IM Cannabis - 20-F annual report 2025

TABLE OF CONTENTS

 

INTRODUCTION			5
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			6
CAUTIONARY NOTE REGARDING FUTURE ORIENTED FINANCIAL INFORMATION			8
ITEM 1.		IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	11
ITEM 2.		OFFER STATISTICS AND EXPECTED TIMETABLE	11
ITEM 3.		KEY INFORMATION	11
	A.	[Reserved]	11
	B.	Capitalization and Indebtedness	11
	C.	Reasons for the Offer and Use of Proceeds	11
	D.	Risk Factors	11
ITEM 4.		INFORMATION ON THE COMPANY	46
	A.	History and Development of the Company	46
	B.	Business Overview	48
	C.	Organizational Structure	62
	D.	Property, Plants and Equipment	63
ITEM 4A.		UNRESOLVED STAFF COMMENTS	63
ITEM 5		OPERATING AND FINANCIAL REVIEW AND PROSPECTS	64
	A.	Operating Results	64
	B.	Liquidity and capital resources	64
	C.	Research and development, patents and licenses, etc	64
	D.	Trend Information	64
	E.	Critical Accounting Estimates	65
ITEM 6.		DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	67
	A.	Directors and Senior Management	67
	B.	Compensation	69
	C.	Board Practices	82
	D.	Employees	89
	E.	Share Ownership	89
	F.	Disclosure of a registrant’s action to recover erroneously awarded compensation	89
ITEM 7.		MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	90
	A.	Major Shareholders	90
	B.	Related Party Transactions	92
	C.	Interests of Experts and Counsel	93
ITEM 8.		FINANCIAL INFORMATION	93
	A.	Consolidated Statements and Other Financial Information	93
	B.	Significant Changes	98
ITEM 9.		THE OFFER AND LISTING	98
	A.	Offer and Listing Details	98
	B.	Plan of Distribution	98
	C.	Markets	98
	D.	Selling Shareholders	99
	E.	Dilution	99
	F.	Expenses of the Issue	99
ITEM 10.		ADDITIONAL INFORMATION	99
	A.	Share Capital	99
	B.	Memorandum and Articles of Association	99
	C.	Material Contracts	103
	D.	Exchange Controls	103
	E.	Taxation	104
	F.	Dividends and Paying Agents	112
	G.	Statement by Experts	112
	H.	Documents on Display	112
	I.	Subsidiary Information	113
	J.	Annual Report to Security Holders	113
ITEM 11.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	113
ITEM 12.		DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	113
ITEM 13.		DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	113

ITEM 14.		MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	113
ITEM 15.		CONTROLS AND PROCEDURES	113
	A.	Disclosure Controls and Procedures	113
	B.	Management’s Annual Report on Internal Control Over Financial Reporting	114
	C.	Attestation Report of the Registered Public Accounting Firm………………………………………………	114
	D.	Changes in Internal Controls Over Financial Reporting	115
ITEM 16A.		AUDIT COMMITTEE FINANCIAL EXPERT	115
ITEM 16B.		CODE OF ETHICS	115
ITEM 16C.		PRINCIPAL ACCOUNTANT FEES AND SERVICES	115
ITEM 16D.		EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	116
ITEM 16E.		PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	116
ITEM 16F.		CHANGE IN COMPANY’S CERTIFYING ACCOUNTANT	116
ITEM 16G.		CORPORATE GOVERNANCE	117
ITEM 16H.		MINE SAFETY DISCLOSURE	117
ITEM 16I.		DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	117
ITEM 16J.		INSIDER TRADING POLICIES	118
ITEM 16K.		CYBERSECURITY	118
		Risk Management and Strategy
		Governance
ITEM 17.		FINANCIAL STATEMENTS	120
ITEM 18.		FINANCIAL STATEMENTS	120
ITEM 19.		EXHIBITS	121

 

 

IM CANNABIS CORP.

 

INTRODUCTION

 

In this annual report on Form 20-F (this “Annual Report”), “Company,” “IMC,” “we”, “us” and “our” refer to IM Cannabis Corp., and its consolidated subsidiaries.

 

Information contained in this Annual Report is given as of December 31, 2025, our fiscal year end, unless otherwise specifically stated.

 

Market and industry data used throughout this Annual Report were obtained from various publicly available sources. Although we believe that these independent sources are generally reliable, the accuracy and completeness of such information are not guaranteed and have not been verified by us.

 

This Annual Report contains trademarks, trade names and service marks, which are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this Annual Report may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply a relationship with, or endorsement or sponsorship of us by, these other parties.

 

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 and except for per share data and the information contained under “Item 6B. Compensation”, all dollar figures in this Annual Report are expressed in thousands and all references in this Annual Report to: (i) “dollars” or “CAD” or “$” are to Canadian dollars; (ii) “USD” or “US$” are to United States of America (“U.S.” or “United States”) dollars; (iii) “NIS” are to New Israeli Shekels; and (iv) “€” or to “Euros” are to Euros. All intercompany balances and transactions were eliminated on consolidation. Common shares, stock options, units, prefunded warrants, warrants, and prices, are not expressed in thousands. Our reporting currency and functional currency is the Canadian dollar. The CAD to USD exchange rate as of December 31, 2025 was 0.7286.

 

On July 12, 2024, we effected a 6-for-1 consolidation of our issued and outstanding common shares, no par value per share (“Common Shares”) (the “July 2024 Consolidation”). All references to Common Shares, and securities issuable into Common Shares in this Annual Report, other than in documents dated prior to July 12, 2024, that are incorporated by reference in this Annual Report, reflect post-July 2024 Consolidation amounts unless otherwise indicated or the context otherwise requires. All documents dated prior to July 12, 2024, that are incorporated by reference in this Annual Report reflect pre-July 2024 Consolidation amounts unless otherwise indicated or the context otherwise requires.

 

This Annual Report should be read in conjunction with our audited consolidated financial statements and the notes thereto as of and for the years ended December 31, 2025 and 2024 (the “2025 Annual Financial Statements”) and the accompanying management’s discussion and analysis for the years ended December 31, 2025 and 2024 (the “2025 Annual MD&A”).

The 2025 Annual Financial Statements were prepared by management in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. IFRS requires management to make certain judgments, estimates and assumptions that affect the reported amount of assets and liabilities at the date of the 2025 Annual Financial Statements and the amount of revenue and expenses incurred during the reporting period. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.

The 2025 Annual Financial Statements include the accounts of the Company and its consolidated subsidiaries, including , among others, the following entities:

Please see Exhibit 8.1 to this Annual Report for a complete list of our subsidiaries.

In this Annual Report, unless otherwise indicated, all references to: (i) “Company Subsidiaries” are to the Israeli Subsidiaries and Adjupharm, (ii) “Israeli Operations” are to IMC Holdings and the Israeli Subsidiaries as defined below (iii) “Trichome” are to Trichome Financial Corp. and its subsidiaries. As of the date of this Annual Report “Israeli Subsidiaries” means IMC Holdings, IMC Pharma, Focus, Pharm Yarok, Rosen High Way, Vironna and Xinteza.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information included in this Annual Report on Form 20-F may be deemed to be “forward-looking statements,” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including statements under Item 3.D. “Risk Factors,” Item 5 “Operating and Financial Review and Prospects,” Item 4 “Information on the Company” and elsewhere in this Annual Report.

 

Forward-looking statements include statements that are not historical facts and involve assumptions, expectations and projections regarding future events, conditions or results of operations. Forward-looking statements are often (but not always) identified by words and phrases such as “may,” “will,” “would,” “could,” “should,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “project,” “forecast,” “target,” “outlook,” “potential,” “continue,” “believe,” and similar expressions (including the negative of such terms). These words and similar expressions are intended to identify forward-looking statements but are not the only means of identifying forward-looking statements.

 

Forward-looking statements are based on management’s current expectations, estimates, projections, beliefs and assumptions based on currently available information and management’s assessment of historical trends, current conditions and expected future developments. Although we believe that the expectations and assumptions reflected in the forward-looking statements are reasonable as of the date of this Annual Report, forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to differ materially from those expressed or implied herein.

 

Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among others, the risks described under “Item 3.D. Risk Factors” and elsewhere in this Annual Report, including: regulatory and licensing compliance in Israel and Germany; changes in laws, regulations and enforcement practices affecting cannabis; import/export restrictions and product quality requirements; pricing pressure and competitive dynamics; supply chain disruptions and the reliability of third-party suppliers, logistics and distribution partners; liquidity, financing and going-concern-related risks; foreign exchange, interest rate and inflation risks; geopolitical and security developments; cybersecurity, privacy and information technology (“IT”)-related risks; and general economic and market conditions. Readers are urged to carefully review and consider the disclosures made throughout this Annual Report, which are designed to advise interested parties of the risks and other factors that may affect our business, financial condition, results of operations and prospects.

 

Forward-looking statements are not guarantees of future performance, and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made (or such other date as may be specified), and we do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law, including applicable U.S. federal securities laws and applicable Canadian securities laws.

 

Forward-looking statements in this Annual Report may include, but are not limited to, statements regarding:

CAUTIONARY NOTE REGARDING FUTURE ORIENTED FINANCIAL INFORMATION

 

This Annual Report may contain (or incorporate by reference) “future-oriented financial information” (“FOFI”) and/or “financial outlook” within the meaning of applicable Canadian securities laws. FOFI and financial outlook are each a form of forward-looking information (“FLI”) that relates to prospective financial performance, financial position or cash flows based on assumptions about future economic conditions and courses of action. FOFI is presented in the format of historical financial statements, whereas a financial outlook is not presented in the format of historical financial statements.

 

Any FOFI and/or financial outlook contained in this Annual Report is provided to assist readers in understanding management’s current expectations and plans relating to our future operations, prospects and financial performance (including, where applicable, expectations regarding revenues, margins, profitability, liquidity, capital resources, operating costs, capital expenditures and other financial measures). Such information is provided for the purpose described in the disclosure in which it appears and may not be appropriate for any other purpose.

 

FOFI and financial outlook are based on estimates and assumptions that management believes are reasonable as of the date(s) on which such information is prepared (or, if no such date is specified, as of the date of this Annual Report). Such assumptions may include without limitation (and as applicable to the particular FOFI/financial outlook): those discussed under “Cautionary Note Regarding Forward-Looking Statements” above; assumptions regarding product pricing and product mix; patient demand and market growth trends in Israel, Germany and other relevant jurisdictions; timing and scope of regulatory developments and compliance requirements; ability to obtain, maintain and renew required licenses, certifications and approvals; availability, cost and reliability of supply, manufacturing, storage, logistics and distribution arrangements (including third-party relationships); foreign exchange rates; inflation and interest rates; taxation rates; general and administrative expenses; operating cost estimates (including labor, utilities and energy); capital expenditure requirements; and the absence of material adverse changes in economic, political, geopolitical and security conditions in the markets in which we operate.

 

FOFI and financial outlook are inherently more uncertain than historical information because they are based on management’s best judgment and assumptions about future events and circumstances and are subject to significant business, economic, competitive, regulatory and other risks and uncertainties. Actual results are likely to vary from any FOFI or financial outlook, and such variation may be material. Accordingly, readers are cautioned not to place undue reliance on any FOFI or financial outlook contained in (or incorporated by reference into) this Annual Report.

 

The material risk factors that could cause actual results to differ materially from any FOFI or financial outlook, and the material factors and assumptions used to develop such FOFI or financial outlook, include those described under “Item 3.D. Risk Factors,” “Item 5. Operating and Financial Review and Prospects,” and elsewhere in this Annual Report (and in the documents incorporated by reference, if applicable). Such risk factors include, without limitation, risks relating to regulatory and licensing compliance in Israel and Germany; changes in cannabis laws and related enforcement priorities; the execution, timing and completion of strategic transactions, including potential divestitures and entry into new lines of business, as well as the integration and performance of any such new operations; import/export restrictions and product quality requirements; pricing pressure and competitive dynamics; reliance on supply, manufacturing and distribution arrangements (including third parties); liquidity, financing and capital markets risks; macroeconomic and geopolitical developments; and operational, IT, cybersecurity and privacy risks.

 

To the extent required by applicable law, including applicable Canadian securities laws, we will update or revise previously disclosed material FLI (including any material FOFI and/or financial outlook) in the circumstances and in the manner required by such laws. Except as required by applicable law, we undertake no obligation to publicly update or revise any FOFI or financial outlook, whether as a result of new information, future events or otherwise.

 

 

Our business is subject to numerous risks, as more fully described in “Item 3.D. Risk Factors” immediately following this summary. You should read these risks in full before you invest in our securities. The following is a summary of such risks.

 

 

 

 

 

 

 

 

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We are subject to the inherent liquidity risk that we will not be able to pay our financial obligations as they become due;

 

 

 

 

 

•

Our operations are subject to environmental and occupational safety laws and regulations, any failure to comply with such laws and regulations could have a material adverse effect on us; and

 

 

 

 

 

 

 

 

•

Our products face an inherent risk of exposure to product liability claims, regulatory action and litigation if such products are alleged to have caused significant loss or injury;

 

 

 

 

 

 

 

 

 

 

PART I

 

 

Not applicable.

 

 

Not applicable.

 

 

 

 

Not applicable.

 

 

Not applicable.

 

 

Our business, financial condition, results of operations and prospects are subject to significant risks and uncertainties, including risks inherent in our industry and other factors beyond our control.

 

The risks described below are not the only ones we are facing. Additional risks not currently known to us, or that we currently consider immaterial, may also adversely affect our business, operations, financial results or prospects. In addition, there are risks associated with an investment in our securities.

 

The risks and uncertainties below are not the only risks and uncertainties facing us. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business, operations and future prospects, cause the price of our securities to decline and cause future results to differ materially from those described herein.

 

If any of the following risks actually occur, our business financial condition and results of operations could be materially adversely affected, and the trading price of our securities could decline, and holders may lose all or part of their investment.

 

This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this Annual Report and our other filings with the U.S. Securities and Exchange Commission (the “SEC”) and SEDAR+ filings. See “Cautionary Note Regarding Forward-Looking Statements” above.

 

 

 

We are an international cannabis company focused on providing premium cannabis products to medical patients in Israel and Germany, two prominent countries in the global medical cannabis industry. We have funded our operations to date primarily through offerings of shares, warrants and convertible debentures.

 

We have only a limited operating history upon which you can evaluate our business and prospects. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the cannabis industry. To date, we have generated revenues from the sale of our products (see “Item 5. Operating and Financial Review and Prospects” for additional information). We have incurred losses in each year since our inception, including operating losses of $11,587 thousand and $10,234 thousand for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $270,210 thousand.

 

Furthermore, in addition to our operating expenses, we expect to incur costs associated with operating as a public company subject to United States federal and Canadian securities laws, rules and regulations. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing a cannabis product, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

 

The regulatory marketing approvals that we currently have are insufficient to generate significant revenue. Therefore, we expect to continue to incur significant losses until we are able to meaningfully commercialize our products, which we may not be successful in achieving. We anticipate that our expenses will increase substantially if and as we:

 

 

 

 

 

 

 

 

The amount of any future operating losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through sales, equity or debt financings, strategic collaborations or grants. Even if we obtain regulatory approval to market our product, our future revenues will depend on the market size (geographic and indication-specific) in which any such product receives approval and our ability to achieve sufficient market acceptance, competition, pricing, reimbursement from third-party payors for our product or any future product candidates. Further, the operating losses that we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Other unanticipated costs may also arise.

 

 

In order to generate significant revenue, we will need to obtain additional regulatory approvals in jurisdictions within which we already have certain regulatory approvals and also in jurisdictions in which we currently have no regulatory approvals to market our product.

 

Our product has regulatory approvals that allow us to market it in certain geographical areas and for specific indications (see “Item 4.B. Business Overview – Government Regulations” for additional information). However, even with these regulatory approvals in place, we have yet to generate significant revenues.

 

In addition to our dependency on receiving adequate regulatory approvals to market our products to our target market (geographic and indication-specific), our ability to generate significant revenues and achieve profitability also depends on our success in many areas, including but not limited to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In addition, even if we were to receive all of the regulatory approvals that we may seek to receive, our expenses could increase beyond expectations if we are required by the FDA, or other regulatory agencies, domestic or foreign, to change our manufacturing processes or assays or to perform studies in addition to those that we currently anticipate.

 

Further, if we are not able to generate significant revenues from the sale of our approved products, we may be forced to curtail or cease our operations. Due to the numerous risks and uncertainties involved in product development, it is difficult to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability.

 

 

During the year ended December 31, 2025, we had negative cash flows from operating activities. There is no assurance that we will generate positive cash flows from its future operating activities. If operational cash flows continue to be negative, we may be required to fund future operations with alternative financing options such as offerings of shares.

 

 

There is no assurance that we will be able to secure the funds necessary to implement its strategies. Additional debt incurred by us from engagements such as major acquisitions may us debt level to increase and result in difficulties in completing or negotiating future debt financings. Any triggering of credit defaults or failure to raise capital by us may cause significant delays in carrying out business objectives or result in a material adverse effect on our business, financial condition, operational results and prospects.

 

 

 

These conditions raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements as of and for the three years ended December 31, 2025 do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should we be unable to continue as a going concern.

 

 

We do not have significant credit risk with respect to customers. All cash and cash equivalents are placed with major Israeli and Germany financial institutions.

 

Loan receivable credit risk is managed by each loan separately according to our procedures and control relating to the borrower’s credit risk management. At the end of each period, the individual loan values are assessed based on a credit risk analysis.

 

The expected credit loss analysis is generally based on management’s understanding of the borrower’s experience/integrity, financial health, business plans, capacity, products, customers, contracts, competitive advantages/disadvantages, and other pertinent factors when assessing credit risk. This would also include the assessment of the borrower’s forecasts as well as taking into consideration any security and/or collateral we have on the outstanding balance.

 

 

Recent volatility in global markets due to market participants' reactions to, and uncertainty surrounding, the magnitude and timing of government and central bank action to be taken in response to geopolitical tension in the Middle East as well as Russia's ongoing presence in Ukraine has resulted in a decline in the level of activity in the financial markets. Continued market volatility or uncertainty related to actions taken or to be taken by central banks, a decline in the global macroeconomic outlook, including as a result of Russia's ongoing presence in Ukraine, conflict in the Middle East, and increased geopolitical tensions worldwide and the threat, or outbreak of more widespread armed conflict in Eastern Europe or in the Middle East could cause financial market activity to continue to decrease, which would negatively affect our revenues and capital markets activity.

 

We are also vulnerable to political, economic, legal, regulatory, and military conditions affecting Israel and the broader Middle East region. Armed conflicts between Israel and its neighbouring countries and territories occur periodically in the region and have recently intensified, leading to heightened uncertainty and operational risks,  which may adversely affect our business, results of operations and financial condition. In addition, we may be adversely affected by other events or factors affecting Israel such as the interruption or curtailment of trade between Israel and its trading partners, or any restrictions or pressure on our partners, customers or others to prevent or discourage them from doing business activities with Israel or Israeli businesses, a significant downturn in the economic or financial condition of Israel, a significant downgrading of Israel’s internal credit rating, labour disputes civil unrest, heightened domestic protests, and political instability, including riots, uprisings and government failures. Restrictive laws or policies directed towards Israel or Israeli businesses could have a material adverse effect on our business, results of operations, financial condition and prospects.

 

 

Any armed conflicts, terrorist activities or political instability in the region could adversely affect our business conditions, limit our ability to operate effectively, could harm our results of operations, and could make it more difficult for us to raise capital. Parties with whom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. The increasing momentum of international movements advocating for economic disengagement from Israel, including corporate divestment and trade restrictions, may have an adverse impact on our operating results, financial condition or the expansion of our business.

 

Furthermore, under Israeli law, citizens and permanent residents of Israel are obligated to perform military reserve duty for extended periods of time and are subject to being called to active duty at any time under emergency circumstances. In response to increased hostilities, there have been periods of significant call-ups of military reservists. The recent conflict escalation has led to an unprecedented number of reservists being drafted, which could disrupt business continuity and impact key personnel availability.

 

 

Political risk is an additional risk that we may be exposed to when operating in Israel and Europe markets. Examples of political risk include without limitation social unrest, threats or occurrences of war, organized crime, political instability, changes of government and changes in taxation policies in domestic and international markets and jurisdictions in which we operate.

 

While we actively analyze risks and developments in markets that it currently or will participate in, there is no assurance that unpredicted impacts will not occur. Depending on the magnitude of such unpredicted impacts, there may be a material adverse effect on our business, financial condition, operating results, and prospects.

 

 

Global economies are currently experiencing elevated inflation which could curtail levels of economic activity, including in our primary production markets. This inflation is predominantly driven by costs of goods as input costs continue to increase with the overall increase in costs caused by several external factors including but not limited to general uncertainties caused by global supply chain constrictions and rising energy prices. As such, delivery and distribution costs, utility costs and other necessary supplies at an economic cost cannot be assured. These are integral requirements for our business and it is reasonable to expect that inflation, supply shortages or increases in demand could impact our future economic performance and competitiveness, as it may entail a meaningful increase in costs for various goods and services that we may not be able to pass onto patients or customers. In addition, our operations could be affected by the economic context should interest rates, inflation or unemployment levels reach levels that consumer trends and spending and, consequently, impact our sales and profitability. We may not be able to effectively or successfully address such risks and uncertainties or successfully implement operating strategies to mitigate the impact of such risks and uncertainties. In the event that we fail to do so, such failure could materially harm our business.

 

As part of our business strategy, we seek new opportunities in the cannabis industry. In pursuit of such opportunities, we may fail to select appropriate investment candidates and negotiate acceptable arrangements. We cannot provide assurance that we can complete any investment that we pursue or are pursuing, on favorable terms, or that any investment completed will ultimately benefit us. In addition, our capital solutions may not attract a following in the cannabis industry. In the event that we choose to raise debt capital to finance any acquisition or other arrangement, our leverage will be increased. In addition, the introduction of new tax laws or regulations, or accounting rules or policies, or rating agency policies, or changes to, or differing interpretations of, or application of, existing tax laws or regulations or accounting rules or policies or rating agency policies, could make the productivity and services offered by us less attractive to entities in which we hold an equity interest (“Investees”). Such changes could adversely affect our ability to enter into new investments.

 

 

In certain circumstances, we may decide, or be required, to divest any of our direct or indirect interests in certain Investees. In particular, if any of these entities in which we hold an equity interest violate any applicable laws and regulations, we may be required to divest our indirect or direct interest in such entity or risk significant fines, penalties, administrative sanctions, convictions or settlements.

 

We may also decide to divest our cannabis operations while retaining only our existing pharmacy business in Israel and diversifying into a new business line, unrelated to the legacy cannabis business or the existing pharmacy business in Israel.

 

There is no assurance that these divestitures will be completed on terms favorable to us, or at all. Any opportunities resulting from these divestitures, and the anticipated effects of these divestitures on us may never be realized, or may not be realized to the extent we anticipate. Any required divestiture or an actual or perceived violation of applicable laws or regulations could have a material adverse effect on us, including our reputation and ability to conduct business, our holdings (directly or indirectly) in the relevant entity, the listing of our securities on applicable stock exchanges, our financial position, operating results, profitability or liquidity or the market price of our Common Shares. In addition, it is difficult for us to estimate the time or resources that may be required for the investigation of any such matters or their final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.

 

 

IMC is a holding company. Substantially all of our operating assets are the capital stock of its Subsidiaries and arrangements with entities in which we hold an equity interest. Substantially all of our business is conducted through Subsidiaries or entities in which we hold an equity interest, which are separate legal entities. Consequently, our cash flows and ability to pursue future business and expansion opportunities are dependent on the earnings of these entities and the distribution of those earnings to us. The ability of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt. In the event of a bankruptcy, liquidation or reorganization of any of our Subsidiaries, holders of indebtedness and trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us.

 

 

We may be owed current or long-term debts such as accounts receivables over the course of our operations. As a result, we may be exposed to the risk of debtor defaults on payments as they come due. We make no guarantee on the level of credit risk that we will hold at any given time but intend to minimize this risk as determined by the Board.

 

We are subject to the inherent liquidity risk that we will not be able to pay our financial obligations as they become due.

 

In light of our recent negative cash flows, we monitor liquidity risk carefully and plan our liquid holdings strategically to avoid any payment defaults. Our liquidity risk is the risk that we will not be able to meet our financial obligations as they become due. We manage our liquidity risk by reviewing our capital requirements on an ongoing basis. Based on our working capital position as of December 31, 2025, management considers liquidity risk to be high.

 

There is a risk that losses will be incurred by us if there is an adverse shift in exchange rates or increases in prevailing interest rates.

 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes exchange rate risk and interest rate risk.

 

Exchange rate risk is the risk of loss arising from changes to foreign exchange rates. As we are a party to certain international contracts that require us to make or receive payments in foreign currencies, there is a risk that losses will be incurred if there is an adverse shift in exchange rates.

 

Interest rate risk pertains to the risk of loss arising from changes in prevailing interest rates. Any increases in prevailing interest rates may increase interest expenses paid by us on any long-term debt.

 

We are dependent upon the global capital markets to raise capital by equity or debt financing.

 

An economic downturn of the global capital markets has been shown to make the raising of capital by equity or debt financing more difficult. We will be dependent upon the capital markets to raise additional financing in the future, while we continue to develop our operations. As such, we are subject to liquidity risks in meeting its development and future operating cost requirements in instances where cash positions are unable to be maintained or appropriate financing is unavailable. These factors may impact our ability to raise equity or obtain loans and other credit facilities in the future and on terms favorable to us and our management. If uncertain market conditions persist, our ability to raise capital could be jeopardized, which could have an adverse impact on our operations and the trading price of our securities.

 

Future crises may be precipitated by any number of causes, including natural disasters, public health crises, geopolitical instability, war, natural disasters, changes to energy prices or sovereign defaults. These factors may impact our ability to obtain equity or debt financing in the future and, if obtained, on terms favorable to us. Increased levels of volatility and market turmoil can adversely impact our operations and the value, and the price of the Common Shares could be adversely affected.

 

In addition, there is a risk that one or more of our current service providers may themselves be adversely impacted by difficult economic circumstances, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

 

 

There is a risk that regulatory authorities in Israel may determine that we are in contravention of Israeli cannabis regulations. Namely, prior approval of the Israeli Medical Cannabis Agency (“IMCA”) is required for any shareholder owning 5% or more of an Israeli company licensed to engage in cannabis-related activities. Any contravention of Israeli cannabis regulations could jeopardize the good standing of our licenses. Such a determination may adversely affect our ability to conduct sales and marketing activities and could have a material adverse effect on our, operating results or financial condition.

 

 

Our cannabis-related business and our activities are heavily regulated in all jurisdictions where we carry our business. Our operations are subject to various laws, regulations and guidelines by governmental authorities, particularly the MOH, and the Federal Opium Agency of Germany’s Federal Institute for Drugs and Medical Devices in Germany (“BfArM”), relating to the grow, propagate, manufacture, marketing, management, transportation, storage, distribution, sale, pricing and disposal of dried and fresh cannabis, cannabis plants and seeds, edible cannabis, cannabis extracts, clones and plants and cannabis extracts. Our operations are also subject to laws and regulations relating to health and safety, insurance coverage, the conduct of operations and the protection of the environment.

 

 

Laws and regulations, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over the activities of the Israeli Subsidiaries and Focus, which can include the power to limit or restrict business activities, the import and export of cannabis products and the imposition of additional quality criteria and disclosure requirements on the products and services provided by Israeli Subsidiaries and Focus. Achievement of the Israeli Subsidiaries and Focus business objectives are contingent, in part, upon compliance with regulatory requirements enacted by these governmental authorities and obtaining all regulatory approvals, where necessary, for the production and sale of its products.

 

We cannot predict the time required for the Israeli Subsidiaries or Focus to secure all appropriate regulatory approvals for the products and activity, or the extent of testing and documentation that may be required by governmental authorities. Any delays in obtaining, or failure to obtain regulatory approvals would significantly delay the development of markets and products and could have a material adverse effect on our business, results of operations, financial condition and prospects.

 

Failure to comply with the laws and regulations applicable to its operations may lead to possible sanctions including the revocation or imposition of additional conditions on licenses to operate the Israeli Subsidiaries and/or the Focus business, the suspension or expulsion from a particular market or jurisdiction or of its key personnel, and the imposition of fines and censures. To the extent that there are changes to the existing laws and regulations or the enactment of future laws and regulations that affect the sale or offering of the Israeli Subsidiaries and/or Focus products or services in any way, this could have a material adverse effect on our business, results of operations, financial condition and prospects.

 

 

On March 10, 2017, the German federal government enacted bill Bundestag- Drucksache 18/8965 – Law amending narcotics and other regulations that amended existing narcotics legislation to recognize cannabis as a form of medicine and allow for the importation and domestic cultivation of medical cannabis products. Under the subsequent updated legislation, cannabis was listed in Annex 3 to the Federal Narcotics Act (“BtMG”) as a “marketable narcotic suitable for prescription” until the Medical Cannabis Act (“MedCanG”) came into force on April 1, 2024. Since then, medical cannabis has no longer been subject to the BtMG but to the MedCanG. With regard to medical cannabis, the cultivation, production, distribution, exportation, transit and importation are currently legal in Germany, subject to regulations and licensing requirements. At the same time as the MedCanG, the Consumer Cannabis Act (“KCanG”) also came into force on April 1, 2024. Operations involving adult-use recreational cannabis products became legal under certain conditions defined in the KCanG. Until the KCanG came into force, legalization in Germany applied only to cannabis for medicinal purposes under state control in accordance with the Narcotic Convention. This development has its origins in the fact that the former German government has declared in the coalition agreement at the end of 2021 its intention to open the German market also in the adult-use recreational market. In October 2022, a key points paper on the controlled supply of cannabis to adults for consumption purposes, although a restructuring of the existing regulatory framework on cannabis in general was also discussed, published by the former cabinet, which was submitted to the European Union Commission for a preliminary legal examination. In this respect, the Federal Government issued a declaration of interpretation with regard to existing international agreements governing the adult-use recreational cannabis usage and submitted a draft law to the European Union Commission within the framework of a notification.

After a long political debate, the German Bundestag approved the federal government's draft law "on the controlled use of cannabis" (BT Drs. 20/8704, BT Drs. 20/8763, BT-Drs. 20/10426) on Friday, February 23, 2024. The draft law (BT Drs. 20/8704) then came into force on April 1, 2024. An adjustment has already been made by Article 1 of the Act of June 20, 2024 (BGBl. 2024 I No. 207). Some components of the KCanG, which deal with so-called consumer cannabis, came into force on 1 July 2024 (such as the possibility to apply for a permission to grow by and distribute recreational cannabis to members of a cultivation association. The entry into force of the law also had direct consequences for medical cannabis, which is the subject matter of Art. 2 (Medical Cannabis Act - MedCanG) and 3 (BtMG) of the law. Since the KCanG and MedCanG came into force, cannabis is no longer a narcotic by definition and is therefore no longer subject to the BtMG. The definition in Annex 3 of the BtMG was be replaced by that in Section 2 MedCanG: "Cannabis for medical purposes: plants, flowers and other parts of plants belonging to the genus Cannabis that are grown for medical purposes under state control in accordance with Articles 23 and 28(1) of the Single Convention on Narcotic Drugs of 1961 of March 30, 1961 (Federal Law Gazette 1973 II p. 1354), as well as delta-9-tetrahydrocannabinol including dronabinol and preparations of all the aforementioned substances". However, the narcotics regulations were replaced by comparable regulations and authorisations. The Federal Institute for Drugs and Medical Devices (BfArM) remains responsible for the latter as a higher federal authority. From a regulatory perspective, medical cannabis remains a medicinal product or an active pharmaceutical ingredient, meaning that the requirements under medicinal product law will remain in place. As a result, the marketing of irradiated products continues to require a marketing authorisation in accordance with the Ordinance on Medicinal Products Treated with Radioactive or Ionising Radiation (AMRadV). Only the narcotics licence pursuant to Section 3 BtMG is replaced by a new licence pursuant to the MedCanG (see Section 1), which, however, largely corresponds to the previous provisions of the BtMG regarding the application process and general regulations. However, there are the following differences that are new since the entry into force: Medical cannabis no longer has to be stored and transported like a narcotic. The corresponding safety precautions no longer apply, meaning that compliance with the provisions of pharmaceutical law is sufficient. The so-called semi-annual reports are replaced by annual reports. The requirements for the person responsible for medical cannabis are slightly reduced compared to those for narcotics. A prescription of medical cannabis is possible without the need to use the form for prescription for narcotics. A normal prescription is sufficient.

However, it is likely to be of great importance that the cultivation of medicinal cannabis based on Section 17 MedCanG is no longer subject to public tenders, but like the trading licence, it is ultimately subject to a two-stage authorisation (at state level regarding the pharmaceutical regulations and at federal level with regard to the fact that it is medicinal cannabis).

Medical cannabis in Germany must comply with the corresponding monographs of the German and European Pharmacopoeia (“Ph. Eur.”).  The Ph. Eur. Suppl. 11.5 contains the new Ph. Eur. Monograph on cannabis flowers and the new Ph. Eur. Monograph on Cannabidiol (“CBD”). With the entry into force of Suppl. 11.5 of the national edition of the Ph. Eur. on April 1, 2025, the monograph 'Cannabis flowers / Cannabis flos [3028]' contained therein became legally binding from this date. The previous monograph 'Cannabis flowers' of the German Pharmacopoeia was deleted with the last edition of the DAB. The new monograph on cannabis flowers includes Starting materials for the production of extracts, medicinal products that can be prescribed as such (herbal medicinal products) that are taken by patients by inhalation or oral administration. There are not entirely irrelevant changes compared to the German monograph. The Committee on Herbal Medicinal Products (“HMPC”) as the European Medicines Agency’s (EMA) committee responsible for compiling and assessing scientific data on herbal substances, preparations and combinations, announced that in view of uniform EU quality requirements (including with respect to import and export of cannabis), further Ph. Eur. Cannabis monographs are in preparation.

All BtMG permit applications had to specify the strains and estimated quantities of medical cannabis involved and any subsequent changes had to be reported to the Federal Opium Agency of Germany, whereby varieties and quantities no longer appear on the permit, even if these are to be specified in the application. The same applies regarding Sections 7, 8 MedCanG in relation to the authorisation to trade in medical cannabis, although it is now apparent that no expected annual quantities are to be specified. However, it can be assumed that the BfArM nevertheless enquire about these due to the (albeit somewhat reduced compared to the BtMG) reporting obligations in Sections 16 and 17 MedCanG and the Foreign Narcotics Trade Regulation, which remains applicable (see Section 14 MedCanG).

 

CBD is neither a real subject to the KCanG nor to the MedCanG. Only in Section 1 No. 3 KCanG is there a definition, in Section 1 No. 8 b) KCanG the exemption of CBD from the term cannabis and in Section 2 para. 2 No. 1 KCanG the exemption from the prohibition of extraction of the cannabis plant, which permits the extraction of CBD, even if it does not contain any further regulations on CBD in isolation. With regard to synthetic CBD, a different set of regulations is important: the handling of cannabimimetics/synthetic cannabinoids is prohibited in accordance with Section 2 of the Annex in conjunction with Section 3 of the New Psychoactive Substances Act (NpSG). Product-specific regulations relating to CBD can be found in other regulations. Thus, Annex 1 of the Ordinance on the Prescription of Medicinal Products stipulates that CBD is in principle subject to prescription but does not specify a minimum quantity or a specific dosage form. If we look at the food sector, a distinction is made between products that naturally contain CBD and those that consist of or contain extracted CBD; the European Commission considers the latter to be novel foods under Regulation (EU) 2015/2283, which require authorisation before being placed on the market. Although applications for such authorisation have been submitted, the European Commission believes that they contain at least insufficient data on safety in food use, meaning that none of the applications can currently lead to authorisation. Against this background, various products containing CBD can be found on the German market. There are currently various court decisions that problematize CBD in foods (especially food supplements) and in cosmetics (especially mouth oil). On the one hand, CBD is regarded as a potential active pharmaceutical ingredient (API) to be used in medicinal products or as a novel food subject to authorisation and therefore unsuitable for a safe use in a foodstuff, and on the other hand as unsuitable for cosmetic use in the mouth, as CBD would ultimately be consumed in this case (like a foodstuff and therefore to be regarded as foodstuff). CBD is therefore sometimes declared as a flavoring in foods, as flavorings are excluded from the scope of the Novel Food Regulation. Nevertheless, there are already decisions that exclude suitability as a flavoring in individual cases.

 

 

In the past, the Federal Opium Agency of Germany’s BfArM formed a cannabis division (the “Cannabis Agency”) to oversee cultivation, harvesting, processing, quality control, storage, packaging and distribution to wholesalers, pharmacists and manufacturers. The Cannabis Agency also regulated pricing of German-produced medical cannabis products and served as an intermediary of medical cannabis product sales between manufacturers, wholesalers and pharmacies on a non-profit basis so far. In late 2018, the Cannabis Agency issued a call for tenders to award licenses for local medical cannabis cultivation and distribution of German-cultivated medical cannabis products (the “German Local Tender”). The Cannabis Agency served as an intermediary in the supply chain between such cultivation and distribution. In April 2019, three licenses for local cultivation were granted. In consequence three companies in Germany received the permission to cultivate on behalf of the Cannabis Agency of the BfArM.

 

 

 

The past and present regime permits the importation of cannabis plants and plant parts for medicinal purposes under state control subject to the requirements under the Narcotic Convention, according to which, Germany must estimate the expected demand of medical cannabis products for medical and research purposes for the following year and report such estimates to the International Narcotics Control Board. In September 2025, Germany already reached the maximum import quota of 122 tonnes of medical cannabis approved by the International Narcotics Control Board. The BfArM was therefore temporarily suspending new import licences until the quota was increased.

 

As a prerequisite to obtaining a German import license, the supplier must grow and harvest in compliance with EU-GACP-Guidelines and manufacture in compliance with EU-GMP-Guidelines and certifications, or alternatively, it is a pure EU-GACP product, and the EU-GMP manufacturing steps then take place in Germany. With regard to imports from third countries and the associated testing and assessment of EU GMP compliance, the relevant pharmaceutical regulations are in force, which also provide for on-site inspections by the EU authorities, provided that no MRA or similar is in force for the specific product type. All medical cannabis products imported to Germany must derive from plant material cultivated in a country whose regulations comply with Art. 23 and 38 of the Narcotic Single Convention and must comply with the relevant and applicable monographs described in the German and European pharmacopeias.

 

 

Medical cannabis products imported pursuant to an import license under the MedCanG and AMG permits are sold exclusively to pharmacies for final dispensing to patients on a prescription basis as ‘magistral preparations’, a term used in Europe to refer to medical products prepared in a pharmacy in accordance with a medical prescription for an individual patient. Magistral preparations require certain manufacturing steps in the pharmacy. Such manufacturing steps of the pharmacist typically include the testing and dosing of pre-packaged cannabis inflorescences (typically referred to as “flos”), medical cannabis products for oral administration (dronabinol), medical cannabis products for inhalation upon evaporation, and medical cannabis-infused teas. In addition to magistral preparations, medical cannabis products are also marketable as pre-packaged, licensed drugs (e.g. Sativex®).

 

 

According to the Federal Ministry of Health (“BMG”), the aforementioned increase in import volumes is due to a rise in the number of prescriptions for self-payers, which are not covered by statutory health insurance. Only a very slight increase has been observed in statutory health insurance funds, which does not reflect the increase in imports to this extent.

 

In order to prevent these developments in prescribing practice, the BMG drafted a bill to amend the MedCanG (RefE)¹ in July 2025. Such legislation amendment was then approved by the German Federal Cabinet on October 8, 2025²and provides for a significant tightening of the MedCanG with regard to the prescription and dispensing of medical cannabis. In the draft, the BMG justifies this necessity with the need to ensure a secure supply of medicines and patient safety. On the one hand, the BMG expresses concerns about the growing use of telemedicine platforms, since it believes that prescriptions for medical cannabis are often issued there without personal contact. The BMG assumes that prescriptions are regularly issued solely on the basis of a questionnaire and sent via (cooperating) mail-order pharmacies. In the view of the ministry, this could cause risks as cannabis flowers for medical purposes are prescribed as a magistral formulation and in consequence without a marketing authorisation. For this reason, according to RefE, Section 3 Med-CanG shall stipulate that the prescription of cannabis flowers would require in-person physician consultation (e.g. in a doctor's office or during a home visit). This shall apply to both: initial prescriptions and repeat prescriptions, for which personal contact between doctor and patient must have taken place within the last four quarters. Furthermore, the distribution of cannabis flowers for medical purposes within Germany by mail-order would be prohibited, while delivery only would be permitted. If implemented, these changes could materially adversely affect our German operations, including by limiting distribution channels and reducing patient accessibility, which may, in return, negatively impact revenues and operating results.

 

¹RefE, Entwurf eines Gesetzes zur Änderung des Medizinal-Cannabisgesetze des Bundesministeriums für Gesundheit vom 14.7.2025.

²Gesetzesentwurf der Bundesregierung eines Ersten Gesetzes zur Änderung des Medizinal-Cannabisgesetzes vom 8.10.2025.

 

For clarification: cross-border dispatch has always been prohibited under the World Postal Convention. The change would only affect dispatch within Germany. Pharmacies would only be able to deliver using their own employees as couriers.

 

However, it should be noted that this drastic complication of prescribing could have significant consequences for certain patient groups. The purpose of telemedicine is precisely to further develop healthcare by providing treatment options, especially for patients in rural areas. The BMG describes precisely these points on its website³. For this reason, there are also dissenting voices with regard to the RefE. It therefore remains to be seen whether and to what extent the legislative changes envisaged in the RefE will ultimately be implemented in the MedCanG. This will be decided in the further course of the proceedings.

 

If the legislative changes are actually adopted as decided by the Federal Cabinet, this would affect not only the patients mentioned above, but also providers of telemedicine services and mail-order pharmacies in particular.

 

 

The development of our business and operating results may be hindered by applicable restrictions on promotion marketing and advertising activities imposed by the MOH or BfArM. If we are unable to effectively market our products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through the selling price for our products, our sales and operating results could be adversely affected.

 

 

Our operations are subject to various laws, regulations and guidelines. We endeavor to comply and endeavor to cause the entities in which we hold an equity interest to comply with all relevant laws, regulations and guidelines. However, there is a risk that the interpretation of laws, regulations and guidelines, including, but not limited to applicable stock exchange rules and regulations, by us and these entities may differ from each other, and we and these entities operations may not be in compliance with such laws, regulations and guidelines. Any potential noncompliance could cause our business, financial condition and results of operations to be adversely affected. Further, any amendment to or replacement of cannabis legislations and applicable rules and regulations governing the activities of such entities may cause adverse effects to our operations. The risks to our business associated with the decision to amend or replace cannabis legislation and regulation, could reduce the addressable market for our products and could materially and adversely affect our business, financial condition and results of operations.

 

We and the entities in which we hold an equity interest incur ongoing costs and obligations related to regulatory compliance. Failure to comply with applicable laws and regulations may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures or remedial actions. Parties may be liable for civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permitting requirements, or more stringent application of existing laws or regulations, may have a material adverse impact on our and/or our Investees, resulting in increased capital expenditures or production costs, reduced levels of cannabis production or abandonment or delays in the development of facilities which could have a material adverse effect on our business, results of operations and financial condition.

 

³Abrufbar unter https://www.bundesgesundheitsministerium.de/service/begriffe-von-a-z/t/telemedizin.html

The introduction of new tax laws, regulations or rules, or changes to, or differing interpretations of, or application of, existing tax laws, regulations or rules in any of the countries in which we invest could result in an increase in our taxes, or other governmental charges, duties or impositions. No assurance can be given that new tax laws, regulations or rules will not be enacted or that existing tax laws, regulations or rules will not be changed, interpreted or applied in a manner which could result in our profits being subject to additional taxation or which could otherwise have a material adverse effect on us.

 

 

Our operations are subject to a complex and evolving framework of laws, regulations and guidelines relating to, among other things, the marketing, acquisition, cultivation, manufacture, management, distribution (including import and export), transportation, storage, sale and disposal of cannabis and cannabis-related products. We are also subject to laws and regulations relating to health and safety, insurance coverage, the conduct of operations, and environmental protection.

 

Any changes in applicable laws, regulations or guidelines, or in the interpretation or enforcement thereof, that are beyond our control could have a material adverse effect on our business, results of operations, financial condition and prospects. In particular, changes in laws, regulations or guidelines relating to medical cannabis could negatively affect our ability to operate in certain jurisdictions, delay or prevent the receipt of required regulatory approvals, or significantly delay the development of our markets and products.

 

Failure to comply with applicable laws, regulations or guidelines could result in sanctions, fines, censures, suspension or revocation of licenses or permits, restrictions on our operations, or expulsion from particular markets or jurisdictions, any of which could materially and adversely affect our business, results of operations, financial condition and prospects.

 

 

Our sales capabilities are subject to estimates in target production capacity. These estimates may prove to be inaccurate due to uncontrollable external factors such as genetic drifts in strain of plants grown and general difficulties in estimating growth of cannabis plants and also unexpected delays in product supply by third party cultivation partners and importation due to reasons related to regulation and the supplier and operational constrains. Any adverse misalignments between the target production capacity and actual production capacity may result in a material adverse effect on our business, financial condition.

 

 

Our operations are subject to environmental and occupational safety laws and regulations in certain jurisdictions, concerning, among other things, emissions and discharges to water, air and land, the handling and disposal of hazardous and nonhazardous materials and wastes, and employee health and safety. We incur ongoing costs and obligations related to compliance with environmental and employee health and safety matters. Any failure to comply or maintain compliance with environmental and occupational safety laws and regulations may result in additional costs for corrective measures, penalties or restrictions on manufacturing operations and could have a material adverse effect on our business, results of operations and financial condition.

 

If the products we sell are not perceived to have the effects intended by the end user, its business may suffer. There is little long-term data with respect to efficacy, unknown side effects and/or interaction with individual human biochemistry of various cannabis products. As a result, our products could have certain side effects if not taken as directed or if taken by an end user that has certain known or unknown medical conditions.

 

 

 

 

Our ability to produce, store, import, distribute and sell cannabis in Israel is dependent on the Israeli Subsidiaries and Focus maintaining the Israeli Licenses with the IMCA. Failure to comply with the requirements or any failure to maintain the Israeli Licenses would have a material adverse impact on our business, financial condition and operating results. There can be no guarantees that the IMCA will extend or renew any of Israeli Licenses as necessary or, if it extended or renewed, that any of the Israeli Licenses will be extended or renewed on the same or similar terms. Should the IMCA not extend or renew any of Israeli Licenses or should it renew any of the Israeli Licenses on different terms, the business, financial condition and results of our operations would be materially adversely affected.

 

 

Our ability to produce and distribute cannabis through Adjupharm’s certification as an EU-GMP and EU-GDP producer and distributor in Germany with wholesale, narcotics handling, manufacturing, procurement, storage and distribution authority is granted by German regulatory authorities. Failure to comply with the requirements of the BfArM issued licenses or any failure to maintain their respective licenses would have a material adverse impact on our business, financial condition and operating results.

 

 

 

 

The Israeli Licenses are specific to each respective Israeli facility holding such license and therefore, both the license and the Israeli facilities must remain in good standing for each of our pharmacies, Vironna and R.A Pharm Yarok (the “Israeli Pharmacies”) to be able to conduct the Israeli cannabis activities authorized thereunder. Adverse changes or developments affecting any of our Israeli facilities, including but not limited to the failure to maintain all requisite regulatory and ancillary permits and licenses, the failure to comply with state or municipal regulations, or a breach of security, could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

Any breach of any lease agreement relevant to the operations of the Israeli Pharmacies or any failure to renew such lease agreements, on materially similar or more favorable terms, may also have a material adverse effect on our business, financial condition, results of operations and prospects.

 

 

Our EU-GMP logistics centre in Germany (the “German Logistics Center”) allows Adjupharm to manage all aspects of its supply chain including the production, the repackaging and distribution of bulk medical cannabis. Any breach of regulatory requirements, including any failure to comply with recommendations or requirements arising from inspections by government regulators, could also have an impact on Adjupharm’s ability to maintain the licenses and/or keep the German Logistics Center in good standing, and to continue operating it under the licenses, could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

 

 

The Israeli Subsidiaries rely on and are substantially dependent on various supply agreements with third-party cannabis cultivators in Israel and Canada, imported cannabis products, manufacture and packaging agreements and distribution agreements to fulfill the supply requirements of its distribution and sales agreements with pharmacies in the Israeli medical cannabis market. The Israeli Subsidiaries acquire cannabis from third parties in amounts sufficient to operate its business. However, there can be no assurance that there will continue to be a supply of cannabis available for us to purchase to operate or expand. Additionally, the price of cannabis and other inputs may rise which would increase the cost of goods. If any suppliers fail to supply any contracted materials to the Israeli Subsidiaries, the Israeli Subsidiaries may fail to meet purchase commitments from their distribution partners. If we were unable to acquire the cannabis or other inputs required to operate or expand or to do so on favorable terms or fail to maintain the manufacture agreements with IMC-GMP manufacture companies, it could have a material adverse impact on our business, financial condition and results of operations. If any of our suppliers fails to provide inputs meeting our quality standards, it may need to source cannabis or other inputs from other suppliers, which may result in additional costs and delay in the delivery of its products and services to distributors, pharmacies and patients. There is no assurance that suppliers will be able to supply and deliver the required materials to us in a timely manner or that the materials they supply to us will not be defective or substandard. Any delay in the delivery of materials, or any defect in the materials, supplied to us may materially and adversely affect or delay its production schedule and affect its product quality. Consequently, we rely on the suppliers of such supply agreements to provide necessary cannabis products to the Israeli Subsidiaries. If we cannot secure cannabis of similar quality and at reasonable prices from alternative suppliers in a timely manner, or at all, the Israeli Subsidiaries may not be able to deliver its products to distributors, pharmacies or patients on time with the required quality. The various suppliers and distributors may elect, at any time, to breach or otherwise cease to participate in supply, service or distribution agreements, or other relationships, upon which our operations rely. Loss of its suppliers, service providers or distributors or their timely service would have a material adverse effect on our business and operational results.

 

 

Adjupharm relies on its sales and distribution agreements to supply IMC-branded products to distribution partners in Germany, which are then distributed to German pharmacies for sales to medical cannabis patients and on direct sales by Adjupharm of IMC-branded products to German pharmacies.

 

Adjupharm relies on supply agreements with cannabis cultivators and producers to meet the demands of their respective sales agreements with distribution partners and pharmacies. Consequently, we rely on the suppliers of such supply agreements to provide necessary cannabis products to Adjupharm. If any suppliers fail to supply any contracted materials to Adjupharm, Adjupharm may fail to meet purchase commitments from their distribution partners and this could result a material adverse effect on our business, financial and operational results.

 

 

We may face intense competition from other companies or groups of companies, some of which can be expected to have more financial resources, industry, manufacturing and marketing experience than us. Because of the early stage of the industry in which we operate, as well as evolving legislation and governmental initiatives in several jurisdictions, we expect to face additional competition from new entrants in the jurisdictions in which we currently operate or are contemplating operations. If the number of users of medical cannabis products in Israel and Europe increases, the demand for products in such areas will increase and we expect that competition will become more intense, as current and future competitors begin to offer an increasing number of diversified products and pricing strategies. Increased competition by larger and better-financed competitors could materially and adversely affect our business, financial condition and results of operations.

 

 

The cannabis industry is undergoing rapid growth and substantial change, which has resulted in an increase in competitors, consolidation and formation of strategic relationships. It is possible that industry maturation could create larger companies that may have increased geographic scope. Such acquisitions or other consolidating transactions could harm us in several ways, including the loss of strategic partners (if they are acquired by or enter into relationships with a competitor), customers, or revenue and market share, all of which could harm our operating results. Our operating results could also be harmed if we were forced to expend greater resources to meet new or additional competitive threats. Additional competition from larger, better-financed competitors with geographic advantages could outcompete us by placing downward pressure on retail prices for products and services. This could ultimately cause a material adverse effect on our business, financial condition, results of operations and our prospects.

 

We are vulnerable due to the results of the “Anti-Dumping” investigation into cannabis imports from Canada that could have a material adverse effect on our business.

 

We are exposed to risks from an ongoing "Anti-Dumping" investigation by the Israeli Ministry of Economy and Industry into cannabis imports from Canada. The investigation, initiated in January 2024, examines potential harm to local producers and has led to various procedural extensions and legal challenges. In July 2024, a preliminary decision found evidence of dumping but did not impose temporary guarantees, prompting local growers to challenge this in court—ultimately without success. In November 2024, the Israeli Ministry of Economy and Industry recommended tax levies on Canadian imports, with non-cooperative companies facing a 175% tax, while cooperating importers would see lower rates starting at 2%. We have actively responded, presenting arguments to the advisory committee to the Israeli Ministry of Economy (the "Advisory Committee") and engaging in legal proceedings to mitigate potential impacts. In April 2025, the Israeli Ministry of Treasury ruled over the Israeli Ministry of Economy and Industry’s recommendation to pose tax levies on Canadian cannabis imports. Such decision was later approved by the Israeli Attorney General in July 2025.

 

Due to the nature of our products and the limited legal channels for distribution, the Israeli Pharmacies and the German Logistics Center is subject to the risk of theft of our product and other security breaches. A security breach in any one of our facilities and external cultivation, manufacturing and storage facilities possessing of our products could result in a significant loss of available product and as a result decrease in sales, revocation of cannabis licenses, exposure to additional liability under applicable regulations and to potentially costly litigation or increased expenses relating to insurance premiums and other resolutions and future prevention of security breaches, any of which could have an adverse effect on our business, financial condition, results of operations and prospects.

 

In Israel, we store products in the Israeli Pharmacies and other pharmacies not owned by us, including with Israeli trade houses, and external service providers such as cultivation, manufacturing, and storage partners. In addition, in Germany, we store products in the German Logistics Center before distribution. Pursuant to the applicable Israeli and German licensing requirements, the Israeli Subsidiaries and Adjupharm are required to maintain certain standards of storage for cannabis products. The risk of inventory theft from these facilities is mitigated by the Israeli Subsidiaries and Adjupharm through the implementation of the security measures required under applicable laws, such as usage of qualified storage units, designated storage locations, locked storage vaults, access control, security cameras, and alert systems. Notwithstanding such security measures, any breaches of security may result in losses of inventory, potential litigation, and increased costs to bolster security and insurance, which may, in turn, have an adverse effect on our business, financial condition, results of operations and our prospects.

 

 

We are dependent on ancillary business licenses, permits and approvals granted by government authorities or other third parties in order to operate effectively including, without limitation, building permits, municipal permits, third-party licenses including distributors and suppliers, and foreign trade licenses. Should we fail to maintain any of these licenses, permits and approvals, or should we fail to renew any of such licenses, permits and approvals on materially similar or more favorable terms, our business, financial condition and results of the operations may be subject to a material adverse effect.

 

Violations of securities laws and breaches of fiduciary duty could result in civil liability, fines, sanctions, or the suspension or revocation of our right to carry on our existing business.

 

Given the nature of our business, we may from time to time be subject to claims or complaints from investors or others in the normal course of business. The legal risks facing us, our directors, officers, employees, or agents in this respect include potential liability for violations of securities laws or breach of fiduciary duty. Violations of securities laws and breach of fiduciary duty could result in civil liability, fines, sanctions, or the suspension or revocation of our right to carry on our existing business. We may incur significant costs in connection with such potential liabilities.

 

 

We may be subject to growth related risks including capacity constraints and pressure on our internal systems and controls. Our ability to manage growth effectively will require us to continue to implement and improve our operational and financial systems and to expand, train and manage our employee base. If we are unable to deal with this growth, any negative impact may have a material adverse effect on our business, financial condition, results of operation and prospects.

 

Additionally, we may decide to divest certain of our cannabis operations while retaining our existing pharmacy business in Israel, and also consider diversifying into a new business line, unrelated to the legacy cannabis business or our existing pharmacy business in Israel, including in the defense sector. There is no certainty as to our ability to retain our existing pharmacy business in Israel successfully, nor to our success in diversifying into a new business line, or completing any such strategic transactions on acceptable terms, or at all, which could have a negative impact and a material adverse effect on our business, financial condition, results of operations and prospects.

 

The evaluation and pursuit of such potential divestitures and new business opportunities may divert management’s attention and resources from our existing operations and may involve significant costs and uncertainties. If completed, such transactions may expose us to new operational, regulatory and competitive risks, including risks associated with operating in industries in which we have limited or no prior experience, and we may not realize the anticipated benefits of such transactions

 

In addition, the realization of the benefits of past and future acquisitions made by us depend in part on successfully consolidating functions and integrating and leveraging operations, procedures and personnel in a timely and efficient manner as well as our ability to share knowledge and realize revenues, synergies and other growth opportunities from combining the acquired businesses and operations with our. The integration of acquired businesses may depend on a number of factors, including without limitation: (i) the input of substantial management effort, time and resources; (ii) the successful incorporation of key personnel from acquired companies for post-acquisition periods. Any failure in successfully integrating acquired businesses may result in a material adverse effect on our business, financial condition, operating results and prospects. The risks we face in connection with a potential acquisition include:

 

 

Our success depends on our ability to secure suppliers and distribution partners. There are many factors which could impact our ability to secure suppliers and distribution partners, including but not limited to IMC and other brand awareness, our ability to continually produce desirable and effective cannabis products, compliance with regulatory requirements in connection with import and export of cannabis products, and the successful implementation of new partnership plans. The failure to secure suppliers or distribution partners could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

 

Our business is dependent on a number of key inputs and their related costs including raw materials and supplies related to our growing and distribution operations as well as electricity, water, and other utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs (e.g. rising energy costs) could cause a material adverse effect on our business, financial condition, and operating results. Any failure to secure required supplies and services or to do so on appropriate terms could also have a material adverse effect on our business, financial condition, and operating results.

 

The failure to effectively compete in our markets and introduce new product offerings may cause a material adverse effect on our business, results of operations, financial condition and prospects.

 

In addition to being subject to general business risks applicable to a business involving an agricultural product and a regulated consumer product, we will need to make investments in our business strategy. These investments include the procurement of raw material, new cannabis strains supplier and distributor outreach projects, marketing efforts and research and development projects. We expect that competitors will undertake similar investments to compete with it. Competitive conditions, third-party partner preferences, patient requirements and spending patterns in this industry and market are relatively unknown and may have unique circumstances that differ from other existing industries and markets and contribute to unsuccessful future business development or expansion efforts by us or other undesirable consequences. As a result, we may not be successful in our efforts to secure suppliers or distribution partners or to develop new cannabis products and produce and distribute these cannabis products. In addition, these activities may require significantly more resources than we currently anticipate in order to be successful.

 

Any new cannabis products that we develop or distribute may be subject to time-intensive regulatory approval procedures that might delay any release schedules or lead to adverse market conditions that might affect product profitability. We may ultimately fail to effectively bring new product offerings to market for reasons that include, but are not limited to, stringent regulatory approval procedures. Any inability to introduce new product offerings may cause a material adverse effect on our business, results of operations, financial condition and prospects.

 

We rely on international third-party transportation services to deliver and receive product-related shipments, which may cause delays and impact our profitability.

 

We rely on international third-party transportation services to deliver and receive product-related shipments. In the process of the deliveries, time delays, labor strikes, Iron Swords War (as defined below) related issues, product storage issues or other logistical problems may occur and force late delivery or receipt of items or receipt of damaged items. Such delays, receipt of damaged items or other logistical problems may cause a material adverse effect on our business, operations or financial condition. Rising costs associated with courier services used by us may also adversely impact our business and our ability to operate profitably.

 

In addition, any breach of security of the products’ package during the possession of the third-party transportation service may result in violations of regulations regarding possession of cannabis products and thus may have a material adverse effect on our business, financial condition and operating results.

 

 

We may enter into further strategic alliances with third parties that we believe will complement or augment our existing business. Our ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen integration obstacles or costs, may not enhance our business, and may involve risks that could adversely affect us, including significant amounts of management time that may be diverted from investment activities operations to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that future strategic alliances will achieve the expected benefits to our business or that we will be able to consummate future strategic alliances on satisfactory terms, or at all.

 

While we conduct due diligence with respect to Investees, there are risks inherent in any investment. Specifically, there could be unknown or undisclosed risks or liabilities of Investees for which we are not or will not be sufficiently indemnified. Any such unknown, undisclosed or unmitigated risks or liabilities could materially and adversely affect our financial performance and results of operations. We could encounter additional transaction and enforcement related costs or other factors such as the failure to realize all of the benefits from our investments. Any of the foregoing risks and uncertainties could have a material adverse effect on our business, financial condition and results of operations.

 

 

We have relied upon the ability, judgment, discretion and good faith of its executive management team. Our future success depends on its continuing ability to attract, develop, motivate and retain highly qualified employees, especially its key personnel. If we were to lose any members of the executive management or key employees, any inability to find suitable replacements at reasonable costs may have a material adverse effect on our business, financial condition and results of operations. Further, certain of our key personnel are subject to a security clearance by IMCA. There is no assurance that any of our key personnel who presently or may in the future require a security clearance will be able to obtain or renew such clearances or that new personnel who require a security clearance will be able to obtain one. A failure by any of those individuals to maintain or renew his or her security clearance, could result in a material adverse effect on our business, financial condition and results of operations. In addition, if any such individual leaves us, and we are unable to find a suitable replacement that has a security clearance required by applicable law, or at all, there could occur a material adverse effect on our, financial condition and results of operations.

 

 

The legal, regulatory, tax and accountant requirements in the foreign countries in which we may invest or operate in with respect to the cultivation and sale of cannabis, banking systems and controls, as well as local business culture and practices are different from those in Israel and Germany. Our officers and directors must rely, to a great extent, on local legal and financial counsels and consultants in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect our business operations, and to assist with governmental relations. We must rely, to some extent, on those members of management and the Board who have previous experience working and conducting business in these countries, if any, in order to enhance our understanding of and appreciation for the local business culture and practices. We also rely on the advice of local experts and professionals in connection with current and new regulations that develop in respect of the cultivation and sale of cannabis as well as in respect of banking, financing, labour, litigation and tax matters in these jurisdictions. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond our control. The impact of any such changes may cause a material adverse effect to our business, financial condition, operating results and our prospects.

 

 

Global capital markets have also recently experienced extreme volatility which may, in conjunction with the factors set out above and despite the actions of government authorities, contribute to a worsening of general economic conditions including, rising interest rates, high levels of inflation and unemployment, the unavailability of credit or the devaluation of currencies. Unexpected changes in these factors and financial market and economic conditions could affect our financial condition, profitability and cash flows, and may also have a negative effect on our valuation of, and our ability to exit or partially divest from, investment positions. Depending on conditions, we may incur substantial realized and unrealized losses in future periods, all of which may materially adversely affect our results of operations and the value of any investment in us.

 

We continue to monitor developments and policies in the foreign markets in which it operates or invests and assess the impact thereof to its operations; however, such developments cannot be accurately predicted. The realization of any of these risks may significantly impair our local operations and have a material adverse effect on our business, financial condition and results of operations.

 

These risks may also limit or disrupt our strategic alliances or investments, restrict the movement of funds, increase our costs, or result in the deprivation of contract rights or the taking of property by nationalization or expropriation without fair compensation, and may have a material adverse effect on our financial position and/or results of operations. In addition, our enforcement of our legal rights in foreign countries, including rights to exploit properties or utilize permits and licenses and contractual rights may not be recognized by the court systems in such foreign countries or enforced in accordance with the rule of law.

 

 

Material acquisitions, dispositions and other strategic transactions involve a number of risks, including but not limited to the potential disruption of our ongoing business, distraction of management, we may become more financially leveraged, the failure to realize anticipated benefits of those transactions fully or at all, or may take longer to realize than expected, and loss or reduction of control over certain of our assets.

 

Despite our due diligence efforts, the presence of one or more material liabilities of an acquired company that are unknown to us at the time of acquisition could have a material adverse effect on our business, results of operations, prospects and financial condition. A strategic transaction may result in a significant change in the nature of our, operations and strategy. In addition, we may encounter unforeseen obstacles or costs in implementing a strategic transaction or integrating any acquired business into ours.

 

In addition, our strategic transaction decisions are based on the economic assessments made by us and our external advisors. Such economic assessments involve a series of assumptions regarding factors such as future cannabis prices, production requirements, expected revenue growth, cash flow and financing requirements, future capital expenditures and operating costs. Many of these factors are subject to change and are beyond our control. In addition, future acquisition or international expansion could require us to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, buildout, staff and regulatory compliance. If there is any significant negative change in any of these factors, we may experience a material adverse effect on our business, financial condition, operating results and our prospects.

 

 

Our expansion into foreign jurisdictions is subject to additional business risks, including new or unexpected risks or could significantly increase our exposure to one or more existing risk factors, including economic instability, changes in laws and regulations, and the effects of competition, as well as operational, regulatory, compliance and reputational and foreign exchange rate risk. The failure of our operating infrastructure to support such expansions could result in operational failures and regulatory fines or sanctions. Additionally, there is no guarantee that we will be able to realize any of the anticipated benefits of any transactions related to our expansion strategy.

 

 

We and, to our knowledge, the entities in which we hold an equity interest do not currently engage in any U.S. cannabis-related activities as defined in Canadian Securities Administrators’ Staff Notice 51-352 (Revised) - Issuers with U.S. Marijuana-Related Activities (“CSA Staff Notice 51-352”). To date, we have caused the entities in which we hold an equity interest to only conduct business and invest in entities in federally-legal jurisdictions by including appropriate representations, warranties and covenants in its agreements with Investees. However, an entity in which we hold an equity interest may breach such obligations. Any such violation of such obligation would result in a breach of the applicable agreement and, accordingly, may have a material adverse effect on our business, operations and financial condition.

However, as of the date of this annual report, we are actively evaluating certain strategic opportunities to expand our operations into the U.S. cannabis market. This initiative follows President Donald Trump's executive order signed on December 18, 2025, which directs the Attorney General to expedite the rescheduling of marijuana from Schedule I to Schedule III under the Controlled Substances Act, recognizing its medical benefits while maintaining federal oversight.

 

To advance our U.S. entry strategy and assess potential divestitures of our businesses in Germany and Israel, we have engaged SSC Advisors to act as our financial advisors. The advisors are expected to provide customary financial advisory services, including strategic guidance on potential U.S. cannabis market entry, the identification of potential partners or acquirors, and management of any transaction processes related to our German and Israeli operations.

 

 

Most members of our management team may not have experience managing a publicly traded company in the United States, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies in the United States. Although we were also a public company in Canada, our management team may not successfully or efficiently manage our transition to being a public company in the United States that is subject to significant regulatory oversight and reporting obligations under the U.S. federal securities laws and the continuous scrutiny of securities analysts and investors. These obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, results of operations and prospects.

 

 

Our business involves the growing of cannabis products by third party suppliers, which are agricultural products. As such, the business is subject to the risks inherent in the agricultural business, such as pests, plant diseases and similar agricultural risks. Although, the third-party cultivators our partners with carefully monitor the growing conditions with trained personnel and applicable equipment, there can be no assurance that natural elements will not have a material adverse effect on the production of its products and results of operations. Any decline in production could have a material adverse effect on our business, operating results or financial condition.

 

 

As a participant of the cannabis market in international jurisdictions with varying regulations, we may be subject to competition from entities that conduct illegal cannabis business operations. Such entities may resort to competitive measures such as producing products with prohibited concentrations of Delta-9 tetrahydrocannabinol (“THC”) and industrial Hemp-based cannabidiol (“CBD”) or producing imitations of our products without our authorization or endorsement. If demand for these illegal products increases and local governments fail to regulate markets accordingly, we may experience a material adverse effect on our business, operating results and our prospects.

 

 

We believe the medical cannabis industry is highly dependent upon consumer perception regarding the safety, efficiency and quality of the medical cannabis products produced. Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medical cannabis products.

 

There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the medical cannabis market or any particular product, or consistent with earlier publicity.

 

Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for products bearing the brands marketed and sold by usp and the business, results of operations, financial condition, prospects and our cash flows.

 

Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of medical cannabis products in general, or our products specifically, or associating the consumption of medical cannabis products with illness or other negative effects or events, could have a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed.

 

 

The parties outside of the cannabis industry with which we do business may perceive that they are exposed to reputational risk as a result of our cannabis business activities. Failure to establish or maintain business relationships could have a material adverse effect on our business, financial condition, results of operations and our prospects.

 

 

Our operations will depend, in part, on how well we and our supply and distribution partners protect networks, equipment, IT systems (“IT Systems”) and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. Our operations also will depend on the timely maintenance, upgrade and replacement of networks, equipment, IT Systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of IT Systems or a component of IT Systems could, depending on the nature of any such failure, adversely impact our financial condition, operating results and reputation.

 

 

Our information systems and its third-party service providers and vendors are vulnerable to increasing threat of continually evolving cybersecurity risks, resulting in data breaches and data losses. These risks arising from events including without limitation malware, computer viruses, employee error, extortion, malfeasance, system errors, and hacking. In order to minimize the risk of these events from occurring, we are performing timely maintenance, upgrade and replacement of networks, equipment, IT systems and software and other protective measures. However, any failure or delay in maintaining, upgrading or replacing such systems and software could materially increase the risk of cybersecurity incident and data breach or data loss, and we may experience operational delays, information system failures, and/or increases in capital expenses. Ultimately, our business, financial condition, operating results and reputation may be impacted adversely by such occurrences.

 

 

Although we have not experienced any material losses to date relating to cybersecurity-attacks or other information security breaches, but there can be no assurance that we will not incur such material losses in the future. Our risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, we may be required to expend additional resources to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

 

 

We collect and store certain personal information about our patients and customers and are responsible for protecting that information from privacy breaches. A privacy breach may occur through certain threats, including, without limitation, procedural or process failure, IT malfunction, or deliberate unauthorized intrusions, computer viruses, and cyber-attacks. Theft of data for competitive purposes is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such theft or privacy breach would have a material adverse effect on our business, financial condition, and results of operations.

 

In addition, there are several Israeli and German federal and provincial laws, rules and regulations protecting the privacy and confidentiality of certain patient health information, and private information including patient records, and employee information, and restricting the collection, use transfer, storage, disposal and disclosure of that protected information. The interpretation and enforcement of such laws and regulations are uncertain, are subject to change and may require us to incur substantial costs to monitor and implement compliance with any additional requirements.

 

In the EU’s General Data Protection Regulation (“GDPR”) governs the collection and use of personal data in the EU. The GDPR, which is wide-ranging in scope, will impose several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S., enhances enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to EUR 20 thousand or four percent of the annual global revenues of the infringer, whichever is greater. In addition, certain breaches of the GDPR may result in regulatory investigations, reputational damage and civil lawsuits including class action lawsuits. In the State of Israel, privacy rights and obligations are mainly regulated under the Protection of Privacy Law, 5741-1981 (the “Israeli Privacy Law”) and the regulations promulgated thereunder (mainly the Protection of Privacy (Data Security) Regulations, 5777-2017 and the Protection of Privacy (Transfer of Data Abroad) Regulations, 5761-2001) (the “Israeli Privacy Regulations”). Under the Israeli Privacy Law, ‘information’ and ‘sensitive information’ includes information such as those related to a person’s health, personality, intimate affairs, financial condition, faith and opinions. The Israeli Privacy Law impose obligations related to database registration, notice, disclosure and use restrictions on an ‘owner’ of a database, and the Israeli Privacy Regulations set forth the security measurements to be implemented and the rules related to the transfer of personal information. Violation of the Israeli Privacy Law could lead to a criminal investigation or an administrative enforcement procedure on behalf of the Israeli Privacy Protection Authority, as well as an administrative fine imposed pursuant to the Administrative Offenses Law, 5746-1985. In addition, legal remedies such as statutory compensation of up to NIS 50thousand are available to successful claimants of privacy violations.

 

Additional jurisdictions in which we operate or in which we may enter in the future, also have data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of sensitive personal information. The interpretation and enforcement of such laws and regulations are uncertain, are subject to change and may require us to incur substantial costs to monitor and implement compliance with any additional requirements. Failure to comply with data protection laws and regulations could result in government enforcement actions, litigation and/or adverse publicity and could negatively affect our operating results, business and prospects.

 

 

The cannabis industry is a margin-based business in which gross profits depend on the excess of sales prices over costs. Consequently, profitability is sensitive to fluctuations in wholesale and retail prices caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment and labour costs, shipping costs, economic situation, government regulations and demand), taxes, government programs and policies for the cannabis industry (including price controls and wholesale price restrictions that may be imposed by government agencies responsible for the sale of cannabis), and other market conditions, all of which are factors beyond our control. Our operating income may be significantly and adversely affected by a decline in the price of cannabis products and will be sensitive to changes in the price of cannabis products and the overall condition of the cannabis industry, as our profitability is directly related to the price of cannabis products. The price of cannabis products is affected by numerous factors beyond our control. Any price decline may have a material adverse effect on our business, financial condition and results of operations.

 

 

Our employees, independent contractors and consultants may expose us to additional risk if they engage in fraudulent or other illegal activity prohibited by relevant laws. Although we have set preventative measures in place to minimize such fraud or illegal activities from occurring, there is no guarantee that the measures will be effective. If the measures fail and fraud or illegal activities take place, we may be subject to lawsuits for failure to comply with regulations and be ordered to pay such penalties as prescribed by the court if found to be in violation. Thus, the occurrence of fraud or illegal activities may cause a material adverse effect on our business, reputation, financial condition and results of operations.

 

 

Our business is subject to applicable anti-corruption or anti-bribery laws to which we are or may become subject, which generally prohibit companies and employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are subject to the anti-bribery laws of any other countries in which we conduct business now or in the future. Our employees or other agents may, without our knowledge and despite our efforts, engage in prohibited conduct under our policies and procedures and anti-bribery laws for which we may be held responsible. Our policies mandate compliance with these anti-corruption and anti-bribery laws. However, there can be no assurance that our internal control policies and procedures will always protect us from recklessness, fraudulent behaviour, dishonesty or other inappropriate acts committed by our affiliates, employees, contractors or agents. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, reputation, financial condition and results of operations.

 

 

Effective internal controls are required for us to provide reasonable assurance that our financial results and other financial information are accurate and reliable. Any failure to design, develop or maintain effective controls, or difficulties encountered in implementing, improving or remediation lapses in internal controls may affect our ability to prevent fraud, detect material misstatements, and fulfill our reporting obligations. As a result, investors may lose confidence in our ability to report timely, accurate and reliable financial and other information, which may expose us to certain legal or regulatory actions, thus negatively impacting its business and financial condition, including the liquidity and/or market value of its securities.

 

 

We maintain various types of insurance which may include product liability insurance, errors and omission insurance, directors and officers’ insurance, trustees’ insurance, property coverage and general commercial insurance. There is no assurance that claims will not exceed the limits of available coverage, that any insurer will remain solvent or willing to continue providing insurance coverage with sufficient limits or at a reasonable cost; or, that any insurer will not dispute coverage of certain claims due to ambiguities in the policies. A judgment against us in excess of available coverage could have a material adverse effect on us in terms of damages awarded and negatively impact our reputation.

 

 

The insurance purchased by us cannot cover all risks that we are exposed to. Additionally, some insurance policies are outside of budget limitations and are therefore elected to be excluded. There is no guarantee that any insurance coverage maintained by any of our member(s) will sufficiently cover any or all liabilities incurred by that member. Any uninsured amounts of liabilities incurred by our member(s) may be paid directly by such members. Accordingly, such direct payments may have a material adverse effect on our business, results of operations, and financial condition.

 

 

Adjupharm and the Israeli Subsidiaries are importers, distributors and/or sellers of products designed to be ingested or inhaled by humans. Such products face an inherent risk of exposure to product liability claims, regulatory action and litigation if such products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of such products involve the risk of injury or loss to consumers or patients due to tampering by unauthorized third parties, product contamination, unauthorized use by consumers or patients or other third parties. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur.

 

We may be subject to various product liability claims, including, among others, that products manufactured, imported, distributed, stored or sold by us or bearing one of our brands caused injury, illness or loss, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against us could result in increased costs, could adversely affect our reputation with our clients, patients and consumers generally, and could have a material adverse effect on our results of operations and financial condition.

 

There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our products.

 

 

Certain members and/or representatives of us are parties to certain legal proceedings or investigations and certain legal proceedings as described in “Legal Proceedings” below. Should such members and/or representatives fail to receive favorable decisions at the conclusion of these legal proceedings or incur significant costs in litigation thereof, our business, financial condition or operating results may be subject to a material adverse effect.

 

Our members and/or representatives are or may become parties to litigation from time to time in the ordinary course of business that could adversely affect our business. Should any litigation in which our members and/or representatives become involved be determined against such members and/or representatives, such a decision could adversely affect our ability to continue operating and the market price for the Common Shares and/or warrants. Even if such members and/or representatives are involved in litigation and win, the litigation process can consume our significant resources.

 

 

The quality and safety of our products and products purchased from third party suppliers are critical to the success of our business and operations. As such, it is imperative that our (and our service providers’) quality control systems operate effectively and successfully. Quality control systems can be negatively impacted by the design of the quality control systems, the quality training program, and adherence by employees to quality control guidelines. Although we strive to ensure that it and all of its service providers have implemented and adhere to high calibre quality control systems, we could experience a significant failure or deterioration of such quality control systems. A failure of our quality control systems could result in significant costs incurred in replacing, destroying or repurposing defective inventory, providing replacement products to our customers or recalling such products. We may be unable to meet customer demand and may lose customers who have to purchase alternative brands or products. In addition, consumers may lose confidence in our brands whether affected or not and such brand reputation may be materially damaged. Any loss of sales volume from a contamination event may affect our ability to fulfill our contractual obligations. During this time, our competitors may benefit from an increased market share that could be difficult and costly to regain.

 

 

Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall.

 

We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention.

 

Although we have detailed procedures in place for testing finished products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if one of our significant brands were subject to recall, the image of that brand and us could be harmed. A recall for any one of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition. Additionally, product recalls may lead to increased scrutiny of our operations by the applicable regulatory body, including but not limited to MOH or BfArM or other regulatory agencies, requiring further management attention and potential legal fees and other expenses.

 

 

Our sales forecasts are largely dependent on our own market research. There is no assurance pertaining to the accuracy of our predictions regarding the cannabis industry. Any assumptions made in producing forecasts may be inaccurate as a result of external factors that are unpredictable to us. Such inaccuracies could have a material adverse effect on our business, financial condition and results of operations.

 

 

Our business may be negatively impacted by a number of events that are beyond our control, including cyber-attacks, energy blackouts, pandemics, terrorist attacks, acts of war, earthquakes, hurricanes, tornados, fires, floods, ice storms or other catastrophic events. Further, we rely on certain suppliers and distribution partners whose businesses may be impacted by the occurrence of any of the foregoing events. Catastrophic events can evolve rapidly and their impacts can be difficult to predict. There can be no assurance that the occurrence of a catastrophic event or the associated consequences will not disrupt our operations, ability to carry on business or supply and distribution chains. In addition, liquidity and volatility, credit availability, market and financial conditions and cannabis cultivation, supply and distribution conditions, among other critical factors to our business, could change at any time as a result. These events and any associated consequences may cause a material adverse effect on the business, financial condition and results of operations of the Group. A catastrophic event, including an outbreak of infectious disease, a pandemic or a similar health threat, such as the COVID-19 pandemic, or fear of any of the foregoing, could adversely impact us and our ability to maintain normal operations.

 

 

We are subject to a variety of laws and regulations domestically and internationally that involve money laundering, financial recordkeeping and proceeds of crime, including any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities internationally. In the event that any of our investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such investments were found to be contrary to money laundering legislation, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This could restrict have a material adverse effect on our business, financial condition and results of operations.

 

 

There is no guarantee that we will be able to effectively enforce any guarantees, indemnities or other security interests we may have. Should a bankruptcy or other similar event occur that precludes an investee from performing its obligations under an agreement with any member of us, we would have to enforce its security interest. In the event that the investee has insufficient assets to pay its liabilities, it is possible that other liabilities will be satisfied prior to the liabilities owed to us. In addition, bankruptcy or other similar proceedings are often a complex, lengthy and expensive process, the outcome of which may be uncertain and could result in a material adverse effect on us.

 

If we are unable to enforce our security interests due to any reasons including regulatory reasons related to its cannabis activity, there may be a material adverse effect on us.

 

 

We may be subject to various potential conflicts of interest because of the fact that some of its officers and directors may be engaged in a range of business activities. In some cases, the executive officers and directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to us and our affairs, and that could adversely affect our operations. These business interests could require significant time and attention of our executive officers and directors. In addition, we may also become involved in other transactions which conflict with the interests of our directors and officers who may from time to time deal with persons, firms, institutions or corporations with which we may be dealing, or which may be seeking investments similar to those we desire. The interests of these persons could conflict with our interests.

 

In addition, from time to time, these persons may be competing with us for available investment opportunities. Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws. In particular, in the event that such a conflict of interest arises at a meeting of directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable laws, directors are required to act honestly, in good faith and in our best interests.

 

 

 

As of March 30, 2026, our principal shareholders, officers and directors beneficially own approximately 23.40% of our Common Shares. This significant concentration of share ownership may adversely affect the trading price for our Common Shares because investors often perceive disadvantages in owning shares in companies with controlling shareholders. As a result, these shareholders, if they acted together, could significantly influence or even unilaterally approve matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of these shareholders may not always coincide with our interests or the interests of other shareholders.

 

 

 

We are subject to the provisions of the ITA12 and to review by CRA13. We file its annual tax compliance based on its interpretation of the Income Tax Act (the “ITA”) and Canada Revenue Agency’s (the “CRA”) guidance. There is no certainty that our returns and tax position will be accepted by CRA as filed. Any difference between our tax filings and CRA’s final assessment could impact our results and financial position.

 

There can be no assurance that income tax laws or the interpretation thereof in any of the jurisdictions in which we operate will not be changed or interpreted or administered in a manner which adversely affects us and our shareholders. In addition, there is no assurance that CRA will agree with the manner in which we calculate taxes payable or that any of the other tax agencies will not change their administrative practices to the detriment of us or our shareholders.

 

 

Any failure to maintain compliance with applicable continued listing requirements and regulations may result in the delisting of our Common Shares from Nasdaq. Such events may have material adverse effects on our business and financial condition. For more information, please see “Item 4A. History and Development of the Company – Important Events in the Development of the Business from January 1, 2025, to the date of this Annual Report”.

 

 

Sales of a substantial number of Common Shares or other equity-related securities in the public markets by us or by our shareholders could depress the market price of our securities and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of Common Shares or other equity-related securities would have on the market price of the Common Shares. The price of the Common Shares could be affected by possible sales of the Common Shares by hedging or arbitrage trading activity.

 

 

We have issued a significant number of Common Shares and we may do so in the future. Common Shares to be issued in future equity offerings could cause the market price of our Common Shares to decline and could have an adverse effect on our earnings per share if and when we become profitable. In addition, future sales of our Common Shares or other securities in the public markets, or the perception that these sales may occur, could cause the market price of our Common Shares to decline, and could materially impair our ability to raise capital through the sale of additional securities.

 

The market price of our Common Shares could decline due to sales, or the announcements of proposed sales, of a large number of Common Shares in the market. Such sales or the perception that these sales could occur could also depress the market price of our Common Shares and impair our ability to raise capital through the sale of additional equity securities or make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate. We cannot predict the effect that future sales of Common Shares or other equity-related securities would have on the market price of our Common Shares.

 

In addition, we may issue additional securities in the future, which may dilute a shareholder’s holdings, or a holder of a convertible security’s underlying relative interest, in us. Our Articles permit the issuance of an unlimited number of Common Shares, and shareholders will have no pre-emptive rights in connection with any such further issuance. Our directors have discretion to determine the price and the terms of further issuances, subject to applicable stock exchange policies. Moreover, additional Common Shares will be issued by us on the full exercise of stock options, restricted share units and warrants, issued or to be issued by us in the future, and the exercise of any resulting convertible securities of such as applicable

 

 

We have not paid any dividends on the outstanding Common Shares, and we maintain no current intention to declare dividends on the Common Shares in the foreseeable future. Any decision to pay dividends on the Common Shares in the future will be at the discretion of the Board and will depend on, among other things, our results of operations, current and anticipated cash requirements and surplus, financial condition, any future contractual restrictions and financing agreement covenants, solvency tests imposed by corporate law and other factors that the Board may deem relevant.

 

 

The market price of the Common Shares and warrants may fluctuate to a wide degree as a result of a number of factors, including without limitation market conditions, financial analyst predictions, changes in law, press releases and public filings, operational activity and results and competitor activity. Overall, such factors, whether related or unrelated to our operational performance, may cause a temporary or non-temporary negative pressure on prices of our securities or assets. If the negative pressure on prices arising from these factors persist, impairment losses may be recorded and we could experience a material adverse effect on its operations, financial condition and operating results.

 

 

Despite the listing of the Common Shares on Nasdaq, there is no guarantee to security holders that the securities will be sufficiently liquid to any degree without a substantial decrease in price, particularly if selling significant quantities within a short time frame. Accordingly, there is a possibility that a lack of liquidity may cause difficulty for security holders to re-sell securities at desired prices.

 

 

We are a “foreign private issuer”, as defined in Rule 405 under the Securities Act of 1933, as amended (the “U.S. Securities Act”), and Rule 3b-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It is therefore not subject to the same requirements that are imposed upon U.S. domestic issuers by the United States Securities and Exchange Commission (the “SEC”). Under the Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. As a result, we do not file the same reports that a U.S. domestic issuer would file with the SEC, although we are required to file with or furnish to the SEC the continuous disclosure documents that we are required to file in Canada under Canadian securities laws.

 

For example, our officers and directors are exempt from Section 16 reporting requirements through an exemption available to Canadian organized entities, and as an foreign private issuer, our principal shareholders are not subject to such reporting requirements. In addition, our officers, director and principal shareholders are exempt from the short-swing profit recovery provisions of Section 16 of the Exchange Act. Therefore, our shareholders may not know on as timely a basis when our principal shareholders purchase or sell Common Shares. Accordingly, our shareholders may not know on as timely a basis as with U.S. domestic issuers when our officers, directors and principal shareholders purchase or sell their Common Shares, as the reporting deadlines under the corresponding Canadian insider reporting requirements are longer (five days to report).

 

As a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements. We are also exempt from Regulation FD, which prohibits issuers from making selective disclosures of material non-public information. While we comply with the corresponding requirements relating to proxy statements and disclosure of material non-public information under Canadian securities laws, these requirements differ from those under the Exchange Act and Regulation FD and shareholders should not expect to receive the same information at the same time as such information is provided by U.S. domestic companies. In addition, we may not be required under the Exchange Act to file annual and quarterly reports with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act.

 

In addition, as a foreign private issuer, we have the option to follow certain Canadian corporate governance practices, except to the extent that such laws would be contrary to U.S. securities laws, and provided that we disclose the requirements it is not following and describes the Canadian practices we follow instead. We may in the future elect to follow home country practices in Canada with regard to certain corporate governance matters. As a result, our shareholders may not have the same protections afforded to shareholders of U.S. domestic companies that are subject to all corporate governance requirements.

 

 

In order to maintain our status as a foreign private issuer, a majority of the Common Shares must be either directly or indirectly owned by non-residents of the U.S. unless we also satisfy one of the additional requirements necessary to preserve this status. We may in the future lose its foreign private issuer status if a majority of our Common Shares are held in the U.S. and if we fail to meet the additional requirements necessary to avoid loss of its foreign private issuer status. The regulatory and compliance costs under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs incurred as a foreign private issuer. If we are not a foreign private issuer, we would not be eligible to use the Multijurisdictional Disclosure System or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. In addition, we would lose the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers.

 

 

We are an “emerging growth company” as defined in section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and we will continue to qualify as an emerging growth company until the earliest to occur of: (a) the last day of the fiscal year during which we have total annual gross revenues of US$1.235 billion (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the U.S. Securities Act; (c) the date on which we have, during the previous three year period, issued more than US$1.0 billion in non-convertible debt; and (d) the date on which we are deemed to be a “large accelerated filer”, as defined in Rule 12b–2 under the Exchange Act. We will qualify as a large accelerated filer (and would cease to be an emerging growth company) at such time when on the last business day of its second fiscal quarter of such year the aggregate worldwide market value of its common equity held by non-affiliates will be US$700 million or more.

 

For so long as we remain an emerging growth company, we are permitted to and intend to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict whether investors will find the Common Shares less attractive because we rely upon certain of these exemptions. If some investors find the Common Shares less attractive as a result, there may be a less active trading market for the Common Shares and the Common Share price may be more volatile. On the other hand, if we no longer qualify as an emerging growth company, we would be required to divert additional management time and attention from our development and other business activities and incur increased legal and financial costs to comply with the additional associated reporting requirements, which could negatively impact our business, financial condition and results of operations.

 

 

We currently have assets and operations in Israel and Germany and transacts business in such jurisdictions and in additional jurisdictions such as Canada in the local currency. As of December 31, 2025, a portion of our financial assets and liabilities held in NIS, Euros, Canadian and U.S. dollars consist of cash and cash equivalents. Our objective in managing our foreign currency risk is to minimize our net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties as applicable. Our objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in NIS. We do not currently use foreign exchange contracts to hedge our exposure of our foreign currency cash flows as management has determined that this risk is not significant at this point of time. Currency fluctuations could have a material adverse effect on our business, financial condition and results of operations.

 

 

Our investments in unlisted shares are sensitive to the market price risk arising from uncertainties about the future value of these investments. We manage the price risk through diversification and tight management attention. The Board reviews and approves all decisions related to investments in shares.

 

We believe that we may have been a PFIC for the tax year ended December 31, 2025. Based on current business plans and financial expectations, there is a possibility that we will be classified as a PFIC for the 2026 tax year and we may continue to be treated as a PFIC in the future. The determination of whether we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. The tests for determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of the Common Shares. Accordingly, there can be no assurance that we currently are not or will not become a PFIC in the future. If we are a PFIC in any taxable year during which a U.S. taxpayer holds the Common Shares, such U.S. taxpayer would be subject to certain adverse U.S. federal income tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a “qualified electing fund”, or QEF, or make a “mark-to-market” election, then “excess distributions” to the U.S. taxpayer, and any gain realized on the sale or other disposition of the Common Shares by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer’s holding period for the Common Shares; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenues Service (the “IRS”), determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a QEF or mark-to-market election. U.S. taxpayers that have held the Common Shares during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S. taxpayers that hold the Common Shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. U.S. taxpayers that hold the Common Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to the Common Shares in the event that we are a PFIC (see “Item 10.E. Taxation–Certain Material U.S. Federal Income Tax Considerations--Passive Foreign Investment Company, or PFIC Rules, in our 2024 Annual Report for additional information).

 

 

We use intellectual property protections such as trademarks, trade secrets and contractual confidentiality obligations in order to protect our products, brands and technologies. The administrative task of maintaining such protections across multiple jurisdictions can result in high costs to us. We would also be required to pay for any costs attributed to the enforcement of intellectual property protections. In addition, in any infringement proceeding, some or all of our intellectual property rights or other proprietary know-how, may be found invalid, unenforceable, anti-competitive or not infringed. An adverse result in any litigation or defense proceedings could create the risk of invalidation or narrow interpretation of our affected intellectual property rights. Such results could cause a material adverse effect on our business, financial condition, results of operations and prospects.

 

Furthermore, the possession of intellectual property protections does not completely eliminate the risk of litigation. Even with such protections properly registered, we are still vulnerable to infringement claims and would be liable for the costs of defending such claims. If the claims succeed, we would be liable for the costs of the resulting court orders and may need to negotiate licensing of the intellectual property rights from third-party owners.

 

In addition, despite any intellectual property protections in place, unauthorized parties may attempt to replicate or otherwise obtain and use our trademarks, know-how, trade secrets, products or technology. Identifying unauthorized use of intellectual property rights is difficult as we may be unable to effectively monitor and evaluate the products being distributed by its competitors, including parties such as illegal distributers, and the processes used to produce such products. We make no assurance that we will successfully identify unauthorized replication, acquisition or use of our trademarks, know-how, trade secrets, products, or technology before the effects of such actions cause a material adverse effect on our business, financial condition, results of operation and prospects.

 

 

Armed conflicts between Israel and its neighboring countries and territories have occurred periodically and may continue in the future. The hostilities that began in October 2023 and subsequent regional developments led to heightened security concerns, economic disruption and volatility in Israel and the broader Middle East. Although ceasefire arrangements have been reached and certain emergency restrictions have been lifted, tensions in the region remain elevated and the risk of renewed or expanded hostilities cannot be ruled out.

 

Regional instability, including potential escalation involving Israel, Iran, Hezbollah or other regional actors, or broader geopolitical involvement by additional countries, could disrupt supply chains, restrict access to ports and airspace, limit the availability of personnel, affect currency stability, increase insurance and logistics costs, and negatively impact capital markets. Such events may adversely affect our ability to import products and raw materials, distribute products, maintain adequate inventory levels, or access financing on favorable terms, if at all.

 

Political instability, changes in government policies, or shifts in regulatory priorities in Israel may also adversely affect our operations. Changes relating to medical cannabis regulation, taxation, import and export controls, healthcare reimbursement policies or public health priorities could materially impact our revenues and profitability. In addition, economic downturns, credit rating downgrades, labor disputes, social unrest or other macroeconomic developments in Israel may adversely affect consumer demand and business conditions.

 

Under Israeli law, citizens and permanent residents of Israel are generally obligated to perform military reserve duty and may be called to active duty under emergency circumstances. Extended reserve call-ups, including of key personnel, could disrupt our operations and adversely affect productivity.

 

In addition, Israel and Israeli companies have in the past been subject to economic boycotts and trade restrictions. Certain countries restrict business dealings with Israel or Israeli companies. Any expansion of such restrictions or increased political pressure on our customers, suppliers or partners to curtail business with Israeli companies could adversely affect our operations.

 

Any deterioration in Israel’s political, economic or security situation, whether due to renewed hostilities, regional instability, macroeconomic pressures or other factors, may have a material adverse effect on our business, financial condition, results of operations and prospects.

 

 

 

Not all of our directors or officers are residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Canadian law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Canadian law. There is little binding case law in Israel addressing the matters described above. Additionally, Israeli courts might not enforce judgments obtained in the United States against us or our non-U.S. our directors and executive officers, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.

Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought.

We are a corporation incorporated under the laws of British Columbia with our principal place of business in Vancouver, Canada. Substantially all of our directors and officers are located outside the United States, and some are located outside Canada and all or a substantial portion of our assets and those of such persons are located outside the United States. Consequently, it may be difficult for U.S. investors to effect service of process within the United States upon us or our directors or officers who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the Securities Act. Investors should not assume that Canadian courts: (1) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or blue-sky laws of any state within the United States or (2) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or any such state securities or blue-sky laws.

Similarly, some of our directors and officers are residents of countries other than Canada, and all or a substantial portion of the assets of such persons are located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these non-Canadian residents. In addition, it may not be possible for Canadian investors to collect from these non-Canadian residents’ judgments obtained in courts in Canada predicated on the civil liability provisions of securities legislation of certain of the provinces and territories of Canada. It may also be difficult for Canadian investors to succeed in a lawsuit in the United States, based solely on violations of Canadian securities laws.

In addition, certain of our directors hold citizenship in jurisdictions outside of Canada and Israel. For example, Eli Zamir holds Bulgarian citizenship, and Asaf Itzchaik, Moti Marcus and Alon Dayan each hold Portuguese citizenship. To the extent any of our directors or officers are located in, or subject to the jurisdiction of, such countries, there is uncertainty as to whether courts in those jurisdictions would recognize or enforce judgments of U.S. or Canadian courts obtained against such persons predicated upon the civil liability provisions of the securities laws of the United States or Canada, or whether such courts would entertain original actions brought in those jurisdictions based on such laws.

 

 

IM Cannabis Corp. was incorporated on March 7, 1980 under the Business Corporations Act (British Columbia) (the “BCBCA”) under the name “Nirvana Oil & Gas Ltd.”  We changed our name to “Nirvana Industries Ltd.” on October 6, 1986; then to “Consolidated Nirvana Industries Ltd.” on February 22, 1989; then to “Navasota Resources Ltd.” on June 2, 1995, then to Anglo Aluminum Corp.” on January 25, 2010; then to Navasota Resources Inc. on July 12, 2013 and to our current name “IM Cannabis Corp.” on October 4, 2019.

 

Our Common Shares currently trade on the Nasdaq Capital Market under the symbol “IMCC.” Our Common Shares and certain warrants previously traded on the Canadian Securities Exchange (the “CSE”) until June 2, 2025.

 

Our registered office is located at 833 Seymour Street, Suite 3606, Vancouver, British Columbia, V6B 0G4, Canada. Our principal executive offices are located at Kibbutz Glil Yam, Israel.

 

On July 12, 2024, we completed a 6-for-1 consolidation of our Common Shares in connection with regaining compliance with Nasdaq’s continued listing requirements. All share numbers in this Annual Report reflect the July 2024 Consolidation unless otherwise indicated.

 

On February 26, 2024, IMC Holdings exercised its option to acquire a 74% ownership interest in Focus held by Oren Shuster and Rafael Gabay, following approval by the IMCA. On May 23, 2025, our disinterested shareholders approved the acquisition of the remaining 26% interest in Focus (the “Focus Transaction”). The purchase price was satisfied through the issuance of Common Shares. Following completion of the Focus Transaction, Focus became our wholly owned subsidiary. On May 23, 2025, our shareholders approved certain related party matters in connection with the Focus Transaction.

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the JOBS Act. As such, we are eligible to, and intend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not “emerging growth companies” such as not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). We could remain an “emerging growth company” for up to five years, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceeds $1.235 billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1 billion in nonconvertible debt during the preceding three-year period.

 

The SEC maintains an Internet site at http://www.sec.govthat contains reports, proxy, information statements, and other information regarding issuers that file electronically with the SEC. Our website is https://www.imcannabis.com. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report on Form 20-F and is not incorporated by reference herein. For more information regarding the Company, please see our profile on the System for Electronic Document Analysis and Retrieval plus (“SEDAR+”) at www.sedarplus.ca and on the Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR") at www.sec.gov.

 

We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us from compliance with certain laws and regulations of the SEC and certain regulations of the Nasdaq Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we are not required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies registered under the Exchange Act.

 

 

Israeli law requires prior approval by the IMCA, a unit of the MOH, of the identity of any shareholder owning 5% or more of an Israeli company licensed by the IMCA to engage in cannabis-related activities in Israel. For a number of reasons, including the opportunity to leverage a network of multiple Israeli licensed producers cultivating under the IMC brand, and in contemplation of a “go-public transaction” to geographically diversify our share ownership, IMC Holdings restructured its organization on April 2, 2019 (the “IMC Restructuring”) resulting in the divestiture to Oren Shuster and Rafael Gabay of its interest in Focus, which is licensed by the IMCA to engage in cannabis-related activity in Israel.

Pursuant to an option agreement, entered into on April 2, 2019, between IMC Holdings and Focus (the “Focus Agreement”), IMC Holdings retains an option with Messrs. Shuster and Gabay to re-acquire the interest sold in Focus at its sole discretion and in accordance with Israeli cannabis regulations, within 10 years of the IMC Restructuring date. The Focus Agreement sets an aggregate exercise price of NIS 765.67 per share of Focus, totaling NIS 2,756 thousand, equivalent to the price paid by Messrs. Shuster and Gabay for the acquired interests in Focus at the time of the IMC Restructuring. On November 30, 2023, IMC Holdings exercised its option to purchase the 74% interest in Focus held by Oren Shuster and Rafael Gabay by submitting a request to IMCA, which approved the transaction on February 25, 2024. IMC Holdings provided all necessary information and filed all required notices with the tax authorities according to applicable law. On February 26, 2024, concurrently with the exercise of IMC Holdings' option, Ewave Group Ltd. exercised its option to receive Mr. Tal Tregerman's 26% holding in Focus in lieu of loan repayment, in accordance with the loan agreement between the parties. IMC Holdings intends to purchase the remaining 26% holding in Focus from Ewave Group Ltd, pending all necessary organizational and regulatory approvals.

As part of the IMC Restructuring, on April 2, 2019, IMC Holdings and Focus entered into the IP Agreement (as defined below), as amended on January 1, 2021, which provides for Focus’s obligation to use the IMC brand for the sale of any cannabis plant and/or cannabis product produced by Focus, either alone or together with other sub-contractors engaged by Focus through the IP Agreement. On February 26, 2024 the parties to the IP Agreement executed a cancellation note, thereby cancelling the IP Agreement as of the signing date.

Focus is also obligated through a services agreement, dated April 2, 2019, and amended on January 1, 2021, (the “Focus Services Agreement”) to use IMC Holdings for certain management and consulting services including: (a) business development services; (b) marketing services; (c) strategic advisory services; (d) locating potential collaborations on a worldwide basis; and (e) financial analysis services through the Focus Services Agreement. Under the Focus Services Agreement, the parties apply an arm’s length markup on total costs, on a quarterly basis, in accordance with a transfer pricing analysis to be updated from time to time, as consideration for the provision of such services.

In addition, Rosen and Pharm Yarok signed a services agreement to use IMC Holdings for certain services such as administrative, financial, legal, and headquarters services. In consideration for the services Rosen and Pharm Yarok shall pay IMC Holdings on a quarterly basis (unless agreed otherwise by the Parties) an amount equal to an arm’s length calculation as determined from time to time. The charges for the services provided by IMC Holdings will be allocated based on Key Performance Indicators.

 

We are an international cannabis company focused on the importation, distribution and sale of medical cannabis products to medical patients in Israel and Germany. Following the regulatory reforms affecting cannabis access in Germany on April 1, 2024, the cannabis market has experienced growth, especially within the medical sector, as access for new patients has become easier. Since such time, we have shifted our focus and resources to concentrate on the burgeoning cannabis market in Germany. We leverage a cross-border supply chain and distribution infrastructure.

In Israel, we import, distribute and sell cannabis to local medical patients by operating medical cannabis retail pharmacies, online platforms, distribution center and logistical hubs operating through IMC Holdings’ subsidiaries. These activities are conducted in accordance with applicable Israeli regulatory requirements. We also maintain certain proprietary genetics through third-party cultivation facilities in Israel.

We continue offer medical cannabis products under our brands in Israel. We offer medical cannabis patients medical cannabis products through strategic alliances with suppliers.

Throughout 2024 and 2025, we implemented several strategic measures in Israel to enhance operational efficiency, reduce costs, and improve overall business performance. These initiatives included optimizing logistics and distribution, streamlining workforce and facilities, and adapting to challenges arising from geopolitical events.

Key actions taken during 2024 and 2025 include:

We operate in the retail segment. We, through IMC Holdings, hold two licensed pharmacies, each selling medical cannabis products to patients: (i) Vironna, a pharmacy in the Arab consumer segment, and (ii) Pharm Yarok, a large pharmacy in the Sharon plain area and a big call center handling deliveries for Pharm Yarok in the country (collectively, the “Israeli Pharmacies”).

We also operate home-delivery services and an online retail platform under the name “Pharm Yarok”, which includes a customer service center. On April 9, 2024, Pharm Yarok entered into a strategic distribution agreement with Vessel Brand Inc. (“Vessel”), a subsidiary of Flora Growth Corp., a global consumer-packaged goods leader and pharmaceutical distributor, headquartered in Carlsbad, CA, pursuant to which certain cannabis accessory products are offered in Israel. We believe our retail operations support our distribution activities and provide insights into patient purchasing patterns.

IMC has been operating through Adjupharm, its German subsidiary, since 2019.

Our focus in Germany is to import cannabis from its supply partners, which are then sold through our own IMC branded products, as well as exclusive ultra premium Canadian cannabis brands, with which we have signed strategic licensing agreements.

In 2025, we continued to develop our supply chain and distribution infrastructure in Germany.

Our German operations are underpinned by the logistics and processing facility in Germany operated by Adjupharm, which holds the required EU-GMP authorizations to conduct repackaging, stability testing and batch release activities.

On March 4, 2022, Adjupharm received a revised EU-GMP license permitting it to engage in additional production, cannabis testing and release activities. The license also allows Adjupharm to repackage bulk cannabis, to perform stability studies and offer such services to third parties.

On March 17, 2024, Adjupharm entered into a supply agreement with GlassHouse Botanics Inc. (“GlassHouse Botanics”), an EU-GMP certified supplier, to supply medical cannabis products for distribution in Germany. Under German law, medical cannabis products distributed to pharmacies must comply with EU-GMP standards.

 

On April 4, 2024, Adjupharm entered into an international trademark licensing agreement with Avant Brands Inc. (the “Avant Licensing Agreement”), pursuant to which Adjupharm obtained the exclusive right to market the BLK MKT™ brand in the German medical cannabis market. Pursuant to the Avant Licensing Agreement, Avant’s subsidiary licenses the BLK MKT™ brand to Adjupharm for use on certain medical cannabis products cultivated by Avant and exported to Germany.

 

 

In November 2022, certain of our former Canadian subsidiaries commenced proceedings under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”). In connection with the CCAA proceedings, our Canadian operations were wound down, and a monitor was appointed by the Ontario Superior Court of Justice. The CCAA proceedings were terminated on September 14, 2023. Following the termination of the CCAA proceedings, we ceased material Canadian operating activities and focused our operations on Israel and Germany.

 

 

On February 26, 2024, IMC Holdings Ltd., our wholly owned subsidiary, exercised its option to acquire a 74% ownership interest in Focus held by certain shareholders, following approval from the Israeli Medical Cannabis Agency. On May 23, 2025, our disinterested shareholders approved the acquisition of the remaining 26% interest in Focus. In connection with the Focus Transaction, and in order to preserve cash, we settled the purchase price of NIS 818,740 through the issuance of 128,818 Common Shares at a deemed price of C$2.44 per share, based on the ten-day volume weighted average trading price prior to shareholder approval. The shares issued were subject to applicable Canadian hold periods and U.S. securities law restrictions. Following completion of the Focus Transaction on May 26, 2025, Focus became a wholly owned subsidiary.

 

 

On January 5, 2025, IMC Holdings entered into an agreement with a third party pursuant to which it sold all of its contractual rights under the Telecana convertible loan agreement for total consideration of NIS 350,000. As a result of this transaction, we no longer hold rights to acquire an ownership interest in Telecana Ltd.

 

 

We maintain credit facilities with Israeli financial institutions to support working capital needs. Focus and certain of our subsidiaries are parties to a credit facility with Bank Mizrahi-Tefahot Ltd., which has been amended from time to time. As of December 31, 2025, outstanding borrowings under this facility totaled approximately $2,003 thousand. The facility contains customary financial covenants. In addition, our subsidiary IMC Holdings has entered into loan arrangements with non-financial institutions from time to time to support liquidity. For a discussion of our liquidity position and related risks, see “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources.”

 

 

The IMC brand has established its reputation in Israel for quality and consistency over the past 15 years. We maintain a portfolio of strains sold under the IMC umbrella from which popular medical cannabis dried flowers and full-spectrum cannabis extracts are produced.

 

We offer a range of cannabis products in Israel, including dried flower and full-spectrum extracts, through our branded portfolio and licensed third-party brands.

Brands under the IMC Cannabis Portfolio in Israel:

 

 

 

 

 

 

 

 

 

 

In Germany, we operate through Adjupharm GmbH and distribute medical cannabis products to licensed pharmacies.

 

We believe our sourcing experience, regulatory expertise and established supply chain relationships support our position in the German medical cannabis market.

In Germany, we initially focused on distributing IMC-branded products, including dried flower and full-spectrum extracts. In the second half of 2024, we expanded our portfolio to include a mid-market brand, “Selected” by IMC, as well as BLKMKT™, an ultra-premium Canadian brand.

The following strains were sold in Germany during 2024: Purple Grape, Outdoor OG, Black Russian, Somango, Blue Dream, Jokerz, Tropicana Banana, Gelato 41, Grapple Pie, Rose Gold Runtz, Peppermint, El Chivo 20, Coco No4, Cherry Dosidos, Rainbow Pie, BLK MLK.

 

Our strategy for new products varies between the various geographies in which we operate, given that each market is at a different stage of development with respect to regulatory regimes, patient and customer preferences, and adoption rates.

 

 

In the second quarter of 2025, we launched 17 new cannabis strains in Israel, across 5 different brands.

 

 

In the second quarter of 2025, we launched 4 new cannabis strains in Germany, within the Token brand.

 

 

The following table presents revenue, in thousands of Canadian dollars, for each product category that accounted for 15% or more of our total consolidated revenue for the fiscal years ended December 31, 2025, 2024 and 2023. The amounts include (i) sales to entities in which we hold an investment accounted for under the equity method; (ii) sales to third-party customers, other than those referred to in (i); and (iii) sales or transfers to controlling shareholders.

 

 

The medical cannabis industry in which we operate is highly competitive. Cannabis companies compete primarily on a regional basis, and competition may vary significantly by jurisdiction.

 

We face competition in Israel from similar established medical cannabis brands and manufacturers in the domestic market.

 

 

We rely on the licensing of our brand in Israel and in Germany to expand our market presence and offer branding, marketing and other related services to participants in the Israeli and German medical cannabis industry. We may also seek to leverage the IMC brand to facilitate the distribution of cannabis products in additional international markets, subject to applicable regulatory approvals.

 

We own and license trademarks and trade secrets that allow us to serve a range of cannabis industry participants.

 

“IMC” is a registered trade name and trademark registered in Israel (valid through May 2027) and in Germany and Portugal through registration with the World Intellectual Property Organization (valid through November 2027). In Canada, the IMC trademark was registered on September 26, 2022 for use in connection with various food supplements, vitamins, minerals and proteins and is valid through September 26, 2026.

 

In February 2022, we completed the registration of the medical cannabis brand strain “ROMA” as a trade name in Israel which is valid through July 2031. In addition, in December 5, 2022, we registered the trademark “I AM Cannabis” in Israel, which is valid through December 2031.

 

There is no material seasonality to our business.

 

 

To operate our business, we must abide by applicable medical cannabis laws in those countries in which it operates, namely Israel and Germany. Each jurisdiction has unique laws and regulations on the propagation, cultivation, production, distribution, use, import and export of medical cannabis products and the current regulatory frameworks continue to evolve. We cooperate with the regulatory authorities in those jurisdictions in which it operates to ensure that it is at all times in full compliance with applicable laws, rules and regulations.

 

 

In Israel, cannabis is currently defined as a “dangerous drug” according to the Dangerous Drugs Ordinance (“DDO”) and the 1961 Single Convention on Narcotic Drugs (“Narcotics Convention”), to which Israel is a signatory. However, both the DDO and Narcotics Convention allow for the use of cannabis for medical or research purposes under a supervised and controlled regime. The competent regulatory authority in Israel in all matters concerning the oversight, control and regulation of cannabis for medical production, consumption, and research in Israel is the IMCA, established by Government Res. No. 3069. The production, distribution and consumption of adult-use recreational cannabis products is currently illegal in Israel.

 

The use of cannabis is allowed for patients and for medical purposes, in respect of certain medical conditions, under a special approval of the MOH. Procedure 106 of the IMCA sets out a list of medical conditions that are allowed to be treated with medical cannabis products. Such authorized medical conditions are examined and updated from time to time, and include, among others, cancer, pain, nausea, seizures, muscle spasms, epilepsy, Tourette syndrome, multiple sclerosis, amyotrophic lateral sclerosis, and post-traumatic stress disorder.

 

In August 2023, the MOH’s Medical Cannabis Unit implemented a comprehensive reform to enhance patient access to medical cannabis. A significant change was the removal of the prior requirement for patients to undergo up to three years of conventional treatments before qualifying for medical cannabis. This update allows patients with certain medical conditions, such as cancer, epilepsy, and post-traumatic stress disorder, to receive medical cannabis treatments more promptly.

 

 

In December 2017, the IMCA issued regulations that standardized the licensing process for any cannabis related activity (the “Road Map”). Pursuant to the Road Map, each operation in the medical cannabis field, including the propagation, cultivation, products manufacturing, storage and distribution to licensed pharmacies, and distribution from licensed pharmacies to licensed patients, requires compliance with the provisions of applicable laws, including the procurement of an appropriate license under the DDO from the IMCA and the maintenance of such license in good standing. Cannabis licenses may not be transferred, exchanged or assigned without the prior approval of the IMCA. The licenses are valid for a period of up to 3 years and can be renewed with the approval of the IMCA only.

 

The IMCA has issued a set of directives containing procedures and requirements for applicants for cannabis related activity licenses and has authorized certain entities to issue official certificates upon compliance with such directives. These directives include (i) Directive 150 (GSP Standard certification); (ii) Directive 151 (GAP Standard certification); (iii) Directive 152 (GMP Standard certification); and (iv) Directive 153 (GDP Standard certification). Regular and periodic examinations are conducted for licensed entities, in order to ensure compliance with the analytical standards and the level of quality required during each of the phases of production and distribution of medical cannabis.

 

The IMCA has introduced reforms to streamline the licensing process for medical cannabis activities. These reforms aim to reduce bureaucratic hurdles and encourage growth within the medical cannabis industry. For more information see "Regulatory Reform from Licenses to Prescriptions for Medical Treatment of Cannabis" below.

 

 

The narcotic convention governs the import and export of cannabis between member countries (the “Narcotic Convention”). Since Israel is a member country, any export and import of cannabis is subject to the Narcotic Convention.

 

 

 

Currently, adult-use recreational cannabis use in Israel and CBD for non-medical use is illegal. In November 2020, an Israeli government committee responsible for advancing the cannabis market reform published a report supporting and recommending the legalization of adult-use recreational cannabis in Israel. The Israeli parliament dissolved since then without applying the committee’s’ recommendations and all legislative initiatives were suspended. However, the new government, formed on June 13, 2021, declared, and settled in the coalition agreement, its commitment to legalization of adult-use recreational cannabis. Since the formation of the new government, several legislative initiatives were filed, including for the decriminalization of the possession of cannabis for individual recreational adult-use and the legalization of CBD for non-medical use. In February 2022, a Ministry of Health committee contemplated the legality of CBD and published its recommendation that CBD should be excluded from the DDO. The main recommendations of the committee were adopted by the Minister of Health, however, to date, the Minister has not enacted an order directing that CBD be removed from the DDO. On April 1, 2022, new regulations came into force which deemed the previously criminal offences of cannabis possession and use for self-consumption into administrative offences, which do not impact a criminal record, and limited the penalty to a monetary fine only.

 

 

As of March 2026, adult-use recreational cannabis remains illegal in Israel. However, there have been ongoing discussions and legislative efforts toward decriminalization and potential legalization. In recent years, the government has shown interest in reforming cannabis laws, but full legalization has not yet been achieved.

 

 

 

 

 

 

 

 

1.

Change in the prescription process: patients with a wide range of diseases and medical conditions from Oncology to Parkinsons will no longer be required to obtain a license to receive medical cannabis. Patients will receive a prescription similar to those for other prescription medications. Pain and PTSD are not included in the April 2024 Regulatory Reform yet.

 

A notice on the Israeli Government’s website dated January 18, 2024, was addressed to 10 different Canadian cannabis producers: Village Farms International, Organigram Holdings, Tilray Canada, Hexo Corp (owned by Tilray), The Green Organic Dutchman, Canopy Growth Corporation, SNDL Inc., Cronos Group, Auxly Cannabis Group, Decibel Cannabis, and all the medical cannabis manufacturers in Canada who export their goods to Israel.

 

The Commissioner for Trade Levies at the Ministry of Economy and Industry (the “MEI Commissioner”), announced by virtue of his authority according to Section 24(d) of the Law on Trade Levies and Defence Measures, 5591 – 1991, of his decision to open an investigation on his own initiative into the import of cannabis from Canada, after he found that special circumstances of actual damage exist or the probability of actual damage to the local manufacturing industry and a causal link between the imported imports and said damage. The notice also included a letter sent to Michael Mancini, the Chief Commercial Counselor with the Embassy of Canada, informing them of the investigation, dated January 15, 2024.The Ministry of Economy and Industry issued a formal notice to the public to respond to questionnaires regarding the "Anti-Dumping" investigation.

Further to several requests received from the parties and in accordance with section 27(b) of the Law on Trade Levies and Defense Measures, 1991 which states that "The Commissioner may, for special reasons that shall be recorded, extend the period specified in subsection (a) by an additional period that shall not exceed 30 days." (the emphasis is not in the original), the MEI Commissioner decided that special conditions exist for extending the deadline for the submission of the required materials as part of the investigation into the export of medical cannabis to Israel from Canada for 10 days until March 10, 2024, Due to constraints presented by the parties following the Iron Swords War, mainly significant delays in the preparation of the materials due to the absence of many workers as part of the extensive recruitment in Israel for the reserve service at this time and due to the unique complexity of the Israeli cannabis market where many players are required to submit data both as producers and importer. On March 10, 2024, we submitted the relevant questionnaires regarding its subsidiaries Focus and IMC Pharma, which are included in the investigation and for its subsidiaries Focus Medical Herbal Ltd, IMC Pharma Ltd and Rosen Highway.

On June 18, 2024, the Ministry of Economy and Industry announced that it has decided to postpone the final deadline for obtaining its preliminary decision until July 18, 2024.

On July 10, 2024, the MEI Commissioner published a preliminary decision regarding the investigation and findings determining that there is dumping and consequent injury, on the basis of best information available. We are evaluating the preliminary decision and its potential impact on us and our subsidiaries. Focus Medical Herbs Ltd. And IMC Pharma Ltd. submitted their response on August 23, 2024.

On November 10, 2024, the MEI Commissioner published the final report on the investigation into cannabis imports from Canada, recommending the imposition of tax levies. According to the recommendations, a tax of 175% will be imposed on cannabis imports from Canadian companies that did not cooperate with the investigation, while major importers that participated will be subject to lower tax rates, starting at 2% and increasing incrementally. We are currently reviewing these recommendations and considering steps to prevent or mitigate the final decision.

On November 24, 2024, we submitted a formal response to the advisory committee, which is responsible for developing and submitting recommendations to the Minister of Treasury prior to the minister's final decision in this regard. It is currently uncertain when the advisory committee will conclude its deliberations or what outcome can be anticipated at this stage.

On December 11, 2024, the Advisory Committee held its first meeting where we participated and presented its arguments against the imposition of dumping tax. The Advisory Committee has not yet sent its recommendations to the Minister of Treasury nor published any recommendations. Following the first meeting, we sent a letter to the Advisory Committee, presenting both new and existing arguments for consideration before the Committee submits its recommendations to the Minister of Treasury.

On January 26, 2025, the Jerusalem District Court held a hearing on the administrative petition filed by the local growers seeking to impose a temporary guarantee. The judge recommended that the local growers withdraw their petition. The local growers subsequently submitted their consent to withdraw the petition without costs being imposed. The parties must submit their response regarding the request to waive costs by February 4, 2025.

On February 4, 2025, we submitted its response, stating that it is not waiving costs from the local growers. Following this, the Court decided to close the petition without costs.

On April 10, 2025, the Minister of Economy and Industry, Mr. Nir Barkat, decided to fully adopt the recommendations of the Public Advisory Committee and impose an anti-dumping tax of up to 165% on imported medical cannabis flowers from Canada, for a period of four years. The tax is intended to assist Israeli growers against unfair competition from imported Canadian cannabis sold at dumped prices, which threatens the viability of the local industry. The tax will take effect following the approval of the Minister of Treasury and the Finance Committee of the Knesset (the Israeli Parliament). Minister Barkat's decision followed a complex process, during which he was temporarily barred from involvement due to a conflict of interest. Efforts to assign the matter to another minister were unsuccessful, and Barkat ultimately resumed responsibility and made the decision amid strong lobbying efforts both for and against the tax.

On April 24, 2025, the Minister of Treasury issued his final decision, rejecting Minister Barkat's decision to impose anti-dumping levies on cannabis imports from Canada. The Minister of Treasury's decision was based on a comprehensive review of the investigation findings, the Commissioner’s recommendation, the advisory committee’s conclusions, the position of the Competition Authority, the Ministry of Health’s views, and additional public comments. After hearing all relevant parties, including local growers and importers, and consulting with Ministry of Finance experts, the Minister concluded that imposing the levy would harm the macroeconomic development of the local cannabis market and the broader Israeli economy. He emphasized that the cannabis sector is still developing, that competition has significantly improved product quality and reduced prices, and that maintaining competitive pressure from imports is essential for the industry’s healthy growth and global competitiveness.

Nonetheless, on April 29, 2025, the Minister of Economy and Industry issued his final decision, rejecting the objections raised against the imposition of the anti-dumping levy. In his statement, the Minister concluded that the objections did not meet the legal standards set by applicable law and the Attorney General’s guidelines. He further stated that, in the absence of any substantive legal refusal submitted within the statutory timeframe, there was no basis to delay or prevent the imposition of the levy. Accordingly, he decided to proceed with promoting the anti-dumping tax. However, pursuant to the Trade Levies and Defense Measures Law, the final authority on whether to impose such levies lies with the Minister of Treasury. In light of this, and in response to the apparent contradiction between the decisions of the Minister of Economy and the Minister of Treasury, we have sent formal letters to the Attorney General of the Government and to the Legal Advisor of the Knesset, requesting their determination that the Minister of Economy's decision to proceed despite the Minister of Treasury’s rejection is not in accordance with the law.

 

On March 10, 2017, the German federal government enacted bill Bundestag- Drucksache 18/8965 – Law amending narcotics and other regulations that amended existing narcotics legislation to recognize cannabis as a form of medicine and allow for the importation and domestic cultivation of medical cannabis products.

Under the updated legislation, cannabis is listed in Annex 3 to the BtMG as a “marketable narcotic suitable for prescription”. Until the KCanG came into force on 1 April 2024, legalization in Germany applied only to cannabis for medicinal purposes under state control in accordance with the Narcotic Convention.

Currently, the production, distribution, exportation and importation of medical cannabis products in Germany is legal, subject to regulations and licensing requirements. Operations involving adult-use recreational cannabis products became legal under certain conditions defined in the KCanG. This development has its origins in the fact that the former German government has declared in the coalition agreement at the end of 2021 its intention to open the German market to the adult-use recreational market.

In October 2022, a key points paper on the controlled supply of cannabis to adults for consumption purposes, although a restructuring of the existing regulatory framework on cannabis in general was also discussed, was published by the former cabinet, which was submitted to the European Union Commission for a preliminary legal examination. In this respect, the German federal government issued a declaration of interpretation with regard to existing international agreements governing the adult-use recreational cannabis usage and submitted a draft law to the European Union Commission within the framework of a notification.

After a long political debate, the German Bundestag approved the federal government's draft law "on the controlled use of cannabis" (BT Drs. 20/8704, BT Drs. 20/8763, BT-Drs. 20/10426) on Friday, 23 February 2024. The draft law (BT Drs. 20/8704) then came into force on 1 April 2024. An adjustment has already been made by Article 1 of the Act of 20 June 2024 (BGBl. 2024 I No. 207). Some components of the KCanG, which deal with so-called consumer cannabis, came into force on 1 July 2024 (such as the possibility to apply for a permission to grow by and distribute recreational cannabis to members of a cultivation association. The entry into force of the law also had direct consequences for medicinal cannabis, which is the subject matter of Art. 2 (Medical Cannabis Act - MedCanG) and 3 (BtMG) of the law.

With the entry into force, cannabis is no longer a narcotic by definition and is therefore no longer subject to the BtMG. The definition in Annex 3 of the BtMG was replaced by the Section 2 in MedCanG: "Cannabis for medical purposes: plants, flowers and other parts of plants belonging to the genus Cannabis that are grown for medical purposes under state control in accordance with Articles 23 and 28(1) of the Single Convention on Narcotic Drugs of 1961 of 30 March 1961 (Federal Law Gazette 1973 II p. 1354), as well as delta-9-tetrahydrocannabinol including dronabinol and preparations of all the aforementioned substances". However, the narcotics regulations were replaced by comparable regulations and authorisations. The BfArM will remain responsible for the latter as a higher federal authority.

From a regulatory perspective, medicinal cannabis remains a medicinal product or an active pharmaceutical ingredient, meaning that the requirements under medicinal product law will remain in place. As a result, the marketing of irradiated products continues to require a marketing authorisation in accordance with the Ordinance on Medicinal Products Treated with Radioactive or Ionising Radiation. Only the narcotics licence pursuant to Section 3 BtMG is replaced by a new licence pursuant to the MedCanG (see Section 1), which, however, largely corresponds to the previous provisions of the BTMG regarding the application process and general regulations. However, there are the following differences that are new due to the entry into force: Medicinal cannabis no longer has to be stored and transported like a narcotic. The corresponding safety precautions no longer apply, meaning that compliance with the provisions of pharmaceutical law is sufficient. The so-called semi-annual reports will be replaced by annual reports. The requirements for the person responsible for medicinal cannabis are slightly reduced compared to those for narcotics. A prescription of medicinal cannabis is possible without the need to use the form for prescription for narcotics. A normal prescription is sufficient.

However, it is likely to be of great importance that the cultivation of medicinal cannabis based on Section 17 MedCanG is no longer subject to public tenders, but - like the trading licence - is ultimately subject to a two-stage authorisation (at state level regarding the pharmaceutical regulations and at federal level with regard to the fact that it is medicinal cannabis).

Medical cannabis in Germany must comply with the corresponding monographs of the German and Ph. Eur.

The Ph. Eur. Suppl. 11.5 contains the new Ph. Eur. Monograph on cannabis flowers and the new Ph. Eur. Monograph on CBD. With the entry into force of Suppl. 11.5 of the national edition of the Ph. Eur. on April 1, 2025, the monograph 'Cannabis flowers / Cannabis flos [3028]' contained therein became legally binding from this date. The previous monograph 'Cannabis flowers' of the German Pharmacopoeia was deleted with the last edition of the DAB. The new monograph on cannabis flowers includes Starting materials for the production of extracts, medicinal products that can be prescribed as such (herbal medicinal products) that are taken by patients by inhalation or oral administration. There are not entirely irrelevant changes compared to the German monograph. The Committee on HMPC as the European Medicines Agency’s (EMA) committee responsible for compiling and assessing scientific data on herbal substances, preparations and combinations, announced that in view of uniform EU quality requirements (including with respect to import and export of cannabis), further Ph. Eur. Cannabis monographs are in preparation.

All BtMG permit applications has to specify the strains and estimated quantities of medical cannabis involved and any subsequent changes had to be reported to the Federal Opium Agency of Germany. The same applies regarding Sections 7, 8 of MedCanG in relation to the authorisation to trade in medicinal cannabis, although it is now apparent that no expected annual quantities are to be specified. However, it can be assumed that the BfArM nevertheless requires these due to the (albeit somewhat reduced compared to the BtMG) reporting obligations in Sections 16 and 17 of MedCanG and the Foreign Narcotics Trade Regulation, which remains applicable (see Section 14 of MedCanG).

CBD is neither a real subject to the KCanG nor to the MedCanG. Only in Section 1 No. 3 KCanG is there a definition and in Section 1 No. 8 b) KCanG the exemption of CBD from the term cannabis and in Section 2 para. 2 No. 1 KCanG the exemption from the prohibition of extraction of the cannabis plant, which permits the extraction of CBD, even if it does not contain any further regulations on CBD in isolation. With regard to synthetic CBD, a different set of regulations is important: the handling of cannabimimetics/synthetic cannabinoids is prohibited in accordance with Section 2 of the Annex in conjunction with Section 3 of the New Psychoactive Substances Act. Product-specific regulations relating to CBD can be found in other regulations. Thus, Annex 1 of the “Ordinance on the Prescription of Medicinal Products” stipulates that CBD is in principle subject to prescription but does not specify a minimum quantity or a specific dosage form.

If we examine the food sector, a distinction is made between products that naturally contain CBD and those that consist of or contain extracted CBD; the European Commission considers the latter to be novel foods under Regulation (EU) 2015/2283, which requires authorisation before being placed on the market. Although applications for such authorisation have been submitted, the European Commission believes that they contain at least insufficient data on safety in food use, meaning that none of the applications can currently lead to authorisation. Against this background, various products containing CBD can be found on the German market. There are currently various court decisions that problematize CBD in foods (especially food supplements) and in cosmetics (especially mouth oil). On the one hand, CBD is regarded as a medicinal product or as a novel food subject to authorisation and therefore unsuitable for use in a foodstuff, and on the other hand as unsuitable for cosmetic use in the mouth, as CBD would ultimately be consumed in this case (like a foodstuff and therefore to be regarded as foodstuff).

 

In the past, the Federal Opium Agency of BfArM formed the Cannabis Agency to oversee cultivation, harvesting, processing, quality control, storage, packaging and distribution to wholesalers, pharmacists and manufacturers. The Cannabis Agency also regulated pricing of German-produced medical cannabis products and served as an intermediary of medical cannabis product sales between manufacturers, wholesalers and pharmacies on a non-profit basis so far. In late 2018, the Cannabis Agency issued a call for tenders to award licenses for local medical cannabis cultivation and distribution of German-cultivated medical cannabis products. The Cannabis Agency serves as an intermediary in the supply chain between such cultivation and distribution. In April 2019, three licenses for local cultivation were granted. As a result, three companies in Germany received permission to cultivate cannabis on behalf of the Cannabis Agency of the BfArM.

 

With the entry into force of the MedCanG, the granting of licences for domestic cultivation is no longer subject to tendering but governed by §§ 4 et seq. MedCanG. The previously time-consuming tendering and awarding of contracts for the domestic cultivation of cannabis for medical purposes by the Cannabis Agency and the subsequent purchase and distribution of the domestic harvest yields by the Cannabis Agency from the economic operators determined during the tendering procedure are no longer necessary. Ultimately, only the corresponding licences in accordance with the MedCanG and the AMG are required in compliance with the respective conditions and the associated regulations.

 

 

The current regime permits the importation of cannabis plants and plant parts for medicinal purposes under state control subject to the requirements under the Narcotic Convention, according to which, Germany must estimate the expected demand of medical cannabis products for medical and research purposes for the following year and report such estimates to the International Narcotics Control Board. In September 2025, Germany already reached the maximum import quota of 122 tonnes of medical cannabis approved by the International Narcotics Control Board. The BfArM was therefore temporarily suspending new import licences until the quota was increased.

 

As a prerequisite to obtaining a German import license, the supplier must grow and harvest in compliance with EU-GACP-Guidelines and manufacture in compliance with EU-GMP-Guidelines and certifications, or alternatively, it is a pure EU-GACP product, and the EU-GMP manufacturing steps then take place in Germany. With regard to imports from third countries and the associated testing and assessment of EU GMP compliance, the relevant pharmaceutical regulations remain in force, which also provide for on-site inspections by the EU authorities, provided that no MRA or similar is in force for the specific product type. All medical cannabis products imported to Germany must derive from plant material cultivated in a country whose regulations comply with the Narcotic Convention and must comply with the relevant monographs described in the German and European pharmacopeias.

 

 

Medical cannabis products imported under an import license issued under the MedCanG and AMG permits are sold exclusively to pharmacies for final dispensing to patients on a prescription basis as ‘magistral preparations’, a term used in Europe to refer to medical products prepared in a pharmacy in accordance with a medical prescription for an individual patient. Magistral preparations require certain manufacturing steps in the pharmacy. Such manufacturing steps of the pharmacist typically include the testing and dosing of pre-packaged cannabis inflorescences (typically referred to as “flos”), medical cannabis products for oral administration (dronabinol), medical cannabis products for inhalation upon evaporation, and medical cannabis-infused teas. In addition to magistral preparations, medical cannabis products are also marketable as pre-packaged, licensed drugs (e.g. Sativex®).

 

 

According to the Federal Ministry of Health (BMG), the aforementioned increase in import volumes is due to a rise in the number of prescriptions for self-payers, which are not covered by statutory health insurance. Only a very slight increase has been observed in statutory health insurance funds, which does not reflect the increase in imports to this extent.

 

In order to prevent these developments in prescribing practice, the BMG drafted a bill to amend the MedCanG (RefE)⁴ in July 2025.Such legislation amendment was then approved by the German Federal Cabinet on  October 8, 2025⁵and provides for a significant tightening of the MedCanG with regard to the prescription and dispensing of medical cannabis. In the draft, the BMG justifies this necessity with the need to ensure a secure supply of medicines and patient safety. On the one hand, the BMG expresses concerns about the growing use of telemedicine platforms, since it believes that prescriptions for medical cannabis are often issued there without personal contact. The BMG assumes that prescriptions are regularly issued solely on the basis of a questionnaire and sent via (cooperating) mail-order pharmacies. In the view of the ministry, this could cause risks as cannabis flowers for medical purposes are prescribed as a magistral formulation and in consequence without a marketing authorisation. For this reason, according to RefE, Section 3 Med-CanG shall stipulate that the prescription of cannabis flowers would require in-person physician consultation (e.g. in a doctor's office or during a home visit). This shall apply to both: initial prescriptions and repeat prescriptions, for which personal contact between doctor and patient must have taken place within the last four quarters. Furthermore, the distribution of cannabis flowers for medical purposes within Germany by mail-order would be prohibited, while delivery only would be permitted. If implemented, these changes could materially adversely affect our German operations, including by limiting distribution channels and reducing patient accessibility, which may, in return, negatively impact revenues and operating results.

 

For clarification: cross-border dispatch has always been prohibited under the World Postal Convention. The change would only affect dispatch within Germany. Pharmacies would only be able to deliver using their own employees as couriers.

 

However, it should be noted that this drastic complication of prescribing could have significant consequences for certain patient groups. The purpose of telemedicine is precisely to further develop healthcare by providing treatment options, especially for patients in rural areas. The BMG describes precisely these points on its website.⁶For this reason, there are also dissenting voices with regard to the RefE. It therefore remains to be seen whether and to what extent the legislative changes envisaged in the RefE will ultimately be implemented in the MedCanG. This will be decided in the further course of the proceedings.

 

If the legislative changes are actually adopted as decided by the Federal Cabinet, this would affect not only the patients mentioned above, but also providers of telemedicine services and mail-order pharmacies in particular.

 

 

We do not engage in any U.S. cannabis-related activities as defined in Canadian Securities Administrators Staff Notice 51-352 (Revised) – Issuers with U.S. Marijuana-Related Activities. However, as of the date of this Annual Report, we are actively evaluating certain strategic opportunities to expand our operations into the U.S. cannabis market. This initiative follows President Donald Trump's executive order signed on December 18, 2025, which directs the Attorney General to expedite the rescheduling of marijuana from Schedule I to Schedule III under the Controlled Substances Act, recognizing its medical benefits while maintaining federal oversight.

 

⁴RefE, Entwurf eines Gesetzes zur Änderung des Medizinal-Cannabisgesetze des Bundesministeriums für Gesundheit vom 14.7.2025.

⁵Gesetzesentwurf der Bundesregierung eines Ersten Gesetzes zur Änderung des Medizinal-Cannabisgesetzes vom 8.10.2025.

⁶Abrufbar unter https://www.bundesgesundheitsministerium.de/service/begriffe-von-a-z/t/telemedizin.html

 

In Israel, we are substantially dependent on several categories of commercial agreements to ensure the continuity of our operations and maintain our revenues, including:

 

The intellectual property agreement dated April 2, 2019, as amended on January 1, 2021, between IMC Holdings and Focus (the “Focus IP Agreement”) and the services agreement dated April 2, 2019 and as amended on January 1, 2021, between IMC Holdings and Focus, 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 this commercial relationship, we were dependent on Focus maintaining its licenses and any ancillary licenses required to conduct operations in the Israeli medical cannabis industry. On February 26, 2024, the parties to the Focus IP Agreement executed a cancellation note, thereby cancelling the Focus IP Agreement as of the signing date.

 

In addition, Rosen and Pharm Yarok signed a services agreement to use IMC Holdings for certain services such as administrative, financial, legal, and headquarters services. In consideration for the services Rosen and Pharm Yarok shall pay IMC Holdings on a quarterly basis (unless agreed otherwise by the Parties) an amount equal to an arm’s length calculation as determined from time to time. The allocation of charges is based on agreed key performance indicators and cost-sharing methodologies.

 

For additional information on potential risks arising from our economic dependence on Focus, its commercial and supply agreements with third parties and its pharmacy operations, see “Risk Factors” above.

 

In Germany, Adjupharm is substantially dependent on the supply, sales and distribution agreements with suppliers, German distributors, and pharmacies. Any failure to maintain the Adjupharm License in good standing could have a material adverse effect on our business, financial condition and results of operations. For additional information on potential risks arising from our dependence on Adjupharm’s operations, see “Risk Factors” above.

 

 

We have one wholly-owned subsidiary, I.M.C. Holdings Ltd. (referred herein as IMC Holdings), incorporated in the State of Israel.

 

IMC Holdings has five wholly owned subsidiaries: I.M.C. Pharma Ltd. (referred herein as IMC Pharma), incorporated in the State of Israel; Focus Medical Herbs Ltd. (referred herein as Focus), incorporated in the State of Israel; R.A. Yarok Pharm Ltd. (referred herein as Pharm Yarok), incorporated in the State of Israel; and Rosen High Way Ltd. (referred herein as Rosen High Way), incorporated in the State of Israel; and  IM Cannabis Holding NL B.V Netherland (referred herein as IMC Holdings NL), incorporated in Netherland.

 

IMC Holdings also has four additional subsidiaries: Rivoly Trading and Marketing Ltd. d/b/a Vironna Pharm (referred herein as Vironna), incorporated in the State of Israel; Adjupharm GmbH (referred herein as Adjupharm), incorporated in Germany; Xinetza API Ltd. (referred herein as Xinetza), incorporated in the State of Israel; and Shiran Societe Anonyme (referred herein as Greece), incorporated in Greece.

 

The following chart illustrates our subsidiaries:

 

 

The proportion of voting power aligns with the proportion of interest held, as shown in the chart above.

 

Total depreciated cost of property, plants and equipment as at December 31, 2025 was $3,711, compared to $3,730 as at December 31, 2024, representing a decrease of $19 or 1%.

 

Additional information set forth under Note 9 to the 2025 Annual Financial Statements.

 

IMC Holdings leases a 358 square-meter facility in Kibutz Glil Yam for administrative activities. The lease agreement will expire on September 1, 2026 and will be renewed upon agreement between the parties.

 

IMC Holdings sub leases the facility to Ewave Nadlan International Investments Ltd, a subsidiary of Ewave Group owned by Mr. Oren Shuater and Refael Gabay, pursuant to a sublease arrangement.

 

Pharm Yarok is leasing a 177.83 square-meter facility in Netanya for pharmacy’s selling activities. The lease will expire on December 26, 2026.

 

The approximately 8,000 square feet German Logistics Center, which Adjupharm owns, allows Adjupharm to manage all aspects of its supply chain, including the production, repackaging and distribution of bulk medical cannabis.

 

 

Not applicable.

 

 

 

See the Management's Discussion and Analysis of the Company for the year ended December 31, 2025 incorporated by reference into this Form 20-F as Exhibit 15.4.