Mr. Oren Shuster reports

IM CANNABIS PROVIDES CORPORATE UPDATES

IM Cannabis Corp. has provided the following corporate updates.

Nasdaq notification letter

The company has received a written notification from the Nasdaq Stock Market LLC dated April 9, 2025, notifying the company that it is no longer in compliance with Nasdaq Listing Rule 5550(b)(1).

Nasdaq Listing Rule 5550(b)(1) requires companies listed on the Nasdaq Capital Market to maintain a minimum of $2.5-million (U.S.) in stockholder equity for continued listing. In the company's Form 20-F for the period ended Dec. 31, 2024, dated March 31, 2025, the company reported stockholder equity of $2,184,722 (U.S.). As of April 8, 2025, Nasdaq has also determined that the company does not meet the alternative requirements relating to market value of listed securities or net income from continuing operations and, therefore, no longer complies with the listing rule.

The notification letter has no immediate effect on the company's listing on the Nasdaq Capital Market at this time, subject to the company's compliance with other Nasdaq listing requirements. In accordance with Nasdaq Listing Rule 5810(c)(2)(A), the company has been provided 45 calendar days, or until May 26, 2025, to submit a plan to regain compliance. If such compliance plan is accepted by Nasdaq, the company may be granted an extension of up to 180 calendar days from the date of the notification letter to evidence compliance.

The company's business operations are not affected by the receipt of the notification letter. The company is looking into various options available to regain compliance and maintain its continued listing on the Nasdaq Capital Market. The company intends to submit the compliance plan as soon as practicable. Although the company will use all reasonable efforts to achieve compliance, there can be no assurance that the company will be able to regain compliance pursuant to the notification letter, or that the company will otherwise be in compliance with other Nasdaq listing criteria.

The notification letter has no immediate impact on the listing of the company's common shares, which will continue to be listed and traded on the Nasdaq Capital Market during this period, subject to the company's compliance with other listing standards.

Purchase of remaining 26 per cent of Focus Medical Herbs Ltd.

Through a series of transactions, the company, through IMC Holdings Ltd., a wholly owned subsidiary of the company, acquired a 74-per-cent interest in Focus Medical Herbs. The company intends to acquire from Ewave Group Ltd. the remaining 26-per-cent interest in Focus. Ewave is a privately held entity jointly owned by Mr. Shuster and Mr. Gabay, related parties to the company.

The board commissioned an arm's-length independent third party to prepare a report to determine the purchase price of the remaining 26-per-cent interest in Focus. It determined the purchase price to be 818,740 new Israel shekels. The company, IMC Holdings and Ewave have agreed that, to preserve the company's cash, they intend to settle the Focus purchase price through the issuance of common shares in the capital of the company calculated on the basis of a deemed price per common share equal to the greater of: (x) the 10-day volume weighted average price of the common shares on the Canadian Securities Exchange ending on the date the company receives disinterested shareholder approval to complete the Focus transaction; and (y) the discounted market price pursuant to the policies of the CSE.

The company plans to seek approval to complete the Focus transaction from disinterested shareholders at its coming annual general and special meeting scheduled for May 23, 2025.

Background of the Focus transaction

On Feb. 3, 2010, Focus, a private company operating in the state of Israel, was incorporated to engage in the cultivation and production of medical cannabis in compliance with a licence issued by the Israeli Medical Cannabis Agency (IMCA). These operations continued until June, 2022, when Focus ceased its cultivation and production activities related to medical cannabis and transitioned exclusively to the importation activities.

Originally, Focus was owned by Mr. Shuster and Mr. Gabay, who collectively held 74 per cent of Focus's share capital, and by Tal Tregerman, an agriculturist, who held the remaining 26 per cent.

On Nov. 29, 2017, Ewave and Mr. Tregerman entered into a loan agreement, pursuant to which Mr. Tregerman received a loan in the amount of 525,000 new Israel shekels from Ewave for a period of 12.5 years at an annual interest rate of 6 per cent. Pursuant to the terms and conditions of the Focus loan agreement, Ewave was provided the option to acquire Mr. Tregerman's 26-per-cent share interest in Focus in settlement of the outstanding loan amount.

On March 18, 2018, Mr. Shuster and Mr. Gabay sold their combined holdings, representing 74 per cent of Focus's share capital, to IMC Holdings for a total consideration of 2.96 million new Israel shekels at a price of 822.22 new Israel shekels per share.

Due to regulatory constraints, on April 2, 2019, an agreement was reached between IMC Holdings and Mr. Shuster and Mr. Gabay, pursuant to which IMC Holdings sold its shares in Focus back to Mr. Shuster and Mr. Gabay for a total consideration of 2,756,000 new Israel shekels. Simultaneously, the parties signed an option agreement pursuant to which Mr. Shuster and Mr. Gabay granted IMC Holdings the right to purchase 3,600 ordinary shares of Focus, representing their combined 74-per-cent ownership interest in Focus, at a price of 765.67 new Israel shekels per Focus share until April 2, 2029, subject to IMCA approval.

On Nov. 30, 2023, IMC Holdings requested approval from IMCA to exercise the Focus option, and, on Feb. 26, 2024, IMCA approved IMC Holdings' acquisition of the Focus shares.

On Feb. 26, 2024, Ewave exercised its option under the Focus loan agreement to acquire Mr. Tregerman's 26-per-cent share interest in Focus in settlement of the outstanding loan amount.

The Focus transaction constitutes a related party transaction, as such term is defined in Multilateral Instrument 61-101, Protection of Minority Shareholders in Special Transactions, due to the involvement of Ewave, a privately held entity jointly owned by Mr. Shuster and Mr. Gabay, related parties to the company, and as such requires 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, unless the company is able to rely on exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101.

Notwithstanding the fact that the Focus transaction is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 pursuant to sections 5.5(a) and 5.7(1)(a) of MI 61-101 as neither the fair market value of the subject matter of the transaction nor the consideration payable under the transaction exceeds 25 per cent of the company's market capitalization insofar as it involves interested parties, the board commissioned an arm's-length third party to prepare a report to determine the Focus purchase price and the company is seeking disinterested shareholders' approval of the Focus transaction at the coming meeting as a means of good governance.

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 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 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, 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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