IM Cannabis : Management's Discussion and Analysis Q2 2023

IM Cannabis Corp.

Management's Discussion and Analysis

For the Three and Six Months Ended June 30, 2023

August 14, 2023

Management's Discussion and Analysis

TABLE OF CONTENTS
EXECUTIVE SUMMARY	4
STRATEGY IN DETAIL	6
GEOGRAPHIES AND NEW MARKETS	6
BRANDS	8
NEW PRODUCTS OFFERINGS	11
HIGH-QUALITY, RELIABLE SUPPLY	11
REVIEW OF FINANCIAL PERFORMANCE	15
LEGAL AND REGULATORY	40
RISK FACTORS	47
CAUTION CONCERNING FORWARD-LOOKING INFORMATION	52

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Management's Discussion and Analysis

INTRODUCTION

IM Cannabis Corp. ("IM Cannabis" or the "Company") is a British Columbia company operating in the international medical cannabis industry. The Company's common shares (the "Common Shares") trade under the ticker symbol "IMCC" on both the NASDAQ Capital Market ("NASDAQ") and the Canadian Securities Exchange ("CSE") as of March 1, 2021, and November 5, 2019, respectively.

This Management's Discussion and Analysis ("MD&A") reports on the consolidated financial condition and operating results of IM Cannabis for the three and six months ended June 30, 2023. Throughout this MD&A, unless otherwise specified, references to "we", "us", "our" or similar terms, as well as the "Company" and "IM Cannabis" refer to IM Cannabis Corp., together with its subsidiaries, on a consolidated basis, and the "Group" refers to the Company, its subsidiaries, and Focus Medical Herbs Ltd.

This MD&A should be read in conjunction with the interim condensed consolidated financial statements of the Company and the notes thereto for the three and six months ended June 30, 2023 (the "Interim Financial Statements") and with the Company's audited annual consolidated financial statements and the notes thereto for the years ended December 31, 2022 and 2021 (the "Annual Financial Statements"). References herein to "Q2 2023" and "Q2 2022" refer to the three and six months ended June 30, 2023 and June 30, 2022, respectively, and references to "2022" refer to the year ended December 31, 2022.

The Interim Financial Statements have been prepared by management in accordance with the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). IFRS requires management to make certain judgments, estimates and assumptions that affect the reported amount of assets and liabilities at the date of the Interim Financial Statements and the amount of revenue and expenses incurred during the reporting period. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. The Interim Financial Statements for the three and six months ended June 30, 2023, include the accounts of the Group, which includes, among others, the following entities:

Legal Entity	Jurisdiction	Relationship with the Company
I.M.C. Holdings Ltd. ("IMC Holdings")	Israel	Wholly-owned subsidiary
I.M.C. Pharma Ltd. ("IMC Pharma")	Israel	Wholly-owned subsidiary of IMC Holdings
I.M.C. Farms Israel Ltd. ("IMC Farms")	Israel	Wholly-owned subsidiary of IMC Holdings
Focus Medical Herbs Ltd. ("Focus")	Israel	Private company over which IMC Holdings
		exercises "de facto control" under IFRS 10
		Consolidated Financial Statements ("IFRS 10")
R.A. Yarok Pharm Ltd. ("Pharm Yarok")	Israel	Wholly-owned subsidiary of IMC Holdings
Rosen High Way Ltd. ("Rosen High Way")	Israel	Wholly-owned subsidiary of IMC Holdings
Revoly Trading and Marketing Ltd. dba	Israel	Subsidiary of IMC Holdings
Vironna Pharm ("Vironna")
Oranim Plus Pharm Ltd. ("Oranim Plus")	Israel	Subsidiary of IMC Holdings
Adjupharm GmbH ("Adjupharm")	Germany	Subsidiary of IMC Holdings
Trichome Financial Corp. ("Trichome") *	Canada	Wholly-owned subsidiary

• Discontinued operations. For more information, please see "Corporate Highlights and Events - Key Highlights for the quarter ended June 30, 2023" below.

All intercompany balances and transactions were eliminated on consolidation. All dollar figures in this MD&A are expressed in thousands of Canadian Dollars ($), except per share data and unless otherwise noted. All references to "NIS" are to New Israeli Shekels. All references to "€" or to "Euros" are to Euros.

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Management's Discussion and Analysis

All references to "US$" or to "U.S. Dollars" are to United States Dollars. The Company's shares, options, units and warrants are not expressed in thousands. Prices are not expressed in thousands.

NON-IFRS FINANCIAL MEASURES

Certain non-IFRS financial measures are referenced in this MD&A that do not have any standardized meaning under IFRS, including "Gross Margin", "EBITDA" and "Adjusted EBITDA". The Company believes that these non-IFRS financial measures and operational performance measures, in addition to conventional measures prepared in accordance with IFRS, enable readers to evaluate the Company's operating results, underlying performance and prospects in a similar manner to the Company's management. For a reconciliation of these non-IFRS financial measures to the most comparable IFRS financial measures, as applicable, see the "Metrics and Non-IFRSFinancial Measures" section of the MD&A.

NOTE REGARDING THE COMPANY'S ACCOUNTING PRACTICES

The Company complies with IFRS 10 to consolidate the financial results of Focus, a holder of an Israeli Medical Cannabis Agency (the "IMCA") license which allows it to import and supply cannabis products, on the basis of which IMC Holdings exercises "de facto control". For a full explanation of the Company's application of IFRS 10, see "Legal and Regulatory - Restructuring" and "Legal and Regulatory - Risk Factors".

EXECUTIVE SUMMARY

OVERVIEW - CURRENT OPERATIONS IN ISRAEL AND GERMANY

IM Cannabis is an international cannabis company that is currently focused on providing premium cannabis products to medical patients in Israel and Germany, two of the world's largest federally legal cannabis markets. Until recently, the Company was also actively servicing adult-use recreational consumers in Canada, however the Company has exited operations in Canada and considers these operations discontinued. 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.

In Israel, the Company imports, distributes and sells cannabis to local medical patients by operating medical cannabis retail pharmacies, online platforms, distribution centers and logistical hubs operating through IMC Holdings' subsidiaries and Focus, leveraging proprietary data and patient insights. The Company also cultivate its existing proprietary genetics with third-partycultivation facilities in Israel.

In Germany, the IM Cannabis ecosystem operates through Adjupharm, importing and distributing cannabis to pharmacies for patients, and acting as the Company's entry point for potential Europe-wide distribution in the future.

OUR GOAL - DRIVE PROFITABLE REVENUE GROWTH

Our primary goal is to sustainably increase revenue in each of our core markets, to accelerate our path to profitability and long-term shareholder value while actively managing costs and margins.

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Management's Discussion and Analysis

HOW WE PLAN TO ACHIEVE OUR GOAL - CORE STRATEGIES

Our strategy of sustainable and profitable growth consists of:

• Continue building on the increasing demand and positive momentum in Israel and Germany, supported by strategic alliances with Canadian suppliers and a highly skilled sourcing team, to cement its leadership position in markets where the Company operates.
• Develop and execute a long-term growth plan in Germany, based on the strong sourcing infrastructure in Israel which is powered by advanced product knowledge and regulatory expertise establishing, in the Company's view, a competitive advantage ahead of proposals for the legalization of recreational cannabis in Germany.
• Properly position brands with respect to target-market, price, potency and quality, such as our IMC brand in Israel and Germany.
• Strong focus on efficiencies and synergies as a global organization with domestic expertise in Israel and Germany.
• High-quality,reliable supply to our customers and patients, leading to recurring sales.
• Ongoing introduction of new Stock Keeping Unit ("SKUs") to keep consumers and patients engaged.
• Reorganization of the Company's management and operations by reducing its workforce in Israel by 36% across all functions, to strengthen its focus on core activities and drive efficiencies to realize sustainable profitability. All actions associated with the workforce reduction were substantially completed by June 30, 2023.

RESULTS - REVENUE OVER QUARTERS

IMC - Quarterly Revenue

Revenue from continuing operations (CAD millions)

$7,5M $8,6M $8,0M

$10M $13,0M $12,7M $14,2M $14,5M $12,5M $13,2M

2021-Q12021-Q22021-Q32021-Q42022-Q12022-Q22022-Q32022-Q42023-Q1*2023-Q2

• See Note 1 under "Review of Financial Performance - Summary of Quarterly Results" section of the MD&A.

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