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SLANG Worldwide Announces First Quarter 2020 Financial Results

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  • Strong revenue growth in core markets of Colorado and Oregon
  • Delivered first cash flow positive month in June 2020;(1) sales rebounding strongly with lifting of stay-at-home orders
  • Core and emerging market transformation strategy making progress; new markets set to be commercialized throughout remainder of 2020
  • Continued strong brand performance in core markets sets the stage for new product introductions expected to contribute to second-half revenue
  • Planned restructuring in California and other emerging markets responsible for sequential revenue decline
  • Cost reduction and streamlining initiatives proving effective as the Company operates through challenges related to COVID-19 pandemic

Toronto, Ontario–(Newsfile Corp. – July 7, 2020) –  SLANG Worldwide Inc. (CNSX: SLNG(“SLANG” or the “Company“), a leading global cannabis consumer packaged goods (CPG) company with a diversified portfolio of popular brands, today released financial results for the three months ended March 31, 2020. All figures in this press release are stated in Canadian dollars unless otherwise noted.

“We began the first quarter with solid momentum in our core markets, but this growth was not enough to offset the combined effects of recalibrating our business in certain emerging markets, together with the COVID-19 pandemic,” said SLANG CEO Peter Miller. “The decisive actions we took in response to these challenges, along with proactive initiatives designed for the market environment, have positioned us to resume our growth in the second half of the year. We have already begun to see positive signs in June, including our highest monthly sales of the year leading to our first month of cash flow positive operations.”

Overall Commentary

In the first quarter, the Company delivered strong growth and continued momentum in its core markets of Colorado and Oregon. The growth was offset by revenue decreases in the emerging markets of California and Massachusetts, where the Company recalibrated its supply chain relationships to achieve more sustainable and profitable growth. Recalibration efforts in those markets are expected to result in a return to growth in the second half of the year.

The other major factor affecting recent results has been the COVID-19 pandemic and response. While the Company has successfully maintained its operations throughout this period and retail cannabis dispensaries have largely remained open as essential businesses, the stay-at-home orders had an overall adverse impact on the business. Many retailers that typically sell the Company’s hardware products, such as vaporizers and batteries, were not deemed to be essential and significantly reduced their orders during the shutdown period. Furthermore, the decline in tourism led to decreased business activity for many dispensaries, with resulting effects on the Company’s wholesale sales continuing into the second quarter.

The Company responded to these events by adjusting business tactics in its core and emerging markets, streamlining its operations to match the current environment, prioritizing cash generation and prudent credit management, and focusing on high margin revenue opportunities. The Company continues to work towards final steps required to complete previously announced acquisitions of Allied Concessions Group (“ACG“) and Lunchbox Alchemy (“LBA“).

Financial Highlights

  • Revenue of $4.7 million increased 17.5% compared to Q1 2019 reported revenue of $4.0 million, and declined 46% compared to $8.7 million in Q4 2019.
    • The decline compared to Q4 2019 is primarily due to the previously announced decision to recalibrate in California and other emerging markets that management believed were not showing a pathway to profitable growth. During Q1 2020, revenue from California and Massachusetts was down 97% from Q4 2019, and down 99% compared to Q1 2019. In addition, hardware sales were down 81% due to the COVID-19 pandemic, as retailers who were not considered essential businesses were forced to close and did not place their typical quarter-end orders in March.
    • The increase compared to Q1 2019 was driven by growth in the Company’s core markets (Colorado and Oregon) during the quarter, which offset the above-mentioned elimination of revenue contributions from California and Massachusetts. Revenue from core markets (Colorado and Oregon) increased by 181% over Q4 2019, and by 757% over Q1 2019.
  • Pro-forma revenue of $11 million which includes the estimated impact of the previously announced proposed acquisitions, investments, and assets within the SLANG Network.(2)
  • Gross profit of $2.9 million (61% gross margin) in Q1 2020 compares to adjusted gross profit of $2.2 million (56% adjusted gross margin) in Q1 2019, reflecting higher sales volumes in core markets and a higher margin profile associated with the licensing sales model. Gross profit declined from $5.5 million (63% gross margin) in Q4 2019 due primarily to the decrease in revenue.
  • Adjusted EBITDA loss of $2.7 million (not inclusive of non-cash items and impairments as described below) exceeded the Q4 2019 loss of $1.6 million, due to the decline in revenue which was not fully offset by cost reductions implemented during Q1 2020.
  • Ongoing cost reductions from streamlining activities at SLANG and within the SLANG Network have resulted in approximately $10.5 million of annualized cost savings. The Company believes it has achieved a level of operating expenses appropriate for current market conditions, while maintaining the flexibility to scale quickly to accommodate growth.
  • $10.4 million of cash and cash equivalents at March 31, 2020. Cash usage during the first quarter included approximately $4.4 million in loans to SLANG Network partners, including material periodic costs such as D&O insurance. During the second quarter, the Company added $4 million of cash to its balance sheet through the acquisition of Cultivate Brands Corp. (“Cultivate“). The Company continues to operate with a strong cash position that is expected to be sufficient to fund operations through to profitability.
  • In June 2020, the Company delivered its first cash flow positive month as it began to realize the impact of previously announced streamlining initiatives as well as a rebound in sales at many key retailers with the easing of COVID-related closures.(1)

Year-to-Date Operational Highlights

  • Product Diversification: Continuing to bring new product SKUs to market in 2020 through the launch of additional brands in new product verticals and expansion of existing product lines.
    • Flower: Subsequent to the quarter ended March 31, 2020, SLANG entered the flower category with the introduction of Cookies flower products in Colorado and Oregon under a previously announced partnership with Cookies. Flower is typically a top-selling category of the cannabis market.
    • Edibles: Launched District Edibles Sour Gummies in Colorado and Nevada, and introduced District Edibles to the Oregon market, marking the Company’s first entry into edibles in Oregon. Edibles represent approximately 12% of the Oregon market, according to BDS Analytics.
    • Concentrates: Introduced Cookies-branded “Terp Sauce” cartridges in Colorado at the end of the second quarter of 2020.
  • Path to Profitability: Accelerating the path to profitability through a rebalancing of the workforce and continued optimization of SLANG Network relationships, resulting in combined annualized savings expected to be approximately $10.5 million. Streamlining efforts were undertaken in the context of a strategic realignment of operations to reflect business realities in the markets where the Company operates, and are expected to improve gross margins and accelerate the timeline to consistently positive cash flow.
  • Emerging Markets: Continuing to recalibrate or strengthen supply chain relationships most appropriate for each emerging market to provide for sustainable and profitable growth. Recent highlights include:
    • Ohio: announced strategic partnership with Standard Wellness Company, LLC in January 2020; product expected in market Q3 2020.
    • Maine: announced strategic partnership with Wellness Connection of Maine in March 2020; product launched in Q2 2020.
    • Michigan: announced strategic partnership with Gage Cannabis Co. in May 2020.
    • Oklahoma: product expected in market in Q3 2020 through strategic partnership with Elite Cultivation LLC announced in 2019.
    • California and Massachusetts: the Company is in late-stage conversations with operators in both markets with plans to return to those markets in a manner designed to achieve sustainable growth.
    • Canada: Minority-owned licensed producer Agripharm Corp. has received a sales license and expects to have product in market during Q3 2020.
  • Brand Leadership: SLANG’s brands continued to earn market-leading positions across multiple product categories and territories in the first quarter of 2020.
    • Highlights include: Open.VAPE ranked as the #1 vape in Colorado and #4 in both Oregon and Nevada; Firefly Mini was the #4 disposable vaporizer in Colorado; Bakked was the #2 distillate in California, and #5 in Colorado, Oregon and Arizona; District Edibles was the #3 gummy in Nevada, #8 in Colorado and #9 in California; Pressies was the #4 pill in Colorado. (Source: BDS Analytics.)
    • 54 million branded servings sold in Q1 2020 (average of approximately 592,000 servings per day) – Branded servings increased by 19% compared to Q1 2019, reflecting a consumer shift towards more premium, larger format product offerings, but declined by 10% from Q4 2019 due to the same factors affecting branded units.
    • 635,000 branded units sold in Q1 2020 Branded units decreased by 34% compared to Q1 2019, and by 23% versus Q4 2019, primarily due to the recalibration of supply chain relationships in markets such as California and the impact of COVD-19.
  • Streamlined Management: On June 11, 2020, the Company announced an executive transition plan which will result in the promotions of Chris Driessen to President & CEO, John Moynan to Chief Operating Officer and General Counsel, and Mikel Rutherford to Chief Financial Officer. Peter Miller will transition from the CEO role to serve as Executive Chairman, while Billy Levy will transition from President to a strategic advisor role, and Kelly Ehler will transition from his current role as CFO to stand for election to the Company’s Board of Directors.

Corporate Development

  • Working towards final steps required to complete previously announced acquisitions of ACG and LBA.
  • Subsequent to quarter end, completed the acquisition of Cultivate, a company with a complementary portfolio of intellectual property, cash and other assets.
  • The Company announced that it does not currently expect to exercise its option to acquire NS Holdings, Inc. in the near term. Furthermore, the Company and Arbor Pacific, Inc. have mutually agreed not to pursue the previously announced acquisition, and are actively exploring other accretive ways to work together in their respective markets.

“Our priority this year has been to leverage SLANG’s unique strengths and flexible business model to tailor our strategy for success in each of our core and emerging markets,” said Mr. Miller. “In a highly dynamic environment, our brands continue to resonate with consumers. We will remain focused on operating with agility, optimizing all aspects of our business, and executing on selective initiatives to drive long-term growth and shareholder value. We are very confident in how the Company is positioned as we enter the second half of the year.”

Outlook for 2020

The conditions that affected the Company’s business in the first quarter of 2020 generally continued into the second quarter. In particular, the impact of the COVID-19 stay-at-home orders were felt over the full three months, compared to the last several weeks of the first quarter. The recalibration process in California and Massachusetts was also ongoing, as the Company worked towards establishing sustainable strategic partnerships with new operators in both markets. Performance in the Company’s core markets of Colorado and Oregon, as well as its wholesaling business, started slowly and improved towards the end of the second quarter as COVID restrictions were eased. These factors are expected to have an overall adverse impact on the Company’s Q2 2020 results.

The Company currently anticipates that momentum being realized throughout the business will lead to stronger results in the second half of 2020. Factors expected to contribute to improved top-line and bottom-line performance include the following:

  • Licensing revenues from recently-signed strategic partners commencing and continuing to grow as those partners introduce products into their local markets;
  • The Company’s planned re-entry into the California and Massachusetts markets, provided new strategic partnerships can be successfully concluded;
  • Increase sales from the Company’s recent and ongoing expansion into new product categories and introduction of new brands;
  • The resumption of economic activity as local economies begin to re-open from COVID-19 closures and travel/tourism resumes;
  • The expected closing of the LBA acquisition during the second half of the year, and the potential closing of the ACG acquisition within this time frame, leading to consolidation of supply chain assets and a corresponding increase in revenue and margins;
  • Positive sales trends in June 2020, which may indicate the start of a bounce-back to pre-COVID sales levels;
  • Reduced operating expense run-rate as a result of recent streamlining activities; and
  • Continued focus on prudent credit management and prioritization of near-term cash generation.

“The adversity we faced in the first half of 2020 has made us more resilient, with a reduced cost structure that will help insulate us from further surprises,” said current SLANG USA President and incoming CEO Chris Driessen. “Despite the challenges experienced in some areas of the business, our core markets have continued to perform. More importantly, we have been putting building blocks in place to deliver sustainable and profitable growth on multiple fronts. We are excited about how all of these initiatives will play out in the second half of the year.”

Q1 2020 Financial Review

The consolidated financial statements were prepared in accordance with IFRS.

The following is selected presentation of the Income Statement for the quarters ended March 31, 2020 and March 31, 2019:

Three Months Ended:
March 31, 2020

March 31, 2019
(Amended)

(In thousands except per share data and percentages) CDN CDN
NET OPERATING REVENUE $ 4,690 $ 4,006
Cost of goods sold 1,836 4,190
GROSS PROFIT 2,854 (184)
GROSS PROFIT MARGIN 61% (5)%
Operating expenses 10,782 11,852
OPERATING (LOSS) (7,928) (12,037)
Other items (Impairment, FV adjustment, FX, gains/losses, deferred tax recovery, etc.) 31,069 (2,901)
TOTAL COMPREHENSIVE INCOME / (LOSS) 23,141 (14,937)
EARNINGS PER SHARE
           Basic $ 0.08 $ (0.08)
           Diluted $ 0.07 $ (0.08)

 

Gross Margin

The Company generated a 61% gross margin in the quarter ended March 31, 2020, which improved from an adjusted gross margin of 56% in Q1 2019. Margin improvements were driven by a shift to higher margin products, as well as the Company’s refocus on the core markets of Colorado and Oregon.

Cost of goods sold for Q1 2019 includes a one-time expense related to the acquisitions of National Concessions Group and NWT Holdings LLC (Firefly) which required the Company to record the fair value of the inventory on-hand on consolidation at the time the transactions closed. The adjusted gross profit margin of 56%, as shown in the table below, adjusts for the impact of the inventory adjustment.

Three Months Ended:
March 31, 2020 March 31, 2019
(In thousands except per share data and percentages) CDN CDN
Net Operating Revenue $ 4,690 $ 4,006
Cost of goods sold 1,836 4,190
Inventory fair value adjustment (2,419)
Adjusted Gross Profit 2,854 2,234
Gross Profit Margin 61% 56%

 

Non-IFRS Measures

EBITDA, Adjusted EBITDA, Adjusted Gross Profit, Branded Unit volume and Branded Servings volume are non-IFRS financial measures that the Company uses to assess its operating performance. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management defines Adjusted EBITDA as EBITDA adjusted for other non-cash items such as the impact of unrealized fair values, share based compensation expense, impairments, one-time gains and losses, and one-time revenues and expenses. Management defines Adjusted Gross Profit as gross profit adjusted for non-recurring items such as fair value adjustments on acquisitions. See the heading “Operations Overview – Branded Volume” in the Company’s management’s discussion and analysis for the quarter ended March 31, 2020 (the “Q1 2020 MD&A“) for a description of how each of Branded Unit volume and Branded Servings volume is calculated. This data is furnished to provide additional information and are non-IFRS measures and do not have any standardized meaning prescribed by IFRS. The Company uses these non-IFRS measures to provide shareholders and others with supplemental measures of its operating performance. The Company also believes that securities analysts, investors and other interested parties, frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-IFRS measures differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities.

Three Months Ended March 31, 2020 Three Months Ended March 31, 2019
(In thousands except per share data and percentages) CDN CDN
TOTAL COMPREHENSIVE INCOME (LOSS) $ 23,141 $ (14,937)
EBITDA (6,346) (7,800)
ADJUSTED EBITDA (2,704) (758)

 

See the Company’s Q1 2020 MD&A for a detailed reconciliation of EBITDA and Adjusted EBITDA to Operating Income / (Loss). SLANG’s financial statements and MD&A for the three months ended March 31, 2020 are available on SEDAR at www.sedar.com, and on the Company’s Investor Relations website at www.slangww.com.

Stock Options and Share Issuances

The Company also announces that incentive stock options to acquire an aggregate of 8,839,416 common shares in the capital of the Company (“Common Shares“), with exercise prices ranging from $0.49 to $1.50, held by certain directors, officers, employees and consultants of the Company, have been voluntarily surrendered for cancellation.

The Company further announces that it will issue an aggregate of 3,153,838 Common Shares, at a deemed price of $0.15 per Common Share, to 15 employees, including an executive officer, who elected to receive shares in lieu of cash as part of their compensation. The issuance will be completed upon lifting of the Company-imposed insider trading blackout on July 9, 2020.

The Company will also issue an aggregate of 909,090 Common Shares, at a deemed price of $0.165 per Common Share, in satisfaction of certain obligations related to the acquisition of Cultivate and which Common Shares are subject to a statutory hold period in Canada, expiring four months and one day from the date of issuance.

Conference Call

The Company will hold a conference call at 10:00 a.m. EDT on Tuesday, July 7, 2020 to discuss the Company’s Q1 2020 financial results.

Dial-in:            888.231.8191 (toll free) or (+1) 647.427.7450 (local or international calls)
Webcast:        A live webcast can be accessed from the Investors section of Company’s website at www.slangww.com or 
                       at this link.

                       An archive of the webcast will be available on the Company’s website for one year.

Slides:            An investor presentation to accompany management’s remarks will be available on the Company’s website
                       and on the webcast page.

Replay:           An audio replay of the call will be available for seven days at (+1) 855.859.2056 passcode 8279327.


Media and Investor inquiries
[email protected]

About SLANG Worldwide Inc.

SLANG Worldwide Inc. is a global leader in the cannabis CPG sector with a diversified portfolio of popular brands distributed across the United States. The Company specializes in acquiring and developing market-proven regional brands as well as launching innovative new brands to seize global market opportunities. SLANG is listed on the Canadian Securities Exchange under the ticker symbol SLNG and on the Frankfurt Stock Exchange under the trading symbol 84S. For more information, please visit www.slangww.com.

Notes:

(1) Preliminary and unaudited financial results are subject to customary financial statement procedures by the Company and its auditors. Actual results could be affected by subsequent events or determinations. While the Company believes there is a reasonable basis for these preliminary financial results, the results involve known and unknown risks and uncertainties that may cause actual results to differ materially. These preliminary fiscal results represent forward-looking information. See “Forward Looking Statements”.

(2) This press release contains references to pro forma financial information, including with respect to pro forma revenues. Pro forma revenues include the estimated revenue for the three month period ended March 31, 2020 for previously announced acquisitions. Such proposed acquisitions include the previously announced proposed acquisitions of and LBA and ACG. These acquisitions cannot be consolidated, in the case of ACG, because such acquisition was still under option as at March 31, 2020 and, in the case of LBA, because such acquisition has not yet closed. Pro forma revenues do not include anticipated costs and expenses to generate such revenue. Completion of the proposed acquisitions of LBA and ACG are subject to, among other things, the negotiation and execution of definitive acquisition agreements and related documents and the satisfaction or waiver of any conditions precedent to the consummation of such acquisitions (including the receipt of any requisite regulatory and third-party approvals). There can be no assurance that the Company will complete the acquisitions of LBA and ACG. The Company believes the pro forma results presented provide relevant and useful information for investors because they clarify each company’s estimated operating performance, making it easier to compare the Company’s results with those of other companies in the same industry as the Company and allow investors to review the performance of these companies in the same way as the Company’s management. Since these measures are not calculated in accordance with IFRS, they should not be considered in isolation of, or as a substitute for, our reported results as indicators of the Company’s performance, and they may not be comparable to similarly named measurements from other companies.

Forward-Looking Statements

This news release contains statements that constitute “forward-looking statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements, or developments in the industry to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects,” “plans”, “anticipates”, “believes”, “intends”, “estimates”, “projects”, “potential” and similar expressions, or that events or conditions “will”, “would”, “may”, “could” or “should” occur.

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management of SLANG at this time, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies that could cause actual results to differ materially from those expressed or implied in such statements. Investors are cautioned not to put undue reliance on forward-looking statements. Applicable risks and uncertainties include, but are not limited to regulatory risks, risks related to the COVID-19 global pandemic, changes in laws, resolutions and guidelines, market risks, concentration risks, operating history, competition, the risks associated with international and foreign operations and the other risks identified under the headings “Risk Factors” in SLANG’s final long form prospectus dated January 17, 2019 and “Risks and Uncertainties” in the Q1 2020 MD&A, as filed on SEDAR at www.sedar.com. SLANG is not under any obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Third Party Information

This press release includes market and industry data that has been obtained from third party sources, including industry publications. The Company believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, the Company has not independently verified any of the data from third party sources referred to in this press release or ascertained the underlying economic assumptions relied upon by such sources.

The Canadian Securities Exchange has not reviewed, approved or disapproved the content of this news release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/59260

Cannabis

IM Cannabis Reports 2023 Financial Results

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im-cannabis-reports-2023-financial-results

TORONTO and GLIL YAM, Israel, March 28, 2024 /PRNewswire/ — IM Cannabis Corp. (the “Company” or “IMC“) (NASDAQ: IMCC) (CSE: IMCC), an international medical cannabis company, announced its financial and operational results for the year ended December 31, 2023, the highlights of which are included in this news release. All figures are reported in Canadian dollars. The Company’s full set of consolidated audited financial statements for the years ended December 31, 2023 and 2022 (the “Annual Financial Statements“) and accompanying management’s discussion and analysis (the “Annual MD&A“) can be accessed by visiting the Company’s website at https://investors.imcannabis.com/, and its profile pages on SEDAR+ at www.sedarplus.ca, and EDGAR at http://www.sec.gov/edgar.

FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2023

  • Revenue decreased to $48.8 million for the fiscal year ended December 31, 2023 (compared to $53.3 in 2022), representing a decrease of 10%.
    • Primarily due to negative currency fluctuations and the impact of the Israel-Hamas war on the Company’s operations.
  • Revenue decreased to $10.7 million for the three months ended December 31, 2023 (compared to $14.5 million in 2022), representing a decrease of 26%.
    • Primarily due to the interruption on the Company’s supply chain caused by the Israel-Hamas war and the Company discounting certain outstanding inventory at lower prices.
  • Gross profit increased to $9.8 million for the fiscal year ended December 31, 2023 (compared to $9.2 million in 2022), representing an increase of 7.5%
  • Gross profit decreased to $0.8 million for the three months ended December 31, 2023 (compared to $2.6 million in 2022), representing a decrease of 68%
    • Primarily due to the interruption on the Company’s supply chain caused by the Israel-Hamas war and the Company discounting certain outstanding inventory at lower prices.
    • The Company’s fair value adjustment was approximately $1 million for the fiscal year ended December 31, 2023 (compared to $2.1 million in 2022).
  • G&A expenses decreased to $11 million for the fiscal year ended December 31, 2023 (compared to $21.5 million in 2022), representing an decrease of 49%
  • G&A expenses decreased to $3.3 million for the three months ended December 31, 2023 (compared to $9.8 million in 2022), representing a decrease of 66%
    • Primarily due to the impairment on Y2022 and restructuring and HC adjustments in 2023.
  • Selling and marketing expenses decreased to $10.8 million for the fiscal year ended December 31, 2023 (compared to $11.5 million in 2022), representing an decrease of 6%
  • Selling and marketing expenses decreased to $2.8 million for the three months ended December 31, 2023 (compared to $3.1 million in 2022), representing a decrease of 10%
    • Primarily due to a decrease in share based compensation payments and a restructuring of the Company’s personnel.
  • Net Loss from continuing operations for the fiscal year ended December 31, 2023 was $10.2 million, as compared to $24.9 million in 2022.
  • Net Loss from continuing operations for the three months ended December 31, 2023 was $3.5 million, as compared to a Net Loss of $9.6 million in the fourth quarter of 2022.
  • Diluted Loss per Share for the fiscal year ended December 31, 2023 was $0.74, compared to a loss of $3.81 per Share in 2022.
  • Diluted Loss per Share for the three months ended December 31, 2023  was $(0.25), compared to a basic loss of $)2.94( per share and a diluted loss of $)3.55( per share in for the three months ended December 31, 2022.
  • Cash and Cash Equivalents as of December 31, 2023, was $1.8 million, compared to $2.4 million as of December 31, 2022. 
  • Total assets were $48.8 million as of December 31, 2023, compared to $60.7 million as of December 31, 2022, representing a decrease of 20%.
    • Primarily attributed to an inventory reduction of about $6.6 million, a reduction in other current assets of $1.8 million and a reduction of non-current assets of about $3.5 million
  • Total Liabilities were $35.1 million as of December 31, 2023, compared to $36.9 as of December 31, 2022, representing a decrease of about 5%. 
    • Primarily attributed to a reduction in trade payables of $6.1 million.
  • Operating expenses decreased to $22.6 million for the year ended December 31, 2023 (compared to $40 million in 2022), representing a decrease of 43%
  • Operating expenses decreased to $6 million for the three months ended December 31, 2023 (compared to $13.3 million in 2022), representing a decrease of 55%
  • Adjusted EBITDA1 decreased to $8 million for the year ended December 31, 2023, (compared to $11.5 in 2022), representing a decrease of 30%
  • Total Dried Flower sold in 2023 was approximately 8,609 kg with an average selling price of $5.14 per gram (compared to approximately 6,794kg, with an average selling price of $7.12 per gram in 2022).
    • Primarily due to increased competition within the retail segment and the Company discounting certain outstanding inventory at lower prices.
  • Total Dried Flower sold in the fourth quarter of 2023 was about 2,082kg with an average selling price of $4.52 per gram (compared to about 2,334kg with an average selling price of $5.19 per gram in 2022).
    • Primarily due to increased competition within the retail segment and the Company discounting certain outstanding inventory at lower prices.

The Annual Financial Statements include a note regarding the Company’s ability to continue as a going concern. The Annual Financial Statements 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 2023 Annual MD&A.

Management Commentary

“IMC Germany delivered accelerated growth in 2023, growing 181% from $252K in 2022 to $709K in 2023. During this time, IMC Germany was #1 in sales per stock keeping unit and posted the highest growth against its competitors in the German market.2 With the regulatory rescheduling of cannabis in Germany set to occur effective April 1st, the Company hopes to continue its growth in the market as the market evolves,” said Oren Shuster, Chief Executive Officer of IMC. “In addition, as we are constantly looking for opportunities to maximize shareholder value, we are hopeful that our potential reverse merger with Israel-based Kadimastem Ltd., a clinical cell therapy public company traded on the Tel Aviv stock exchange under the symbol (TASE: KDST) will proceed as expected, which we believe will create significant value for the shareholders.”

“As previously warned and as expected, unfortunately, the Israel-Hamas war had a negative impact on our fourth quarter 2023 results, which weighed on our full year results. Due to the ongoing conflict, there was a 6% decrease in our yearly revenue. Coupled with our fourth quarter of 2023 inventory reduction, the war caused our fourth quarter gross profit to decrease by 68% as compared to the fourth quarter of 2022. However, our gross profit for 2023 increased by 7.5% to $9.8 million as compared to last year,” said Uri Birenberg, Chief Financial Officer of IMC. “Partially offsetting these declines, we were able to reduce our operating costs in the fourth quarter of 2023 by 55% as compared to the fourth quarter of 2022, ending the year with a 43% reduction in our operating costs as compared to last year, as we leaned further into our goal of active cost management.”

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.

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 2023 MD&A.

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

About IM Cannabis Corp.

IM Cannabis Corp. (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 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 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 exited operations in Canada and considers these operations as discontinued.

Disclaimer for Forward-Looking Statements

This press release contains forward-looking information or forward-looking statements under applicable Canadian and United States 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 pivot its focus and resources to achieve sustainable and profitable growth in its highest value markets, Israel and Germany; the impact of the Israel-Hamas war on the Company, including its operations and the medical cannabis industry in Israel; the timing and impact of the partial legalization of medicinal cannabis in Germany, including, the Company having it “all in house”, the Company being positioned to take advantage of the partial legalization, the Company’s growth in 2024, the market growth for medicinal cannabis in Germany, and the stated benefits of the Company’s EU-GMP processing facility and an EU-GDP logistics center; the Company to host a teleconference meeting as stated; and the Company’s stated goals, scope, and nature of operations in Germany, Israel, and other jurisdictions the Company may operate.

Forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to: the Company’s ability to focus and resources to achieve sustainable and profitable growth in its highest value markets; the Company’s ability to mitigate the impact of the Israel-Hamas war on the Company; the Company’s ability to take advantage of the partial legalization of medicinal cannabis in Germany; the Company’s ability to host a teleconference meeting as stated; and the Company’s ability to carry out its stated goals, scope, and nature of operations in Germany, Israel, and other jurisdictions the Company may operate.

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:  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; risks surrounding war, conflict and civil unrest in Eastern Europe and the Middle East, including the impact of the Israel-Hamas war on the Company, its operations and the medical cannabis industry in Israel; risks associated with the Company focusing on the Israel and Germany markets; the inability of the Company to achieve sustainable profitability and/or increase shareholder value; the inability of the Company to actively manage costs and/or improve margins; the inability of the company to grow and/or maintain sales; the inability of the Company to meet its goals and/or strategic plans; the inability of the Company to reduce costs and/or maintain revenues; the Company’s inability to take advantage of the partial legalization of medicinal cannabis in Germany; and the Company’s inability to host a teleconference meeting as stated.

Please see the other risks, uncertainties and factors set out under the heading “Risk Factors” in the Company’s annual report dated March 28, 2024, which is available on the Company’s issuer profile on SEDAR+ at www.sedarplus.ca and Edgar at www.sec.gov/edgar. 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.

1 Earnings before interest, taxes, depreciation, and amortization (“EBITDA“) and Adjusted EBITDA. These measures do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS“) and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-IFRS measures provide investors with a supplemental measure of the Company’s operating performance and therefore highlight trends in Company’s core business that may not otherwise be apparent when relying solely on IFRS measures. Management uses non-IFRS measures in measuring the financial performance of the Company.

2 Based on reporting by Insight Health’s as of December 31, 2023.

 

Company Contact: 

Anna Taranko, Director Investor & Public Relations
IM Cannabis Corp.
+49 157 80554338
[email protected]

Oren Shuster, CEO
IM Cannabis Corp.
+972-77-3603504
[email protected]

 

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$    1,813

$        2,449

Trade receivables

6

7,651

8,684

Advances to suppliers

936

1,631

Other accounts receivable

7

3,889

3,323

Inventory

9

9,976

16,585

24,265

32,672

NON-CURRENT ASSETS:

Property, plant and equipment, net

10

5,058

5,221

Investments in affiliates

15c

2,285

2,410

Right-of-use assets, net

12

1,307

1,929

Deferred tax assets, net

17

763

Intangible assets, net

11

5,803

7,910

Goodwill

11

10,095

9,771

24,548

28,004

Total assets

$       48,813

$       60,676

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Trade payables

14

$        9,223

$       15,312

Credit from banks and others

13

12,119

9,246

Other accounts payable and accrued expenses

15

6,218

6,013

Accrued purchase consideration liabilities

5

2,097

2,434

PUT Option liability

2,697

Current maturities of operating lease liabilities

12

454

814

32,808

33,819

NON-CURRENT LIABILITIES:

Warrants measured at fair value

17

38

8

Operating lease liabilities

12

815

1,075

Credit from banks and others

394

399

Employee benefit liabilities, net

16

95

246

Deferred tax liability, net

19

963

1,332

2,305

3,060

Total liabilities

35,113

36,879

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:

20

Share capital and premium

253,882

245,776

Translation reserve

95

1,283

Reserve from share-based payment transactions

9,637

15,167

Accumulated deficit

(249,145)

(239,574)

Total equity attributable to shareholders of the Company

14,469

22,652

Non-controlling interests

(769)

1,145

Total equity

13,700

23,797

Total equity and liabilities

$       48,813

$       60,676

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands

Year ended December 31,

Note

2023

2022

 *) 2021

Revenues

21

$       48,804

$       54,335

$       34,053

Cost of revenues

21

37,974

43,044

25,458

Gross profit before fair value adjustments

10,830

11,291

8,595

Fair value adjustments:

Unrealized change in fair value of biological assets

(315)

6,308

Realized fair value adjustments on inventory sold in the year

(984)

(1,814)

(8,570)

Total fair value adjustments

(984)

(2,129)

(2,262)

Gross profit after fair value adjustments

9,846

9,162

6,333

General and administrative expenses

21

11,008

21,460

17,221

Selling and marketing expenses

21

10,788

11,473

6,725

Restructuring expenses

1

617

4,383

Share-based compensation

20

225

2,637

5,422

Total operating expenses

22,638

39,953

29,368

Operating loss

(12,792)

(30,791)

(23,035)

Finance income

7,006

6,703

23,544

Finance expenses

(3,671)

(1,972)

(673)

Finance income (expense), net

3,335

4,731

22,871

Loss before income taxes

(9,457)

(26,060)

(164)

Income tax expense (benefit)

18

771

(1,138)

500

Net loss from continuing operations

(10,228)

(24,922)

(664)

Net loss from discontinued operations, net of tax

25

(166,379)

(17,854)

Net loss

(10,228)

(191,301)

(18,518)

*)       Reclassified in respect of discontinued operations – see Note 25.

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands, except per share data

Year ended December 31,

Note

2023

2022

 *) 2021

Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:

Remeasurement gain on defined benefit plans

38

59

21

Exchange differences on translation to presentation currency

(894)

(1,238)

858

Total other comprehensive income that will not be reclassified to profit or loss in subsequent periods

(856)

(1,179)

879

Other comprehensive income that will be reclassified to profit or loss in subsequent periods:

Adjustments arising from translating financial statements of foreign operation

231

(246)

530

Total other comprehensive income (loss)

(625)

(1,425)

1,409

Total comprehensive loss

$     (10,853)

$    (192,726)

$      (17,109)

Net loss attributable to:

Equity holders of the Company

$      (9,498)

$    (188,890)

$      (17,763)

Non-controlling interests

(730)

(2,411)

(755)

$       (10,228)

$    (191,301)

$      (18,518)

Total comprehensive loss attributable to:

Equity holders of the Company 

$        (10,648)

$    (190,162)

$      (16,357)

Non-controlling interests 

$        (205)

(2,564)

(752)

$        (10,853)

$    (192,726)

$     (17,109)

Earnings (loss) per share attributable to equity holders of the Company from continuing operations:

22

Basic earnings (loss) per share (in CAD)

$              (0.74)

$          (3.13)

$            0.02

Diluted loss per share (in CAD)

$              (0.74)

$          (3.81)

$           (3.62)

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)

$              (0.74)

$        (26.3)

$          (3.06)

Diluted loss per share (in CAD)

$              (0.74)

$        (26.98)

$          (6.7)

*)       Reclassified in respect of discontinued operations – see Note 25.

The accompanying notes are an integral part of the consolidated financial statements.

 

 

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, 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

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

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Canadian Dollars in thousands

Share capital
and
premium*)

Reserve from
share-based
payment
transactions

Translation
reserve

Accumulated
deficit

Total

Non-controlling interests

Total
equity

Balance as of December 31, 2022

245,776

15,167

1,283

(239,574)

22,652

1,145

23,797

Net loss

(9,498)

(9,498)

(730)

(10,228)

Total other comprehensive income (loss)

(1,188)

38

(1,150)

525

(625)

Total comprehensive loss

(1,188)

(9,460)

(10,648)

(205)

(10,853)

Issuance of treasury common shares

2,351

2,351

2,351

Issuance of shares, net of issuance costs of $178

Exercise of options

Other comprehensive income Classification

(111)

(111)

(1,709)

(1,820)

Share-based compensation

225

225

225

Expired options

5,755

(5,755)

Balance as of December 31, 2023

253,882

9,637

95

(249,145)

14,469

(769)

13,700

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash provided from operating activities:

Net loss

$     (10,228)

$ (191,301)

$   (18,518)

Adjustments for non-cash items:

Unrealized gain on changes in fair value of biological assets

(84)

(7,210)

Fair value adjustment on sale of inventory

984

4,342

8,796

Fair value adjustment on warrants, investments, and accounts receivable

(6,955)

(6,000)

(21,638)

Depreciation of property, plant and equipment

644

3,044

3,021

Amortization of intangible assets

1,758

2,343

1,158

Depreciation of right-of-use assets

594

1,944

1,550

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

3,019

6,532

1,262

Deferred tax payments (benefit), net

394

(3,004)

278

Share-based payments

225

3,767

7,471

Share based acquisition costs related to business combination

807

Revaluation of other accounts receivable

3,982

Restructuring expenses

8,757

Loss from revaluation of investments

601

1,264

144,867

(4,230)

Changes in non-cash working capital:

Increase (decrease) in trade receivables, net

2,320

6,058

(6,602)

Increase (decrease) in other accounts receivable and advances to suppliers

1,299

3,622

845

Decrease in biological assets, net of fair value adjustments

565

6,412

Increase (decrease) in inventory, net of fair value adjustments

4,771

883

(19,707)

Increase (decrease) in trade payables

(6,098)

11,284

5,573

Changes in employee benefit liabilities, net

(139)

(63)

28

Increase in other accounts payable and accrued expenses

(750)

12,126

2,661

1,403

34,475

(10,790)

Taxes paid

(514)

(681)

(834)

Net cash used in operating activities

(8,075)

(12,640)

(34,372)

The accompanying notes are an integral part of the consolidated financial statements.

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash flows from investing activities:

Purchase of property, plant and equipment

(581)

(1,562)

(4,578)

Proceeds from sales of property, plant and equipment

210

Proceeds from loans receivable

350

7,796

Purchase of intangible assets

(17)

Acquisition of businesses, net of cash acquired

(12,536)

Deconsolidation of subsidiary (see Note 25)

(406)

Investments in financial assets

(13)

Proceeds from sale of investment

319

Proceeds from (investment in) restricted deposits

17

Investments in associates

(601)

(125)

Net cash used in investing activities

(1,182)

(1,533)

(9,012)

Cash provided by financing activities:

Proceeds from issuance of share capital, net of issuance costs

1,688

3,756

28,131

Proceeds from issuance of warrants measured at fair value

6,585

11,222

Proceeds from exercise of warrants

3,682

Proceeds from exercise of options

333

133

Repayment of lease liability

(586)

(1,656)

(633)

Payment of lease liability interest

(63)

(1,429)

(1,347)

Proceeds from loans

5,482

9,636

7,804

Repayment of loans

(4,827)

(4,976)

Interest paid

(1,664)

(902)

(261)

Proceeds from discounted checks

2,802

Net cash provided by financing activities

9,417

4,762

48,731

Effect of foreign exchange on cash and cash equivalents

(796)

(2,043)

(329)

Increase (decrease) in cash and cash equivalents

(636)

(11,454)

5,018

Cash and cash equivalents at beginning of year

2,449

13,903

8,885

Cash and cash equivalents at end of year

$      1,813

$      2,449

$    13,903

Supplemental disclosure of non-cash activities:

Right-of-use asset recognized with corresponding lease liability

$         309

$         613

$      1,678

Conversion of warrant and compensation options into common shares

$                 –

$             –

$         611

Issuance of shares in payment of purchase consideration liability

$                 –

$      3,061

$             –

Issuance of shares in payment of debt settlement to a non-independent director of the company

$      1,061

$             –

$             –

 

 

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