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Aleafia Health Reports Q4 2021 Financial Results with $11.5 Million Branded Cannabis Gross Revenue, representing a 103% Increase from 2020

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  • Transforming business towards a branded cannabis provider, with branded revenue representing 80% of total net revenue in 2021 compared to 33% in 2020
  • 96% increase in branded cannabis net revenue to $28.7 million in 2021 from $14.6 million in 2020
  • 396% increase in adult-use net revenue to $16.0 million in 2021 from $3.2 million in 2020
  • 60% increase in branded cannabis net revenue to $8.3 million in Q4 2021 from $5.2 million in Q4 2020
  • 33% increase in medical cannabis net revenue to $10.6 million in 2021 from $8.0 million in 2020
  • Consolidating medical market share with 17% growth in scripts in 2021 relative to 23% overall market decline
  • Average THC potency of 22% with up to 27% levels achieved in record-breaking outdoor harvest
  • Projecting Adjusted EBITDA Profitability during the Second Half of 2022

TORONTO, Feb. 14, 2022 (GLOBE NEWSWIRE) — Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the three and 12 months ended December 31, 2021. The Company’s 2021 unaudited, consolidated financial statements and management discussion and analysis for the fourth quarter and 12-month periods will be available in the Investors section of the Company’s website at aleafiahealth.com and will be filed on SEDAR and available at sedar.com.  

“The core strategic objectives that will drive Aleafia Health to sustained profitability reflect a pivot to focus on branded cannabis revenue. Branded revenue is comprised of ‘sticky,’ recurring medical revenue at attractive gross margins and robust growth in adult-use cannabis revenue where Aleafia continues to aggressively take market share,” said Aleafia Health CEO Tricia Symmes. “We are focused on achieving Top 10 in total LP market share in 2022, driven by leadership in the value cannabis category. Aleafia’s five cannabis brands span the spectrum from premium and craft flower to the value category with Divvy, where we already enjoy significant leadership. The company’s market share rose from 30th in Q1 2021, when we launched our House of Brands, to 15th in Q4 2021, representing the third highest change in market share rankings out of 40 Canadian Licensed Producers (“LPs”).(1) Q4 retail sales increased 37% relative to Q3. Our Divvy value brand is consistently among the top searched brands at the Ontario Cannabis Store website.”

“In 2021, the total net revenue of $36.1 million represents a highly diversified sales mix. Driven by robust growth in adult-use and medical sales, these two sales channels represented 80% of total net revenue, a complete turnaround from 2020, where bulk-wholesale product represented 67% of total net revenue,” Symmes added. “This is just the beginning, and we are very excited about the future. A record-breaking outdoor harvest that produced average THC potency of 22% allows us to direct this flower into the adult-use market, delivering significantly higher net margin per gram than the bulk wholesale channel. With our highly competitive THC levels, the quality of the brand is the company’s competitive advantage in the value category, and by focusing on the top performing high margin products through portfolio optimization, we are poised to achieve breakeven adjusted EBITDA profitability in the second half of 2022.”

“Aleafia Health’s revenue is driven by three strong business lines: its CPG branded adult-use portfolio, where we aim to enjoy a Top 10 overall market share position, which currently generates $24 million annualized run-rate net revenue, with significant momentum in the first 6 weeks of 2022; leadership in medical cannabis with its highly recurring $10 million annualized run-rate net revenue, and a 17% increase year over year in script counts; and international sales, where we are well positioned in three countries, Germany, the UK and Australia, and have developed partnerships with key established European supply distributors.

Our Sunday Market House of Brands achieved 396% growth year over year and is anchored around our hugely successful everyday Divvy brand, we have moved strongly ahead into categories that consumers want and are providing the innovative products and a value proposition that they demand.”

OPERATIONAL HIGHLIGHTS

  • Net revenue was $36.1 million for the 12 months ended December 31, 2021 (“2021”), compared to $44.5 million in the 12 months ending December 31, 2020 (“2020”). For the three months ended December 31, 2021 (“Q4 2021”), net revenue was $8.8 million, compared with $15.2 million in Q4 2020. The decline in net revenue was based on shifting from lower margin, higher volume bulk wholesale commodity cannabis revenue to higher margin, higher potency and innovative adult-use products, offering a unique value proposition. The Company’s branded cannabis revenue includes its “sticky” medical sales and market share consolidating branded adult-use cannabis products along with its burgeoning international sales.
  • Branded cannabis net revenue increased 96% to $28.7 million in 2021 compared to $14.6 million in 2020, and increased 60% to $8.3 million in Q4 2021 compared to $5.2 million in Q4 2020, largely attributable to the launch of the Sunday Market House of Brands, which enjoyed 396% growth in 2021 compared to 2020, anchored around Divvy, the everyday brand focused on potency and an exceptional value proposition. Aleafia delivered the top 3 out of 40 Canadian LPs in market share rank increase from Q1 2021 (#30) to Q4 2021 (#15).(1)
  • Adult-use net revenue increased 396% to $16.0 million in 2021 compared to $3.2 million in 2020, and increased 326% to $6.0 million in Q4 2021 compared to $1.4 million in Q4 2020. Sales velocity continues to accelerate driving market share capture with 37% retail sales pull through in Q4 2021 relative to Q3 2021.(2)
  • Medical cannabis net revenue increased 33% to $10.6 million in 2021 compared to $8.0 million in 2020, driven by strong ordering patterns from its flagship Emblem cannabis brand. Script count increased 17% year over year, to 37,779 in 2021 compared to 32,191 in 2020. The patient base grew 13% to 19,700 in 2021 from 17,400 in 2020. In 2021, the Company onboarded four unionized employers through its exclusive partnership with Unifor, Canada’s largest private sector union, with more than 515,000 members and retirees across the country. The highly scalable new patient onboarding platform is well-positioned to accelerate patient uptake. The Company will continue pursuing its recurring revenue base in which patients receive reimbursement for medical cannabis.
  • Bulk wholesale net revenue declined 75% to $7.4 million in 2021 compared to $29.9 million in 2020, which was offset in part by strong growth in branded cannabis revenue. This was driven by the Company’s redirection of its cultivation flower from the bulk wholesale sales channel towards its higher net revenue per gram branded cannabis products.
  • The Q4 2021 outdoor harvest delivered over 11,600kg of high potency saleable flower with THC levels averaging 22%. The Company plans to primarily utilize this product in the first half of 2022 in its adult-use branded cannabis products.
  • Total gross profit fair value adjustments and inventory provision was 31% in Q4 2021, compared to 59% in Q4 2020, primarily due to the Company’s pivot away from bulk-wholesale towards branded cannabis products that deliver higher overall net margin per gram.

KEY DEVELOPMENTS
In 2021, the Company transformed its business to become a branded cannabis provider. It has produced high potency flower at its Port Perry outdoor growth facility, allowing it to direct that product to higher margin, adult-use products. It has engaged with the consumer and attracted a top executive sales and marketing team, with an internal sales force, that understands the CPG marketplace, what consumers want and is focused on the need to drive value to secure loyal customers and drive and maintain market share. Higher THC levels as well as the lower cost of input materials has allowed the Company to significantly increase its market share. Other developments include:

  • Branded Cannabis Represented 80% of 2021 Total Net Revenue: The Company launched 37 new SKUs since Q4 2020 and built five cannabis brands spanning value to premium, craft. Divvy, an everyday consumer value brand, is consistently a top searched brand on OCS.ca. Twelve new product formats were launched in 2021 including: Craft Dried Flower, Milled Flower, 1g Distillate Vapes, Live Resin Vapes, Live Resin Diamond Sauce, Salted Caramel Pretzel Bites, Cluster Pucks, HotSauce, Omega CBD Soft Gels, Bath Bombs, Freshly Minted Roll-Ons and Topical Creams.
  • Significant Increase in Adult-Use Market Share: The Company is aggressively capturing market share. It achieved a top 3 market share rank increase among 40 Canadian LPs in the Q1 2021 (#30) to Q4 2021 (#15) period, based on HiFyre data. Its 37% increase in retail sales pull through from Q3 2021 to Q4 2021 placed it among the top 10 Canadian LPs. The Company’s market share increased from 0.3% in Q1 2021 to 2.0% in Q4 2021. Over this period, the Company delivered strong retail sales pull through in each of the three major categories, with flower increasing approximately 1,400%, pre-roll increasing approximately 1,000% and vape increasing approximately 200%. The Company enjoys 94% penetration at the retail store level in Ontario and 84% in Alberta, and has supply agreements with Saskatchewan and British Columbia.
  • Medical Ecosystem Expanded: The Company onboarded four unionized employers in 2021 through its exclusive Unifor partnership. These employers represent less than 5% of the Unifor member base and the Company continues to focus on additional onboardings. Despite restrictions on interacting directly with potential patients due to Covid-19, the Company experienced modest growth in both Unifor-based patients and sales from Q3 2021 to Q4 2021. The Company saw scripts increase 17% year over year, driven primarily by continued onboarding of third-party clinics which represented a largely reimbursed patient base comprising approximately 55% of total medical sales in Q4 2021. The Company launched tailored programs targeted at the Veteran medical demographic and entered the Quebec market.
  • International: The Company successfully saw its products exported into three countries Germany, UK and Australia in 2021. The Company established partnerships with key European suppliers and wholesalers to facilitate a ramp-up in pull-through into the European market in 2022.
  • Cultivation: The Company owns three licensed cannabis production facilities and operates a strategically located distribution centre all in the province of Ontario, including in Port Perry the first large-scale, outdoor cultivation facility in Canadian history. Port Perry delivered over 11,500 kg of flower with average THC potency of 22% in 2021. THC levels ranged from a record-breaking 21-to 27% and the terpene profile was outstanding, ranging from 2.7% to 5.7%.
  • Cost Rationalizations: The Company methodically reviewed its cost structure and optimized its talent and resources towards the sales channels which delivered the highest net realizable margin per gram of flower sold – its branded cannabis products. The Company initiated headcount reductions in Q4 2021, representing approximately 10% of the workforce and approximately $1.9 million in annualized savings. The Company has undergone a SKU optimization to align its portfolio on best-selling product formats with the strongest margin profile. The Company is in the process of integrating its virtual, physical and third-party clinic platform which is expected to generate additional operating expense savings. The Company reviewed its inventory and fixed assets and identified certain slow-moving assets primarily related to the bulk wholesale sales channel. As a result of the Company’s pivot towards focusing on branded cannabis products, the Company recorded a $19.6 million inventory provision. The Company also recorded a $28.8 million impairment of property, plant & equipment due to changes in market conditions for these assets.
  • Adjusted EBITDA Profitability: The Company evaluated all facets of the organization and realigned executive management to focus on achieving profitability. Significant non-recurring one-time costs were incurred in 2021 as the Company developed, built, and launched its Sunday Market House of Brands. Most of these costs are not expected to be recurring. Over the last four quarters, the Company saw significant progress and is trending towards achieving breakeven Adjusted EBITDA profitability in the second half of 2022.
  • Repositioning the Balance Sheet. The Company completed two senior secured debt financings in Q4 2021, including a $10 million senior secured term credit facility in August 2021 and a new $19 million credit facility in December 2021. The new credit facility consists of a $12 million term loan and a revolving receivables facility of up to $7 million. The revolving receivables facility remains undrawn, providing the Company with liquidity to fund working capital investments required to continue rapidly scaling its adult-use sales. As reflected in the Company’s announcement on February 1, 2022, the Company is actively engaging with holders of its listed unsecured convertible debentures maturing on June 27, 2022 (TSX: AH.DB) with a view to effecting changes in key terms that are equitable to both the holders and the Company, and provide a sustainable foundation for the Company’s continued growth.

Note that the Company announced on February 8, 2022 that it changed its year-end to March 31. As a result, in this transition year, annual audited financial statements for the 15 months ended March 31, 2022 will be issued prior to June 29, 2022.

NET INCOME & ADJUSTED EBITDA

  Three months ended Twelve months ended
($,000s) Dec 31, 2021 Dec 31, 2020 Dec 31, 2021 Dec 31, 2020
Net loss (71,509 ) (217,301 ) (165,715 ) (247,238 )
Add back:        
Depreciation and amortization(1) 3,715   2,649   10,278   10,164  
Interest expense, net 2,185   3,098   8,161   11,636  
Income tax expense (recovery)   2,854   (2,854 ) (2,540 )
EBITDA (65,609 ) (208,700 ) (150,130 ) (227.978 )
Inventory provision 17,266     19,648   16,973  
FV changes in biological assets and changes in inventory sold 6,663   11,106   547   12,160  
Share-based payments 663   582   2,831   2,690  
Bad debt expense 12   988   9,956   1,892  
Business transaction costs 951   824   4,330   4,146  
Gain on sale of assets   (1,181 ) (12,092 ) (1,181 )
Fair value through profit and loss adjustments 8,785   (877 ) 14,385   (943 )
Impairment of intangible assets   22,116   53,093   22,116  
Impairment of goodwill   177,476   11,314   177,476  
Impairment of property, plant & equipment 28,800     28,800    
Non-operating expense (income) 71   (74 ) (281 ) (481 )
Adjusted EBITDA(2) (2,398 ) 2,260   (17,599 ) 6,870  
1. Includes non-cash depreciation expensed to cost of sales.
2. See “Cautionary Statements Regarding Certain non-IFRS Measures” section for term definition.

CONFERENCE CALL & WEBCAST
Date:   February 15, 2022
Time:   9:30 a.m. ET
USA/Canada Toll-Free Participant Call-in: (866) 679-9046; Passcode: 6187986
International Toll-Free Participant Call-in: (409) 217-8323; Passcode: 6187986
WEBCAST LINK

This conference call will be webcast live over the internet and can be accessed through the link provided. Audio of the call will be available to participants through both the conference call line and webcast; however, the presentation may only be viewed via the webcast. Participants who miss the live call can view a replay at any time via the link provided.

For Investor & Media Relations:

Matt Sale, CFO

1-833-879-2533
[email protected]
LEARN MORE: www.AleafiaHealth.com

About Aleafia Health:

Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.

FORWARD LOOKING INFORMATION

Certain statements herein relating to the Company constitute “forward-looking information”, within the meaning of applicable securities laws, including without limitation, statements regarding future estimates, business plans and/or objectives, sales programs, forecasts and projections, assumptions, expectations, and/or beliefs of future performance, are “forward-looking information”. Such forward-looking statements involve unknown risks and uncertainties that could cause actual and future events to differ materially from those anticipated in such statements. Forward-looking statements include, but are not limited to, statements with respect to our market share, net revenue, net branded revenue, gross profit, gross profit margin, Adjusted SG&A, Adjusted EBITDA, and other financial outlook projections for fiscal year 2022, our commercial operations, including production and / or sales of cannabis, quantities of future cannabis production, anticipated revenue in connection with such sales, and other Information that is based on forecasts of future results, estimates of production not yet determinable, and other key management assumptions. The following material factors or assumptions were used to develop the forward-looking information: market size and growth of the Canadian adult-use and medical cannabis markets, retail store penetration, script trends, cultivation and processing capacity, costs of production, gross and net revenue per gram.

Actual results may differ materially from those expressed or implied by such forward-looking statements and involve risk and uncertainties relating to: future cultivation yield and quality, actual operating performance of facilities, product launches, facility licenses and amendments, average selling prices, cost of goods sold, operating expenses, Adjusted EBITDA, regulatory changes in the Canadian and international markets, and other uninsured risks. The forward-looking information was approved by Management as of February 14, 2022. The Company assumes no responsibility to update or revise forward-looking information to reflect new events or circumstances unless required by law. The forward-looking information is provided for information purposes only and readers are cautioned that it may not be appropriate for other purposes. This presentation is provided for general information purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security in any jurisdiction.

CAUTIONARY STATEMENT REGARDING NON-IFRS MEASURES

Branded Cannabis Net Revenue, Adjusted SG&A, and Adjusted EBITDA are not recognized financial measure under IFRS, does not have a standardized meaning and therefore may not be comparable to similar measures presented by other issuers. For additional information including the definition and purpose of the non-IFRS measure, see “Cautionary Statement re Non-IFRS measures” in the Company’s Management’s Discussion and Analysis for the period ended December 31, 2021 found on SEDAR at www.sedar.com.”

  1. Based on HiFyre data comparing retail sales pull through March 31, 2021 to December 31, 2022 rankings.
  2. Based on HiFyre data comparing Q3 2021 to Q4 2021 retail sales pull through.

Cannabis

IM Cannabis Reports 2023 Financial Results

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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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