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Company to continue its focus on the Israeli and German markets with a primary goal of sustainably increasing revenue in each of these core markets and accelerating path to profitability, while actively managing costs and margins
TORONTO, and GLIL YAM, Israel, March 29, 2023 /PRNewswire/ — IM Cannabis Corp. (the “Company” or “IMC“) (NASDAQ: IMCC) (CSE: IMCC), an international medical cannabis company, today announced its financial results for the fourth quarter and full year ended December 31, 2022. All amounts are reported in Canadian dollars unless otherwise stated.
Management Commentary
“The fourth quarter marked another pivotal moment on our trajectory to growth and profitability,” said Oren Shuster, Chief Executive Officer of IMC. “By commencing our exit from Canada, and the restructuring initiatives announced a few weeks back, we will be able to better focus our resources on growth opportunities in Israel, Germany and elsewhere in Europe. We are determined to continue with our strategic plan by maximizing efficiencies to create a leaner and more flexible organization to better suit the current market environment and our short- to mid-term objectives. We will continue building on the increasing demand and positive momentum in Israel and Germany, supported by strategic alliances with Canadian suppliers and a highly skilled sourcing team, to cement our leadership position in the markets we operate in.”
Q4 & Full Year 2022 Financial Results
Q4 & Full Year 2022 Business Highlights
The Company’s financial statements as of December 31, 2022 includes a note regarding the Company’s ability to continue as a going concern. The Company’s Q4 2022 financial results do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. For more information, please refer to the “Liquidity and Capital Resources” and “Risk Factors” sections in the Company’s management’s discussion and analysis for the fiscal year ended December 31, 2022.
The Company’s audited consolidated financial statements for the fiscal year ended December 31, 2022 and related management’s discussion and analysis, together with its Annual Report on Form 20-F, are available electronically under the Company’s SEDAR profile at www.sedar.com and will be available on EDGAR at www.sec.gov/edgar.
Q4 & Full Year 2022 Conference Call
The Company will host a zoom web conference call today at 9:00 a.m. ET to discuss the results, followed by a question-and-answer session for the investment community. Investors are invited to register by clicking here. All relevant information will be sent upon registration.
If you are unable to join us live, a recording of the call will be available on our website at https://investors.imcannabis.com/ within 24 hours after the 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 commenced exiting 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. (“Focus Medical“), 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 Trichome JWC Acquisition Corp. and MYM Nutraceuticals Inc., 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 is exiting operations in Canada and considers these operations discontinued. For more information, please visit www.imcannabis.com.
Company Contact:
Oren Shuster, CEO
IM Cannabis Corp.
[email protected]
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, Germany and Europe; achieving profitability and shareholder value; expectations related to demand, growth opportunities in Israel, Germany and Europe; demand and momentum in the Company’s Israeli operations; the restructuring of Trichome under CCAA and the expected wind up of Trichome; statements regarding the Company’s ongoing restructuring of its operations, including the reduction in its Israeli workforce and the strategic plans of the Company.
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.
Any forward-looking statement included in this press release is made as of the date of this press release and is based on the beliefs, estimates, expectations and opinions of management on the date such forward-looking information is made. The Company does not undertake any obligation to update forward-looking statements except as required by applicable securities laws. Investors should not place undue reliance on forward-looking statements. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
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.
For an explanation of how management defines Gross Margin and Adjusted EBITDA, see the Company’s management’s discussion and analysis for the period ended December 31, 2022, available under the Company’s SEDAR profile at www.sedar.com on EDGAR at www.sec.gov/edgar.
We reconcile these non-IFRS financial measures to the most comparable IFRS measures as set out below.
For the year ended
December 31,
For the three months
ended December 31,
2022
2021
2022
2021
Operating Loss
$ (30,791)
$ (23,035)
$ (10,709)
$ (8,741)
Add: Depreciation & Amortization
$ 2,815
$ 2,125
$ 873
$ 1,022
EBITDA (Non-IFRS)
$ (27,976)
$ (20,910)
$ (9,836)
$ (7,719)
Add: IFRS Biological assets fair value adjustments, net (1)
$ 2,129
$ 1,448
$ 188
$ (638)
Add: Share-based payments
$ 2,637
$ 3,305
$ 428
$ (650)
Add: Costs related to the Nasdaq listing (2)
$ –
$ 1,261
$ –
$ –
Add: Restructuring cost (3)
$ 4,383
$ –
$ –
$ –
Add: Other non-recurring costs (4)
$ 7,336
$ 570
$ 7,336
$ –
Adjusted EBITDA (Non-IFRS)
$ (11,491)
$ (14,326)
$ (1,884)
$ (9,007)
Year ended
Dec 31, 2022
Year ended
Dec 31, 2021
Three months
ended Dec 31, 2022
Three months
ended Dec 31, 2021
Net Revenue
$ 54,335
$ 34,053
$14,461
$ 9,912
Cost of sales
$ 43,044
$ 25,458
$ 11,670
$ 8,832
Gross profit before fair value adjustments
$ 11,291
$ 8,595
$ 2,791
$ 1,080
Gross margin before fair value adjustments (Non-IFRS)
21 %
25 %
19 %
11 %
[1] Continuing Operations are the ongoing activities of the Company, excluding the segments that are discontinued.
[2] Gross Margin and Adjusted EBITDA are non-IFRS financial measures with no standardized meaning under IFRS, and therefore they may not be comparable to similar measures presented by other issuers. The closest IFRS measure to Adjusted EBITDA is “operating loss”. For further information and detailed reconciliations of non-IFRS financial measures to the most directly comparable IFRS measures, see “Non-IFRS Measures” in this press release.
[3] Discontinued Operations are Trichome Financial Corp. and its wholly-owned subsidiaries.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Canadian Dollars in thousands
December 31,
2022
2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$ 2,449
$ 13,903
Trade receivables
8,684
16,711
Advances to suppliers
1,631
2,300
Other accounts receivable
3,323
14,482
Loans receivable
–
2,708
Biological assets
–
1,687
Inventory
16,585
29,391
32,672
81,182
NON-CURRENT ASSETS:
Property, plant and equipment, net
5,221
30,268
Investments in affiliates
2,410
2,429
Advance payment for intangible assets of pharmacy
–
3,129
Derivative assets
–
14
Right-of-use assets, net
1,929
18,162
Deferred tax assets, net
763
16
Intangible assets, net
7,910
30,885
Goodwill
9,771
121,303
28,004
206,206
Total assets
$ 60,676
$ 287,388
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Canadian Dollars in thousands
December 31,
2022
2021
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables
$ 15,312
$ 13,989
Bank loans and others
9,246
9,502
Other accounts payable and accrued expenses
6,013
20,143
Accrued purchase consideration liabilities
2,434
6,039
Current maturities of operating lease liabilities
814
1,554
33,819
51,227
NON-CURRENT LIABILITIES:
Warrants measured at fair value
8
6,022
Operating lease liabilities
1,075
17,820
Long-term loans
399
392
Employee benefit liabilities, net
246
391
Deferred tax liability, net
1,332
6,591
3,060
31,216
Total liabilities
36,879
82,443
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
Share capital and premium
245,775
237,677
Treasury Stock
(660)
(660)
Translation reserve
1,283
2,614
Reserve from share-based payment transactions
15,167
12,348
Accumulated deficit
(238,913)
(50,743)
Total equity attributable to shareholders of the Company
22,652
201,236
Non-controlling interests
1,145
3,709
Total equity
23,797
204,945
Total equity and liabilities
$ 60,676
$ 287,388
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
Canadian Dollars in thousands
Year ended
December 31,
2022
2021 (*)
2020
Revenues
$ 54,335
$ 34,053
$ 15,890
Cost of revenues
43,044
25,458
7,081
Gross profit before fair value adjustments
11,291
8,595
8,809
Fair value adjustments:
Unrealized change in fair value of biological assets
(315)
6,308
11,781
Realized fair value adjustments on inventory sold in the year
(1,814)
(8,570)
(10,122)
Total fair value adjustments
(2,129)
(2,262)
1,659
Gross profit after fair value adjustments
9,162
6,333
10,468
General and administrative expenses
21,459
17,221
11,549
Selling and marketing expenses
11,473
6,725
3,782
Restructuring expenses
4,383
–
–
Share-based compensation
2,637
5,422
3,382
Total operating expenses
39,952
29,368
18,713
Operating loss
(30,790)
(23,035)
(8,245)
Finance income
6,703
23,544
277
Finance expenses
(1,972)
(673)
(20,504)
Finance income (expense), net
4,731
22,871
(20,227)
Loss before income taxes
(26,060)
(164)
(28,472)
Income tax expense (benefit)
(1,138)
500
262
Net loss from continuing operations
(24,922)
(664)
(28,734)
Net loss from discontinued operations, net of tax
(166,379)
(17,854)
–
Net loss
$ (191,301)
$ (18,518)
$ (28,734)
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
Canadian Dollars in thousands, except per share data
Year ended
December 31,
2022
2021 (*)
2020
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:
Remeasurement gain (loss) on defined benefit plans
59
21
(30)
Exchange differences on translation to presentation currency
(1,238)
858
1,144
Total other comprehensive income that will not be reclassified to profit or loss in subsequent periods
(1,179)
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
(246)
530
(124)
Total other comprehensive income (loss)
(1,425)
1,409
990
Total comprehensive loss
(192,726)
(17,109)
(27,744)
Net loss attributable to:
Equity holders of the Company
(188,890)
(17,763)
(28,698)
Non-controlling interests
(2,411)
(755)
(36)
(191,301)
(18,518)
(28,734)
Total comprehensive income (loss) attributable to:
Equity holders of the Company
(190,162)
(16,357)
(27,808)
Non-controlling interests
(2,564)
(752)
64
$ (192,726)
$ (17,109)
$ (27,744)
Earnings (loss) per share attributable to equity holders of the Company from continuing operations:
Basic earnings (loss) per share (in CAD)
$ (3.13)
$ 0.02
$ (1.9)
Diluted loss per share (in CAD)
$ (3.81)
$ (3.62)
$ (1.9)
Loss per share attributable to equity holders of the Company from discontinued operations:
Basic and diluted loss per share (in CAD)
$ (23.17)
$ (3.08)
$ –
Loss per share attributable to equity holders of the Company from net loss:
Basic earnings (loss) per share (in CAD)
$ (26.30)
$ (3.06)
$ (1.9)
Diluted loss per share (in CAD)
$ (26.98)
$ (6.7)
$ (1.9)
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
Expired options
8
–
(8)
–
–
–
–
–
Balance as of January 1, 2021
$ 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
–
–
–
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
Expired options
32
–
(32)
–
–
–
–
–
Balance as of December 31, 2021
$ 237,677
$ (660)
$ 12,348
$ 2,614
$ (50,743)
$ 201,236
$ 3,709
$ 204,945
*) Including the effect of Share Consolidation (See note 18a).
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, 2022
$ 237,677
$ (660)
$ 12,348
$ 2,614
$ (50,743)
$ 201,236
$ 3,709
$ 204,945
Net loss
–
–
–
–
(188,890)
(188,890)
(2,411)
(191,301)
Total other comprehensive income (loss)
–
–
–
(1,331)
59
(1,272)
(153)
(1,425)
Total comprehensive loss
–
–
–
(1,331)
(188,831)
(190,162)
(2,564)
(192,726)
Issuance of treasury common shares
–
660
–
–
–
660
–
660
Issuance of shares, net of issuance costs of $178
6,818
–
–
–
–
6,818
–
6,818
Exercise of options
992
–
(659)
–
–
333
–
333
Share-based compensation
–
–
3,767
–
–
3,767
–
3,767
Expired options
289
–
(289)
–
–
–
–
–
Balance as of December 31, 2022
$ 245,776
$ –
$ 15,167
$ 1,283
$ (239,574)
$ 22,652
$ 1,145
$ 23,797
CONSOLIDATED STATEMENTS OF CASH FLOWS
Canadian Dollars in thousands
Year ended
December 31,
2022
2021
2020
Cash provided from operating activities:
Net loss
$ (191,301)
$ (18,518)
$ (28,734)
Adjustments for non-cash items:
Unrealized gain on changes in fair value of biological assets
(84)
(7,210)
(11,781)
Fair value adjustment on sale of inventory
4,342
8,796
10,122
Fair value adjustment on Warrants, Investments, and Accounts Receivable
(6,000)
(21,638)
20,155
Depreciation of property, plant and equipment
3,044
3,021
690
Amortization of intangible assets
2,343
1,158
31
Depreciation of right-of-use assets
1,944
1,550
209
Impairment of goodwill
107,854
275
–
Impairment of property, plant and equipment
2,277
–
–
Impairment of intangible assets
7,199
–
–
Impairment of right-of-use assets
1,914
–
–
Finance income, net
6,532
1,262
72
Deferred tax payments (benefit), net
(3,004)
278
(66)
Share-based payments
3,767
7,471
3,382
Share based acquisition costs related to business combination
–
807
–
Revaluation of other accounts receivable
3,982
–
–
Restructuring expenses
8,757
–
–
144,867
(4,230)
22,814
Changes in non-cash working capital:
Increase (decrease) in trade receivables, net
6,058
(6,602)
(3,534)
Increase (decrease) in other accounts receivable and advances to suppliers
3,622
845
(1,029)
Decrease in biological assets, net of fair value adjustments
565
6,412
11,771
Increase (decrease) in inventory, net of fair value adjustments
883
(19,707)
(12,729)
Increase in trade payables
11,284
5,573
2,135
Changes in employee benefit liabilities, net
(63)
28
59
Increase in other accounts payable and accrued expenses
12,126
2,661
1,929
34,475
(10,790)
(1,398)
Taxes paid
(681)
(834)
(601)
Net cash used in operating activities
(12,640)
(34,372)
(7,919)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Canadian Dollars in thousands
Year ended
December 31,
2022
2021
2020
Cash flows from investing activities:
Purchase of property, plant and equipment
$ (1,562)
$ (4,578)
$ (2,617)
Proceeds from sales of property, plant and equipment
210
–
–
Proceeds from loans receivable
350
7,796
–
Purchase of intangible assets
–
(17)
(93)
Acquisition of businesses, net of cash acquired
–
(12,536)
–
Deconsolidation of subsidiary (see Note 24)
(406)
–
–
Investments in financial assets
–
(13)
(1,347)
Proceeds from sale of investment
–
319
–
Proceeds from (investment in) restricted deposits
–
17
(18)
Net cash used in investing activities
(1,408)
(9,012)
(4,075)
Cash provided by financing activities:
Proceeds from issuance of share capital, net of issuance costs
3,756
28,131
–
Proceeds from issuance of warrants measured at fair value
–
11,222
–
Proceeds from exercise of warrants
–
3,682
6,378
Proceeds from exercise of options
333
133
612
Repayment of lease liability
(1,656)
(633)
(182)
Payment of lease liability interest
(1,429)
(1,347)
(68)
Proceeds from loans
9,636
7,804
–
Repayment of loans
(4,976)
–
–
Interest paid
(902)
(261)
–
Net cash provided by financing activities
4,762
48,731
6,740
CONSOLIDATED STATEMENTS OF CASH FLOWS
Canadian Dollars in thousands
Year ended
December 31,
2022
2021
2020
Effect of foreign exchange on cash and cash equivalents
$ (2,168)
$ (329)
$ 213
Increase (decrease) in cash and cash equivalents
(11,454)
5,018
(5,041)
Cash and cash equivalents at beginning of year
13,903
8,885
13,926
Cash and cash equivalents at end of year
$ 2,449
$ 13,903
$ 8,885
Supplemental disclosure of non-cash activities:
Right-of-use asset recognized with corresponding lease liability
$ 613
$ 1,678
$ 107
Conversion of warrant and compensation options into common shares
$ –
$ 611
$ –
Issuance of shares in payment of purchase consideration liability
$ 3,061
$ –
$ –
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SOURCE IM Cannabis Corp
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