Facility Damage and Recovery - The Southern Facility suffered significant damage due to attacks from Hamas, and the company is currently in the process of restoring it as part of its war recovery plan[48]. - The company experienced significant damage to its Southern Facility due to attacks from Hamas, which has been designated as a closed military area by Israeli authorities[105]. - The Southern Facility in Nir Oz suffered extensive destruction, resulting in the near-total devastation of cultivation areas, greenhouses, irrigation systems, and electrical infrastructure, rendering it completely inoperative and uninhabitable[170]. - The company is in the process of restoring the Southern Facility as part of its war recovery plan and is working with Israeli authorities to obtain full compensation for the damages[105]. - As of the date of the Annual Report, the Company has received tens of millions of shekels as advance payments from Israeli authorities for damages caused by the terrorist attack and the war in Gaza[172]. - The Company secured NIS 66 million (approximately $18.2 million) in financing to support the recovery of the Southern Facility, with potential total proceeds of approximately NIS 107 million (approximately $29.8 million) if warrants are fully exercised[172]. - The ongoing war has led to the absence of personnel in Israel, but as of the report date, all personnel except those at the Southern Facility have returned to full capacity[170]. - The intensity and duration of the current war against Hamas and its economic implications remain unpredictable, with potential adverse effects on the Company's operations[173]. - The Company is entitled to full compensation for damages under Israeli law, and management is actively working with authorities to secure this compensation[172]. Regulatory and Compliance Challenges - The company is dependent on regulatory approvals and licenses for the production and distribution of pharmaceutical-grade cannabis products, which are subject to ongoing compliance requirements[39]. - The medical-use cannabis industry is highly regulated, and changes in laws or regulations could materially affect the company's operations[36]. - The company is subject to various U.S. and foreign laws regarding cannabis production and distribution, which could lead to significant fines or penalties if violated[75]. - The company may face increased legal and financial compliance costs due to changing laws and regulations, which could divert management's focus from revenue-generating activities[123]. - Regulatory uncertainties, such as proposed anti-dumping duties of 175% on imports from Canada, could increase costs and impact pricing dynamics in the Israeli medical cannabis market[68][69]. - The company is subject to risks related to the protection and enforcement of intellectual property rights, which could adversely affect its ability to commercialize products[35]. - The company has submitted trademark applications in multiple jurisdictions, including Israel, Canada, the U.S., and EU member states, to protect its intellectual property rights[152]. - The company has obtained protected breeding rights for five unique genetics in Israel and is pursuing additional rights in various jurisdictions[153]. - The company relies on trade secret protection and confidentiality agreements to safeguard its proprietary technologies and products[154]. - The company may face challenges in obtaining and maintaining effective protections for its intellectual property rights, which could harm its competitive position[157]. Financial Performance and Risks - The company experienced negative cash flow from operating activities for the years ended December 31, 2024 and December 31, 2023, following positive cash flow in 2022 and 2021, primarily due to the impacts of the October 7, 2023 attacks and the subsequent war in Gaza on its Southern Facility[84]. - Economic conditions, including inflation and geopolitical events, may adversely affect the company's operating results and financial condition, potentially leading to slower sales cycles and increased price competition[55]. - The company is exposed to risks related to inflation, which could raise costs for commodities, labor, and materials, impacting financial condition and cash flows[56]. - The company may continue to finance its growth with debt, which could increase its debt levels above industry standards[120]. - The company incurs increased costs due to operating as a public company listed on both U.S. and Israeli securities exchanges, impacting its financial condition[121]. - The company may face challenges in attracting and retaining key personnel necessary for its continued growth and operational success[99]. - The company may face adverse impacts on financial results due to its equity compensation plan, which could create volatility in financial statements[144]. - Legal proceedings may arise, potentially leading to substantial defense and settlement costs, which could adversely affect the company's financial position[146]. Market and Competitive Landscape - The company anticipates competition from both licensed producers and unregulated market participants, which may affect market share and revenue[65][71]. - The company must build brand awareness and invest in production capacity to compete effectively in the medical-use cannabis industry[63]. - The success of the company's business model depends on the continued growth of the medical-use cannabis market and its ability to attract and retain patients[62]. - The company is classified as an emerging growth company and can rely on exemptions from certain disclosure requirements until December 31, 2026, or until it exceeds $1.235 billion in total annual gross revenue[125]. - The company is continuously seeking new strategic agreements for distribution partnerships in target markets, despite some previous agreements becoming invalid[221]. - The company is establishing joint ventures and distribution arrangements in the EU and Canada to expand its global production and distribution capabilities[221]. - The company operates 28 pharmacies across Israel, the UK, and Austria, with 25 already possessing permits for distributing medical cannabis[223][224]. - In July 2024, the company completed the acquisition of Leon Pharm, enhancing its presence in the medical cannabis pharmacy sector in Israel[225]. Operational Challenges - The company may face operational challenges and liquidity risks due to potential future resurgences of COVID-19 or other pandemics, which could disrupt normal business operations and access to capital[52]. - The company relies on joint ventures for production and distribution outside of Israel, facing risks if partners fail to meet obligations[86]. - The company depends on third-party transportation services for product distribution, and any disruptions could materially affect sales volumes[91]. - The company may face product recalls due to contamination or quality assurance concerns, which could incur significant costs and damage its reputation[93]. - The company is exposed to potential liability from fraudulent or illegal activities by employees and contractors, which could harm its reputation and financial condition[100]. - The company may not be able to manage its expanding operations effectively, which could hinder its ability to meet demand and achieve profitable operations[118]. - The company is subject to operational risks, including potential disruptions from inadequate technology or external events, which could lead to financial loss or reputational damage[137]. Production Capacity and Future Growth - The company has two main production facilities: the Northern Facility and the Southern Facility, aimed at increasing production capabilities and expanding global distribution[215]. - The Southern Facility in Kibbutz Nir Oz has a gross area of 1.7 million square feet, with 600,000 square feet currently in use, producing 7 to 10 tons of cannabis annually[216]. - The company aims to triple the capacity of the Southern Facility, potentially allowing for the production of approximately 88 tons of pharmaceutical-grade cannabis per year once fully operational[219]. - The Northern Facility has a gross area of 55,000 square feet, capable of producing up to 3 tons of pharmaceutical-grade cannabis annually, with plans to expand to 160,000 square feet, increasing total capacity to 10 tons[220]. - The company’s future growth is dependent on its ability to develop and commercialize its production know-how and expand its distribution network in regulated markets[215]. - The company has not completed any clinical trials using cannabis or cannabis-based products to date, and future trials may be expensive and time-consuming[50]. - The company has received IMCA feasibility approval to initiate nine clinical trials, with one phase 3 trial currently underway, although recruitment has faced delays due to COVID-19[226].

Core Viewpoint - InterCure Ltd. announces the resignation of Mr. Ehud Barak as Chairman of the Board, effective February 13, 2025, with Mr. Alexander Rabinovich succeeding him as Chairman [1][2] Group 1: Leadership Changes - Mr. Ehud Barak, marking his 83rd birthday, steps down after six years of service, pursuing personal endeavors [2] - Mr. Alexander Rabinovich, who has been CEO for the past five years, will take over as Chairman, having led the company to significant profitable growth and strategic partnerships [1][5] Group 2: Financial Developments - InterCure completed a financing round securing NIS 66 million (approximately $18.2 million) to support the recovery of the Nir Oz Facility, with potential proceeds increasing to NIS 107 million (approximately $29.8 million) if warrants are fully exercised [3] - Key shareholders, including the CEO and lead investors, participated in the financing, which also included a loan agreement from a leading Israeli bank [3] Group 3: Recovery and Growth Strategy - The company is executing a war recovery plan to restore the Nir Oz facility, re-launch products, and rebuild its pharmaceutical cannabis portfolio [4] - InterCure aims to complete rehabilitation of the Nir Oz facility and secure compensation for war-related damages, which is essential for returning to profitable growth [5] - The company is focused on expanding international operations in Germany, the UK, and Australia, leveraging its successful financing round to reinforce its market position [5][7]

Core Viewpoint - InterCure Ltd. has secured funding commitments totaling NIS 66 million (approximately USD 18.2 million), which may increase to NIS 107 million (approximately USD 29.8 million) to support the recovery and expansion of its operations post-war [10][11]. Funding and Investment - The company received a binding commitment from a leading Israeli bank for a loan of NIS 30 million (approximately USD 8.3 million) for up to 24 months, contingent on closing conditions including a private placement [1]. - Key shareholders, including CEO Alexander Rabinovich, Yaron Yakobi, and Tzahi Hagag, are committing to invest in the company, resulting in each holding over 5% of the company's share capital post-investment [3]. - The private placement involves issuing 7,349,896 ordinary shares at a price of NIS 4.83 (approximately USD 1.34) per share, with potential additional proceeds of up to NIS 77 million (approximately USD 21.5 million) if warrants are fully exercised [3]. Recovery and Growth Strategy - The funding will enable the company to complete post-war recovery processes and return to profitable growth, including expanding international operations in Germany, the UK, and Australia [2][11]. - The company is working closely with Israeli authorities to receive additional substantial payments for war-related damages, which will further support its recovery efforts [4][17]. - InterCure aims to double its production capacity in Israel and enhance its product portfolio using advanced technologies as part of its global growth strategy [12]. Market Position - InterCure, operating as Canndoc, is recognized as the leading and fastest-growing cannabis company outside North America, with a strong distribution network and a vertically integrated "seed-to-sale" model [6].

Core Insights - InterCure Ltd. has demonstrated resilience in H1 2024, reporting revenues of 126 million NIS ($33.97 million), exceeding the estimated 121 million NIS [1] - The company is still below pre-October 2023 revenue levels of 414 million NIS due to disruptions at its southern Israeli facility occupied by the IDF [2] - InterCure's EBITDA for H1 2024 was reported at 17.6 million NIS, significantly higher than the 5 million NIS estimate, aided by government compensation for damages [4] Financial Performance - Cash reserves have decreased from 111 million NIS in December 2023 to 21 million NIS by the end of June 2024 [5] - Net debt increased from 60 million NIS to 112 million NIS during the same period, although the company has access to an unused credit line of over 22 million NIS [5] Future Outlook - InterCure is guiding for double-digit sales growth in H2 2024, with expected revenues around 140 million NIS, revised down from previous estimates of 180 million NIS [6] - The company plans to launch over 30 new GMP SKUs in collaboration with brands such as Cookies, Binske, and Organigram OGI, with Cookies products expected to be introduced in Germany by Q4 2024 [6] Stock Performance and Valuation - The stock price has declined from a peak of $3.12 in May 2024 to $1.97, yet the valuation remains attractive, trading at 1x sales and 8x EBITDA for CY25 [7] - InterCure's enterprise value is estimated at $132 million, comprising $96 million in market capitalization and $36 million in net debt [7]

Core Insights - InterCure reported revenues of NIS 126 million and an Adjusted EBITDA of NIS 21 million for the first half of 2024, representing approximately 17% of revenues, despite challenges from the October 7 terrorist attack and the ongoing war in Gaza [1][3][4] - The company has achieved profitability for 17 consecutive quarters, with both Q1 and Q2 of 2024 showing positive EBITDAs and operational profits [1][3][4] - InterCure is entitled to full compensation from Israeli authorities for damages to its Southern Facility and has received tens of millions of NIS in advance payments [1][3][4] Financial Performance - Revenue for the first half of 2024 was NIS 126 million, down from NIS 147 million in the second half of 2023, which was only partially affected by the recent conflicts [3][5] - The operating profit for the first half of 2024 was NIS 11 million, with a gross profit of NIS 40.4 million, resulting in a gross profit margin of 32% [3][5] - The company expects double-digit growth in the second half of 2024 compared to the first half, driven by product launches in Germany and the UK [1][3][4] Strategic Developments - InterCure announced an expansion of its strategic partnership with Cookies™ into the German market, with plans to launch Cookies products in Q4 2024 [1][3][4] - The company is expanding its medical cannabis pharmacy chain to a total of 24 active locations and plans to introduce over 30 new GMP SKUs in the second half of 2024 [3][4] - The restoration of the Southern Facility is ongoing, supported by advance payments from Israeli authorities, and is expected to return to full capacity in the coming quarters [1][3][4] Market Position - InterCure is recognized as the leading and fastest-growing cannabis company outside North America, leveraging a vertically integrated "seed-to-sale" model [6] - The company holds 100% of Cannolam LTD and the full rights to Cookies™ international agreements, enhancing its product offerings [3][4] - The CEO emphasized the company's commitment to providing high-quality, pharma-grade cannabis and creating shareholder value, particularly in the growing German market [4]

Company Overview - InterCure is a leading pharmaceutical/medical cannabis company based in Israel, publicly traded on Nasdaq and the Tel Aviv Stock Exchange [3] - The company is vertically integrated, involved in producing, manufacturing, and distributing GMP-compatible cannabis products [3] - InterCure's largest production facility is located near the Gaza Strip, currently partially operational due to military activities, with a pre-invasion capacity of 7 tons per year and a maximum potential of 88 tons [3] - The northern facility has a production capacity of approximately 3 tons, with a maximum of 10 tons [3] - InterCure is entitled to full compensation from the Israeli government for damages incurred due to the state of war [3] Recent Performance - Despite a challenging environment due to the Hamas attack, InterCure reported a 9% decline in revenue and EBITDA for FY 2023 compared to 2022, which exceeded preliminary estimates [6] - The stock price experienced a significant drop to an all-time low of $1 but has since recovered to $3.73, indicating market recognition of its undervaluation [8] - The company has successfully resolved legal issues with Cannolam, gaining full ownership, while another case remains active [6] Industry Developments - The pharmaceutical/medical cannabis industry is in early growth stages, with a market size estimated at approximately $3.4 billion in 2023 and a projected CAGR of 53.3% through 2030 [7] - Regulatory progress is being made, with Germany's recent removal of cannabis from the list of narcotics and anticipated rescheduling in the US [7] - InterCure is positioned to benefit from these developments, with plans to launch products in Germany and potential expansion into recreational cannabis [5][7] Valuation - InterCure's current P/S ratio is 0.98, significantly lower than the pharmaceuticals sector median of 3.55, suggesting a potential valuation closer to 2 P/S [8] - Conservative future valuation scenarios for 2030 include estimates of $374 million at 10% CAGR, $688 million at 20% CAGR, and $1.2 billion at 30% CAGR [8] - The company is currently valued at $96 million, indicating a compelling investment opportunity given its growth potential [8]

Financial Performance - Revenues for FY2023 reached NIS 356 million, with an Adjusted EBITDA of NIS 61 million, approximately 17% of revenues, compared to NIS 51 million in preliminary results [6]. - The company's operating profit was NIS 26 million, before reductions of goodwill and fixed assets of NIS 68 million due to war damage [6]. - InterCure has cash on hand of NIS 111 million and achieved positive EBITDAs for Q3 and Q4 2023, marking the fourteenth and fifteenth consecutive quarters of profitability [6]. - The October 7 terror attack impacted revenues in H2 2023, but the company anticipates resuming growth in 2024 [6]. Product Development and Launch - The company plans to launch its first products in Germany in the coming months, following recent cannabis reform [6]. - InterCure expanded its branded products portfolio by launching over 40 new GMP SKUs during 2023 [6]. Growth Strategy - InterCure expects sequential double-digit quarterly growth during 2024 [6]. - The company continues to execute its global expansion strategy, focusing on enhancing product offerings and international partnerships [7]. Operational Expansion - The company has expanded its medical cannabis pharmacy chain to a total of 24 active locations as of now [6]. - InterCure is entitled to full compensation from Israeli authorities for damages caused to its Southern Facility, having received tens of millions of NIS as advance payments [6].

Regulatory Compliance and Approvals - The company holds licenses for breeding and cultivating pharmaceutical-grade cannabis in Israel, with compliance to IMC-GAP and IMC-GSP standards[43] - Regulatory approvals are critical for the company's ability to produce, import, and distribute pharmaceutical-grade cannabis products, with ongoing compliance requirements[43] - The company has received IMCA feasibility approval to initiate nine clinical trials, with one phase 3 clinical trial commenced[54] - The company competes in a highly regulated medical-use cannabis industry, which may impact its market share and operational capabilities[38] - The company has strategic partnerships with leading brands, which depend on obtaining necessary import/export permits for cannabis products[49] - The company is subject to various laws and regulations regarding money laundering, which could disrupt operations and incur significant costs if violated[83] - The company’s licenses for cannabis-related activities may be suspended or revoked if any person acquires control of 5% or more of its outstanding shares without prior approval from the IMCA[205][206] - The company has implemented measures to ensure that no person can acquire more than 4.99% of its outstanding Ordinary Shares without prior approval from the IMCA, to mitigate risks related to its IMCA Licenses[207] Operational Challenges - The company is currently facing operational challenges due to the State of War in Israel, limiting access to the Southern Facility[53] - Since October 7, 2023, the company has limited access to its Southern Facility due to the ongoing State of War in Israel, impacting operations[113] - The Southern Facility has been designated as a closed military area, with limited access and parts of the site being used by the IDF[181] - The company has been impacted by personnel absences due to the ongoing conflict in Israel, particularly affecting the Southern Facility in Nir Oz[180] - The company may face disruptions in operations due to military service obligations of Israeli citizens, potentially affecting key employees and suppliers[188][189] - Hostilities in the region, including missile strikes against civilian targets, have negatively affected business conditions in Israel[185] - The intensity and duration of the current war against Hamas are unpredictable, which may adversely affect the company's operations and financial condition[182] Financial Performance and Risks - The company reported negative cash flow from operating activities for the year ended December 31, 2023, primarily due to the impacts of the War in Gaza, contrasting with positive cash flow in 2022 and 2021[91] - The resurgence of COVID-19 may materially affect the company's economic performance, leading to significant disruptions in global financial markets and impacting liquidity[59] - Future developments regarding COVID-19 are highly uncertain and could adversely impact the company's operations, financial performance, and ability to raise capital[60] - Economic conditions, including inflation and interest rate increases, may negatively affect sales cycles, technology adoption, and market share[62] - Increased inflation raises costs for commodities, labor, and materials, potentially impacting the company's financial condition[63] - Recent bank closures have created liquidity risks that may impair the company's ability to access working capital and could lead to market uncertainty[64] - Future revenues are difficult to forecast due to the underdeveloped medical-use cannabis market, which may lead to unanticipated reductions in revenue[90] - The company may incur increased costs due to operating as a public company in the U.S.[38] - Additional financing will be required for continued business development, and there is no assurance that such financing will be available on favorable terms[128] Market and Competitive Landscape - The company faces competition from established firms with greater resources and experience in the medical-use cannabis industry[72] - The medical-use cannabis market may not develop as anticipated, affecting the company's ability to attract and retain patients[69] - The company is exposed to currency fluctuation risks as a portion of operational expenses is incurred in currencies other than NIS[200] - The market price of the company's shares may be volatile, influenced by factors such as trading volume of comparable companies and market analyst expectations[152] - The company may face challenges in executing strategic alliances or acquisitions, which could divert management focus and incur additional costs[141] Production Capacity and Future Plans - The company aims to produce approximately 88 tons of pharmaceutical-grade cannabis annually once its Southern Facility is fully operational and all regulatory approvals are obtained[231] - The Southern Facility currently operates at a capacity of 7 tons of cannabis annually, utilizing 300,000 square feet of its 1.7 million square feet gross area[228] - The company is currently in the initial stages of plans to expand its production capacity at the Southern Facility[231] - The company does not plan to produce or distribute cannabis in the United States due to federal regulations, despite many U.S. states permitting medical use[225] Governance and Management - The CEO, Alexander Rabinovich, holds 26.6% of the company's voting power, while insiders collectively hold approximately 29% of the outstanding Ordinary Shares, indicating a high concentration of ownership[210] - The company is classified as an emerging growth company and may rely on exemptions from certain disclosure requirements for up to five years or until total annual gross revenue exceeds $1.235 billion[135] - The company is permitted to follow home country corporate governance practices, which may provide less protection to investors compared to U.S. domestic issuers[138] - Changing laws and regulations regarding corporate governance may increase compliance costs and divert management's focus from revenue-generating activities[133] - The company may incur higher costs for director and officer liability insurance due to being listed on a U.S. national securities exchange[134] Risks and Liabilities - The company may face significant liabilities from product recalls or liability claims, which could adversely affect its reputation and financial position[102] - The company is exposed to risks from fraudulent or illegal activities by employees and third parties, which could lead to significant financial penalties and reputational damage[108] - There is a risk of security breaches at facilities, which could result in product loss and increased operational costs[111] - The company faces risks inherent to agricultural businesses, including crop failure due to weather and pests, which could significantly disrupt production[87] - The shelf life of dried inflorescences is 12 months, while pharmaceutical-grade cannabis oil products last approximately one to two years, posing risks of spoilage and supply chain disruptions[88] Strategic Expansion - The company plans to expand operations in the European Union, but may face import restrictions that could require establishing local production facilities[81] - The company has experienced revenue growth in recent years, but sustaining this growth will depend on various factors, including capital availability and competition[126] - The ongoing conflict in Ukraine and related sanctions may adversely affect the company's operations and sales, although it does not rely on raw materials or revenue from that region[219]

Morsa Images InterCure Ltd. (NASDAQ:INCR) has surprisingly rallied sharply off the post October 7 lows despite not having access to a prime facility in Israel. The cannabis business likely deserves a better stock valuation, but the dust needs to settle in both the Israel cannabis market and the conflict with Hamas. My investment thesis remains Bullish on the cannabis stock, even after the double off the lows already. Source: Finviz Still Waiting No matter where in the globe, cannabis has constantly been hit ...

Financial Performance - Achieved record revenues of NIS 209 million ($75 million) for the first half of 2023, representing over 14% year-over-year growth[5] - Revenue for the six months ended June 30, 2023, was NIS 208,614 thousand, an increase of 14.3% compared to NIS 182,506 thousand in the same period of 2022[16] - Gross profit for the first half of 2023 was NIS 68 million ($24 million), representing a gross margin of 33%[5] - Gross profit for the same period was NIS 66,968 thousand, down 19.3% from NIS 83,010 thousand in 2022[16] - Operating profit decreased significantly to NIS 11,767 thousand, a decline of 68.9% compared to NIS 37,914 thousand in the previous year[16] - EBITDA for the six months ended June 30, 2023, was NIS 18,209 thousand, down 57.2% from NIS 42,543 thousand in 2022[16] - Adjusted EBITDA of NIS 30 million ($11 million) for the first half of 2023, with an EBITDA margin of 14%[5] - Basic earnings per share for the period was NIS 0.11, compared to NIS 0.64 in the same period last year[17] - Total comprehensive profit for the six months was NIS 3,817 thousand, a decrease of 87.4% from NIS 30,175 thousand in 2022[16] Cash Flow and Financial Health - Generated NIS 35 million ($13 million) cash from operations in the second quarter, with a negative cash flow of NIS 17 million ($6 million) for the first half[5] - Voluntary repayment of loans totaling NIS 86 million ($31 million) during the first half of 2023, reflecting a strong balance sheet with over NIS 116 million ($42 million) in cash[5] - Financing expenses increased to NIS 11,842 thousand, compared to NIS 6,099 thousand in the same period last year[16] Market and Product Development - Launched over 20 new SKUs during the first half of 2023, contributing to sustained market share growth[5] - Added 18 new high-demand cannabis strains to cultivation operations, expected to launch in Q3 and Q4 2023[5] - Collaboration agreement signed with Mike Tyson's cannabis brand TYSON 2.0 for exclusive rights in multiple countries[7] - New Israeli medical cannabis regulations expected to increase patient numbers and demand for products starting February 2024[7] Expenses - Research and development expenses were NIS 256 thousand, a slight decrease from NIS 338 thousand in the previous year[16] - General and administrative expenses increased to NIS 21,856 thousand, up 28.0% from NIS 16,958 thousand in 2022[16] Fair Value Changes - The company reported a loss from fair value changes realized in the current year of NIS 5,316 thousand, compared to NIS 2,270 thousand in 2022[16]