IM Cannabis Corp. Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

EQUITY

EQUITY

12 Months Ended

Dec. 31, 2023

Disclosure of classes of share capital [abstract]

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NOTE 20:-

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Composition of share capital:

	December 31, 2023			December 31, 2022
	Authorized	Issued and outstanding		Authorized	Issued and outstanding
	Number of shares

Common Shares without par value	Unlimited		13,394,136	Unlimited		7,569,526

Common Shares confer upon their holders the right to participate in the general meeting where each Ordinary 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.

On November 14, 2022, the Company's shareholders general meeting resolved to consolidated all of its issued and outstanding Ordinary shares on a ten (10) to one (1) basis (the “Share Consolidation”). All share and per share amounts in these consolidated financial statements, give effect to the Share Consolidation for all periods presented.

Capital issuances:

On May 10, 2021, the Company completed an overnight marketed offering (the “Offering”) of 608,696 Common Shares (each an “Offered Share”) at a price of US$57.5 per Offered Share for aggregate gross proceeds of approximately US$35 million ($42,000). The Company also issued 304,348 Common Share purchase warrants (each an “2021 Warrant”) to the purchasers of Offered Shares, for no additional consideration, that entitle the holders to purchase 304,348 Common Shares of the Company at an exercise price of US$7.2 per Common Share for a term of 5 years from the closing date.

As the exercise price of the 2021 Warrants is denominated in US dollars, which is not the functional currency of the Company, the 2021 Warrants are accounted for as a derivative liability, which is measured at fair value. Gross proceeds in the amount of $30,670 were recorded as Share capital and premium, and $11,832 were recorded as a warrant liability, based on a valuation using the Black & Scholes option pricing model. The transaction costs incurred as a result of the Common Shares issuance amounted to approximately $3,800, of which approximately $1,296 (attributed to the issuance of the warrants classified as liabilities) were recorded as an expense in the Company's consolidated statements of profit or loss and approximately $2,539 (attributed to the issuance of share capital) as a deduction from Share capital and premium.

Pursuant to the terms of the Offering, the placement agents held an over-allotment option to purchase up to an additional 91,304 Offered Shares and 45,652 2021 warrants on the same terms and conditions for a period of 30 days following the closing date. The over- allotment option was not exercised by the placement agents and expired as of June 30, 2021. The Company recorded expenses in the amount of approximately $800 under share-based compensation expenses with respect to the Offering.

The Offering was conducted pursuant to the Company's effective shelf registration statement on Form F-10 filed with the U.S. Securities and Exchange Commission and a corresponding Canadian shelf prospectus filed with the Securities Regulatory Authority in each of the provinces and territories of Canada and a final prospectus supplement which was filed with the SEC on May 5, 2021.

On March 14, 2022, the Pharm Yarok Transaction closed upon receipt of all requisite approvals, including the IMCA approval. In connection with closing of the Pharm Yarok Transaction, the Company completed a non-brokered private placement with former shareholders of Pharm Yarok and Rosen High Way on March 14, 2022. A total of 52,370 Common Shares were issued at a deemed price of $26.16 for aggregate proceeds of $1,370.

On March 14, 2022, the Vironna Transaction closed upon receipt of all requisite approvals, including the approval of the IMCA and NIS 3,500 (approximately $1,360) in Common Shares issued on closing. In satisfaction of the share consideration component, the Company issued 48,536 Common Shares at a deemed issue price of US$22.09 per share (approximately $28.09).

On March 28, 2022, the Oranim Transaction closed upon receipt of all requisite approvals, including the approval of the MOH and NIS 1,536 (approximately $600) in Common Shares issued on closing. In satisfaction of the share consideration component, the Company issued 25,100 Common Shares at a deemed issue price of US$19.74 per share (approximately $25.1).

On August 19, 2022, the Company announced a private placement for aggregate gross proceeds of up to $6,500 (US$5 million) (the “Private Placement”). As of December 31, 2022, the Company issued 599,999 Common Shares for a total amount of $3,756 (US$3 million) including investments by the Company’s management and executives. Issuance costs of this transaction amounted to $178.

In January and February of 2023, the Company issued an aggregate of issued 2,828,248 units of the Company (each a “Unit”) at a price of US$1.25 per Unit for aggregate gross proceeds of US$3,535 (approximately $4,792) in a series of closings pursuant to a non-brokered private placement offering to purchasers resident in Canada (except the Province of Quebec) and/or other qualifying jurisdictions relying on the listed issuer financing exemption under Part 5A of National Instrument 45-106 – Prospectus Exemptions (the “LIFE Offering”). Each Unit consisted of one Common Share and one Common Share purchase warrant (each, a “Warrant”), with each Warrant entitling the holder thereof 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.

In addition, a non-independent director of the Company subscribed for an aggregate of 131,700 Units under the LIFE Offering at an aggregate subscription price of US$165 (approximately $224). The director's subscription price was satisfied by the settlement of US$165 in debt owed by the Company to the director for certain consulting services previously rendered by the director to the Company.

Concurrent with the LIFE Offering, the Company issued an aggregate of 2,317,171 Units on a non-brokered private placement basis at a price of US$1.25 per Unit for aggregate gross proceeds of US$2,896 (approximately $3,926) (the “Concurrent Offering”). The Concurrent Offering was led and participated by insiders of the Company of 1,159,999 Units out of the total Concurrent offering Units. The Units offered under the Concurrent Offering were offered for sale to purchasers in all provinces and territories of Canada and jurisdictions outside Canada pursuant to available prospectus exemptions other than for the LIFE Offering exemption.

All Units issued under the Concurrent Offering were subject to a statutory hold period of four months and one day in accordance with applicable Canadian securities laws.

Changes in issued and outstanding share capital:

	Number of shares

Balance as of January 1, 2022		6,811,620

Common shares issued as a result of options exercises		21,736
Common shares issued in settlement of purchase consideration of business combination		126,006
Issuance of treasury Common shares		10,165
Issuance of Common shares		599,999

Balance as of December 31, 2022		7,569,526

Issuance of Common Shares pursuant to debt settlement		492,492
Issuance of Common Shares pursuant to vested RSUs		54,999
Issuance of Common shares		5,277,119

Balance as of December 31, 2023		13,394,136

Share option plan:

Awards granted under the company’s current plan which was approved by the board of directors on December 19, 2018 (“2018 Plan”) are subject to vesting schedules and unless determined otherwise by the administrator of the 2018 Plan, generally vest following a period of three years from the applicable vesting commencement date, such that 33.3% of the awards vest on the first anniversary of the applicable vesting commencement date and 66.7% of the awards vest in eight equal installments upon the lapse of each three-month period thereafter. Subject to the discretion of the 2018 Plan administrator, if an award has not been exercised within seven years after the date of the grant, the award expires. As of December 31, 2023, 746,352 Ordinary shares are available for future grants under the 2018 Plan.

	Year ended December 31,
	2023	2022

Exercise price (in CAD)	$1.1	$2.3-$27.3
Dividend yield (%)	-	-
Expected life of share options (years)	5	4-5
Volatility (%)	104.4-109.35	77.04-107.03
Annual risk-free rate (%)	3.55-3.65	1.43-3.85
Share price (in CAD)	$1.1	$2.3-$27.3

The weighted average fair value of each option on the grant date, for the years ended December 31, 2023, 2022 and 2021, amounted to $28.2, $31.9 and $41.6, respectively.

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

	Year ended December 31, 2023
	Number of options			Weighted average exercise price
				in CAD

Options outstanding at the beginning of the year		519,170			37.6

Options granted during the year		3,000			1.1
Options exercised during the year		-			-
Options forfeited during the year		(196,718	)	(51.78		)

Options outstanding at the end of year		325,452			28.72

Options exercisable at the end of year		299,442			28.39

	Year ended December 31, 2022
	Number of options			Weighted average exercise price
				in CAD

Options outstanding at the beginning of the year		544,325			39.1

Options granted during the year		32,503			10.85
Options exercised during the year		(22,705	)		16
Options forfeited during the year		(34,953	)		49.9

Options outstanding at the end of year		519,170			37.6

Options exercisable at the end of year		360,769			36.95

*) Includes $nil Options exercised under cashless mechanism to $nil Common shares.

The weighted average remaining contractual life for the share options outstanding as of December 31, 2023 and 2022 was 3.76 years and 4.32 years, respectively.

The share-based payment expenses for the years ended December 31, 2023, 2022 and 2021, amounted to $225, $2,637 and $5,422, respectively.

The following table lists the number of restricted share units (“RSUs”) as of December 31, 2023:

	Number of RSU

Outstanding at the beginning of the year		55,000

Granted during the year		-

Outstanding at the end of the year		55,000

Exercisable at the end of year		-

Other convertible securities:

As of December 31, 2023, there are 18,261 compensation warrants. Each compensation warrant is exercisable for one Common Share at an exercise price of US$ 66.1 (approximately $84.2). These warrants are exercisable until November 5, 2024.

As the exercise price of the 2021 warrants is denominated in US dollars, which is not the functional currency of the Company, the 2021 Warrants are accounted for as a derivative liability, which is measured at fair value. Gross proceeds in the amount of $30,670 were recorded as Share capital and premium, and $11,832 were recorded as a warrant liability, based on a valuation using the Black & Scholes option pricing model. The transaction costs incurred as a result of the Offering amounted to approximately $3,800, of which approximately $1,296 (attributed to the issuance of the warrants classified as liabilities) were recorded as an expense in the Company's consolidated statements of profit or loss and approximately $2,539 (attributed to the issuance of share capital) as a deduction from Share capital and premium.

As of December 31, 2023 and 2022, there were 6,063,960 and 304,348 warrants outstanding re-measured according to Black & Scholes model, in the amount of $38 and $8, respectively. As a result, for the years ended December 31, 2023, 2022 and 2021, the Company recognized a revaluation gain of $6,955, $6,014 and $5,810, in the consolidated statement of profit or loss and other comprehensive income, which unrealized gain is included in finance income (expense), respectively.

The warrants fair value was measured using the Black & Scholes model with the following key assumptions:

	Issue date
	May 2023			February 2023			May 2021

Expected volatility		48.43	%		48.43	%		48.43	%
Share price (Canadian Dollar)		0.48			0.48			0.48
Expected life (in years)		2.342			2.096			2.342
Risk-free interest rate		4.12	%		4.12	%		4.12	%
Expected dividend yield		0	%		0	%		0	%
Fair value:

Per Warrant (Canadian Dollar)	$	0.009		$	0.006		$	0
Total Warrants (Canadian Dollar in thousands)	$	5		$	33		$	0