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Exhibit 99.2

 

 


 

IM CANNABIS CORP.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF DECEMBER 31, 2021

 

CANADIAN DOLLARS IN THOUSANDS

 

INDEX

 

 

Page

   
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1281) 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
 
 

 

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

 

Opinion on the consolidated financial statements

 

We have audited the accompanying consolidated statements of financial position of IM Cannabis Corp. (the “Company”) and its subsidiaries (collectively, the "Group"), as of December 31, 2021 and 2020 and the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the years then ended and the related notes (collectively referred to as the “consolidated financial statements”).

 

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2021 and 2020 and the results of its operations and its cash flows for the years then ended, in conformity with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
 
Basis for Opinion
 
These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on the Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

KOST FORER GABBAY & KASIERER
 
A Member of Ernst & Young Global
 
   
We have served as the Company's auditor since 2018.
 
   
Tel-Aviv, Israel
 
March 31, 2022
 
 

F - 2


 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands
 
         
December 31,
 
   
Note
   
2021
   
2020
 
ASSETS
                 
                   
CURRENT ASSETS:
                 
Cash and cash equivalents
       
$
13,903    
$
8,885  
Restricted deposit
          1       18  
Trade receivables
   
6
      16,711       5,501  
Advances to suppliers
   
 
      2,300       3,602  
Other accounts receivable
   
7
      14,481       689  
Investments and financial instruments
    5       3,129       -  
Loans receivable
   
15e
      2,708       -  
Biological assets
   
8
      1,687       78  
Inventories
   
9
      29,391       8,370  
                         
              84,311       27,143  
NON-CURRENT ASSETS:
                       
Property, plant and equipment, net
   
10
      30,268       5,532  
Investments
   
15c
      2,429       2,341  
Derivative assets
            14       -  
Right-of-use assets, net
   
12
      18,162       935  
Deferred tax assets, net
   
17
      16       769  
Intangible assets, net
   
5, 11
      30,885       1,092  
Goodwill
   
5, 11
      121,303       304  
                         
              203,077       10,973  
                         
Total assets
         
$
287,388    
$
38,116  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
F - 3

 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands
 
         
December 31,
 
   
Note
   
2021
   
2020
 
LIABILITIES AND EQUITY
                 
                   
CURRENT LIABILITIES:
                 
Trade payables
       
$
13,989    
$
2,605  
Bank loans
   
1a
 
    9,502       -  
Other accounts payable and accrued expenses
   
14
      20,143       3,497  
Accrued purchase consideration liabilities
   
5
      6,039       -  
Current maturities of operating lease liabilities
   
12
      1,554       167  
                         
              51,227       6,269  
                         
NON-CURRENT LIABILITIES:
                       
Warrants measured at fair value
   
15
      6,022       16,540  
Operating lease liabilities
   
12
      17,820       823  
Long-term loans
            392       -  
Employee benefit liabilities, net
   
13
      391       371  
Deferred tax liability
   
17
      6,591       1,503  
                         
              31,216       19,237  
                         
Total liabilities
            82,443       25,506  
                         
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
   
18
                 
Share capital and premium
            237,677       37,040  
Treasury Stock
            (660 )     -  
Translation reserve
            2,614       1,229  
Reserve from share-based payment transactions
            12,348       5,829  
Accumulated deficit
            (50,743
)
    (33,001
)
                         
Total equity attributable to shareholders of the Company
            201,236       11,097  
Non-controlling interests
            3,709       1,513  
                         
Total equity
            204,945       12,610  
                         
Total equity and liabilities
         
$
287,388    
$
38,116  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
March 31, 2022
           
Date of approval of the
 
Marc Lustig
 
Oren Shuster
 
Shai Shemesh
financial statements
 
Chairman of the Board
 
Chief Executive Officer
 
Chief Financial Officer
 
F - 4

 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands
 
         
Year ended
December 31,
 
   
Note
   
2021
   
2020
 
                   
Revenues
       
$
54,300    
$
15,890  
Cost of revenues
          42,418       7,081  
                       
Gross profit before fair value adjustments
          11,882       8,809  
                       
Fair value adjustments:
                     
Unrealized change in fair value of biological assets
          7,210       11,781  
Realized fair value adjustments on inventory sold in the year
          (8,796
)
    (10,122
)
                       
Total fair value adjustments
          (1,586
)
    1,659  
                       
Gross profit after fair value adjustments
          10,296       10,468  
                       
General and administrative expenses
          32,219       11,549  
Selling and marketing expenses
          8,995       3,782  
Share-based compensation
   
18
      7,471       3,382  
                         
Total operating expenses
            48,685       18,713  
                         
Operating loss
            (38,389
)
    (8,245
)
                         
Finance income
   
15
      22,024       277  
Finance expenses
            (1,648
)
    (20,504
)
                         
Finance income (expense), net
            20,376       (20,227
)
                         
Loss before income taxes
            (18,013
)
    (28,472
)
Income tax expense
   
17
      505       262  
                         
Net Loss
            (18,518
)
    (28,734
)
                         
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:
                       
Remeasurement gain (loss) on defined benefit plans
            21       (30
)
Exchange differences on translation to presentation currency
            858       1,144  
                         
Total other comprehensive income that will not be reclassified to profit or loss in subsequent periods
            879       1,114  
                         
Other comprehensive income that will be reclassified to profit or loss in subsequent periods:
                       
Adjustments arising from translating financial statements of foreign operation
            530       (124
)
                         
Total other comprehensive income that will be reclassified to profit or loss in subsequent periods
           
530
      (124
)
                         
Total other comprehensive income
            1,409       990  
                         
Total comprehensive loss
         
$
(17,109
)
 
$
(27,744
)
 
The accompanying notes are an integral part of the consolidated financial statements.
 
F - 5

 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands, except per share data
 
         
Year ended
December 31,
 
   
Note
   
2021
   
2020
 
                   
Net loss attributable to:
                   
Equity holders of the Company
         
$
(17,763
)
 
$
(28,698
)
Non-controlling interests
            (755
)
    (36
)
                         
           
$
(18,518
)
 
$
(28,734
)
                         
Total comprehensive income (loss) attributable to:
                       
Equity holders of the Company
            (16,357
)
    (27,808
)
Non-controlling interests
            (752
)
    64  
                         
           
$
(17,109
)
 
$
(27,744
)
                         
Net loss per share attributable to equity holders of the Company:
   
20
                 
Basic
         
$
(0.31
)
 
$
(0.74
)
Diluted
         
$
(0.66
)
 
$
(0.74
)
 
The accompanying notes are an integral part of the consolidated financial statements.
 
F - 6

IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Canadian Dollars in thousands
 
   
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
 
$
25,947    
$
-
   
$
2,677    
$
309    
$
(4,273
)
 
$
24,660    
$
1,449    
$
26,109  
                                                                 
Net loss
    -      
-
      -       -       (28,698
)
    (28,698
)
    (36
)
    (28,734
)
Total other comprehensive income (loss)
    -      
-
      -       920       (30
)
    890       100       990  
                                                                 
Total comprehensive income (loss)
    -      
-
      -       920       (28,728
)
    (27,808
)
    64       (27,744
)
                                                                 
Exercise of warrants and compensation options
    10,251      
-
      -       -       -       10,251       -       10,251  
Exercise of options
    834      
-
      (222
)
    -       -       612       -       612  
Share-based compensation
    -      
-
      3,382       -       -       3,382       -       3,382  
Forfeited options
    8      
-
      (8
)
    -       -       -       -       -  
                                                                 
Balance as of December 31, 2020
    37,040      
-
      5,829       1,229       (33,001
)
    11,097       1,513       12,610  
                                                                 
Net loss
    -      
-
      -       -       (17,763
)
    (17,763
)
    (755
)
    (18,518
)
Total other comprehensive income (loss)
    -      
-
      -       1,385       21       1,406       3       1,409  
                                                                 
Total comprehensive income (loss)
    -      
-
      -       1,385       (17,742
)
    (16,357
)
    (752
)
    (17,109
)
                                                                 
Issuance of common shares, net of issuance costs of $3,800
    195,259      
-
      -       -       -       195,259       2,948       198,207  
Purchase of treasury common shares
    -      
(660
)
    -       -       -       (660
)
    -       (660 )
Exercise of warrants and compensation options
    4,293      
-
      -       -       -       4,293       -       4,293  
Exercise of options
    1,053      
-
      (920
)
    -       -       133       -       133  
Share-based compensation
    -      
-
      7,471       -       -       7,471       -       7,471  
Forfeited options
    32      
-
      (32
)
    -       -       -       -       -  
                                                                 
Balance as of December 31, 2021
 
$
237,677    
$
(660
)
 
$
12,348    
$
2,614    
$
(50,743
)
 
$
201,236    
$
3,709    
$
204,945  
 
The accompanying notes are an integral part of the consolidated financial statements.
 
F - 7

 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands
 
 
   
Year ended
December 31,
 
   
2021
   
2020
 
Cash provided from operating activities:
           
             
Net loss
 
$
(18,518
)
 
$
(28,734
)
                 
Adjustments for non-cash items:
               
                 
Unrealized gain on changes in fair value of biological assets
    (7,210
)
    (11,781
)
Fair value adjustment on sale of inventory
    8,796       10,122  
Fair value adjustment on Warrants, Investments, and Accounts Receivable
    (21,638
)
    20,155  
Depreciation of property, plant and equipment
    3,021       690  
Amortization of intangible assets
    1,158       31  
Depreciation of right-of-use assets
    1,550       209  
Impairment of goodwill
    275       -  
Finance income, net
    1,262       72  
Deferred tax benefit
    278       (66
)
Share-based payments expenses
    7,471       3,382  
Share based acquisition costs related to business combination
    807       -  
                 
     
(4,230
)
   
22,814
 
Changes in non-cash working capital:
               
                 
Increase in trade receivables, net
    (6,602
)
    (3,534
)
Increase in other accounts receivable and advances to suppliers
    845       (1,029
)
Decrease in biological assets, net of fair value adjustments
    6,412       11,771  
Increase in inventories, net of fair value adjustments
    (19,707
)
    (12,729
)
Increase in trade payables
    5,573       2,135  
Changes in employee benefit liabilities, net
    28       59  
Increase in other accounts payable and accrued expenses
    2,661       1,929  
                 
     
(10,790
)
   
(1,398
)
                 
Taxes paid
    (834
)
    (601
)
                 
Net cash used in operating activities
    (34,372
)
    (7,919
)
                 
Cash flows from investing activities:
               
                 
Purchase of property, plant and equipment
    (4,578
)
    (2,617
)
Proceeds from loans receivable
    7,796       -  
Purchase of intangible assets
    (17
)
    (93
)
Acquisition of subsidiaries
    (12,536
)
    -  
Investments in associates
    (13
)
    (1,347
)
Proceeds from sale of investment
    319       -  
Proceeds from (investment in) restricted deposits
    17       (18
)
                 
Net cash used in investing activities
 
$
(9,012
)
 
$
(4,075
)
 
The accompanying notes are an integral part of the consolidated financial statements.
 
F - 8

 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands
 
   
Year ended
December 31,
 
   
2021
   
2020
 
Cash provided by financing activities:
           
             
Proceeds from issuance of share capital, net of issuance costs
 
$
28,131    
$
-  
Proceeds from issuance of warrants measured at fair value
    11,222       -  
Proceeds from exercise of warrants and compensation options
    3,682       6,378  
Proceeds from exercise of options
    133       612  
Repayment of lease liability
    (633
)
    (182
)
Repayment of lease liability interest
    (1,347
)
    (68
)
Proceeds from bank loan
    7,804       -  
Interest paid in respect of loans
    (261
)
    -  
                 
Net cash provided by financing activities
    48,731       6,740  
                 
Effect of foreign exchange on cash and cash equivalents
    (329
)
    213  
                 
Increase (decrease) in cash and cash equivalents
    5,018       (5,041
)
Cash and cash equivalents at beginning of year
    8,885       13,926  
                 
Cash and cash equivalents at end of year
 
$
13,903    
$
8,885  
                 
Supplemental disclosure of non-cash activities:
               
                 
Right-of-use asset recognized with corresponding lease liability
 
$
1,678    
$
107  
Conversion of warrant and compensation options into common shares
 
$
611    
$
3,873  
 

Schedule A - Acquisition of TFC:

The subsidiary's assets and liabilities at date of acquisition:
     
       
Working capital (excluding cash and cash equivalents)
 
$
9,427  
Investments
    319  
Property, plant and equipment
    15,193  
Right of use assets
    15,037  
Lease liability
    (15,037
)
Intangible assets
    6,458  
Goodwill
    67,269  
Common shares issued upon the acquisition
    (99,028
)
         
    $ (362
)
 
The accompanying notes are an integral part of the consolidated financial statements.
 
F - 9

 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands
 
Schedule B - Acquisition of Panaxia:
 
The assets and liabilities at date of acquisition:
     
       
Inventory
 
$
19  
Accrued purchase consideration liability
   
(126
)
Investments
    2,837  
Property, plant and equipment
    88  
Intangible assets
    776  
Goodwill
    3,240  
         
   
$
6,834  
 
Schedule C - Acquisition of MYM:
 
The subsidiary's assets and liabilities at date of acquisition:
     
       
Working capital (excluding cash and cash equivalents)
 
$
4,471  
Loan payables
    (915
)
Property, plant and equipment and right of use assets
    6,735  
Lease liability
    (873
)
Deferred tax liability
    (4,061
)
Intangible assets
    17,200  
Goodwill
    39,932  
Common shares issued upon the acquisition
    (62,620
)
         
    $ (131
)
 
Schedule D - Acquisition of Pharm Yarok:
 
The subsidiary's assets and liabilities at date of acquisition:
     
       
Working capital deficit (excluding cash and cash equivalents)
 
$
(646
)
Accrued purchase consideration liability
    (1,332
)
Property, plant and equipment
    1,145  
Long-term loans
    (1,042
)
Deferred tax liability
    (224
)
Intangible assets
    974  
Goodwill
    4,294  
         
   
$
3,169  

Schedule E - Acquisition of Vironna:
 
The subsidiary's assets and liabilities at date of acquisition:
     
       
Working capital (excluding cash and cash equivalents)
 
$
44  
Accrued purchase consideration liability
    (1,855
)
Property, plant and equipment
    210  
Deferred tax liability
    (532
)
Intangible assets
    2,316  
Goodwill
    2,250  
Non-controlling interest
    (1,026
)
         
   
$
1,407  
 
F - 10

 
IM CANNABIS CORP.
and its subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands
 
Schedule F - Acquisition of Oranim:
 
The subsidiary's assets and liabilities at date of acquisition:
     
       
Working capital deficit (excluding cash and cash equivalents)
 
$
595  
Accrued purchase consideration liability
    (2,726
)
Property, plant and equipment
    389  
Right of use assets
    1,312  
Lease liability
    (1,312
)
Intangible assets
    2,991  
Deferred tax liability
    (688
)
Goodwill
    2,907  
Non-controlling interest
    (1,849
)
         
   
$
1,619  
 
F - 11

IM CANNABIS CORP.
and its subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Canadian Dollars in thousands, except share and per share data
 
NOTE 1:-
GENERAL
 
  a.
Corporate information:
 
IM Cannabis Corp. (the "Company" or "IMCC") is listed for trading on the Canadian Securities Exchange (“CSE”) and, commencing from March 1, 2021, on NASDAQ under the ticker symbol “IMCC”. IMCC’s main office is located in Kibutz Glil-Yam, Israel.
 
IMCC operates in the field of medical cannabis, through Focus Medical Herbs Ltd. ("Focus"), which is licensed under the regulations of medical cannabis by the Israeli Ministry of Health ("MOH") through its Israel Medical Cannabis Agency ("IMCA") to breed, grow and supply medical cannabis product in Israel and all of its operations are performed pursuant to the Israeli Dangerous Drugs Ordinance (New Version), 1973 (the "Dangerous Drugs Ordinance"), and the related regulations issued by IMCA. During 2021 IMCC entered to the retail market using pharmacies selling medical cannabis and other pharma products.
 
In Europe, IMCC operates through Adjupharm, a German-based subsidiary acquired by IMC Holdings on March 15, 2019. Adjupharm is an EU-GMP certified medical cannabis producer and distributor with wholesale, narcotics handling, manufacturing, procurement, storage and distribution licenses granted by German regulatory authorities that allow for import/export capability with requisite permits.
 
In Canada, IMCC operates through Trichome JWC Acquisition Corp. (“TJAC”) d/b/a JWC and MYM, both Canadian federally licensed producer of cannabis products in the adult-use recreational cannabis market in Canada.
 
The Company and its subsidiaries do not engage in any U.S. cannabis-related activities as defined in Canadian Securities Administrators Staff Notice 51-352.
 
The Company, its subsidiaries and Focus (collectively: the "Group"), operate in geographical reporting segments (note 23). The majority of the Group’s revenues are generated from sales of medical cannabis products to customers in Israel and recreational cannabis in Canada. The remaining revenues are generated from sales of medical cannabis, as well as other products, to customers in Germany.
 
COVID-19:
 
Since March 31, 2020, the outbreak of the novel strain of coronavirus ("COVID-19") and the ongoing pandemic, has resulted in governments worldwide enacting various emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods, closing of non-essential businesses and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown.

 

F - 12

IM CANNABIS CORP.
and its subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Canadian Dollars in thousands, except share and per share data
   
NOTE 1:-
GENERAL (Cont.)