HYLQ STRATEGY CORP — Management Reports 2020

Dec 29, 2020

Introduction

This management's discussion and analysis ("MD&A"), which is current to December 24, 2020, is management's assessment of the operations and the financial results of Braingrid Limited ("Braingrid", "BGRD" or the "Company"). This MD&A should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and related notes for the nine-month period ended October 31, 2020, prepared in accordance with International Financial Reporting Standards ("IFRS"). All figures are in Canadian dollars unless stated otherwise.

This discussion contains forward-looking statements that are historical in nature and involves risks and uncertainties. Forward-looking statements are not a guarantee as to Braingrid's future results as there are inherent difficulties in predicting future results. This MD&A includes, but is not limited to, forward looking statements. Management considers the assumptions on which these forward-looking statements are based to be reasonable at the time the statements were prepared. Accordingly, actual results could differ materially from those expressed or implied in the forward-looking statements.

Caution Note Regarding Forward-Looking Statements

Certain statements contained in this MD&A and in certain documents incorporated by reference in this MD&A, contain "forward-looking information" for the purposes of applicable Canadian securities laws (the "forwardlooking statements"). All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues", "forecasts", "projects", "predicts", "intends", "anticipates" or "believes", or variations of, or the negatives of, such words and phrases, or statements that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements, including those risk factors identified below in the section "Risk Factors. The forward-looking statements in this MD&A speak only as of the date of this MD&A unless an alternative date is specified in such statement. Certain forward-looking statements contained in this MD&A relate to the Company's ability to continue its business activities and to execute on its business plan as currently anticipated. These forward look-statements as well as the other forward-looking statements contained herein, are based upon certain material assumptions, including the Company's expectation that its costs will remain consistent with the costs currently anticipated and that financing through equity raises, debt financing or a combination thereof will continue to be available to the Company and on terms anticipated and reasonably acceptable to the Company. The risk factors identified in the "Risk Factors" section below may cause such assumptions and/or the forward-looking statements to be untrue.

Inherent in forward-looking statements are risks, uncertainties, and other factors beyond the Company's ability to predict or control. Please see the "Risk Factors" section included in this MD&A. Readers are cautioned that actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A.

The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements, unless required by law.

Description of Business

Braingrid is an agricultural technology and services company that provides monitoring and cultivation analytics using its affordable, versatile, and easy-to-install sensor platform, capturing critical real-time data that is used to provide alerts, information and analytical reports to farmers, particularly licensed cannabis producers, to increase revenues, decrease costs (including energy) and reduce risks.

Operations

Braingrid has commercialized the "Sentroller" which in the case of cannabis, is installed in licensed cannabis facilities throughout North America. These Sentrollers connect to sensors, which measure environmental conditions such as temperature, humidity, and CO2. This data is then communicated wirelessly within the facility to the Synapse, a gateway developed and sold by Braingrid, which in turn sends the data via cellular modem to Braingrid's internet-based servers. This data can then be accessed by customers via online dashboards and reports. In addition, the platform can send email alarms to the customer when out of bounds conditions are detected. The Sentroller is an extremely versatile device capable of interfacing with a wide variety of third-party sensors.

Since the commercial launch of the Sentroller in 2015, the Company has deployed over 200 Sentrollers at over twelve installations. The Company currently focuses its operations towards precision agriculture for cannabis producers. The Company is currently focused on maintaining existing customer relationships and strategic alternatives.

Key Developments during Nine-month Period Ending October 31, 2020

Shares for Debt Settlement

On April 9, 2020, the Company and the European High Growth Opportunities Securitization Fund (the "Fund") entered into a shares for debt settlement agreement (the "Agreement"), pursuant to which Fund has agreed to accept 78,300,000 common shares of the Company ("Shares"), at a deemed issued price of $0.01 per Share, in full settlement of $783,000 of indebtedness owing to Fund by the Company (the "Debt Settlement").

Upon closing the Debt Settlement, Fund beneficially owned and controlled an aggregate of 78,300,000 Shares and 14,875,000 Warrants, representing, on a partially diluted basis, approximately 60.62% of the outstanding Shares.

Staff Changes

On July 31, 2020, the Company announced that Michael Kadonoff had left the Company as President, Chief Executive Officer, and director.

In connection with the Debt Settlement, Andrew Parks and Ron McKenna were appointed to the Company's board of directors to fill the vacancies left by the earlier departures of David Posner and Sanford Liu.

On April 16, 2020 Damian Lopez was appointed as an independent member of the Company's Board of Directors. Concurrent with the appointment of Mr. Lopez, Eric Klein and David Argudo resigned as Directors of the Company.

On August 28, 2020 Braingrid announced that Andrew Parks was appointed Interim Chief Executive Officer.

Promissory Note

On June 24, 2020, the Fund advanced a promissory note to Braingrid in the principal amount of $50,000, which together with interest in the amount 4% is due on August 22, 2020 (the "Promissory Note").

On August 27, 2020, the due date of the Promissory Note was extended to October 31, 2020.

On October 28, 2020, the Fund advanced a promissory note to Braingrid in the principal amount of $60,000 (the "October Promissory Note"), which together with interest in the amount 4% is due on December 31, 2020.

Delay in Filing Financial Statements and Cease-Trade Order

On May 29, 2020, the Company announced that due to the circumstances created by and relating to the COVID-19 pandemic the Company would not be able to file its audited financial statements and management discussion and analysis for the fiscal year ended January 31, 2020 together with officers' certificates relating thereto (collectively, the "Annual Filings") by its usual deadline of June 1, 2020 and was relying on the extended deadline of July 14, 2020 (the "Extended Deadline") allowed by the Ontario Securities Commission (the "OSC") and other members of the Canadian Securities Administrators for "Issuers" in the Canadian securities industry to complete annual and quarterly statutory filings. The Company was not able to meet the extended deadline for its Annual Filings and on July 22, 2020, the OSC issued a "Cease-Trade Order" prohibiting any trading in the Company's securities, whether direct or indirect, by anyone in Ontario or in any other province or territory of Canada. On July 23, 2020 in keeping with the Cease-Trade Order, the Canadian Securities Exchange ("CSE") suspended the Company from trading pursuant to CSE Policy 3. The suspension is considered a Regulatory Halt as defined in National Instrument 23-101 Trading Rules. On August 27, 2020, the Company filed its Annual Filings and, on September 9, 2020 filed its financial statements and management discussion and analysis for the first quarter ending April 30, 2020. The Company's securities were reinstated for trading on October 27, 2020.

Subsequent Events

On November 13, 2020, the Company announced that it had completed a previously announced consolidation of its Shares on the basis of 100 pre-Consolidation Shares for one (1) post-Consolidation Share. The Consolidation reduced the number of outstanding Shares from 138,841,920 to 1,388,419.

On November 26, 2020, the Company announced that Gregory Pepin was appointed to the Company's Board of Directors. Concurrent with the above appointment, Damian Lopez resigned as a member of the Company's Board of Directors.

On November 26, 2020, Braingrid's shares were halted pending the announcement of the proposed change of business announced on November 30, 2020 and will remain halted pending review by the CSE.

On November 30, 2020, the Company announced that it will be pursuing a change of business to an investment company (the "Proposed COB") under the rules of the Canadian Securities Exchange (the "CSE") from a "technology issuer" to an "investment issuer". For additional information on the Proposed COB please refer to the Company's press release dated November 30, 2020.

Trends

Management regularly monitors economic conditions and estimates their impact on the Company's operations and incorporates these estimates in both short-term operating and longer-term strategic decisions. Year to date the equity markets in Canada have been good overall but challenging in the cannabis sector as producers are having difficulty meeting production and revenue expectations, making financing difficult for smaller companies in the cannabis sector. Apart from these and the risk factors noted under the heading "Risk Factors", management is not aware of any other trends, commitments, events, or uncertainties that would have a material effect on the Company's business, financial condition, or results of operations. See "Risk Factors" below.

Selected Quarterly Information

	Q3'21	Q2'21	Q1'21	Q4'20	Q3'20	Q2'20	Q1'20	Q4'19
Revenue	$25,225	$30,416	$36,505	$36,833	$40,935	$42,213	$33,320	$23,931
Net loss	(96,911)	(99,829)	(55,639)	(541,768)	(903,614)	(102,771)	(581,934)	(1,841,456)
Net loss per share – basic anddiluted	(0.00)	(0.00)	(0.00)	(0.01)	(0.02)	(0.00)	(0.01)	(0.045)

Summary of Expenses for the Nine-month Periods Ending October 31, 2020 and October 31, 2019:

	October 31,	2020	October 31,2019
Expenses
Occupancy costs		99,089	82,526
Professional fees		87,093	128,011
Office & general		58,838	105,705
Consulting expenses		42,500	280,214
Salaries & wages		15,000	734,991
Interest expense (income)		5,289	3,757
Computer & internet		4,526	4,208
Bad debt expense		4,232	19,200
Stock based compensation		4,050	(27,438)
Advertising & promotion		1,343	131,879
Transaction costs		-	127,947
Depreciation		-	22,590
Travel		-	7,682
Meals & entertainment		-	2,971
Research & development		-	4,846
Investment tax recovery		-	(190,000)
Total expenses	$321,960		$1,439,089
Other income (expenses)
Fair value gain in derivative liability		-	535,536
Make whole amount		-	(771,340)
Total expenses	$321,960		$1,674,893

Discussion of Operations

Nine-month period ended October 31, 2020 compared to the nine-month period ended October 31, 2019

The Company's net loss totaled $252,379 for the nine-month period ended October 31, 2020, with basic and diluted loss per Share of $0.00. This compares with a net loss of $1,589,237 with basic and diluted loss per Share of $0.03 for the nine-month period ended October 31, 2019. The net loss decreased by $1,336,858 principally because:

• Salaries & wages expense decreased $719,991 for the nine-month period ended October 31, 2020 compared to the nine-month period ended October 31, 2019. The decrease in payroll expense is mainly due to the layoffs that occurred during the first and third quarters of fiscal 2020.
• Consulting expenses decreased $237,714 during the nine-month period ending October 31, 2020 to $42,500 compared to $280,214 of consulting expenses during the nine-month period ending October 31, 2019 as the Company's focus on maintaining existing customer relationships and strategic alternatives reduced the need for outside consultants.
• Advertising and promotion expenses were $1,343 during the nine-month period ending October 31, 2020, a decrease of $130,536 from the nine-month period ending October 31, 2019. The decrease is due to the Company reducing advertising costs as it focused on maintaining existing customer relationships and strategic alternatives.
• Transaction costs were $nil for the nine-month period ending October 31, 2020, compared to $127,947 for the nine-month period ending October 31, 2019, reflecting the financing costs pursuant to the Fund's convertible debenture investment in the Company during the nine-month period ending October 31, 2019.
• The Company realized an investment tax recovery of $nil for Scientific Research and Experimental Development ("SRED") during the nine-month period ending October 31, 2020, a decrease of $190,000 from the nine-month period ending October 31, 2019. The Company received its fiscal 2019 recovery for SRED eligible investments in fiscal 2020. The Company obtained a public listing near the end of fiscal 2019, making it ineligible for SRED credits in fiscal 2020 and fiscal 2021.
• The provision for the Make Whole Amount of $nil during the nine-month period ending October 31, 2020 compared to $771,340 for the nine-month period ending October 31, 2019.
• The fair value gain in derivative liability was $nil for the nine-month period ending October 31, 2020, compared to $535,536 for the nine-month period ending October 31, 2019, reflecting the reduction of the gain in the value of the derivative liability as the convertible debentures were converted into equity subsequent to the nine-month period ending October 31, 2019.

	October 31,	October 31,
	2020	2019
Expenses
Occupancy costs	42,665	27,509
Office & general	32,242	21,621
Consulting expenses	27,500	34,495
Professional fees	5,660	10,783
Stock based compensation	3,600	(38,419)
Computer & internet	2,724	484
Interest expense (income)	2,020	1,169
Bad debt expense	1,832	-
Salaries & wages	-	165,889
Transaction costs	-	84,685
Advertising & promotion	-	30,616
Depreciation	-	7,506
Travel	-	2,136
Research & development	-	1,437
Meals & entertainment	-	449
Investment tax recovery	-	(190,000)
Total expenses	$118,244	$160,360
Other income (expenses)
Make whole amount	-	(771,340)
Total expenses	$118,244	$931,700

Summary of Expenses for the Three-month Periods Ending October 31, 2020 and October 31, 2019:

Discussion of Operations

Three-month period ended October 31, 2020 compared to the three-month period ended October 31, 2019

The Company's net loss totaled $96,911 for the three-month period ended October 31, 2020, with basic and diluted loss per Share of $0.00. This compares with a net loss of $903,614 with basic and diluted loss per Share of $0.02 for the three-month period ended October 31, 2019. The net loss decreased by $806,703 principally because:

• Stock-based compensation was $3,600 for the three-month period ended October 31, 2020 compared to a gain of $38,419 during the three-month period ended October 31, 2019, an increase of $42,019. Previously recognized stock-based compensation was reversed during the three-month period ended October 31, 2019 concurrent with lay-offs that occurred during the three-month period ending October 31, 2019.
• Salaries & wages expense decreased to $nil for the three-month period ended October 31, 2020 compared to $165,889 the three-month period ended October 31, 2019. The decrease in payroll expense is mainly due to the layoffs that occurred during the first and third quarters of fiscal 2020 and Michael Kadonoff leaving the Company during three-month period ending July 31, 2020.
• Transaction costs were $nil for the three-month period ending October 31, 2020, compared to $84,685 for the three-month period ending October 31, 2019, reflecting the financing costs pursuant to the Fund's convertible debenture investment in the Company during the three-month period ending October 31, 2019.
• The Company realized an investment tax recovery of $nil for Scientific Research and Experimental Development ("SRED") during the three-month period ending October 31, 2020, a decrease of $190,000

from the three-month period ending October 31, 2019. The Company received its fiscal 2019 recovery for SRED eligible investments in fiscal 2020. The Company obtained a public listing near the end of fiscal 2019, making it ineligible for SRED credits in fiscal 2020 and fiscal 2021.

• The provision for the Make Whole Amount of $nil during the three-month period ending October 31, 2020 compared to $771,340 for the three-month period ending October 31, 2019.

Cash Flow

As at October 31, 2020, the Company had cash and cash equivalents of $21,342 compared to $17,574 as at January 31, 2020. The increase in cash and cash equivalents of $3,768 from January 31, 2020 was mainly due to the cash invested in operations, reflected in the operating loss discussed above, offset by the proceeds of $40,000 from a demand loan, $50,000 from the Promissory Note and $60,000 from the October Promissory Note.

Liquidity & Capital Resources

As at October 31, 2020, the Company had working capital deficit of $764,485 compared to a working capital deficit of $1,303,401 as at January 31, 2020. Working capital includes current assets less current liabilities on the Company's statement of financial position. Cash flows used in operations for the nine-month period ending October 31, 2020 were $158,577 (2019 - $2,296,120). Cash flows from operations fluctuate based on the timing of customer payments and other annual payments. The Company used $nil in investing activities in connection with property and equipment acquired or disposed of and investments in intangible assets during the quarter ended October 31, 2020 (2019 - $442). During the nine-month period ending October 31, 2020 the Company's net cash provided by financing activities was $162,345 (2019 - $1,720,607) due to the proceeds from the issuance of common shares, the proceeds from the demand loan and promissory note, offset by the settlement of the make-whole provision and repayment of the promissory note.

The Company's total assets as at October 31, 2020 were $151,392 (January 31, 2020 - $175,243) against total liabilities of $885,853 (January 31, 2020 - $1,444,375). The decrease in total assets of $23,851 resulted primarily from the increase in accounts receivable offset by the reduction in the contract asset, prepaid expenses and right of use assets. Total liabilities decreased by $558,522 mainly due to the settlement of the make-whole provision of $771,350, which was converted into equity, offset by an increase in demand loan and promissory notes of $150,694. As at October 31, 2020 the Company did not have sufficient cash and accounts receivable to pay its existing accounts payable and accrued liabilities of $358,696.

The Company has incurred cash losses to date and there can be no assurance that the Company will gain adequate market acceptance for its products or be able to generate sufficient positive cash flow to achieve its business plans. The Company's objectives when managing its liquidity and capital structure are to generate sufficient cash to fund the Company's operating, acquisition, and organic growth requirements.

See "Risk Factors" below and "Caution Note Regarding Forward-Looking Statements" above.

Disclosure of Outstanding Share Data

As at October 31, 2020 the Company had 138,842,196 common shares issued and outstanding (unlimited authorized), 3,355,902 options outstanding, of which all have vested, 17,774,161 warrants to acquire common shares outstanding and 300,000 restricted share units granted.

Changes in Accounting Policies including Initial Adoption

The Company adopted the following accounting standards which came into effect commencing February 1, 2018:

Effective February 1, 2019 (hereafter referred to as the "date of initial application"), the Company adopted IFRS 16 Leases as issued by the IASB in January 2016. The standard sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both the lessee and lessor. The standard supersedes the requirements in IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC 15 Operating Leases – Incentives, and SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Company adopted IFRS 16 using the modified retrospective approach and accordingly the information presented for 2019 has not been restated. It remains as previously reported under IAS 17 and related interpretations. On initial application, the Company has elected to record right-of-use assets based on the corresponding lease liability, adjusted by the amount of any prepaid or accrued lease payments. Right-of-use assets and lease obligations of $108,836 were recorded as of February 1, 2019, with no net impact on deficit. When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate of 16% at February 1, 2019. The Company has elected to apply the practical expedient to account for leases for which the lease term ends within 12 months of the date of initial application as short-term leases. The Company has elected to apply the practical expedient to grandfather the assessment of which transactions are leases on the date of initial application, as previously assessed under IAS 17 and IFRIC 4. The Company applied the definition of a lease under IFRS 16 to contracts entered into or changed on or after February 1, 2019.

Contracts with Multiple Products or Services

Typically, the Company enters into contracts that contain multiple products and services such as sale of products, monthly maintenance and support, and professional services. The Company evaluates these arrangements to determine the appropriate unit of accounting (performance obligation) for revenue recognition purposes based on whether the product or service is distinct from some or all of the other products or services in the arrangement. A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the Company's promise to transfer the good or service is separately identifiable from other promises in the contractual arrangement with the customer. Non-distinct products and services are combined with other goods or services until they are distinct as a bundle and therefore form a single performance obligation.

Where a contract consists of more than one performance obligation, revenue is allocated to each performance obligation based on their estimated standalone selling price.

The Company recognizes revenue when the transfer of control of the promised products or services has occurred to customers in exchange for consideration the Company expects to receive, net of discounts and taxes. Revenue from the sale of products is recognized when the product is shipped and received by the customer, and depending on the delivery conditions, title and risk have passed to the customer. Monthly support and maintenance revenue is recognized over the term of the maintenance agreement as services are provided. The Company defers revenues that have been billed but which do not meet the revenue recognition criteria. Cash received in advance of revenue being recognized is classified as contract liabilities (deferred revenues). The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the costs to be recoverable and has determined that such costs meet the requirements to be capitalized. Capitalized contract acquisition costs are amortized consistent with the pattern of transfer to the customer for the goods and services to which the asset relates. The amortization period includes specifically identifiable contract renewals where there is no substantive commission paid on renewals. The expected customer renewal period is estimated based over the life of the intellectual property including expected software upgrades by the customer. The Company does not capitalize incremental costs of obtaining contracts if the amortization period is one year or less.

IFRS 9, Financial Instruments

The Company has adopted IFRS 9 with a date of initial application of February 1, 2018. IFRS 9 introduces new requirements for the classification and measurement of financial assets, amends the requirements related to hedge accounting, and introduces a forward-looking expected loss impairment model.

The standard contains three classifications categories for financial assets: measured at amortized cost, fair value through other comprehensive income ("FVOCI") or fair value through profit or loss ("FVTPL"). The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans, and receivables and available for sale. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9 and the adoption of IFRS 9 did not change the Company's accounting policies for financial liabilities.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of Braingrid.

Proposed Transactions

There were no proposed transactions as of the date of this MD&A.

Transactions with Related Parties

For details with respect to the Company's transactions with related parties please refer to note 16 of the unaudited financial statements for the quarter ended October 31, 2020.

Risk Factors

An investment in the securities of the Company is highly speculative and involves numerous and significant risks. In addition to the risks identified therein, additional risks not presently known to the Company may arise from to time and may cause a material adverse effect on the Company and any investment in the Company. Investors are cautioned not to rely upon any forward-looking statements in this MD&A as such statements are subject to known and unknown risks.

Demand

The ultimate profitability of any product depends upon its audience appeal in relation to the cost of its production and distribution. The audience appeal of a given product depends, among other things, on unpredictable critical reviews and changing public tastes and such appeal cannot be anticipated with certainty. If certain segments of the potential customer base do not like, are not willing to pay for, or otherwise disapprove of its products, Braingrid's business may fail.

The market for Braingrid's products is limited in scope and there is no assurance that the products will generate market acceptance and result in sales. Braingrid has developed the products with limited market research and there is no assurance that Braingrid will be able to respond to the rapidly evolving markets in the cannabis industry. The inability to sell its products would result in a material adverse effect on Braingrid.

Sales Risk

Braingrid's business success is completely dependent on its ability to develop products and secure direct and indirect distribution channels. Revenues derived therefrom represent vital funds for its continued operations. The loss or damage of any of its business relationships and or associated revenues would have a material adverse effect on Braingrid.

U.S. Related Risk Factors

Braingrid is indirectly involved in the U.S. cannabis industry in that its Sentrollers can be used by U.S. citizens to monitor and control cannabis plants. To management's knowledge, there have been no cannabis-related prosecutions of manufacturers or sellers of cannabis plant tracking equipment. Management believes that, at present, there are no cannabis-related laws, federal or state, preventing use of plant tracking equipment to monitor cannabis plants. However, federal and/or state laws could change at any time and such change(s) could render Braingrid's devices unsaleable in the U.S., particularly as Braingrid expects a portion of its sales revenue to be derived from the U.S. market.

Cannabis remains illegal under U.S. federal law and the approach to enforcement of U.S. federal laws against cannabis is subject to change. Management is not aware of any state or federal laws or regulations specifically related to the use of Braingrid's products. It could be that federal and/or state laws could be interpreted in a way that results in adverse enforcement action resulting in a direct negative effect on Braingrid's sales in the U.S. and such negative effect could cause Braingrid to fail and investors could lose all of their investment. For example, it is possible that Braingrid will not be able to ship product to the U.S. given a broad interpretation that such devices are used in the sale or distribution of an illegal drug under federal law. As well, executives or visitors travelling over the U.S. border have now been stopped and refused entry to the U.S. on the basis that such traveller is an investor in a cannabis company or trades in cannabis products or services, resulting in such traveller being banned for life seeking to re-enter the U.S.

Unlike in Canada which has federal legislation uniformly governing the cultivation, distribution, sale, and possession of cannabis, investors are cautioned that in the United States, cannabis is largely regulated at the state level. But it should be noted that in spite of the permissive regulatory environment of medical cannabis in many states within the United States, cannabis continues to be categorized as a controlled substance under the U.S. federal Controlled Substances Act and as such, violates federal law in the United States. The United States Congress has passed appropriation bills in each of the last three years that have not appropriated funds for prosecution of cannabis offenses of individuals who are in compliance with state medical cannabis laws.

American courts have construed these appropriations bills to prevent the federal government from prosecuting individuals when those parties comply with state law. However, because this conduct continues to violate federal law, American courts have observed that should Congress, at any time, choose to appropriate funds to fully prosecute the Controlled Substances Act, any individual or business even those who have fully complied with state law, could be prosecuted for violations of federal law. Violations of federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions, or settlements arising from civil proceedings conducted by either the federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities, or divestiture. Braingrid is not aware of any noncompliance with U.S. federal law; however, if Braingrid was found to be non-compliant, this could have a material adverse effect on Braingrid, including its reputation and ability to conduct business, its financial position, operating results, profitability or liquidity or the market price of its publicly traded shares. In addition, it is difficult for Braingrid to estimate the time or resources that would be needed for the investigation or defence of such matters or its final resolution.

Braingrid plans to sell its products and services into the U.S. and these sales will be subject to U.S. federal and state laws. Given the illegality of cannabis under U.S. federal law Braingrid's access to capital could be negatively affected by public and/or private capital not being available to support continuing operations. At present, management believes that both private and public capital is available to Braingrid on terms acceptable to Braingrid, but management also believes that this capital availability could change without notice, requiring Braingrid to operate solely on internally generated funds. In the event that Braingrid has insufficient internally generated funds Braingrid could fail and investors could lose all of their investment.

Management is not currently aware of any specific U.S. federal or state initiatives that would lessen Braingrid's capital access. States typically have regulations related to mechanical aspects of equipment with compliance required by the operator of the subject equipment in that operator's jurisdiction. Braingrid sells its platform including its devices F.O.B Toronto and because of this, the compliance requirement transfers to the buyer, in their respective state. Management believes it is in compliance with general state regulation and is not aware of non-compliance with any U.S. federal or state law or regulation.

Licensed Technology

Rather than owning all of the intellectual property on which it relies, Braingrid licenses the Sentroller technology from the Licensor (as defined in the Financial Statements) and is substantially dependent on the Sentroller License (as defined in the Financial Statements) in order to market and sell the Sentroller. It is possible that such license could be terminated in accordance with the terms of the Sentroller License Agreement. In such an event, Braingrid may not be able to function in part or at all for a significant period of time and Braingrid could suffer material losses. In addition, the Sentroller Patent could be challenged by a third party, also resulting in material expense and possible loss of the benefits of the Sentroller Patent, thereby impacting the uniqueness of Braingrid's products.

Bankruptcy of Licensor

In the event that the Licensor files a petition in bankruptcy, there can be no assurance that the rights under its licenses will not be curtailed or otherwise affected, even if Braingrid actively pursues enforcement of the Sentroller License Agreement (as defined in the Financial Statements). If the Licensor files for bankruptcy, among other results, the Licensed Technology may be sold to a third party and such sale may extinguish Braingrid's rights under the Sentroller License Agreement. This could cause a significant hardship for Braingrid and have a material adverse effect on its business, and therefore, Braingrid's business.

Assignment of Sentroller License

Pursuant to the Sentroller License Agreement, Braingrid may not assign the Sentroller License Agreement or its rights thereunder to any person without the written consent of the Licensor, which shall not be unreasonably withheld.

Right of Licensor to Sell the Licensed Technology

Pursuant to the Sentroller License Agreement, the Licensor is permitted to sell the Licensed Technology to a third party. It is possible that such license could be terminated in accordance with the terms of the Sentroller License Agreement. In such an event, Braingrid may not be able to function in part or at all for a significant period of time and Braingrid could suffer material losses.

Cost Overruns

The costs of developing products and marketing/selling Braingrid's products may be underestimated and may be increased by factors beyond its control. Such factors may include without limitation weather conditions, taxation, labour disputes, trade and customs duties and disputes, governmental regulations, increased production costs, equipment breakdowns and other production disruptions. While Braingrid intends to engage qualified personnel, the risk of running over budget is always significant and may have a substantial adverse impact on Braingrid's profitability.

Premature Abandonment of Products

The development of Braingrid's products may be abandoned at any stage if further expenditures do not appear commercially feasible, with the resulting loss of some or all of the funds previously expended on the development of the projects, including funds expended in connection with the development of any products. In the event that Braingrid decides to abandon a product, it is unlikely that it will be able to recoup any of its costs.

Limited Operating History and Uncertainty of Future Revenues

Braingrid has a limited operating history and, accordingly, potential investors will have a limited basis on which to evaluate its ability to achieve its business objectives. The future success of Braingrid is dependent on management's ability to implement its strategy. Whilst management is optimistic about Braingrid's prospects, there is no certainty that anticipated outcomes and sustainable revenue streams will be achieved and there is no certainty that Braingrid will successfully produce and market its products. Braingrid faces risks frequently encountered by early-stage companies. In particular, its future growth and prospects will depend on its ability to expand its operation and gain additional revenue streams while at the same time maintaining effective cost controls. Any failure to expand is likely to have a material adverse effect on Braingrid's business, financial condition, and results.

Competition

Braingrid will be competing with the producers of other products and competition in the cannabis technology industry will limit the availability of channels required for the successful distribution of its products. Its products may be competing directly and indirectly with other products. Braingrid may not be able to compete successfully against its existing and future competitors and competition could have a material adverse effect on its business, results of operations and financial condition. Potential competitors may develop superior products and services that achieve greater market acceptance than that of Braingrid. Accordingly, failure of Braingrid's marketing efforts may have a material adverse

effect on Braingrid.

Dependence on Key Executives

The performance of Braingrid will depend heavily on its ability to retain the services of management and to recruit, motivate and retain further suitably skilled personnel. The loss of the services of key individuals may have an adverse effect on the business, operations, customer relationships and results of Braingrid.

History of Net Losses

Braingrid has incurred losses in recent periods. Braingrid may not be able to achieve or maintain profitability and may continue to incur significant losses in the future. In addition, Braingrid expects to continue to increase operating expenses as it implements initiatives to continue to grow its business. If Braingrid's revenues do not increase to offset these expected increases in costs and operating expenses, Braingrid will not be profitable. Further Funding Requirements

In order to execute the anticipated growth strategy, Braingrid may require some additional 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 Braingrid when needed or on terms which are acceptable. Braingrid's inability to raise financing to support ongoing operations or to fund capital expenditures or acquisitions could limit Braingrid's growth and may have a material adverse effect upon future profitability. Braingrid may require additional financing to fund its operations to the point where it is generating positive cash flows.

If additional funds are raised through further issuances of equity or convertible debt securities, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences, and privileges superior to those of holders of Braingrid Shares. Any debt financing secured in the future could involve restrictive covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for Braingrid to obtain additional capital and to pursue business opportunities, including potential acquisitions.

Product Liability

Braingrid faces the risk of product liability claims, regulatory action, and litigation if its products are alleged to have caused loss or injury. A product liability claim or regulatory action against Braingrid could result in increased costs, could adversely affect Braingrid's reputation with its clients and consumers generally, and could have a material adverse effect on the results of operations and financial condition of Braingrid. There can be no assurances that Braingrid 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 result in a material adverse effect to Braingrid.

Product Recalls

Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects. If any of Braingrid's products are recalled due to an alleged product defect or for any other reason, Braingrid could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. Braingrid 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 Braingrid has procedures in place for testing its products, there can be no assurance that any quality issues will be detected in time to avoid unforeseen product recalls, regulatory action, or lawsuits. A recall for any of the foregoing reasons could lead to decreased demand for Braingrid's products and could have a material adverse effect on the results of operations and financial condition of Braingrid.

Insurance and Uninsured Risks

Although Braingrid maintains insurance to protect against certain risks in such amounts as it considers to be reasonable, its insurance does not cover all the potential risks associated with its operations. Braingrid may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards encountered in the operations of Braingrid is not generally available on acceptable terms. Braingrid might also become subject to liability for pollution or other hazards which may not be insured against or which Braingrid may elect not to insure against because of premium costs or other reasons. Losses from these events may cause Braingrid to incur significant costs that could have a material adverse effect upon its financial performance and results of operations.

Regulations on Products

Some jurisdictions have rules and regulations related to plant monitoring equipment and without an exemption, Braingrid's products may be unsaleable without certification.

Certification is often a matter of passing operating specification tests and paying fees but there is no guarantee that any relevant authority will not change certification processes and that any such changes would not render the products unsaleable in the applicable jurisdiction. A lack of certification or changes in the certification process could result in a material adverse effect to Braingrid.

Management of Growth

Braingrid may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. The ability of Braingrid to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of Braingrid to deal with this growth may have a material adverse effect on Braingrid's business, financial condition, results of operations and prospects.

Intellectual Property Protection

Braingrid cannot guarantee that its products, or the Licensed Technology, will not infringe upon patents, trademarks, copyrights, or other intellectual property rights held by third parties. In addition, since it may rely on third parties to help develop some of its products, it cannot ensure that litigation will not arise from disputes involving these third parties. It may incur substantial expenses in defending against prospective claims, regardless of their merit. Successful claims against it may result in substantial monetary liability, significantly impact results of operations in one or more quarters or materially disrupt the conduct of its business. Braingrid's success depends in part on its ability to obtain and enforce intellectual property protection for its concepts, to preserve its trade secrets and to operate without infringing the proprietary rights of third parties, as previously stated.

Braingrid currently holds no patents. The patent with respect to the Sentroller Technology (the Sentroller Patent) is owned by the Licensor. No assurances can be given that any future patent will be issued, or if issued, that any of its existing and future patents will be held valid if subsequently challenged, or that others will not claim rights in, or ownership of, the potential copyrights or trademarks or other proprietary rights held by it, or the Licensor, or that its, or the Licensor's, intellectual property will not infringe, or be alleged to infringe, the proprietary rights of others. Furthermore, there can be no assurance that others have not developed or will not develop similar concepts to its products. In addition, whether or not additional intellectual property protection is issued to Braingrid, others may hold or receive intellectual protection covering concepts that were subsequently developed by Braingrid; and no assurance can be given that others will not, or have not, independently developed or otherwise acquired substantially equivalent intellectual property.

See also the risk factor with respect to "Licensed Technology" above

Conflicts of Interest

Certain of the directors and officers of Braingrid are also directors and officers of other companies or are engaged and will continue to be engaged in activities that may put them in conflict with the business strategy of Braingrid. In addition, Michael Kadonoff is the beneficial owner of the Licensor which has provided Braingrid with the Sentroller License. See the risk factor related to "Licensed Technology" above. Consequently, there exists the possibility for such directors and officers to be in a position of conflict. All decisions to be made by such directors and officers involving Braingrid are required to be made in accordance with their duties and obligations to act honestly and in good faith with a view to the best interests of Braingrid. In addition, such directors and officers are required to declare their interests in, and such directors are required to refrain from voting on, any matter in which they may have a material conflict of interest.

Unfavourable Publicity or Consumer Perception

Braingrid believes the cannabis industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of the cannabis distributed to such consumers. Consumer perception of Braingrid's products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of 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 favourable to the 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 favourable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for Braingrid's products and the business, results of operations, financial condition, and cash flows of Braingrid. Braingrid's dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on Braingrid, the demand for Braingrid's products, and the business, results of operations, financial condition, and cash flows of Braingrid. Further, adverse publicity reports or other media attention regarding the safety, efficacy, and quality of cannabis in general, or Braingrid's products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such 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.

Foreign Market Risk

Foreign and ancillary markets are expected to become increasingly important in the medical and recreational cannabis industries. As such Braingrid may rely on foreign and ancillary markets for revenue. Neither foreign nor ancillary markets provide a guarantee of revenue. Many markets may never legalize the consumption of cannabis, which limits the demand for its products and services. If Braingrid's products are not a success or if, for any reason, they are not well-received by the public, this may have a material adverse effect on Braingrid.

Share Price Volatility

The market price of Braingrid Shares may be subject to wide fluctuations in response to many factors, including variations in the operating results of Braingrid and its subsidiaries, divergence in financial results from analysts' expectations, changes in earnings estimates by stock market analysts, changes in the business prospects for Braingrid and its subsidiaries, general economic conditions, legislative changes, community support for the cannabis industry and other events and factors outside of Braingrid's control. In addition, stock markets have from time-to-time experienced extreme price and volume fluctuations, which, as well as general economic and political conditions, could adversely affect the market price for Braingrid Shares.

Transportation Disruptions

The ability to obtain speedy, cost-effective, and efficient transport services will be essential to the prolonged operations of Braingrid's business. Should such transportation become unavailable for prolonged periods of time, there may be a material adverse effect on Braingrid's business, financial situation, and operations.

Reliance on Key Inputs

Braingrid's business is dependent on a number of key inputs and their related costs including the production of its products. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact the business, financial condition, and operating results of Braingrid. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on the business, financial condition, and operating results of Braingrid.

Dependence on Suppliers and Skilled Labour

The ability of Braingrid to compete and grow will be dependent on it having access, at a reasonable cost and in a timely manner, to skilled labour, equipment, parts, and components. No assurances can be given that Braingrid will be successful in maintaining its required supply of skilled labour, equipment, parts, and components.

Difficulty to Forecast

Braingrid must rely largely on its own market research to forecast sales as detailed forecasts are not generally obtainable from other sources at this early stage of the cannabis industry. A failure in the demand for its products to materialize as a result of competition, technological change or other factors could have a material adverse effect on the business, results of operations and financial condition of Braingrid.

Need to Attract and Retain Qualified Personnel

Braingrid's success depends to a significant extent on its ability to identify, attract, hire, train and retain qualified personnel. Competition for such personnel may be intense and there can be no assurance that Braingrid will be successful in identifying, attracting, hiring, and retaining such personnel in the future. If Braingrid is unable to identify, attract, hire, and retain qualified personnel in the future, such inability could have a material adverse effect on its business, operating results, and financial condition.

Litigation

Braingrid may become party to litigation from time to time in the ordinary course of business which could adversely affect its business. Should any litigation in which Braingrid becomes involved be determined against Braingrid such a decision could adversely affect Braingrid's ability to continue operating and the market price for Braingrid Shares and could use significant resources. Even if Braingrid is involved in litigation and wins, litigation can redirect significant resources that could have a material adverse impact on day-to-day operations of the business. Rent for the Head Office was unpaid for the months of August 2019 through October 2020 which may lead to litigation with the landlord if not remediated by the Company.

Currency Risk

Currency fluctuations may affect the cash flow which Braingrid may realize from its operations, since a portion of its sales are expected to occur in foreign currencies whereas Braingrid's costs are incurred primarily in Canadian dollars.

Dividends

Braingrid has no profit or dividend record and does not anticipate paying any dividends on Braingrid Shares in the foreseeable future. Dividends paid by Braingrid would be subject to tax and, potentially, withholdings.

Limited Market for Securities

There can be no assurance that an active and liquid market for Braingrid Shares will develop or be maintained and an investor may find it difficult to resell any securities of Braingrid.

Covid-19 Pandemic

Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as "COVID-19", has resulted in the World Health Organization declaring this virus a global pandemic in March 2020. Governments around the world have enacted emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing and closure of businesses have caused material disruption to businesses resulting in an economic slowdown. Governments and central banks have responded with significant monetary and fiscal interventions designed to stabilize the financial markets. A critical estimate for the Company is to assess the impact of the pandemic on the recoverability of its accounts receivable as well as the availability of future financing in assessing the going concern assumption. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or results of operations at this time.