Mr. Oren Shuster reports

IMC ANNOUNCES POTENTIAL REVERSE MERGER WITH KADIMASTEM A LEADING CLINICAL CELL THERAPY COMPANY

IM Cannabis Corp. has entered into a non-binding term sheet dated Feb. 13, 2024, as amended, and a loan agreement (as defined herein) with holding company (as defined herein), with Israel-based Kadimastem Ltd., a clinical cell therapy public company traded on the Tel Aviv Stock Exchange under the symbol (TASE: KDST), whereby the parties will complete a business combination that will constitute a reverse merger into the company by Kadimastem.

"We have been looking for a way to deliver maximum value for our shareholders in the current situation and believe that a reverse merger with Kadimastem will provide this," said Oren Shuster, chief executive officer of IM Cannabis. "With its focus on clinical stage cell therapy, and an FDA approval for a phase IIa clinical trial, we believe that Kadimastem has tremendous potential."

"Kadimastem's strategic decision to pursue a Nasdaq listing underscores our commitment to maximizing the potential of our diabetes and ALS product candidates," said Ronen Twito, Kadimastem's executive chairman of the board. "This move positions us closer to our target markets in the U.S., leverages our recent FDA approvals to initiate a phase IIa multisite clinical trial in the U.S. for our ALS product candidate and the joint development of a diabetes product with our Florida-based partner, a multibillion-dollar market. We strongly believe this comprehensive strategy will create significant value to the company's shareholders".

The proposed transaction

The proposed transaction will be effected by way of a plan of arrangement involving a newly created wholly owned subsidiary of IM Cannabis and Kadimastem. The resulting issuer that will exist upon completion of the proposed transaction (the resulting issuer) will change its business from medical cannabis to biotechnology and, at the closing of the proposed transactions, Kadimastem shareholders will hold 88 per cent of the common shares of the resulting issuer and the shareholders of the company will hold 12 per cent of the resulting issuer share. Parties may agree, in the definitive agreement, on a different structure of equity in lieu of the warrants (as described herein) with a similar result. The proposed transaction is an arm's-length transaction.

Prior to closing, IM Cannabis's existing medical cannabis operation and other current activities in Israel and Germany (the legacy business) will be restructured (the spinout) as a contingent value right (the CVR). The CVR will entitle the holders thereof to receive net cash, equity or other net value upon the sale of the legacy business following the closing, subject to the terms of the loan agreement.

To facilitate the sale of the legacy business, a special committee of IM's board of directors was formed, which will oversee the potential sale in collaboration with legal and financial advisers.

The legacy business will be made available for potential sale to a third party for a period of up to 12 months from closing (the record date). After the record date, any remaining legacy business in the CVR will be offered for sale through a tender process, subject to the terms of the best offer. The proceeds from the sale of the legacy business will be utilized to settle debts and distribute the remaining balance, if any, to CVR holders.

As a condition of closing, Kadimastem will have approximately $5-million in gross funds at closing including capital raised concurrently with the completion of the proposed transaction from existing shareholders and additional investors.

In addition to the foregoing, subject to compliance with applicable law, the company shall grant shareholders of the company as of closing, with warrant(s) equal their pro rata portion, of 2 per cent of the resulting issuer's issued and outstanding common share capital prior to the closing date (in the aggregate), with an exercise price per share equal to the 10-day volume-weighted average price of the resulting issuer's shares calculated on the Nasdaq Capital Market, ending two trading days prior to closing, the warrants will be for a period of 24 months following closing.

Description of Kadimastem and its business

Kadimastem is a clinical stage cell therapy company, Kadimastem's recently reported receipt of FDA (Food and Drug Administration) approval for a phase IIa multisite clinical trial in the U.S. for the treatment of ALS, and the joint development agreement signed with iTolerance Inc., a Florida-based company with a product in the field of diabetes which recently have a successful joint INTERCT meeting with the FDA.

Exchange of securities

In accordance with the terms of the proposed transaction, the holders of the issued and outstanding shares in the capital of Kadimastem will be issued such number of IM shares in exchange for every one Kadimastem share held immediately prior to the completion of the proposed transaction that reflects the ratio outlined herein (the exchange ratio). Outstanding convertible securities of Kadimastem will be treated through customary mechanics as shall be determined in the definitive agreement, which may include, the assumption of the Kadimastem convertible securities by IM subject to customary adjustments to reflect the exchange ratio and exercise price.

Loan agreement

Pursuant to the terms of the term sheet, a loan agreement dated Feb. 28, 2024, was entered between IMC Holdings Ltd., a wholly owned subsidiary of IM (the holding company), and Kadimastem. Pursuant to the loan agreement, Kadimastem will provide a loan of up to $650,000 (U.S.) to the holding company, financed in two instalments: $300,000 (U.S.) upon signing the loan agreement and $350,000 (U.S.) upon the execution of the definitive agreement regarding the proposed transaction.

The loan accrues interest at a rate of 9.00 per cent per annum, compounding annually and is secured by the following collaterals and guarantees: (a) 10 per cent of the proceeds derived from any operation sale under the CVR (charged rights), limited to the outstanding loan amount and expenses according to the loan agreement, accordingly holding company may, at its sole discretion, to record a second-ranked fixed charge over the charged rights or, alternatively, in case the existing pledges over the charged rights at the date of signing this loan agreement are subsequently discharged or removed, then the borrower shall promptly record a first-ranking fixed charge over the charged assets with all applicable public records; provided that holding company shall not impose any new lien, mortgage, charge or pledge over the charged rights that did not exist on the date hereof, or any other liens, subject to customary exclusions; (b) the holding company shall use its best efforts to record a first-ranking fixed charge over the assets of its subsidiary, A.R Yarok Pharm Ltd., in due course when applicable and as deemed appropriate; and (c) a personal guarantee by Oren Shuster, IM's chief executive officer.

IM shareholder meeting

Prior to the completion of the proposed transaction, IMC will call a meeting of its shareholders for the purpose of approving, among other matters:

• Approve the proposed transaction;
• Approve the spinout;
• A change of name of the company as directed by Kadimastem and acceptable to the applicable regulatory authorities effective upon closing;
• Reconstitution of the company's board of directors.

Management of the resulting issuer

Upon closing of the proposed transaction, all of IM's current directors and executive officers will resign and the board of directors of the resulting issuer will, subject to the approval of governing regulatory bodies, consist of nominees of Kadimastem. All of the executive officers shall be replaced by nominees of Kadimastem, all in a manner that complies with the requirements of governing regulatory bodies and applicable securities and corporate laws.

Details of insiders and proposed directors and officers of the resulting issuer will be disclosed in a further news release.

Closing conditions

The completion of the proposed transaction is subject to a number of conditions, including but not limited to the following:

• The execution of a definitive agreement;
• Completion of mutually satisfactory due diligence;
• Completion of the share consolidation;
• Receipt of all required regulatory, corporate and third party approvals, including approvals by governing regulatory bodies, the shareholders of IM and Kadimastem, applicable Israeli governmental authorities, and the fulfilment of all applicable regulatory requirements and conditions necessary to complete the proposed transaction.

The parties are committed to seeking a successful completion of the proposed transaction as soon as practicable, but there can be no absolute certainty that the proposed transaction will take place.

Further information

Further details about the proposed transaction and the resulting issuer will be provided in a comprehensive news release when the parties enter into the definitive agreement.

Investors are cautioned that any information released or received with respect to the proposed transaction in this press release may not be complete and should not be relied upon. Trading in the common shares of the company should be considered highly speculative.

Completion of the proposed transaction is subject to a number of conditions, including but not limited to, Canadian Securities Exchange (CSE) and Nasdaq acceptance, and, if applicable, disinterested shareholder approval. Where applicable, the proposed transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the proposed transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the proposed transaction, any information released or received with respect to the proposed transaction may not be accurate or complete and should not be relied upon.

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.

About Kadimastem Ltd.

Kadimastem is a clinical stage cell therapy company, developing off-the-shelf, allogeneic, proprietary cell products based on its technology platform for the expansion and differentiation of human embryonic stem cells (hESCs) into functional cells. AstroRx, Kadimastem's lead product, is an astrocyte cell therapy in clinical development for the treatment for ALS and in preclinical studies for other neurodegenerative indications.

IsletRx is Kadimastem 's treatment for diabetes. IsletRx comprises functional pancreatic islet cells producing and releasing insulin and glucagon, intended to treat and potentially cure patients with insulin-dependent diabetes. Kadimastem was founded by Prof. Michel Revel, chief scientific officer of Kadimastem, and professor emeritus of molecular genetics at the Weizmann Institute of Science. Prof. Revel received the Israel Prize for the invention and development of Rebif, a multiple sclerosis blockbuster drug sold worldwide. Kadimastem is traded on the Tel Aviv Stock Exchange (TASE: KDST).

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