Entourage Health Corp. (ENTG) Earnings Call Transcript & Summary

I second the motion.

I will now move to the next item of business. The next item to be addressed is the approval -- is to approve the approval of the corporation's 10% rolling omnibus incentive plan. A summary of the plan is included in the management information circular. I would now ask that a motion be brought to approve the corporation's 10% rolling omnibus incentive plan.

I move that the resolution approving the corporation's 10% rolling omnibus incentive plan as set out in the management circular be passed.

I second the motion.

Registered shareholders and duly appointed proxy holders have been provided with ample time to register their votes. Accordingly, the polls will be closing in 30 seconds. Once the electronic ballots closes, the voting page will disappear and your votes will automatically be submitted. [Voting]

The polls are now closed. I would ask that the scrutineer compile the report on the results of voting on all business matters. I've been advised by the scrutineer that the ballots and the proxy dispositive have been voted in favor of all the resolutions and that Angelo Tsebelis, George Scorsis, Gail Paech, G. Edmund King, Dr. Hugh Scully and Bruce Croxon have been elected to the Board of Directors. Therefore, I declare all the resolutions to have been carried. I direct that the results of the ballots be annexed to the minutes of the meeting. Is there any further business? As there is no further business to come before the meeting, I move and second that the formal portion of this meeting now be terminated. As the formal business of the meeting has now concluded, I would now like to hand things over to our Chief Executive Officer, Angelo Tsebelis, who will offer some remarks about the corporation and our business. An opportunity for registered shareholders to ask questions will follow the presentation. Thank you.

Thank you, George, and good morning, everyone. I'd like to extend a warm welcome and thank you to our shareholders and guests for joining us today. It's unfortunate that we're not able to meet in person for this year's meeting, but I suppose virtual meetings are now the new norm for us under the circumstances. Looking at the first half of 2020, it was expected to be a period of strategic transition and adjustment for WeedMD. Following the acquisition of Starseed and the subsequent integration, we not only made changes to the leadership team, but also changed the vision and strategic direction of the company. But what we did not anticipate was the added layer and complexity of managing through all of this while going through a global pandemic. Despite the external change of pace and fluctuating business dynamics, we remain steadfast and focused on executing against our strategic plan. We continue to solidify our unique medical channel and commercialize one of the best cultivation platforms in the country and by delivering quality cannabis products to consumers, while at the same time, managing our costs and optimizing our infrastructure in an efficient and fiscally sound manner. Before I get into the future of WeedMD, I'd like to take a few minutes to summarize and reflect on some of our key accomplishments so far this year. As I already mentioned, the change in leadership earlier this year marked a point of change in the strategic direction of our company. Whereas 2019 was about laying our foundation and building a solid infrastructure for growth, the first half of 2020 was all about navigating a period of strategic transition and carving our path forward. For starters, the primary shift in our focus was to produce and deliver top-quality products that cannabis consumers are looking for in both our medical and adult-use segments and transition away from wholesale bulk market. Also as part of our integration plan, we took the critical steps to definitively right-size and streamline our operations. With the proper leadership and team and assets in place, we continue to focus on our core pillars for long-term success: That is a world-class cultivation platform, strong distribution channels and a fiscally sound decision-making process. The first pillar is really about leveraging our core competency and the strength of our cultivation program. The strong legacy of our genetics and cultivation platform positions us well in the market to build our Color, Saturday and additional brands. With 20 10,000 square foot rooms now online in our hybrid greenhouse, we're harvesting craft-style cannabis at commercial scale, and I can tell you that our plants have never looked better. And we are currently producing the most cannabis that WeedMD has ever produced in a single period. Most importantly, we have been able to scale without compromising on the quality that the market demands and our customers expect. Coupled with one of the most successful outdoor harvests in 2019, we continue to be recognized as one of the best grow operations in the country and we continue to improve. With the commercialization of our extraction hub, CX Industries, we recently launched our medical vapes, which will be the first of many 2.0 products to come. Our Aurum vape was introduced into our medical channel with exceptional success, and we're looking forward to the future expansion and product line available to medical patients. We'll also be launching further product innovation in the adult-use market, beginning with Color-branded vapes. The quality and consistency of our cultivation is what will help drive and grow our distribution channels. Our renewed commercialization plan is focused on capturing strategic sales channels and delivering finished products to this market. The Starseed medical channel offers the most unique medical channel and platform in the country, with preferred and exclusive relationships with large unions, employers and payer groups. We've developed a closed-loop model to provide medical cannabis as a paid benefit to customers across the country. Our service helps consumers navigate the clinical and medical support they need to register right through to direct billing to insurance, resulting in a cashless transaction for the patient. This insurance channel, along with other distribution channels, such as Shoppers Drug Mart, positions us well to become leaders in the medical cannabis space. We have built a captive market with over 350,000 addressable lives that we can exclusively access to drive further high-margin revenue. We will continue to discuss new potential partnerships and look forward to growing the Starseed model. On the adult-use side, we continue to ramp up activities around our Color cannabis brand and as more retailers come online in 2020. Since launching the brand last year in June, we've continued to experience increased brand recognition and positive retailer feedback across the country and have consistently appeared in the top 5 most popular brands in Ontario. While COVID has created its share of obstacles, we've been able to pivot and align with our distribution partners to provide education and behind-the-scenes encouragement and engagement opportunities for budtenders and retailers alike. And while we continue to focus on delivering craft cannabis at scale, we're also engaged in developing high-quality, customer-focused products in traditional and new formats. And finally, around making fiscally sound business decisions, we've always taken a measured and calculated approach to our growth, and this is why we feel well positioned to grow into our infrastructure, while others in the industry are beginning to rationalize and close excess capacity and facilities. We enjoy the optionality of adding to our existing footprint in both the indoor and outdoor cultivation, and we'll continue to explore those options accordingly. While I touched on this briefly at the onset, I think it's important to note how far we've come on integration and synergy realization as we brought 2 operations together. We've worked diligently to identify areas that could maximize cost reductions and consolidate our key business functions to meet our synergy savings by the end of the year. To date, we have successfully consolidated our corporate offices, streamlined functional support teams, specifically around investor relations, admin and finance. We've streamlined our medical and client services and brought all the teams together in Bowmanville. We've optimized our -- all departments across and during the COVID emergency order. We streamlined operation production and more recently identified additional synergies in cultivation operations and production as we look to further improve our labor and SG&A. And finally, we've optimized the Bowmanville facility, transitioning all production activities from Bowmanville over to Aylmer and Strathroy, and we converted our Bowmanville facility into a medical and fulfillment hub. The first half of 2020 showed the top line benefits of our combination with Starseed. We increased our scale, capacity and operating efficiencies. And with the $25 million strategic equity investment from our -- from LiUNA Pension Fund, with recent amendments to our BMO credit facility, we have a solid operational infrastructure already in place to support our continued commercial growth and broader distribution channels. We'll continue to focus on improving our operational performance, managing product inventory and properly controlling expenditures. As we move into the second half of the year, we do so with a great sense of confidence and optimism. We've made the necessary changes and decisions that will set us up for success and growth. Our confidence is rooted in the fact that we have the right team in place to move us forward and drive us toward profitability. Looking ahead into the rest of 2020, we aim to be laser-focused on driving sales growth and optimizing operations. We will build on our solid captive medical channel by adding new partnerships with other unions and employers, while at the same time, driving more consumers and patients through additional networks through our expanded product formats and offerings. We will enhance our presence in the adult-use retail and drive substantial growth, building on our Color cannabis brand. This includes ramping production to meet the demand for our carefully curated products as well as significantly increased retail outreach. On the heels of our initial vape launch, we'll continue to expand our portfolio of 2.0 products through the creation of extracts, concentrates, and ultimately, all of these value-added cannabis products that consumers and patients demand. By leveraging our unique data sets and customer insights, we will launch new differentiated products and enhance our service offering to improve the overall customer experience with our brands. And finally, we'll establish strategic commercial partnerships through CX Industries and look for further optimization at all our production sites. All of this will only be achieved through our clear and focused strategic plan that will be executed by our engaged and empowered team. As we continue to refine our corporate culture, we recently cascaded our mission and value statements across our organization. It's imperative for us to reaffirm and share that we look to solidify our commitment to equality, diversity, inclusion and fostering real change within our company and our communities. We want our customers to relate to our values as we are a part of the environment and the communities around us. As we look ahead, we believe WeedMD is well positioned for continued sales growth and long-term profitability. Our best-in-class cultivation and processing operations are among the finest in the industry, and our commercial team takes great pride in leveraging our platform to deliver craft cannabis at scale. We will continue to make the development of our market position a top priority to ensure our continued growth as we move forward through the balance of 2020 and beyond. Thank you. We'll now open the floor to questions, and I'm joined by our CFO, Lincoln Greenidge; and our Chief Commercial Officer, Stephen Ng.

We will now respond to questions received from registered shareholders. As there are no further questions, I'd like to now conclude the meeting. Thank you very much.

Thank you.