Exhibit 99.2






IM CANNABIS CORP.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2022

Canadian dollars in thousands

(Unaudited)

INDEX

   
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2 - 3
     
 
4 - 5
     
 
6
     
 
7 - 8
     
 
9 - 19




IM CANNABIS CORP.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Canadian Dollars in thousands


         
March 31,
2022
    
December 31,
2021
  
   
Note
    
(Unaudited)
        
                   
ASSETS
                  
                   
CURRENT ASSETS:
                  
                   
Cash and cash equivalents
        
$
10,315
    
$
13,903
  
Restricted deposit
          
-
      
1
  
Trade receivables
          
22,148
      
16,711
  
Advances to suppliers
          
5,047
      
2,300
  
Other accounts receivable
          
8,518
      
14,481
  
Loans receivable
          
2,247
      
2,708
  
Biological assets
  
4
      
2,117
      
1,687
  
Inventories
  
5
      
30,368
      
29,391
  
                       
           
80,760
      
81,182
  
NON-CURRENT ASSETS:
                      
                       
Property, plant and equipment, net
          
26,875
      
30,268
  
Investments
          
2,467
      
2,429
  
Investments and financial instruments
  
3
      
4,141
      
3,129
  
Derivative assets
          
26
      
14
  
Right-of-use assets, net
          
16,794
      
18,162
  
Deferred tax assets
          
355
      
16
  
Intangible assets, net
          
29,436
      
30,885
  
Goodwill
          
120,214
      
121,303
  
                       
           
200,308
      
206,206
  
                       
Total assets
        
$
281,068
    
$
287,388
  

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F - 2
IM CANNABIS CORP.
 
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Canadian Dollars in thousands

         
March 31,
2022
    
December 31,
2021
  
   
Note
    
(Unaudited)
        
                   
LIABILITIES AND EQUITY
                  
                   
CURRENT LIABILITIES:
                  
                   
Trade payables
        
$
15,069
    
$
13,989
  
Bank loans and credit facilities
          
15,526
      
9,502
  
Other accounts payable and accrued expenses
          
20,130
      
20,143
  
Accrued purchase consideration liabilities
          
2,836
      
6,039
  
Current maturities of operating lease liabilities
          
1,552
      
1,554
  
                       
           
55,113
      
51,227
  
                       
NON-CURRENT LIABILITIES:
                      
Warrants measured at fair value
  
6
      
3,347
      
6,022
  
Operating lease liabilities
          
17,276
      
17,820
  
Long-term loans
          
378
      
392
  
Employee benefit liabilities, net
          
295
      
391
  
Deferred tax liability, net
          
6,299
      
6,591
  
                       
           
27,595
      
31,216
  
                       
Total liabilities
          
82,708
      
82,443
  
                       
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
  
7
                  
                       
Share capital and premium
          
241,903
      
237,677
  
Treasury Stock
          
(660
)
    
(660
)
Translation reserve
          
1,776
      
2,614
  
Reserve from share-based payment transactions
          
13,212
      
12,348
  
Accumulated deficit
          
(60,195
)
    
(50,743
)
                       
Total equity attributable to equity holders of the Company
          
196,036
      
201,236
  
                       
 Non-controlling interests
          
2,324
      
3,709
  
                       
Total equity
          
198,360
      
204,945
  
                       
Total liabilities and equity
        
$
281,068
    
$
287,388
  

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F - 3
 
IM CANNABIS CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (UNAUDITED)
Canadian Dollars in thousands, except per share data

         
Three months ended
March 31,
  
   
Note
    
2022
    
2021
  
                   
Revenues
        
$
23,569
    
$
8,767
  
Cost of revenues
          
17,215
      
4,140
  
Gross profit before fair value adjustments
          
6,354
      
4,627
  
                       
Fair value adjustments:
                      
Unrealized change in fair value of biological assets
          
1,079
      
2,343
  
Realized fair value adjustments on inventory sold in the period
          
(863
)
    
(1,942
)
Total fair value adjustments
          
216
      
401
  
                       
Gross profit
          
6,570
      
5,028
  
                       
General and administrative expenses
          
9,042
      
4,913
  
Selling and marketing expenses
          
3,720
      
1,190
  
Restructuring expenses
          
3,747
      
-
  
Share-based compensation
          
1,610
      
630
  
Total operating expenses
          
18,119
      
6,733
  
                       
Operating loss
  
10
      
(11,549
)
    
(1,705
)
                       
Finance income
  
6
      
2,891
      
7,226
  
Finance expense
          
(2,336
)
    
(303
)
Finance income, net
          
555
      
6,923
  
                       
Income (loss) before income taxes
          
(10,994
)
    
5,218
  
                       
Income tax expense (benefit)
          
(253
)
    
503
  
                       
Net income (loss)
          
(10,741
)
    
4,715
  
                       
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods:
                      
                       
Exchange differences on translation to presentation currency
          
(1,792
)
    
(1,390
)
                       
Total other comprehensive income that will not be reclassified to profit or loss in subsequent periods
          
(1,792
)
    
(1,390
)
                       
Other comprehensive income that will be reclassified to profit or loss in subsequent periods:
                      
                       
Adjustments arising from translating financial statements of foreign operation
          
858
      
232
  
                       
Total other comprehensive income (loss) that will be reclassified to profit or loss in subsequent periods
          
858
      
232
  
                       
Total other comprehensive income (loss)
          
(934
)
    
(1,158
)
                       
Total comprehensive income (loss)
        
$
(11,675
)
  
$
3,557
  

F - 4
IM CANNABIS CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (UNAUDITED)
Canadian Dollars in thousands, except per share data

         
Three months ended
March 31,
  
   
Note
    
2022
    
2021
  
                   
Net income (loss) attributable to:
                  
Equity holders of the Company
          
(9,452
)
    
4,505
  
Non-controlling interests
          
(1,289
)
    
210
  
                       
         
$
(10,741
)
  
$
4,715
  
Total comprehensive income (loss) attributable to:
                      
Equity holders of the Company
          
(10,290
)
    
3,336
  
Non-controlling interests
          
(1,385
)
    
221
  
                       
         
$
(11,675
)
  
$
3,557
  
Net income (loss) per share attributable to equity holders of the Company:
  
9
                  
                       
Basic net income (loss) per share (in CAD)
        
$
(0.14
)
  
$
0.11
  
Diluted net income (loss) per share (in CAD)
        
$
(0.17
)
  
$
(0.06
)

The accompanying notes are an integral part of the interim condensed consolidated financial statements.
F - 5

IM CANNABIS CORP.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
Canadian Dollars in thousands

   
Share
Capital and premium
    
Treasury
Stock
    
Reserve from share-based
payment transactions
    
Translation
 reserve
    
Accumulated
deficit
    
Total
    
Non-controlling interests
    
Total
equity
  
                                                 
Balance as of January 1, 2022
  
$
237,677
    
$
(660
)
  
$
12,348
    
$
2,614
    
$
(50,743
)
  
$
201,236
    
$
3,709
    
$
204,945
  
                                                                 
Net loss
    
-
      
-
      
-
      
-
      
(9,452
)
    
(9,452
)
    
(1,289
)
    
(10,741
)
Total other comprehensive loss
    
-
      
-
      
-
      
(838
)
    
-
      
(838
)
    
(96
)
    
(934
)
                                                                 
Total comprehensive loss
    
-
      
-
      
-
      
(838
)
    
(9,452
)
    
(10,290
)
    
(1,385
)
    
(11,675
)
                                                                 
Issuance of common shares
    
3,147
      
-
      
-
      
-
      
-
      
3,147
      
-
      
3,147
  
Exercise of options
    
1,060
      
-
      
(727
)
    
-
      
-
      
333
      
-
      
333
  
Share-based compensation
    
-
      
-
      
1,610
      
-
      
-
      
1,610
      
-
      
1,610
  
Forfeited options
    
19
      
-
      
(19
)
    
-
      
-
      
-
      
-
      
-
  
                                                                 
Balance as of March 31, 2022
  
$
241,903
    
$
(660
)
  
$
13,212
    
$
1,776
    
$
(60,195
)
  
$
196,036
    
$
2,324
    
$
198,360
  

   
Share
Capital and premium
    
Reserve from share-based
payment transactions
    
Translation
reserve
    
Accumulated
deficit
    
Total
    
Non-controlling interests
    
Total
equity
  
                                           
Balance as of January 1, 2021
  
$
37,040
    
$
5,829
    
$
1,229
    
$
(33,001
)
  
$
11,097
    
$
1,513
    
$
12,610
  
                                                         
Issuance of Common Shares related to the Trichome Transaction
    
100,098
      
-
      
-
      
-
      
100,098
      
-
      
100,098
  
Exercise of warrants and compensation options
    
1,131
      
-
      
-
      
-
      
1,131
      
-
      
1,131
  
Exercise of options
    
746
      
(681
)
    
-
      
-
      
65
      
-
      
65
  
Share based compensation
    
-
      
630
      
-
      
-
      
630
      
-
      
630
  
Expired options
    
8
      
(8
)
    
-
      
-
      
-
      
-
      
-
  
 Net income
    
-
      
-
      
-
      
4,505
      
4,505
      
210
      
4,715
  
Other comprehensive income (loss)
    
-
      
-
      
(1,169
)
    
-
      
(1,169
)
    
11
      
(1,158
)
                                                         
Balance as of March 31, 2021
  
$
139,023
    
$
5,770
    
$
60
    
$
(28,496
)
  
$
116,357
    
$
1,734
    
$
118,091
  

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F - 6

IM CANNABIS CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Canadian Dollars in thousands

   
Three months ended
March 31,
  
   
2022
    
2021
  
Cash provided by operating activities:
            
             
Net income (loss) for the period
  
$
(10,741
)
  
$
4,715
  
Adjustments for non-cash items:
                
Unrealized gain on changes in fair value of biological assets
    
(1,079
)
    
(2,343
)
Fair value adjustment on sale of inventory
    
863
      
1,942
  
Fair value adjustment on Warrants, investments and accounts receivable
    
(2,688
)
    
(7,160
)
Depreciation of property, plant and equipment
    
1,038
      
256
  
Amortization of intangible assets
    
636
      
45
  
Depreciation of right-of-use assets
    
163
      
84
  
Finance expenses, net
    
2,132
      
211
  
Deferred tax liability, net
    
(542
)
    
211
  
Share-based payment
    
1,610
      
630
  
Share-based acquisition costs related to business combination with acquisition of subsidiary
    
-
      
989
  
Revaluation of other receivable
    
67
      
-
  
Restructuring expense
    
3,069
      
-
  
     
5,269
      
(5,135
)
                 
Changes in working capital:
                
Increase in trade receivables
    
(6,009
)
    
(3,682
)
Decrease (increase) in other accounts receivable and advances to suppliers
    
1,892
      
(4,656
)
Decrease (increase) in biological assets, net of fair value adjustments
    
641
      
(387
)
Increase in inventories, net of fair value adjustments
    
(1,847
)
    
(1,007
)
Increase in trade payables
    
2,377
      
3,561
  
Changes in employee benefit liabilities, net
    
(83
)
    
(24
)
Decrease in other accounts payable and accrued expenses
    
(437
)
    
(1,620
)
                 
     
(3,466
)
    
(7,815
)
                 
Taxes (paid) received
    
(505
)
    
444
  
                 
Net cash used in operating activities
    
(9,443
)
    
(7,791
)
                 
Cash flows from investing activities:
                
                 
Purchase of property, plant and equipment
    
(682
)
    
(916
)
Proceeds from loan receivable
    
350
      
-
  
Acquisition of subsidiary
    
-
      
362
  
Investment in associate
    
-
      
(12
)
Proceeds from restricted cash
    
-
      
17
  
                 
Net cash used in investing activities
  
$
(332
)
  
$
(549
)

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F - 7
IM CANNABIS CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Canadian Dollars in thousands

   
Three months ended
March 31,
  
   
2022
    
2021
  
Cash flow from financing activities:
            
             
   Proceeds from exercise of warrants
    
-
      
461
  
   Proceeds from exercise of options
    
333
      
65
  
   Repayment of lease liability
    
(371
)
    
(40
)
   Interest paid - lease liability
    
(435
)
    
(16
)
   Receipt of bank loan and credit facilities
    
6,047
      
-
  
   Cash paid for interest
    
(211
)
    
-
  
                 
Net cash provided by financing activities
    
5,393
      
470
  
                 
Effect of foreign exchange on cash and cash equivalents
    
824
      
237
  
                 
Decrease in cash and cash equivalents
    
(3,588
)
    
(7,633
)
Cash and cash equivalents at beginning of the period
    
13,903
      
8,885
  
                 
Cash and cash equivalents at end of the period
  
$
10,315
    
$
1,252
  
                 
Supplemental disclosure of non-cash activities:
                
                 
Right-of-use asset recognized with corresponding lease liability
  
$
169
    
$
81
  
Issuance of shares in payment of purchase consideration liability
  
$
3,147
    
$
-
  

The accompanying notes are an integral part of the interim condensed consolidated financial statements.
F - 8

IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 1:-
GENERAL


a.
Corporate information:

IM Cannabis Corp. (the "Company" or "IMCC) is listed for trading on the Canadian Securities Exchange (“CSE”) and, commencing from March 1, 2021, on NASDAQ under the ticker symbol “IMCC”. IMCC’s main office is located in Kibbutz Glil-Yam, Israel.

In Israel, IMCC operates in the field of medical cannabis, through Focus Medical Herbs Ltd. ("Focus"), which is licensed under the regulations of medical cannabis by the Israeli Ministry of Health through its Israel Medical Cannabis Agency ("IMCA") to breed, grow and supply medical cannabis product in Israel and all of its operations are performed pursuant to the Israeli Dangerous Drugs Ordinance (New Version), 1973 (the "Dangerous Drugs Ordinance"), and the related regulations issued by IMCA.

During 2021, IMCC also entered into the field of retail medical cannabis and other pharma products in Israel through the acquisition of several pharmacies and trade houses, including the pharmacies of Vironna, Pharm Yarok and Oranim, and the trade houses of  Panaxia and Rosen High Way.

In Europe, IMCC operates through Adjupharm, a German-based subsidiary acquired by IMC Holdings on March 15, 2019. Adjupharm is an EU-GMP certified medical cannabis producer and distributor with wholesale, narcotics handling, manufacturing, procurement, storage and distribution licenses granted by German regulatory authorities that allow for import/export capability with requisite permits.

In Canada, IMCC operates through Trichome JWC Acquisition Corp. (“TJAC”) d/b/a JWC and MYM, both Canadian federally licensed producer of cannabis products in the adult-use recreational cannabis market in Canada.

The Company and its subsidiaries do not engage in any U.S. cannabis-related activities as defined in Canadian Securities Administrators Staff Notice 51-352.

The Company, its subsidiaries and Focus (collectively: the "Group"), operate in geographical reporting segments (Note 10). The majority of the Group’s revenues are generated from sales of medical cannabis products to customers in Israel and recreational cannabis in Canada. The remaining revenues are generated from sales of medical cannabis, as well as other products, to customers in Germany.

These financial statements have been prepared in a condensed format as of March 31, 2022, and for the three months then ended (the "interim condensed consolidated financial statements"). These financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2021, and for the year then ended and accompanying notes (the "annual consolidated financial statements").

F - 9

IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 1:-
GENERAL (Cont.)

Liquidity and capital resources

As of March 31, 2022, the Company's cash position (cash and cash equivalents) totaled $10,315 and the Company's working capital (current assets less current liabilities) amounted to $25,647. In the three months ended March 31, 2022, the Company had an operating loss of ($11,549) and negative cash flows from operating activities of ($9,443). The Company’s current operating budget includes various assumptions concerning the level and timing of cash receipts from sales and cash outlays for operating expenses and capital expenditures, including a cost saving plan. The Company is planning to finance its operations from its existing and future working capital resources and to continue to evaluate additional sources of capital and financing.

However, there is no assurance that additional capital and or financing will be available to the Company, and even if available, whether it will be on terms acceptable to the Company or in amounts required. Accordingly, the Company’s board of directors approved a cost saving plan, to be implemented if needed, in whole or in part, at its discretion, to allow the Company to continue its operations and meet its cash obligations. The cost saving plan consist of cost reduction due to efficiencies and synergies, which include mainly the following steps: reduction in payroll and headcount, reduction in compensation paid to key management personnel, operational efficiencies and reduced capital expenditures. The Company and the board of directors believe that its existing financial resources and its operating plans, including the effects of the costs saving plan, will be adequate to satisfy its expected liquidity requirements for a period of at least twelve months from the end of the reporting period.

During 2021, TJAC and certain MYM subsidiaries entered into a revolving credit facility (the “Facility”) with a private Canadian creditor. The Facility is guaranteed by Trichome Financial Corp. Advances from the Facility is used for working capital needs. The Facility has a total commitment of up to $10,000 and has a one-year term, renewable upon mutual agreement by the parties on May 14, 2022 for up to two additional periods of 180 days. The borrowing base available for draw at any time throughout the Facility is a function of the trade receivable and inventory balances at the time of drawdown. The Facility bears interest at the higher of 9.75% and the Toronto Dominion Bank Prime Rate plus 7.30% per annum. The balance as of March 31, 2022 was $9,980. See Note 11 for details of the amendment and extension of the Facility in April 2022.

In January 2022, Focus entered into a revolving credit facility with Bank Mizrahi (the “Mizrahi Facility”). The Mizrahi Facility is guaranteed by Focus assets. Advances from the Mizrahi Facility will be used for working capital needs. The Mizrahi Facility has a total commitment of up to NIS 15,000 thousand (approximately $6,000) and has a one-year term for on-going needs and 6 months term for imports and purchases needs. The Mizrahi Facility is renewable upon mutual agreement by the parties. The borrowing base available for draw at any time throughout the Mizrahi Facility and is subject to several covenants to be measured on a quarterly basis (the “Mizrahi Facility Covenants”). The Mizrahi Facility bears interest at the Israeli Prime interest rate plus 1.5% (approximately 3.5%) per annum. As of March 31, 2022, the Company met the Mizrahi Facility Covenants and the balance was $5,545.

F - 10

IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 1:-
GENERAL (Cont.)


b.
Approval of Interim Condensed Consolidated Financial Statements:

These interim condensed consolidated financial statements of the Company were authorized for issue by the board of directors on May 12, 2022.


 c.
Strategic Developments:


1.
On April 30, 2021, the Company announced that its wholly-owned Israeli subsidiary, IMC Holdings, signed a definitive agreement (the "Panaxia Agreement") with Panaxia Pharmaceutical Industries Israel Ltd. and Panaxia Logistics Ltd. (collectively "Panaxia") (the "Panaxia Transaction"). Pursuant to the Panaxia Agreement, IMC Holdings will acquire Panaxia’s trading house license and in-house pharmacy activities, certain distribution assets and an option to purchase a pharmacy with licenses to sell medical cannabis to patients, for an aggregate purchase price of NIS 18.7 million (approximately 7,000), comprised of NIS 7.6 million (approximately $2,800) in cash and NIS 11.1 million (approximately $4,200) in Common Shares. As of March 31, 2022, the accrued purchased consideration with respect to Panaxia transaction amounts to $291. On February 15, 2022, the Company notified Panaxia regarding its decision to exercise the option to purchase the pharmacy. Per Panaxia Agreement, Panaxia has 3 months to transfer the shares of the pharmacy to the Company.


2.
On July 28, 2021, IMC Holdings entered into a definitive agreement to acquire all of the issued and outstanding share of R.A. Yarok Pharm Ltd., Rosen High Way Ltd. and High Way Shinua Ltd. (collectively "Pharm Yarok Group"). The aggregate consideration for the Pharm Yarok Group acquisition comprised of NIS 11,900 thousand (approximately $4,600), of which NIS 3,500 thousand (approximately $1,300) in Common Shares which were issued on March 14, 2022, in settlement of the purchase consideration liability recorded in 2021.


3.
On August 16, 2021, IMC Holdings signed a definitive agreement to acquire 51% of the outstanding ordinary shares of Revoly Trading and Marketing Ltd.  ("Vironna") for a total consideration of NIS 8,500 thousand (approximately $3,300), of which NIS 5,000 thousand (approximately $1,893) in cash and NIS 3,500 thousand (approximately $1,350) is in Common Shares which were issued on March 14, 2022. As of March 31, 2022, the Company paid a consideration amounted to NIS 3,750 (approximately $1,400) to the former shareholders of Vironna, in settlement of the purchase consideration liability recorded in 2021.


4.
On December 1, 2021, IMC Holdings signed a definitive agreement to acquire 51% of the rights in Oranim Pharm for an aggregate consideration of NIS 11,940 (approximately $4,900), comprised of NIS 5,202 (approximately $2,104) paid in cash upon signing, NIS 5,202 (approximately $2,052) which will be paid in cash on the first quarter of 2023 and NIS 1,536 (approximately $630) paid in 251,001 Common Shares on March 30, 2022. As of March 31, 2022 the company issued the common shares with respect to Oranim Pharm transaction and paid NIS 5,202 (approximately $2,104).


F - 11

IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 1:-
GENERAL (Cont.)


5.
On April 6, 2022, Focus announced its decision, from March 30, 2022, to close the Sde Avraham cultivation farm in Israel, therefore, the Company recorded restructuring expenses related to impairment of property, plant and equipment, biological assets and right of use asset, in the total amount of $3,747.


d.
Definitions:

In these financial statements:

The Company, or IMCC
-
IM Cannabis Corp.
     
The Group
-
IM Cannabis Corp., its Subsidiaries and Focus
     
Subsidiaries
-
Companies that are controlled by the Company (as defined in IFRS 10) and whose accounts are consolidated with those of the Company
     
CAD or $
-
Canadian Dollar
     
NIS
-
New Israeli Shekel
     
USD or US$
-
United States Dollar
     
EURO or €
-
Euro

NOTE 2:-      SIGNIFICANT ACCOUNTING POLICIES


 a.
Basis of Presentation and Measurement:

The interim condensed consolidated financial statements of the Company have been prepared in accordance with International Accounting Standards 34, "Interim Financial Reporting" ("IAS 34").

The interim condensed consolidated financial statements are presented in Canadian dollars and are prepared in accordance with the same accounting policies, described in the Company's annual consolidated financial statements.


 b.
Significant Accounting Judgements and Estimates:
 
The preparation of the Company's interim condensed consolidated financial statements under IFRS requires management to make judgements, estimates, and assumptions about the carrying amounts of certain assets and liabilities. Estimates and related assumptions are based on historical experience and other relevant factors. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis for reasonableness and relevancy. Where revisions are required, they are recognized in the period in which the estimate is revised as well as future periods that are affected.
F - 12
IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 3:-
BUSINESS COMBINATIONS

Panaxia's Assets and Operations

On April 30, 2021, the Company acquired all Panaxia's online-related activities and intellectual property. For an aggregate purchase price of NIS 18.7 million (approximately $7,000). In order to complete the acquisition, the Company will issue Common Shares in the aggregate amount of NIS 11.1 million (approximately $4,200).

During 2021, the Company issued the four installments of the Panaxia Consideration Shares, in the aggregate amount of 934,755, at a various of share price ranging between US$5.01 to US$3.1. The total consideration represents an aggregate amount of NIS 11.1 million (approximately $4,200). The fifth and final installment of Panaxia Consideration Shares will be issued following the Panaxia GDP License Closing.

The acquisition is accounted for under IFRS 3 as a business combination. Accordingly, the Group recognized the fair value of the assets acquired and liabilities assumed in the business combination based on a preliminary valuation study prepared by an external valuation specialist.

The fair value of the identifiable assets acquired and liabilities assumed on the acquisition date based on the updated valuation:

   
Initial PPA
    
Adjustments
    
Adjusted PPA
  
                   
Inventory
  
$
19
      
-
    
$
19
  
Current Investments and Financial Instruments
    
2,837
      
1,126
      
3,963
  
Property, plant and equipment
    
88
      
-
      
88
  
Intangible assets
    
776
      
(532
)
    
244
  
                         
Total identifiable assets
    
3,720
      
594
      
4,314
  
                         
Goodwill arising on acquisition
    
3,240
      
(594
)
    
2,646
  
                         
Total purchase price
  
$
6,960
      
-
    
$
6,960
  

The effect of the adjustments on profit or loss for the year ended December 31, 2021, is immaterial.

F - 13
IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 4:-
BIOLOGICAL ASSETS

The Company's biological assets consist of cannabis plants. The changes in the carrying value of
biological assets are as follows:

Balance as of January 1, 2022
  
$
1,687
  
         
Production costs capitalized
    
2,578
  
Changes in fair value less cost to sell due to biological transformation
    
1,149
  
Transferred to inventory upon harvest
    
(3,289
)
Foreign exchange translation
    
(8
)
         
Balance as of March 31, 2022
  
$
2,117
  

As of March 31, 2022, and December 31, 2021, the weighted average fair value less cost to sell was $3.02 and $2.48 per gram, respectively.
The fair value of biological assets is categorized within Level 3 of the fair value hierarchy.

The following inputs and assumptions were used in determining the fair value of biological assets:


 1.
Selling price per gram - calculated as the weighted average historical selling price for all strains of cannabis sold by the Group, which is expected to approximate future selling prices.

2.
Post-harvest costs - calculated as the cost per gram of harvested cannabis to complete the sale of cannabis plants post-harvest, consisting of the cost of direct and indirect materials, depreciation and labor as well as labelling and packaging costs.

3.
Attrition rate - represents the weighted average percentage of biological assets which are expected to fail to mature into cannabis plants that can be harvested.

4.
Average yield per plant - represents the expected number of grams of finished cannabis inventory which are expected to be obtained from each harvested cannabis plant.

5.
Stage of growth - represents the weighted average number of weeks out of the average weeks growing cycle that biological assets have reached as of the measurement date. The growing cycle is approximately 12 weeks.

The following table quantifies each significant unobservable input, and also provides the impact a 10% increase/decrease in each input would have on the fair value of biological assets:

           
10% change as of
  
   
March 31, 2022
    
December 31, 2021
    
March 31, 2022
    
December 31, 2021
  
   
In CAD
    
In Thousands of CAD
  
Average selling price per gram of dried cannabis
  
$
3.79
    
$
3.64
    
$
474
    
$
296
  
Average post-harvest costs per gram of dried cannabis
  
$
0.77
    
$
1.16
    
$
280
    
$
140
  
Attrition rate
    
27
%
    
27
%
    
410
      
100
  
Average yield per plant (in grams)
    
48
      
47
      
392
      
228
  
Average stage of growth
    
53
%
    
47
%
    
387
      
212
  

These estimates are subject to volatility in market prices and a number of uncontrollable factors, which could significantly affect the fair value of biological assets in future periods.
The Company's estimates are, by their nature, subject to change including differences in the anticipated yield. These changes will be reflected in the gain or loss on biological assets in future periods.

F - 14
IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 5:-
INVENTORIES

The following is a breakdown of inventory as of March 31, 2022:

   
March 31, 2022
  
   
Capitalized costs
    
Fair valuation adjustment, net
    
Carrying value
  
Work in progress:
                  
Bulk cannabis
  
$
14,228
    
$
2,849
    
$
17,077
  
Other cannabis products
    
914
      
-
      
914
  
Finished goods
                        
Packaged dried cannabis
    
10,181
      
333
      
10,514
  
Other cannabis products
    
1,270
      
-
      
1,270
  
Other products
    
593
      
-
      
593
  
                         
Balance as of March 31, 2022
  
$
27,186
    
$
3,182
    
$
30,368
  

The following is a breakdown of inventory as of December 31, 2021:

   
December 31, 2021
  
   
Capitalized costs
    
Fair valuation adjustment, net
    
Carrying value
  
Work in progress:
                  
Bulk cannabis
  
$
14,113
    
$
3,336
    
$
17,449
  
Other cannabis products
    
1,074
      
-
      
1,074
  
Finished goods:
                        
Packaged dried cannabis
    
8,974
      
270
      
9,244
  
Other cannabis products
    
744
      
-
      
744
  
Other products
    
880
      
-
      
880
  
                         
Balance as of December 31, 2021
  
$
25,785
    
$
3,606
    
$
29,391
  

During the three months ended March 31, 2022 and 2021, inventory expensed to cost of goods sold of cannabis products was $19,973 and $4,613, respectively, which included $863 and $1,942 of non-cash expense, respectively, related to the changes in fair value of inventory sold.

Cost of revenues in three months period ended March 31, 2022 and 2021, also include production overhead not allocated to costs of inventories produced and recognized as an expense as incurred.
F - 15
IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 6:-
FINANCIAL INSTRUMENTS

Financial instruments are measured either at fair value or at amortized cost. The table below lists the valuation methods used to determine fair value of each financial instrument.

Financial Instruments Measured at Fair Value
  
Fair Value Method
     
Derivative assets
  
Black & Scholes model (Level 3 category)
Liability for Warrants *)
  
Black & Scholes model (Level 3 category)
Investment in Xinteza
  
Market comparable (Level 3 category)

Management believes that the carrying amount of cash and cash equivalents, restricted deposit, trade receivables, other accounts receivable, loans receivables, trade payables, bank loans and credit facility, other account payables and accrued expenses and accrued purchase consideration payable, and approximate their fair value due to the short-term maturities of these instruments.


 *)
Finance income from revaluation of Warrants measured at fair value, for the three months ended March 31, 2022 and 2021, amounted to $2,688 and $7,060, respectively.

NOTE 7:-      EQUITY


 a.
Composition of share capital:

   
March 31,
  
December 31,
   
2022
  
2021
   
Authorized
  
Issued and outstanding
  
Authorized
  
Issued and outstanding
                 
Common Shares without par value
  
Unlimited
  
69,690,151
  
Unlimited
  
68,217,894

Common Shares confer upon their holders the right to participate in the general meeting where each Common Share has one voting right in all matters, receive dividends if and when declared and to participate in the distribution of surplus assets in case of liquidation of the Company.


 b.
Changes in issued and outstanding share capital:

   
Number of shares
  
       
Balance as of January 1, 2022
    
68,217,894
  
         
Common Shares issued as a result of options exercised
    
212,194
  
Common Shares issued in settlement of purchase consideration of a business combination (1)
    
1,260,063
  
         
Balance as of March 31, 2022
    
69,690,151
  


(1)
Pharm Yarok - 523,700, Vironna - 485,362, Oranim - 251,001


F - 16
IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 7:-      EQUITY (Cont.)

The following table lists the movement in the number of share options and the weighted average exercise prices of share options in the 2018 Plan:

   
Three months ended
March 31, 2022
  
   
Number of options
    
Weighted average exercise price
  
         
in CAD
  
             
Options outstanding at the beginning of the period
    
5,443,245
      
3.91
  
                 
Options exercised during the period (*)
    
(214,566
)
    
1.60
  
Options forfeited during the period
    
(122,938
)
    
8.84
  
                 
Options outstanding at the end of the period
    
5,105,741
      
3.92
  
                 
Options exercisable at the end of the period
    
2,156,435
      
3.14
  

(*) Includes 6,254 Options exercised under cashless mechanism to 3,882 Common Shares.

NOTE 8:-
SELECTED STATEMENTS OF PROFIT OR LOSS DATA

   
For the three months ended
March 31,
  
   
2022
    
2021
  
             
Salaries and related expenses
  
$
7,195
    
$
9,253
  
Depreciation and amortization
  
$
2,198
    
$
385
  

NOTE 9:-      NET EARNINGS (LOSS) PER SHARE

Details of the number of shares and income (loss) used in the computation of earnings per share:

   
Three months ended March 31,
  
   
2022
    
2021
  
   
Weighted average number of shares (in thousands)
    
Net income (loss) attributable to equity holders of the Company
    
Weighted average number of shares (in thousands)
    
Net income (loss) attributable to equity holders of the Company
  
                         
For the computation of basic net earnings
    
68,779
    
$
(9,452
)
    
41,623
    
$
4,505
  
                                 
Effect of potential dilutive Common Shares
    
1,809
      
(2,675
)
    
2,592
      
(7,060
)
                                 
For the computation of diluted net earnings
    
70,588
    
$
(12,127
)
    
44,215
    
$
(2,555
)

F - 17
IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 10:-
OPERATING SEGMENTS


a.
Reporting operating segments:

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker ("CODM"), who is responsible for allocating resources and assessing performance of the operating segments. The Company's Chief Executive Officer is the CODM. The Company has determined that it operates in three operating segments.

Three months ended March 31, 2022:

   
Israel
    
Canada
    
Germany
    
Adjustments
    
Total
  
                               
Revenue
  
$
12,403
    
$
10,568
    
$
598
    
$
-
    
$
23,569
  
Inter-segment revenues
  
$
-
    
$
663
    
$
-
    
$
(663
)
  
$
-
  
Total revenues
  
$
12,403
    
$
11,231
    
$
598
    
$
(663
)
  
$
23,569
  
                                         
Segment loss
  
$
(6,620
)
  
$
(2,690
)
  
$
(1,028
)
  
$
-
    
$
(10,338
)
                                         
Unallocated corporate expenses
  
$
-
    
$
-
    
$
-
    
$
(1,211
)
  
$
(1,211
)
                                         
Total operating loss
  
$
(6,620
)
  
$
(2,690
)
  
$
(1,028
)
  
$
(1,211
)
  
$
(11,549
)
                                         
Depreciation, amortization and impairment
  
$
407
    
$
1,368
    
$
62
    
$
-
    
$
1,837
  



Three months ended March 31, 2021:

   
Israel
    
Canada
    
Germany
    
Adjustments
    
Total
  
                               
Revenue
  
$
4,344
    
$
1,256
    
$
3,167
    
$
-
    
$
8,767
  
                                         
Segment loss
  
$
1,040
    
$
(763
)
  
$
230
    
$
-
    
$
507
  
                                         
Unallocated corporate expenses
  
$
-
    
$
-
    
$
-
    
$
(2,212
)
  
$
(2,212
)
                                         
Total operating loss
  
$
1,040
    
$
(763
)
  
$
230
    
$
(2,212
)
  
$
(1,705
)
                                         
Depreciation, amortization and impairment
  
$
306
    
$
61
    
$
18
    
$
-
    
$
385
  

F - 18
IM CANNABIS CORP.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Canadian Dollars in thousands, except share and per share data

NOTE 11:-
SUBSEQUENT EVENTS

During April 2022, the Company completed an amendment to increase the availability under the existing revolving credit facility with a private Canadian creditor that is maintained by Trichome JWC Acquisition Corp. (“TJAC”) to $15,000 (the “Revolving Credit Facility”) to better support the working capital needs associated with its global supply chain and the growing demand for its premium Canadian-grown cannabis. Amounts drawn under the Revolving Credit Facility are margined against eligible accounts receivable and inventory and are secured against the assets of the Company’s Canadian subsidiaries. The term of the Revolving Credit Facility was extended to May 2023.

F - 19