EX-99.3 4 ex99-3.htm

Exhibit 99.3

Intercure Ltd.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As of March 31, 2023

(Unaudited)

Intercure Ltd.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As of March 31, 2023

(Unaudited)

INDEX

	Page

Condensed Consolidated Interim Statements of Financial Position	3-4

Condensed Consolidated Interim Statements of Profit or Loss and Other 5 Comprehensive Income	5

Condensed Consolidated Interim Statements of Changes in Equity	6

Condensed Consolidated Interim Statements of Cash Flows	7-8

Notes to Condensed Consolidated Interim Financial Statements	9-16

Intercure Ltd.

Condensed Consolidated Interim Statements of Financial Position

		March 31		December 31
		2023		2022
	Note	NIS in thousands
Current assets
Cash and cash equivalents			106,370		232,589
Restricted cash			13,775		13,907
Trade receivables, net			58,114		36,919
Other receivables	8		111,123		97,375
Inventory	5		126,404		120,133
Biological assets	6		10,041		6,365
Financial assets measured at fair value through profit or loss	7		207		205

			426,034		507,493

Non-current assets
Property, plant and equipment and right-of-use asset			101,351		103,133
Goodwill	9		284,181		284,181
Deferred tax assets			21,548		20,635
Financial assets measured at fair value through profit or loss			2,565		2,565
Investment in associate and loan			40,000		40,000

			449,645		450,514

Total assets			875,679		958,007

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

Intercure Ltd.

Condensed Consolidated Interim Statements of Financial Position

	March 31			December 31
	2023			2022

Current liabilities
Short term loan and current maturities		75,576			126,935
Trade payables		98,964			126,067
Other payables		49,812			48,397
Contingent consideration		7,919			10,230
Short term loan from non-controlling interest		1,139			1,090

		233,410			312,719

Non-current liabilities
Long term loans		95,962			99,684
Liabilities in respect of employee benefits		882			1,025
		-
Lease liability		22,447			23,102
		119,291			123,811

Total liabilities		352,701			436,530

Equity
Share capital, premium and other reserves		633,434			632,025
Capital reserve for transactions with controlling shareholder		2,388			2,388
Receipts on account of shares		8,541			8,541
Accumulated losses		(141,435	)		(141,649	)

Equity attributable to owners of the Company		502,928			501,305

Non-controlling interests		20,050			20,172

Total equity		522,978			521,477

Total equity and liabilities		875,679			958,007

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

Intercure Ltd.

Condensed Consolidated Interim Statements of Profit or Loss and Other 5 Comprehensive Income

	Three months ended March 31,						Year ended December 31
	2023			2022			2022
	NIS in thousands

Revenue		106,175			87,229			388,684
Cost of revenue before fair value adjustments		71,052			51,372			229,727

Gross income before impact of changes in fair value		35,123			35,857			158,957

Unrealized changes to fair value adjustments of biological assets		4,203			4,855			13,054
Loss from fair value changes realized in the current year		4,999			1,328			16,928

Gross Profit		34,327			39,384			155,083

Research and development expenses		157			162			632
General and administrative expenses		11,210			8,308			36,082
Sales and marketing expenses		13,570			9,830			56,533
Other expenses, net		2,038			195			2,128
Changes in the fair value of financial assets through profit or loss, net.		(4	)		50			174
Share based payments		1,409			851			8,907

Operating Profit		5,947			19,988			50,627

Financing income		1,533			1,713			8,170
Financing expenses		5,706			2,294			14,955

Financing expenses, net		4,173			581			6,785

Profit before tax on income		1,774			19,407			43,842

Tax (expense) benefit		(1,682	)		(4,708	)		(93	)
Total comprehensive Profit (loss)		92			14,699			43,749

Attribution of net profit (loss) for the quarterly:
To the Company’s shareholders		214			13,374			44,819
To non-controlling interests		(122	)		1,325			(1,070	)
Total		92			14,699			43,749

Earnings per share
Basic earnings		0.005			0.38			0.99
Diluted earnings		0.005			0.36			0.99

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

Intercure Ltd.

Condensed Consolidated Interim Statements of Changes in Equity

	Share capital, premium and other reserves			Capital reserve for transactions with controlling shareholder		Receipts on account of shares		Accumulated losses			Equity attributable to owners of the Company			Non-controlling interests			Total equity
	NIS in thousands

As of January 1, 2023		632,025			2,388		8,541		(141,649	)		501,305			20,172			521,477

Profit (loss) for the period		-			-		-		214			214			(122	)		92
Share-based payment		1,409			-		-		-			1,409			-			1,409

As of March 31, 2023		633,434			2,388		8,541		(141,435	)		502,928			20,050			522,978

As of January 1, 2022		623,567			2,388		8,541		(186,468	)		448,028			21,384			469,412

Profit for the period		-			-		-		13,374			13,374			1,325			14,699
Settlement in cash of an obligation to issue shares		(449	)		-		-		-			(449	)		-			(449	)
Share-based payment		851			-		-		-			851			-			851

As of March 31, 2022		623,969			2,388		8,541		(173,094	)		461,804			22,709			484,513

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

Intercure Ltd.

Condensed Consolidated Interim Statements of Cash Flows

	Three months ended March 31,
	2023			2022
	NIS in thousands
Cash flows from operating activities

Profit for the period		92			14,699
Taxes paid		(2,044	)		(849	)
Adjustments required to present cash flows from operating activities (A)		(50,587	)		(10,782	)

Net cash provided (used) by operating activities		(52,539	)		*3,068

Cash flows from investing activities

Purchase of property, plant and equipment		(688	)		(6,891	)
Loans granted		(8,762	)		-
Acquisition of subsidiaries, net of cash acquired		-			1,311
Decrease in restricted cash, net		(13	)		-
Payments of contingent consideration		(2,200	)		(4,155	)
Payment of deferred consideration for the acquisitions		(2,758	)		-
Net cash used in investing activities		(14,421	)		(9,735	)

Cash flows from financing activities

Lease payments		(1,136	)		(619	)
Receipt of loans from banks		9,803			22,022
Repayment of loans from banks		(63,657	)		(2,633	)
Repayment of loan from related party and controlling shareholder		(241	)		(41	)
Interest paid		(4,124	)		*(963)
Net cash provided by financing activities		(59,355	)		17,766

Increase (decrease) in cash and cash equivalents		(126,315	)		11,099
Exchange differences in respect of balances of cash and cash equivalents		96			1,657
Balance of cash and cash equivalents at beginning of period		232,589			196,217

Balance of cash and cash equivalents at end of period		106,370			208,973

* Reclassified due to change in accounting policy, see Note 2(2).

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

Intercure Ltd.

Condensed Consolidated Interim Statements of Cash Flows

	Three months ended March 31,
	2023			2022
	NIS in thousands
A) Adjustments required to present cash flows from operating activities

Adjustments to items in the consolidated statement of Profit or loss and Other comprehensive income:

Depreciation		3,177			2,354
Share-based payment		1,409			851
Changes in the fair value of financial assets through profit or loss, net		(2	)		50
Finance expenses (income), net		2,896			581
Change in liabilities in respect of employee benefits, net		(143	)		251
Remeasurement of contingent consideration		(111	)		-
Tax expense		1,682			4,708
		8,908			8,795
Changes in assets and liabilities items:

Increase in trade receivables		(21,195	)		(2,160	)
Decrease (increase) in other receivables		(4,696	)		4,513
Increase in inventory		(6,271	)		(20,795	)
Increase in biological assets		(3,676	)		(3,363	)
Increase (decrease) in trade payables		(27,103	)		18,672
Increase (decrease) in other payables		3,446			(16,444	)

		(59,495	)		(19,577	)

		(50,587	)		(10,782	)

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

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 1 - General

The Company’s activity

Intercure Ltd. (hereinafter: the “Company”) is a public company which is listed on the Tel Aviv Stock Exchange, Toronto Stock Exchange and Nasdaq, domiciled in Israel. Its offices are located in Herzliya. The Company is engaged in the medical cannabis sector mainly through its holdings of the entire issued and paid-up capital of Canndoc Ltd. (hereinafter: “Canndoc”), the entire issued and paid-up capital of Pharmazone Ltd. (hereinafter: “Pharmazone”) and through its 50.1% stake in the issued and paid-in capital of Cannolam Ltd. (hereinafter: “Cannolam”). The Company also has additional holdings in the biomed sector.

Investments in the biomed sector:

The Company invested in two companies in the biomed sector: F.O.R.E Biotherapeutics Ltd. (formerly known as NovellusDX Ltd., hereinafter: “Fore”) and Cavnox Ltd. (hereinafter: “Cavnox”). For additional details regarding investments in the biomed sector, see Note 7.

Definitions:

In these consolidated financial statements:

Company	-	Intercure Ltd.
Group	-	The Company and its subsidiaries.
Related Parties	-	As defined in IAS 24.
USD	-	U.S. dollars.
NIS	-	New Israeli shekel.
Subsidiaries	-	Companies which are controlled by the Company (as defined in IFRS 10), directly or indirectly, and whose financial statements are fully consolidated with the Company’s reports.
Investee companies	-	Subsidiaries and companies, including a partnership or joint venture, the Company’s investment in which is stated, directly or indirectly, on the equity basis.

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 2 - Significant Accounting Policies

Basis of Preparation of the financial statements

The Group’s condensed consolidated financial statements (hereinafter: the “Interim Financial Statements”) have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” (hereinafter: “IAS 34”).

These financial statements have been prepared in a condensed format as of March 31, 2023, and for the three months then ended (“condensed consolidated interim financial statements”). These financial statements should be read in conjunction with the Company’s annual financial statements as of December 31, 2022 and accompanying notes (“annual consolidated financial statements”).

These condensed consolidated interim financial statements were authorized for issue by the Group’s Board of Directors on May 15 ,2023.

Change in accounting policy, IAS 7

In September 2022, the Company elected to change the method of accounting for classification of interest paid in the statement of cash flows under investing activities. The Company has retrospectively amended the statement of cash flows for period ending at March 31, 2022 in order to reflect the effects of changes in the accounting policy to comparative periods.

Before the change in accounting policy, the Company classified interest paid in the statement of cash flows under operating activities. The Company believes classification of interest paid under investing activities in the statement of cash flows provides more relevant information to the users of its financial statements as it reflects better the essence of interest paid during the Company’s normal course of business.

(1)

Effect of the classification on the statements of cash flows:

	Three months ended March 31, 2022
							As presented in
	As presented			Effect of			these financial
	in the past			correction			statements
	NIS thousands			NIS thousands			NIS thousands
Profit for the period		14,699						14,699
Interest paid		(963	)		963			-
Taxes on income paid		(849	)					(849	)
Adjustments required to present cash flows from operating activities (A)		(10,782	)					(10,782	)

Net cash provided by (used in) operating activities		2,105			963			3,068

Net cash provided by financing activities		18,729			(963	)		17,766

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 3 - Transactions and Events During the Reporting Period

	A.	During the reporting period, the Company borrowed loans in an aggregate amount of NIS 9.8 million for periods of 0.25 - 5 years at interest rates ranging from Prime +1.97% to Prime +2.05%.

		During the reporting period the Company repaid loans in an aggregate amount of NIS 63.7 million.

	B.	On February 16, 2022, the Company engaged in an agreement with Cann Pharmaceutical Ltd. (“Better”). On January 31, 2023 the agreement was automatically terminated after the fact that the closing conditions in accordance with the terms of the agreement were not met. During the negotiations and after the merger agreement was executed, the Company extended loans to Better, and also provided funding and cultivation services to it, in light of the parties’ cooperation. On February 14, 2023, the Company filed a statement of claim (“SoC”) against Cann Pharmaceutical Ltd. (“Cann”) with the Tel-Aviv Magistrate Court. In the SoC, the Company argues that Cann owes the Company a NIS 7,875,189 due to written agreements and commitments made by the parties that Cann violated.

Note 4 - Cultivating Facilities

Canndoc has an advanced propagation and growing facility which is located in Kibbutz Beit HaEmek, in which it develops and grows a wide variety of unique strains of medical cannabis (hereinafter: the “Northern facility”). As of the reporting date, the northern facility is spread over an area of approximately 5 dunams, whereby Canndoc has the right of first refusal regarding an option to expand the area of the northern facility to a total area of approximately 16 dunams. The northern facility includes a greenhouse for propagating, growing and florescence, as well as a processing facility and operational areas. Canndoc performed extension, upgrade and adjustment works on the northern facility, for the purpose of ensuring the northern facility’s compliance with the high-quality standards required to export from Israel and adjusting the quality of the products to the level required in Israel and in the target countries. On May 21, 2020, an addendum to the agreement was signed, which formalized, inter alia, the investment in the Company’s facility in Beit HaEmek. On January 1, 2023, a cooperative was established and as of this date the activity of the Northern facility is executed under this entity.

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 4 - Cultivating Facilities (Cont.)

On April 23, 2019, Canndoc signed a binding agreement with an Israeli corporation which holds agricultural areas in Kibbutz Nir Oz, in the Western Negev, for the construction of a production complex with maximum production potential of up to 88 tons of medical cannabis per year, which will operate in addition to the northern facility (hereinafter: the “Southern facility”). During 2020, the Company completed the investment in the construction of facilities for the purpose of growing and production of inventory.

The southern facility includes a greenhouse for propagating, growing and florescence, as well as a processing facility and operational areas. Canndoc performed extension, upgrade and adjustment works on the southern facility, for the purpose of ensuring the southern facility’s compliance with the high-quality standards required to export from Israel and adjusting the quality of the products to the level required in Israel and in the target countries.

On January 1, 2023, a cooperative was established and as of this date the activity of the Southern facility is executed under this entity.

Note 5 - Inventory:

Inventory is comprised of finished goods of dry packaged or rolled medical cannabis and cannabis oil, as well as the outputs of processing procedures, which include, inter alia, agricultural produce which has been transferred from biological assets, where the procedure of processing into finished goods has not yet been completed.

	March 31,		December 31,
	2023		2022
	NIS in thousands
Finished goods		65,424		50,140
Goods in process and dried inflorescence		60,980		69,993
Total inventory		126,404		120,133

Note 6 - Biological Assets:

The Company measured biological assets (level 3), which are mostly comprised of medical cannabis plants and agricultural produce, at fair value less selling costs up to the point of harvest. This value serves as the cost basis of inventory after the harvest.

The Company’s biological assets are primarily comprised of medical cannabis seedlings and medical cannabis. Presented below are the changes in biological assets during the reporting period:

	March 31,			December 31,
	2023			2022
	NIS in thousands
Balance as of January 1		6,365			5,566
Costs of growing medical cannabis plants		4,087			79,131
Change in fair value less selling costs		4,203			13,054
Transfer to inventory		(4,614	)		(91,386	)
Balance as of the end of the period		10,041			6,365

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 6 - Biological Assets: (Cont.)

Disclosure regarding assumptions which were used to estimate the net fair value of biological assets

below are the main assumptions used:

	March 31			December 31
	2023			2022
Net growing area (in thousands of square meters)		10.5			10.5
Estimate net yield as of the reporting date (tons) (1)		2.2			1.9
Estimated net selling price (NIS per gram) (2)		17.4			17.4
Estimated growing cycle length (in weeks) (4)		13			13
Estimated growing cycle completion rate (in percent) (5)		38	%		28	%
Proportion of plants which do not reach the harvesting stage		3	%		3	%

	(1)	According to the number of seedlings as of the end of the reporting period
	(2)	According to the price range of the Company’s existing products as of the end of the reporting period
	(3)	The Company’s estimate regarding the future ratio of sales
	(4)	In accordance with the Company’s experience, and according to the strains which exist as of the reporting date
	(5)	By planting date vs. growing cycle length

Below is a sensitivity analysis on the fair value of the biological assets (in NIS thousands) in respect of a 10% increase in each of the following variables:

	March 31			December 31
	2023			2022
	NIS in thousands
Average selling price		1,214			769
Proportion of oil products		11			18
Proportion of plants which do not reach harvesting		(30	)		(20	)

Note 7 - Investments in Financial Assets Measured at Fair Value Through Profit or Loss:

As of March 31, 2023 and as of December 31, 2022, the Company holds 3,840,617 shares of XTL Biopharmaceuticals Ltd. (hereinafter: “XTL”), which constitute 0.70% of XTL’s issued and paid-up capital.

The fair value of these shares as of the end of the reporting period was based on the quoted share price (level 1) as XTL is a publicly traded company listed in the Nasdaq and Tel-Aviv stock exchange.

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 8 - Other receivables:

The balance as of March 31, 2023, is comprised mainly of debts and loans in the amount of NIS 72,912 thousand, provided to non-related parties as part of mergers and acquisitions processes which did not materialize and were not completed, net of respective provision for impairment.

Balance of non-related parties before provision for impairment	85,760
Provision for impairment	(12,849	)
Balance of non-related parties after provision for impairment	72,912

Note 9 - Goodwill:

As a result of the decline in the Company’s share price the Company performed goodwill impairment testing for the Cannabis segment cash-generating unit’s recoverable amount as of March 31, 2023. In prior periods the Cannabis segment cash-generating unit’s recoverable amount was based on fair value less costs of disposal. The fair value less costs of disposal was estimated according to external market prices of the Company’s shares. As a result of the decline in share price, management has determined the recoverable amount to be the value in use calculated by using the discounted cash flow method. The recoverable amount of the unit was determined to be higher than the carrying amount and accordingly no impairment was recognized.

Note 10 - Operating segment data:

Reconciliation of operating segment data includes addition of assets and liabilities which were not attributed to segments.

	NIS in thousands
	Cannabis segment		Biomed segment		Reconciliations			Total

Period ended March 31, 2023
External revenue		106,175		-		-			106,175
Segment profit		12,085		4		-			12,089

General and administrative expenses not attributable to segments									(4,104	)
Other expenses, net									(2,038	)
Operating loss									5,947

Segment assets		846,190		2,772		26,716			875,679
Segment liabilities		484,356		-		(131,655	)		352,701

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 10 - Operating segment data: (Cont.)

	NIS in thousands
	Cannabis segment		Biomed segment			Reconciliations		Total

Period ended March 31, 2022
External revenue		87,229		-			-		87,229
Segment profit (loss)		22,471		(50	)		-		22,421

General and administrative expenses not attributable to segments									(2,238	)
Other expenses, net									(195	)
Operating loss									19,988

Segment assets		604,180		2,845			136,711		743,736
Segment liabilities		173,225		-			85,998		259,223

	NIS in thousands
	Cannabis segment		Biomed segment			Reconciliations			Total

Year ended December 31, 2022
External revenue		388,684		-			-			388,684
Segment profit (loss)		68,552		(174	)		-			68,378

General and administrative expenses not attributable to segments										(15,623	)
Other expenses, net										(2,128	)
Operating Profit										50,627

Segment assets		886,184		2,770			69,053			958,007
Segment liabilities		526,285		-			(89,755	)		436,530

Intercure Ltd.

Notes to Condensed Consolidated Interim Financial Statements

Note 11 - Subsequent events:

	A.	On April 25, 2023 the Company was informed that an application to approve a class action against 26 cannabis companies in Israel, including Intercure and three of its subsidiaries, was filed to the court in Israel. The subject of the application is the alleged claim that the defendants are in violation of the advertising prohibitions included in the Israeli regulations overseeing medical cannabis in Israel. The Company is currently considering the application and its likelihood of acceptance. In light of the preliminary stage of the proceedings, it is not possible to estimate the claim’s chances. Therefore, a provision in respect of the motion was not included in the Company’s financial statements.

	B.	On April 26, 2023, we announced that we were informed that a lawsuit was filed against us in Tel Aviv-Jaffa District Court in Israel by minority shareholders of our subsidiary, Cannolam. The lawsuit relates to disagreements concerning the ongoing management of Cannolam. Intercure has conducted a preliminary review of the claims made by the minority shareholders and believes that they lack a valid legal basis. The Company is evaluating all legal options, including potential counterclaims. The Company is committed to vigorously defend its interests and will take all legal actions available to it. In light of the preliminary stage of the proceedings, it is not possible to estimate the claim’s chances. Therefore, a provision in respect of the motion was not included in the Company’s financial statements.

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