Mr. Oren Shuster reports

IM CANNABIS REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS

IM Cannabis Corp. has released its financial results today for the third quarter ended Sept. 30, 2023. All amounts are reported in Canadian dollars and compared with the quarter ended Sept. 30, 2022, unless otherwise stated.

The full set of unaudited interim condensed consolidated financial statements for the three and nine months ended Sept. 30, 2023, and the accompanying management's discussion and analysis, can be accessed by visiting the company's website, and its profile pages on SEDAR+ and EDGAR.

Q3 2023 financial highlights:

• 6.6-per cent decrease in revenue and an additional 6.4-per-cent decrease in revenue directly related to negative currency fluctuations for a total revenue of $12.4-million;
• 10-per-cent increase in gross margin;
• 30-per-cent increase in gross profit;
• 65-per-cent decrease in non-IFRS (international financial reporting standard) adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss;
• 34-per-cent decrease in operating expenses, a 6-per-cent decrease compared with Q2 2023.

Management commentary

"As in the previous quarters, in Q3 2023, we continued towards our goal of sustainable profitability," said Oren Shuster, chief executive officer of IM Cannabis. "Our focus on premium and premium plus in the Israeli market, where we are market leaders. On the flip side, we had to adjust our portfolio accordingly, to clean out the slow-moving mid- and low-range stock, which increased our sales volumes, but affected both our revenue and gross margin this quarter."

"In Q3 we were further able to deliver on our goal of active cost and margin management," said Itay Vago, chief financial officer of IM Cannabis. "While we were able to further reduce our operating costs in Q3 by 34 per cent versus Q3 2022 and 6 per cent versus Q2 2023, our revenue and gross margin was negatively impacted by the currency fluctuations between the Israeli shekel and the Canadian dollar, causing a 2.4-per-cent decrease in revenue in Q3 versus Q2 2023 and a $800,000 decrease overall in 2023."

Q3 2023 conference call

The company will host a Zoom Web conference call today at 9 a.m. ET to discuss the results, followed by a question-and-answer session for the investment community. Investors are invited to register. All relevant information will be sent upon registration.

If you are unable to join live, a recording of the call will be available on IM Cannabis's website within 24 hours after the call.

Operational highlights:

• In Q3 the company kicked off a full integration project between Israel and Germany to further drive efficiencies in both of IM Cannabis's markets. From supply to marketing and sales the company is sharing information and working together as one team.

On Oct. 7, 2023, the war between the terror organization Hamas and Israel began. While it is still too early to assess the extent of the impact it has and will have on the medical cannabis industry in Israel and on IM Cannabis, the company expects that it may be impacted.

IM Cannabis Israel:

• IM Cannabis reinforced its position as No. 1 in the premium market through the launch of two new Lot 420 high-THC (tetrahydrocannabinol) strains, Glto 33 and Xeno, as well as an additional IM Cannabis product, Chemchew.
• IM Cannabis outsourced outpatient delivery service, keeping the same level of service but with an estimated $300,000 in annual savings.

IM Cannabis Germany:

• IM Cannabis launched its first premium high-THC strain leveraging the entire IM Cannabis Israel branding and collateral. By working closely with the Israeli team, the company was able to ensure that this launch was its strongest launch in Germany so far.

Q3 2023 financial results:

• Revenues for the third quarter of 2023 were $12.4-million compared with $14.2-million in the third quarter of 2022, a decrease of 13 per cent. Of these 13 per cent, almost half, 6.4 per cent or $900,000 of the decrease is coming from negative currency fluctuations.
• Gross margin, before fair value adjustments, in the third quarter of 2023 was 22 per cent, compared with 20 per cent in the third quarter of 2022, an increase of 10 per cent.
• Non-IFRS adjusted EBITDA loss in the third quarter of 2023 was $1.3-million, compared with an adjusted EBITDA loss of $3.7-million in the third quarter of 2022, a decrease of 65 per cent. The decrease is mainly attributable to slow-moving mid-range stock discounts and dollar rate increase effect.
• Total operating expenses in the third quarter of 2023 were $4.9-million, compared with $7.5-million in the third quarter of 2022, a decrease of 34 per cent. Most of the decline can be attributed to restructuring that took place in 2023.
• Total dried flower sold in the third quarter of 2023 was approximately 2,558 kilograms with an average selling price of $4.35 per gram compared with approximately 1,453 kg in the third quarter of 2022 with an average selling price of $9.08 per gram. The decrease in average selling price was caused by increased competition within the retail segment, and mid-range stock discounts.
• Gross profit for the third quarter of 2023 was $2.6-million, compared with $2-million in the third quarter of 2022, an increase of 30 per cent. The increase is mainly attributable to increased high-margin sales of imported premium cannabis products, and reduction of costs of sales.
• General and administrative expenses in the third quarter of 2023 were $2.1-million, compared with $4.3-million in the third quarter of 2022, a decrease of 51 per cent. The decrease in the general and administrative expense is mainly attributable to reduced employee salaries derived from the restructuring plan in Israel announced in the first quarter of 2023 and presented separately in the interim financial statement for the period.
• Selling and marketing expenses in the third quarter of 2023 were $2.6-million, compared with $2.8-million in the third quarter of 2022, a decrease of 7 per cent.
• Operating loss in the third quarter of 2023 was $2.3-million, compared with $5.5-million in the third quarter of 2022, a decrease of 58 per cent.
• Net loss from continuing operations in the third quarter of 2023 was $2.1-million, compared with $4.5-million in the third quarter of 2022, driven mostly by higher gross margin and reduction in operating expenses and offset by finance income in the third quarter of 2022.
• Basic loss and diluted per share from continuing operations in the third quarter of 2023 was (16 cents), compared with a loss of (six cents) per share in the third quarter of 2022.
• Cash and cash equivalents as of Sept. 30, 2023, were $1.3-million, compared with $2.4-million in Dec. 31, 2022.
• Total assets as of Sept. 30, 2023, were $52.4-million, compared with $60.7-million in Dec. 31, 2022, a decrease of 14 per cent. The decrease is mainly attributed to reduced cash and cash equivalents, inventory, and to the effect of dollar rate increase on items denominated in Israeli shekels.
• Total liabilities as of Sept. 30, 2023, were $32.6-million, compared with $36.9 in Dec. 31, 2022, a decrease of 12 per cent. The decrease was mainly due to the reduction in trade payables, valuation of warrants fair value and to the effect of dollar rate increase on items denominated in Israeli shekels.

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.

We seek Safe Harbor.