IM Cannabis Revenue Grows 78% YoY, What About Debt?

IM Cannabis Corp. IMCC IMCC Q3 2022 revenues were CA$14.2 million ($10.7 million), compared to CA$8.0 million on Q3 2021, an increase of 78%, representing a 12% sequential organic growth. The increase in revenues is primarily attributed to the increase in the quantity of medical cannabis products sold, as well as from the higher average selling price per gram the company realized from its portfolio of branded cannabis products in Israel.

Q3 2022 Financial Results

• Gross profit, before fair value adjustments, for Q3 2022 was CA$2.8 million, compared to CA$2.0 million in Q3 2021, an increase of 39%.

• Gross Margin, before fair value adjustments, for Q3 2022 was 20%, compared to 25% in Q3 2021.

• Adjusted EBITDA loss from continuing operations in Q3 2022 was CA$3.7 million, compared to an adjusted EBITDA loss of CA$2.3 in Q3 2021.

• Net loss from continuing operations for Q3 2022 was CA$4.5 million, compared with net income of CA$800,000 in Q3 2021.

• Net loss from discontinued operations for Q3 2022 was CA$123.6 million, compared with a loss of CA$6.5 million in Q3 2021. This decrease was primarily due to the goodwill impairment of Trichome in the amount of CA$107.9 million.

• Cash and cash equivalents as of September 30, 2022 were CA$3.2 million compared with CA$13.9 million on December 31, 2021.

• By commencing the exit from the Canadian market, the company has been able to reduce its debt level. Debt from continuing operations for September 30, 2022 was CA$5.1 million, representing a decrease of approximately 57%.

Q3 2022 Highlights

• Canadian restructuring efforts continued with the decision to seek a sale of the company's Canadian operations in September 2022. On November 7, 2022, the company announced that it was commencing an exit of the Canadian cannabis market to focus its resources on pursuing growth opportunities in Israel, Germany and Europe. Trichome and certain of its wholly-owned subsidiaries, filed for and obtained creditor protection under the Canadian Companies' Creditors Arrangement Act. The CCAA proceedings are solely in respect of Trichome. As such, the company's other assets or subsidiaries, including those in Israel and Germany, are not parties to the CCAA proceedings.

• Trichome's assets and associated liabilities are classified as "held for sale" in the consolidated statement of financial position as of September 30, 2022 and as "discontinued operations" in the consolidated statements of profit or loss and other comprehensive income for all periods presented.

• Total assets as of September 30, 2022 were CA$129.1 million compared to CA$287.4 million as of December 31, 2021, representing a decrease of CA$158.3 million or 55%. This decrease in the company's total assets was primarily due to the goodwill impairment of Trichome in the amount of CA$107.9 million.

Share Consolidation

The company will be consolidating all of its issued and outstanding common shares on the basis of one post-consolidation common share for each ten pre-consolidation common shares. The objective of the consolidation is to enable the company to regain compliance with the minimum bid price requirement set forth in the listing rules of The Nasdaq Stock Market LLC and maintain its listing on the Nasdaq Capital Market.

The company's board of directors approved the consolidation and it is expected that the common shares will commence trading on a post-consolidation basis on the Canadian Securities Exchange and NASDAQ on or about November 17, 2022.

Assuming the consolidation is completed, the existing 75.7 million common shares will be reduced to approximately 7.57 million common shares, subject to adjustments for rounding purposes. No fractional common shares will be issued. Any fractional interest in common shares that is less than 0.5 of a common share resulting from the consolidation will be rounded down to the nearest whole common share and any fractional interest in common shares that is 0.5 or greater of a common share will be rounded up to the nearest whole common share.

Price Action

IM Cannabis shares were trading 3.05% higher at $0.4120 per share at the time of writing Monday morning.

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Photo by Mackenzie Marco on Unsplash

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