IM Cannabis
IM Cannabis has become the latest major Israeli cannabis company to announce plans to depart the industry altogether and sell off its remaining assets.
Last week, IMC announced in a press release that it has signed a ‘non-binding term sheet’ with Israel-based Kadimastem to complete a ‘reverse merger’ which would effectively combine the two businesses.
Should the deal go ahead as planned, the new combined entity (Cadimastem) will ‘change its business from medical cannabis to biotechnology’, a market in which Kadimastem is already well embedded.
IMC shareholders would hold just 12% of the newly combined entity, whereas shareholders of the Tel Aviv Stock Exchange-listed Kadimastem would hold 88% of the common shares of the resulting issuer.
Furthermore, Kadimastem is set to lend IMC $650,000 with an annual interest rate of 9%. The stated purpose of the loan is to facilitate the preparation of IMC’s medical cannabis assets for potential sale, as outlined by both companies.
The remaining assets of IMC’s ‘legacy business’, which according to the Israeli Cannabis Magazine consist of three cannabis pharmacy businesses and a cannabis trading house, will now go up for sale via a tender process.
The proceeds of the sale will reportedly go towards settling debts, and ‘the remaining balance, if any’, will be distributed to stakeholders.
“We have been looking for a way to deliver maximum value for our shareholders in the current situation and believe that a reverse merger with Kadimastem will provide this,” said Oren Shuster, CEO of IMC.
“With its focus on clinical stage cell therapy, and an FDA approval for a Phase IIa clinical trial, we believe that Kadimastem has tremendous potential.”
It comes as the company continues to pursue a strategy of cost management and margin improvement amid falling revenues and consistent losses into the millions of dollars.
In the three months to September 30, 2024, its most recently published financial figures, IMC saw revenues dip from $14.2m to $12.4m sequentially, a drop of 13%.
Its net losses for the same period came to $2.1m, a significant decline from the $4.5m loss seen a year earlier.
IMC is just the latest Israeli cannabis company to announce its departure from the industry over the past 18 months as companies continue to struggle to turn a profit.
Of the 15 Israeli cannabis companies publicly traded on the stock exchange at the beginning of 2022, four had either left or announced their intention to leave by the end of the year.
This included the planned withdrawal of Panaxia, one of the most prominent players in Israel, from the public market and Israeli cannabis market altogether in December.
In March 2023, Business of Cannabis reported that ‘more than 50%’ of Israeli companies were expected to have gone bust or been acquired within two years.
