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TABLE OF CONTENTS

 

   

INTRODUCTION

 

In this Annual Report on Form 20-F (the “Annual Report”), “Company,” “IMC,” “Group,” “we,” “us” and “our” refer to IM Cannabis Corp. and its consolidated subsidiaries, and Focus Medical Herbs Ltd. (“Focus”), an Israeli private company over which IMC Holdings exercises “de facto control” under IFRS 10.

 

Information contained in this Annual Report is given as of December 31, 2022, the fiscal year end of Company, unless otherwise specifically stated.

 

Market and industry data used throughout this Annual Report was obtained from various publicly available sources. Although the Company believes that these independent sources are generally reliable, the accuracy and completeness of such information are not guaranteed and have not been verified due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and the limitations and uncertainty inherent in any statistical survey of market size, conditions and prospects.

 

Statements made in this Annual Report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we file any of these documents as an exhibit to this Annual Report, you may read the document itself for a complete description of its terms.

 

Unless otherwise indicated, all references in this Annual Report to “dollars” or “CAD” or “$” are to Canadian dollars and all references to “USD” or “US$” are to United States dollars. All references to “NIS” are to New Israeli Shekels. All references to “€” or to “Euros” are to Euros.

The audited consolidated financial statements of the Company and the notes thereto for the years ended December 31, 2022, and 2021 include the accounts of IM Cannabis Corp. and its consolidated subsidiaries, and Focus (the “Group”), which includes, among others, the following entities:

All intercompany balances and transactions were eliminated on consolidation.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report, including any documents incorporated by reference herein, contains “forward-looking information” and “forward-looking statements” within the meaning of applicable securities laws (collectively referred to herein as “forward-looking statements”). All statements other than statements of fact may be deemed to be forward-looking statements, including statements with regard to expected financial performance, strategy and business conditions. The words “believe”, “plan”, “intend”, “estimate”, “expect”, “anticipate”, “continue”, or “potential”, and similar expressions, as well as future or conditional verbs such as “will”, “should”, “would”, and “could” often identify forward-looking statements. These statements reflect management’s current beliefs with respect to future events and are based on information currently available to management as of the date of this Annual Report on Form 20-F, or a document incorporated by reference therein, including reasonable assumptions, estimates, internal and external analysis and opinions of management considering its experience, perception of trends, current conditions and expected developments as well as other factors that management believes to be relevant as at the date such statements are made.

•

the expected performance of the Company’s business and operations;

•

the exportation of the Company’s cannabis products from Israel;

•

the exportation of cannabis products from Canada to Israel and Germany;

•

the Company’s expansion and development of its foreign operations and supply arrangements;

•

the Company’s intentions regarding leveraging its German operational platform and further developing its presence in Europe;

•

the Company’s retail presence, distribution capabilities and data-driven insights;

•

expectations regarding the Company’s revenues, expenses and profits;

•

the anticipated Gross Margins, EBITDA and Adjusted EBITDA from the Company’s operations;

•

expectations in the growth of demand in the medical cannabis industry, including without limitation, in Israel and Germany;

•

the competitive conditions of the medical and recreational cannabis industry, including ancillary industries such as medical cannabis operations consulting;

•

the anticipated legalization and/or decriminalization of adult-use recreational cannabis in Israel and the Company’s business intentions in the event such legalization and/or decriminalization occurs;

•

the Company’s anticipated obligations to comply with environmental and employee health and safety matters;

•

the effect of new or altered government regulations with respect to the marketing, acquisition, manufacture, management, transportation, storage, sale and disposal of cannabis and cannabis products;

•

the grant or renewal of licenses or governmental approvals required to conduct activities related to cannabis;

•

the intentions of management of the Company;

•

the Company’s expectations to meet target production capacity;

•

the impacts of future scientific findings regarding the medical and/or recreational cannabis market;

•

the availability of raw materials and supplies at acceptable quantities, qualities and prices;

•

the scope of protection the Company is able to establish and maintain, if any, for intellectual property rights covering its products;

•

future liquidity and financial capacity;

•

the Company’s plan with respect to any payments of dividends;

•

the Company’s contractual obligations and commitments.

With respect to the forward looking-statements contained in this Annual Report, the Company has made assumptions regarding, among other things:

 

Readers are cautioned that the above lists of forward-looking statements and assumptions are not exhaustive. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated or implied by such forward-looking statements due to a number of factors and risks. These include:

 

•

any unexpected failure of Focus Medical to maintain in good standing or renew its licenses;

The foregoing list of risk factors is not exhaustive. Additional information on these and other factors that could affect the business, operations or financial results of the Company are detailed under the heading “Risk Factors” in this Annual Report. Unless otherwise indicated, forward-looking statements in this Annual Report describe our expectations as of the date of this Annual Report. The Company and management caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company and management assume no obligation to update or revise them to reflect new events or circumstances except as required by applicable securities laws.

1)	the Company receiving economic benefits from Focus (and the terms of the Commercial Agreements cannot be changed without the approval of the Company);

2)	the Company having the option to purchase the divested 74% interest in Focus held by Oren Shuster, the CEO, director and a promoter of the Company, and Rafael Gabay, a former consultant director, a former consultant and a promoter of the Company;

3)	Messrs. Shuster and Gabay each being a director of Focus (while Mr. Shuster concurrently being a director, officer and substantial shareholder of the Company and Mr. Gabay concurrently being a substantial shareholder of the Company); and

4)	the Company providing management and support activities to Focus through the Services Agreement.

•

diversion of management time and focus from operating our business to addressing acquisition integration challenges;

•

coordination of research and development and sales and marketing functions;

•

retention of employees from the acquired company;

•

cultural challenges associated with integrating employees from the acquired company into our organization;

•

integration of the acquired company's accounting, management information, human resources, and other administrative systems;

•

the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked effective controls, procedures, and policies;

•

potential write-offs of intangible assets or other assets acquired in transactions that may have an adverse effect on our operating results in a given period;

•

liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; and

•

litigation or other claims in connection with the acquired company, including claims from terminated employees, consumers, former stockholders, or other third parties.

The WAGNERS™ brand launched in Israel in Q1 2022, with premium 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, Cherry Jam launched in Q1 2022, and Golden Ghost that was launched in Q4 2022.

BLKMKT™, the Company’s second Canadian brand, was introduced to the Israeli market in Q4 2022.

Revenues from Continuing operations - By Product Type
Financial Year	Medical Cannabis Products	Adult-Use Recreational Cannabis Products	Other Products	Total
2022	$48,384	-	$5,952	$54,335
2021	$26,449	-	$7,604	$34,053
2020	$14,863	-	$1,027	$15,890

•

Cannabi-s flos (3028),

•

Cannabis extractum siccum (3068),

•

Cannabis extractum spissum (3069).

•

The IP Agreement and the Services Agreement (collectively, the “Commercial Agreements”), whereby IMC Holdings derives economic benefit from Focus and whereby Focus (i) uses the IMC brand on an exclusive basis for the sale of cannabis products; and (ii) engages IMC Holdings to provide certain management and consulting services. As a result of the Company’s commercial relationship with Focus, it is dependent on Focus maintaining the Focus License, the Focus Lease Agreement and the Focus Facility in good standing, as well as any ancillary licenses required to carry on its operations in the Israeli medical cannabis industry.

•

Supply agreements with third party cannabis cultivators and suppliers to meet the Israeli market’s demand for the Company’s products.

•

Purchase orders received from time to time for the sale of the Company’s products to pharmacies or distributors, either in association with Focus or through the Company’s direct trading house operations.

•

Ongoing retail purchases of the Company’s products sold at the Israeli Pharmacies by Israeli medical cannabis patients.

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
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 Vironna Pharm (“Vironna”)	Israel	Subsidiary of IMC Holdings
Oranim Plus Pharm Ltd. (“Oranim Plus”)	Israel	Subsidiary of IMC Holdings
Trichome Financial Corp. (“Trichome”) *	Canada	Wholly-owned subsidiary
Trichome JWC Acquisition Corp. (“TJAC”) *	Canada	Wholly-owned subsidiary of Trichome
MYM Nutraceuticals Inc. (“MYM”) *	Canada	Wholly-owned subsidiary of Trichome
Highland Grow Inc. (“Highland” or “Highland Grow”) *	Canada	Wholly-owned subsidiary of MYM International Brands Inc.
Adjupharm GmbH (“Adjupharm”)	Germany	Subsidiary of IMC Holdings

a.

Amendment to IAS 1, "Presentation of Financial Statements":

-

Only covenants with which an entity must comply on or before the reporting date will affect a liability's classification as current or non-current.

-

An entity should provide disclosure when a liability arising from a loan agreement is classified as non-current and the entity's right to defer settlement is contingent on compliance with future covenants within twelve months from the reporting date. This disclosure is required to include information about the covenants and the related liabilities. The disclosures must include information about the nature of the future covenants and when compliance is applicable, as well as the carrying amount of the related liabilities. The purpose of this information is to allow users to understand the nature of the future covenants and to assess the risk that a liability classified as non-current could become repayable within twelve months. Furthermore, if facts and circumstances indicate that an entity may have difficulty in complying with such covenants, those facts and circumstances should be disclosed.

b.

Amendment to IAS 8, "Accounting Policies, Changes to Accounting Estimates and Errors":

c.

Amendment to IAS 12, "Income Taxes":

d.

Amendment to IAS 1, "Disclosure of Accounting Policies":

Nominee Name and Place of Residence	Position with IM Cannabis Corp.	Present and Principal Occupation, Business or Employment for Previous 5 years	Became Director/Executive Officer	Number of Common Shares beneficially owned, controlled or directed
Oren Shuster(3) Ra’anana, Israel	Chief Executive Officer & Director	CEO of the Company since October 2019; Founder and director of I.M.C. Holdings Ltd. since 2018; Founder and director of Focus Medical Herbs Ltd. since 2010; Founder of Ewave Group Ltd.	October 11, 2019	1,872, 870 (4)
Marc Lustig West Vancouver, British Columbia, Canada	Executive Chairman and Director	Executive Chairman of the Company since December 2020; Director of Pharmacielo Ltd. since November 2020; Director of Cresco Labs Inc. since June 2020; Director of Trichome Financial Corp. since October 2019; Founder, Chairman and Chief Executive Officer of CannaRoyalty Corp. (dba Origin House) from 2016 to 2020. Director of Briacell Therapeutics Corp., a Nasdaq listed biotechnology company since September 2021.	October 11, 2019	338,144
Moti Marcus(1)(2)(3) Tel Aviv, Israel	Director	Chief Executive Officer of Packer Quality Metals Ltd. since 2019; Chief Financial Officer and deputy Chief Executive Officer of S. Cohen Metal Works Ltd. from 2013 and 2018.	September 12, 2022	Nil
Einat Zakariya(1)(2)(3) Herzliya, Israel	Director	Chief Executive Officer and Partner of Liv Residence Ltd., a subsidiary of Ewave Holdings Ltd.; Chief Executive Officer and Partner of Ewave Nadlan International Investments Ltd., since 2018; Chief Executive Officer and Partner of The Promised Land, a subsidiary of Ewave Nadlan International Investments Ltd., from 2014 to 2018.	September 12, 2022	61,200
Brian Schinderle(1)(2) Illinois, USA	Director	Founder and Manager of Solidum Capital since 2017; Executive Vice President of Finance of GHG Management (dba Grassroots Cannabis) from 2018 to 2020; Portfolio Manager of Balyasny Asset Management from 2009 to 2017.	February 22, 2021	Nil
Shai Shemesh	Chief Financial Officer(6)	Group CFO at IMC since 2019; CFO at IVM Minrav Sadyt, 2011-2019.	October 11, 2019	21,190
Rinat Efrima(5)	Chief Executive Officer of Subsidiary, IMC Holdings(7)	Managing Director Israel and Global Chief Marketing Officer at Caesarstone Ltd. Since June 2019 to February 2022; Sector General Manager for Europe, Middle East and Africa at Kimberly-Clark Corporation since September 2015 to May 2019.	March 1, 2022	15,000
Yael Harrosh	Chief Legal and Operations Officer	Group’s CLO since 2019 and COO since 2022; Deputy CEO and legal counsel at Promarket Group, 2016-2018. Prior to that, associate at top law firms in Israel,	October 11, 2019	Nil
Richard Balla	Chief Executive Officer of Subsidiary	Managing Director of Adjupharm, Head of Market and Product Development at ACA Müller Pharma AG	October 11, 2019	Nil
Itay Vago(6)	Incoming Chief Financial Officer(6)	Finance Director of IMC Holdings Ltd., the Company’s Israeli subsidiary (“IMC Holdings”), 2022-2023. Senior Finance Controller at AstraZeneca Ltd, 2018-2022; APAC CFO at Telit Communication PLC, 2014-2018.	(6)March 8, 2023	Nil
Eyal Fisher(7)	Incoming General Manager Subsidiary, IMC Holdings(7)	Deputy CEO and Sales & Trade Director of IMC Holdings since 2021; Vice President Sales and Division Manager at Pandora Jewellery, 2016-2020.	(7)March 8, 2023	Nil

(1)	Member of the Audit Committee.

(2)	Member of Compensation Committee.

(3)	Member of the Governance and Nomination Committee.

(4)	1,872,717 Common Shares are held by Oren Shuster directly and 153 Common Shares are held indirectly through Ewave Group Ltd., a privately-held entity of which Mr. Shuster owns and controls 50% of the outstanding voting.

(5)	Ms. Efrima is the Chief Executive Officer of IMC Holdings Ltd.

Board Diversity Matrix (As of March 29, 2023)
Country of Principal Executive Offices:	Israel
Foreign Private Issuer	Yes
Disclosure Prohibited under Home Country Law	No
Total Number of Directors	5
	Male	Female	Non-Binary	Did Not Disclose Gender
Part I: Gender Identity
Directors	4	1	–	–
Part II: Demographic Background
Under-represented person in Home Country	0
LGBTQ+	0

1.	base salary;

2.	cash bonuses; and/or

3.	long-term incentives.

1.	Base Salary

2.	Cash Bonuses

3.	Long Term Incentives

(a)

the maximum number of RSUs available for grant to any one person under the RSU Plan and any other Securities Based Compensation Arrangements of the Company in a 12 month period is 5% of the total number of Common Shares then outstanding on a non-diluted basis; and

(b)

the maximum number of Common Shares issuable to insiders of the Company (as a group) under the RSU Plan, together with any other Common Shares issuable under any other Securities Based Compensation Arrangements, shall not exceed at any time or within any 12 month period, 10% of the issued and outstanding Common Shares on a non-diluted basis at the time of grant.

(a)

increase the number of Common Shares which may be issued pursuant to the RSU Plan, other than by virtue of a change in Common Shares, whether by reason of a stock dividend, consolidation, subdivision or reclassification which adjustment may be made by the Board or Compensation Committee for the number of Common Shares available under the RSU Plan and the number of Common Shares subject to RSUs;

(b)

amend the definition of “Participant” under the RSU Plan which would have the potential of narrowing, broadening or increasing insider participation;

(c)

amendments to cancel and reissue RSUs;

(d)

amendments to the list of amendments to the RSU Plan or RSUs requiring requisite regulatory and shareholder approval and those subject to requisite regulatory approval (where required) but not subject to shareholder approval;

(e)

amendments that extend the term of an RSU;

(f)

amendments to the participation limits including: the maximum number of shares issuable under the RSU Plan, limitations on grants of RSUs to any one person in a 12-month period, grants within a one year period to insiders, and the number of shares issuable to a person providing investor relations activities in any 12-month period; and

(g)

amendments to the RSU Plan that would permit RSUs, or any other right or interest of a RSU Participant under the RSU Plan, to be assigned or transferred, other than for normal estate settlement purposes.

(a)

amendments of a housekeeping nature;

(b)

amendments to the vesting provisions of a RSU or the RSU Plan;

(c)

amendments to the definitions, other than such definitions noted above;

(d)

amendments to reflect changes to applicable securities laws; and

(e)

amendments to ensure that the RSUs granted under the RSU Plan will comply with any provisions respecting income tax and other laws in force in any country or jurisdiction of which a RSU Participant to whom a RSU has been granted may from time to time be a resident, citizen or otherwise subject to tax therein.

(1)	Mr. Shuster was appointed CEO and director of the Company on October 11, 2019. Mr. Shuster does not earn consideration for his role as a director of the Company.

(2)	Mr. Shemesh was appointed CFO of the Company on October 11, 2019.

(3)	Mr. Lustig was appointed Executive Chairman of the Company on December 29, 2020. Mr. Lustig does not earn consideration for his role as a director of the Company.

(4)	Mr. Ruscetta is the Chief Executive Officer of Trichome.

(5)	Mr. Steinberg is the Chief Executive Officer of TJAC and MYM.

(6)	On September 21, 2021 the Company granted Mr. Lustig 550,000 RSUs.

(7)

The Company used the Black-Scholes pricing model as the methodology to calculate the grant date fair value, and relied on the following the key assumptions and estimates for each calculation under the following assumptions: (i) risk free interest rate of 0.42% to 1.97% (ii) expected dividend yield of 0%; (iii) expected volatility of 76.28% to 82.31%; and (iv) a term of 5 to 10 years. The Black-Scholes pricing model was used to estimate the fair value as it is the most accepted methodology.

(1)	Ms. Bercovici resigned on September 13, 2022.

(2)	Ms. Barath resigned on September 13, 2022.

(1)	Each Option entitles the holder to purchase one Common Share.

(2)	On February 12, 2021, the Company completed a consolidation of its Common Shares on a 4:1 basis. The figures reported in this table are presented on a 4:1 post-consolidation basis.

(1)	Ms. Bercovici resigned on September 13, 2022 but remained as a director of IMC Holdings, therefore her options continued to vest according to the Option Plan. Ms. Bercovici resigned from IMC Holdings on January 8, 2023.

(2)	Ms. Barath resigned on September 13, 2022 but remained as a director of IMC Holdings, therefore her options continued to vest according to the Option Plan.

(3)	Mr. Marcus appointed on September 13, 2022.

(4)	Ms. Zakariya appointed on September 13, 2022.

(1)	On November 17, 2022, the Company completed a consolidation of its Common Shares on a 10:1 basis. The figures reported in this table are presented on a 10:1 post-consolidation basis.

Year		Full Time		Part Time		Total
Fiscal 2020		80		-		80
Fiscal 2021		283		-		363
Fiscal 2022		153		-		153

Name	Aggregate Number of Common Shares	Percentage of Outstanding Common Shares
Oren Shuster	1,872,870	14.58%
Rafael Gabay	1,173,869	9.14%
Luminera Derm Ltd.	757,172	5.89%

Notes:

(1)	1,872,717 Common Shares are held by Oren Shuster directly and 153 Common Shares are held indirectly by Ewave Group Ltd., a privately-held entity jointly owned by Mr. Shuster and Mr. Gabay of which Mr. Shuster owns and controls 50% of the outstanding voting shares.
(2)	1,173,716 Common Shares are held by Rafael Gabay directly and 153 Common Shares are held indirectly by Ewave Group Ltd., a privately-held entity jointly owned by Mr. Gabay and Mr. Shuster of which Mr. Gabay owns and controls 50% of the outstanding voting shares.

•

Under the Focus Agreement,  IMC Holdings retains an option with Messrs. Shuster and Gabay to re-acquire the sold interest in Focus Medical at its sole discretion and in accordance with Israeli cannabis regulations.

•

The Company is a party to Indemnification Agreement with certain directors and officers of the Company and Trichome to cover certain tax liabilities, interest and penalties arising from the Trichome Transaction.

•

On August 5, 2022, the Company sold the wholly owned subsidiary of TJAC, Sublime, to a group of purchasers that included current and former members of the Sublime management team for aggregate proceeds of $100,000 less working capital adjustments, for a final net purchase price of $89,000. The transaction constituted a “related party transaction” within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”), however pursuant to Sections 5.5(a) and 5.7(1)(a) of MI 61-101, the transaction is exempt from the formal valuation and minority shareholder approval requirements of such instrument.

•

The Stalking Horse Purchase Agreement constituted a related party transaction as L5 is an entity controlled by Marc Lustig, who is a director of Trichome and the Executive Chairman of the Board of the Company. On March 8, 2023, the Company announced that the SISP approved by the Ontario Superior Court of Justice (Commercial List) did not result in any bids for the going-concern business of Trichome Group. In addition, L5, controlled by Marc Lustig, advised that it would not complete the proposed transaction contemplated by the Stalking Horse Share Purchase Agreement.

•

On August 24, 2022, the Company announced that it closed the first tranche of the 2022 Private Placement and on October 5, 2022 announced that it closed the second tranche of the 2022 Private Placement. Insiders of the Company, led by the Company’s CEO and Director, and the Company’s CFO, subscribed for 1,563,496 Common Shares for aggregate proceeds of US$782 in the first tranche of the 2022 Private Placement, and the Executive Chairman and Director of the Company, subscribed for 1,112,504 Common Shares for aggregate proceeds of US$556 in the second tranche of the 2022 Private Placement. As a result of the participation by the CEO, the CFO and the Executive Chairman and Director of the Company, the 2022 Private Placement was considered a “related party transaction” pursuant to MI 61-101. The Company relied on Sections 5.5(a) and 5.7(1)(a) of MI 61-101 for exemptions from the requirements to obtain a formal valuation and minority shareholder approval, respectively, because the fair market value of the Insiders’ participation in the 2022 Private Placement was below 25% of the Company’s market capitalization for purposes of MI 61-101.

•

On January 16, 2023, the Company announced the closing of the first tranche of the Concurrent Offering comprised of an aggregate of 1,159,999 Units for aggregate gross proceeds of US$1,500. The Units under the first tranche of the Concurrent Offering were issued and sold to insiders of the Company, including the Company’s CEO and director of the Company.

•

On January 20, 2023, the Company closed the second tranche of the LIFE Offering comprised of 102,152 Units for an aggregate subscription price of approximately US$128. The second tranche of the LIFE Offering was comprised of a single subscription by Marc Lustig, a non-independent director of the Company whose subscription price was satisfied by the settlement of approximately US$128 in debt owed by the Company to Marc Lustig for certain consulting services previously rendered to the Company.

•

On February 16, 2023, the Company closed the fifth and final tranche of the LIFE Offering. Marc Lustig, a non-independent director of the Company subscribed for 29,548 Units in the fifth tranche at an aggregate subscription price of US$36,935. Marc Lustig’s subscription price was satisfied by the settlement of US$37 in debt owed by the Company to the director for certain consulting services previously rendered by the director to the Company.

2.

that the contractual partner of the Company is not the defendant, Stroakmont & Atton is not the real purchaser rather a company named Uniclaro GmbH.

3.

that the Company allegedly placed an order with Uniclaro GmbH for a total of 4.3 million Clongene COVID-19 tests, of which Uniclaro GmbH claims to have a payment claim against the Company for a partial delivery of 380,400 Clongene COVID-19 tests in the total amount of EUR 941,897.20. Uniclaro GmbH has assigned this alleged claim against the Company to Stroakmont & Atton Trading GmbH, and Stroakmont & Atton Trading GmbH has precautionary declared a set-off against the Company’s claim.

1.

under the age of 18 years;

2.

found by a court, in Canada or elsewhere, to be incapable of managing the individual’s own affairs, unless a court, in Canadaor elsewhere, subsequently finds otherwise; ;

3.

an undischarged bankrupt; or

4.

convicted in or out of the Province of British Columbia of an offence in connection with the promotion, formation or management of a corporation or unincorporated business, or of an offence involving fraud, unless:

a.

the court orders otherwise;

b.

5 years have elapsed since the last to occur of:

i.

the expiration of the period set for suspension of the passing of sentence without a sentence having been passed;

ii.

the imposition of a fine;

iii.

the conclusion of the term of any imprisonment; and

iv.

the conclusion of the term of any probation imposed; or

c.

a pardon was granted or issued, or a record suspension ordered, under the Criminal Records Act (Canada) and the pardon or record suspension, as the case may be, has not been revoked or ceased to have effect.

a.

Option agreement between IMC Holdings and Focus, dated April 2, 2019, whereby IMC Holdings has an option to purchase, at its sole discretion, all of the issued and outstanding ordinary shares of Focus at a price equal to NIS 765.67 per ordinary share for total consideration of NIS 2,756,500 until April 2029.

b.

Services Agreement dated April 2, 2019 and as amended on January 1, 2021, between IMC Holdings and Focus, as further described in “Business Overview – Economic Dependence”.

c.

Agency agreement dated May 5, 2021 between the Company Roth Canada, ULC, pursuant to which Roth Canada, ULC acted as the sole agent in Canada in respect to an offering of Common Shares and Warrant completed in May 2021 for aggregate gross proceeds of US$35,000,000.

d.

The warrant indenture between the Company and Odyssey Trust Company, dated January 30, 2023, entered into in respect of Warrants issued under the LIFE Offering.

e.

The warrant indenture between the Company and Odyssey Trust Company, dated February 7, 2023, entered into in respect of Warrants issued under the LIFE Offering.

f.

The warrant indenture between the Company and Odyssey Trust Company, dated February 16, 2023, entered into in respect of Warrants issued under the LIFE Offering.

A.

a citizen or individual resident of the United States;

B.

a corporation (or other entity classified as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;

C.

an estate whose income is subject to U.S. federal income taxation regardless of its source; or

D.

a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

(i)

are resident solely in the United States for the purposes of the Canada-U.S. Tax Convention;

(ii)

are entitled to the benefits of the Canada-U.S. Tax Convention and is a “qualifying person” within the meaning of the Canada-U.S. Tax Convention;

(iii)

hold all Common Shares as capital property and as beneficial owner;

(iv)

hold no Common Shares that are “taxable Canadian property” (as defined in the Tax Act) of the holder;

(v)

deal at arm’s length with and are not affiliated with the Company;

(vi)

do not use or hold and are not deemed to use or hold any Common Shares in  the course of a business or part of a business carried on in Canada;

(vii)

did not, do not and will not have a permanent establishment in Canada within the meaning of the Canada-U.S. Tax Convention;

(viii)

did not acquire Common Shares by virtue of employment;

(ix)

are not financial institutions, authorized foreign banks, partnerships or trusts for the purposes of the Tax Act; and

(x)

are not insurers that carry on business in Canada and elsewhere;

(i)

the holder, persons with whom the holder does not deal at arm’s length, or any partnership in which the holder or persons with whom the holder did not deal at arm’s length holds a membership interest directly or indirectly through one or more partnerships, alone or in any combination, owned 25% or more of the issued shares of any class of the capital stock of the Company; and

(ii)

more than 50% of the fair market value of the Common Shares was derived directly or indirectly from, or from any combination of, real or immovable property situated in Canada, “Canadian resource properties” (as defined in the Tax Act), “timber resource properties” (as defined in the Tax Act), or options in respect of or interests in, or for civil law a right, in such properties.

	December 31, 2022(1)	December 31, 2021(1)
Audit fees(2)	$315	$894
Audit-related fees(3)	$45	-
Tax fees(4)	$60	$17
All other fees(5)	-	-
Total fees	$420	$911

(1)	Amounts are stated in thousands USD and are from continuing operations.

(2)	Audit fees consist of the aggregate fees billed for the audit or review of the Company’s annual and quarterly financial statements that are normally provided in connection with statutory and regulatory filings or engagements.

(3)	Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported as audit fees.

(4)	For tax compliance, tax advice and tax planning.

(5)	For products and services other than the audit fees, audit-related fees and tax fees described above.

(6)	Amounts stated in the table above are not including 2022 audit fees related to the deconsolidated Trichome Group in the amount of $331,000.

Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021

Independent Auditors’ Reports

Consolidated Statements of Financial Position

Consolidated Statements of Net Loss and Comprehensive Loss

Consolidated Statements of Changes in Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements