Mr. Oren Shuster reports

IM CANNABIS CLOSES CONVERTIBLE DEBENTURE OFFERING TO SUPPORT ACCELERATED GROWTH IN GERMANY

In order to preserve its cash for to support accelerated growth in Germany, IM Cannabis Corp. has closed a non-brokered private placement of secured convertible debentures of the company for aggregate proceeds of $2,091,977. The debentures are being issued to holders of short-term loans and obligations owed by the company or its wholly owned subsidiaries. The debentures will mature on May 26, 2025, and will not incur interest except in the event of default. The debentures may be converted into common shares in the company at a conversion price of 85 cents per share.

"Active cost management has been our focus since the beginning of 2023. Last year we concentrated on reducing our operating expenses, reducing our 2023 G&A [general and administrative] expenses minus 49 per cent versus 2022," said Oren Shuster, chief executive officer of IM Cannabis. "This year, we looked at our financial costs. By renegotiating our debt, we expect a significant reduction in our financing costs. Our goal is to free resources to drive accelerated growth in Germany, where we currently see the biggest potential following the April 1 legalization."

Related party transactions

Mr. Shuster, a director and the chief executive officer of the company (the insider), has subscribed for an aggregate of $237,214 of debentures in the offering. The insider's participation in the offering is a related party transaction within the meaning of Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions. The company intends to rely on the exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 under sections 5.5(a) and 5.7(1)(a) of MI 61-101 as the fair market value of the insider transaction does not exceed 25 per cent of the company's market capitalization. As the material change report disclosing the insider transaction is being filed less than 21 days before the transaction, there is a requirement under MI 61-101 to explain why the shorter period was reasonable or necessary in the circumstances. In the view of the company, it is necessary to immediately close the insider transaction and, therefore, such shorter period is reasonable and necessary in the circumstances to improve the company's financial position.

Early warning report

Mr. Shuster will file an early warning report in accordance with National Instrument 62-104, Take-Over Bids and Issuer Bids, and NI 62-103, The Early Warning System and Related Take-Over Bid and Insider Reporting Issues. On May 26, 2024, Mr. Shuster acquired a debenture in the principal amount of $237,214 pursuant to the offering, which was issued in full satisfaction of $237,214 of debt owed by the company to him.

Immediately prior to the acquisition, Mr. Shuster beneficially owned or controlled 1,872,870 shares, 856,704 warrants and 131,250 stock options of the company, which represented approximately 13.98 per cent of the then outstanding shares of the company on a non-diluted basis and 19.89 per cent on a partially diluted basis if Mr. Shuster converted all of the convertible securities held by him. As a result of the acquisition, Mr. Shuster now beneficially owns or controls an aggregate of 1,872,870 shares, 856,704 warrants, 131,250 stock options and a debenture in the principal amount of $237,214 of the company (the debenture is convertible into up to 279,075 shares at 85 cents per share), which represented approximately 1.8 per cent of the company's issued and outstanding shares on a non-diluted basis (based on 13,394,136 shares issued and outstanding as of the date hereof) and 23.44 per cent on a partially diluted basis if Mr. Shuster converted all of the convertible securities held by him.

Mr. Shuster acquired the securities for general investment purposes only. Mr. Shuster may in the future take such actions in respect of his holdings in IM Cannabis as he may deem appropriate based on his assessment of market conditions and any other conditions he considers relevant at the time, including the purchase of additional shares through open market or privately negotiated transactions or the sale of all or a portion of his holdings in the open market or in privately negotiated transactions to one or more purchasers, subject in each case to applicable securities laws.

Since the previous early warning report filed by Mr. Shuster in respect of the company, Mr. Shuster's share ownership position increased by more than 2 per cent and Mr. Shuster acquired securities convertible into more than 2 per cent of the issued and outstanding shares, which triggered the requirement to file an early warning report under applicable Canadian securities legislation.

A copy of the early warning report may be found at SEDAR+ under IM Cannabis's profile. For further information or to obtain a copy of the early warning report, please contact Mr. Shuster at 972-77-3603504.

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 recently 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 its commercial relationship with 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, a distribution centre 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. Until recently, the company also actively operated in Canada through Trichome Financial Corp. and its wholly owned subsidiaries. The company has exited operations in Canada and considers these operations discontinued.

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