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Zenabis Provides Operations Update for September 2019

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Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company“) is pleased to provide an update on its recent facility construction and licensing activities and recent cannabis production results.

Highlights:

  • With respect to production results:

    • Cultivation output in September 2019 was 2,089 kg of dried cannabis, with production at Zenabis Atholville outperforming its revised design capacity by 21.8% (the Performance Ratio1).

    • Cultivation output of 2,089 kg of dried cannabis was 21.2% greater than Zenabis’ revised forecast output (as updated on August 6, 2019) of 1,731 kg of dried cannabis.

  • Zenabis submitted a license amendment application for Zenabis Langley’s existing cultivation license on September 27, 2019 to include additional growing areas totaling 101,300 sq. ft. for Zenabis Langley – Part 2AZenabis’ licensed annual production capacity is expected to increase by 39,400 kg to 96,400 kg once this license amendment is approved by Health Canada.

  • Zenabis continues to focus on construction and licensing of Zenabis Langley. Zenabis has revised its construction timelines at Zenabis Langley to split Zenabis Langley – Part 2B into two phases (Zenabis Langley – Part 2B and Zenabis Langley – Part 2C) in order to preserve cashflow given current market conditions and reduce ramp-up risk, among other reasons detailed below. Zenabis expects to submit a license amendment for Part 2B in November 2019 (14,800 kg of licensed annual production capacity). Zenabis expects to submit a license amendment for Part 2C in February 2020 (32,000 kg of licensed annual production capacity) to the extent this is justified by market demand at economic prices. Zenabis’ total annual cultivation capacity is expected to increase to 143,200 kg of dried cannabis on completion of licensing at Zenabis Langley early in the second quarter of 2020.

Andrew Grieve, Chief Executive Officer of Zenabis, stated, “We continued to see strong cultivation results in September, with output exceeding our forecast of 1,731 kg by 21.8%. Our Performance Ratio decreased month over month as a result of the significant number of harvests from newly licensed rooms in the month (five of the 10 harvests). The Performance Ratio for newly licensed rooms harvested in September was 14.2% while the Performance Ratio for rooms that had previously been operated was 30.0%. Although the variety of cultivation approaches and rapid scale-up at Zenabis Atholville continues to cause room by room variance, steady-state yields for each cultivar are expected in the near-term, with general steady-state operations expected at Zenabis Atholville by the end of 2019.

“Since our last update, we increased our licensed annual cultivation capacity to 57,000 kg and submitted a licence application that is expected to increase our licensed annual production capacity by 69%, from 57,000 kg to 96,400 kg,” continued Andrew Grieve, Chief Executive Office of Zenabis. “While the timeline revision for Zenabis Langley will delay achieving full design capacity at the facility, we expect to have 96,400 kg of capacity licensed and operational by the end of 2019 with approval of the Zenabis Langley – Part 2A amendment. By early in the first quarter of 2020, we expect to have 111,200 kg of capacity licensed and operational with the approval of the Zenabis Langley – Part 2B amendment.”

_________________________

1

To better reflect the actual performance of its facilities, the Company reports a Performance Ratio, calculated as follows: after each harvest, Zenabis calculates the dry weight cannabis output for each room (the “Total Output”), taking into account the amount of days in production through a combination of: (1) the amount of flower room days used (including turnaround time) for that room; and (2) the amount of flower-room equivalent days required from other flower rooms in support of that harvest (together the “Effective Flower Room Equivalent Days”). Zenabis then divides the Total Output by the Effective Flower Room Equivalent Days in order to produce the “Effective Yield Per Day” for each room, and then divides the Effective Yield Per Day by the Design Capacity Yield Per Day for each room in order to determine actual performance versus the Design Capacity Yield Per Day (this ratio being the “Performance Ratio”). Zenabis believes that the Performance Ratio will provide investors with the best measure of actual cultivation performance versus Zenabis’ published design capacity. Zenabis intends to update and publish updated design capacities for each of its facilities when a facility has harvested from all its flower rooms (with the update at that time reflecting the most recent performance from each flower room) and again, if required due to significantly different results, when a facility achieves consistent monthly performance at a level that is different from its published Design Capacity.  Zenabis revised its design capacity at Zenabis Atholville upwards by 35% (equal to Zenabis Atholville’s Performance Ratio for the three months ended June 30, 2019) from 34,300 kg per annum to 46,300 kg per annum. Zenabis no longer reports outperformance relative to original design capacity (the kg/day figure utilized to derive the 34,300 kg design capacity).

Cannabis Production Summary

In September 2019, Zenabis realized a total harvest weight of 2,089 kg of dried cannabis.

The amount harvested at Zenabis Atholville for the three months ending September 30, 2019 exceeded the revised design capacity of the flower rooms by an average of 25.7%, compared to 23.2% in the three-month period from June 2019 through August 2019. A month-to-month comparison of actual harvests compared with harvest forecast based on revised design capacity between January 2019 and September 2019 for Zenabis Atholville is provided in the table below.

Revised Design Capacity

Performance at Zenabis

Atholville

Jan

2019

Feb

 2019

Mar

 2019

Apr

2019

May

2019

June

2019

July

2019

Aug

2019

Sept

2019

Total

Actual Harvest Weight (kg)

474

480

518

809

908

756

1,238

1,912

2,089

9,184

Revised Design Capacity

Harvest Weight (kg)2

467

643

539

796

895

716

1,097

1,357

1,715

8,225

Difference (kg)

7

(163)

(21)

13

13

40

141

555

374

959

Difference (%) – Revised

“Performance Ratio”

1.5%

(25.3%)

(3.9%)

1.6%

1.5%

5.6%

12.9%

40.9%

21.8%

11.7%

2

The Revised Design Capacity Harvest Weight is based on the “design capacity” yield that Zenabis has disclosed to date.  This figure was derived by converting the actual square footage of flower room space and the forecast canopy for each specific flower room into a kilograms per room per day figure based on Zenabis’ historical yield data at the Zenabis Atholville facility based on the yield performance in the three months ending June 2019 for revised design capacity. The Revised Design Capacity Harvest Weight in the table above is the harvest weight that would have resulted if the Design Capacity Yield Per Day for a room was multiplied by the Effective Flower Room Equivalent Days, as defined under “Performance Ratio”. Zenabis has revised its design capacity at Zenabis Atholville upwards by 35% (equal to Zenabis Atholville’s Performance Ratio for the three months ended June 30, 2019) from 34,300 kg per annum to 46,300 kg per annum. Zenabis no longer reports outperformance relative to original design capacity (the kg/day figure utilized to derive the 34,300 kg original design capacity for Zenabis Atholville)

In September 2019, Zenabis completed 10 harvests at Zenabis Atholville. The average Performance Ratio for these harvests was 21.8% relative to the revised design capacity. In September 2019, Zenabis did not complete any harvests at Zenabis Stellarton or Zenabis Langley.

2019 Harvest Forecast – Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1

For its existing licensed facilities of Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1, Zenabis expects to produce approximately 16,7335 kg of dried cannabis from October 2019 through January 2020. Zenabis continues to expect to complete its first harvest from Zenabis Langley in November. Zenabis’ forecast harvest output in November includes 1,650 kg from Zenabis Langley. The following table sets out Zenabis’ estimated aggregate monthly harvests for Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1 for the remainder of 2019 and January of 2020.

July

2019

Aug

2019

Sept

2019

Oct

2019

Nov

2019

Dec

2019

Jan

2020

Total

Forecast (kg)3

1,212

1,579

1,731

3,758

5,199

4,200

3,576

21,255

Actual (kg)

1,238

1,996

2,089

5,323

3 

This forward-looking estimate of future harvest results is based on the following material assumptions: (1) Zenabis Stellarton and Zenabis Langley Site A – Part 1 operate at their published design capacity on a room by room basis for the cultivation space that is licensed and in cultivation at the forward-looking periods noted; (2) Atholville rooms operate based on the current flower schedule and at revised design capacity (a 35% increase relative to original design capacity); and (3) Cultivation commencement at Zenabis Langley Site A – Part 1 in September 2019.   

Zenabis intends to provide a monthly cultivation forecast for Zenabis Langley Site A – Part 2A and Zenabis Langley Site A – Part 2B upon receipt of all cultivation license amendments for these phases.

Cannabis Post-Harvesting and Packaging Discussion

The timeline from harvest to the point at which Zenabis completes a sale of that product ranges from a minimum of three weeks (in the case of a bulk sale to a licensed producer) to more than eight weeks (in the case of soft gel capsules which involve external extraction, processing, filling, packaging and shipment). Zenabis recognizes the revenue from completion of such sales in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

In August 2019, Zenabis replaced its original packaging equipment (for bud jar filling) at Zenabis Atholville with new packaging equipment intended to achieve output of 30,000 units per day (equivalent to more than 90,000 grams per day at current average volumes per jar). During September 2019, the new packaging equipment was not able to achieve its expected output. Instead average output in September was 6,276 units per day, resulting in completed bud filling of only 517 kg (this excludes pre-roll packaging and bulk packaging). As a result, Zenabis was not able to package, ship and sell all of its product cultivated in August and September that had been destined for provincial counterparties, causing a delay in achieving the Company’s expected revenues. With focused troubleshooting, Zenabis has now achieved primary packaging output of 11,643 units per day, on average, during the 14 days ending October 20, 2019, with a maximum of 22,416 units per day. In addition, Zenabis has moved the original packaging equipment at Zenabis Atholville to Zenabis Stellarton and is in the process of ramping-up packaging at Zenabis Stellarton (bud filling commenced October 10, 2019 and pre-roll packaging commenced September 11, 2019). Zenabis expects that, as of November 2019, the Company will have surplus packaging capacity, and that there will be no further delays in the Company’s ability to package, ship and sell all of the product cultivated at Zenabis Atholville.

Currently, indicative demand from provincial counterparties exceeds forecast supply of both packaged flower and packaged pre-rolls for October 2019 through January of 2020 without further reductions in price. Indicative demand does not necessarily translate into actual demand, as the planning process with provincial counterparties may not result in firm volume indications until two weeks prior to a shipment, with purchase orders at times being finalized within days of shipments. As ramp-up of Zenabis’ facilities and the facilities of competitors occurs, Zenabis expects continued pressure on wholesale pricing to be applied by provincial counterparties.

In September, Zenabis packaged 650 kg of bulk product and shipped 190 kg, with the remainder held over for shipment to bulk counterparties in October to meet prepaid supply agreement commitments. Zenabis packaged 732 kg of flower and pre-rolls for provincial counterparties in September and shipped 462 kg. Zenabis also shipped 174 litres of oil products in September.

Construction and Facility Update

Zenabis Atholville

Now that construction is substantially complete4 at Zenabis Atholville, Zenabis is focused on operational improvements to reduce operating costs (increasing packaging automation, for example), improve post-harvest processing, increase yield, and improve packaging throughput.

Zenabis Langley

The first phase of Zenabis Langley (Zenabis Langley – Part 1) is licensed and operational. Since Zenabis’ August operations update was released, Zenabis has reached substantial completion of Part 2A4 and submitted a cultivation license amendment for this phase.

Zenabis remains focused on converting the remaining portion of Zenabis Langley but has revised its conversion plan for these phases to split Zenabis Langley – Part 2B into two phases (Zenabis Langley – Part 2B and Zenabis Langley – Part 2C). Zenabis has made this revision for the following reasons:

  • Focus on Cashflow Generation. By revising the timeline for the submission of Zenabis Langley’s final two flower rooms (Zenabis Langley – Part 2C), Zenabis expects to be able to reduce cashflow outflows for capital expenditure as Zenabis works to generate positive cashflow from operations.

  • Staggering Operational Ramp-Up. Further staggering the operational ramp-up at Zenabis Langley is expected to reduce the inherent issues that come with ramping up a facility of this size. As is illustrated by the packaging discussion above (regarding ramp-up at Zenabis Atholville), ramp-up challenges are possible in this industry. While Zenabis is focused on ramping up its facilities in a manner where any commercially possible action is taken to mitigate ramp-up risk, Zenabis believes that staggering the ramp-up at Zenabis Langley is in the best interest of the Company.

  • Defer Budget Overages. Zenabis recently identified that it expects to spend the entirety of its estimated amount remaining at Zenabis Langley (as forecast in Zenabis’ MD&A for the period ending June 30, 2019 at $13,700,000) upon completion of Part 2B. As a result, Zenabis expects capital expenditure amounts remaining to spend relating to Part 2C to be budget overages (estimated to be $4,000,000). This overage was driven by increases in equipment costs relating to HVAC equipment and automated tray tables. Zenabis has made the decision to defer this overage expenditure to a time when it can be funded by operating cashflow as opposed to cash on hand.

Zenabis expects this timeline revision to have the following impact on the cumulative capacity submitted for licensing at Zenabis Langley:

Month

Cumulative Capacity

Submitted for Licensing

(Original Timeline)

Cumulative Capacity

Submitted for Licensing

(Revised Timeline)

Difference

October 2019

49,300 kg

49,300 kg

November 2019

96,100 kg

64,100 kg

(32,000 kg)

December 2019

96,100 kg

64,100 kg

(32,000 kg)

January 2020

96,100 kg

64,100 kg

(32,000 kg)

February 2020

96,100 kg

96,100 kg

A summary of construction status by phase is provided below:

Phase

Design Capacity

Description

Part 1

9,900 kg

– Licensed and operational

Part 2A

39,400 kg

– Consists of 101,300 sq. ft. of flower room space (two flower rooms)

– Substantially complete

– License amendment submitted in September 2019

Part 2B

14,800 kg

– Consists of 38,000 sq. ft. of flower room space (one flower room)

– HVAC, flooring and shade screen installation is ongoing

– Security equipment and lighting installation is substantially complete

Part 2C

32,000 kg

– Consists of 82,200 sq. ft. of flower room space (two flower rooms) and

122,300 sq. ft. of other operational spaces (includes drying rooms,

packaging rooms, mother space and vegetation space)

– HVAC, flooring and shade screen installation is ongoing

– Security equipment and lighting installation is substantially complete

_________________________

4 

Zenabis defines substantial completion as the ability to undertake (subject to licensing) all production activities within the design capacity of the facility.

Zenabis Stellarton

On September 6, 2019, Zenabis received a cannabis processing license for Zenabis Stellarton. Zenabis commenced pre-roll production at Zenabis Stellarton during the week of September 9, 2019. Zenabis’ current pre-roll production capacity at Zenabis Stellarton is estimated at ~600 kg of pre-rolls per month. Zenabis intends to achieve output of 1,200 kg of pre-rolls per month at Zenabis Stellarton by November 2019, subject to market demand for pre-rolls.

In addition, as noted above, Zenabis has installed at Zenabis Stellarton the packaging equipment (for bud jar filling) previously used at Zenabis Atholville. Following completion of the ramp-up of this equipment, combined with the new packaging equipment in operation at Zenabis Atholville, Zenabis expects to have excess packaging capacity.

Zenabis Delta

Zenabis is currently in the process of constructing extraction and post-processing capacity, a product development lab, a formulation design lab, and a full ISO certified analytical testing lab at Zenabis Delta. This construction project is expected to be complete in the first half of 2020.

Licensing Update

Zenabis is currently in the process of various licensing applications for Zenabis Delta, Zenabis Langley, Zenabis Stellarton and the Zen Craft Grow program as outlined in the table below:

License Submission

Submission Month

Annual Design Capacity

Zenabis Delta – Analytical Testing

May 2019

N/A

Zen Craft Grow – Grower 1

July 2019

350 kg

Zenabis Langley – Part 2A

September 2019

39,400 kg

Zenabis Stellarton – Sales License

October 20195

N/A

Zenabis Langley – Part 2B

November 20195

14,800 kg

Zenabis Langley – Part 2C

February 20205

32,000 kg

5

Expected submission timeline subject to receipt of prior license or license amendment for each facility

Zenabis is currently using Zenabis Pitt Meadows, Zenabis Aldergrove and Zenabis Langley for the Company’s propagation and floral business, as well as hemp cultivation activities. All hemp cultivation at Zenabis Aldergrove that uses greenhouse space is currently not being used by the propagation and floral business, and thus will not have a negative impact on Zenabis’ propagation and floral business. Hemp cultivation will neither interfere with the planned cannabis cultivation activities at Zenabis Langley, nor will it reduce the cannabis cultivation design capacity of Zenabis Langley.

 

SOURCE Zenabis Global Inc.

Cannabis

IM Cannabis Reports 2023 Financial Results

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im-cannabis-reports-2023-financial-results

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

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

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

The Annual Financial Statements include a note regarding the Company’s ability to continue as a going concern. The Annual Financial Statements do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. For more information, please refer to the “Liquidity and Capital Resources” and “Risk Factors” sections in the 2023 Annual MD&A.

Management Commentary

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

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

Conference Call 

The Company will host a Zoom web conference call today at 9:00 a.m. ET to discuss the results, followed by a question-and-answer session for the investment community. Investors are invited to register by clicking here. All relevant information will be sent upon registration.

If you are unable to join us live, a recording of the call will be available on our website at https://investors.imcannabis.com/ within 24 hours after the call.

Non-IFRS Measures

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

For an explanation of how management defines Gross Margin and Adjusted EBITDA, see the 2023 MD&A.

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

About IM Cannabis Corp.

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

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

Disclaimer for Forward-Looking Statements

This press release contains forward-looking information or forward-looking statements under applicable Canadian and United States securities laws (collectively, “forward-looking statements“). All information that addresses activities or developments that we expect to occur in the future are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “believe”, “plan”, “estimate”, “expect”, “likely” and “intend” and statements that an event or result “may”, “will”, “should”, “could” or “might” occur or be achieved and other similar expressions. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. In the press release, such forward-looking statements include, but are not limited to, statements relating to: the Company leaving the Canadian cannabis market to pivot its focus and resources to achieve sustainable and profitable growth in its highest value markets, Israel and Germany; the impact of the Israel-Hamas war on the Company, including its operations and the medical cannabis industry in Israel; the timing and impact of the partial legalization of medicinal cannabis in Germany, including, the Company having it “all in house”, the Company being positioned to take advantage of the partial legalization, the Company’s growth in 2024, the market growth for medicinal cannabis in Germany, and the stated benefits of the Company’s EU-GMP processing facility and an EU-GDP logistics center; the Company to host a teleconference meeting as stated; and the Company’s stated goals, scope, and nature of operations in Germany, Israel, and other jurisdictions the Company may operate.

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

The above lists of forward-looking statements and assumptions are not exhaustive. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated or implied by such forward-looking statements due to a number of factors and risks. These include:  the failure of the Company to comply with applicable regulatory requirements in a highly regulated industry; unexpected changes in governmental policies and regulations in the jurisdictions in which the Company operates; the Company’s ability to continue to meet the listing requirements of the Canadian Securities Exchange and the NASDAQ Capital Market; any unexpected failure to maintain in good standing or renew its licenses; the ability of the Company and Focus Medical (collectively, the “Group“) to deliver on their sales commitments or growth objectives; the reliance of the Group on third-party supply agreements to provide sufficient quantities of medical cannabis to fulfil the Group’s obligations; the Group’s possible exposure to liability, the perceived level of risk related thereto, and the anticipated results of any litigation or other similar disputes or legal proceedings involving the Group; the impact of increasing competition; any lack of merger and acquisition opportunities; adverse market conditions; the inherent uncertainty of production quantities, qualities and cost estimates and the potential for unexpected costs and expenses; risks of product liability and other safety-related liability from the usage of the Group’s cannabis products; supply chain constraints; reliance on key personnel; the risk of defaulting on existing debt; risks surrounding war, conflict and civil unrest in Eastern Europe and the Middle East, including the impact of the Israel-Hamas war on the Company, its operations and the medical cannabis industry in Israel; risks associated with the Company focusing on the Israel and Germany markets; the inability of the Company to achieve sustainable profitability and/or increase shareholder value; the inability of the Company to actively manage costs and/or improve margins; the inability of the company to grow and/or maintain sales; the inability of the Company to meet its goals and/or strategic plans; the inability of the Company to reduce costs and/or maintain revenues; the Company’s inability to take advantage of the partial legalization of medicinal cannabis in Germany; and the Company’s inability to host a teleconference meeting as stated.

Please see the other risks, uncertainties and factors set out under the heading “Risk Factors” in the Company’s annual report dated March 28, 2024, which is available on the Company’s issuer profile on SEDAR+ at www.sedarplus.ca and Edgar at www.sec.gov/edgar. Any forward-looking statement included in this press release is made as of the date of this press release and is based on the beliefs, estimates, expectations and opinions of management on the date such forward looking information is made. The Company does not undertake any obligation to update forward-looking statements except as required by applicable securities laws. Investors should not place undue reliance on forward-looking statements. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

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

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

 

Company Contact: 

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

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

 

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$    1,813

$        2,449

Trade receivables

6

7,651

8,684

Advances to suppliers

936

1,631

Other accounts receivable

7

3,889

3,323

Inventory

9

9,976

16,585

24,265

32,672

NON-CURRENT ASSETS:

Property, plant and equipment, net

10

5,058

5,221

Investments in affiliates

15c

2,285

2,410

Right-of-use assets, net

12

1,307

1,929

Deferred tax assets, net

17

763

Intangible assets, net

11

5,803

7,910

Goodwill

11

10,095

9,771

24,548

28,004

Total assets

$       48,813

$       60,676

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

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Trade payables

14

$        9,223

$       15,312

Credit from banks and others

13

12,119

9,246

Other accounts payable and accrued expenses

15

6,218

6,013

Accrued purchase consideration liabilities

5

2,097

2,434

PUT Option liability

2,697

Current maturities of operating lease liabilities

12

454

814

32,808

33,819

NON-CURRENT LIABILITIES:

Warrants measured at fair value

17

38

8

Operating lease liabilities

12

815

1,075

Credit from banks and others

394

399

Employee benefit liabilities, net

16

95

246

Deferred tax liability, net

19

963

1,332

2,305

3,060

Total liabilities

35,113

36,879

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:

20

Share capital and premium

253,882

245,776

Translation reserve

95

1,283

Reserve from share-based payment transactions

9,637

15,167

Accumulated deficit

(249,145)

(239,574)

Total equity attributable to shareholders of the Company

14,469

22,652

Non-controlling interests

(769)

1,145

Total equity

13,700

23,797

Total equity and liabilities

$       48,813

$       60,676

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

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands

Year ended December 31,

Note

2023

2022

 *) 2021

Revenues

21

$       48,804

$       54,335

$       34,053

Cost of revenues

21

37,974

43,044

25,458

Gross profit before fair value adjustments

10,830

11,291

8,595

Fair value adjustments:

Unrealized change in fair value of biological assets

(315)

6,308

Realized fair value adjustments on inventory sold in the year

(984)

(1,814)

(8,570)

Total fair value adjustments

(984)

(2,129)

(2,262)

Gross profit after fair value adjustments

9,846

9,162

6,333

General and administrative expenses

21

11,008

21,460

17,221

Selling and marketing expenses

21

10,788

11,473

6,725

Restructuring expenses

1

617

4,383

Share-based compensation

20

225

2,637

5,422

Total operating expenses

22,638

39,953

29,368

Operating loss

(12,792)

(30,791)

(23,035)

Finance income

7,006

6,703

23,544

Finance expenses

(3,671)

(1,972)

(673)

Finance income (expense), net

3,335

4,731

22,871

Loss before income taxes

(9,457)

(26,060)

(164)

Income tax expense (benefit)

18

771

(1,138)

500

Net loss from continuing operations

(10,228)

(24,922)

(664)

Net loss from discontinued operations, net of tax

25

(166,379)

(17,854)

Net loss

(10,228)

(191,301)

(18,518)

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

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

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands, except per share data

Year ended December 31,

Note

2023

2022

 *) 2021

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

Remeasurement gain on defined benefit plans

38

59

21

Exchange differences on translation to presentation currency

(894)

(1,238)

858

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

(856)

(1,179)

879

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

Adjustments arising from translating financial statements of foreign operation

231

(246)

530

Total other comprehensive income (loss)

(625)

(1,425)

1,409

Total comprehensive loss

$     (10,853)

$    (192,726)

$      (17,109)

Net loss attributable to:

Equity holders of the Company

$      (9,498)

$    (188,890)

$      (17,763)

Non-controlling interests

(730)

(2,411)

(755)

$       (10,228)

$    (191,301)

$      (18,518)

Total comprehensive loss attributable to:

Equity holders of the Company 

$        (10,648)

$    (190,162)

$      (16,357)

Non-controlling interests 

$        (205)

(2,564)

(752)

$        (10,853)

$    (192,726)

$     (17,109)

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

22

Basic earnings (loss) per share (in CAD)

$              (0.74)

$          (3.13)

$            0.02

Diluted loss per share (in CAD)

$              (0.74)

$          (3.81)

$           (3.62)

Loss per share attributable to equity holders of the Company from discontinued operations:

Basic and diluted loss per share (in CAD)

$        (23.17)

$          (3.08)

Loss per share attributable to equity holders of the Company from net loss:

Basic earnings (loss) per share (in CAD)

$              (0.74)

$        (26.3)

$          (3.06)

Diluted loss per share (in CAD)

$              (0.74)

$        (26.98)

$          (6.7)

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

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

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Canadian Dollars in thousands

Share capital and premium

Treasury Stock

Reserve from share-based payment transactions

Translation reserve

Accumulated deficit

Total

Non-controlling interests

Total
equity

Balance as of January 1, 2021

$     37,040

$              –

$       5,829

$       1,229

$   (33,001)

$     11,097

$       1,513

$     12,610

Net loss

(17,763)

(17,763)

(755)

(18,518)

Total other comprehensive income

1,385

21

1,406

3

1,409

Total comprehensive income (loss)

1,385

(17,742)

(16,357)

(752)

(17,109)

Issuance of common shares, net of issuance costs of $3,800

195,259

195,259

2,948

198,207

Purchase of treasury common shares

(660)

(660)

(660)

Exercise of warrants and compensation options

4,293

4,293

4,293

Exercise of options

1,053

(920)

133

133

Share-based compensation

7,471

7,471

7,471

Expired options

32

(32)

Balance as of December 31, 2021

237,677

(660)

12,348

2,614

(50,743)

201,236

3,709

204,945

Net loss

(188,890)

(188,890)

(2,411)

(191,301)

Total other comprehensive income (loss)

(1,331)

59

(1,272)

(153)

(1,425)

Total comprehensive loss

(1,331)

(188,831)

(190,162)

(2,564)

(192,726)

Issuance of treasury common shares

660

660

660

Issuance of shares, net of issuance costs of $178

6,818

6,818

6,818

Exercise of options

992

(659)

333

333

Share-based compensation

3,767

3,767

3,767

Expired options

289

(289)

Balance as of December 31, 2022

245,776

15,167

1,283

(239,574)

22,652

1,145

23,797

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

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Canadian Dollars in thousands

Share capital
and
premium*)

Reserve from
share-based
payment
transactions

Translation
reserve

Accumulated
deficit

Total

Non-controlling interests

Total
equity

Balance as of December 31, 2022

245,776

15,167

1,283

(239,574)

22,652

1,145

23,797

Net loss

(9,498)

(9,498)

(730)

(10,228)

Total other comprehensive income (loss)

(1,188)

38

(1,150)

525

(625)

Total comprehensive loss

(1,188)

(9,460)

(10,648)

(205)

(10,853)

Issuance of treasury common shares

2,351

2,351

2,351

Issuance of shares, net of issuance costs of $178

Exercise of options

Other comprehensive income Classification

(111)

(111)

(1,709)

(1,820)

Share-based compensation

225

225

225

Expired options

5,755

(5,755)

Balance as of December 31, 2023

253,882

9,637

95

(249,145)

14,469

(769)

13,700

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash provided from operating activities:

Net loss

$     (10,228)

$ (191,301)

$   (18,518)

Adjustments for non-cash items:

Unrealized gain on changes in fair value of biological assets

(84)

(7,210)

Fair value adjustment on sale of inventory

984

4,342

8,796

Fair value adjustment on warrants, investments, and accounts receivable

(6,955)

(6,000)

(21,638)

Depreciation of property, plant and equipment

644

3,044

3,021

Amortization of intangible assets

1,758

2,343

1,158

Depreciation of right-of-use assets

594

1,944

1,550

Impairment of goodwill

107,854

275

Impairment of property, plant and equipment

2,277

Impairment of intangible assets

7,199

Impairment of right-of-use assets

1,914

Finance income, net

3,019

6,532

1,262

Deferred tax payments (benefit), net

394

(3,004)

278

Share-based payments

225

3,767

7,471

Share based acquisition costs related to business combination

807

Revaluation of other accounts receivable

3,982

Restructuring expenses

8,757

Loss from revaluation of investments

601

1,264

144,867

(4,230)

Changes in non-cash working capital:

Increase (decrease) in trade receivables, net

2,320

6,058

(6,602)

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

1,299

3,622

845

Decrease in biological assets, net of fair value adjustments

565

6,412

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

4,771

883

(19,707)

Increase (decrease) in trade payables

(6,098)

11,284

5,573

Changes in employee benefit liabilities, net

(139)

(63)

28

Increase in other accounts payable and accrued expenses

(750)

12,126

2,661

1,403

34,475

(10,790)

Taxes paid

(514)

(681)

(834)

Net cash used in operating activities

(8,075)

(12,640)

(34,372)

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash flows from investing activities:

Purchase of property, plant and equipment

(581)

(1,562)

(4,578)

Proceeds from sales of property, plant and equipment

210

Proceeds from loans receivable

350

7,796

Purchase of intangible assets

(17)

Acquisition of businesses, net of cash acquired

(12,536)

Deconsolidation of subsidiary (see Note 25)

(406)

Investments in financial assets

(13)

Proceeds from sale of investment

319

Proceeds from (investment in) restricted deposits

17

Investments in associates

(601)

(125)

Net cash used in investing activities

(1,182)

(1,533)

(9,012)

Cash provided by financing activities:

Proceeds from issuance of share capital, net of issuance costs

1,688

3,756

28,131

Proceeds from issuance of warrants measured at fair value

6,585

11,222

Proceeds from exercise of warrants

3,682

Proceeds from exercise of options

333

133

Repayment of lease liability

(586)

(1,656)

(633)

Payment of lease liability interest

(63)

(1,429)

(1,347)

Proceeds from loans

5,482

9,636

7,804

Repayment of loans

(4,827)

(4,976)

Interest paid

(1,664)

(902)

(261)

Proceeds from discounted checks

2,802

Net cash provided by financing activities

9,417

4,762

48,731

Effect of foreign exchange on cash and cash equivalents

(796)

(2,043)

(329)

Increase (decrease) in cash and cash equivalents

(636)

(11,454)

5,018

Cash and cash equivalents at beginning of year

2,449

13,903

8,885

Cash and cash equivalents at end of year

$      1,813

$      2,449

$    13,903

Supplemental disclosure of non-cash activities:

Right-of-use asset recognized with corresponding lease liability

$         309

$         613

$      1,678

Conversion of warrant and compensation options into common shares

$                 –

$             –

$         611

Issuance of shares in payment of purchase consideration liability

$                 –

$      3,061

$             –

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

$      1,061

$             –

$             –

 

 

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