GABY Inc. — Interim / Quarterly Report 2021

May 26, 2021

GABY Inc. Management’s Discussion & Analysis March 31, 2021 and 2020

FOREWORD FOREWORD

FOREWORD

The following is Management’s Discussion and Analysis (“ MD&A ”) of the financial condition and results of operations of GABY Inc. (“ the Corporation, “The Company ” or “ GABY ”) for the quarter ended March 31, 2021 and 2020. This MD&A should be read in conjunction with the unaudited interim consolidated financial statements of the Corporation and accompanying notes for the quarters ended March 31, 2021 (“ Q1 2021 ”) and 2020 (“ Q1 2020 ”) (the “ Financial Statements ”) and the audited consolidated financial statements of the Corporation and accompanying notes as at and for the years ended December 31, 2020 and 2019 (the “ Annual Financial Statements ”). The Financial Statements, Annual Financial Statements and the “SELECTED FINANCIAL INFORMATION” and “SELECTED QUARTERLY INFORMATION” sections of the MD&A have been prepared using International Financial Reporting Standards (“ IFRS ”) and all amounts are reported in Canadian dollars (“ CAD ”) unless otherwise noted, including United States dollars (“ USD”) . Additional information about the Corporation can be found on SEDAR at www.sedar.com and on GABYs corporate website at www.gabyinc.com. Readers should also read the section “CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS” contained at the end of this document. This MD&A is dated May 25, 2021.

NON-GAAP MEASURES: GABY refers to Pro Forma Revenue, Pro Forma Gross Profit and Adjusted Pro Forma EBITDA from continuing operations and Adjusted EBITDA from continuing operations. These measures are not defined under IFRS and are considered non-GAAP measures. Management believes that, in addition to revenue and net loss, adjusted EBITDA from continuing operations provides a measure of operating cash flows before servicing debt, income taxes, capital expenditures and other gains and losses. Management believes Pro Forma Revenue, Pro Forma Gross Profit and Adjusted Pro Forma EBITDA from continuing operations provide insight into the future operations of GABY. These measures do not have a standardized meaning and may not be comparable to similar measures presented by other issuers and should not be viewed as a substitute for measures reported under IFRS. These financial measures are reconciled to IFRS in the section titled “NON-GAAP DISCLOSURE” towards the end of this document.

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GABY Inc. Management’s Discussion & Analysis March 31, 2021 and 2020

CORPORATE PROFILE

As of the date of the MD&A, GABY is a holding company with USA subsidiaries, with the most significant being Miramar Professional Services (“ Miramar ” or “ Mankind ”) (acquired in April 2021) and Sonoma Pacific Distribution Inc. (“ Sonoma Pac ” or “ SPD ”) which operate in the cannabis industry. Mankind holds a retail and distribution license, and SPD holds a distribution license, issued by the California Bureau of Cannabis Control (“ CBCC ”). With the foundation of the Mankind dispensary and the expertise of the management team, GABY plans to acquire additional dispensaries and continue to roll out its proprietary brands in Mankind and in other dispensaries it may acquire as well as to third party dispensaries within California. GABY also owns CBD brands and sells those brands in the mainstream market and on-line. GABY trades on the Canadian Securities Exchange (“ CSE ”) under the symbol GABY and on the OTCQB under the symbol GABLF. As of the date of the MD&A, GABY’s operations include:

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GABY Inc.

Management’s Discussion & Analysis March 31, 2021 and 2020

OUTLOOK - INTEGRATION AND CONSOLIDATION

Consistent with the Company’s announcement in the fourth quarter of its intent to acquire 100% of Miramar and to complete a capital raise coincident therewith, GABY closed a brokered private placement, together with a non-brokered private placement of units of the Corporation (the “ Q1 Financing ) for aggregate gross proceeds of $12.5 million on February 5th, 2021 and closed the Miramar acquisition (the “ Miramar Transaction ”) effective April 1, 2021 pursuant to regulatory approval of the Miramar Transaction.

Miramar acquisition effective April 1, 2021

Miramar operates a retail cannabis business in San Diego, California operating under the name Mankind and in December 2019 Miramar acquired Wild West Industries, Inc. (“ Wild West ”), a California licensed cannabis distributor and manufacturer, which launched its first in-house cannabis brand, “ Kind Republic ” in January of this year.

Mankind operates under Miramar’s Type 10 cannabis retail license issued by the CBCC and is one of the highest-volume cannabis retailers in California. Mankind offers cannabis goods to medical and recreational consumers through its storefront, curbside pickup, and delivery. It is predominately a reseller of goods produced by other companies.

Total consideration paid to the shareholders of Miramar in April 2021 included 157,894,737 common shares of GABY, USD 5 million cash (CAD 6.3 million), and a secured non-convertible promissory note for USD 25.5 million (the “ Notes ”). The purchase agreement also calls for working capital adjustments which will be finalized by June 30, 2021 with any resulting adjustment accommodated through a corresponding adjustment of the Notes.

Miramar’s affect on future operations of GABY

The Miramar Transaction is accretive to GABY and will establish a foundation and strong base of cash flow to continue to fund and grow GABY’s California operations. Further, proceeds from the Q1 Financing bolstered GABY’s existing operations with increased ability to invest in working capital to increase sales. As case in point, GABY’s Q1 2021 reported revenue, gross margin and EBITDA (prior to the acquisition of Miramar) all improved over the same quarter last year and moreover, these same performance measures for Q1 2021 Pro forma[1] (which incorporate Miramar’s first fiscal quarter results) vastly exceed Q1 2020. For example, GABY’s first quarter revenue was $3.4 million, up 135% from the same quarter last year and its Q1 2021 pro forma revenue[i] was $12.3 million, up 8.5 times over Q1 2020. Likewise, GABY’s gross margin for Q1 2021 was 7% and its pro forma gross margin[1] for Q1 2021 was 37% compared to negative 15% in Q1 2020. Adjusted EBITDA from continuing operations (“ EBITDA ”)[1 ] for Q1 2021 was negative $0.9 million and Pro Forma EBITDA for Q1 2021 was $1.0 million compared to negative $2.5 million the same quarter last year.

In addition, management believes it will harvest further synergies from the acquisition of Miramar, by leveraging Mankind’s existing supplier relationships for the benefit of GABY’s other verticals (including manufacturing and distribution). This strategy should see increased revenue generation from onboarding of additional third-party brands to GABY’s distribution and manufacturing platform (operating through the Type 11 license issued to Sonoma Pac, reaping of additional margins on the enhanced sales of its proprietary brands now that they will also be sold in Mankind, and by streamlining shared overhead costs as further detailed below.

Integration

Upon closing the Miramar Transaction, GABY has been working on integrating and streamlining Mankind operations. Specifically, management has:

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GABY Inc.

Management’s Discussion & Analysis March 31, 2021 and 2020

1. Implemented a spending freeze pending final approval of departmental budgets which integrate the synergies of the acquisition of Mankind. All new spends are subject to an expected return on investment.

2. Commenced mapping the decision making and deliverables in each department to identify redundancies, inefficiencies, risk, and improvements in communication and collaboration with other departments.

3. Reviewed and revised Standard Operating Procedures (SOPs) with the benefit of the mapping project so as to create an operation manual by which all dispensaries (current and future) will operate (much like a franchise model).

In addition, GABY has implemented a strategy whereby it leverages the retail relationships Mankind has with its suppliers for the benefit of its other three verticals, namely, manufacturing, distribution and procurement. Specifically:

• a) GABY’s goal is to bring 10 third party brands to its distribution platform from which it can harvest margin with existing suppliers (brands) from both the distribution and retail verticals. Mankind’s knowledge of the pain points of the relationship between brands and third-party distributors, plus its insight into the relative strength of brands, will aid in onboarding additional strong brands onto the SPD platform.

• b) GABY will apply this same strategy to encourage its suppliers to use the third-party manufacturing services of SPD to enable it to harvest additional margin from this vertical.

• c) Further, GABY intends to work with cultivators who have launched, or are interested in launching their own proprietary brands, to exchange shelf space for better wholesale pricing of flower and biomass for its proprietary retail brands.

Finally, GABY launched its proprietary brands onto Mankind shelves with a mandate to grow its proprietary products on shelf to between 20% and 30%. On January 1, 2021 Mankind launched this same strategy of giving priority to its proprietary brands. Since then, proprietary brands of flower represented 20% of all flower sold in Mankind. The goal is for proprietary brands to represent 30% of all flower sales. Management is launching a concentrate brand in May 2021 and is identifying other product categories where proprietary brands can be placed on Mankind shelves.

Consolidation

GABY’s overarching strategy is to consolidate dispensaries in California, to replicate the synergies from its vertical platforms of manufacturing, distribution and dispensaries and to generate horizontal synergies of having multiple dispensaries replicating efficient operational procedures.

To that end, GABY bolstered its bench strength of merger and acquisition ( “M&A” ) advisors to three. In addition, James Schmachtenberger, formerly CEO of Mankind, will move into a strategy role and assist with M&A. The M&A team is led by TJ Finch, formerly Head of Business Development for Cresco Labs, one of the largest vertically-integrated multi-state cannabis operators in the United States. Consequently, GABY has a number of potential acquisition targets at varying stages of discussion and negotiation.

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GABY Inc.

Management’s Discussion & Analysis March 31, 2021 and 2020

SELECTED FINANCIAL INFORMATION AND OVERALL PERFORMANCE

Quarter ended March 31,	Quarter ended March 31,	Quarter ended March 31,
In $ Pro forma 20211	2021 2020 % Change
Revenue 12,319,566 Variable gross profit (loss)	3,411,901 1,449,054 135 369,558 (18,675) 2,079 11 (1%) 235,240 (223,627) 205 7 (15) (875,862) (2,493,310) 65 (1,106,697) (2,776,123) 60 (2,519,830) (3,161,187) 20
Variable gross profit (loss) as % of gross revenue (“Variable gross margin”)
Gross profit (loss) after distribution and allocated indirect costs (“Gross profit”) 4,515,234
Gross profit (loss) as a percentage of revenue (“Gross margin”) 37
Adjusted EBITDA from continuing operations (“Adjusted EBITDA”)1 1,000,701
Loss from operations before other income (expense) (“Loss from operations”)
Net loss from continuing operations
Net loss from discontinued operations	- (839,678)	100
Net loss	(2,519,830) (4,000,865)	37
Total comprehensive loss	(2,519,392) (2,992,511)	16
Loss per share, basic and diluted2	(0.01) (0.02)	51
Weighted average number of common shares – basic and diluted1	287,658,573 222,946,438 29 As at March 31, 2021 Dec 31, 2020
Total assets	13,229,561 5,036,633	163
Total non-current financial liabilities	734,549 776,353 (5)

(1) See Non-GAAP Disclosure towards end of this document

(2) Percentage change based on unrounded earnings per share

OVERALL PERFORMANCE OF EXISTING OPERATIONS

As detailed in the table above, the revenue increase of 135% to $3.4 million plus the variable gross margin improvement of 11% (versus negative 1% Q1 2020) contributed to the increase of gross profit to $235,240 from negative $223,627 the same quarter last year. As further detailed below, most of the improvements were generated from the licensed segment which had greater access to capital in Q1 2021 and which results were not hampered by the prior year’s requirement to sell off excess flower due to implications of the California wildfires the previous fall. Adjusted EBITDA of negative $0.9 million and loss from operations of $1.1 million both improved by over 60% on the increased gross profit and on reduced selling, general and administrative (“ SG&A ”) on cost cutting initiatives introduced the end of Q1 2020. Likewise, net loss from continuing operations of $2.5 million improved 20% over Q1 2020 for the same reasons despite Q1 2021 including $1.1 million of transaction costs related to the Miramar acquisition and related regulatory filings.

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GABY Inc.

Management’s Discussion & Analysis March 31, 2021 and 2020

RESULTS OF EXISTING OPERATIONS

Segmented information:

In$	Quarter ended March 31,
	Licensed Unlicensed Total
	2021 2020 2021 2020 2021 2020
Revenue Variable gross profit (loss) Variablegross margin	3,210,354 1,199,605 201,547 249,449 3,411,901 1,449,054 243,183 (168,511) 126,375 149,836 369,558 (18,675) 8% (14%) 63% 60% 11% (1%)
Grossprofit(loss)	133,885 (354,763) 101,355 131,136 235,240 (223,627)
Gross margin	4% (30%) 50% 53% 7% (15%)

Licensed segment (at March 31, 2021 - comprised of manufacturing and distribution of SPD)

Revenue from the licensed segment of $3.2 million increased 168% over the same quarter last year. With excess funds from the Q1 Financing, SPD was able to generate higher revenue on further investment in inventory. The increase also reflects that in Q1 of 2020, SPD was pressured to sell excess flower at reduced prices on the heels of the California wildfires in late 2019. The wildfires resulted in temporary closure of SPD’s facilities and significantly reduced sales activity in the fourth quarter of 2019 which resulted in the excess flower.

Variable gross profit of SPD was $243,183 or 8% of revenue compared to the same quarter last year of negative $168,511 or negative 14% of revenue as a result of the sale of flower at suppressed prices in Q1 2020. The improvement in variable gross profit, as well as lower production overheads on cost cutting initiatives introduced towards the end of Q1 2020, resulted in higher gross profit, of $133,885, or 4% of revenue compared to negative $354,763, or -30% of revenue.

Unlicensed segment (Lulu’s and 2Rise)

Revenue from the unlicensed segment of approximately $202,000 declined 19% over the same quarter last year as this division transitioned more of its sales towards a higher proportion of direct-to-consumer retail sales through its online platform (versus wholesale). The division pivoted in this direction in response to COVID-19 shelter-in-place restrictions which hampered sales starting in Q2 2020 with the closure of many CBD retailers. The transition has resulted in slightly higher variable gross margins which improved from 60% to 63% from Q1 2020 to Q1 2021 but was more than offset by increased shipping costs which resulted in a slightly lower gross margin of 50% compared to 53% the same quarter last year.

Remaining profit and loss items:

SG&A expenses of $1.1 million in Q1 2021 are down $1.2 million or 51% compared to the same quarter last year. Most of the decrease was in respect of lower salaries and benefits and consultant fees of $0.9 million which reflects many of the cost cutting measures GABY implemented in late Q1 2020.

Share-based compensation and expenses of $0.2 million increased 63% over the same quarter last year primarily due to subsequent issuances of share-based compensation, primarily being restricted share units (“ RSU ”s).

Depreciation of plant and equipment expense of approximately $11,000 decreased 93% due to lower depreciation on right-of-use assets as result of the termination of five office and warehouse leases on cost cutting measures introduced late Q1 2020.

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GABY Inc.

Management’s Discussion & Analysis March 31, 2021 and 2020

Other gains (losses) as reported on the consolidated statement of losses amounted to a $1.4 million loss in Q1 2021 compared to a loss of $0.4 million Q1 2020. The increase primarily reflects $1.1 million of transaction costs in respect of the Mankind acquisition and required regulatory filings on this fundamental change.

Loss from discontinued operations

In March 2020, the Corporation shuttered its food operations related to Gabriella’s Kitchen (“ GK ”). Accordingly, the results of GK were reclassified out of continuing operations. The net loss from discontinued operations was $0.8 million in Q1 2020.

Net loss and Other comprehensive loss

The resulting net loss from continued and discontinued operations is $2.5 million, 37% lower than $4.0 million Q1 2020. The net loss per share decreased by 51% to $0.01 as the weighted average common shares outstanding for the period of 288 million was up 29% over the same quarter last year.

Other comprehensive loss (“OCL”) includes foreign exchange gains and losses on the translation of GABY’s USA subsidiaries. Q1 2020 included a foreign exchange gain of $1 million compared to a nominal amount in Q1 2021.

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GABY Inc. Management’s Discussion & Analysis March 31, 2021 and 2020

SELECTED QUARTERLY FINANCIAL INFORMATION

CHANGES IN PRESENTATION RELATED TO DISCONTINUED OPERATIONS

The prior periods for 2019 have been restated to reflect reclassifications for the discontinued operations of GK which was shuttered in Q1 2020.

Note 1	2021	2020	2020	2020	2020	2019	2019	2019
In$	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2
Revenue	3,411,901	1,075,591	806,699	740,202	1,449,054	1,900,111	5,793,974	2,132,827
Net loss and loss per share from continuing operations:
Net loss	(2,519,830)	(6,589,384)	(1,390,964)	(1,687,307)	(3,161,187)	(12,002,310)	(1,711,603)	(4,195,077)
Loss per share	(0.01)	(0.03)	(0.01)	(0.01)	(0.01)	(0.06)	(0.01)	(0.03)
Net loss and loss per share:
Net loss	(2,519,830)	(6,655,508)	(1,536,080)	(1,798,161)	(4,000,865)	(13,088,848)	(2,347,919)	(4,971,889)
Loss per share	(0.01)	(0.03)	(0.01)	(0.01)	(0.02)	(0.07)	(0.01)	(0.04)

1 Refer to “CHANGES IN PRESENTATION RELATED TO DISCONTINUED OPERATIONS” above

REVENUE

Q2 2019 and beyond reflects revenue from Sonoma Pac and Q1 of 2020 and beyond also reflect the revenue from the acquisition of Lulu’s and 2Rise on December 31, 2019. The higher revenue in Q3 2019 reflects the ramping of SPD after its acquisition in Q2 2019. The Q4 2019 reflects the impact of the northern California wildfires which resulted in temporary closure of its facilities. The relatively lower revenue levels in Q2 to Q4 of 2020 compared to the same quarters of 2019 reflect a combination of the impact of COVID-19 on both operations and the price of raw materials, as well as a shortage of capital caused by low collection rates from its struggling customers and limited access to capital, as GABY pursued the acquisition of Miramar, which restricted inventory investment and revenue growth. Greater access to capital in Q1 2021 from excess funds from the Q1 Financing generated higher revenue in SPD as it was able to invest in greater quantities of inventory for sale.

NET LOSS

The general successive increases in net losses from Q2 2019 to Q1 2020 mostly reflects increased costs required to obtain and maintain public listing and to support GABY’s organic and acquisition growth. The decrease in net loss in Q3 2019 from Q2 2019 mostly reflects a $2.1 million gain on contingent consideration on the Sonoma Pac acquisition as described in the Financial Statements and lower SG&A of $0.9 million mostly on lower advertising and investor relation costs. The increase in net loss in Q4 2019 over Q3 2019 of $10.7 million mainly reflects the effect of the aforementioned $2.1 million gain the prior quarter, $6.9 million of impairment losses and a $1.3 million write-down of inventory. The $9.1 million lower loss in Q1 2020 relative to 2019 is mainly due to the aforementioned impairment loss and inventory write-down and lower SG&A in 2020 as GABY started to shed costs. The lower net loss of $1.8 million in Q2 2020 compared to $4.0 million in Q1 2020 reflects cost saving initiatives discussed in overall performance and results from operations, which continued into the remainder of 2020. The increase of $5.1 million in the Q4 2020 net loss over Q3 2020 is primarily a result of impairment losses of $4.7 million recognized in Q4 as described previously, as well as an increase in share-based compensation and expenses of $0.3 million. The net loss in Q1 2021 of $2.5 million includes $1.1 million of transaction costs on the acquisition of Miramar.

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GABY Inc. Management’s Discussion & Analysis March 31, 2021 and 2020

FINANCIAL CONDITION

Readers should refer to Note 1 of the Financial Statements regarding the going concern assumption in conjunction with the discussion below.

The following chart highlights significant changes in the Consolidated Statements of Financial Position from December 31, 2020 to March 31, 2021. As most of the balances are in USD translated into CAD, the accounts are affected by foreign currency fluctuations. The foreign exchange rate of CAD to USD used to translate period end balances were 1.2752 and 1.2575 at December 31, 2020 and March 31, 2021; respectively.

	Increase
	(decrease) in
Line item	$Millions		Primary factors explaining change inQ1 2021
Total assets	8.2		Restricted cash of $8.2 million on the Q1 Financing (restrictions
			subsequently removed on CSE approval of fundamental change)
Total liabilities	(1.3)		Mostly due to repayment of promissory notes payable from proceeds of
			Q1 Financing
Equity	9.5		Increase primarily reflects Q1 Financing, See Consolidated Statements of
			Changes in Shareholders’ Equity (Deficiency)

LIQUIDITY AND CAPITAL RESOURCES

Readers should refer to Note 1, Going Concern, of the Financial Statements.

During the quarter, GABY completed the Q1 Financing for aggregate gross proceeds of $12.5 million. The non-brokered private placement resulted in issuance of 80,140,144 units (“ Units ”) at $0.05 per Unit with each Unit comprised of one common share of GABY and one warrant (“ Warrant ”) to purchase one common share of GABY for $0.09 of which $3.8 million was used immediately to settle certain promissory notes, convertible debentures payable and other amounts as described in the subsequent events note of the Annual Financial Statements. The brokered private placement resulted in the issuance of 172,929,123 subscription receipts at $0.05 per receipt and will convert into the same number of common shares and Warrants on June 5, 2021. The net proceeds from the brokered private placement were held in escrow pending regulatory approval of the Miramar Transaction by the CSE and were reflected as restricted cash of $8.2 million as at March 31, 2021. Subsequent to quarter end, the Miramar Transaction was approved by the CSE, the cash was released from escrow and USD 5 million (CAD 6.3 million) was paid to the Miramar shareholders pursuant to closing of the Miramar Transaction. The remaining funds from the Q1 Financing will be used for the pro forma business plan of the Corporation and general corporate purposes.

For the three months ended March 31, 2021 the Corporation had a net loss of $2.5 million and negative cash flow from operations of $2.3 million, which included $1.1 million of transaction costs associated with the Miramar Transaction and associated regulatory approval. As at March 31, 2021 working capital amounted to $1.5 million, of which subsequent thereto, $6.3 million of restricted cash was used for the cash portion of the Miramar Transaction. The cash remaining from the Q1 Financing and cash flow generated from the merger with Mankind will be used in part to fund the future operations of the Corporation and to service interest payments on the Notes as described below. In addition, management believes it will harvest further synergies from the acquisition of Miramar, including increased revenue generation from onboarding of additional third-party brands to its distribution and manufacturing platform, reaping of additional margins

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GABY Inc.

Management’s Discussion & Analysis March 31, 2021 and 2020

on its proprietary brands through its multi- vertical infrastructure which spans from manufacturing to retail, and streamlining of shared overhead costs. Management believes this, in conjunction with prudent management of working capital, will enable GABY to support operations over the next year and beyond.

The Notes issued April 1, 2021 in respect of the Miramar Transaction have a term of 7 years, an annual coupon rate of 10% with balloon payments every 24 months of USD 5 million and a final balloon payment of USD 10.5 million on maturity. Quarterly interest payments are limited to $500,000. Accrued and unpaid quarterly interest in excess of the limit is brought current every two years in conjunction with the principal payment schedule. GABY may prepay all or any portion of the promissory note without penalty. GABY will need to raise capital to service future balloon payments, to fund growth of its operations and future growth strategy, including future acquisitions as part of its consolidation strategy. While the Corporation has been successful in raising capital in the past, there can be no assurance that it will be able to do so in the future.

Analysis of Cash Flows

In $ Summary of Cash Flows from:	Quarter ended March 31,
	2021 2020 Increase (decrease) in cash over comparativequarter
Cash flow from operations before working capital changes	(2,049,539) (3,519,197) 1,469,658
Workingcapital changes	(256,022) 2,184,216 (2,440,238)
Operating activities Investing activities Financing activities Foreign currencytranslation adjustment	(2,305,561) (1,334,981) (970,580) 1,899 11,177 (9,278) 2,349,619 651,015 1,698,604 (2,026) 27,992 (30,018)
Increase (decrease) in cash Cash,beginningofyear	43,931 (644,797) 688,728 102,808 698,951 (596,143)
Cash,end ofperiod	146,739 54,154 92,585
Restricted cash,end ofperiod	8,158,309 - 8,158,309
Total cash and restricted cash, end of period	8,305,048 54,154 8,250,894

The restricted cash of $8.2 million at the end of the period was released from escrow in April 2021 following regulatory approval of the Miramar Transaction by the CSE.

The increase in cash operating losses before working capital changes of $1.5 million is primarily due the prior quarter’s loss from discontinued operations of $0.8 million and this quarter including an improvement in gross profit of $0.5 million and having lower penalties and interest on past-due taxes of $0.2 million. The increased cash used for working capital of $2.4 million primarily reflects partial use of proceeds from the non-broker private placement to increase investment in inventory and payments of accounts payable and prepaid amounts.

Investing activities were limited in both quarters.

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GABY Inc.

Management’s Discussion & Analysis March 31, 2021 and 2020

Financing activities in Q1 2021 include $12.5 million on the Q1 Financing of which as at March 31, 2021 $8.5 million was held in trust pending regulatory approval (and offset reflected as restricted cash). A portion of the funds from the nonbrokered private placement were used to repay promissory notes, debentures, advances from related parties and other resulting in $2.3 million net cash provided from financing activities. Q1 2020 financing activities of $0.7 million was primarily comprised of issuance of promissory notes.

FINANCIAL INSTRUMENTS

The nature, extent, risk and use of the Corporation’s financial instruments at March 31, 2021 are relatively unchanged from December 31, 2020.

Off-Balance Sheet Arrangements

The Corporation does not have any special purpose entities nor is it party to any material arrangement that would be excluded from the balance sheet.

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GABY Inc. Management’s Discussion & Analysis March 31, 2021 and 2020

RELATED PARTY TRANSACTIONS

All related party transactions are reviewed by the Audit Committee of the Corporation. Note 5 to the Financial Statements sets out the amounts of related party transactions, the nature of which are further outlined as below.

a) Amounts included in Selling, general and administrative expenses Compensation of key management personnel

Certain services of C-suite executives of GABY were provided through companies controlled by certain shareholders (“ Management Entities ”). The C-suite executives, along with the Board have the authority and responsibility for directing and controlling the activities of the Corporation. Compensation for consulting services is paid to these C-suite executives for the provision of their services. The directors do not receive cash compensation for services related to the Board, but along with C-suite executives, receive share-based compensation.

Other expenses

One of the Management Entities is reimbursed for expenses incurred by it in respect of GABY’s business. GABY enters into this related party transaction as the Management Entity is responsible for a number of its investment companies and can often provision the services more economically and efficiently. The Management Entity does not charge a mark-up on these expenses.

Consulting fees

The Corporation receives general capital markets and merger and acquisitions advisory services from a company controlled by a close family member of a director and officer for $15,000 per month. The Corporation has the option to pay for the services in cash or common shares and has issued both in the past depending on its liquidity.

Rent included in SG&A expenses

Starting in October of 2018, GABY sublet office space on a month-to month basis from an entity controlled by an officer and director of GABY. The entity charges rent based on the actual rent paid by it in total apportioned to GABY and others based on the percentage of square footage occupied by each party. With the move of all of GABY’s operations to California in March of 2020, effective April 1, 2020, GABY no longer leases this office space.

Amounts included in interest expense

From time to time, the Corporation is and has been financed by related parties, often to bridge cash flow needs until the Corporation is able to raise equity. This support is not unusual for companies like GABY which are in the initial growth stage of the business life cycle and in the cannabis industry, where often traditional sources of financing are unavailable.

Promissory notes, convertible debentures and accounts payable and accrued liabilities owing to related parties

As is common for venture corporations in early stages of the business life cycle, the founder, family and directors often provide bridge financing and may also defer compensation and incur out-of-pocket expenses on behalf of the corporation to support operations. With the completion of the Q1 Financing, the promissory notes and convertible debentures outstanding at December 31, 2020 of $780,903 and $100,000, respectively, and most of the accounts payable and accrued liabilities outstanding to related parties at December 31, 2021, was repaid.

These related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

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GABY Inc. Management’s Discussion & Analysis March 31, 2021 and 2020

CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION

The Corporation adopted no new accounting policies during the quarter.

VOTING SECURITIES AND SECURITIES CONVERTIBLE INTO VOTING SECURITIES OUTSTANDING

As of the date of the MD&A, GABY had outstanding:

		Number of
	Number of	Common Shares
	instruments	Issuable upon
	outstanding as of	Conversion or
Designation of Securities	date of MD&A1	Exercise
Common Shares	483,003,095	483,003,095
Warrants	118,094,637	118,094,637
Broker Warrants –expiring June 2021	4,522,634	6,783,951
Options	6,165,000	6,165,000
Restricted Share Units	23,375,000	23,375,000
Subscription Receipts	172,929,123	345,858,246
Broker Warrants – issued February2021	7,992,569	15,985,138
Total Fully Diluted Capital		999,265,067

(1) Reflects 165,069,243 common shares (mostly in respect of the Miramar Transaction) and 200,000 Warrants issued subsequent to March 31, 2021

RISK FACTORS

Readers should refer to Risk Factors in the Corporation’s December 31, 2020 MD&A.

ISSUERS WITH UNITED STATES CANNABIS-RELATED ACTIVITIES

Canadian Securities Administrators Staff Notice 51-352 (Revised) – Issuers with U.S. Marijuana-Related Activities (“Staff Notice 51-352”) provides specific disclosure expectations for issuers that currently have, or are in the process of developing, cannabis-related activities in the USA as permitted within a particular state's regulatory framework.

In accordance with Staff Notice 51-352, the Corporation will evaluate, monitor and reassess the disclosure contained herein, and any related risks, on an ongoing basis and the same will be supplemented, amended and communicated to investors in public filings, including in the event of government policy changes or the introduction of new or amended guidance, laws or regulations regarding marijuana regulation. As a result of the Corporation’s direct involvement in distribution of Cannabis edibles (as described herein), the Corporation is subject to Staff Notice 51-352 and accordingly provides the following disclosure.

Nature of involvement and exposure to USA cannabis-related activities

As of March 31, 2020, the Corporation had direct involvement in USA cannabis-related activities through its 100% owned subsidiary, Sonoma Pac, which holds a Type 11 (as described below) cannabis distribution license for the State of California issued by the CBCC.

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Effective April 1, 2021, GABY acquired Miramar and its subsidiary, Wild West Industries, Inc. (“Wild West”), which had involvement and exposure to USA-cannabis related activities as follows:

In June 2015, the founders of Miramar received a conditional use permit from the City of San Diego to operate a medical marijuana consumer cooperative. Following the passage of the Adult Use of Marijuana Act in 2016, the City of San Diego announced that its licensed dispensaries would be allowed to sell adult-use cannabis as soon as was permissible under California law. The City also allowed local permittees to begin operating for-profit. On January 1, 2018, Miramar began adult-use cannabis sales alongside offering medical cannabis to its customers. Miramar received its annual provisional license for its Type 10 cannabis retail outlet operations in July 2019. In December 2020, Miramar renewed its conditional use permit for an additional five years.

In 2019, Miramar acquired Wild West, a licensed distributor and manufacturer of cannabis products in California. Wild West holds a provisional annual license for Type 6 (non-volatile) manufacturing issued by the Department of Public Health of the State of California, and a provisional annual license (Type 11) for distribution of adult-use and medicinal cannabis issued by the CBCC.

Regulatory Overview

Pursuant to the above-mentioned involvement in USA cannabis-related activities, the Corporation derives and will continue to derive a substantial portion of its revenues from the cannabis industry in the state of California, which industry is illegal under USA federal law. While some states in the USA have authorized the use and sale of cannabis, it remains illegal under federal law and the approach to enforcement of USA federal laws against cannabis is subject to change. Because the Corporation engages in cannabis-related activities in the USA, it assumes certain risks due to conflicting state and federal laws. The federal law relating to cannabis could be enforced at any time and this would put the Corporation at risk of being prosecuted and having its assets in the USA seized.

To GABY’s knowledge, presently 35 states, four out of five permanently inhabited USA territories, as well as the District of Columbia, have legalized medical cannabis. Thirteen other states have laws that limit THC content, for the purpose of allowing access to products that are rich in CBD, a non-psychoactive component of cannabis. The recreational use of cannabis is legal in 14 states, the District of Columbia, the Northern Mariana Islands, and Guam. Another 16 states and the U.S. Virgin Islands have decriminalized its use. Notwithstanding the foregoing, marijuana remains illegal under USA federal law with marijuana listed as a Schedule 1 drug under the United States Controlled Substances Act of 1970, as amended (the "Controlled Substances Act").

The USA federal government regulates drugs through the Controlled Substances Act, which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug. Under USA federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the USA, and a lack of accepted safety for the use of the drug under medical supervision. The U.S. Food and Drug Administration has not approved marijuana as a safe and effective drug for any indication.

In August 2013, the US administration attempted to address the inconsistencies between federal and state regulation of cannabis and issued the Cole Memorandum ("Cole Memorandum"), which outlined certain priorities for the Department of Justice ("DOJ") relating to the prosecution of cannabis offences. The Cole Memorandum instructed the DOJ to not prosecute violations of federal drugs laws related to cannabis activity in states where laws had been enacted legalizing cannabis in some form and where strong and effective regulatory and enforcement systems to control the cultivation, processing, distribution, sale and possession of cannabis had been implemented. The DOJ did not provide (and has not provided since) specific guidelines for what regulatory and enforcement systems would be deemed sufficient under the Cole Memorandum. In light of limited investigative and prosecutorial resources, the Cole Memorandum concluded that

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the DOJ should be focused on addressing only the most significant threats related to cannabis, a non-exhaustive list of which was enumerated therein.

In January 2018, former Attorney General Sessions rescinded the aforementioned Cole Memorandum and directed all US Attorneys to enforce the laws enacted by Congress by following well-established principles when pursuing prosecutions related to cannabis activities (the "Sessions Memorandum"). There can be no assurance that the federal government will not enforce federal laws relating to cannabis in the future. As a result of the Sessions Memorandum, federal prosecutors are now free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities despite the existence of state-level laws that may be inconsistent with federal prohibitions. No discretion was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities and it is uncertain how active U.S. federal prosecutors will be in relation to such activities.

In 2014, following the Cole Memorandum, the Financial Crimes Enforcement Network under the U.S. Treasury Department notified banks that it would not seek enforcement of money laundering laws against banks that service cannabis companies operating under state law, provided strict due diligence and reporting standards are met. While most banks continue to decline to operate under such strict requirements, a number of local banks have undertaken to service the cannabis industry with basic financial services. Since 2014, the U.S. Congress has annually passed appropriations bills that include a provision, known as the Rohrabacher Farr Amendment, now known as the Leahy Amendment (the "Leahy Amendment"), which prohibits expenditure of federal budget resources on the enforcement of federal controlled substances laws that interfere with state medical cannabis programs.

While there is a risk that these US Attorneys and the current administration at large may seek to enforce federal drug laws against use that is now permitted under state law, as described below, the Leahy Amendment remains in force, preventing the expenditure of Department of Justice budgetary resources on such enforcement against medical cannabis companies. Additionally, Senators Gardner (R-CO) and Warren (D-MA) introduced legislation that would amend the federal Controlled Substances Act to exempt state-legal marijuana activity from its provisions. Public support in the USA for legalization of medical and adult-use cannabis continues to grow, with a majority of the public supporting legalization, which continues to spread under state law.

In July 2020, a House subcommittee introduced a base appropriations bill with the Leahy Amendment included. The Leahy Amendment was then renewed through a series of stopgap spending bills throughout 2020 and on December 27, 2020 it was renewed effective through September 30, 2021. The Cole Memorandum and the Leahy Amendment gave medical cannabis operators and investors in states with legal regimes greater certainty regarding federal enforcement as to establish cannabis businesses in those states; however, should the Leahy Amendment not be renewed in subsequent spending bills, there can be no assurance that the federal government will not seek to prosecute cases involving cannabis businesses that are otherwise compliant with state law. Such potential proceedings could involve significant restrictions being imposed upon GABY or third parties, while diverting the attention of key executives. Such proceedings could have a material adverse effect on GABY's business, revenues, operating results and financial condition as well as GABY's reputation, even if such proceedings were concluded successfully in favor of GABY.

While the Sessions Memorandum has introduced some uncertainty regarding federal enforcement, the cannabis industry continues to experience growth in legal medical and adult- use markets across the USA. USA Attorney General Jeff Sessions resigned on November 7, 2018. As of his resignation, Matthew Whitaker was the acting USA Attorney General until William Barr was appointed as the USA Attorney General on February 14, 2019. In an April 10, 2019 Senate Appropriations Subcommittee meeting to discuss the Justice Department's budget 2020, in response to a question about his position on the proposed Strengthening the Tenth Amendment Through Entrusting States (STATES) Act, Attorney General Barr stated: "Personally, I would still favor one uniform federal rule against marijuana," "But if there is not sufficient consensus to obtain that then I think the way to go is to permit a more federal approach so states can, you know, make their own decisions within the framework of the federal law. So we're not just ignoring the enforcement of federal law." The STATES

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Act, if it were to pass, would allow states to determine their own approaches to marijuana. Attorney General Barr said the legislation is still being reviewed by his office but that he would "much rather... the approach taken by the STATES Act than where we currently are."

On January 7, 2021, President Joe Biden announced Judge Merrick Garland as his nominee for the next U.S. Attorney General. On January 20, 2021, Robert M. Wilkinson replaced Jeffrey A. Rosen as the Acting Attorney General while Judge Garland seeks confirmation from the U.S. Senate. Neither interim Attorney General Jeffrey A. Rosen nor Robert M. Wilkinson have provided a clear policy directive for the United States as it pertains to state-legal marijuana-related activities. On March 11, 2021, Judge Garland was sworn in as Attorney General of the United States. It is not yet known whether the Department of Justice under President Biden and Attorney General Garland will re-adopt the Cole Memorandum or announce a substantive marijuana enforcement policy. It is unclear what impact this development will have on USA federal government enforcement policy. Despite the expanding market for legal cannabis, traditional sources of financing, including bank lending or private equity capital, is lacking which can be attributable to the fact that cannabis remains a Schedule I substance under the Controlled Substances Act. These traditional sources of financing are expected to remain scarce until the federal government legalizes cannabis cultivation and sales.

Compliance with State Licensing and Regulatory Frameworks

The Corporation will continue to obtain legal advice from its counsel regarding compliance with applicable state regulatory frameworks and potential exposure and implications arising from federal law of the USA.

Program for Monitoring Compliance and Disclosure of Material Non-Compliance

The following sections present an overview of market and regulatory conditions for the cannabis industry in USA states which the Corporation is directly involved, of which at the date of this document comprises the state of California. Although the Corporation's activities are compliant with applicable state and local law in the USA, strict compliance with such state and local laws with respect to cannabis may neither absolve the Corporation of liability under USA federal law, nor may it provide a defense to any federal proceeding which may be brought against the Corporation.

California Regulatory Landscape

In 1996, California voters approved Proposition 215 (the “Compassionate Use Act”), allowing physicians to recommend cannabis for an inclusive set of qualifying conditions including chronic pain. The law established a not-for-profit patient/caregiver system, but there was no state licensing authority to oversee the businesses that emerged as a result of the system. In September of 2015, the California legislature passed three bills, collectively known as the “Medical Marijuana Regulation and Safety Act”. In 2016, California voters passed “The Adult Use of Marijuana Act”, which legalized adult-use cannabis for adults 21 years of age and older and created a licensing system for commercial cannabis businesses. On June 27, 2017, Governor Brown signed SB-94 into law. SB-94 combined California’s medicinal and adult-use cannabis regulatory frameworks into one licensing structure under the Medicinal and Adult-Use of Cannabis Regulation and Safety Act (“MAUCRSA”).

Pursuant to MAUCRSA, the three agencies that regulate cannabis at the state level are: (1) CalCannabis, a division of the California Department of Food and Agriculture, which issues licenses to cannabis cultivators; (2) the California Department of Public Health, via the Manufactured Cannabis Safety Branch, which issues licenses to cannabis manufacturers; and (3) the California Department of Consumer Affairs, via its agency the CBCC, which issues licenses to cannabis distributors, testing laboratories, retailers and micro-businesses. These agencies also oversee the various aspects of implementing and maintaining California's cannabis landscape, including the statewide track and trace system.

In May 2018, the California Department of Consumer Affairs, the California Department of Public Health and the California Department of Food and Agriculture proposed to re-adopt their emergency cannabis regulations. The three licensing

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authorities proposed changes to the regulatory provisions to provide greater clarity to licensees and to address issues that had arisen since the emergency regulations went into effect in December 2017. One of the included changes was that applicants may now complete one license application which allow for both medical and adult-use cannabis activity. These emergency cannabis regulations were officially readopted and came into effect in June 2018. In January 2019, California's three state cannabis licensing authorities announced that the Office of Administrative Law officially approved state regulations for cannabis businesses. The final cannabis regulations took effect immediately and superseded the previous emergency regulations.

To operate legally under state law, cannabis operators must obtain a state license and local approval. Local authorization is a prerequisite to obtaining state licensure from all three state licensing agencies, and local governments are permitted to prohibit or otherwise regulate the types and number of cannabis businesses allowed in their locality. California has not set a limit on the number of state licenses an entity may hold, unlike other states that have restricted how many cannabis licenses an entity may hold in total or for various types of cannabis activity. Although vertical integration across multiple license types is allowed under MAUCRSA, testing laboratory licensees may not hold any other licenses aside from a laboratory license. There are also no residency requirements for ownership under MAUCRSA.

As of the reporting date of March 31, 2021, the Corporation was directly involved in the distribution of cannabis in California through Sonoma Pac. Sonoma Pac's business has been conducted in substantial compliance with the regulatory framework enacted by the State of California. Sonoma Pac has been subject to site visits by the CBCC during 2020 and all minor non-conformances noted have been rectified as of the date of this document.

As of April 1, 2021, the Corporation is further involved in the cannabis-related activities in the state of California through its acquisition of Miramar. Miramar is directly involved in operating a cannabis dispensary, through its Type 10 cannabis retail outlet operations, and through its subsidiary, Wild West, which holds a provisional annual license for Type 6 (nonvolatile) manufacturing issued by the Department of Public Health of the State of California, and a provisional annual license for distribution of adult-use and medicinal cannabis issued by the CBCC. Miramar has represented to the Corporation as of the date of this document, that its business, including Wild West, was conducted in substantial compliance with the regulatory framework enacted by the State of California.

Below is an overview of some of the principal license types issued in California (each of which can be issued with a Medical (M-Class) or Adult-Use (A-Class) designation):

Type 7: authorized to manufacture cannabis products using volatile solvent extractions.

Type 6: authorized to manufacture cannabis products using mechanical or non-volatile solvent extractions.

Type N: authorized to manufacture cannabis products (other than extracts or concentrates) using infusion processes but does not conduct extractions.

Type P: authorized to only package or repackage cannabis products or relabel the cannabis product container.

Each of the above manufacturing license types is inclusive of the types in the list below it. For example, a Type 7 licensee would be able to perform Type 6, N or P tasks. A Type 6 license could perform Type N or P tasks. A Type N licensee would be able to perform Type P tasks. In addition to these four licenses, MCSB is developing a fifth license type, Type S, for shared-use manufacturing facilities. This license type will be for businesses and facility owners that alternate use of a manufacturing premises.

Type 8: authorized to test the chemical composition of cannabis and cannabis products.

Type 9: authorized to conduct retail cannabis sales exclusively by delivery.

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Type 10: authorized to sell cannabis goods to customers.

Type 11: authorized to transport and store cannabis goods purchased from other licensed entities and sell them to licensed retailers, and responsible for laboratory testing and quality assurance to ensure packaging and labeling compliance.

Type 13: authorized to transport cannabis goods between licensed cultivators, manufacturers, and distributors.

Local Licensure, Zoning and Land Use Requirements

To obtain a state license, cannabis operators must first obtain local authorization, which is a prerequisite to obtaining state licensure. All three state regulatory agencies require confirmation from the applicable locality that an applicant is in compliance with local requirements and has either been granted authorization to, upon state licensure, continue previous cannabis activities or commence cannabis operations. One of the basic aspects of obtaining local authorization is compliance with all local zoning and land use requirements. Local governments are permitted to prohibit or otherwise regulate the types and number of cannabis businesses allowed in their locality. Some localities have limited the number of authorizations an entity may hold in total or for various types of cannabis activity. Others have tiered the authorization process, granting the initial rounds of local authorization to applicants that previously conducted cannabis activity pursuant to the Compassionate Use Act or those that meet the locality’s definition of social equity. Sonoma Pac was granted full zoning and use permits by Sonoma County on March 14, 2019. Miramar and Wild West have represented to the Corporation that they each hold full zoning and use permits from the City of San Diego.

Record-Keeping and Continuous Reporting Requirements

California's state license application process additionally requires comprehensive criminal history, regulatory history and personal disclosures for all owners. Any criminal convictions or civil penalties or judgments occurring after licensure must promptly be reported to the regulatory agency from which the licensee holds a license. State licenses must be renewed annually. Disclosure requirements for local authorization may vary, but generally tend to mirror the State of California's requirements. Licensees must also keep detailed records pertaining to various aspects of the business for up to seven years. Such records must be easily accessible by the regulatory agency from which the licensee holds a license. Additionally, licensees must record all business transactions, which must be uploaded to METRC, the state-wide traceability system selected by California to track commercial cannabis activity.

Operating Procedure Requirements

Applicants must submit standard operating procedures (“T&T System”) describing how the operator will, among other requirements, secure the facility, manage inventory, comply with California's seed-to-sale tracking requirements, dispense cannabis, and handle waste, as applicable to the license sought. Once the standard operating procedures are determined compliant and approved by the applicable state regulatory agency, the licensee is required to abide by the processes described and seek regulatory agency approval before any changes to such procedures may be made. Licensees are additionally required to train their employees on compliant operations and are only permitted to transact with other legal and licensed businesses. Each licensee is required to assign an account manager to oversee the T&T System. The account manager must be fully trained on the system and is accountable to record all commercial cannabis activities accurately and completely. The licensee should correct any data that is entered into the T&T System in error within three business days of discovery of the error.

Site Visits & Inspections

As a condition of obtaining a state license, operators must consent to random and unannounced inspections of the commercial cannabis facility, as well as the facility's books and records to monitor and enforce compliance with state law. Many localities have also enacted similar standards for inspections, and the state has already commenced site-visits and compliance inspections for operators who have received state temporary or annual licenses.

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Sonoma Pac has been subject to site visits by the CBCC during 2020 and all minor non-conformances noted have been rectified as of the date of this document. Miramar and Wild West each receive annual site visits from the CBCC.

Retail Compliance

California requires that certain warnings, images, and content information to be printed on all marijuana packaging. CBCC regulations also include certain requirements about tamper-evident and child-resistant packaging. Both distributors and retailers are responsible for confirming that products are properly labeled and packaged before they are sold to a customer.

Corporation’s Compliance Procedures

Since its inception, Sonoma Pac has retained industry experts in California cannabis law as local outside counsel to oversee and monitor compliance with USA state law on an ongoing basis. These experts in the field keep Sonoma Pac fully informed of regulatory changes and recommend standard operating procedures to facilitate the implementation and maintenance of compliant operations, required tracking and license reporting. The Corporation will continue to work closely with the advisors to develop and improve its internal compliance program and will defer to their legal opinions and risk mitigation guidance regarding California’s complex regulatory framework.

The internal compliance program, including the update of operational procedures and use of checklists, requires continued monitoring by managers and executives of the Corporation to ensure all operations conform with legally compliant standard operating procedures. In anticipation of future growth, the Corporation is investigating a number of software solutions developed specifically for the cannabis industry to allow for automation of both internal as well as third-party compliance auditing, covering all state and municipal, facility and operational requirements to maintain licensing criteria. Sonoma Pac is required to report and disclose to the Corporation all instances of non-compliance, regulatory, administrative, or legal proceedings that may be initiated against them. Sonoma Pac has been in compliance with the regulatory requirements as they have unfolded throughout 2018, 2019 and 2020. Miramar and Wild West have represented to the Corporation that they are in compliance with regulatory requirements.

Service Providers

As a result of any adverse change to the approach in enforcement of USA cannabis laws, adverse regulatory or political change, additional scrutiny by regulatory authorities, adverse change in public perception in respect of the consumption of marijuana or otherwise, third party service providers to the Corporation could suspend or withdraw their services, which may have a material adverse effect on the Corporation’s business, revenues, operating results, financial condition or prospects.

Ability to Access Capital

The Corporation requires equity and/or debt financing to support ongoing operations, to undertake capital expenditures or to undertake acquisitions or other business combination transactions. There can be no assurance that additional financing will be available to the Corporation when needed or on terms which are acceptable. The Corporation’s inability to raise financing through traditional banking to fund ongoing operations, capital expenditures or acquisitions could limit its growth and may have a material adverse effect upon the Corporation’s business, results of operations, financial condition or prospects.

If additional funds are raised through further issuances of equity or convertible debt securities, existing Corporation shareholders could suffer some level of dilution.

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Restricted Access to Banking

In February 2014, the Financial Crimes Enforcement Network (“FinCEN”) bureau of the USA Treasury Department issued guidance (which is not law) with respect to financial institutions providing banking services to cannabis businesses, including burdensome due diligence expectations and reporting requirements. This guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the Department of Justice, FinCEN or other federal regulators. Thus, most banks and other financial institutions in the USA do not appear to be comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which can be amended or revoked at any time by the federal government. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, the Corporation may have limited or no access to banking or other financial services in the USA. The inability or limitation in the Corporation’s ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for the Corporation to operate and conduct its business as planned or to operate efficiently.

Anti-Money-Laundering Laws and Regulations

The Corporation is subject to a variety of laws and regulations domestically and in the USA that involve money laundering, financial recordkeeping and proceeds of crime, including the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), Sections 1956 and 1957 of U.S.C. Title 18 (the Money Laundering Control Act), the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as amended and the rules and regulations thereunder, the Criminal Code (Canada) and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the USA and Canada.

In the event that any of the Corporation’s operations, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such operations in the USA were found to be in violation of money laundering legislation or otherwise, 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 or otherwise jeopardize the ability of the Corporation to declare or pay dividends, effect other distributions or subsequently repatriate such funds back to Canada. Furthermore, while there are no current intentions to declare or pay dividends on the Corporation’s common shares in the foreseeable future, in the event that a determination was made that the Corporation’s proceeds from operations (or any future operations or investments in the USA) could reasonably be shown to constitute proceeds of crime, the Corporation may decide or be required to suspend declaring or paying dividends without advance notice and for an indefinite period of time.

Heightened Scrutiny by Regulatory Authorities

For the reasons set forth above, the Corporation’s existing operations in the USA, and any future operations or investments of the Corporation, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada. As a result, the Corporation may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on the Corporation’s ability to operate or invest in the USA or any other jurisdiction, in addition to those described herein.

Balance sheet and operating statement exposure to USA cannabis-related activities

As at March 31, 2021, most of GABY’s financial statement line items are highly related to USA cannabis related activities and as of April 1, 2021, with the acquisition of Miramar, almost all of its activities and applicable financial statement line items will be USA cannabis related.

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NON-GAAP DISCLOSURE

Pro forma revenue, pro forma gross profit, pro forma Adjusted EBITDA from continuing operations and Adjusted EBITDA from continuing operations do not have any standardized meaning as prescribed by IFRS, and, therefore, are considered to be non-GAAP measures. Management believes that, in addition to revenue and net loss, adjusted EBITDA from continuing operations provides a measure of operating cash flows before servicing debt, income taxes, capital expenditures and other gains and losses. Management believes Pro Forma Revenue, Pro Forma Gross Profit and Adjusted Pro Forma EBITDA from continuing operations provide insight into the future operations of GABY. These measures do not have a standardized meaning and may not be comparable to similar measures presented by other issuers and should not be viewed as a substitute for measures reported under IFRS.

Below is a reconciliation of the non-GAAP measures highlighted in green in the following table:

	Q1 2021 of Miramar1 Q1 2021 GABY Q1 2021 Pro forma
	USD CAD2 CAD CAD
Revenue	7,034,403 8,907,665 3,411,901 12,319,566
Gross profit Gross margin Adjustments to gross profit to arrive at Adjusted EBITDA from continuing operations: Subtract SG&A expenses Add back Depreciation of plant and equipment included in Miramar’s SG&A	3,379,921 4,279,994 235,240 4,515,234 48% 48% 7% 37% (2,083,623) (2,638,492) (1,111,102) (3,749,594) 185,628 235,061 - 235,061
Adjusted EBITDA from continuingoperations	1,481,926 1,876,563 (875,862) 1,000,701

1Revenue, gross profit, SG&A and depreciation of plant and equipment as reported in USD in Miramar’s Condensed Interim Consolidated Financial Statements (UNAUDITED) for the three months ended December 31, 2020 included in GABY’s CSE Form 2A Listing Statement filed on SEDAR April 21, 2021.

2USD in preceding column translated using average foreign exchange rate of 1.2663 CAD per USD used in translating GABY’s Q1 2021 USD income statement line items.

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This MD&A contains “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities laws (“ forward-looking statements ”). Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on management’s current beliefs, expectations or assumptions regarding the future of the business, future plans and strategies, operational results and other future conditions of the Corporation. In addition, the Corporation may make or approve certain statements in future filings with Canadian securities regulatory authorities, in press releases, or in oral or written presentations by representatives of the Corporation that are not statements of historical fact and may also constitute forward-looking statements. All statements, other than statements of historical fact, made by the Corporation that address activities, events or developments that the Corporation expects or anticipates will or may occur in the future are forward-looking statements, including, but not limited to, statements preceded by, followed by or that include words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words and includes, among others, information regarding: expectations for the effects of any transactions; expectations for the potential benefits of any transactions; statements relating to the business and future activities of, and developments related to, the Corporation after the date of this MD&A, including such things as future business strategy, competitive strengths, goals, expansion and growth of the Corporation’s business, operations and plans; expectations that planned acquisitions will be completed, including but not limited to other potential acquisition(s); expectations that licenses applied for will be obtained; potential future legalization of adult-use and/or medical cannabis under USA federal law; expectations of market size and growth in the USA, California and such other states in which the Corporation has expressed desire to operate in; expectations for other economic, business, regulatory and/or competitive factors related to the Corporation or the cannabis industry generally; and other events or conditions that may occur in the future. Forward-looking statements may relate to future financial conditions, results of operations, plans, objectives, performance or business developments. These statements speak only as of and at the date they are made and are based on information currently available and on the then current expectations. Holders of securities of the Corporation are cautioned that forward-looking statements are not based on historical facts but instead are based on reasonable assumptions and estimates of management of the Corporation at the time they were provided or made and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation, as applicable, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, including, but not limited to, risks and uncertainties related to: the available funds of the Corporation and the anticipated use of such funds; the availability of financing opportunities; legal and regulatory risks inherent in the cannabis industry; risks associated with economic conditions, dependence on management; risks relating to USA regulatory landscape and enforcement related to cannabis, including political risks; risks relating to anti-money laundering laws and regulation; other governmental and environmental regulation; public opinion and perception of the cannabis industry; risks related to contracts with thirdparty service providers; risks related to the enforceability of contracts; reliance on the expertise and judgment of senior management of the Corporation, and ability to retain such senior management; risks related to proprietary intellectual property and potential infringement by third parties; risks relating to the management of growth; increasing competition in the industry; risks associated to cannabis products manufactured for human consumption including potential product recalls; reliance on key inputs, suppliers and skilled labor; cybersecurity risks; ability and constraints on marketing products; fraudulent activity by employees, contractors and consultants; tax and insurance related risks; risks related to the economy generally; risk of litigation; conflicts of interest; risks relating to certain remedies being limited and the difficulty of enforcement of judgments and effecting service outside of Canada; risks related to future acquisitions or

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dispositions; sales by existing shareholders; limited research and data relating to cannabis; as well as those risk factors discussed under “Risk Factors” described in the Annual Financial Statements.

The purpose of forward-looking statements is to provide the reader with a description of management’s expectations, and such forward-looking statements may not be appropriate for any other purpose. In particular, but without limiting the foregoing, disclosure in this MD&A as well as statements regarding the Corporation’s objectives, plans and goals, including future operating results and economic performance may make reference to or involve forward-looking statements. Although the Corporation believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Certain of the forward-looking statements and other information contained herein concerning the cannabis industry, its medical, adult-use and hempbased CBD markets, and the general expectations of the Corporation concerning the industry and the Corporation’s business and operations are based on estimates prepared by the Corporation using data from publicly available governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Corporation believes to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. While the Corporation is not aware of any misstatement regarding any industry or government data presented herein, the cannabis industry involves risks and uncertainties that are subject to change based on various factors.

A number of factors could cause actual events, performance or results to differ materially from what is projected in the forward-looking statements. You should not place undue reliance on forward-looking statements contained in this MD&A. Such forward-looking statements are made as of the date of this MD&A. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The Corporation’s forward-looking statements are expressly qualified in their entirety by this cautionary statement.

i See Non-GAAP Disclosure

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