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Canopy Rivers reports second quarter fiscal year 2021 financial results

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4 years ago

on

Canopy Rivers Inc. (“Canopy Rivers” or the “Company“) (TSX: RIV) (OTC: CNPOF) today released its unaudited condensed interim consolidated financial statements and management’s discussion and analysis (“MD&A“) for the three and six months ended September 30, 2020 (“Q2 2021″).

“Our quarter was framed with a sharp focus on PharmHouse. We provided debtor-in-possession financing to enable PharmHouse to remain operational as it commenced its CCAA process and our team has been working towards securing the best possible outcome for our shareholders,” said Narbe Alexandrian, President and CEO, Canopy Rivers. “While supporting PharmHouse has been our priority, we are confident we will put this challenging situation behind us and remain encouraged by the progress across our portfolio. This quarter, we participated in Headset’s bridge round as it continues to bring its industry-leading analytical tools to new markets, High Beauty launched a new product line, and BioLumic’s most recent cannabis field trials showed promising gains in dried flower mass and cannabinoid content.”

“Most notably, the value of TerrAscend’s common shares increased by 101% during the quarter, and the implied value of our investment in TerrAscend is now approximately $214 million,” added Alexandrian. “After a U.S. election that potentially spells good outcomes for the cannabis sector, including the legalization of adult-use cannabis in New Jersey, we are pleased to have our U.S. exposure through our holdings of exchangeable shares in one of the nation’s leading multistate operators. We believe that we will be well positioned to capitalize on opportunities in the U.S. once we are permitted to do so.”

Q2 2021 Financial Results2

Select Summary of Quarterly Results

Three months ended 

Three months ended 

Six months ended 

Six months ended 

30-Sep-20

30-Sep-19

30-Sep-20

30-Sep-19

Operating income (loss) (before equity method investees and fair value changes)

$

(5,795)

$

2,171

$

(3,133)

$

4,312

Operating expenses

1,555

6,192

4,224

11,959

Net operating loss (before equity method investees and fair value changes)

(7,350)

(4,021)

(7,357)

(7,647)

Equity method investees and fair value changes

(36,211)

(1,241)

(38,566)

(697)

Other PharmHouse-related charges(1)

(70,756)

–

(70,756)

–

Net operating loss

(114,317)

(5,262)

(116,679)

(8,344)

Net loss

(110,381)

(4,406)

(113,807)

(7,372)

Other comprehensive income (loss) (net of tax)

23,417

(28,252)

34,118

(34,036)

Total comprehensive loss

(86,964)

(32,658)

(79,689)

(41,408)

Basic loss per share (“EPS”)

$

(0.58)

$

(0.02)

$

(0.60)

$

(0.04)

Diluted EPS

$

(0.58)

$

(0.02)

$

(0.60)

$

(0.04)

Cash flows used in operating activities

(1,055)

(669)

(1,862)

(3,457)

Cash flows used in investing activities

(4,927)

(5,327)

(6,854)

(18,029)

Cash flows provided by (used in) financing activities

(2)

25

(80)

82

(1) Excludes the Company’s share of loss from its investment in PharmHouse common shares, which is captured in “Equity method investees and fair value changes”

“Naturally, we are extremely disappointed by the recent developments at PharmHouse and their impact on our financial results for this quarter, which reflect significant charges across various financial instruments we hold,” said Eddie Lucarelli, CFO, Canopy Rivers. “While the Company’s underlying net asset value continues to be supported by the sustained appreciation of our investment in TerrAscend, we remain critically focused on resolving PharmHouse’s current situation and maximizing value preservation for our shareholders.”

Three months
ended 

Three months
ended 

Six months
ended 

Six months
nded 

30-Sep-20

30-Sep-19

30-Sep-20

30-Sep-19

Royalty, interest, and lease income (before provisions)

$

4,066

$

2,171

$

6,733

$

4,312

Provision for credit losses on interest and royalty receivables

PharmHouse

(8,939)

–

(8,939)

–

Other

(922)

–

(927)

–

Operating income (loss)
(before equity method investees and fair value changes)

$

(5,795)

$

2,171

$

(3,133)

$

4,312

Consulting and professional fees

$

350

$

1,183

$

726

$

1,675

General and administrative expenses

1,287

1,998

2,629

3,545

Share-based compensation 

(555)

2,968

354

6,654

Depreciation and amortization expense

45

43

87

85

Restructuring costs

428

–

428

–

Operating expenses

$

1,555

$

6,192

$

4,224

$

11,959

Net operating loss
(before equity method investees and fair value changes)

$

(7,350)

$

(4,021)

$

(7,357)

$

(7,647)

Canopy Rivers reported a net operating loss of $7.4 million (before equity method investees and fair value changes) for the quarter.

Royalty, interest, and lease income (before provisions for credit losses) was $4.1 million for the quarter. This includes income from the Company’s various royalty, convertible debenture, and loan agreements, among other items. Offsetting this income was a provision for credit losses of $9.9 million for the quarter, which primarily related to interest accrued on the Company’s $40.0 million shareholder loan to PharmHouse Inc. (“PharmHouse“) of $8.9 million.

Operating expenses were $1.6 million for the quarter, compared with $6.2 million for the same period last year. Share-based compensation was negative for the quarter as the Company recorded a significant recapture of previously-recognized share-based compensation expense as a result of stock option forfeitures. Operating expenses included $1.3 million of general and administrative expenses relating to employee and director compensation, marketing and business development, and other public company costs, as well as $0.4 million of professional fees relating to legal, audit, tax, accounting, and other regulatory advisory fees. Also included in operating expenses were $0.4 million in advisory fees relating to the Claim and Restructuring (each as defined and discussed in further detail below).

Three months
ended 

Three months
ended 

Six months
ended 

Six months
ended 

30-Sep-20

30-Sep-19

30-Sep-20

30-Sep-19

Share of loss from equity method investees

PharmHouse

$

(32,607)

$

(453)

$

(37,025)

$

(695)

Other

(550)

(229)

(117)

(955)

Net change in fair value of financial assets at FVTPL

(3,054)

(559)

(1,424)

953

Other PharmHouse-related charges

Provision for credit losses on loans receivable

(45,756)

–

(45,756)

–

Provision for credit losses on financial guarantee liability

(25,000)

–

(25,000)

–

Equity method investees and fair value changes

$

(106,967)

$

(1,241)

$

(109,322)

$

(697)

The Company’s share of loss from equity method investees (excluding PharmHouse) was $0.6 million for the quarter. The Company’s equity method investees include Canapar Corp. (“Canapar“), 10663522 Canada Inc. d/b/a/ Herbert (“Herbert“), High Beauty, Inc. (“High Beauty“), LeafLink Services International ULC (“LeafLink“), and Radicle Medical Marijuana Inc. (“Radicle“).

The Company also reported a net decrease in the fair value of financial assets that are reported at fair value through profit or loss (“FVTPL“) of $3.1 million for the quarter. The net decrease was primarily driven by negative changes in the estimated fair values of the Company’s royalty investment in Agripharm Corp. (“Agripharm“) and convertible debenture investments in 10831425 Canada Ltd. d/b/a/ Greenhouse Juice Company (“Greenhouse Juice“), and was partially offset by positive changes in the estimated fair values of the Company’s royalty investment in The Tweed Tree Lot Inc. (“Tweed Tree Lot“), and term loan investment to TerrAscend Canada Inc. (“TerrAscend Canada“), along with the associated warrants issued by TerrAscend Corp. (“TerrAscend“).

In light of recent developments at PharmHouse, described in further detail below, the Company performed a recoverability assessment as at September 30, 2020, to estimate the differences between the recoverable amounts of its investments in various PharmHouse-related financial assets and their respective carrying values. The Company estimated the recoverable amount of PharmHouse en bloc to determine the quantum of charges to be recognized in respect of its various financial assets. Due to the lack of profitable operating history of PharmHouse as a cannabis entity, the Company estimated the net proceeds to be received pursuant to an orderly liquidation of PharmHouse’s assets and then compared this amount to the carrying values of various PharmHouse-related financial instruments held by the Company, in sequence based on the priority of claims on PharmHouse’s assets held by various stakeholders (the “PharmHouse Recoverability Assessment“).

Based on the PharmHouse Recoverability Assessment, the Company estimated that the recoverable amount of PharmHouse’s assets en bloc may be less than the principal amount drawn on PharmHouse’s $90.0 million non-revolving syndicated credit facility (the “PharmHouse Credit Facility“), which the Company has guaranteed (the “PharmHouse Guarantee“). Accordingly, the Company recognized the following charges during the quarter:

  • Share of loss from investment in PharmHouse common shares (due to impairment adjustments) of $32.6 million;
  • Provision for credit losses on the Company’s loans receivable with PharmHouse of $45.8 million; and
  • Provision for credit losses on the PharmHouse Guarantee liability of $25.0 million.

The Company’s financial liability in respect of the PharmHouse Guarantee was estimated to be $25.0 million as at September 30, 2020, on the basis of a number of assumptions and estimates regarding the recoverable amount of PharmHouse’s assets under an orderly liquidation scenario where the greenhouse facility is no longer used for cannabis operations. A further deterioration in PharmHouse’s credit worthiness, an inability to generate sufficient future cash flows, or a significant decrease in the value of the PharmHouse assets will expose the Company to the risk of additional losses. There is a risk that the actual net proceeds that PharmHouse would realize upon an orderly liquidation of its assets is less than that estimated, which could materially increase the Company’s financial liability in respect of the PharmHouse Guarantee.

After consideration of operating income, operating expenses, equity method investees, FVTPL fair value changes, and PharmHouse charges, among other items, Canopy Rivers reported a net loss of $110.4 million for the quarter.

Three months
ended 

Three months
ended 

Six months
ended 

Six months
ended 

30-Sep-20

30-Sep-19

30-Sep-20

30-Sep-19

TerrAscend

$

30,500

$

(20,000)

$

33,500

$

(30,000)

Vert Mirabel

(3,400)

(8,237)

6,100

1,144

YSS

(218)

(435)

(218)

(1,197)

Headset

(100)

47

(300)

(36)

Zeakal

(300)

154

(900)

(246)

BioLumic

61

–

61

–

Dynaleo

835

–

835

–

Other

–

(4,129)

(976)

(8,843)

Gross change in fair value of financial assets at FVTOCI

$

27,378

$

(32,600)

$

38,102

$

(39,178)

OCI income tax expense (recovery)

3,962

(4,313)

3,962

(5,916)

Net change in fair value of financial assets at FVTOCI(1)

$

23,416

$

(28,287)

$

34,140

$

(33,262)

(1) In addition to the fair value change noted above, net change in fair value of financial assets at FVTOCI also includes FX gains/losses related to equity method investees denominated in USD currency 

Other comprehensive income was $23.4 million, net of tax, for the quarter, which includes a net increase in the fair value of financial assets that are reported at fair value through other comprehensive income (“FVTOCI“) of $27.4 million. The net increase was primarily attributable to the positive change in the fair value of the Company’s exchangeable share investment in TerrAscend.

Total comprehensive loss for the quarter was $87.0 million.

As at

As at

Period ended

30-Sep-20

31-Mar-20

Cash

$

37,928

$

46,724

Loans receivable

–

42,450

Equity method investees

13,379

50,543

Financial assets at FVTPL

78,290

80,170

Financial assets at FVTOCI

106,905

64,599

Other assets

9,165

15,899

Total assets

$

245,667

$

300,385

Financial guarantee liability

$

25,000

$

–

Other liabilities

1,726

2,107

Total shareholders’ equity

218,941

298,278

Total liabilities and shareholders’ equity

$

245,667

$

300,385

PharmHouse Update

On August 14, 2020, the Company announced that it had formed a special committee comprised of the Company’s independent directors (the “Special Committee“) to oversee the Company’s investment in PharmHouse, including the offtake agreements with Canopy Growth Corporation (“Canopy Growth“) and TerrAscend Canada, and the PharmHouse Guarantee, as well as to consider potential alternatives for the Company regarding its investment in PharmHouse.

While the Special Committee’s review of the Company’s investment in PharmHouse continues, there were several notable developments during and subsequent to the quarter:

  • On September 14, 2020, the Company received a statement of claim (the “Claim“) filed by the PharmHouse majority shareholder concerning certain disputes relating to PharmHouse. The Claim makes a number of allegations against the Company, Canopy Growth, TerrAscend, and TerrAscend Canada, including claims relating to bad faith, fraud, civil conspiracy, breach of the duty of honesty and good faith in contractual relations, and breach of fiduciary duty, and claims relating to PharmHouse’s offtake agreements with Canopy Growth and TerrAscend Canada. The Company considers the Claim as it relates to its own actions to be completely without merit and intends to vigorously defend its position. The Company has not recognized any provision relating to the Claim. Pursuant to an endorsement from the Ontario Superior Court of Justice (the “Court“) dated October 30, 2020, the PharmHouse majority shareholder is to discontinue the Claim and has agreed not to issue a new claim in respect of this matter prior to January 1, 2021.
  • On September 15, 2020, PharmHouse obtained an order (the “Initial Order“) from the Court granting PharmHouse creditor protection under the Companies’ Creditors Arrangement Act (“CCAA“) (the “CCAA Proceedings“). Ernst & Young Inc. was appointed by the Court to act as the Monitor of PharmHouse in the CCAA Proceedings while PharmHouse explores a restructuring of its business and operations (the “Restructuring“).
  • Pursuant to the Initial Order, Canopy Rivers entered an agreement to provide a debtor-in-possession interim, non-revolving credit facility up to a maximum principal amount of $7.2 million (the “DIP Financing“). The DIP Financing matures on December 29, 2020. Based on current circumstances, the Company anticipates that PharmHouse will require additional capital beyond that available pursuant to the DIP Financing prior to the conclusion of the CCAA Proceedings.
  • On October 29, 2020, PharmHouse received approval from the Court to initiate a Sale and Investment Solicitation Process (“SISP“) to identify interest in, and opportunities for, a sale of, or investment in, all or part of PharmHouse’s assets or business. This may include a restructuring, recapitalization, or other form of reorganization of PharmHouse’s business and affairs. The phase one deadline for offers under the SISP will be on or about November 30, 2020.
  • The Company is working collaboratively with the syndicate of lenders under the PharmHouse Credit Facility during the CCAA Proceedings. No repayments of principal have occurred and the current outstanding balance remains $90.0 million, with interest payable monthly. 
    • Note: The Company’s press release dated April 16, 2020, incorrectly stated that the commencement date of principal repayments under the PharmHouse Credit Facility was extended to March 31, 2021. The Conversion Date (as defined in the PharmHouse Credit Agreement) was extended to March 31, 2021, and the principal repayment commencement date was extended to September 30, 2020.

The Company will continue to provide updates on the Restructuring and other aspects of the CCAA Proceedings as required.

Q2 2021 Corporate and Portfolio Updates

The following represents a summary of key developments at Canopy Rivers and its other portfolio companies during Q2 2021:

Canopy Rivers

  • Asha Daniere was named Chair of the Board of Directors (the “Board“).
  • Canopy Rivers also welcomed Garth Hankinson, CFO of Constellation Brands, to the Board.
  • Canopy Rivers participated in Headset Inc.’s (“Headset“) bridge financing, helping the company to continue to expand to new markets in the U.S. and Canada. Headset’s bridge round closed at US$3.2 million.
  • Olivier Dufourmantelle, Canopy Rivers’ Chief Operating Officer, will be leaving the Company to pursue new opportunities, effective November 13, 2020. The Company thanks him for his contributions and wishes him the best in his future endeavours. The Company does not expect to hire a replacement for Mr. Dufourmantelle at this time.

Portfolio

  • TerrAscend again had several notable announcements during the quarter. Its success, alongside increased market optimism around cannabis in the U.S., helped TerrAscend’s share value increase from $2.87 on June 30, 2020 to $9.75 as of the close of markets on November 6, 2020. During the quarter, the company opened an Apothecarium location in Berkeley, California. TerrAscend also received approval to cultivate cannabis at its New Jersey facility and open its first Apothecarium dispensary in the state. Finally, in August, TerrAscend announced strong second quarter results, reporting net sales of $47.2 million. The Company owns 19,445,285 exchangeable shares of TerrAscend that are convertible into common shares upon the occurrence of certain events. The Company also owns an additional 2,559,437 common share purchase warrants of TerrAscend, exercisable upon the occurrence of similar events as the conversion of the exchangeable shares. Assuming the conversion and exercise of both instruments, this would imply a value of $214.5 million for the Company’s investment in TerrAscend as of the close of markets on November 6, 2020.[3]
  • High Beauty introduced canBE, a new line of natural, aloe-based products combining hemp seed oil, organic plant oils, essential vitamins, antioxidants, and bioflavonoids. canBE is now available on Walmart.com and in 1,760 CVS locations across the U.S. High Beauty has also signed a contract to sell canBE in Kohls in early 2021. High Beauty’s products are now available in 33 retailers, totalling over 2,800 stores, in Canada, the U.S., and Europe.
  • BioLumic Ltd.’s (“BioLumic“) proprietary UV light treatment for cannabis achieved 59% dry flower mass gains in its most recent trials. The tests have demonstrated cannabinoid increases of 25% or higher in each of THCA, CBGA, CBG, CBD, and CBC. BioLumic was also named a finalist for the 2020 KiwiNet Research Commercialisation Awards, recognizing impact from science through successful research commercialization.
  • Agripharm obtained an amendment to its licence from Health Canada enabling it to sell certain U.S.-based SLANG-branded products in Canada. Furthermore, Agripharm secured a supply agreement to provide the Ontario Cannabis Store with dried flower (and edibles at a later date) from Green House Seed Co., for which Agripharm holds an exclusive licence in Canada.
  • Headset launched Headset Insights in Oregon and Massachusetts. It also launched the free version of this tool, Headset Insights Pulse, in Michigan, expanding its coverage of the North American market.
  • Dynaleo Inc. (“Dynaleo“) entered into a supply agreement with High12 Brands to manufacture and package gummies for the Canadian adult-use market. Dynaleo and High12 Brands expect that these products will be available to consumers by the end of this calendar year.
  • YSS Corp. (“YSS“) announced its second quarter results, reporting a 12% revenue increase quarter-over-quarter. Subsequent to the Company’s quarter end, YSS opened its 18th store, YSS Hamptons, in Edmonton. Construction is underway on the company’s next two stores, including its first Ontario-based store in Waterloo.

This press release should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and MD&A for the three and six months ended September 30, 2020, which are available under the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at www.canopyrivers.com/investors. All financial information in this press release is reported in Canadian dollars, unless otherwise indicated.

For more information regarding the Company and its portfolio companies, please refer to the MD&A and the Company’s annual information form dated June 2, 2020 (“AIF“), also available under the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at www.canopyrivers.com/investors.

[1]

Based on the closing price of the TerrAscend common shares on the Canadian Securities Exchange as of November 6, 2020 and assuming the conversion of all exchangeable shares and common share purchase warrants in the capital of TerrAscend held by Canopy Rivers. These instruments are not currently convertible or exercisable, and will not be convertible or exercisable until the earlier of: (i) federal legalization of permissibility in the United States regarding the general cultivation, distribution and possession of marijuana in the United States, and (ii) the stock exchange(s) on which securities of Canopy Rivers or its affiliates are listed, if any, permit listed issuers to invest in entities that are engaged in the cultivation, distribution or possession of marijuana in states within the United States where it is legal to do so.

[2]

The financial highlights in this summary are presented in CA$ thousands.

[3] 

Based on the closing price of the TerrAscend common shares on the Canadian Securities Exchange as of November 6, 2020 and assuming (i) the conversion of all exchangeable shares in the capital of TerrAscend held by Canopy Rivers. These exchangeable shares are not currently convertible and will not be convertible until the earlier of: (A) the date that federal laws regarding the cultivation, distribution and possession of marijuana in the United States are changed, such that TerrAscend is fully compliant with federal regulation in the United States; and (B) the stock exchange(s) on which securities of Canopy Rivers or its affiliates are listed have amended its policies to permit listed issuers to invest in entities that are engaged in the cultivation, distribution or possession of marijuana in the states in the United States where it is legal to do so; and (ii) the exercise of all common share purchase warrants in the capital of TerrAscend held by Canopy Rivers. These warrants are not currently exercisable and will not be exercisable until similar events occur.
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Mikra Announces Partnership with Virun NutraBiosciences Inc. and Releases CELLF 2.0

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IM Cannabis Reports First Quarter Financial Results

Published

4 days ago

on

May 8, 2024

By

im-cannabis-reports-first-quarter-financial-results

IMC prepares for accelerated growth after legalization in Germany and recovers from the impact of the Israel-Hamas war.

TORONTO and GLIL YAM, Israel, May 8, 2024 /PRNewswire/ — IM Cannabis Corp. (the “Company” or “IMC“) (NASDAQ: IMCC) (CSE: IMCC), an international medical cannabis company, announced its financial results today for the first quarter ended March 31, 2024. All amounts are reported in Canadian dollars and compared to the quarter ended March 31, 2023, unless otherwise stated.

Q1 2024 Financial Highlights

  • 13% Revenue increase vs. Q4 2023 of $12.1M vs. $10.7M and 4% decrease vs. Q1 2023 of $12.5M

 

  • 125% Gross profit increase vs. Q4 2023 of $1.8M vs. $0.8 and 39% Gross profit decrease vs. Q1 2023 of $2.9M

 

  • 29% decrease in operating expenses vs. Q1 2023 excluding the one-time Oranim revoke related losses of $4.6M vs. $6.5M and 14% increase including Oranim

 

  • 12% increase of Non-IFRS Adjusted EBITDA loss to $2.1M

Operational Highlights

The Company intends to complete a non-brokered private placement (the “Offering“) of secured convertible debentures of the Company (each, a “Debenture“) for aggregate proceeds of up to C$2,500,000. The Debentures will mature on the date that is 12 months from the date of issuance and will not incur interest except in the event of default. The Debentures are being issued to holders of short term loans and obligations owed by the Company or its wholly owned subsidiaries. The principal of the Debenture may be converted into common shares in the Company (each, a “Share“) at a conversion price of $1.08 per Share.

Management Commentary 

“With the April 1st cannabis legalization in Germany, we are augmenting our focus and resources on the German market, where we expect to see the biggest growth potential, and the best return on investment. While it is still too early to make any predictions, our sales in Germany almost doubled during the month of April,” said Oren Shuster, Chief Executive Officer of IMC. “Looking back on the first month post legalization in Germany, I see that we have the infrastructure and the supply agreements in place to continue delivering the accelerated growth we have already seen in April. We will also ensure that we have the necessary resources in place for success.”   

“In 2023 we completely restructured, becoming a very lean and agile company, leaning into active cost management. This process is reflected in the numbers, our G&A decreased 27% vs Q1 2023” said Uri Birenberg, Chief Financial Officer of IMC. “While our results have recovered from the impact of the Israel-Hamas war, our revenue was still effected by both an unfavorable exchange rate, as well as price reductions to sell off inventory.”

Q1 2024 Conference Call 

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

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

Q1 2024 Financial Results

  • Revenues for the first quarter of 2024 were $12.1 million compared to $12.5 million in the first quarter of 2023, a decrease of 3%. The decrease is mainly due an exchange rate effect of about $0.2 million and decrease in avg. price per sale due to increased competition.

 

  • Gross profit for the first quarter of 2024 was $1.8 million, compared to $2.9 million in Q1 2024, a decrease of 39%. The downside is attributed mainly to the slow-moving stock that was moved out at a lower price and an exchange rate difference totaling $0.4 million and $0.64 million cost of sales loss due to an inventory erase of the slow-moving stock. Company fair value adjustment was $0 and $0.4 million for the Q1 2024 and Q1 2023 respectively.

 

  • Total Dried Flower sold in Q1 2024 was approximately 1,873 kg with an average selling price of $5.68 per gram, compared to approximately 1,842kg in Q1 2023, with an average selling price of $6.59 per gram. This difference is mainly due to increased competition within the retail segment, and mid-range stock discounts to move out slow moving stock.

 

  • Total operating expenses in Q1 2024 were $7.4 million compared to $6.5 million in Q1 2023. The increase is due to the other operating expenses related to Oranim Deal revoke, with an expected losses of $2.8 million. Adjusting for this one-time losses, Q1 2024 operating expenses were $4.6 million compared to $6.5 million in Q1 2023, a decrease of 29%.

 

  • G&A Expenses in Q1 2024 were $2.3 million, compared to $3.2 million in Q1 2023, a decrease of 28%. The decrease in the G&A expense is attributable mainly to salaries and professional services of $0.64 million.

 

  • Selling and Marketing Expenses in Q1 2024 were $2.3 million, compared to $2.8 million in Q1 2023, a decrease of 18% mainly due to a decrease in Salaries and professional services of $0.5 million.

 

  • Net Loss from continuing operations in Q1 2024 was $6.0 million, compared to $0.9 million in Q12023.

 

  • Basic and diluted Loss per Share in Q1 2024 was $0.42, compared to a loss of $0.05 per Share in Q1 2023.

 

  • Non-IFRS Adjusted EBITDA loss in Q1 2024 was $2.1 million, compared to an Adjusted EBITDA loss of $1.9 million in Q1 2023 an increase of 10%.

 

  • Cash and Cash Equivalents as of March 31, 2024, were $1.0 million compared to $1.8 million in December 31, 2023.

 

  • Total assets as of March 31, 2024, were $41.1 million, compared to $48.8 million in December 31, 2023, a decrease of 16%. The decrease is mainly attributed to the goodwill reduction due to Oranim agreement cancelation of about $2.8M, a reduction in Inventory of $2.1 million, reduction of Cash and cash equivalents of $0.8M and reduction in Trade payables of $1.2 million.

 

  • Total Liabilities as of March 31, 2024, were $32.8 million, compared to $35.1 in December 31, 2023, a decrease of about 7%. The decrease was mainly due to the reduction in other accounts payables and accrued expenses of $1.8 million and reduction in the PUT option liability of $0.7 million.

 

The Company’s financial statements as of March 31, 2024 includes a note regarding the Company’s ability to continue as a going concern. The Company’s Q1 2024 financial results do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. For more information, please refer to the “Liquidity and Capital Resources” and “Risk Factors” sections in the Company’s management’s discussion and analysis for the quarter ended March 31, 2024.

Non-IFRS Measures

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

For an explanation of how management defines Gross Margin and Adjusted EBITDA, see the Company’s management’s discussion and analysis for the period ended March 31, 2024, available under the Company’s SEDAR+ profile at www.sedarplus.ca on EDGAR at www.sec.gov/edgar.
We reconcile these non-IFRS financial measures to the most comparable IFRS measures as set out below.

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

March 31,
2024

December 31,
2023

Note

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$           1,048

$           1,813

Trade receivables

6,506

7,651

Advances to suppliers

780

936

Other accounts receivable

3,732

3,889

Inventories

3

7,901

9,976

19,967

24,265

NON-CURRENT ASSETS:

Property, plant and equipment, net

4,939

5,058

Investments in affiliates

2,078

2,285

Right-of-use assets, net

1,243

1,307

Intangible assets, net

5,440

5,803

Goodwill

7,442

10,095

21,142

24,548

Total assets

$          41,109

$          48,813

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

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Canadian Dollars in thousands

March 31,
2024

December 31,
2023

Note

(Unaudited)

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

 

Trade payables

$      9,511

$      9,223

Bank loans and credit facilities

11,941

12,119

Other accounts payable and accrued expenses

4,440

6,218

Accrued purchase consideration liabilities

2,165

2,097

PUT Option liability

1,967

2,697

Current maturities of operating lease liabilities

461

454

30,485

32,808

NON-CURRENT LIABILITIES:

 

Warrants measured at fair value

4

137

38

Operating lease liabilities

744

815

Long-term loans

401

394

Employee benefit liabilities, net

96

95

Deferred tax liability, net

902

963

2,280

2,305

Total liabilities

32,765

35,113

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:

5

Share capital and premium

253,887

253,882

Translation reserve

1,399

95

Reserve from share-based payment transactions

9,664

9,637

Accumulated deficit

(255,431)

(249,145)

Total equity attributable to equity holders of the Company

9,519

14,469

 Non-controlling interests

(1,175)

(769)

Total equity

8,344

13,700

Total liabilities and equity

$  41,109

$     48,813

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

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME (UNAUDITED)

Canadian Dollars in thousands, except per share data

Three months ended

March 31,

Note

2024

2023 (*)

Revenues

$      12,063

$      12,529

Cost of revenues

10,274

9,286

Gross profit before fair value adjustments

1,789

3,243

Fair value adjustments:

Realized fair value adjustments on inventory sold in the period

(10)

(339)

Total fair value adjustments

(10)

(339)

Gross profit

1,779

2,904

General and administrative expenses

2,332

3,175

Selling and marketing expenses

2,292

2,805

Restructuring expenses

–

283

Share-based compensation

32

258

Other operating expenses

9

2,753

–

Total operating expenses

7,409

6,521

Operating loss

5,630

3,617

Finance income

4

(14)

3,530

Finance expense

(487)

(795)

Finance income, net

(501)

2,735

Gain (loss) before income taxes

(6,131)

(882)

Income tax benefit

(111)

(16)

Net )loss( gain

(6,020)

(866)

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

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

67

36

Exchange differences on translation to presentation currency

1,330

(562)

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

1,397

(526)

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

Adjustments arising from translating financial statements of foreign operation

(35)

155

Total other comprehensive income (loss) that will be reclassified to profit or loss
 in subsequent periods

(35)

155

Total other comprehensive income (loss)

1,362

(371)

Total comprehensive loss

$       (4,658)

$       (1,237)

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME (UNAUDITED)

Canadian Dollars in thousands, except per share data

Three months ended

March 31,

Note

2024

2023 (*)

Net income (loss) attributable to:

Equity holders of the Company

(5,623)

(600)

Non-controlling interests

(397)

(266)

$       (6,020)

$           (866)

Total comprehensive income (loss) attributable to:

Equity holders of the Company 

(4,252)

(959)

Non-controlling interests 

(406)

(278)

$       (4,658)

$       (1,237)

Net income (loss) per share attributable to equity holders of the Company: 

7

Basic and diluted (loss) gain per share (in CAD)

$           (0.42)

$           (0.05)

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

Basic and diluted (loss) gain per share (in CAD)

$         (0.42)

$          (0.05)

(*) See note 1 regarding figures disclosure.

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

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Canadian Dollars in thousands

Three months ended

March 31,

2024

2023 (*)

Cash provided by operating activities:

Net income (loss) for the period

$    (6,020)

$          43

Adjustments for non-cash items:

Fair value adjustment on sale of inventory

10

339

Fair value adjustment on Warrants, investments and accounts receivable

100

(3,636)

Depreciation of property, plant and equipment

147

174

Amortization of intangible assets

452

456

Depreciation of right-of-use assets

118

179

Impairment of goodwill

2,753

–

Finance expenses, net

401

635

Deferred tax liability, net

(69)

(150)

Share-based payment

32

258

Restructuring expense

–

283

3,944

(1,462)

Changes in working capital:

Decrease (increase) in trade receivables

1,332

1,937

Decrease (increase) in other accounts receivable and advances to suppliers

159

(940)

Decrease (increase) in inventories, net of fair value adjustments

2,159

90

Decrease (increase) in trade payables

663

(6,021)

Changes in employee benefit liabilities, net

–

(22)

Increase in other accounts payable and accrued expenses

(2,745)

(14)

1,568

(4,970)

Taxes (paid) received

(121)

328

Net cash used in operating activities

(629)

(6,061)

Cash flows from investing activities:

Purchase of property, plant and equipment

(2)

(411)

Payment of purchase consideration

–

(56)

Net cash used in investing activities

$            (2)

$        (467)

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

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Canadian Dollars in thousands

Three months ended

March 31,

2024

2023

Cash flow from financing activities:

   Proceeds from issuance of share capital, net of issuance costs

176

825

   Proceeds from issuance of warrants

(176)

7,027

   Repayment of lease liability

(118)

(175)

   Interest paid – lease liability

(15)

(18)

   Receipt (repayment) of bank loan and credit facilities

(2,856)

(1,046)

   Cash paid for interest

(444)

(56)

   Proceeds from discounted checks

2,581

Net cash (used in) provided by financing activities

(852)

6,557

Effect of foreign exchange on cash and cash equivalents

718

(1,059)

Decrease in cash and cash equivalents

(765)

(1,030)

Cash and cash equivalents at beginning of the period

1,813

2,449

Cash and cash equivalents at end of the period

$      1,048

$     1,419

Supplemental disclosure of non-cash activities:

Right-of-use asset recognized with corresponding lease liability

$           40

$          49

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

$              –

$        222

(*) See note 1 regarding Figures disclosure.

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

 

About IM Cannabis Corp.

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

The IMC ecosystem operates in Israel through Focus Medical Herbs Ltd., which imports and distributes cannabis to medical patients, leveraging years of proprietary data and patient insights. The Company also operates medical cannabis retail pharmacies, online platforms and logistical hubs in Israel that enable the safe delivery and quality control of IMC products throughout the entire value chain. In Germany, the IMC ecosystem operates through Adjupharm GmbH, where it distributes cannabis to pharmacies for medical cannabis patients. The Company also  operated in Canada through Trichome Financial Corp and its wholly owned subsidiaries. The Company has exited operations in Canada and considers these operations as discontinued.

Disclaimer for Forward-Looking Statements

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

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

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

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

Company Contact: 

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

Oren Shuster, CEO
IM Cannabis Corp.
+972-77-3603504

Logo – https://mma.prnewswire.com/media/1742228/IM_Cannabis_Logo.jpg

 

Cision View original content:https://www.prnewswire.co.uk/news-releases/im-cannabis-reports-first-quarter-financial-results-302139688.html

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