MATERIAL CHANGE REPORT
Item 1 — Name
and Address of Company
IM Cannabis Corp. (the “Company”)
Suite 2300 – 550 Burrard Street
Vancouver, BC, Canada, V6C 2B5
Item 2 — Date
of Material Change
The date of the material change was May 8, 2023.
Item 3 — News
The news release disclosing the material change was issued by the Company through the services of Canadian Newswire on May 8, 2023, and
subsequently filed on the Company’s SEDAR profile at www.sedar.com.
Item 4 — Summary
of Material Change
The Company announced that it closed the previously announced securities for debt settlement transaction (the “Debt Settlement”) with L5 Capital Inc. (“L5 Capital”), a company wholly-owned and controlled by Marc Lustig, the executive chairman and a director of the Company. Pursuant to the Debt Settlement, the Company settled
outstanding indebtedness of $838,776 (approximately US$615,615) through issuing 492,492 units (the “Units”) at a price of US$1.25 per Unit. Each Unit consists of one common share of the Company (each, a “Common Share”) and one Common Share purchase warrant (each, a “Warrant”). Each Warrant entitles L5 Capital to purchase one additional Common Share at an exercise price of US$1.50 for a period of 36
months from the date of issue.
Item 5 — Full
Description of Material Change
5.1 – Full Description of Material
The Company closed the Debt Settlement with L5 Capital. Pursuant to the Debt Settlement, the Company settled outstanding indebtedness of
$838,776 (approximately US$615,615) through the issuance of 492,492 Units to L5 Capital.
All securities issued are subject to a statutory hold period of four months and one day from the date of issuance in accordance with
applicable Canadian securities legislation.
The Debt Settlement is a “related party transaction” pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) by virtue of L5 Capital being wholly-owned and controlled by an insider
of the Company. The Company relied on Sections 5.5(a) and 5.7(1)(a) of MI 61-101 for exemptions from the requirements to obtain a formal valuation and minority shareholder approval, respectively, because the fair market value securities issued to the
director was below 25% of the Company’s market capitalization for the purposes of MI 61-101.
The following table sets out the effect of Mr. Lustig’s
participation in the Debt Settlement, indirectly through L5 Capital, on the percentage of securities of the Company beneficially owned or controlled by Mr. Lustig, directly or indirectly.
Subscription Amount (US$)
Number of Units issued
Percentage (%) of issued and outstanding Common Shares prior to closing of the Debt Settlement
Percentage (%) of issued and outstanding Common Shares held after closing of the Debt Settlement
Settlement of indebtedness of $838,776 (approximately US$615,615)
The board of directors of the Company approved the Debt Settlement Agreement with L5 Capital and the issuance of Units. A special committee was not established in connection with the approval of the Debt Settlement Agreement and no contrary view was raised by any director with respect to
the related party transaction. Mr. Lustig, a director of the Company, abstained from voting on the resolutions approving the Debt Settlement Agreement with respect to his interest.
The Company did not file a material change report 21 days before the closing of the Debt Settlement as the terms were not finalized
until, or close to, the date of the closing of the Debt Settlement and the Company wished to complete the Debt Settlement in a timely manner.
5.2 – Disclosure for
Item 6 — Reliance
on subsection 7.1(2) of National Instrument 51‑102
Item 7 — Omitted
Item 8 — Executive
Chief Legal and Operations Officer
Item 9 — Date
May 8, 2023
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