IM CANNABIS CORP.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
CANADIAN DOLLARS IN THOUSANDS
INDEX
Page |
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Report of Independent Registered Public Accounting Firm (PCAOB ID: |
F - 2 |
Consolidated Statements of Financial Position | F - 3 – F - 4 |
Consolidated Statements of Profit or Loss and Other Comprehensive Income | F - 5 – F - 6 |
Consolidated Statements of Changes in Equity | F - 7 |
Consolidated Statements of Cash Flows | F - 8 - F - 11 |
Notes to Consolidated Financial Statements | F - 12 - F - 79 |
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Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
to the Shareholders and Board of directors of
IM CANNABIS CORP. and its subsidiaries
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A Member of Ernst & Young Global
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We have served as the Company's auditor since 2018.
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March 31, 2022
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F - 2
December 31,
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||||||||||||
Note
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2021
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2020
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||||||||||
ASSETS
|
||||||||||||
CURRENT ASSETS:
|
||||||||||||
Cash and cash equivalents
|
$
|
$
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||||||||||
Restricted deposit
|
||||||||||||
Trade receivables
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6
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|||||||||||
Advances to suppliers
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|
|||||||||||
Other accounts receivable
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7
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|||||||||||
Investments and financial instruments
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5 | |||||||||||
Loans receivable
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15e
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|||||||||||
Biological assets
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8
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|||||||||||
Inventories
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9
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|||||||||||
NON-CURRENT ASSETS:
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||||||||||||
Property, plant and equipment, net
|
10
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|||||||||||
Investments
|
15c
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|||||||||||
Derivative assets
|
||||||||||||
Right-of-use assets, net
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12
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|||||||||||
Deferred tax assets, net
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17
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|||||||||||
Intangible assets, net
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5, 11
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|||||||||||
Goodwill
|
5, 11
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|||||||||||
Total assets
|
$
|
$
|
December 31,
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||||||||||||
Note
|
2021
|
2020
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||||||||||
LIABILITIES AND EQUITY
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||||||||||||
CURRENT LIABILITIES:
|
||||||||||||
Trade payables
|
$
|
$
|
||||||||||
Bank loans
|
1a
|
|
||||||||||
Other accounts payable and accrued expenses
|
14
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|||||||||||
Accrued purchase consideration liabilities
|
5
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|||||||||||
Current maturities of operating lease liabilities
|
12
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|||||||||||
NON-CURRENT LIABILITIES:
|
||||||||||||
Warrants measured at fair value
|
15
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|||||||||||
Operating lease liabilities
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12
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|||||||||||
Long-term loans
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||||||||||||
Employee benefit liabilities, net
|
13
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|||||||||||
Deferred tax liability
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17
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|||||||||||
Total liabilities
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||||||||||||
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
|
18
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|||||||||||
Share capital and premium
|
||||||||||||
Treasury Stock
|
( |
) | ||||||||||
Translation reserve
|
||||||||||||
Reserve from share-based payment transactions
|
||||||||||||
Accumulated deficit
|
( |
)
|
( |
)
|
||||||||
Total equity attributable to shareholders of the Company
|
||||||||||||
Non-controlling interests
|
||||||||||||
Total equity
|
||||||||||||
Total equity and liabilities
|
$
|
$
|
March 31, 2022
|
||||||
Date of approval of the
|
Marc Lustig
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Oren Shuster
|
Shai Shemesh
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|||
financial statements
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Chairman of the Board
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Chief Executive Officer
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Chief Financial Officer
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Year ended
December 31,
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||||||||||||
Note
|
2021
|
2020
|
||||||||||
Revenues
|
$
|
$
|
||||||||||
Cost of revenues
|
||||||||||||
Gross profit before fair value adjustments
|
||||||||||||
Fair value adjustments:
|
||||||||||||
Unrealized change in fair value of biological assets
|
||||||||||||
Realized fair value adjustments on inventory sold in the year
|
( |
)
|
( |
)
|
||||||||
Total fair value adjustments
|
( |
)
|
||||||||||
Gross profit after fair value adjustments
|
||||||||||||
General and administrative expenses
|
||||||||||||
Selling and marketing expenses
|
||||||||||||
Share-based compensation
|
18
|
|||||||||||
Total operating expenses
|
||||||||||||
Operating loss
|
( |
)
|
( |
)
|
||||||||
Finance income
|
15
|
|||||||||||
Finance expenses
|
( |
)
|
( |
)
|
||||||||
Finance income (expense), net
|
( |
)
|
||||||||||
Loss before income taxes
|
( |
)
|
( |
)
|
||||||||
Income tax expense
|
17
|
|||||||||||
Net Loss
|
( |
)
|
( |
)
|
||||||||
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:
|
||||||||||||
Remeasurement gain (loss) on defined benefit plans
|
( |
)
|
||||||||||
Exchange differences on translation to presentation currency
|
||||||||||||
Total other comprehensive income that will not be reclassified to profit or loss in subsequent periods
|
||||||||||||
Other comprehensive income that will be reclassified to profit or loss in subsequent periods:
|
||||||||||||
Adjustments arising from translating financial statements of foreign operation
|
( |
)
|
||||||||||
Total other comprehensive income that will be reclassified to profit or loss in subsequent periods
|
|
( |
)
|
|||||||||
Total other comprehensive income
|
||||||||||||
Total comprehensive loss
|
$
|
( |
)
|
$
|
( |
)
|
Year ended
December 31,
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||||||||||||
Note
|
2021
|
2020
|
||||||||||
Net loss attributable to:
|
||||||||||||
Equity holders of the Company
|
$
|
( |
)
|
$
|
( |
)
|
||||||
Non-controlling interests
|
( |
)
|
( |
)
|
||||||||
$
|
( |
)
|
$
|
( |
)
|
|||||||
Total comprehensive income (loss) attributable to:
|
||||||||||||
Equity holders of the Company
|
( |
)
|
( |
)
|
||||||||
Non-controlling interests
|
( |
)
|
||||||||||
$
|
( |
)
|
$
|
( |
)
|
|||||||
Net loss per share attributable to equity holders of the Company:
|
20
|
|||||||||||
Basic
|
$
|
( |
)
|
$
|
( |
)
|
||||||
Diluted
|
$
|
( |
)
|
$
|
( |
)
|
Share Capital and premium
|
Treasury Stock
|
Reserve from share-based payment transactions
|
Translation reserve
|
Accumulated deficit
|
Total
|
Non-controlling interests
|
Total
equity
|
|||||||||||||||||||||||||
Balance as of January 1, 2020
|
$
|
$
|
|
$
|
$
|
$
|
( |
)
|
$
|
$
|
$
|
|||||||||||||||||||||
Net loss
|
|
( |
)
|
( |
)
|
( |
)
|
( |
)
|
|||||||||||||||||||||||
Total other comprehensive income (loss)
|
|
( |
)
|
|||||||||||||||||||||||||||||
Total comprehensive income (loss)
|
|
( |
)
|
( |
)
|
( |
)
|
|||||||||||||||||||||||||
Exercise of warrants and compensation options
|
|
|||||||||||||||||||||||||||||||
Exercise of options
|
|
( |
)
|
|||||||||||||||||||||||||||||
Share-based compensation
|
|
|||||||||||||||||||||||||||||||
Forfeited options
|
|
( |
)
|
|||||||||||||||||||||||||||||
Balance as of December 31, 2020
|
|
( |
)
|
|||||||||||||||||||||||||||||
Net loss
|
|
( |
)
|
( |
)
|
( |
)
|
( |
)
|
|||||||||||||||||||||||
Total other comprehensive income (loss)
|
|
|||||||||||||||||||||||||||||||
Total comprehensive income (loss)
|
|
( |
)
|
( |
)
|
( |
)
|
( |
)
|
|||||||||||||||||||||||
Issuance of common shares, net of issuance costs of $3,800
|
|
|||||||||||||||||||||||||||||||
Purchase of treasury common shares
|
(
|
)
|
( |
)
|
( |
) | ||||||||||||||||||||||||||
Exercise of warrants and compensation options
|
|
|||||||||||||||||||||||||||||||
Exercise of options
|
|
( |
)
|
|||||||||||||||||||||||||||||
Share-based compensation
|
|
|||||||||||||||||||||||||||||||
Forfeited options
|
|
( |
)
|
|||||||||||||||||||||||||||||
Balance as of December 31, 2021
|
$
|
$
|
(
|
)
|
$
|
$
|
$
|
( |
)
|
$
|
$
|
$
|
Year ended
December 31,
|
||||||||
2021
|
2020
|
|||||||
Cash provided from operating activities:
|
||||||||
Net loss
|
$
|
( |
)
|
$
|
( |
)
|
||
Adjustments for non-cash items:
|
||||||||
Unrealized gain on changes in fair value of biological assets
|
( |
)
|
( |
)
|
||||
Fair value adjustment on sale of inventory
|
||||||||
Fair value adjustment on Warrants, Investments, and Accounts Receivable
|
( |
)
|
||||||
Depreciation of property, plant and equipment
|
||||||||
Amortization of intangible assets
|
||||||||
Depreciation of right-of-use assets
|
||||||||
Impairment of goodwill
|
||||||||
Finance income, net
|
||||||||
Deferred tax benefit
|
( |
)
|
||||||
Share-based payments expenses
|
||||||||
Share based acquisition costs related to business combination
|
||||||||
(
|
)
|
|
||||||
Changes in non-cash working capital:
|
||||||||
Increase in trade receivables, net
|
( |
)
|
( |
)
|
||||
Increase in other accounts receivable and advances to suppliers
|
( |
)
|
||||||
Decrease in biological assets, net of fair value adjustments
|
||||||||
Increase in inventories, net of fair value adjustments
|
( |
)
|
( |
)
|
||||
Increase in trade payables
|
||||||||
Changes in employee benefit liabilities, net
|
||||||||
Increase in other accounts payable and accrued expenses
|
||||||||
(
|
)
|
(
|
)
|
|||||
Taxes paid
|
( |
)
|
( |
)
|
||||
Net cash used in operating activities
|
( |
)
|
( |
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchase of property, plant and equipment
|
( |
)
|
( |
)
|
||||
Proceeds from loans receivable
|
||||||||
Purchase of intangible assets
|
( |
)
|
( |
)
|
||||
Acquisition of subsidiaries
|
( |
)
|
||||||
Investments in associates
|
( |
)
|
( |
)
|
||||
Proceeds from sale of investment
|
||||||||
Proceeds from (investment in) restricted deposits
|
( |
)
|
||||||
Net cash used in investing activities
|
$
|
( |
)
|
$
|
( |
)
|
Year ended
December 31,
|
||||||||
2021
|
2020
|
|||||||
Cash provided by financing activities:
|
||||||||
Proceeds from issuance of share capital, net of issuance costs
|
$
|
$
|
||||||
Proceeds from issuance of warrants measured at fair value
|
||||||||
Proceeds from exercise of warrants and compensation options
|
||||||||
Proceeds from exercise of options
|
||||||||
Repayment of lease liability
|
( |
)
|
( |
)
|
||||
Repayment of lease liability interest
|
( |
)
|
( |
)
|
||||
Proceeds from bank loan
|
||||||||
Interest paid in respect of loans
|
( |
)
|
||||||
Net cash provided by financing activities
|
||||||||
Effect of foreign exchange on cash and cash equivalents
|
( |
)
|
||||||
Increase (decrease) in cash and cash equivalents
|
( |
)
|
||||||
Cash and cash equivalents at beginning of year
|
||||||||
Cash and cash equivalents at end of year
|
$
|
$
|
||||||
Supplemental disclosure of non-cash activities:
|
||||||||
Right-of-use asset recognized with corresponding lease liability
|
$
|
$
|
||||||
Conversion of warrant and compensation options into common shares
|
$
|
$
|
Schedule A - Acquisition of TFC:
The subsidiary's assets and liabilities at date of acquisition:
|
||||
Working capital (excluding cash and cash equivalents)
|
$
|
|||
Investments
|
||||
Property, plant and equipment
|
||||
Right of use assets
|
||||
Lease liability
|
( |
)
|
||
Intangible assets
|
||||
Goodwill
|
||||
Common shares issued upon the acquisition
|
( |
)
|
||
$ | ( |
)
|
The assets and liabilities at date of acquisition:
|
||||
Inventory
|
$
|
|||
Accrued purchase consideration liability
|
(
|
)
|
||
Investments
|
||||
Property, plant and equipment
|
||||
Intangible assets
|
||||
Goodwill
|
||||
$
|
The subsidiary's assets and liabilities at date of acquisition:
|
||||
Working capital (excluding cash and cash equivalents)
|
$
|
|||
Loan payables
|
( |
)
|
||
Property, plant and equipment and right of use assets
|
||||
Lease liability
|
( |
)
|
||
Deferred tax liability
|
( |
)
|
||
Intangible assets
|
||||
Goodwill
|
||||
Common shares issued upon the acquisition
|
( |
)
|
||
$ | ( |
)
|
The subsidiary's assets and liabilities at date of acquisition:
|
||||
Working capital deficit (excluding cash and cash equivalents)
|
$
|
( |
)
|
|
Accrued purchase consideration liability
|
( |
)
|
||
Property, plant and equipment
|
||||
Long-term loans
|
( |
)
|
||
Deferred tax liability
|
( |
)
|
||
Intangible assets
|
||||
Goodwill
|
||||
$
|
The subsidiary's assets and liabilities at date of acquisition:
|
||||
Working capital (excluding cash and cash equivalents)
|
$
|
|||
Accrued purchase consideration liability
|
( |
)
|
||
Property, plant and equipment
|
||||
Deferred tax liability
|
( |
)
|
||
Intangible assets
|
||||
Goodwill
|
||||
Non-controlling interest
|
( |
)
|
||
$
|
The subsidiary's assets and liabilities at date of acquisition:
|
||||
Working capital deficit (excluding cash and cash equivalents)
|
$
|
|||
Accrued purchase consideration liability
|
( |
)
|
||
Property, plant and equipment
|
||||
Right of use assets
|
||||
Lease liability
|
( |
)
|
||
Intangible assets
|
||||
Deferred tax liability
|
( |
)
|
||
Goodwill
|
||||
Non-controlling interest
|
( |
)
|
||
$
|
NOTE 1:- |
GENERAL
|
a. |
Corporate information:
|
NOTE 1:- |
GENERAL (Cont.)
|