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Westleaf to Combine with We Grow BC, Ultra Premium Cannabis Producer of Qwest Branded Products

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Westleaf Inc. (the “Company” or “Westleaf“) (TSX-V: WL) (OTCQB: WSLFF) is pleased to announce that it has entered into a definitive arrangement agreement (“Arrangement Agreement“) to combine with We Grow BC Ltd. (“We Grow“), a leading indoor cannabis producer located in Creston, British Columbia (the “Transaction“). We Grow brings an ultra-premium cannabis brand, Qwest (“Qwest“), which achieves some of the highest realized pricing in the Canadian adult-use markets(1). The combination of We Grow’s Qwest brand with Westleaf’s high quality production and retail assets, creates a combined company which is expected to be one of Canada’s preeminent craft-at-scale cultivators, manufacturers, and retailers of ultra-premium cannabis products.

“This transaction brings together a known brand with revenue and EBITDA to complement some of Canada’s most premier indoor cultivation and extraction facilities. Together, we will be able to aggressively expand a trusted brand, increase market share, drive revenue and EBITDA growth and become an extremely competitive company in Canada and beyond” said Scott Hurd, President and Chief Executive Officer of Westleaf.

“Westleaf has built world class cultivation, extraction and retail assets that will allow us to scale quickly and address the existing demand for our Qwest branded products. Together, we create the preeminent ultra-premium cannabis brand in Canada” said Benjamin Sze, Chief Executive Officer of We Grow.

Highlights of the Transaction

The Arrangement is expected to accelerate We Grow’s strategy to expand cultivation capabilities for its popular Qwest and Qwest Reserve ultra-premium cannabis flower brands. The Arrangement is expected to elevate the combined entity’s forecasted 2020 cannabis production capacity to 9,100 kgs(2) of dried cannabis flower while enabling the Company to fully leverage the Qwest ultra-premium brand through Westleaf’s extraction facility and Westleaf’s chain of award-winning Prairie Records retail stores. Specific additional highlights include the following:

  • Established Industry Leading Cannabis Brands: Qwest has established itself as a leading cannabis brand, recognized for ultra-premium quality products and rare flower varieties, evidenced by its leading realized selling prices in the Canadian recreational market and strong demand across various distribution channels(1). The Transaction positions the combined company to accelerate Qwest’s brand growth through Westleaf’s assets by expanding into cannabis derivative products, adding craft-style cultivation capacity, and owning the relationship with the consumer through the award winning wholly owned retail stores, Prairie Records.

  • Creates One of Canada’s Largest Craft Producers: The Transaction combines We Grow’s current production and Westleaf’s nearly completed Thunderchild cultivation facility, creating one of the largest craft producers in Canada with a core focus on producing the highest quality cannabis and cannabis derivative products for the recreational market. We Grow’s access to an extensive genetic library is anticipated to be commercialized on an accelerated basis to bring novel, differentiated cannabis products to market.

  • Positioned for Cannabis 2.0 Products: Westleaf brings scalable extraction and product manufacturing assets which is expected to enable Qwest to expand its ultra-premium product lines into high margin derivative cannabis products in time to meet the expected demand for cannabis 2.0 products.

  • Proven Execution Capabilities: We Grow intends to take its best-in-class production practices and cannabis cultivation expertise and apply it to Westleaf’s high quality assets to maintain its high standard of quality for products under the Qwest banner, including Westleaf’s Thunderchild Cultivation facility and The Plant extraction facility.

  • Highly Experienced Management Teams: We Grow’s management and cultivation teams have a proven ability to scale ultra-premium indoor cannabis production at industry leading yields and obtain best in class wholesale pricing. Westleaf brings a complementary and experienced processing and extraction team, industry leading retail operators and capital markets expertise.

  • Additional Non-Dilutive Financing from ATB Financial: As part of the transaction ATB Financial has committed, subject to customary conditions precedent to be satisfied prior to or concurrent with closing of the Transaction, to provide $8.9 million of additional credit and liquidity through the issuance of a new term loan ($4.7 million) and removal of the restricted cash requirement (~$4.2 million) under the Company’s current subsidiary level credit facilities (which are expected to be consolidated at the Company level as part of the Transaction). Following the close of the Transaction, the combined company’s remaining infrastructure projects are anticipated to be fully funded.

  • Strong Economics and Demonstrated Cash Flow: We Grow has demonstrated a disciplined approach to sustainable profitability, achieving positive Adjusted EBITDA and net income in Q3 2019 enabling the Transaction to be immediately accretive to Westleaf. The combined entity is anticipated to be reflective of We Grow’s commitment to lean and efficient operations and the pro forma management team is expected to be focused on delivering strong financial performance going forward.

Transaction Summary

The Arrangement

Under the Arrangement Agreement, Westleaf will purchase all of the issued and outstanding shares of We Grow (the “We Grow Shares“), other than its Class “H” non-voting common participating shares (“Class H Shares“), in exchange for common shares in the capital of Westleaf (“Westleaf Shares“), by way of plan of arrangement under Division 5 of Part 9 of the Business Corporations Act (British Columbia)(the “Arrangement“). Each We Grow Share will be exchanged for 4.264 Westleaf Shares and each outstanding option to purchase one We Grow Share (the “We Grow Options“) will be exchanged for one Westleaf option (“Westleaf Options“) to purchase 4.264 Westleaf Shares pursuant to the Westleaf stock option plan currently in place.

All Westleaf Shares issued to the former holders of We Grow Shares (excluding any Westleaf Shares issued in exchange for We Grow Shares issued pursuant to the We Grow Financing or any We Grow Shares issued on the exercise of We Grow Warrants (as defined below)) or to the holders of We Grow Options on the valid exercise of their Westleaf Options, will be subject to a hold period from the closing of the Arrangement (the “Hold Period“), whereby 10% of such Westleaf Shares will be released on the date of closing of the Arrangement (the “Closing Date“), 30% of such Westleaf Shares will be released from the Hold Period on the date that is six months from the Closing Date, 30% of such Westleaf Shares will be released from the Hold Period on the date that is nine months from the Closing Date and the remaining 30% of such Westleaf Shares will be released from the Hold Period on the date that is 12 months from the Closing Date. All such foregoing Westleaf Shares will be legended with the applicable details of the Hold Period.

After giving effect to the Arrangement, the pre-Arrangement holders of We Grow Shares excluding the holders of We Grow Shares issued pursuant to the We Grow Financing (as defined herein), will hold approximately 55% of Westleaf’s issued and outstanding shares on a pro forma basis and the existing shareholders of Westleaf will hold approximately 45% of Westleaf’s issued and outstanding shares on a pro forma basis.

Upon closing of the Arrangement, it is anticipated that Westleaf’s board of directors (the “Westleaf Board“) will be reconstituted and will include three appointees of We Grow being Benjamin SzeMichael KellyPaul Wilson, and two appointees of Westleaf, being Cody Church and a Thunderchild nominee.  Westleaf’s officers will be reconstituted and will include Benjamin Sze, current Chief Executive Officer of We Grow, as Chief Executive Officer, Scott Hurd as President, Taylor Ethans as Chief Financial Officer, Gary Leong as Chief Compliance Officer, and Adam Coates as Executive Vice-President, Commercial. The foregoing changes will constitute a “Change of Management” as defined in the policies of the TSX Venture Exchange (“TSXV“)(the “Change of Management“).

The Arrangement is anticipated to close in mid-December 2019. Closing of the Arrangement is subject to the approval of not less than 662/3% of the votes cast by holders of We Grow Shares and We Grow Options, each voting as a separate class, on a resolution approving the Arrangement (the “We Grow Resolution“) at the upcoming We Grow Meeting (as defined below) and, as a result of the Change of Management and in accordance with the polices of the TSXV, approval of not less than 50% of the votes cast by holders of Westleaf Shares on a resolution approving such Change of Management (the “Westleaf Resolution“) at the upcoming Westleaf Meeting (as defined below).

It is anticipated that a meeting (the “We Grow Meeting“) of the holders of We Grow Shares and We Grow Options and a meeting (the “Westleaf Meeting“) of the holders of Westleaf Shares will each be held on or around December 11, 2019 following the mailing to such securityholders of a joint management information circular regarding the Arrangement in November 2019 (the “Joint Information Circular“).

Westleaf previously completed a financing of convertible debentures (“Debentures“), and the Arrangement constitutes a “Change of Control” as defined in the debenture indenture dated May 10, 2019 for the Debentures between the Company and Computershare Trust Company of Canada, as trustee for the Debentures (the “Debenture Indenture“). Holders of 50% of the principal amount of the outstanding Debentures have agreed in writing to consent to the Arrangement, provide a waiver and modification of the Debenture Indenture so that the Arrangement will not require the Company to repurchase the Debentures and to an amendment of the conversion price of the Debentures from $1.30 to $0.45 per Westleaf Share.

Additional Transaction Terms

The Arrangement is subject to We Grow completing a non-brokered management and key stakeholder led private placement financing of subscription receipts of We Grow (“Subscription Receipts“) for gross proceeds of not less than $3,000,000, at a price of $0.30 per Subscription Receipt, to be completed prior to or concurrently with closing of the Arrangement (the “We Grow Financing“). Each Subscription Receipt shall entitle the holder thereof to acquire a unit of We Grow, which unit will ultimately be exchanged under the Arrangement for one (1) Westleaf Share and one-half of a warrant of Westleaf (each a full warrant, “Westleaf Warrant“).  Each Westleaf Warrant shall be exercisable at a price of $0.38 per share for a period of 2 years following the closing of the Arrangement.

The Arrangement is also subject to, among other conditions, the approval of the Supreme Court of British Columbia, the receipt of all necessary regulatory approvals, including approval of Health Canada, applicable provincial retail cannabis regulators and the TSXV, and satisfaction of certain other closing conditions that are customary for a transaction of this nature.

The Agreement contains representations, warranties and covenants, including a termination fee in the amount of 3% of the transaction value payable by Westleaf or We Grow to the other party, as applicable, in the event that the Arrangement Agreement is terminated in certain circumstances. The Arrangement Agreement also includes certain non-solicitation covenants subject to the rights of each of Westleaf and We Grow to accept a superior proposal in certain circumstances, with the other party having a five business day right to match any such superior proposal received. Additional details of the Arrangement will be provided in the Joint Information Circular.

Westleaf Board Approval and Recommendation

Westleaf appointed a special independent committee (the “Special Committee“) of the Westleaf Board consisting of Cody ChurchKareen StangherlinDelbert Wapass and John Radostits, with the mandate to review and evaluate strategic transaction alternatives for the Company including the Arrangement. Based on the recommendation of the Special Committee, the Westleaf Board has unanimously approved the Arrangement Agreement, determined that the Arrangement is in the best interests of Westleaf and the Westleaf Board has unanimously resolved to recommend that the holders of Westleaf Shares vote in favour of the Westleaf Resolution at the Westleaf Meeting. The Special Committee also received a verbal fairness opinion provided by Eight Capital Inc. (the “Eight Capital Fairness Opinion“) which was considered in connection with its recommendation to the Board, that provided, subject to the assumptions, qualifications and limitations contained in the Eight Capital Fairness Opinion, that the consideration to be paid by Westleaf for the acquisition of We Grow pursuant to the Arrangement, is fair, from a financial point of view, to Westleaf.

All of the directors and officers of Westleaf, who beneficially own, or exercise control or direction over, approximately 19% of the outstanding Westleaf Shares, have entered into support agreements pursuant to which each has agreed to vote their Westleaf Shares in favour of the Westleaf Resolution and all other matters in favour of the Arrangement as applicable.

We Grow Board Approval and Recommendation

We Grow’s board of directors (the “We Grow Board“) has unanimously approved the Arrangement Agreement, determined that the Arrangement is fair and in the best interests of We Grow and, based on the verbal fairness opinion provided by AltaCorp Capital Inc. (the “AltaCorp Fairness Opinion“), determined that and subject to the assumptions, qualifications and limitations contained in the AltaCorp Fairness Opinion, that the consideration to be paid by Westleaf to the holders of We Grow Shares with respect to the Arrangement is fair , from a financial point of view, and the We Grow Board has unanimously resolved to recommend that the holders of We Grow Shares and the holders of We Grow Options vote in favour of the We Grow Resolution at the We Grow Meeting.

All of the directors and officers of We Grow who beneficially own, or exercise control or direction over, approximately 36% of the outstanding We Grow Shares, have entered into support agreements pursuant to which each has agreed to vote their We Grow Shares and We Grow Options in favour of the We Grow Resolution and all other matters in favour of the Arrangement as applicable.

Complete details of the terms of the Arrangement are set out in the Arrangement Agreement, which will be filed by Westleaf and will be available for viewing under Westleaf’s profile at www.sedar.com.

Combined Westleaf-We Grow Pro-Forma Facility and Assets

  • Creston Valley Cultivation (We Grow) – We Grow has a purpose-built indoor cultivation facility currently consisting of 26,000 square feet which has been retrofitted for phase 1 cultivation including over 14,000 square feet of growing rooms, and up to 100-acre cultivation abilities for future production. We Grow is currently constructing a genetics and tissue culture lab in the existing facility.

  • Thunderchild Cultivation (Westleaf): Construction of Westleaf’s purpose-built, GMP compliant, indoor cultivation facility near Battleford, Saskatchewan has progressed significantly in the third quarter and is nearing completion. Phase I of the indoor grow operation will be a total of 80,000 square feet with 20 grow rooms and approximately 21,000 square feet of flower bench. Phase II will add an additional 50,000 square feet of production space. The name of the facility reflects the company’s first and largest investor, the Thunderchild First Nation, an independent Cree nation based in Turtleford, Saskatchewan.

  • The Plant by Westleaf Labs (Westleaf): A scalable extraction, processing, and product manufacturing facility located in Calgary, Alberta is a strategic asset for the Company. With the legalization of derivative products, Westleaf anticipates strong industry wide demand for efficient extraction, processing and formulation capacity and recently announced receipt of its first white label order. The Plant is currently a 16,000 square foot licensed production facility with scalable capacity of up to 65,000 kgs(3) of dried flower per annum. The Plant has an additional 45,000 square feet of expansion space.

  • Prairie Records (Westleaf): The Company’s experiential retail concept Prairie Records, which combines music and cannabis into a unique retail environment, launched with three stores in the Saskatoon region and one in Calgary. Westleaf maintains a portfolio of over 20 premium retail locations with development permits.

 

SOURCE Westleaf Inc.

 

Cannabis

IM Cannabis Reports 2023 Financial Results

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

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

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

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

Management Commentary

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

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

Conference Call 

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

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

Non-IFRS Measures

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

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

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

About IM Cannabis Corp.

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

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

Disclaimer for Forward-Looking Statements

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

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

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

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

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

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

 

Company Contact: 

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

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

 

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$    1,813

$        2,449

Trade receivables

6

7,651

8,684

Advances to suppliers

936

1,631

Other accounts receivable

7

3,889

3,323

Inventory

9

9,976

16,585

24,265

32,672

NON-CURRENT ASSETS:

Property, plant and equipment, net

10

5,058

5,221

Investments in affiliates

15c

2,285

2,410

Right-of-use assets, net

12

1,307

1,929

Deferred tax assets, net

17

763

Intangible assets, net

11

5,803

7,910

Goodwill

11

10,095

9,771

24,548

28,004

Total assets

$       48,813

$       60,676

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

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

December 31,

Note

2023

2022

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Trade payables

14

$        9,223

$       15,312

Credit from banks and others

13

12,119

9,246

Other accounts payable and accrued expenses

15

6,218

6,013

Accrued purchase consideration liabilities

5

2,097

2,434

PUT Option liability

2,697

Current maturities of operating lease liabilities

12

454

814

32,808

33,819

NON-CURRENT LIABILITIES:

Warrants measured at fair value

17

38

8

Operating lease liabilities

12

815

1,075

Credit from banks and others

394

399

Employee benefit liabilities, net

16

95

246

Deferred tax liability, net

19

963

1,332

2,305

3,060

Total liabilities

35,113

36,879

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:

20

Share capital and premium

253,882

245,776

Translation reserve

95

1,283

Reserve from share-based payment transactions

9,637

15,167

Accumulated deficit

(249,145)

(239,574)

Total equity attributable to shareholders of the Company

14,469

22,652

Non-controlling interests

(769)

1,145

Total equity

13,700

23,797

Total equity and liabilities

$       48,813

$       60,676

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

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands

Year ended December 31,

Note

2023

2022

 *) 2021

Revenues

21

$       48,804

$       54,335

$       34,053

Cost of revenues

21

37,974

43,044

25,458

Gross profit before fair value adjustments

10,830

11,291

8,595

Fair value adjustments:

Unrealized change in fair value of biological assets

(315)

6,308

Realized fair value adjustments on inventory sold in the year

(984)

(1,814)

(8,570)

Total fair value adjustments

(984)

(2,129)

(2,262)

Gross profit after fair value adjustments

9,846

9,162

6,333

General and administrative expenses

21

11,008

21,460

17,221

Selling and marketing expenses

21

10,788

11,473

6,725

Restructuring expenses

1

617

4,383

Share-based compensation

20

225

2,637

5,422

Total operating expenses

22,638

39,953

29,368

Operating loss

(12,792)

(30,791)

(23,035)

Finance income

7,006

6,703

23,544

Finance expenses

(3,671)

(1,972)

(673)

Finance income (expense), net

3,335

4,731

22,871

Loss before income taxes

(9,457)

(26,060)

(164)

Income tax expense (benefit)

18

771

(1,138)

500

Net loss from continuing operations

(10,228)

(24,922)

(664)

Net loss from discontinued operations, net of tax

25

(166,379)

(17,854)

Net loss

(10,228)

(191,301)

(18,518)

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

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

 

 

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

Canadian Dollars in thousands, except per share data

Year ended December 31,

Note

2023

2022

 *) 2021

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

Remeasurement gain on defined benefit plans

38

59

21

Exchange differences on translation to presentation currency

(894)

(1,238)

858

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

(856)

(1,179)

879

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

Adjustments arising from translating financial statements of foreign operation

231

(246)

530

Total other comprehensive income (loss)

(625)

(1,425)

1,409

Total comprehensive loss

$     (10,853)

$    (192,726)

$      (17,109)

Net loss attributable to:

Equity holders of the Company

$      (9,498)

$    (188,890)

$      (17,763)

Non-controlling interests

(730)

(2,411)

(755)

$       (10,228)

$    (191,301)

$      (18,518)

Total comprehensive loss attributable to:

Equity holders of the Company 

$        (10,648)

$    (190,162)

$      (16,357)

Non-controlling interests 

$        (205)

(2,564)

(752)

$        (10,853)

$    (192,726)

$     (17,109)

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

22

Basic earnings (loss) per share (in CAD)

$              (0.74)

$          (3.13)

$            0.02

Diluted loss per share (in CAD)

$              (0.74)

$          (3.81)

$           (3.62)

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

Basic and diluted loss per share (in CAD)

$        (23.17)

$          (3.08)

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

Basic earnings (loss) per share (in CAD)

$              (0.74)

$        (26.3)

$          (3.06)

Diluted loss per share (in CAD)

$              (0.74)

$        (26.98)

$          (6.7)

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

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

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Canadian Dollars in thousands

Share capital and premium

Treasury Stock

Reserve from share-based payment transactions

Translation reserve

Accumulated deficit

Total

Non-controlling interests

Total
equity

Balance as of January 1, 2021

$     37,040

$              –

$       5,829

$       1,229

$   (33,001)

$     11,097

$       1,513

$     12,610

Net loss

(17,763)

(17,763)

(755)

(18,518)

Total other comprehensive income

1,385

21

1,406

3

1,409

Total comprehensive income (loss)

1,385

(17,742)

(16,357)

(752)

(17,109)

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

195,259

195,259

2,948

198,207

Purchase of treasury common shares

(660)

(660)

(660)

Exercise of warrants and compensation options

4,293

4,293

4,293

Exercise of options

1,053

(920)

133

133

Share-based compensation

7,471

7,471

7,471

Expired options

32

(32)

Balance as of December 31, 2021

237,677

(660)

12,348

2,614

(50,743)

201,236

3,709

204,945

Net loss

(188,890)

(188,890)

(2,411)

(191,301)

Total other comprehensive income (loss)

(1,331)

59

(1,272)

(153)

(1,425)

Total comprehensive loss

(1,331)

(188,831)

(190,162)

(2,564)

(192,726)

Issuance of treasury common shares

660

660

660

Issuance of shares, net of issuance costs of $178

6,818

6,818

6,818

Exercise of options

992

(659)

333

333

Share-based compensation

3,767

3,767

3,767

Expired options

289

(289)

Balance as of December 31, 2022

245,776

15,167

1,283

(239,574)

22,652

1,145

23,797

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

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Canadian Dollars in thousands

Share capital
and
premium*)

Reserve from
share-based
payment
transactions

Translation
reserve

Accumulated
deficit

Total

Non-controlling interests

Total
equity

Balance as of December 31, 2022

245,776

15,167

1,283

(239,574)

22,652

1,145

23,797

Net loss

(9,498)

(9,498)

(730)

(10,228)

Total other comprehensive income (loss)

(1,188)

38

(1,150)

525

(625)

Total comprehensive loss

(1,188)

(9,460)

(10,648)

(205)

(10,853)

Issuance of treasury common shares

2,351

2,351

2,351

Issuance of shares, net of issuance costs of $178

Exercise of options

Other comprehensive income Classification

(111)

(111)

(1,709)

(1,820)

Share-based compensation

225

225

225

Expired options

5,755

(5,755)

Balance as of December 31, 2023

253,882

9,637

95

(249,145)

14,469

(769)

13,700

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash provided from operating activities:

Net loss

$     (10,228)

$ (191,301)

$   (18,518)

Adjustments for non-cash items:

Unrealized gain on changes in fair value of biological assets

(84)

(7,210)

Fair value adjustment on sale of inventory

984

4,342

8,796

Fair value adjustment on warrants, investments, and accounts receivable

(6,955)

(6,000)

(21,638)

Depreciation of property, plant and equipment

644

3,044

3,021

Amortization of intangible assets

1,758

2,343

1,158

Depreciation of right-of-use assets

594

1,944

1,550

Impairment of goodwill

107,854

275

Impairment of property, plant and equipment

2,277

Impairment of intangible assets

7,199

Impairment of right-of-use assets

1,914

Finance income, net

3,019

6,532

1,262

Deferred tax payments (benefit), net

394

(3,004)

278

Share-based payments

225

3,767

7,471

Share based acquisition costs related to business combination

807

Revaluation of other accounts receivable

3,982

Restructuring expenses

8,757

Loss from revaluation of investments

601

1,264

144,867

(4,230)

Changes in non-cash working capital:

Increase (decrease) in trade receivables, net

2,320

6,058

(6,602)

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

1,299

3,622

845

Decrease in biological assets, net of fair value adjustments

565

6,412

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

4,771

883

(19,707)

Increase (decrease) in trade payables

(6,098)

11,284

5,573

Changes in employee benefit liabilities, net

(139)

(63)

28

Increase in other accounts payable and accrued expenses

(750)

12,126

2,661

1,403

34,475

(10,790)

Taxes paid

(514)

(681)

(834)

Net cash used in operating activities

(8,075)

(12,640)

(34,372)

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

Canadian Dollars in thousands

Year ended December 31,

2023

2022

2021

Cash flows from investing activities:

Purchase of property, plant and equipment

(581)

(1,562)

(4,578)

Proceeds from sales of property, plant and equipment

210

Proceeds from loans receivable

350

7,796

Purchase of intangible assets

(17)

Acquisition of businesses, net of cash acquired

(12,536)

Deconsolidation of subsidiary (see Note 25)

(406)

Investments in financial assets

(13)

Proceeds from sale of investment

319

Proceeds from (investment in) restricted deposits

17

Investments in associates

(601)

(125)

Net cash used in investing activities

(1,182)

(1,533)

(9,012)

Cash provided by financing activities:

Proceeds from issuance of share capital, net of issuance costs

1,688

3,756

28,131

Proceeds from issuance of warrants measured at fair value

6,585

11,222

Proceeds from exercise of warrants

3,682

Proceeds from exercise of options

333

133

Repayment of lease liability

(586)

(1,656)

(633)

Payment of lease liability interest

(63)

(1,429)

(1,347)

Proceeds from loans

5,482

9,636

7,804

Repayment of loans

(4,827)

(4,976)

Interest paid

(1,664)

(902)

(261)

Proceeds from discounted checks

2,802

Net cash provided by financing activities

9,417

4,762

48,731

Effect of foreign exchange on cash and cash equivalents

(796)

(2,043)

(329)

Increase (decrease) in cash and cash equivalents

(636)

(11,454)

5,018

Cash and cash equivalents at beginning of year

2,449

13,903

8,885

Cash and cash equivalents at end of year

$      1,813

$      2,449

$    13,903

Supplemental disclosure of non-cash activities:

Right-of-use asset recognized with corresponding lease liability

$         309

$         613

$      1,678

Conversion of warrant and compensation options into common shares

$                 –

$             –

$         611

Issuance of shares in payment of purchase consideration liability

$                 –

$      3,061

$             –

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

$      1,061

$             –

$             –

 

 

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