Mr. Oren Shuster reports

IM CANNABIS REPORTS SECOND QUARTER FINANCIAL RESULTS

IM Cannabis Corp. has released its financial results today for the second quarter (Q2) ended June 30, 2024. All amounts are reported in Canadian dollars and compared with the quarter ended June 30, 2023, unless otherwise stated.

Q2 2024 financial highlights:

• 12-per-cent revenue increase to $14.8-million, versus $13.2-million in Q2 2023;
• 129-per-cent increase in IM Cannabis Germany sales versus Q2 2023 to $3.5-million. IM Cannabis Germany sales now make up 24 per cent of the entire company revenue, a growth of 105 per cent versus Q2 2023;
• 78-per-cent decrease in GM versus 26 per cent in Q2 2023 to 6 per cent, mainly caused by inventory clearance of $800,000, plus an accrual of $1.1-million for slow-moving stock;
• 29-per-cent decrease in operating expenses to $3.7-million, versus $5.2-million in Q2 2023.

Management commentary

"The German market is not just poised to start delivering significant growth after the April 1 cannabis legalization, we can already see the impact the legalization has had on our German business. We were well positioned to take advantage of the growing market and delivered a 200-per-cent increase in sales in Q2," said Oren Shuster, chief executive officer of IM Cannabis. "We are actively making sure that we are allotting the resources and support the German business needs to deliver further accelerated growth."

"Our revenue in Q2 increased by 12 versus Q2 2023. This growth was driven in part by the 200-per-cent Germany [growth] in Q2 versus Q1 2024. Our selling price per gram of dried flower also increased 21 per cent versus Q2 2023 to $6.09 per gram. In addition, our operating expenses continued to decrease by 29 per cent versus Q2 2023, as a result of last year's restructuring," commented Uri Birenberg, chief financial officer of IM Cannabis. "Conversely, we cleared old raw material and accrued for slow-moving stock for total of about $1.9-million, which impacted our cost of sales, gross margin and gross profit."

Q2 2024 conference call

The company will host a Zoom conference call today at 9 a.m. ET to discuss the results, followed by a question-and-answer session for the investment community. Investors are invited to register on-line. All relevant information will be sent upon registration. If you are unable to join the company live, a recording of the call will be available on the company's website within 24 hours after the call.

Q2 2024 financial results:

• Revenue for the second quarter of 2024 was $14.8-million, compared with $13.2-million in Q2 2023, an increase of $1.6-million or 11.7 per cent. The increase is mainly attributed to accelerated growth in Germany revenue of $2-million net and decreased net revenue in Israel of $400,000, which consists of Oranim deal cancellation effect in decreased revenue of $2.4-million.
• Total dried flower sold in Q2 2024 was approximately 2,333 kilograms (kg), with an average selling price of $6.09 per gram, compared with approximately 2,128 kg in Q2 2023, with an average selling price of $5.04 per gram, which is an increase of 21 per cent.
• Cost of revenue for Q2 2024 was $13.9-million, compared with $9.5-million in Q2 2023, an increase of $4.4-million or 46.6 per cent, mainly due to an increase in company revenue related costs of approximately $2.5-million, clearing of old raw materials of approximately $800,000 and accrued for slow inventory of approximately $1.1-million.
• Gross profit for the second quarter of 2024 was $800,000, compared with $3.5-million in Q2 2023, a decrease of 75.6 per cent. The downside is attributed mainly to the clearing of old inventory, accrual for slow-moving inventory of approximately $1.9-million and slow-moving stock that was moved out at a lower price. The company fair value adjustment was $0 and $300,000 for the Q2 2024 and Q2 2023, respectively.
• G&A (general and administrative) expenses in Q2 2024 were $2.2-million, compared with $2.4-million in Q2 2023, a decrease of $200,000 or 9.5 per cent. The decrease in the G&A expense is attributable mainly to insurance of approximately $200,000.
• Selling and marketing expenses in Q2 2024 were $1.5-million, compared with $2.6-million in Q2 2023, a decrease of $1.1-million or 44 per cent, mainly due to the revocation of Oranim agreement of $600,000, and a decrease in salaries and professional services of $400,000.
• Total operating expenses in Q2 2024 were $3.7-million, compared with $5.2-million in Q2 2023, a decrease of $1.5-million or 29 per cent, mainly due to a decrease in salaries of approximately $400,000, insurance of $200,000, depreciation expenses of $300,000 and professional services of $200,000.
• Net loss in Q2 2024 was $3.5-million, compared with $3.7-million in Q2 2023.
• Basic and diluted loss per share in Q2 2024 was 23 cents, compared with a loss of 26 cents per share in Q2 2023.
• Non-IFRS (international financial reporting standards) adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss in Q2 2024 was $2.3-million, compared with an adjusted EBITDA loss of $500,000 in Q2 2023, a loss increase of 357 per cent.
• Cash and cash equivalents as of June 30, 2024, were $700,000, compared with $1.8-million on Dec. 31, 2023.
• Total assets as of June 30, 2024, were $40.2-million, compared with $48.8-million on Dec. 31, 2023, a decrease of $8.6-million or 17.6 per cent. The decrease is mainly attributed to the Oranim agreement cancellation of $9.5-million, of which mainly attributed to: goodwill, $3.5-million; intangible asset, $1.4-million; inventory, $800,000; trade receivables, $1.3-million; and property, plant and equipment, $800,000, and a eduction of cash and cash equivalents of $300,000. In addition to the Oranim revocation agreement effect, there is a total asset increase of $900,000, mainly due to an increase of $5.8-million in trade receivables, offset by a $3.4-million reduction in inventory, a reduction of cash and cash equivalents of $800,000, and a reduction of $700,000 in intangible assets.
• Total liabilities as of June 30, 2024, were $34.7-million, compared with $35.1-million on Dec. 31, 2023, a decrease of $400,000 or 1.1 per cent. The decrease was mainly due to the Oranim agreement cancellation of $6.8-million, of which mainly attributed to a decrease in put option liability in the amount of $2.0-million, a decrease in purchase consideration payable in the amount of $2.2-million, a decrease of $1.6-million in trade payables, a decrease of $400,000 in lease liabilities and a decrease of $300,000 in deferred tax liability. In addition to the Oranim revocation agreement effect, there is a total liabilities increase of $6.4-million, mainly due to an increase of $6.2-million in trade payables, offset by a $1.7-million reduction in other accounts payable. The company's financial statements as of June 30, 2024, includes a note regarding the company's ability to continue as a going concern. The company's Q2 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 June 30, 2024.

Non-IFRS measures

This news 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 with similar measures presented by other companies. These measures are provided as complementary information to the company's IFRS measures by providing further understanding of the company's results of operations from management's perspective. Accordingly, these measures should neither be considered in isolation nor as a substitute for analysis of the company's financial information reported under IFRS.

About IM Cannabis Corp.

IM Cannabis 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 IM Cannabis 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, on-line platforms and logistical hubs in Israel that enable the safe delivery and quality control of IM Cannabis products throughout the entire value chain. In Germany, the IM Cannabis ecosystem operates through Adjupharm GmbH, where it distributes cannabis to pharmacies for medical cannabis patients.

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