of bad things out there that are creating negative atmosphere problems in the hand space that go active or not. The way we operate a business is incredibly and building trust for the consumers, direct and do the wholesale channels. And there's real opportunities for growth. There's a lot of people out there that are selling thick, reactive hemp that are not falling within the limits and it's causing real issues for other people to build real businesses, for us, it's more or less now focused on our traditional lines of gummies, tinctures, so on so-called 300 different skews, but really the team, like I said before, has really dialed it on the beverage front. So, everyone's really, really focused on developing that, and we see that as a huge, huge growth opportunity versus just selling another gummy.

Clifford Starke: I'm going to White House, September 25th. I don't, I think there's a lot of political noise on the synthetics, obviously, besides the bad scenes in terms of companies and people. There's, you know, there's a real risk of synthetic side, which you understand. The rest, I think, will be perfectly fine on. And again, I don't think we're actually worried about it in 2024 anyways. They don't fall and, you know, running into the political movement here, I think we learn a lot more.

Clifford Starke: But it's tough to comment on politics, I'm going to show comfortable overall. Sure. Dany, I think you mentioned increased competition. Is that Cliff what you're referring to with some of the folks pushing some of the psychoactive products, maybe a little haphazardly? Is that where the competition's coming from? Yeah, just offset. I really think, I really think that this whole, you know, a lot of the major players are moving into the denying space on the beverage front.

Clifford Starke: They're very credible. There's other groups, they're, you know, running smoke shops that, you know, children shouldn't be going into and buying and leaving. And I understand that. So how do we, how do we actually govern this properly? So it's very similar to alcohol. How does it get unfold? And it's a really political, awkward situation for everyone from MSOs to us to, you know, even the private prisons of everyone has an angle and an issue.

Clifford Starke: And I understand a political standpoint. You people were in jail for cannabis and so are for, you know, extremely small amounts. And you're given a situation now where there's some static and MSOs don't feel comfortable with that with all given cat-backs opposite put into actually going to, you know, states and, and, and following law. And now see a New York kind of switching over finally. I was with Aaron in New York a while ago after I'd been, I walked around.

Clifford Starke: It's extremely uncomfortable walking in the stores that are selling illegal, you know, cannabis derivatives, hemp derivatives, mushroom derivatives, so on so far. While it's, you know, we're just trying to build a real credible trustworthy business. So if everyone is on the same page and they get scavenged properly to protect buildings, everyone else, that's what we're trying to do. And I think that's what will be implemented. I don't think it's a scare of our business.

Clifford Starke: I don't think CBV is anything that's one of the opposite way. Some CBV retailers are, you know, the big box stores are starting to feel very comfortable, obviously. On the beverage shy, you're seeing, you know, big alcohol just feels feeling very comfortable and the total wine, so on so forth. And they're fighting anyone who actually is saying a notice that they're doing anything wrong. So it's all moving in the right direction.

Clifford Starke: But in this local environment, which is very tricky and confusing for everyone, I think we just have to get to November and then, you know, stay close to what's happened day to day. But I do think, you know, there has to be a better job to protect kids as well as make sure the right companies are actually operational in Thanks. That's perfect.

Operator: Thank you, Cliff. Thank you, Dany. Once again, if you have a question, please press star, then one. Is there no more questions?

Operator: This concludes the question and answer session.

Clifford Starke: I would like to turn the conference back over to Clifford Starke for any closing remarks. Please go ahead. Thank you for all stakeholders we're going today. We're working hard to build the company. I think all seriousness and macro trends come into effect and pause the matter on both sides politically. And we're very, very excited for it. And if anyone needs more information, we're happy to provide it and show it to Dany and I. Thank you very much. And have a great day.

Operator: This brings to close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.