TORONTO, and GLIL YAM, Israel, Aug. 11, 2023 /PRNewswire/ -- IM Cannabis Corp. (the "Company" or "IMC") (NASDAQ: IMCC) (CSE: IMCC), an international medical cannabis company, announced its financial results today for the second quarter ended June 30, 2023. All amounts are reported in Canadian dollars and compared to Q2 2022 unless otherwise stated.

 

 

 

Q2 2023 Financial Highlights

 

 

 

 

 

Management Commentary

 

“Active cost and margin management was a key focus of Q2, accelerating our to move towards sustainable profitability, while maintaining sales,” said Itay Vago, Chief Financial Officer of IMC. “The actions we took since exiting the Canadian market last year and the associated restructure, have significantly improved our gross margin and reduced our total operating expenses, leading to a substantial decrease in our non-IFRS Adjusted EBITDA Loss.”

 

Operational Highlights

 

IMC Israel:

 

 

IMC Germany:

 

Q2 2023 Financial Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The quarterly figures provided in the Q2 FS and the accompanying Q2 MD&A, include some immaterial updates and adjustments to the Company's previously filed unaudited interim financial statements for the first quarter of the year ended December 31, 2023 ("Q1 2023"), see note 1 under the heading Summary of Quarterly Results in the Q2 MD&A. The updated figures provided in the Q2 FS and Q2 MD&A that cover the Q1 2023 period supersede and replace the financial information for Q1 2023 filed on May 15, 2023.

 

Q2 2023 Conference Call 

 

 

 

About IM Cannabis Corp.

 

IMC (Nasdaq: IMCC) (CSE: IMCC) is an international cannabis company that provides premium cannabis products to medical patients in Israel and Germany, two of the largest medical cannabis markets. The Company has recently exited operations in Canada to pivot its focus and resources to achieve sustainable and profitable growth in its highest value markets, Israel and Germany. The Company leverages a transnational ecosystem powered by a unique data-driven approach and a globally sourced product supply chain. With an unwavering commitment to responsible growth and compliance with the strictest regulatory environments, the Company strives to amplify its commercial and brand power to become a global high-quality cannabis player.

 

The IMC ecosystem operates in Israel through its commercial relationship with Focus Medical Herbs Ltd., which imports and distributes cannabis to medical patients, leveraging years of proprietary data and patient insights. The Company also operates medical cannabis retail pharmacies, online platforms, distribution centers, and logistical hubs in Israel that enable the safe delivery and quality control of IMC products throughout the entire value chain. In Germany, the IMC ecosystem operates through Adjupharm GmbH, where it distributes cannabis to pharmacies for medical cannabis patients. Until recently, the Company also actively operated in Canada through Trichome Financial Corp and its wholly owned subsidiaries, where it cultivated, processed, packaged, and sold premium and ultra-premium cannabis at its own facilities under the WAGNERS and Highland Grow brands for the adult-use market in Canada. The Company has exiting operations in Canada and considers these operations discontinued.

 

Disclaimer for Forward-Looking Statements

 

This press release contains forward-looking information or forward-looking statements under applicable Canadian and U.S. securities laws (collectively, "forward-looking statements"). All information that addresses activities or developments that we expect to occur in the future are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "expect", "likely" and "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. In the press release, such forward-looking statements include, but are not limited to, statements relating to the Company leaving the Canadian cannabis market to focus on Israel and Germany; achieving profitability and shareholder value; statements regarding the Company's ongoing restructuring of its operations, including the reduction in its Israeli workforce, the strategic plans of the Company, estimated cost reductions and maintaining revenues.

 

Forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to: the development and introduction of new products; continuing demand for medical and adult-use recreational cannabis in the markets in which the Company operates; the Company's ability to reach patients through both e-commerce and brick and mortar retail operations; the Company's ability to maintain and renew or obtain required licenses; the effectiveness of its products for medical cannabis patients and recreational consumers; and the Company's ability to market its brands and services successfully to its anticipated customers and medical cannabis patients.

 

The above lists of forward-looking statements and assumptions are not exhaustive. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated or implied by such forward-looking statements due to a number of factors and risks. These include:  any failure of the Company to maintain "de facto" control over Focus Medical in accordance with IFRS 10; the failure of the Company to comply with applicable regulatory requirements in a highly regulated industry; unexpected changes in governmental policies and regulations in the jurisdictions in which the Company operates; the Company's ability to continue to meet the listing requirements of the Canadian Securities Exchange and the NASDAQ Capital Market; any unexpected failure to maintain in good standing or renew its licenses; the ability of the Company and Focus Medical (collectively, the "Group") to deliver on their sales commitments or growth objectives; the reliance of the Group on third-party supply agreements to provide sufficient quantities of medical cannabis to fulfil the Group's obligations; the Group's possible exposure to liability, the perceived level of risk related thereto, and the anticipated results of any litigation or other similar disputes or legal proceedings involving the Group; the impact of increasing competition; any lack of merger and acquisition opportunities; adverse market conditions; the inherent uncertainty of production quantities, qualities and cost estimates and the potential for unexpected costs and expenses; risks of product liability and other safety-related liability from the usage of the Group's cannabis products; supply chain constraints; reliance on key personnel; the risk of defaulting on existing debt and war, conflict and civil unrest in Eastern Europe and the Middle East. 

 

 

Non-IFRS Measures

 

This press release makes reference to "Gross Margin" and "Adjusted EBITDA", which are financial measures that are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are provided as complementary information to the Company's IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should neither be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.

 

 

We reconcile these non-IFRS financial measures to the most comparable IFRS measures as set out below.

 

Company Contact:

Anna Taranko, Director Investor & Public Relations
IM Cannabis Corp.
+49 157 80554338
a.taranko@imcannabis.de

 

Oren Shuster, CEO
IM Cannabis Corp.
+972-77-3603504
info@imcannabis.com

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Canadian Dollars in thousands
						June 30, 2023				December 31, 2022
		Note				(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents						$	1,321			$	2,449
Trade receivables							9,701				8,684
Advances to suppliers							1,492				1,631
Other accounts receivable							3,400				3,323
Inventories							14,484				16,585
							30,398				32,672
NON-CURRENT ASSETS:
Property, plant and equipment, net							5,235				5,221
Investments in affiliates							2,244				2,410
Right-of-use assets, net							1,457				1,929
Deferred tax assets, net							749				763
Intangible assets, net							6,572				7,910
Goodwill							9,095				9,771
							25,352				28,004
Total assets						$	55,750			$	60,676

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Canadian Dollars in thousands
						June 30, 2023				December 31, 2022
		Note				(Unaudited)
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables						$	9,381			$	15,312
Bank loans and credit facilities							11,477				9,246
Other accounts payable and accrued expenses							4,786				6,013
Accrued purchase consideration liabilities							1,865				2,434
Current maturities of operating lease liabilities							596				814
							28,105				33,819
NON-CURRENT LIABILITIES:
Warrants measured at fair value			3				3,689				8
Operating lease liabilities							830				1,075
Long-term loans							379				399
Employee benefit liabilities, net							128				246
Deferred tax liability, net							1,081				1,332
							6,107				3,060
Total liabilities							34,212				36,879
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:			4
Share capital and premium							248,798				245,776
Translation reserve							1,097				1,283
Reserve from share-based payment transactions							14,617				15,167
Accumulated deficit							(243,597	)			(239,574	)
Total equity attributable to equity holders of the Company							20,915				22,652
Non-controlling interests							623				1,145
Total equity							21,538				23,797
Total liabilities and equity						$	55,750			$	60,676

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (UNAUDITED)

Canadian Dollars in thousands, except per share data

		Six months ended June 30,								Three months ended June 30,
		2023					2022(*)				2023				2022(*)
		(Unaudited)
Revenues		$	25,736			$	25,704			$	13,207			$	12,703
Cost of revenues			18,759				20,023				9,473				10,108
Gross profit before fair value adjustments			6,977				5,681				3,734				2,595
Fair value adjustments:
Unrealized change in fair value of biological assets			-				(315	)			-				-
Realized fair value adjustments on inventory sold in the period			(617	)			(760	)			(278	)			(394	)
Total fair value adjustments			(617	)			(1,075	)			(278	)			(394	)
Gross profit			6,360				4,606				3,456				2,201
General and administrative expenses			5,563				7,284				2,389				3,337
Selling and marketing expenses			5,427				5,581				2,622				3,120
Restructuring expenses			617				4,383				334				636
Share-based compensation			121				1,842				(137	)			732
Total operating expenses			11,728				19,090				5,208				7,825
Operating loss			5,368				14,484				1,752				5,624
Finance income			3,474				6,113				-				3,227
Finance expense			(2,853	)			(3,530	)			(2,114	)			(2,197	)
Finance income (expenses), net			621				2,583				(2,114	)			1,030
Loss from disposal of investment			-				114				-				114
Loss before income taxes			(4,747	)			(12,015	)			(3,866	)			(4,708	)
Income tax benefit			(175	)			(1,232	)			(160	)			(1,007	)
Net loss from continuing operations			(4,572	)			(10,783	)			(3,706	)			(3,701	)
Net loss from discontinued operations			-				(18,936	)			-				(15,277	)
Net loss			(4,572	)			(29,719	)			(3,706	)			(18,978	)
Other comprehensive income (loss) that will not be reclassified to profit or loss in subsequent periods:
Remeasurement gain on defined benefit plan			36				-				-				-
Exchange differences on translation to presentation currency			(661	)			(2,942	)			(99	)			(1,150	)
Total other comprehensive income that will not be reclassified to profit or loss in subsequent periods			(625	)			(2,942	)			(99	)			(1,150	)
Other comprehensive income that will be reclassified to profit or loss in subsequent periods:
Adjustments arising from translating financial statements of foreign operation			466				1,203				311				345
Total other comprehensive income that will be reclassified to profit or loss in subsequent periods:			466				1,203				311				345
Total other comprehensive income (loss)			(159	)			(1,739	)			212				(805	)
Total comprehensive loss		$	(4,731	)		$	(31,458	)		$	(3,494	)		$	(19,783	)

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (UNAUDITED)

Canadian Dollars in thousands, except per share data

						Six months ended June 30,								Three months ended June 30,
						2023					2022(*)				2023				2022(*)
		Note				Unaudited
Net loss attributable to:
Equity holders of the Company						$	(4,059	)		$	(28,117	)		$	(3,459	)		$	(18,665	)
Non-controlling interests							(513	)			(1,602	)			(247	)			(313	)
						$	(4,572	)		$	(29,719	)		$	(3,706	)		$	(18,978	)
Total comprehensive loss attributable to:
Equity holders of the Company						$	(4,209	)		$	(29,727	)		$	(3,250	)		$	(19,437	)
Non-controlling interests							(522	)			(1,731	)			(244	)			(346	)
						$	(4,731	)		$	(31,458	)		$	(3,494	)		$	(19,783	)
Net income (loss) per share attributable to equity holders of the Company:			6
Basic loss per share (in CAD)						$	(0.33	)		$	(4.05	)		$	(0.26	)		$	(2.72	)
Diluted loss per share (in CAD)						$	(0.33	)		$	(4.82	)		$	(0.26	)		$	(3.12	)
Earnings (loss) per share attributable to equity holders of the Company from continuing operations:
Basic loss per share (in CAD)						$	(0.33	)		$	(1.32	)		$	(0.26	)		$	(0.49	)
Diluted loss per share (in CAD)						$	(0.33	)		$	(2.09	)		$	(0.26	)		$	(0.89	)
Loss per share attributable to equity holders of the Company from discontinued operations:
Basic and diluted loss per share (in CAD)							-			$	(2.73	)			-			$	(2.23	)

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Canadian Dollars in thousands

		Six months ended June 30,
		2023				2022
Cash flows from operating activities:
Net loss for the period		$	(4,572	)		$	(29,719	)
Adjustments for non-cash items:
Unrealized gain on changes in fair value of biological assets			-				(1,135	)
Fair value adjustment on sale of inventory			617				2,517
Fair value adjustment of warrants measured at fair value and derivative assets			(3,304	)			(5,697	)
Depreciation of property, plant and equipment			337				1,762
Amortization of intangible assets			898				1,284
Depreciation of right-of-use assets			352				1,014
Finance expenses, net			2,683				6,527
Deferred tax benefit, net			(220	)			(1,836	)
Share-based payment			121				2,658
Revaluation of other receivable			-				3,818
Loss from disposal of investments			-				114
Restructuring expenses			-				8,791
			1,484				19,817
Changes in working capital:
Increase in trade receivables, net			(2,428	)			(4,518	)
Decrease (increase) in other accounts receivable			(2,572	)			556
Decrease in biological assets, net of fair value adjustments			-				569
Decrease (increase) in inventories, net of fair value adjustments			1,484				(570	)
Increase (decrease) in trade payables			(5,078	)			3,916
Decrease in employee benefit liabilities, net			(106	)			(182	)
Increase (decrease) in other accounts payable and accrued expenses			(992	)			(337	)
			(9,692	)			(566	)
Taxes paid			(432	)			(462	)
Net cash used in operating activities			(13,212	)			(10,930	)

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Canadian Dollars in thousands

		Six months ended June 30,
		2023				2022
		Unaudited
Cash flows from investing activities:
Purchase of property, plant and equipment			(553	)			(1,076	)
Proceeds from sales of property, plant and equipment			-				201
Proceeds from loans receivable			-				350
Investments in associate			-				(114	)
Net cash used in investing activities		$	(553	)		$	(639	)
Cash flow from financing activities:
Proceeds from issuance of share capital, net of issuance costs		$	1,688			$	-
Proceeds from exercise of options			-				335
Proceeds from issuance of Warrants			6,585				-
Repayment of lease liability			(345	)			(722	)
Payment of lease liability interest			(34	)			(859	)
(Repayment) proceeds from bank loan and credit facilities, net			(1,060	)			8,871
Interest paid			(124	)			(504	)
Proceeds from factoring of checks receivables			3,967				-
Net cash provided by financing activities			10,677				7,121
Effect of foreign exchange on cash and cash equivalents			1,960				(3,594	)
Increase (decrease) in cash and cash equivalents			(1,128	)			(8,042	)
Cash and cash equivalents at beginning of the period			2,449				13,903
Cash and cash equivalents at end of the period		$	1,321			$	5,861
Supplemental disclosure of non-cash activities:
Right-of-use asset recognized with corresponding lease liability		$	49			$	269
Issuance of shares in payment of purchase consideration liability		$	-			$	3,147
Issuance of shares and warrants in payment of debt settlement to a non- independent director of the company		$	1,061			$	-

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