Mr. Oren Shuster reports

IM CANNABIS ANNOUNCES UP TO US$1,613,000 PRIVATE PLACEMENT OFFERING LED BY MANAGEMENT

IM Cannabis Corp. intends to undertake a non-brokered private placement offering of up to $1,613,000 (U.S.) through the sale of approximately 625,000 units at a price per unit calculated on the basis of the deemed price per common share in the capital of the company equal to the 10-day volume-weighted average price of the shares on Canadian Securities Exchange ending on the trading day preceding Oct. 3, 2024.

Each unit will comprise one share and one share purchase warrant. Each warrant shall entitle the holder thereof to acquire one additional share at a price equal to a 50-per-cent premium to the offering price at any time prior to 5 p.m. ET on second anniversary of the closing date. The offering, which is expected to close in one or more tranches, will be led by the company's management team, including Oren Shuster, chief executive officer and chairman of the board of directors, and Shmulik Arbel, a director of the company.

All securities issued under the offering will be subject to a hold period of four months and one day from the closing date under applicable Canadian securities laws, in addition to such other restrictions as may apply under applicable securities laws of jurisdictions outside Canada.

The company intends to use the proceeds from the offering for the repayment of a loan to ADI Car Alarms & Stereo Systems Ltd. provided to the company's subsidiary, IMC Holdings Ltd., on Oct. 11, 2022.

The closing of the offering is expected to occur by Nov. 11, 2024.

Loan bonus

Since October, 2022, the company has borrowed from various groups more than $8-million (U.S.). As required by the lenders, Mr. Shuster has personally guaranteed the loans. The independent members of the board commissioned a valuation to determine the value of Mr. Shuster's personal guarantees, which ascribes the benefit to the company to be approximately $560,000 (U.S.). The company and Mr. Shuster intend to enter into a settlement agreement to settle the amount of the benefit in shares or a prefinanced share purchase warrant, at the offering price. Each prefinanced warrant will entitle the holder to purchase one settlement share for a price of 0.001 cent, upon receipt of shareholder approval to allow Mr. Shuster to become a control person (as defined in the policies of the exchange). All securities issued in consideration for the benefit will be subject to a hold period of four months and one day from the closing date under applicable Canadian securities laws, in addition to such other restrictions as may apply under applicable securities laws of jurisdictions outside Canada.

Cancellation of options and warrants

Effective today, the company has cancelled an aggregate of 32,305 options to purchase shares, which were previously granted to board members, officers, employees, advisers and consultants of the company. Management reviewed the company's outstanding options and determined that certain options granted to such participants, at exercise prices ranging from $6.60 to $600 per share, no longer represented a realistic incentive to motivate such participants.

Effective today, the company has cancelled an aggregate of 142,784 share purchase warrants to purchase shares, which were previously granted to Mr. Shuster. Management reviewed the company's outstanding warrants and determined that the subject warrants at an exercise price of $9 (U.S.) per share no longer represented a realistic incentive to motivate Mr. Shuster.

Option grant

The company has also approved the grant of 32,305 options to certain eligible persons of the company at an exercise price of greater of: (i) the warrant exercise price; or (ii) $2.24 (U.S.) per share, with an expiry date of two years from the date of issuance. The options grants vest as follows: one-third immediately, one-third on the six-month anniversary and the final one-third on the 12-month anniversary. All securities issued under the option grant are subject to a statutory hold period of four months plus one day from the date of issuance, in accordance with the polices of the exchange.

Related party transactions

The company expects that each of Mr. Shuster and Mr. Arbel will be related parties, as defined in Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions, as Mr. Shuster and Mr. Arbel will be participating in the offering and Mr. Shuster will be settling the benefit. The company expects that any such resulting related party transaction will be exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 based on the exemptions under sections 5.5(a) and 5.7(1)(a) of MI 61-101, as the fair market value of the units being purchased and securities issued to settle the benefit will not exceed 25 per cent of the company's market capitalization. The company expects that the closing of the offering and the settlement of the benefit will occur within 21 days of this announcement and that it will not file a material change report in respect of the related party transaction at least 21 days before the closing date. The company deems this circumstance reasonable and necessary in order to complete the offering and settlement of the benefit in an expeditious manner.

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 subsidiaries, which import and distribute cannabis to medical patients, leveraging years of proprietary data and patient insights. The company also operates medical cannabis retail pharmacies, on-line platforms, distribution centres 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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