IM Cannabis : Management's Discussion and Analysis Q3 2023

IM Cannabis Corp.

Management's Discussion and Analysis

For the Three and Nine Months Ended September 30, 2023

November 13, 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 nine months ended September 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 nine months ended September 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 "Q3 2023" and "Q3 2022" refer to the three and nine months ended September 30, 2023 and September 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 nine months ended September 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 September 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

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Management's Discussion and Analysis

noted. All references to "NIS" are to New Israeli Shekels. All references to "€" or to "Euros" are to Euros. 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.

ןכדעל ןרילו יתיא :תורעה םע ]1א[ RESULTS - REVENUE OVER QUARTERS

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

STRATEGY IN DETAIL

GEOGRAPHIES AND NEW MARKETS

The Company operates in the Israeli and German medical cannabis markets. Until recently, the Company was also actively servicing adult-use recreational consumers in Canada, however these operations are discontinued and deconsolidated, effective November 7, 2022, pursuant to IFRS. The Canadian operations were wound-down under the Canadian Companies' Creditors Arrangement Act ("CCAA") under the supervision of the Ontario Superior Court of Justice (Commercial List) (the "Court") (the "CCAA

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Management's Discussion and Analysis

Proceedings"). The Company has exited operations in Canada Pursuant to an Order of the Court made on April 6, 2023, in which the Court approved a share purchase agreement, selling certain of the Trichome and certain of Trichome's wholly owned subsidiaries (collectively, the "Trichome Group") to a party that is not related to the Company. On September 14, 2023 the CCAA Monitor has asked for an order terminating the CCAA Proceedings and bankrupting Trichome and releasing the Monitor from his duties. On September 14, 2023, the Court issued a Termination Order including the reasons in relation thereto. The Company announced that it is pivoting its focus and resources to achieve sustainable and profitable growth in its highest value markets, Israel, Germany and Europe.

In the context of the deconsolidation of the Canadian operations, there are no remaining liabilities to the Company or any of its consolidated subsidiaries related to the Canadian entities, except tax obligation of $839 related to debt settlement with L5 Capital Inc. ("L5 Capital").

The CCAA Proceedings are solely in respect of the Trichome Group. As such, the Company's other assets or subsidiaries, including those in Israel and Germany, are not parties to the CCAA Proceedings. For more information about the CCAA Proceedings, see "Corporate Highlights and Events - Key Highlights for the quarter ended September 30, 2023" below.

Israel

In Israel, we continue to expand IMC brand recognition and supply the growing Israeli medical cannabis market with our branded products. The Company offers medical cannabis patients a rich variety of high- end medical cannabis products through strategic alliances with Canadian suppliers supported by a highly skilled sourcing team. In addition to the benefits of the Group's long-term presence in Israel, we believe that with our strong sourcing infrastructure in Israel, and advanced product knowledge, regulatory expertise and strong commercial partnerships, the Company is well-positioned to address the ongoing needs and preferences of medical cannabis patients in Israel.

The Company entered additional segments of the medical cannabis value chain in Israel, namely the distribution and retail segments. The Company, through IMC Holdings, acquired three licensed pharmacies in 2022, each selling medical cannabis products to patients: (i) Oranim Plus, Israel's largest pharmacy in Jerusalem and one of the largest in Israel, (ii) Vironna, a leading pharmacy in the Arab sector, and (iii) Pharm Yarok, the largest pharmacy in the Sharon plain area and the biggest call center in the country (Oranim Plus, Vironna, and Pharm Yarok collectively, the "Israeli Pharmacies").

The Company has also acquired home-delivery services and an online retail footprint, operating under the name "Panaxia-to-the-Home", which includes a customer service center and an Israeli medical cannabis distribution licensed center (the "Panaxia Transaction"), from Panaxia Pharmaceutical Industries Israel Ltd. and Panaxia Logistics Ltd., part of the Panaxia Labs Israel, Ltd. group of companies (collectively, "Panaxia"). On June 30, 2023, IMC Pharma, the entity responsible for operating the trading house that was acquired within the Panaxia Transaction, ceased its operations at the aforementioned licensed center located in Lod, Israel. Consequently, the Company transitioned the operation that was conducted through IMC Pharma to third-party entities and to its own trading house currently being operated by Rosen High Way and there are no material obligations remained open following closure of the trading house.

The entrance into the new segments in Israel position IM Cannabis as a large distributor of medical cannabis in Israel. We are strategically focused on establishing and reinforcing a direct connection with medical cannabis patients, providing direct access to IM Cannabis products, obtaining and leveraging market data and gaining a deeper understanding of consumer preferences. The acquisition of the Israeli Pharmacies allows the Company to increase purchasing power with third-party product suppliers, offers

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[א2] םע תורעה: הזה רפסמל סיסבה המ?

Management's Discussion and Analysis

potential synergies with our established call center and online operations, achieves higher margins on direct sales to patient and creates the opportunity for up-sales across a growing range of products. On October 2023, Pharm Yarok has entered into an agreement with a third-party distribution company to provide medical cannabis distribution services. This agreement includes bulk transportation services for medical cannabis, secure storage within a trading house, and the distribution of medical cannabis products in Israel. Simultaneously, Pharm Yarok scaled down its distribution operations previously managed by Pharm Yarok. The shift from Pharm Yarok's independent service provision to the services offered by the third-party company results in a monthly cost reduction of approximately 40% and an annual savings of approximately $300.

Germany

In Europe, the Company operates in Germany through Adjupharm, its German subsidiary and EU-GMP certified medical cannabis producer and distributor. We continue to lay our foundation in Germany, which is currently the European market with the largest number of medical cannabis patients.1 Leveraging our global supply chain, IM Cannabis continues to focus on growing its business in Germany to be well- positioned through brand recognition in preparation for future regulatory reforms.

Similar to Israel, the Company's focus in Germany is to import premium dried cannabis from its supply partners, which we believe will satisfy the rapid growth in demand for high-THC premium cannabis across a variety of strains and qualities. In addition, Adjupharm sells cannabis extracts to meet the existing demand in the German market.

In the Company's view, the strong sourcing infrastructure in Israel, powered by advanced product knowledge and regulatory expertise, will establish a competitive advantage in Germany ahead of proposals for the legalization of recreational cannabis. This is based on the premise that the German and Israeli markets share a number of common attributes such as robust commercial infrastructure, highly developed digital capabilities, favourable demographics and customer preferences.

While the Company does not currently distribute products in other European countries, the Company intends to leverage the foundation established by Adjupharm, its state-of-the-art warehouse and EU-GMP production facility in Germany (the "Logistics Center"), its vast knowledge in the cannabis market and costumers' preferences and its network of distribution partners to expand into other jurisdictions across the continent.

Adjupharm received a revised EU-GMP license in May 2022 that permits it to engage in production, cannabis testing and release activities. It allows Adjupharm to repackage bulk cannabis, to perform stability studies and offer such services to third parties.

BRANDS

The IMC brand is well-known in the Israeli medical cannabis market, with signature reputable brands such as Roma®, highly popular among Israeli consumers. Building on its long-term success in Israel, the Company launched the IMC brand in Germany in 2020.

1 The European Cannabis Report - Edition 8https://prohibitionpartners.com/reports/the-european-cannabis-report-8th-edition/?__hstc=102379230.c3806f05dbbd9246bb30c3897deb768c.1680505679399.1680505679399.1680505679399.1&__hssc =102379230.1.1680505679401&__hsfp=3485682252;

Statista Website:https://www.statista.com/outlook/hmo/cannabis/medical-cannabis/germany#analyst-opinion

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Management's Discussion and Analysis

Israeli Medical Cannabis Business

The IMC brand has established its reputation in Israel for quality and consistency over the past 10 years and more recently with new high-end,ultra-premium strains that have made it to the top-sellers list in pharmacies across the country.

The Group maintains a portfolio of strains sold under the IMC umbrella from which popular medical cannabis dried flowers and full-spectrum cannabis extracts are produced.

The IMC brand offers four different product lines, leading with the Craft Collection which offers the highest quality Canadian craft cannabis flower and has established IMC as the leader of the super-premium segment in Israel.

The Craft Collection - The IMC brand's premium product line with indoor-grown,hand-dried and hand- trimmed high-THC cannabis flowers. The Craft Collection includes exotic and unique cannabis strains such as Cherry Crasher, Wedding Crasher, Peanut Butter MAC, Watermelon Zkittlez and Chemchew.

The Top-ShelfCollection -offersindoor-grown,high-THC cannabis flowers with strains such as Lemon Rocket, Diesel Drift, Tropicana Gold, Lucy Dreamz and Santa Cruz. Inspired by the 1970's cannabis culture in America, the Top-Shelf Collection targets the growing segment of medical patients who are cannabis culture enthusiasts.

The Signature Collection - The IMC brand's high-quality product line with greenhouse-grown or indoor grown, high-THC cannabis flowers. The Signature Collection currently includes well known proprietary cannabis dried flowers such as Roma®, Tel Aviv and London as well as Strawnana, an indoor-grown flower, and Sydney, the Company's first high-CBD cannabis strain.

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Management's Discussion and Analysis

The Full Spectrum Extracts - The IMC brand's full spectrum, strain-specific cannabis extracts, including high-THC Roma®T20 oil, balanced Paris oil and Super CBD oil and the new Roma® T15 oil, Tel Aviv oil and DQ.

As part of its recent rebranding the Company expanded its Roma® product portfolio to include pre-rolls and oils range, offering the widest range of different product SKUs for a single strain in the Israeli market. This delivers a variety of formats of IMC's most successful, well-known and proprietary strain to Israeli medical cannabis patients. IMC's Roma® strain is a high-THC medical cannabis flower that offers a therapeutic continuum and is known for its strength and longevity of effect.

The WAGNERS™ brand launched in Israel in Q1 2022, with indoor-grown cannabis imported from Canada. The WAGNERS™ brand was the first international premium, indoor-grown brand introduced to the Israel cannabis market, at a competitive price point. The WAGNERS™ brand includes the Dark Helmet, Dark Helmet Minis, Cherry Jam launched in Q1 2022, and Golden Ghost that was launched in Q4 2022. In Q1 2023 The Company launched three additional products under the WAGNERS™ brand, Pink Bubba, Golden Ghost and Tiki Rain; all an indoor-grown cannabis flowers, with high-THC. In Q2 2023 the Company launched Rainforest Crunch. In Q3 2023 the Company launched Cherry Jam.

BLKMKT™, the Company's second Canadian brand, super-premium product line with indoor-grown,hand-dried and hand-trimmedhigh-THC cannabis flowers The BLKMKT™ includes Jealousy, BACIO GLTO, PNPL P and PARK FIRE OG

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Management's Discussion and Analysis

THE

LOT420 brand launched in Israel in Q2 2023, with super-premiumindoor-grown cannabis imported from Canada with high-THC. The LOT420 includes ICY C and GLTO 33 and as of Q3 2023 also Glto 33 and Xeno.

The PICO collection (minis)- Under the BLKMKT™ and LOT420 brands, the Company launched a new type of products (small flowers), a super-premiumindoor-grown cannabis imported from Canada with high- THC.

For more information, see "Strategy in Detail - Brands - New Product Offerings" section of the MD&A.

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