IM Cannabis Announces $1.6M Private Placement to Repay Loans

Oren Shuster, IM Cannabis Co-founder & CEO

IM Cannabis Corp. ("IM Cannabis" or the "Company") (NASDAQ: IMCC) (CSE: IMCC), a leading medical cannabis company with operations in Israel and Germany, is pleased to announce that it intends to undertake a non-brokered private placement offering of up to US$1,613,000 through the sale of approximately 625,000 units (each, an "Unit") at a price per Unit (the "Offering Price") calculated on the basis of the deemed price per common shares in the capital of the Company (each, a "Share") equal to the 10-day volume weighted average price of the Shares on Canadian Securities Exchange (the "Exchange") ending on the trading day preceding October 3, 2024.

Each Unit will be comprised of one Share and one Share purchase warrant (each, a "Warrant"). Each Warrant shall entitle the holder thereof to acquire one additional Share (each, a "Warrant Share) at a price equal to a 50% premium to the Offering Price (the "Warrant Exercise Price") at any time prior to 5:00 p.m. (Toronto time) 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 (the "Board") and Shmulik Arbel a director of the Company (together, the "Insiders").  

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 A.D.I. CAR ALARMS & STEREO SYSTEMS Ltd. provided to the Company's subsidiary IMC Holdings Ltd. on October 11, 2022.

The closing of the Offering is expected to occur by November 11, 2024.

Loan Bonus

Since October 2022, the Company has borrowed from various groups more than US$8,000,000 (together, the "Loans"). 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 US$560,000 (the "Benefit"). The Company and Mr. Shuster intend to enter into a settlement agreement to settle the amount of the Benefit in Shares (a "Settlement Share") or a pre-funded Share purchase warrant (a "Pre-Funded Warrant"), at the Offering Price. Each Pre-Funded Warrant will entitle the holder to purchase one Settlement Share for a price of $0.00001, 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.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities to, or for the account or benefit of, persons in the United States or U.S. persons. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws and may not be offered or sold to, or for the account or benefit of, persons in the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Options and Warrants Cancellation

Effective today, the Company has cancelled an aggregate of 32,305 options ("Options") to purchase Shares, which were previously granted to Board members, officers, employees, advisors and consultants of the Company (each a "Participant"). 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 (the "Subject 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 US$9.00 per Share, no longer represented a realistic incentive to motivate Mr. Shuster.

Option Grants

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; and (ii) US$2.24 per Share, with an expiry date of two years from the date of issuance (the "Option Grants"). The Options Grants vest as follows: one third vest immediately, one third vests on the six-month anniversary and the final one third vests on the twelve-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.

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 ("MI 61-101") as Mr. Shuster and Mr. Arbel will be participating in the Offering, Mr. Shuster will be settling the Benefit. The Company expects that any such resulting related party transaction will be exempt from the formal valuation requirement 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% 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.

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