Thank you, Roya. Good afternoon.

I’d like to thank everyone for joining us for the second quarter 2019 conference call. My name is Jeffery Reath, Executive Vice President of Finance and Investor Relations; and with me on the call this afternoon is Cansortium’s CEO, Jose Hidalgo.

Our CFO, Henry Batievsky sends his regrets for today as he is not feeling well. Jose will provide brief comments on our second quarter and first half financial results, as well as address our strategic plans and progress thus far in 2019.

I will return to review the financial results in more detail, as well as our revised outlook for the balance of 2019. We will take questions at the end of our prepared remarks.

A telephone replay of this call will be available through next week, accessible further details provided on our earnings release, which was issued today. A webcast replay of this call will also be available on the investor relations section on our website at cansortium.com through to August 28, 2020.

The earnings press release along with unaudited financial statements and MD&A for the quarter can be found on the investor relations section of our website and is also been filed on SEDAR.com. A reminder to our listeners that certain subjects discussed in this call, including some answers we may provide to questions may included content that is forward looking in nature and therefore subject to risks and uncertainties and other factors which could cause actual future results, or performance to defer materially from any implied expectations.

Such risks surrounding forward-looking statements are all outlined in detail within the company’s regulatory filing, which can be found on SEDAR.com. The company does not undertake to update or revise any forward statements accepting the extend required by applicable securities laws in Canada.

In addition, during this call, we will refer to supplemental non-IFRS accounting measures, including EBITDA and adjusted EBITDA, which do not have any standardized meaning prescribed by IFRS. EBITDA and adjusted EBITDA are defined in our press releases, as well as in the MD&A as filed SEDAR.

Our reconciliation of EBITDA and adjusted EBITDA to consolidated net income reported in accordance with IFRS was included with our financial statements on SEDAR and is also available in the investor section of our website. With the final reminder on today’s call, unless otherwise indicated all dollar amounts are expressed in U.S.

dollars. I would now like to turn the call over to our CEO, Jose Hidalgo.

Jose?

Thank you, Jeff and good afternoon everyone. I want to welcome all of our shareholders, including those who have supported and believe in our company from its earlier days.

Those who became shareholders during the past 90 days since we held our first investors conference call as a public company, as well as any investor listening today who are contemplating their investment in Cansortium. In every market when we chose to compete, our goal is to establish through after leading premium medical cannabis brand and a standard-setter for consistent formulation and unmatched customer experience at each of our Fluent-branded medical marijuana dispensaries.

I’m going to focus my remarks on our successful ongoing efforts to increase our revenue generating potential in our home state of Florida. Under increased clarity, we have obtained in other markets that we are waiting action of licensing our regulatory authority at the time of our first quarter conference call at the end of May.

The increased clarity we have recently obtained from several potential expansion markets has helped our management team become even more laser focused on directing our capital and human resources going forward through the markets that we believe offer the greatest revenue potential over the near-to-mid-term and with more achievable path to profitability for the company, namely Florida, Michigan, and Texas. Let us start with Florida, which we expect to account for more than 75% of 2019 revenue.

Our current and projected growth in Florida is being driven by investment to expand our cultivation capacity, increase our supply of premium flower and oil-based products and expand our network of Fluent-branded dispensaries across the state. As a reminder, throughout the first two quarters of 2019, our Florida cultivation production came primarily from our winter garden cultivation facility.

We have since brought online a new indoor cultivation facility in Tampa, which recently obtained final approval from the Florida Department of Health to expand more than tripling our Florida cultivational capacity. As of today, we are utilizing 40% of the available expanded capacity in Tampa and we expect to reach full capacity within the next stage.

Since the approval of smokable flower sales in Florida, we have been quickly selling out of our limited supply of flower. They increase supply of our indoor grown flower from the expanded Tampa facility will help us satisfy demand.

While we are excited to reach full capacity at our new Tampa facility, we experienced unexpected delays in construction needed in order to secure final regulatory approval. As a result, we need to revise our previous 2019 financial outlook.

The latter than planned launch of our Tampa facility is the primary driver in reducing our 2019 outlook. They have now been sold.

Our ultimate revenue generated potential in Florida remains intact, based on increasing consumer demand and our enhanced ability to satisfy that demand through increased through increased cultivation capacity, introduction of new products and expansion of our network of Fluent-branded dispensaries into key markets across this space. I am proud of the way our team works diligently with the department of health at every step of the design, construction, review process consistently and very important and acting in the spirit of our companies unwavering commitment to regulatory compliance, which has been one of our core values in [indiscernible].

Turning to our Florida dispensary network, today we operate 14 dispensaries in the state. As noted in our press release, earlier today, local permitting and construction delays which delayed final approvals from the Department of Health resulted in later than plant openings for our new dispensary.

We have an additional 19 locations secured, which we’ll open over the next several months. At present, we expect to have approximately 25 dispensaries open at the end of 2019.

We plan to expand to 40 locations in Florida by the end of 2020. In summary, we are executing on all elements of our growth strategy and expect Florida to represent a large portion of our revenue into 2020 until our operations in Michigan and Texas come up to full production in the coming months.

Turning to Michigan. Our in-market partner received final approval for 24 [indiscernible] division licenses, a processing license, and 8 dispensary locations in the state.

The third outdoor harvest of approximately 18,000 plants is expected to occur in October. This production will be sold on a wholesale basis and will contribute to our consolidated results in the fourth quarter of 2019, and become a more meaningful portion of our business in 2020.

The third key market for us is Texas. The second most popular state in the United States where we hold one of only three licenses.

We have been generating a small amount of revenue in Texas since January 2019, through a statewide home delivery service that we operate from our facility in Schulenburg, Texas. In May, the Texas legislature passed a bill that significantly expanded the number of qualifying medical condition.

The new law increases legal access to medical cannabis products or patients coping with a broader [indiscernible] chronic medical condition and diseases, including all forms of epilepsy, a seizure disorder, multiple sclerosis, plasticity, [AOL] autism, terminal cancer, and incurable neurodegenerative diseases. The Bill also removed the requirement for a second license efficient recommendation making it faster, easier, and less expensive for patients to access medical cannabis.

We believe this new legislation has significantly increased our addressable markets in Texas. We are sensing now with an opportunity similar to what we saw in the early period of Florida developing medical markets.

We are executing on the following initiatives to capture the expanded demand, including identifying potential locations for Fluent-branded dispensary, expanding our statewide home delivery service and expanding our product offering of medical cannabis products, including our current inventory in Texas. While Texas represents a very small portion of our project of revenue for 2018, we anticipate it will begin contributing more meaningful in 2020 and beyond.

These three states, Florida, Michigan and Texas are our main focus and are the key driver of near-term and sustainable revenue growth and the best start to achieve profitability in the most capital efficient and timely manner. With regard to the other markets that we’re presently in, named Canada, Pennsylvania, and Puerto Rico.

We continue to explore strategies to maximize profitability and shareholder value. Taking into consideration, all of the operational and timing shift and the strategic re-prioritization that I just described, our revised 2019 outlook now anticipates full-year revenues of approximately 40 million, which is still more than double our pro forma 2019 revenue of 19 million.

As we are reminded every day, the cannabis industry is still in very early stages of development and the same can be said for Cansortium. We are focusing our capital and effort on our highest value markets to drive near-term revenue growth, sustainable profitability and shareholder value.

With our revised and focused strategic plan, we're confident that we can achieve profitability in the first quarter of 2020. The founders and senior executive team firmly believe in this plan and are committing to seeing it through.

To that end, we have agreed to a voluntary lock-up of our shares, which represents 25% of the outstanding shares of our fully diluted basis. We look forward to continuing to execute our strategies and appreciate your support and confidence.

Now, I’ll ask Jeff to cover our second quarter and the year-to-date financial results, as well as our revised 2019 outlook. Jeff?

Thank you, Jose, and thanks to everyone who joined our call today. We appreciate your interest and support.

As a quick reminder, the financial statements that we issued today for the second quarter and first-half of 2019 include comparisons to pro forma figures for the comparable periods of 2018, which are a representation of consolidated results, assuming we had increased our interest in Knox Medical from 38% to 100% as of January 1, 2018, instead of the actual August 15, 2018 acquisition data. Our financial statements also include the balance sheet effect of the $27 million that we raised in May to a private placement of convertible debentures, which we're using to accelerate the expansion of our U.S.-based cultivation and dispensary platform, and for general working capital needs.

Turning now to the results of the quarter. Second quarter revenues of $6.1 million increased 19%, compared to pro forma revenues of $5.1 million in last year’s second quarter.

While we continue to execute our strategy to expand cultivation, processing, and dispensaries during the second quarter, a combination of unexpected delays in construction in order to secure final regulatory approval at our Tampa cultivation facility, and our new Florida dispensaries that we opened during the quarter, resulted in lower second quarter revenues than we anticipated. Second quarter gross margin before fair value adjustments is 74.7%, up sequentially from our first quarter’s 53.4%, as we move beyond most of the lingering effects of our Q4 2018 partial crop failure in Florida.

Second quarter selling, general and administrative expenses totaled $11.4 million, compared with pro forma SG&A of $4.7 million in last year's comparable quarter. The increase was primarily attributable to incremental fees and expenses related to our financing activities, increased depreciation and amortization, commencement of share-based compensation charges and costs associated with our business expansion, including additions to leadership talent and increased sales and marketing expenses.

Second quarter operating loss totaled $8.1 million, compared with pro forma second quarter 2018 operating income of $2.4 million, primarily reflecting the $6.7 million of incremental SG&A expenses and $3.9 million unfavorable swing and fair value adjustments and biological assets. It is a change in corporate structure at the very end of Q1 2019, Cansortium is no longer a disregarded entity for tax purposes and is now a taxable entity under both U.S.

and Canadian Tax Authority. As such, the company has recognized an income tax provision expense of $1.3 million for the second quarter.

Second quarter net loss totaled $5.3 million, or $0.03 per diluted share, compared with pro forma net income of $4.9 million, or $0.04 per diluted share in the second quarter of 2018. Second quarter EBITDA totaled $1.8 million, compared with $5.8 million pro forma EBITDA in last year's second quarter.

While adjusted second quarter EBITDA loss totaled $2.6 million, compared to pro forma adjusted EBITDA gain of $0.1 million in Q2 of 2018. For the six months year-to-date, the company achieved $11.6 million in revenue and recorded an adjusted EBITDA loss of $6.6 million and a consolidated net loss of $21.8 million.

As noted in today's press release, approximately $10 million in expense was recognized in this period for costs related to the preparation for and execution of our initial public offering and other financing costs, which we do not expect to reoccur in future periods. Turning to our revised full-year 2019 outlook.

As Jose indicated earlier, we took several steps to reassess our priority markets and to recalibrate our projections to reflect delays in expanding our Tampa cultivation capacity and anticipated signing of Florida dispensary opening. As a result, our revised 2019 outlook anticipates consolidated revenues of approximately $40 million and full-year consolidated net loss of approximately $30 million.

As indicated, two-thirds of the full-year loss has already been recognized as of June 30. The company has stabilized month-to-month cash burn, and we anticipate increasing revenues throughout the back-half of the year.

We've worked diligently over the past 90 days reassessing and refocusing our capital allocation towards what we believe are most promising market opportunity. Our remaining laser-focused on these initiatives, we expect to finish 2019 with good momentum and the ability to achieve profitability in early 2020.

I encourage you to read a second quarter MD&A that we filed at SEDAR earlier today and that is also available on our website. It contains a thorough review of our results, and of course, we welcome any questions you may have.

With that, let’s turn the call back over to the operator to take your questions. Roya?

Hi, guys. So, I think probably my first one is just trying to understand the delays in Florida, what that means for you guys competitively?

So, it sounds like you're saying that you feel like your opportunity there is intact in terms of how much revenue you can get out of that state. Are there any kind of things you have to worry about in terms of competitors that can take advantage of this pause, or are there other people do you think experiencing similar permitting delays?

What's your sense on contextualizing that with the broader competitive environments in the state?

Hi, Bobby, thanks for the question. There’s a couple of different parts to that, that let's unpack it a little bit.

We do feel very strong about our upcoming quarters, as indicated in our filings today, as well as prepared remarks. Most of the expenses we experienced through the year, in the first couple of quarters, a great portion of that is contained within the non-recurring expenses.

A revenue delay, it's really that, it's a delay of revenue, it's not a loss of revenue. So, it's really been pushed back 60 to 90 days, possibly as long as six months depending on how you want to look at it.

And we anticipate that the buildup of our capabilities out of the Tampa facility is more than enough to meet the full demand that are current, as well as future plan dispensaries we bring online in Florida alone. Other companies that we've seen in the market space with us, we're not going to comment on that.

I think that everybody has had opportunities to experience difficulties in engaging markets and growth. And I expected that the other companies will continue to have that problem in a go-forward basis.

As far as Cansortium is concerned, we feel we've taken the steps required in order to minimize the impact of that uncertainty and to maximize the potential for revenues in the upcoming quarters. Does that answer your questions, or did I leave anything out?

Yes, that helps. That helps.

And then in terms of costs that you incur during the delays, are – is there construction-related headcount things you're paying for, like at work. What should we think about in terms of what happens with CapEx assumptions that you had for this year versus where they might be now?

Yes. Look, a lot of our CapEx has been captured already in the build-out of our facility in Tampa, and it took a lot longer than we had anticipated, it really did, but that that's not been minimized.

And as far as the management and the manpower required for an OpEx perspective, that's well in hand. From a CapEx perspective, really, we're looking at buildings of our dispensaries in Florida that we can recapture in coming months.

We've got that allocated with the cash on hand. So, we feel comfortable with that particular approach to things.

Other markets that we're looking at, we're minimizing the CapEx and we'll build towards the demand as it develops. It's been a – I hate to say, it has been a bit of a learning curve, but at the same time, we have been able to identify clearly what some of the pitfalls of CapEx are.

And we’ve – I think we've done a good job at minimizing the impact and certainly in a go-forward basis that will not be as big as we've seen in the past.

Okay. And can you just remind us what your expectations were for the number of dispensaries in Florida by the end of 2019?

Prior to going into this call, was it – how different was it from that 25?

We have 30 dispensaries that we’ve planned for 2019. We will end the year approximately with 25 dispensaries.

As I said in the prepared remarks, 19 of those dispensaries are secured. We have several of them that we expect to open in the coming weeks.

Obviously, we have inspections that are pending and a hurricane that is heading to Florida right now. So, if everything goes as planned, we should open several of them in the coming weeks.

Okay, great. And then just last one for me.

Switching gears, a little bit to Pennsylvania the Clinical Registrant Program that you guys are excited about there, can you give us an update on the status of that program and how it might impact what you guys are able to do in that state?

Yes. We did not receive the license in the first round for the Clinical Registered Program.

I believe that the new applications are being distributed and we are reassessing our plan going forward in the Pennsylvania market.

Okay. Okay, great.

Thanks a lot.

Thank you.

Good afternoon, Jose and Jeff. Thanks for taking my call.

Can you hear me, okay?

Yes, we can hear you fine.

Great. So clearly, a little bit of a difficult quarter.

But it sounds like you're back on track with sort of a kind of 90-day delay to what originally expected. So, in terms of the – fulfilling the anticipated dispensary that you will have coming online, particularly with Tampa, I think, Jeff, you did to refer to that.

Maybe you can elaborate a little bit more in terms of how that facility will be able to fulfill demand as you ramp up your dispensary?

Well, this facility does many things for us. First of all, it provides redundancies, it's an indoor facility versus the greenhouses that we've been operating in Orlando area and Winter Garden.

And given the demand that exists for multiple power products in Florida, that satisfied that growing market sector, which is what's driving the foot traffic to the dispensary. This new facility more than tripled our production capacity.

So, we feel confident that just with that facility alone, if you have our existence – our previous of zero Winter Garden gives us more than enough capacity to exceed our financial projections all the way to 2020.

Great, that's very helpful. And then moving on to Texas, and then clearly, there's a dual competitive advantage with one of the three licenses there.

Are we now with the proliferation of hemp, particularly in that state? Do you find that you still have that competitive advantage, or do you find that maybe that is – if there's going to be more competition coming from Tampa?

Yes, it's interesting. Well, first of all, in terms of the hemp regulation in Texas, nobody has received licenses to grow hemp in Texas as of yet.

We know that those rules are being promulgated and perhaps those licensing will be issued at the beginning of the year. Then you're also looking, I'm giving you some of the contrast between medical cannabis and hemp.

You also have other restrictions of how products can be sold, that’s all pending FDA approval. So, with the expanded conditions in Texas in the medical cannabis program, along with increased concentration and they actually have made the product more in-line with what we saw in Florida in early 2016, now we'll be able to sell things like vape in Texas.

We think that we have a distinctive product offering to what could become available from the hemp side, which is mostly topical at this point, but also the concentration of [DUC] makes us an entirely different offerings, than what you're seeing today. So, I think that we still have a significant first-mover advantage in Texas by having one of only three licenses.

And by the time, any of these licenses for hemp are issued, we’re still going to take a significant amount of time for those companies to ramp up and then pending FDA approval still remains to be seen what products are going to be able to sell. So, we feel so strongly about that, about our [personal advantage].

We're also sitting on a significant role inventory that now can get formulated into the various new allowable [Florida] and Texas. So, we're very optimistic about the Texas market.

Great. That's very helpful.

Thank you very much. And then my last question is sort of moving a little bit beyond to Latin America, which is clearly an area of strength – the strength for Cansortium.

So, I recognize that you’re really focusing on Florida, Michigan, and Texas as the short-term revenue, but really, in terms of long-term strategic growth, maybe you can comment a little bit in terms of what's happening around and any development around Latin American aspiration?

Yes. Latin America is still in very early developmental stages.

Whatever, whether you're looking at Columbia, whether you're looking at Brazil, or some of the other markets, they're still growing up in regulations. So, we are positioned very well to take advantage of that.

We have established ourselves in several hubs. So, we will be able to take advantage and be able to, whether he's distributing products, or whether he's taking advantage of the local regulations for the local markets will present.

But at this point, we're just sitting and waiting to see when the regulations will develop and allow for a more traditional distribution of products. That's going to be lagging whatever we've seen here in the United States.

It's going to take a little bit longer, but we're very well positioned and optimistic and – for the future. And just to clarify, we are not making any additional investment in Latin America at this point.

We've done everything that we needed to do to get established and wait for regulations to evolve.

Great. Thank you very much.

That's all for me today.

We would like to thank you for your interest and support of Cansortium. Should you have any further questions, please reach out to Jeff Reath.

We look forward to updating you on our progress next quarter. Thank you very much, and have a great day.