Rockland Resources Ltd. — Management Reports 2026

Jan 31, 2026

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MERCANTO HOLDINGS INC. Formerly known as THE GOOD SHROOM CO INC.

Management Discussion & Analysis For the quarter ended April 30, 2025

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Effective Date: June 25th, 2025

Management Discussion & Analysis

For the quarter ended April 30, 2025

Management's discussion and analysis ("MD&A") outlines the financial position of Mercanto Holdings Inc. formerly known as The Good Shroom Co Inc. (the "Company") for the quarter ended April 30, 2025. Teonan Biomedical Inc. ("Teonan") is a wholly owned subsidiary of the Company as a result of a three-cornered amalgamation completed on April 15th, 2021. This document should be read in conjunction with the audited Consolidated Financial Statements for the quarter ended April 30, 2025 and the related notes for the same period.

This discussion should not be considered all inclusive as it excludes changes that may occur in general economic, political and environmental conditions as well as in the future that may affect the Company. All dollar amounts are stated in Canadian dollars.

FORWARD LOOKING INFORMATION

This MD&A may include forward-looking statements. Forward-looking statements are statements that are not historical facts, and include, but are not limited to, estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to the Company's products, its business model, future operations, the impact of regulatory initiatives on its operations, the size of and opportunities related to the markets for the products, general industry and macroeconomic growth rates and statements regarding future performance. Forward-looking statements used in this MD&A are subject to various risks and uncertainties, most of which are difficult to predict and are generally beyond the control of the Company. If risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected in this MD&A. Forward-looking statements in this document are not a prediction of future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

Information relating to the Company is available on SEDAR at www.sedar.com.

DESCRIPTION OF THE COMPANY AND OVERALL PERFORMANCE

The Company's subsidiary, Teonan, accounts for all operations. It develops and sells instant wellness beverages as well as a separate line of cannabis and cannabis infused products for the Canadian market.

In November 2019, the Company was granted a micro-processing license (a "MPL") from Health Canada which allowed it to develop a cannabidiol (CBD) infused beverage line, the Velada beverages. The MPL was granted in accordance with the Cannabis Act and the Cannabis Regulations, and it allows the Company to manufacture cannabis products, namely in the form of beverages, and to package and label the products, subject to a maximum threshold of 600kg of dried cannabis or the equivalent in cannabis oil of 150kg, which can be possessed in a calendar year. The MPL was amended in June 2021 to have the "activity of sale" added as a permitted

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activity allowing the Company to commence distribution and sales of cannabis products to authorized retailers in Canada.

On October 5, 2023 the company obtained a standard processing license which does not limit the processing of dried cannabis or the equivalent in concentrates during a calendar year. This allows the Company to continue to grow the cannabis division in line with Health Canada regulations.

The company currently sells cannabis products primarily in Quebec, but also has some listings in Alberta, Ontario and Prince Edward Island as of Q1 of the current fiscal year.

The Company also produces a line of Teonan™ branded instant tea and coffee-based beverages that come in a soluble powdered form and made using a custom blend of selected organic mushroom extracts each containing a dry and shelf stable strain of probiotics. The beverages are certified organic (Ecocert - USDA), vegan, dairy free, GMO free, gluten free and contain zero sugar. The Company, began selling Teonan™ instant beverages in December 2019, direct to consumers, across North America via the Company's online stores and third-party platforms. In late Q2 of fiscal year ended July 31, 2022, the Company initiated its retail brick and mortar rollout with a focus on 4 flavors (Americano, Café au Lait, Matcha Latte, and Hot Chocolate) in a 15 servings format.

The Company continues to sell Teonan beverages both online and at retail locations.

QUARTER END HIGHLIGHTS

The Company continues to manage administrative costs prudently while expanding its cannabis product portfolio in alignment with a focused strategy. Product development has been guided by criteria emphasizing consistent sales performance, cost efficiency—for both the Company and consumers—and distinctiveness in both regional and national cannabis markets.

For the quarter ended April 30, 2025, the Company reported a net loss of \$88,367, compared to a net profit of \$30,840 in the same period of the prior year. Key contributors to the quarterly loss include non-cash expenses totaling \$47,349 (comprising share-based compensation and depreciation), as well as an inventory write-down of \$20,564. Adjusting for these items, the normalized operational loss was \$20,454.

Sales during the quarter remained stable, driven by performance with the Company's primary customer in Quebec, which represented approximately 82% of quarterly revenue. With new product listings introduced in late Q3 and early Q4, management anticipates a moderate increase in sales for the fourth quarter. While this projected growth is unlikely to fully offset fiscal year-to-date losses, the outlook for fiscal 2026, beginning August 1, remains positive particularly within the Quebec market.

Quebec's cannabis retail structure, which is vertically integrated and government-controlled, contrasts with other provinces where retail is privatized. As a Montreal-based operator, the Company has benefited from early and meaningful access to this unique market, enabling accelerated revenue generation compared to other provinces.

However, expanding beyond Quebec has proven more complex. In privatized provincial markets, retail distribution is fragmented across numerous stakeholders, complicating market entry and the ability to scale consistently across jurisdictions.

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Management is aware of the concentration risk associated with overreliance on a single customer. Over the past year, the Company has actively pursued growth in other provincial markets, with varying results. Quebec has continued to be the dominant contributor to revenue. While this contributed to rapid early growth, it also introduced exposure to provincial-level policy shifts.

One such shift occurred in Spring 2024, when Quebec's cannabis authority initiated a rationalization of listed SKUs across retail outlets. This led to a material decline in sales—up to \$30,000 per week—and significantly impacted financial performance in the latter part of the fiscal year.

The SKU rationalization process has now concluded. However, it has prompted changes to how Quebec selects and maintains products in its portfolio. The Company has been invited to participate in industry consultations to provide feedback on the future structure of product listings in the province. Management views this engagement positively and remains optimistic about upcoming opportunities in the Quebec market.

SUBSEQUENT EVENTS

The Company has launched its innovative Deckies THC pouches in Ontario and will be launching this product in Saskatchewan and New Brunswick in the upcoming quarters. The THC pouches will also be made available on the Aqualitas and Entourage medical patient platforms. These new provincial and medical markets have also opened the door for some of the Company's existing cannabis products to be sold through as well.

In Quebec, new products have been launched in the following quarter which include two new hash SKUs as well as infused pre-rolls from a well-known west coast brand, Astro Labs. The latter is the result of a coordination with Simply Solventless Concentrates Inc. to expand its Quebec market presence. The Company hopes this will be the first of many collaborations to allow potential and existing out of province partners access to the Quebec market.

The Company also received approval to launch 1 of only 2 batteries to be sold in all Quebec authorized retailers beginning in November 2025 concurrent with the launch of the Vape cartridge category in the province.

Results from Operations

Sales and Expenses

As described above, sales were down in comparison to the same quarter last fiscal year. The Company's remains vigilant in its efforts to be as efficient as possible with all resources.

Sales were lower this quarter, \$887,862 in comparison to the same period last year, \$1,135,991. As described above, this is in large part due to the initiatives taken by the province of Quebec. The Company was able to test the New Brunswick market with its innovative THC pouches which seems to be yielding positive results thus far. Additionally, some medical markets will be placing orders for the THC pouches in the 4th quarter as well.

Teonan beverages have been pulled from the US market during the quarter. This decision was taken based on market uncertainty related to tariffs as well as shifting costs that made continued effort in the US market challenging. Teonan will remain available for sale in Canada both online and in retail locations.

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Selling expense were also higher this quarter, \$47,808 versus \$17,579 for the same period last fiscal year. This is due in large part to delivery and transportation costs. Smaller volumes of shipped products but more frequently out of province and across the country resulted in higher costs and loss of some of the advantages of economies of scale. As a result, the Company has taken action to reduce these costs by shifting to other warehousing and delivery providers. It anticipates at least a 40% savings which will materialize in the 4th quarter.

Share-based compensation was \$42,047 for the quarter ended April 30, 2025 versus \$9,777 for the same period last year. This was due to options granted to the board, employees, and a consultant in February 2025. The latter initiative was taken to continue to incentivize staff and others as the Company believes in long term upside in share value.

Professional fees were \$10,582 for the quarter ended April 30, 2025 compared to \$47,267 last year. As previously explained, the main change was the decision to bring quality assurance management in house versus outsourcing. The net result is a slightly higher payroll but a much larger reduction in professional fees.

Liquidity

At April 30, 2025, the Company held assets of \$1,169,109 in comparison to \$1,735,022 of assets in the same period last fiscal year ended April 30, 2024. The receivables of \$523,549 for the quarter ended April 30, 2025 is much lower in comparison to the same period last year, \$966,983 and the main contributor to the reduction in assets. This is due to a temporary change in payment terms with the province of Quebec to assure cash flow remains manageable. The result of the latter is also reflected in a reduction in the payables; \$797,843 for the quarter ended April 30, 2025 compared \$1,094,165 for the same period last year.

The Company will continue to face challenges regarding cash flow, as do all companies in the heavily regulated Canadian cannabis market, but is carefully navigating through cooperative efforts with key suppliers and customers.

The Company continues to maintain a debt free balance sheet.

NON IFRS MEASURE

The Company's EBIDTA for the quarter ended April 30, 2025 was a loss of \$41,018. There were other one-time costs such as inventory write downs which would contribute to an even higher EBDITA if presented on an adjusted basis as in the table below.

	Year quarter
	January 31,
In Dollars (CDN)	2025
Net Loss	(88,367)
Add Back Non-Cash Expenditures:
Share-Based Compensation	42,047
Depreciation	5,302
Inventory Write Down	20,564
EBIDTA	(20,454)

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RELATED PARTY TRANSACTIONS

Transactions with key management and members of the Board of Directors

The related party transactions are solely related to remuneration of key personnel, that is the President and Chief Executive Officer and Chief Financial Officer:

	Quarter ended April 30, 2025
Salaries of key personnel	\$100,974
Cargologan Inc.	\$8,135

Off-balance sheet arrangements

There are no off-balance sheet arrangements as of April 30, 2025.

FORWARD-LOOKING STATEMENTS

Forward-looking statements used in this MD&A - QUARTERLY HIGHLIGHTS are subject to various risks and uncertainties, most of which are difficult to predict and are generally beyond the control of the Company. If risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected in this MD&A - QUARTERLY HIGHLIGHTS. Forward-looking statements in this document are not a prediction of future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

Information relating to the Company is available on SEDAR at www.sedar.com.