Cannabis
Aleafia Health Announces Achieving Major Profitability Milestone Ahead of Target and $10.6 Million Total Net Revenue in Q2 FY2023
- Adjusted EBITDA1 profitability achieved in Q2 FY2023, ahead of plan
- 21% increase in total revenue year over year to $14.5
- 23% increase in branded cannabis net revenue2 year over year to $9.4 million
- #3 ranking in total retail sales pull through growth among 20 top Canadian LPs3
- #2 milled and #4 pre-roll market share ranking in key Ontario market for Divvy4
- Record quarter in international net revenue5
- 16% increase in medical net revenue6 over the prior year
- 35% gross profit margin versus -41% in the prior year
- Transforming balance sheet with $53.5 million improvement in net current assets relative to year end
- Wind down of Grimsby greenhouse, $4.1 million in net annualized cost savings
TORONTO, Nov. 09, 2022 (GLOBE NEWSWIRE) — Aleafia Health Inc. (TSX: AH, OTCQB: ALEAF) (“Aleafia Health” or the “Company”) is pleased to report its financial results for the three months ended September 30, 2022, its second quarter of its fiscal year ending March 31, 2023 (“FY2023”).
Milestone Adjusted EBITDA Profitability: In the second quarter, the Company grew its Adjusted EBITDA by $8.9 million relative to the prior year, thereby achieving $0.1 million Adjusted EBITDA in Q2 of FY2023, well in advance of its previous estimate, having extracted over $11 million in cost reductions over the last four quarters. The Company believes it is the first Canadian LP of similar size, scale and operational footprint to attain Adjusted EBITDA profitability on a sustainable basis.7
“We have worked diligently over the past 12 months to achieve this major milestone, and to be among the first publicly traded Canadian Licensed Producers to reach Adjusted EBITDA profitability is an enormous accomplishment,” said Tricia Symmes, CEO. “It is the result of a relentlessly profit-focused management team putting into place the discipline and high-growth mindset instrumental in achieving this meaningful and substantial objective. The fact that this occurred during a period of market volatility with the OCS cybersecurity attack, the BC lockout and our whole flower supply constraints all impacting adult-use sales, is an even stronger testament to the power of our growing brands, led by Divvy.”
“The Company has achieved Adjusted EBITDA profitability by transforming to a branded cannabis producer from a high-volume bulk wholesale producer, and we are incredibly proud of achieving $0.1 million in Adjusted EBITDA in the quarter ending September 30, 2022, compared with -$8.8 million in the same period last year.” said Matt Sale, CFO. “In focusing on products in large format categories with strong margin profiles and enacting an aggressive cost rationalization and containment culture throughout the organization, this quarter is only the beginning of the Company’s long term sustainable profitability.”8
Branded Cannabis Net Revenue Increased 23% over the Prior Year: Adding to this achievement is another year-over-year increase for the Company in branded cannabis net revenue. For the period ending September 30, 2022, the Company grew total revenue by 21% to $14.5 million as compared to $11.9 million in the prior year. Branded cannabis net revenue grew 23% over the prior year to $9.4 million for the three months ended September 30, 2022, up from $7.6 million for the same calendar period in 2021, primarily driven by the success of Divvy.
Divvy Brand Success: Divvy continues to demonstrate market leadership positions in key product segments, with milled flower and pre-rolls rising to #2 and #4 market share rankings in Ontario, respectively. Overall, the Company achieved a top 3 ranking in total retail sales pull through growth among 20 top Canadian LPs, with 36% growth since Q1 2021.9
“Our successful multi-pronged growth strategy with innovative products and programs continues to increase Divvy’s market share,” said Symmes. “One such innovation is the new Divvy Buyer’s Club, which recently introduced a new rotating flower SKU, curated by our discerning procurement team from trusted cultivation partners. By focusing on obtaining unique high-quality offerings for the brand, we have positioned Divvy to continue to accelerate its market share as a strong, competitive player in the whole flower category. It is a testament to the growth and rapid success of the brand that we must continue innovating to keep up with the demand for our whole flower.”
Record International Net Revenue: Record quarterly net revenue of $0.7 million was achieved for the Company’s growing international sales channel. The trajectory of the international growth pillar continues to climb, with a new committed sales agreement signed and EU-GACP certification attained in Q2 FY2023. Our first purchase order under the new sales agreement was received and shipments are expected to begin in Q3 FY2023.
“We continue to drive high-margin growth for the Company in Germany and Australia and are already executing against sales commitments and minimum purchase requirements with our new European based partner,” said Sale.
Continued Strength in Medical: In the increasingly challenging Canadian medical market, the Company’s continued growth remains driven by deepening penetration in key high value segments, including Veterans, Quebec, and third-party clinics. Medical net revenue increased 16% to $3.0 million for the quarter ended September 30, 2022, compared with $2.6 million in the comparable calendar quarter last year.
“This market segment continues to be highly attractive as the Company is able to cross-sell its adult-use branded products to its patients, and the ‘sticky,’ recurring medical revenue encompasses mainly cannabis derivative products which deliver a higher gross profit margin than adult-use sales,” said Symmes.
Adjusted SG&A10 -38% Decline Over the Prior Year: The Company continues to carry out significant cost rationalization initiatives into its FY2023. The Company has dramatically improved its Adjusted SG&A profile by extracting over $11 million in annualized cost reductions over the last four quarters by implementing a strategic headcount realignment, integrating its medical business, insourcing certain finance, legal and IT functions and removing certain non-recurring brand and product launch-related costs.
“The Company’s current SG&A profile is now flexible and scalable to facilitate continued revenue growth,” said Matt Sale, CFO. “The Company continues to implement further targeted initiatives to improve operating leverage and contain its cost structure while also rapidly scaling across its three core sales channels. In Q2 FY2023, the Company further trimmed its headcount representing an incremental $1.0 million in annualized cost savings. The Company is demonstrating capital efficiency and resilience, finding innovative ways to further develop Divvy’s brand awareness among consumers, driving branded cannabis net revenue growth, and expanding margins and profitability.”
Grimsby Greenhouse Realignment: In Q3 FY2023, the Company is enacting further cost savings initiatives with the winddown of its Grimsby greenhouse, representing an annualized net savings of approximately $4.1 million. The Company is focused on continuing to build the brand awareness of its everyday value brand, Divvy, by supplying its consumers with innovative sought-after cultivation strains from the best sources of flower supply, whether that be internally grown or procured from other third-party growers. The Company will commence the process of winding down operations, effective November 2022, impacting 41 employees.
“Over the last four quarters the Company has experienced consistent whole flower stock outs as the scale of the Grimsby greenhouse was outstripped by consumer demand for our products. We have mitigated this issue by onboarding strategic partners to supply our ongoing requirements,” said Symmes. “We want to sincerely thank our valued employees at the Grimsby greenhouse for their many contributions over the years, particularly in the launch of Divvy and transformation of our business to a branded cannabis provider.”
“This development helps us drive further Adjusted EBITDA profitability,” said Sale, “as the Company is able to support continued growth in our dried flower products at a price point which is also accretive to our margin profile.”
“Aleafia today is delivering on its core commitments across all four pillars of our strategic growth plan,” said Symmes. “With innovative and sought-after formats directed strategically toward high-margin adult-use categories, it’s an exciting time for the Company as we demonstrate that we can achieve our lofty goals. Our motivated team is creating the best branded cannabis company in the country, devoted to expanding our reach in the adult-use, medical and international markets with best-in-class branded products. We believe this is the first of many profitable quarters and will continue to execute on our long-term strategy to drive sustainable profitable growth for the Company and all its shareholders. Although we’re not the biggest and we’re not the first, we strive to build the best branded cannabis company with the aspiration of leading in Canada and globally.”
Operational and Financial Highlights
| ($,000s) | Three months ended | Six months ended | ||||||||||
| 30-Sep-22 | 30-Sep-21 | 30-Sep-22 | 30-Sep-21 | |||||||||
| Operating Results | ||||||||||||
| Kilograms Sold – Dried Flower | 7,389 | 5,860 | 15,886 | 13,671 | ||||||||
| Avg Net Realized Price | 1.43 | 1.63 | 1.43 | 1.51 | ||||||||
| Adult-Use Market Share % | 2.1 | % | 1.3 | % | 2.1 | % | 1.3 | % | ||||
| Adult-Use Market Share Ranking | 14 | 18 | 14 | 18 | ||||||||
| Medical Use Orders | 14,799 | 18,723 | 30,367 | 39,082 | ||||||||
| Medical Use Avg Order Value | $ | 165 | $ | 143 | $ | 160 | $ | 144 | ||||
| Financial Results | ||||||||||||
| Revenue | 14,487 | 11,931 | 30,906 | 24,028 | ||||||||
| Branded Cannabis Net Revenue | 9,392 | 7,628 | 19,406 | 13,501 | ||||||||
| Wholesale Net Revenue | 1,184 | 1,947 | 3,259 | 7,192 | ||||||||
| Net revenue | 10,576 | 9,575 | 22,664 | 20,693 | ||||||||
| Branded Cannabis profit $ | 3,738 | 1,866 | 6,257 | 3,001 | ||||||||
| Branded Cannabis profit % | 40 | % | 24 | % | 32 | % | 22 | % | ||||
| Bulk Wholesale profit $ | – | (5,789 | ) | 108 | (4,196 | ) | ||||||
| Bulk Wholesale profit % | 0 | % | -297 | % | 3 | % | -58 | % | ||||
| Gross profit before fair value adjustments | 3,738 | (3,923 | ) | 6,365 | (1,195 | ) | ||||||
| Total Gross profit % | 35 | % | -41 | % | 28 | % | -6 | % | ||||
| Adjusted SG&A (1) | 4,571 | 7,379 | 9,201 | 16,684 | ||||||||
| % of total net revenue | 43 | % | 77 | % | 41 | % | 81 | % | ||||
| Adjusted EBITDA(1) | 83 | (8,814 | ) | (855 | ) | (12,248 | ) | |||||
| 1. See “Cautionary Statements Regarding Certain non-IFRS Measures” section for term definition. | ||||||||||||
Cautionary Statement Regarding Non-IFRS Measures
Adjusted EBITDA, Adjusted SG&A, International Net Revenue, Adult-Use Cannabis Net Revenue, Branded Cannabis Net Revenue and Medical Cannabis Net Revenue are non-IFRS measures that do not have a standardized meaning and therefore may not be comparable to similar measures presented by other issuers. Definitions of each measure and a reconciliation of Adjusted EBITDA and Adjusted SG&A against the comparable IFRS measure can be found below. For additional information including the 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 September 30, 2022 found on SEDAR at www.sedar.com.
Adjusted EBITDA
Adjusted EBITDA is widely used by industry participants and analysts to measure company performance. The Company considers Adjusted EBITDA a key metric for measuring operating performance and cash flow, to manage working capital, debt repayments and capital expenditures. Adjusted EBITDA is calculated as net income (loss), excluding (i) amortization and depreciation, (ii) fair value changes in biological assets and changes in inventory sold, (iii) share-based payments, (iv) bad debt expense, (v) business transaction costs, (vi) non-operating expenses (income), (vii) taxes, (viii) interest expenses, (ix) one-time sale of assets, and (x) unrealized gain (loss) on marketable securities. Adjusted EBITDA is not recognized or defined under IFRS, and as a result, it may not be comparable to the data presented by competitors.
| Three months ended | Six months ended | |||||||
| ($,000s) | 30-Sep-22 | 30-Sep-21 (Restated) | 30-Sep-22 | 30-Sep-21 (Restated) | ||||
| Net profit (loss) | 7,047 | (80,335 | ) | 2,577 | (75,103 | ) | ||
| Add back: | ||||||||
| Depreciation and amortization | 1,953 | 1,836 | 3,903 | 4,733 | ||||
| Interest expense, net | 2,054 | 1,983 | 4,814 | 3,738 | ||||
| Income tax expense (recovery) | – | (2,854 | ) | – | (2,854 | ) | ||
| EBITDA (1) | 11,054 | (79,370 | ) | 11,294 | (69,486 | ) | ||
| Inventory provision | – | 2,382 | – | 2,382 | ||||
| FV changes in biological assets and changes in inventory sold | (11,893 | ) | (3,434 | ) | (14,983 | ) | (7,006 | ) |
| Share-based payments | 956 | 1,050 | 1,526 | 1,589 | ||||
| Bad debt expense | – | (363 | ) | – | 1,531 | |||
| Business transaction costs | 45 | 905 | 361 | 1,966 | ||||
| Gain on sale of assets | (109 | ) | – | (112 | ) | (12,092 | ) | |
| Fair value through profit and loss adjustments | 30 | 5,600 | 1,007 | 4,900 | ||||
| Impairment of intangible assets | – | 53,093 | – | 53,093 | ||||
| Impairment of goodwill | – | 11,314 | – | 11,314 | ||||
| Non-operating expense (income) | – | 8 | 52 | (439 | ) | |||
| Adjusted EBITDA(1) | 83 | (8,815 | ) | (855 | ) | (12,248 | ) | |
| 1. This is a non-IFRS measure, please see cautionary statement | ||||||||
Gross Profit before Fair Value Adjustments
Gross Profit before Fair Value adjustments is the gross profit before fair value adjustments and inventory provision. Management believes that this is a useful metric to assess the profitability of cannabis sales, as it eliminates the effects of non-cash FV changes in inventory and biological assets.
ADJUSTED SG&A
Adjusted selling, general and administrative (“Adjusted SG&A”) is defined as SG&A expenses adjusted to exclude non-recurring costs. These non-recurring items may relate to certain transaction costs, one time subsidies, and severances. Medical clinic supply services amounts are included in SG&A. Adjusted SG&A is not recognized or defined under IFRS, and as a result, it may not be comparable to the data presented by competitors.
| ($,000s) | Three months ended | Six months ended | |||||
| 30-Sep-22 | 30-Sep-21 | 30-Sep-22 | 30-Sep-21 | ||||
| SG&A | 4,257 | 6,581 | 9,183 | 15,364 | |||
| Business transaction costs | 45 | 905 | 361 | 1,925 | |||
| Bonus reversals, severance, other adjustments | 269 | (107 | ) | (343 | ) | (605 | ) |
| Adjusted SG&A | 4,571 | 7,379 | 9,201 | 16,684 | |||
Adult-use Cannabis Net Revenue is net cannabis revenue for Canadian adult-use sales.
Cannabis net revenue is sale of cannabis revenue less excise taxes
Branded Cannabis Net Revenue is calculated as Adult-use Cannabis Net Revenue, Medical Cannabis Net Revenue and clinic revenue.
International Net Revenue is net cannabis revenue for international medical sales.
Medical Cannabis Net Revenue is net cannabis revenue for Canadian and international medical sales
For Investor & Media Relations
Matthew Sale, CFO
[email protected]
LEARN MORE: www.AleafiaHealth.com
About Aleafia Health:
The Company is a federally licensed Canadian cannabis company offering cannabis products in Canadian adult-use and medical markets and in select international markets, including Australia and Germany. The Company operates a virtual medical cannabis clinic staffed by physicians and nurse practitioners which provide health and wellness services across Canada.
The Company owns three licensed cannabis production facilities and operates a strategically located distribution centre all in the province of Ontario, including the largest, outdoor cannabis cultivation facility in Canada. The Company produces a diverse portfolio of cannabis and cannabis derivative products including dried flower, pre-roll, milled, vapes, oils, capsules, edibles, sublingual strips, and topicals.
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 long term profitability, market share, net revenue, branded cannabis net revenue, Adjusted EBITDA, and other financial outlook projections for fiscal year 2023, 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 November 8, 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.
1 This is a non-IFRS measure. See cautionary statement re non-IFRS measures below.
2 This is a non-IFRS measure. See cautionary statement re non-IFRS measures below.
3 Based on HiFyre retail sales pull through data in BC, AB, SK, and ON for the period Q1 2021 to Q3 2022 and excludes beverage and cultivation.
4 Based on OCS sales data of wholesale channel and non-premium segment in Q3 CY2022 and excludes beverage and cultivation.
5 This is a non-IFRS measure. See cautionary statement re non-IFRS measures below.
6 This is a non-IFRS measure. See cautionary statement re non-IFRS measures below.
7 Compared against publicly-traded cannabis producers in Canada that are in both the medical and adult-use markets without retail presence and a market capitalization of less than $50 million.
8 This is forward looking information. Please see cautionary statement below.
9 Based on HiFyre retail sales pull through data in BC, AB, SK, and ON for the period Q1 2021 to Q3 2022 and excludes beverage and cultivation.
10 This is a non-IFRS measure. See cautionary statement re non-IFRS measures below.
IMC prepares for accelerated growth after legalization in Germany and recovers from the impact of the Israel-Hamas war.
TORONTO and GLIL YAM, Israel, May 8, 2024 /PRNewswire/ — IM Cannabis Corp. (the “Company” or “IMC“) (NASDAQ: IMCC) (CSE: IMCC), an international medical cannabis company, announced its financial results today for the first quarter ended March 31, 2024. All amounts are reported in Canadian dollars and compared to the quarter ended March 31, 2023, unless otherwise stated.
Q1 2024 Financial Highlights
- 13% Revenue increase vs. Q4 2023 of $12.1M vs. $10.7M and 4% decrease vs. Q1 2023 of $12.5M
- 125% Gross profit increase vs. Q4 2023 of $1.8M vs. $0.8 and 39% Gross profit decrease vs. Q1 2023 of $2.9M
- 29% decrease in operating expenses vs. Q1 2023 excluding the one-time Oranim revoke related losses of $4.6M vs. $6.5M and 14% increase including Oranim
- 12% increase of Non-IFRS Adjusted EBITDA loss to $2.1M
Operational Highlights
The Company intends to complete a non-brokered private placement (the “Offering“) of secured convertible debentures of the Company (each, a “Debenture“) for aggregate proceeds of up to C$2,500,000. The Debentures will mature on the date that is 12 months from the date of issuance and will not incur interest except in the event of default. The Debentures are being issued to holders of short term loans and obligations owed by the Company or its wholly owned subsidiaries. The principal of the Debenture may be converted into common shares in the Company (each, a “Share“) at a conversion price of $1.08 per Share.
Management Commentary
“With the April 1st cannabis legalization in Germany, we are augmenting our focus and resources on the German market, where we expect to see the biggest growth potential, and the best return on investment. While it is still too early to make any predictions, our sales in Germany almost doubled during the month of April,” said Oren Shuster, Chief Executive Officer of IMC. “Looking back on the first month post legalization in Germany, I see that we have the infrastructure and the supply agreements in place to continue delivering the accelerated growth we have already seen in April. We will also ensure that we have the necessary resources in place for success.”
“In 2023 we completely restructured, becoming a very lean and agile company, leaning into active cost management. This process is reflected in the numbers, our G&A decreased 27% vs Q1 2023” said Uri Birenberg, Chief Financial Officer of IMC. “While our results have recovered from the impact of the Israel-Hamas war, our revenue was still effected by both an unfavorable exchange rate, as well as price reductions to sell off inventory.”
Q1 2024 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.
Q1 2024 Financial Results
- Revenues for the first quarter of 2024 were $12.1 million compared to $12.5 million in the first quarter of 2023, a decrease of 3%. The decrease is mainly due an exchange rate effect of about $0.2 million and decrease in avg. price per sale due to increased competition.
- Gross profit for the first quarter of 2024 was $1.8 million, compared to $2.9 million in Q1 2024, a decrease of 39%. The downside is attributed mainly to the slow-moving stock that was moved out at a lower price and an exchange rate difference totaling $0.4 million and $0.64 million cost of sales loss due to an inventory erase of the slow-moving stock. Company fair value adjustment was $0 and $0.4 million for the Q1 2024 and Q1 2023 respectively.
- Total Dried Flower sold in Q1 2024 was approximately 1,873 kg with an average selling price of $5.68 per gram, compared to approximately 1,842kg in Q1 2023, with an average selling price of $6.59 per gram. This difference is mainly due to increased competition within the retail segment, and mid-range stock discounts to move out slow moving stock.
- Total operating expenses in Q1 2024 were $7.4 million compared to $6.5 million in Q1 2023. The increase is due to the other operating expenses related to Oranim Deal revoke, with an expected losses of $2.8 million. Adjusting for this one-time losses, Q1 2024 operating expenses were $4.6 million compared to $6.5 million in Q1 2023, a decrease of 29%.
- G&A Expenses in Q1 2024 were $2.3 million, compared to $3.2 million in Q1 2023, a decrease of 28%. The decrease in the G&A expense is attributable mainly to salaries and professional services of $0.64 million.
- Selling and Marketing Expenses in Q1 2024 were $2.3 million, compared to $2.8 million in Q1 2023, a decrease of 18% mainly due to a decrease in Salaries and professional services of $0.5 million.
- Net Loss from continuing operations in Q1 2024 was $6.0 million, compared to $0.9 million in Q12023.
- Basic and diluted Loss per Share in Q1 2024 was $0.42, compared to a loss of $0.05 per Share in Q1 2023.
- Non-IFRS Adjusted EBITDA loss in Q1 2024 was $2.1 million, compared to an Adjusted EBITDA loss of $1.9 million in Q1 2023 an increase of 10%.
- Cash and Cash Equivalents as of March 31, 2024, were $1.0 million compared to $1.8 million in December 31, 2023.
- Total assets as of March 31, 2024, were $41.1 million, compared to $48.8 million in December 31, 2023, a decrease of 16%. The decrease is mainly attributed to the goodwill reduction due to Oranim agreement cancelation of about $2.8M, a reduction in Inventory of $2.1 million, reduction of Cash and cash equivalents of $0.8M and reduction in Trade payables of $1.2 million.
- Total Liabilities as of March 31, 2024, were $32.8 million, compared to $35.1 in December 31, 2023, a decrease of about 7%. The decrease was mainly due to the reduction in other accounts payables and accrued expenses of $1.8 million and reduction in the PUT option liability of $0.7 million.
The Company’s financial statements as of March 31, 2024 includes a note regarding the Company’s ability to continue as a going concern. The Company’s Q1 2024 financial results do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. For more information, please refer to the “Liquidity and Capital Resources” and “Risk Factors” sections in the Company’s management’s discussion and analysis for the quarter ended March 31, 2024.
Non-IFRS Measures
This press release makes reference to “Gross Margin” and “Adjusted EBITDA”, which are financial measures that are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are provided as complementary information to the Company’s IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should neither be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.
For an explanation of how management defines Gross Margin and Adjusted EBITDA, see the Company’s management’s discussion and analysis for the period ended March 31, 2024, available under the Company’s SEDAR+ profile at www.sedarplus.ca on EDGAR at www.sec.gov/edgar.
We reconcile these non-IFRS financial measures to the most comparable IFRS measures as set out below.
|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
||||||
|
Canadian Dollars in thousands |
||||||
|
March 31, |
December 31, |
|||||
|
Note |
(Unaudited) |
|||||
|
ASSETS |
||||||
|
CURRENT ASSETS: |
||||||
|
Cash and cash equivalents |
$ 1,048 |
$ 1,813 |
||||
|
Trade receivables |
6,506 |
7,651 |
||||
|
Advances to suppliers |
780 |
936 |
||||
|
Other accounts receivable |
3,732 |
3,889 |
||||
|
Inventories |
3 |
7,901 |
9,976 |
|||
|
19,967 |
24,265 |
|||||
|
NON-CURRENT ASSETS: |
||||||
|
Property, plant and equipment, net |
4,939 |
5,058 |
||||
|
Investments in affiliates |
2,078 |
2,285 |
||||
|
Right-of-use assets, net |
1,243 |
1,307 |
||||
|
Intangible assets, net |
5,440 |
5,803 |
||||
|
Goodwill |
7,442 |
10,095 |
||||
|
21,142 |
24,548 |
|||||
|
Total assets |
$ 41,109 |
$ 48,813 |
||||
|
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
||||||
|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
||||||
|
Canadian Dollars in thousands |
||||||
|
March 31, |
December 31, |
|||||
|
Note |
(Unaudited) |
|||||
|
LIABILITIES AND EQUITY |
||||||
|
CURRENT LIABILITIES:
|
||||||
|
Trade payables |
$ 9,511 |
$ 9,223 |
||||
|
Bank loans and credit facilities |
11,941 |
12,119 |
||||
|
Other accounts payable and accrued expenses |
4,440 |
6,218 |
||||
|
Accrued purchase consideration liabilities |
2,165 |
2,097 |
||||
|
PUT Option liability |
1,967 |
2,697 |
||||
|
Current maturities of operating lease liabilities |
461 |
454 |
||||
|
30,485 |
32,808 |
|||||
|
NON-CURRENT LIABILITIES:
|
||||||
|
Warrants measured at fair value |
4 |
137 |
38 |
|||
|
Operating lease liabilities |
744 |
815 |
||||
|
Long-term loans |
401 |
394 |
||||
|
Employee benefit liabilities, net |
96 |
95 |
||||
|
Deferred tax liability, net |
902 |
963 |
||||
|
2,280 |
2,305 |
|||||
|
Total liabilities |
32,765 |
35,113 |
||||
|
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: |
5 |
|||||
|
Share capital and premium |
253,887 |
253,882 |
||||
|
Translation reserve |
1,399 |
95 |
||||
|
Reserve from share-based payment transactions |
9,664 |
9,637 |
||||
|
Accumulated deficit |
(255,431) |
(249,145) |
||||
|
Total equity attributable to equity holders of the Company |
9,519 |
14,469 |
||||
|
Non-controlling interests |
(1,175) |
(769) |
||||
|
Total equity |
8,344 |
13,700 |
||||
|
Total liabilities and equity |
$ 41,109 |
$ 48,813 |
||||
|
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
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|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS |
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|
AND OTHER COMPREHENSIVE INCOME (UNAUDITED) |
||||||
|
Canadian Dollars in thousands, except per share data |
||||||
|
Three months ended March 31, |
||||||
|
Note |
2024 |
2023 (*) |
||||
|
Revenues |
$ 12,063 |
$ 12,529 |
||||
|
Cost of revenues |
10,274 |
9,286 |
||||
|
Gross profit before fair value adjustments |
1,789 |
3,243 |
||||
|
Fair value adjustments: |
||||||
|
Realized fair value adjustments on inventory sold in the period |
(10) |
(339) |
||||
|
Total fair value adjustments |
(10) |
(339) |
||||
|
Gross profit |
1,779 |
2,904 |
||||
|
General and administrative expenses |
2,332 |
3,175 |
||||
|
Selling and marketing expenses |
2,292 |
2,805 |
||||
|
Restructuring expenses |
– |
283 |
||||
|
Share-based compensation |
32 |
258 |
||||
|
Other operating expenses |
9 |
2,753 |
– |
|||
|
Total operating expenses |
7,409 |
6,521 |
||||
|
Operating loss |
5,630 |
3,617 |
||||
|
Finance income |
4 |
(14) |
3,530 |
|||
|
Finance expense |
(487) |
(795) |
||||
|
Finance income, net |
(501) |
2,735 |
||||
|
Gain (loss) before income taxes |
(6,131) |
(882) |
||||
|
Income tax benefit |
(111) |
(16) |
||||
|
Net )loss( gain |
(6,020) |
(866) |
||||
|
Other comprehensive income that will not be reclassified to profit or loss in |
||||||
|
Total other comprehensive income that will not be reclassified to profit or loss |
67 |
36 |
||||
|
Exchange differences on translation to presentation currency |
1,330 |
(562) |
||||
|
Total other comprehensive income (loss) that will not be reclassified to profit |
1,397 |
(526) |
||||
|
Other comprehensive income that will be reclassified to profit or loss in |
||||||
|
Adjustments arising from translating financial statements of foreign operation |
(35) |
155 |
||||
|
Total other comprehensive income (loss) that will be reclassified to profit or loss |
(35) |
155 |
||||
|
Total other comprehensive income (loss) |
1,362 |
(371) |
||||
|
Total comprehensive loss |
$ (4,658) |
$ (1,237) |
||||
|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS |
||||||
|
AND OTHER COMPREHENSIVE INCOME (UNAUDITED) |
||||||
|
Canadian Dollars in thousands, except per share data |
||||||
|
Three months ended March 31, |
||||||
|
Note |
2024 |
2023 (*) |
||||
|
Net income (loss) attributable to: |
||||||
|
Equity holders of the Company |
(5,623) |
(600) |
||||
|
Non-controlling interests |
(397) |
(266) |
||||
|
$ (6,020) |
$ (866) |
|||||
|
Total comprehensive income (loss) attributable to: |
||||||
|
Equity holders of the Company |
(4,252) |
(959) |
||||
|
Non-controlling interests |
(406) |
(278) |
||||
|
$ (4,658) |
$ (1,237) |
|||||
|
Net income (loss) per share attributable to equity holders of the Company: |
7 |
|||||
|
Basic and diluted (loss) gain per share (in CAD) |
$ (0.42) |
$ (0.05) |
||||
|
Earnings (loss) per share attributable to equity holders of the Company |
||||||
|
Basic and diluted (loss) gain per share (in CAD) |
$ (0.42) |
$ (0.05) |
||||
|
(*) See note 1 regarding figures disclosure. |
||||||
|
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
||||||
|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
||||
|
Canadian Dollars in thousands |
||||
|
Three months ended March 31, |
||||
|
2024 |
2023 (*) |
|||
|
Cash provided by operating activities: |
||||
|
Net income (loss) for the period |
$ (6,020) |
$ 43 |
||
|
Adjustments for non-cash items: |
||||
|
Fair value adjustment on sale of inventory |
10 |
339 |
||
|
Fair value adjustment on Warrants, investments and accounts receivable |
100 |
(3,636) |
||
|
Depreciation of property, plant and equipment |
147 |
174 |
||
|
Amortization of intangible assets |
452 |
456 |
||
|
Depreciation of right-of-use assets |
118 |
179 |
||
|
Impairment of goodwill |
2,753 |
– |
||
|
Finance expenses, net |
401 |
635 |
||
|
Deferred tax liability, net |
(69) |
(150) |
||
|
Share-based payment |
32 |
258 |
||
|
Restructuring expense |
– |
283 |
||
|
3,944 |
(1,462) |
|||
|
Changes in working capital: |
||||
|
Decrease (increase) in trade receivables |
1,332 |
1,937 |
||
|
Decrease (increase) in other accounts receivable and advances to suppliers |
159 |
(940) |
||
|
Decrease (increase) in inventories, net of fair value adjustments |
2,159 |
90 |
||
|
Decrease (increase) in trade payables |
663 |
(6,021) |
||
|
Changes in employee benefit liabilities, net |
– |
(22) |
||
|
Increase in other accounts payable and accrued expenses |
(2,745) |
(14) |
||
|
1,568 |
(4,970) |
|||
|
Taxes (paid) received |
(121) |
328 |
||
|
Net cash used in operating activities |
(629) |
(6,061) |
||
|
Cash flows from investing activities: |
||||
|
Purchase of property, plant and equipment |
(2) |
(411) |
||
|
Payment of purchase consideration |
– |
(56) |
||
|
Net cash used in investing activities |
$ (2) |
$ (467) |
||
|
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
||||
|
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
||||
|
Canadian Dollars in thousands |
||||
|
Three months ended March 31, |
||||
|
2024 |
2023 |
|||
|
Cash flow from financing activities: |
||||
|
Proceeds from issuance of share capital, net of issuance costs |
176 |
825 |
||
|
Proceeds from issuance of warrants |
(176) |
7,027 |
||
|
Repayment of lease liability |
(118) |
(175) |
||
|
Interest paid – lease liability |
(15) |
(18) |
||
|
Receipt (repayment) of bank loan and credit facilities |
(2,856) |
(1,046) |
||
|
Cash paid for interest |
(444) |
(56) |
||
|
Proceeds from discounted checks |
2,581 |
|||
|
Net cash (used in) provided by financing activities |
(852) |
6,557 |
||
|
Effect of foreign exchange on cash and cash equivalents |
718 |
(1,059) |
||
|
Decrease in cash and cash equivalents |
(765) |
(1,030) |
||
|
Cash and cash equivalents at beginning of the period |
1,813 |
2,449 |
||
|
Cash and cash equivalents at end of the period |
$ 1,048 |
$ 1,419 |
||
|
Supplemental disclosure of non-cash activities: |
||||
|
Right-of-use asset recognized with corresponding lease liability |
$ 40 |
$ 49 |
||
|
Issuance of shares in payment of debt settlement to a non-independent director of the company |
$ – |
$ 222 |
||
|
(*) See note 1 regarding Figures disclosure. |
||||
|
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
||||
About IM Cannabis Corp.
IMC (Nasdaq: IMCC) (CSE: IMCC) is an international cannabis company that provides premium cannabis products to medical patients in Israel and Germany, two of the largest medical cannabis markets. The Company has 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 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. The Company also operated in Canada through Trichome Financial Corp and its wholly owned subsidiaries. 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 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 legalization of medicinal cannabis in Germany, including, the Company having it “all in house”; the Company being positioned to take advantage of the legalization; the Company’s growth in 2024; the market growth for medicinal cannabis in Germany; 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 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 its subsidiaries (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 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.
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
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View original content:https://www.prnewswire.co.uk/news-releases/im-cannabis-reports-first-quarter-financial-results-302139688.html
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