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: |
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.
|
|
|
|
A Member of Ernst & Young Global
|
|
|
We have served as the Company's auditor since 2018.
|
|
|
|
|
|
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
|
$
|
$
|
||||||||||
|
Restricted deposit
|
||||||||||||
|
Trade receivables
|
6
|
|||||||||||
|
Advances to suppliers
|
|
|||||||||||
|
Other accounts receivable
|
7
|
|||||||||||
|
Investments and financial instruments
|
5 | |||||||||||
|
Loans receivable
|
15e
|
|||||||||||
|
Biological assets
|
8
|
|||||||||||
|
Inventories
|
9
|
|||||||||||
|
NON-CURRENT ASSETS:
|
||||||||||||
|
Property, plant and equipment, net
|
10
|
|||||||||||
|
Investments
|
15c
|
|||||||||||
|
Derivative assets
|
||||||||||||
|
Right-of-use assets, net
|
12
|
|||||||||||
|
Deferred tax assets, net
|
17
|
|||||||||||
|
Intangible assets, net
|
5, 11
|
|||||||||||
|
Goodwill
|
5, 11
|
|||||||||||
|
Total assets
|
$
|
$
|
||||||||||
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
|
$
|
$
|
||||||||||
|
Bank loans
|
1a
|
|
||||||||||
|
Other accounts payable and accrued expenses
|
14
|
|||||||||||
|
Accrued purchase consideration liabilities
|
5
|
|||||||||||
|
Current maturities of operating lease liabilities
|
12
|
|||||||||||
|
NON-CURRENT LIABILITIES:
|
||||||||||||
|
Warrants measured at fair value
|
15
|
|||||||||||
|
Operating lease liabilities
|
12
|
|||||||||||
|
Long-term loans
|
||||||||||||
|
Employee benefit liabilities, net
|
13
|
|||||||||||
|
Deferred tax liability
|
17
|
|||||||||||
|
Total liabilities
|
||||||||||||
|
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
|
18
|
|||||||||||
|
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
|
$
|
$
|
||||||||||
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
AND OTHER COMPREHENSIVE INCOME
Canadian Dollars in thousands
|
Year ended
December 31,
|
||||||||||||
|
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
|
$
|
( |
)
|
$
|
( |
)
|
||||||
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
|
$
|
( |
)
|
$
|
( |
)
|
||||||
|
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
|
$
|
( |
)
|
$
|
( |
)
|
||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
IM CANNABIS CORP.
and its subsidiaries
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
|
$
|
$
|
|
$
|
$
|
$
|
( |
)
|
$
|
$
|
$
|
|||||||||||||||||||||
|
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
|
$
|
$
|
(
|
)
|
$
|
$
|
$
|
( |
)
|
$
|
$
|
$
|
||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
|
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
|
$
|
( |
)
|
$
|
( |
)
|
||
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
|
$
|
$
|
||||||
|
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 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
|
$
|
|||
|
Accrued purchase consideration liability
|
(
|
)
|
||
|
Investments
|
||||
|
Property, plant and equipment
|
||||
|
Intangible assets
|
||||
|
Goodwill
|
||||
|
$
|
||||
Schedule C - Acquisition of MYM:
|
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
|
( |
)
|
||
| $ | ( |
)
|
||
Schedule D - Acquisition of Pharm Yarok:
|
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
|
||||
|
$
|
||||
Schedule E - Acquisition of Vironna:
|
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
|
( |
)
|
||
|
$
|
||||
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)
|
$
|
|||
|
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:
|
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.)
|