Mr. Oren Shuster reports

IM CANNABIS CLOSES NON-BROKERED PRIVATE PLACEMENT LED BY MANAGEMENT AND CONCURRENT DEBT SETTLEMENT

IM Cannabis Corp., further to its news release dated Oct. 4, 2024, has closed its previously announced non-brokered private placement offering, effective today, through the issuance of 742,517 units for gross proceed of $2,138,448.96 (Canadian). Capitalized terms not otherwise defined herein have the meanings attributed to them in the Oct. 4 news release.

Each unit was sold at a price of $2.88 (Canadian) per unit, calculated on the basis of the deemed price per share equal to the 10-day volume weighted average price of the shares on the exchange ending on the trading day preceding Oct. 3, 2024, and consisted of one share and one warrant.

Each warrant entitles the holder thereof to acquire one warrant share at a price of $4.32 (Canadian) per warrant share, calculated as a 50-per-cent premium to the offering price, at any time prior to 5 p.m. Toronto time on the date that is 24 months following the closing date.

All securities issued under the offering are subject to: (i) a four-month-and-one-day hold period from the date of issuance; and (ii) applicable legends as required pursuant to the United States Securities Act of 1933, as amended.

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

Loan bonus and debt settlement

The company also announces that the company has completed a debt settlement in the amount of $560,000 (U.S.), approximately $758,240 (Canadian), based on an exchange rate of $1 (U.S.) to $1.354 (Canadian) as at Oct. 3, 2024, as published on the website of the Bank of Canada, with Oren Shuster, the company's chief executive officer, in connection with the benefit, to preserve the company's cash for working capital through the issuance of 110,576 settlement shares and 152,701 prefinanced warrants at a deemed price of $2.88 (Canadian).

Each prefinanced warrant will entitle the holder to purchase one settlement share for a price of 0.001 Canadian 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 are subject to: (i) a four-month-and-one-day hold period from the date of issuance; and (ii) applicable legends as required pursuant to the United States Securities Act of 1933, as amended.

Related party transaction

Mr. Shuster, who is a director and officer of the company, Shmulik Arbel, a director of the company, and Rafael Gabay, an insider of the company, each participated in the offering, and Mr. Shuster participated in the debt settlement. Mr. Shuster acquired 194,110 units, 110,576 settlement shares and 152,701 prefinanced warrants, Mr. Arbel acquired 48,349 units, and Mr. Gabay acquired 194,088 units.

The participation of the participating insiders in the offering constitutes a related party transaction, as such term is defined in Multilateral Instrument 61-101, and would require the company to receive minority shareholder approval for and obtain a formal valuation for the subject matter of the transaction, in accordance with MI 61-101, prior to the completion of such transaction. However, in completing the offering, the company has relied on exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101, on the basis of subsections 5.5(g) and 5.7(g), Financial Hardship, of MI 61-101, as the company is: (i) in a situation of serious financial difficulty; (ii) the transactions are designed to improve the financial position of the company as (x) the company would be unable to repay back the loan provided to A.D.I. Car Alarms provided to the company's subsidiary, IMC Holdings, without the completion of the offering and (y) would have been unable to obtain loans without Mr. Shuster personal guaranteeing them; (iii) the circumstances described in Section 5.5(f) of MI 61-101 are not applicable; and (iv) the board and independent directors (as such term is defined in MI 61-101) have, acting in good faith, determined that (i) and (ii) apply, and the terms of the transactions are reasonable in the circumstances of the company.

The transactions were approved by the members of the board who are independent for the purposes of the transactions, respectively. No special committee was established in connection with the transactions; however, the independent members of the board commissioned a third party valuator to determine the benefit.

Further details will be included in a material change report to be filed by the company. The company did not file a material change report more than 21 days before the closing date of the transactions as the participation of participating insiders in the offering was not definitively known to the corporation until closing. In the company's view, the shorter period was necessary to permit the company to close the transactions in a time frame consistent with usual market practice for transactions of this nature, and was reasonable and necessary to improve the company's financial position.

Corrective disclosure -- option cancellation and grants

In addition, the company wishes to correct the following disclosures made in the Oct. 4 news release.

Option cancellation

The company cancelled an aggregate of 31,305 options, not 32,305 options.

Option grant

The company granted an aggregate of 31,305 options, not 32,305 options. Each option granted was at an exercise price of $3 (Canadian), not the greater of: (i) the warrant exercise price; and (ii) $3 (Canadian) per share, with an expiry date of two years from the date of issuance. The options grants vest as follows: One-third vests immediately, one-third vests on the six-month anniversary and the final one-third vests on the 12-month anniversary. All securities issued under the option grants 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.

Early warning disclosure

This news release is being issued in accordance with the requirements of National Instrument 62-104, Take-Over Bids and Issuer Bids, and National Instrument 62-103, The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, in connection with the early warning reports (as defined herein), which will be filed by Mr. Shuster, whose registered address is 22, Hanachal St. Ra'anana, Israel, 4356990, and Mr. Gabay, whose registered address is Shmerling 8, Tel Aviv, Israel, 5251241, in connection with their acquisition of securities of the company, the registered address of which is Kibbutz Glil Yam, Central District, Israel, 4690500.

Effective Nov. 12, 2024: (i) Mr. Shuster acquired 194,110 units in the offering at a price of $2.88 (Canadian) per unit for an aggregate subscription amount of $559,036.80 (Canadian) and settled debt with the company pursuant to the debt settlement, in the amount of $560,000 (U.S.), approximately $758,240 (Canadian), based on an exchange rate of $1 (U.S.) to $1.354 (Canadian) as at Oct. 3, 2024, as published on the website of the Bank of Canada, and acquired 110,576 settlement shares and 152,701 prefinanced each at a deemed price of $2.88 (Canadian); and (ii) Mr. Gabay acquired 194,088 units in the offering at a price of $2.88 (Canadian) per unit for an aggregate subscription amount of $558,973.44 (Canadian).

Immediately prior to the completion of the transactions, Mr. Shuster, along with his joint actor, Ewave Group Ltd., a privately held entity of which Mr. Shuster owns and controls 50 per cent of the outstanding voting shares, owned an aggregate of 312,145 common shares, 21,875 options exercisable into common shares and debentures in the principal amount $237,214 (Canadian), convertible into up to 46,512 common shares at a deemed price of $5.10 (Canadian) per common share, which represented approximately 13.98 per cent of the then company's issued and outstanding common shares on a non-diluted basis (based on 2,232,359 common shares issued and outstanding prior to the completion of the transactions), and 24.34 per cent on a partially diluted basis if Mr. Shuster converted all of the convertible securities owned or controlled by him.

As a result of the transactions, Mr. Shuster, along with his joint actor, Ewave Group, a privately held entity of which Mr. Shuster owns and controls 50 per cent of the outstanding voting shares, now beneficially owns or controls an aggregate of 616,831 common shares, 194,110 warrants, 152,701 prefinanced warrants, 21,875 options exercisable into common shares and debentures in the principal amount $237,214 (Canadian), convertible into up to 46,512 common shares at a deemed price of $5.10 (Canadian) per common share, representing approximately 19.99 per cent of the company's issued and outstanding common shares on a non-diluted basis (based on 3,085,452 common shares issued and outstanding as of the date hereof), and 33.96 per cent on a partially diluted basis if Mr. Shuster converted all of the convertible securities owned or controlled by him.

Immediately prior to the completion of the transactions, Mr. Gabay, along with his joint actor, Ewave Group, a privately held entity of which Mr. Gabay owns and controls 50 per cent of the outstanding voting, owned an aggregate of 195,619 common shares, 1,500 options exercisable into common shares, 50,549 common share purchase warrants exercisable into common shares and debentures in the principal amount $236,617 (Canadian), convertible into up to 46,395 common shares at a deemed price of $5.10 (Canadian) per common share, which represented approximately 8.76 per cent of the then issued and outstanding common shares of the company on a non-diluted basis (based on 2,232,359 common shares issued and outstanding prior to the completion of the transactions), and 20.67 per cent on a partially diluted basis if Mr. Gabay converted all of the convertible securities owned or controlled by him.

As a result of the transactions, Mr. Gabay, along with its joint actor, Ewave Group, a privately held entity of which Mr. Gabay owns and controls 50 per cent of the outstanding voting, now beneficially owns or controls an aggregate of 389,707 common shares, 194,088 warrants, 1,500 options exercisable into common shares, 50,549 common share purchase warrants exercisable into common shares and debentures in the principal amount $236,617 (Canadian), convertible into up to 46,395 common shares at a deemed price of $5.10 (Canadian) per common share, representing approximately 12.63 per cent of the company's issued and outstanding common shares on a non-diluted basis (based on 3,085,452 common shares issued and outstanding as of the date hereof), and 25.42 per cent on a partially diluted basis if Mr. Gabay converted all of the convertible securities owned or controlled by him.

The acquirors acquired the above-noted securities for investment purposes. In the future, the acquirors will evaluate their respective investment in the company from time to time and may, based on such evaluation, market conditions and other circumstances, increase or decrease their respective shareholdings as circumstances require through market transactions, private agreements or otherwise.

The acquirors currently have no plans or intentions that would result in a corporate transaction, a sale or transfer of a material amount of the assets of the company or any of its subsidiaries, a change in the board of directors or management of the company, including any plans or intentions to change the number or term of directors or to fill any existing vacancies on the board, a material change in the company's business or corporate structure, a change in the company's charter, bylaws or similar instruments, or another action that might impede the acquisition of control of company by any person or company, a class of securities of the company being delisted from, or ceasing to be authorized to be quoted on, a marketplace, the company ceasing to be a reporting issuer in any jurisdiction of Canada, a solicitation of proxies from securityholders, or an action similar to any of those enumerated.

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

Copies of the early warning reports may be found at SEDAR+ under IM Cannabis's profile. For further information or to obtain copies of the early warning reports, please contact the acquirors by e-mailing michal.l@imcannabis.com or calling 972-542815033.

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, importing and distributing 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.

We seek Safe Harbor.